Part 4

The validity of that generalization is sometimes questioned on the basis of the fact that men often seek to satisfy their desires with excessive exertion. But is that true? Is it not at best only apparently true? Although for the purpose of satisfying a desire for something, one were to walk three miles when he might reach his goal and satisfy his desire by a shortcut only one mile long, but which is unknown to him or is haunted by a dreadful ghost or infested with predatory men or savage animals, or so reputed to be, he would nevertheless be seeking to satisfy his desire with the least exertion. To risk contact with a ghost or a robber or savage beasts would add much more to his exertion mental and physical, than a walk of three miles for the satisfaction of a desire that might be satisfied by a walk of one. The statement that men seek to satisfy their desires with least exertion is to be read with the interpretation that they do so with the least known and the least dreaded exertion; also that the desire may include effort for the sake of effort, for effort desired as in exercise for health’s sake or exertion for the sake of play.

The Economic principle that men seek to satisfy their desires with least exertion does not imply that all men, or any of them know what the least possible exertion is. It is least only in their more or less biased or ignorant judgment. There is no contention that they do satisfy their desires with least exertion. The contention is that they naturally seek to do so. Critics of this natural law of Economics should have a care lest they fail to “see the forest for the trees.”

Like the principle in physics to which it is analogous this law of Economics involves the element of least resistance. As in physics the line of least resistance may not be a straight line, although that is its tendency, so in Economics it may not be a direct line. Nor may it be the same line from generation to generation. Precisely as in physics physical obstacles may divert a line from direct to crooked, so in Economics such obstacles as customs, habits, superstitions and ignorance may cause analogous diversions. But as the physical line of least resistance, though not always the shortest by foot rule measurement, is the shortest considering obstacles, so the Economic line of least exertion is as straight as habit, custom, superstition, advice, ignorance, and other obstacles permit.

Let the principle be tested by Money measurements. Will any sane man pay $100 to satisfy any Economic desire of his which he knows he can satisfy as perfectly for $75, or $80, or $90, or even more than $90 so it be less than $100? Certainly not. Then the Economic law in question may be expressed in terms of Money. Instead of saying that men seek to satisfy their Economic desires with least exertion, we may express the same natural law by saying that men seek to satisfy their Economic desires at the lowest Money cost. Both statements have the same meaning. The only difference between them is that the latter is expressed in terms of Money measurement whereas the former is expressed in terms of human effort.

Another familiar demonstration of this natural Economic law that men both individually and in the mass seek to satisfy their Economic desires with least exertion, is the human craving for Labor-saving invention. Could any more comprehensive exemplification of the natural law in question be demanded? Why does mankind crave Labor-saving methods for producing Artificial Objects from and upon Natural Resources, if there be no law of human nature which impels mankind to seek satisfaction of Economic desires with least exertion? John Orr concisely sums up this Economic law in these words: “Very strong and deep is the desire of men to find the easiest way of doing things.”[4]

[4] “Short History of British Agriculture,” By John Orr. Oxford University Press, 1922.

The earliest expression of this principle was by Henry George in 1879. Alluding to Political Economy, the term by which Economics was then identified, he wrote: “It lays its foundations upon firm ground. The premises from which it makes its deductions are truths which have the highest sanction; axioms which we all recognize; upon which we safely base the reasoning and actions of every-day life, and which may be reduced to the metaphysical expression of the physical law that motion seeks the line of least resistance--viz., that men seek to gratify their desires with the least exertion.”[5]

[5] “Progress and Poverty: An Inquiry into the Cause of Industrial Depressions, and of Increase of Want With Increase of Wealth. The Remedy.” By Henry George. New York: D. Appleton and Company. 1883.

In the Economic realm all human exertion is usually and appropriately distinguished by the technical term “Labor.” This Economic term for human exertion in the production of satisfactions for human wants has been much abused by colloquial interpretations. So interpreted, Labor is often limited in meaning to the exertions of persons hired in “lower class” pursuits for fixed “wages.” For somewhat “higher” grades of service, “salaries” instead of “wages” are paid. For self-employers still other terms are colloquially used, such as “profits” for the services of merchants and manufacturers and contractors; “fees” for the services of lawyers and physicians; “commissions” for the services of salesmen and brokers; and “discounts” for the services of bankers. Those verbal variations are of course admissible for such secondary purposes as private business may require; but for fundamental or general Economic distinctions which concern the whole human family, they are recklessly undiscriminative and hopelessly confusing. This lack of discrimination is attributable to a tendency in Economic study toward devotion to infinite detail regardless of precise generalization.

The result is a confusion of fundamentally different objects in messy categories, such as Labor with Labor-products; such as Labor-products with Natural Resources; such as income from Natural Resources with income from Labor--as, for instance, “Land” (Natural Resources) with “Capital” (Artificial Objects). It is like thinking of oil and water as a chemical compound when they happen to be in the same receptacle.

Fundamental conclusions in Economics cannot be based upon unassorted details. Students must concentrate their study upon the big facts, the Basic Facts, those primary categories which distinctively classify the whole swarm of secondary facts. Well enough it may be not to start out with assumed principles, nor with the scientific substitute known as “hypotheses;” but all rational study of Economics must begin with the Basic Facts and proceed thence to a consideration of details with reference to their basic relations.

The distinctive phase of the present Lesson with reference to human exertion is exertion of the Economic type. Whatever its kind as matter of secondary classification, all human exertion comes within the meaning of the comprehensive Economic term for human service, which, as already stated, is Labor.

No more truly in the Labor category are the services of “wage-workers” than are those of farmers, of manufacturers, of merchants, of brokers, of bankers, of architects, of lawyers, of physicians, of engineers, of authors, publishers, teachers, or the services of any other useful workers who participate in the intricate processes of Economic production. All are within the Labor category. Be the Economic service whatever it may which any human being--from inventor to chattel slave--contributes to the satisfaction of human wants, such service belongs in the same basic category with every other Economic service. Consequently, it must be identified in fundamental Economic classification by the same technical term.

What term may be best for that purpose is of minor importance, if of any importance at all, since names are for identification rather than description. Consequently, the technical term Labor, adopted long ago by Economists of the highest rank to identify human service in Economics, is fully justified regardless of its descriptive qualities. Even as a descriptive term, what other word could better identify human service as a whole?

Among the outstanding minor classifications of Labor is Business, and to this another attaches which some advanced students in Economics classify by itself fundamentally. The latter is the service of the “entrepreneur” or “enterpriser.” As a secondary classification this distinction is probably useful; but for comprehensive Economic study it is as useless as “carpenter” or “bricklayer” would be. Worse yet, it is misleading.

The “enterpriser” is a worker whose compensation for service is not fixed but depends upon the profitableness of the enterprise he pursues, which may be any business venture from mining or manufacturing to merchandizing, and in any capacity from employer seeking “profits” to salesman on “commission.” To eliminate this type of Economic service from the fundamental Labor category in Economic science is not only useless and misleading but also absurd. The fact that the “enterpreneur’s” service may or may not prove profitable to himself--the fact, in other words, that when he enters upon an enterprise he “takes chances” as to compensation--does not alter the Economic character of his functioning. He is none the less nor any the more in the Man category of Economics in contradistinction to the Natural Resource category and the Artificial Objects category. The only Economic difference, essentially, between him and the “common laborer” or “wage-worker”--except that one may be more serviceable than the other, individual for individual--is that the compensation of the “common laborer” or “wage-worker” is nominally secured by contract, whereas the “enterpriser’s” is contingent; and this difference is not fundamental. To take the “enterpriser” out of the Labor category in Economics by assigning him to a fourth fundamental category, is to trifle with Economic classifications. Why extend the basic categories of Economics from Natural Resources, Artificial Objects and Man, to Natural Resources, Artificial Objects, Man and Enterprisers?

A similar classification of Business itself--which, by the way, is usually managed by “enterprisers”--would likewise be absurd and trifling as well as confusing. What is legitimate Business but human service? And what else in Economic classification fundamentally can human service be but Labor? Business is in the Man class of Economics in contradistinction to the Natural Resource class and the Artificial Objects class. No other fundamental classifications are possible. Consequently, the activities of Business classify themselves naturally in the domain of Economics as Labor.

And so of the professions.

So, too, of every other kind of human service in the Productive Process, whether the service take on such direct forms of Production as making Artificial Objects and such as delivering them from hand to hand or place to place, or such indirect forms as promoting the comfort, the enjoyment, the health, the education, the cleanliness or what not (provided it be Economically legitimate), of such human workers as literally do make or deliver Artificial Objects. All are in the Labor category.

Labor comprises, too, the serviceable operations of partnerships as such; also of corporations, of chambers of commerce, of labor unions; the services of schools and churches and theaters and social clubs; of political parties and religious societies--every kind of corporate service, in short, including the service of governments--to the extent that such service contributes, in addition to the contributions of its constituents in their individual capacities, to the production of Artificial Objects.

And Production--let the reference to this fact be not overlooked--comprises Delivery throughout the whole Productive Process to and including its termination in delivery to ultimate consumers. Railway workers and sailors and storekeepers and household servants and waiters at hotels and restaurants and all their Economic associates from employer to “menial,” are producers as truly as are farmers, mechanics or manufacturers.

Human services of the corporate type, as well as those of the individual distinctively, are too numerous and too intricately woven together to permit of detailed consideration here. It is enough to note that far and away as some of them may at a glance seem to be from the Productive Process in Economics, they will be found upon intelligent inquiry--except as they may be more or less perverted in operation--to be in the Economic category of Labor. That is to say, they are human factors in the Production of Artificial Objects from and upon Natural Resources.

One kind of corporate service, a comprehensive kind, should perhaps be given brief special consideration for the double purpose of illustrating the Productive functions of every variety of corporate service and of explaining the Economic characteristics of that outstanding one of all. This particular kind is Government.

The “business” of Government, to use a colloquialism, the Labor of Government, to use the technical Economic term, is comprehensive and effective in the Productive Process to the degree--a reservation that applies to all other subclassifications of Labor, from the lowest grade of “hired man” to the most powerful partnership or corporation, from the most awkward apprentice to the shrewdest business “enterpriser,”--that its functions are wisely and fairly devoted to the task.

Governments are legislative, executive and judicial agencies of social wholes. It is their function to contribute service to the production of Artificial Objects by preserving public order, defining and protecting private rights, distinguishing and conserving common rights, and managing or providing for the management of common affairs. To the degree that governments faithfully exercise their legitimate public functions and refrain from interfering with legitimate private functions, they contribute to the Productive Process. This is demonstrated by observable Economic results. Wherever Government approximates a realization of its functions, Economic conditions are manifestly better than where it neglects or abuses them. Evidently, then, Government is a form of human service which, like all other human service forms, belongs as an Economic factor in the Labor category.

And as with Governments, so is it with all other organizations in so far as their organic activities tend to promote good order, fair dealing, righteous social adjustments, peace, and general Economic prosperity.

The essential considerations with reference to Labor may be compactly summarized in these terms: (1) Labor can create nothing; it can only _produce_, by altering the forms and locations of natural substances. (2) Nothing but Labor can so produce. (3) Labor is therefore the sole directing factor in the production of Artificial Objects from and upon Natural Resources.

II. NATURAL RESOURCE FACTORS

In the foregoing discussion of the relation of Labor in its broad Economic meaning to the Productive Process, it has been necessary, as a precaution in the interest of clear thinking, to give warning that the technical term Labor is often blurred in its significance by colloquial or business interpretations. A like warning is necessary with reference to the technical term for Natural Resources. This term, adopted long ago and quite appropriate and distinctive, is Land.

If it be said that Labor applied to Land produces Artificial Objects, the Economic meaning is the same precisely as if it were said that Artificial Objects are produced by Man from and upon Natural Resources. But all rational Economic meaning departs from the statement if indefinite colloquialisms or loose business terms be substituted for the precise technical terms.

Yet the technical term Land, like the technical term Labor, suffers in significance from a variety of colloquial and indefinite business interpretations. Indiscriminately it may mean open prairie land, or improved farms, or vacant building-lots, or buildings and the lots on which they stand, or all of them together. The absurdity of such undiscriminating interpretations is obvious to any one who reflects upon the significance of the three Basic Facts of Economics--Man, Natural Resources and Artificial Objects.

Such colloquial and business-habit confusions of the technical Economic term Land, like similar confusions with reference to the technical Economic term Labor, often mislead advanced students of Economics as well as “the man on the street.” In any serious consideration of the Productive Process it is of the utmost importance that the Basic facts be kept distinctively and definitely in mind.

As Labor in Economics means service by and for Man, and nothing else, so Land in Economics means neither more nor less than any and all Natural Resources. It is the technical Economic term for the Natural Resource factor in the Productive Process.

Without Land, Labor would be powerless to produce Artificial Objects. But Land is abundant in all varieties. Trees grow in forests, minerals repose in the earth, the soil offers itself to the farmer, the sea to the sailor, solid ground to the builder, flowing streams to all. Together with the winds, the lightning, the snow, the rain and all the other subtle and mysterious forces of Nature, those Natural Resources respond freely to the multifarious energies, the broadening knowledge of natural law, and the intensifying skill of Labor. They are among the natural substances and forces which are comprehended in the word Land as a technical Economic term.

As Labor is the active factor in the production of Artificial Objects, so Land is the corresponding passive factor.

III. ARTIFICIAL OBJECTS

Unless the category of Artificial Objects (which are the continuous outcome of the Productive Process) be treated with like fidelity to the meaning of technical Economic terms, there will still be confusion and consequent bafflement in Economic study.

Yet such fidelity is sadly lacking. There is an unfortunate tendency to indulge in the same colloquial trifling and business habits of speech with the technical term for this Basic Fact as with the technical term for the Man factor and the technical term for the Natural Resource factor. Although Wealth is the generally accepted technical term for Artificial Objects, careless uses of this term have well nigh obliterated its technical significance.

Technically it is correct to say that Wealth is produced by Labor applied to Land. This means neither more nor less than that Artificial Objects are produced from and upon Natural Resources by mental and physical exertions of Man. So used and understood, those technical terms enable us to trace Economic details in the Productive Process easily and accurately through all their complexities from origin to destination. We have but to assign them to their respective categories or Basic Facts and always to think of them in that connection. Yet, as with Labor and Land, so with Wealth. Colloquializations and arbitrary business meanings of this specific technical term multiply complexities and make Economic confusion worse confounded.

By colloquial usage and in business accounts the word “wealth”--“capital” when used as a sub-classification of Wealth, that is, Wealth devoted to the production of more Wealth--has taken on a variety of misleading connotations. In business accounts, for example, whatever will bring a price to the owner is accounted Wealth, or Capital as a sub-classification of Wealth, whether the object of the price be a building, a domesticated animal, a slave, a vacant building-lot, an unused agricultural area, or an improved and cultivated farm. Some of those items of “wealth” or “capital” do belong, Economically, in the Wealth category, buildings and domesticated animals being among them; but many fall wholly or in part into one or the other of the two other categories, Labor and Land.

Evidently the science of Economics, which comprehends the interests of all and not merely those of a private business, cannot classify slaves as Wealth. Since they are not and cannot be Artificial Objects, but are human beings, they belong of necessity in the Man or Labor category. They differ radically from animals. In the wild state animals belong Economically in the category of Land (Natural Resources) as truly as wild vegetation does; in the domesticated state they are Wealth (Artificial Objects) as truly as produced vegetation is; and if used to produce Wealth they are Capital (Wealth used for the production of Wealth) as truly as machinery is. But slaves in their “wild state” are not Natural Resources for the use of Man, as wild animals are; they are human beings, and as such they belong in the Man category.

As used in business accounts and colloquially, the word “wealth” does, as indicated above, include some kinds of true Economic Wealth, such as “store goods,” buildings, farm produce, machinery and other Artificial Objects. But in those undiscriminating uses it also includes such Natural Resources (Land) as mineral deposits, water fronts, building sites, railroad rights of way; also mere titles to various kinds of property interests, such as bonds, mortgages, deeds, bank balances, money in hand and corporation stocks.

Some of the Economically desirable things which are included colloquially and for business accountings in the term “wealth” are truly Wealth in the technical Economic sense, let us repeat, since they are Artificial Objects produced by Man from and upon Natural Resources--that is to say, by Labor from and upon Land. But others are not at all in the Wealth category, and putting them there has no other Economic result than confusion. Such of them as consist solely of Natural Resources belong in the Land category. Artificial Objects alone belong in the Wealth category. Deeds, mortgages, bank balances, money in hand, corporation stocks and the like, belong in no Economic category at all below the surface of customary titles to property. They are nothing but evidences of legal title to property of any kind--Natural Resources, Artificial Objects, Man himself when and where ownership of Man by Man is conventional.

To illustrate that species of confusion, for the importance of precise discrimination in Economic thought cannot be overemphasized in Economic study, a farm is often accounted “wealth” or “capital” in colloquial and business usage. So of its purchase “price” or “value,” and also of a mortgage upon it. Yet its purchase price and a mortgage are merely evidences of title to property. Neither of them is Wealth or Capital within the meaning of precise Economic terminology. If they were, the more the mortgages upon a farm the more valuable it would be. A farm the purchase price of which is ten thousand dollars would be worth fifteen thousand if it were mortgaged for five, and seventeen if it carried a second mortgage for two. And that would be absurd. The farm itself really consists of a combination of Artificial Objects and Natural Resources--that is to say, of Wealth and also of Land--two radically different things as matter of Economic discrimination. Its site is a Natural Resource, its untilled soil is a Natural Resource, the space which it and its surrounding atmosphere occupy are Natural Resources. All those characteristics are in the Land category. But its artificial enrichments of soil by tillage or other human activity, and artificial replacements of exhausted or partly exhausted fertility, the fencing and the ditching and the buildings, what are they? what can they be but Artificial Objects, and therefore in the Wealth category? Nor is this conclusion vitiated by the fact that permanent improvements of the soil or location by means of drainage or “made land” or the like may with lapse of time lose their artificial characteristics in consequence of an ultimate natural merging with the site.

A different type of illustration, though identical in Economic terminology, would be an urban residence or a building for business. Its site, the enveloping atmosphere, the space--all these are in the Economic category of Natural Resources or Land. But the building is an Artificial Object and therefore in the category of Wealth. If the building burn down or be torn down, then the property--the site and the space it commands--is in the category of Land alone. In no respect can the site and the space it commands be Wealth in the technical Economic sense--in the discriminative sense which identifies basic differences.

In that sense nothing is or can be Wealth except Artificial Objects produced by Man from and upon Natural Resources. The common characteristic of Wealth in the technical Economic sense is that it consists of natural substances which have been adapted by human exertion to human uses. Another term would serve as well, but no term would serve if used also to designate something radically different.