Chapter 3 Chapter One Introduction

Section 1 Economics is a study of wealth, but also a study of people.The history of the world has been shaped by religious and economic forces. Political economy or economics is the study of the affairs of human life in general; it studies that part of individual and social activity which is most closely concerned with the acquisition and use of the necessities of material well-being. Thus, on the one hand it is a study of wealth, and on the other, and more important, it is a part of the study of man.For man's character is formed by his daily occupations, and the material resources derived from them, and no other influence than that of his religious ideals can form his character.The two constitutive forces of world history are religious and economic forces.Though martial or artistic zeal has prevailed for a time everywhere, religious and economic influences have always and everywhere come to the fore; they have almost always been more important than all the other influences put together.The religious motive is stronger than the economic motive, but its direct action does not affect human life as generally as the economic motive.For when a man is at his best, his thoughts are occupied most of the time with matters of earning a living; and during that time his character is shaped by the way in which he uses his faculties at work, by the way in which he works. The thoughts and feelings aroused and the relationship between him and his colleagues, employers or employees are gradually formed.

And the amount of a man's income often has as much, if not a lesser, effect on his character than the manner in which he acquires it.Whether a family earns £1,000 or £5,000 a year may not matter very much to the prosperity of the family; but whether it earns £30 or £150 makes a great difference: for there are For £150, the family can obtain the material conditions for a good life, whereas £30 does not.Indeed, in religion, family affection, and friendship, even the poor can find opportunities to develop many talents that are the source of supreme happiness.But circumstances of extreme poverty, especially where they are overcrowded, always weaken the higher talents.Those who are called the pariahs of our great cities have little chance of seeking friendship; they know little of refinement and tranquility, and little even of the harmony of domestic life; and the power of religion often falls short of them. There.There is no doubt that their physical, mental, and moral ill-health is due in part to causes other than poverty, but poverty is the chief cause.

And besides these untouchables, there are many people in cities and villages who grew up without food, clothing, and shelter; Undernourished bodies do long hours of tiring work, and thus have no opportunity to develop their higher mental powers.Their lives must have been unhealthy or unpleasant.Their love of God and man delights them, and they may even have some natural emotional refinement, so that they may lead lives that are more fulfilling than those of many people with more material possessions.But, having said that, their poverty has always been a great and almost pure evil to them.Even when they are healthy, their fatigue is often equal to their misery, and their joys are few; and when they are sick, the misery of poverty is tenfold greater.Though a spirit of contentment may make them content with these afflictions, there are many others which this spirit cannot resolutely endure.Overworked and undereducated, tired and depressed, without quiet and leisure, they have no opportunity to develop their intellect to the fullest.

Though some of the misery which often accompanies poverty is not the inevitable consequence of poverty; yet, generally speaking, "the trouble of the poor is their poverty," so to study the causes of poverty is to study the causes of the depravity of the greater part of mankind. The question of whether poverty is inevitable in the second section gives economics the greatest concern. Slavery was taken for granted by Aristotle, and ancient slaves presumably thought so too.The dignity of man is proclaimed by Christianity, and it has been embraced with growing fervor during the last century: but it is only because of the recent spread of education that we have begun to understand the full meaning of this statement.Now, at last, we have to seriously inquire whether the existence of the so-called "inferior classes" is necessary: ​​that is, whether there must be many men who are condemned from birth to drudgery, to provide others with the necessities of a good and civilized life; They themselves, through poverty and toil, have little share in this life.

The hope that poverty and ignorance could be gradually eradicated did find considerable support in the fact of the progress of the working class in the nineteenth century.The steam engine relieved them of much laborious and injurious work; wages increased; education improved and became more widespread; the railroad and the printing press made easy contacts of men of the same trade in all parts of the country, and enabled them to pursue and carry out far-reaching policies. ; At the same time, the growing need for intellectual work has rapidly multiplied skilled workers, who now outnumber those who are wholly unskilled."Inferior class" in the original sense of the term, to which the majority of skilled workers no longer belong, and some of them live a better life than most of the upper class did even a century ago. Life is better and nobler.

This progress, more than anything else, calls for a practical interest in the next question: that all men should have a fair chance of a civilized life, free from the pains of want and the dullness of over-mechanical labour, Is this really impossible?This question is being pushed to the forefront by the growing demands of our time. This question cannot be fully answered by economics.Since the answer depends partly on the moral and political faculties of human nature, the economist has no particular way of knowing these things: he has to do as everyone else does, and speculate as best he can.But this answer rests largely on facts and inferences within the sphere of economics; and it is this which gives the study of economics its chief and greatest concern.

Section 3 Economics is largely a recent development. We might have expected that a science dealing with so important a question concerning the welfare of mankind, which had attracted the attention of many of the ablest thinkers of all ages, had now been brought to near maturity.But the fact is this: the number of scientific economists is always small in proportion to the difficulty of the work to be done; The science is thus still almost in its infancy.One reason for this fact is that the relationship of economics to the larger welfare of mankind has been neglected.Indeed, a science which has wealth as its subject is often at first sight repulsive to many scholars; for those who endeavor to enlarge the range of knowledge are little concerned with the possession of wealth for the sake of possession.

But a more important reason is this: Many of the conditions of industrial life, and the methods of production, distribution, and consumption studied in modern economics, are only recent.It is true that in some respects the change in substance has not been as great as in appearance; and much more of modern economic theory is applicable to the condition of backward nations than it was when it first appeared.But the substantive unity which underlies many formal changes is not easy to see; Otherwise they may benefit more. The economic situation of modern life, though more complex than that of earlier generations, is in many respects more definite than that of earlier generations.Business is more clearly separated from other things; the rights of the individual to others and to society are more clearly defined; and above all, freedom from the shackles of custom, and the development of free activity, constant provision for a rainy day, and endless enterprise, It gives new validity and new importance to the causes which determine the relative value of things and kinds of labour.

Section 4. Competition can be constructive or destructive: even when it is constructive, competition is not as beneficial as cooperation.However, the basic characteristics of modern business are the freedom of industry and enterprise, self-reliance and preparation for a rainy day. We often say this: The difference between the way of modern industrial life and the past is that it is more competitive.But this statement is not entirely satisfactory.Competition in the strict sense seems to refer to the competition of one person against another, especially with regard to bids for buying or selling things.There is no doubt that this competition is more intense and more extensive than in the past: but it is only a secondary, even accidental, consequence of the basic features of modern industrial life.

No noun adequately indicates these characteristics.They are, as we can now know, a certain independence and habit of choosing one's own direction;These characteristics can, and often do, set men in competition; but on the other hand, they can also, and do now lead men, on the road of cooperation and all kinds of associations, good and bad.But this tendency towards common ownership and common activities is quite different from that of previous generations, for it is not the result of custom, nor of any passive association with one's neighbour, but of a certain act at the free choice of each. As a result, such conduct seems, after careful consideration, to be best suited to his ends, whether selfish or not.

The very word "competition" is already imbued with connotations of sin, and also of a certain egoism and indifference to the welfare of others.It is true that the industrial forms of the previous generations were not as self-interested as the modern ones, but they were also not as self-interested as the modern ones.Therefore, modern times are characterized by shrewdness rather than selfishness. For example, when the customs of primitive societies extended the circle of the family, and prescribed certain duties of a man to his neighbors-duties which have been abolished by posterity, it also prescribed a hostile attitude towards strangers.In modern societies the duties arising from the affections of the family, though concentrated in a narrower circle, have become stronger; and regard neighbors as well as strangers almost equally.The standards of fairness and honesty with which modern peoples ordinarily treat both kinds are lower than those with which primitive peoples treat their neighbors: but much higher than primitive peoples treat strangers.Thus, only the ties of neighbors are loosened, while the ties of the family are in many respects stronger than ever before, and the self-sacrifice and devotion which family sentiments arouse are much greater than before: sympathy for strangers such as never existed before modern times. A growing source of conscious human interest.The country which was the birthplace of modern competition spent more of its revenues on charity than any other, and spent twenty millions of dollars in purchasing the liberty of the slaves in the West Indies. Poets and social reformers of all ages have tried to inspire the people of their own time to a higher life, with moving stories of the virtues of the heroes of antiquity.However, neither historical records nor contemporary observations of backward peoples, after careful study, can confirm the statement that people today are generally harsher and more ruthless than people in the past; At times, people in the past were more often than people are now willing to sacrifice their own happiness for the benefit of others.There are peoples whose intellect seems otherwise undeveloped, and who have not possessed the original powers of modern merchants, and many of them have displayed a pernicious ingenuity by weighing every penny even with their neighbors in business.None of the merchants who took advantage of others were more blatant than the corn merchants and money-lenders of the East. Again, there is no doubt that modern times have opened up new opportunities for fraud in trade. The advance of knowledge has discovered new methods of deception and has made possible many new methods of adulteration.The producer is now at a great distance from the last consumer; his wrongdoing is not immediately and severely punished, but if a man must live and die in his native country, when he cheats his neighbor such punishment.It is true that there are more opportunities for fraud than in the past; but there is no reason to think that people will take advantage of them any more than in the past.On the contrary, the modern methods of commerce involve, on the one hand, the habit of trusting others, and, on the other, a power to resist the temptations of fraudulent practices, both of which are absent among backward nations.In all social conditions there are instances of simple truth and personal fidelity: but those who have tried to establish new businesses in backward countries feel that they are often unable to entrust the natives with positions of importance.Works that require strong virtue cannot be without outside help even more than those that require fine skill and intellect.Adulteration and fraud in trade flourished in the Middle Ages to an astonishing degree, and we now consider that it was difficult for such wrongdoing to go undetected. In all stages of civilization where the power of money is dominant, poets like to describe a real "golden age" in the past before they feel the pressure of only tangible gold.Their poetic descriptions are beautiful, inspiring noble vision and resolution; but they have little historical truth.The inhabitants of many small places, whose desires are simple, whose gratifications are well prepared by the bounty of nature, indeed sometimes have little concern for material needs, and do not arouse base ambitions.But whenever we gain insight into the inner life of the crowded peoples in their primitive state, we see poverty, narrowness, and hardship greater than they appear from a distance: we never see The more common and less painful comforts that exist in the Western world today.We should not, therefore, attach malicious names to the forces that constitute modern civilization. It may be unreasonable to add this connotation to the term "competition," but in fact it is.Indeed, when competition is censured, its antisocial forms come to the fore; little attention has been paid to investigating whether there are other forms of it which are so important to the maintenance of activity and spontaneity that the absence of them would be detrimental to social welfare.When the merchant or producer finds that a competitor sells his goods at a price below which they can make a great profit, they are indignant at his disturbing conduct, and complain of loss; Even if those who buy cheap goods may indeed be poorer than themselves, and the energy and ingenuity of their competitors may indeed be beneficial to society, they do not care.In many cases, "restriction of competition" is a misleading term that belies the formation of a privileged class of producers who often use their combined power to prevent a capable individual from The attempt to advance in class.Under the pretense of curbing anti-social competition, they deprive him of the freedom to create a new enterprise of his own, which would render him a greater service to the consumers of commodities than the small group against which he would compete. damage. Competition, even in its best form, is comparatively injurious, when contrasted with vigorous co-operation, which works disinterestedly for the public good; and it is simply hateful in its harsher and meaner forms.In a world where everyone was perfectly good, there would be no competition, but neither would private property and all forms of private rights.Men think only of their duties, and no one desires greater comforts and luxuries than his neighbor.Strong producers can easily bear a little difficulty, so they would expect their weaker neighbors to produce less and consume more.Taking pleasure in thinking this way, they will work for the common good with all their energies, creativity, and ardent enterprise; and man will be all-powerful in his struggle with nature.This was the golden age imagined by poets and dreamers.But, in the responsible conduct of business, it would be folly to overlook the imperfections which still affix to human nature. History in general, and that of the socialist venture in particular, shows that ordinary people cannot practice pure and ideal humanism for long in succession; The only exception is when lofty beliefs become insignificant in comparison. Undoubtedly, even now men can make much greater contributions to others than they usually do: the highest aim of the economist is to discover how this latent social asset can be developed most rapidly, how can be used most wisely.But he should never denigrate competition in general without analysis: he must remain neutral to any particular manifestation of it until he is convinced that human nature is indeed such that the check of competition is more counterproductive than competition itself. role of society. We can therefore draw the following conclusion: the term "competition" is not quite appropriate to characterize modern industrial life.We need a term which bears no connotation of good or bad moral character, but simply refers to the indisputable fact that modern business and industry are characterized by more self-reliant habits, more foresight and more prudence. and freedom of choice.No term is suitable for the purpose: but "liberty of industry and enterprise," or, in short, "economic liberty," points in the right direction; so long as there is no better term, it may be employed.Of course, this deliberate and free choice may lead to a certain departure from individual liberty when cooperation or association appears to be the best means of attaining a certain end.How far these deliberate forms of association destroy the liberty of the individual from which they also originate, and how far they contribute to the public good, is beyond the scope of this book. Section V, an overview of these features and economic developments, has been moved from this volume to Appendices I and II. In previous editions of this book, the introduction to this chapter was followed by two short essays: one on the development of free enterprise and economic freedom in general, and the other on the development of economics.Although austere, they cannot be called systematic histories; they merely illustrate some of the major events in the development of economic structure and economic thought to their present position.These two short essays have now been relocated to the first and second appendices at the end of the book, partly because their full significance will not become fully apparent until after a considerable knowledge of the subject matter of economics; In the two decades since it was written, public opinion has grown considerably over the place that the study of economics and the social sciences should occupy in higher education.It is less necessary than ever to emphasize the statement that many of the themes of modern economic problems have been drawn from recent technological and social changes, and that the form and importance of these problems are all relevant to the effective economic freedom of the majority. related. The relationship of many ancient Greeks and Romans to their domestic slaves was sincere and humane.But, even in Adhika, the material and spiritual well-being of the majority of the inhabitants was not regarded as the main purpose of the citizens.The ideals of life, noble as they are, concern only a few: the theory of value was extremely complex in modern times, and it could have been conceived then, as it can be conceived now, as long as almost all manual work was done at that time. It is enough that it can be replaced by automatic machinery, which uses only a certain amount of steam power and raw materials, irrespective of the requirements of a good civic life.Much of modern economics may indeed have been foreseen in the medieval city, where a spirit of intelligence and daring was first combined with stoic industry.But the cities of the Middle Ages could not quietly build their businesses; the world must wait for a new economic era until the peoples of the nation were ready to take the test of economic freedom. England in particular was gradually getting ready for the job; but towards the end of the eighteenth century the change, which had been slow and gradual, suddenly became rapid and intense. The invention of machinery, the centralization of industry, and the system of mass production for distant markets, broke up the old industrial traditions, and made everyone bargain as freely as possible; There is no shelter for the increased population beyond the mere foothold in the city.Thus free competition, or rather freedom of industry and enterprise, runs rampant like a gigantic and unruly monster.The misuse of their new power by able and uneducated merchants caused evil on all sides; it placed mothers in positions unfit for them.It has increased overwork and disease among children, and in many places has degraded the nation.At the same time, the benevolent sloppiness of the poor laws (poorlaW) was even more sufficient to lower the moral and physical strength of the Englishman than the brutal sloppiness of industrial discipline: those capacities, it increases the harm done by the advent of free enterprise, and diminishes the good it does. But free enterprise is most celebrated by economists when it assumes an uncharacteristically ruthless form.This is partly because they clearly saw, and our generation has largely forgotten, the cruelty of the bondage of customs and strict laws that free enterprise has superseded; All liberties—political and social—are worth it at any cost, except for the loss of security.But it was also partly because the productive power given to Britain by free enterprise was its only means of victory against Napoleon.Economists, therefore, do not regard free enterprise as a purely good thing, but only as less evil than the restrictions that could be imposed at the time. The idea of ​​free enterprise was mainly initiated by merchants in the Middle Ages, and continued to be developed by Anglo-French philosophers in the second half of the eighteenth century. Ricardo and his followers developed a theory of the function of free enterprise based on this idea (or as The theory of free competition, as they themselves say), contains many truths whose importance will probably last forever.Their work is extremely perfect in the narrow range it deals with.But its essence consisted for the most part of the questions of rent and the value of corn on which the fortunes of England seemed to depend; But many of these problems, which Ricardo solved in a particular way, are not directly relevant to the present situation. Much of what remains of their writings has been narrowed by too much attention to the particular circumstances of England at the time; this narrowness has provoked a reaction.Now, therefore, when more experience, more leisure, and greater material resources have enabled us to exercise some control over free enterprise, and to lessen its power for harm and increase its power for good , and among many economists there has instead developed a distaste for it.Some even like to exaggerate its harm and attribute to it the cause of ignorance and suffering, which are the result of tyranny and oppression of past ages, or of misunderstanding and misuse of economic freedom. Most economists fall between these two extremes, conducting their research simultaneously in many different countries, willing to undergo long and arduous work with an unbiased desire for truth in their research, Only in this way can valuable scientific results be obtained.Differences in will, temper, training, and opportunity have made their methods of working different, and have made different emphases on the various parts of the problem.They all more or less need to collect and organize facts and statistics about the past and present; I find the latter job more attractive.However, such a division of labor is not contradictory in purpose, but consistent.Their work has enriched the knowledge that enables us to understand the various influences of the means of livelihood and the nature of livelihood on the character and interests of human life.