Manual of References and Exercises in Economics - For Use with Volume II. Modern Economic Problems

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Title: Manual of References and Exercises in Economics - For Use with Volume II. Modern Economic Problems
Author: Fetter, Frank A. (Frank Albert), 1863-1949
Language: English
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MANUAL

OF REFERENCES AND EXERCISES
IN ECONOMICS

FOR USE WITH
VOLUME II. MODERN ECONOMIC PROBLEMS

BY
FRANK A. FETTER, PH.D., LL.D.
PROFESSOR OF ECONOMICS, PRINCETON UNIVERSITY

[Illustration]

NEW YORK
THE CENTURY CO.
1917

FOREWORD

This Manual follows the lines of the "Manual of References and
Exercises," published in the autumn of 1916, to accompany the volume on
Economic Principles.

The literature of the field treated in "Modern Economic Problems" is now
so vast that no more than a few of the titles could be included in the
following lists. The references given are usually the more recent of
those that would be helpful to students desiring to go more deeply into
the subjects.

The collection of questions and exercises is based upon the list
printed, first in 1904 and much enlarged in 1910, in the author's
"Principles of Economics." Much material has been added that had been
shaped and used in class work at Princeton University, and a few other
problems have been drawn from, or suggested by, other published lists.
The plan of indicating the original sources of a number of these
questions has been found to be too difficult to be completed for the
present edition. Indeed, it appears that numerous test problems have
become a common heritage for economic teachers, and one can hardly be
sure when one has traced the ideas to their original sources. Some of
them have appeared in somewhat differing forms in various lists for a
half century past.

Particular acknowledgment is made to my colleagues, Professors Adriance
and McCabe, who devised a number of the questions for class use; and to
Dr. Stanley E. Howard, who has given most valuable aid in the
preparation of this Manual in its present form.

F. A. F.

Princeton, N. J., February, 1917.

MANUAL
OF REFERENCES AND EXERCISES
IN ECONOMICS

MANUAL OF REFERENCES AND EXERCISES IN ECONOMICS

CHAPTER I

MATERIAL RESOURCES OF THE NATION

REFERENCES. (Those marked with an asterisk (*) are the shorter
assignments that are most applicable.)

_Adams, C. C._, Commercial geography. 1906.

_Marsh, G. P._, Man and nature: or physical geography as modified by
human action. 1864. (Later editions under the title, "The earth as
modified by human action.")

*_Materials_, 58-61 (Extract from _Mason, O. T._, Technogeography,
or the relation of the earth to the industries of mankind.
American Anthropologist, 7: 135-158. 1905); 61-66 (extract from
_Semple, E. C._, Influence of geographic environment. 1911.)

_Smith, J. R._, Industrial and commercial geography, 1913.

*_Source Book_, 292-302 (extract from); _Daniels, W. M._, Economic
causes as affecting the political history of the United States.
Accountants' Magazine, May, 1907.

_Teele, R. P._, Irrigation in the United States. 1915.

_Trotter, S._, The geography of commerce. 1903.

_United States Census_, 1910. Volume on wealth, debt, and taxation.

_Van Hise, C. R._, Conservation of natural resources. 1910.

QUESTIONS.

1. What relation can be observed between general industrial conditions
and the per capita wealth? Between the character of the people and the
per capita wealth? Can countries be grouped geographically according
to per capita wealth?

2. How does the United States compare with other countries with
respect to the estimated amounts and values of cereal products?
Textile fibres? Coal? Iron and copper ore? Present the results of your
study in tabular form.

3. From the reports of the Thirteenth Census prepare a statement in
tabular form showing the geographical distribution of our chief
domestic sources of supply of the leading cereals, of neat cattle, of
textile fibres, of coal, iron ore and copper ore, and of water power.

4. What physical conditions account for the greatness of ancient
Egypt, of Venice, of Holland, of England, of the United States?

5. Has the isothermal line any relation to the number of millionaires?

CHAPTER 2

THE PRESENT ECONOMIC SYSTEM

REFERENCES.

_Cooley, C. H._, Human nature and the social order. 1902.

_Cooley, C. H._, Personal competition. Amer. Econ. Assn., Econ.
Studies, 4: 78-173. 1899.

*_Ely, R. T._, Competition: its nature, its permanency, and its
beneficence. A. E. Assn. Pubs., 3d ser., 2: 55-70. 1901.

_Ely, R. T._, Evolution of industrial society. 1903.

_Ely, R. T._, Property and contract in their relation to the
distribution of wealth. 1914. (2 vols.)

_Giddings, F. H._, The economic ages. P. S. Q., 16: 193-221. 1901.

*_Gray, John H._, Economics and the law. A. E. Rev., 5 (no. 1,
supp.): 3-23. 1914.

_Kinley, David_, The renewed extension of government control of
economic life. A. E. Rev., 4 (no. 1, supp.): 3-17. 1914.

_Schmoller, Gustav_, The mercantile system. Trans. by Ashley, 1896.

QUESTIONS.

1. State briefly and criticize the theories of the origin of private
property.

2. What have been the theories put forward to justify the system of
private property in the past?

3. Under private property, can men complain of the use made by others
of their wealth on the ground merely that it was unwise?

4. What are the recognized limitations upon the right of private
property? Are these limitations in opposition to the principle by
which private property is now generally defended?

5. Is the right of bequest a necessary condition of private property?

6. Do you know of any father who created more wealth because he could
bequeath it to his son?

7. Does the son work as hard when he inherits his father's wealth?

8. What is the effect of private property on saving?

9. What is meant by the "Factory System"?

10. Through what historic stages has production passed?

CHAPTER 3

NATURE, USE AND COINAGE OF MONEY

REFERENCES.

_Jevons, W. S._, Money and the mechanism of exchange. 1875. Chs.
III-VII, XIII.

*_Johnson, J. F._, Money and currency. 1905. Chs. I, II, IX.

*_Phillips, C. A. (Ed.)_, Readings in money and banking. 1916. Chs.
I-III, XIV.

_Walker, F. A._, Money in its relations to trade and industry. 1st
ed. 1879. Chs. I, II.

_White, Horace_, Money and banking illustrated by American history.
Ed. 1914. Bk. I.

QUESTIONS.

1. What are the qualities of metallic money?

2. What is the difficulty in deciding whether to call the following
money: gold ingots, gold coin, silver dollars, copper cents,
greenbacks, bank-checks, chalk-marks to keep account?

3. Who makes coins? Would jewelers make better ones?

4. What are the advantages and disadvantages of a seigniorage tax?

CHAPTER 4

THE VALUE OF MONEY

REFERENCES.

_Fisher, Irving_, The purchasing power of money. 1911.

_Gibson, Thomas_, Special market letters on the increasing gold
supply and its effect on security values; interest rates;
commodity prices, etc. 1908.

*_Johnson_, chs. III-VIII, X.

_Kemmerer, E. W._, Money and credit instruments in their relation to
general prices. 2d ed. 1909.

_Magee, J. D._, Money and prices. J. P. E., 21: 681-711, 798-818.
1913.

*_Phillips_, chs. VIII, XI.

_Round table discussion_, Money and prices. A. E. Assn. Bul., 4th
ser., 1 (no. 2): 46-70. 1911.

*_Source Book_, 303-313. (Extract from report of the Secretary of
the Treasury, 1911.)

_United States Secretary of the Treasury_, Finance report, 1911.

_Walker, F. A._, chs. IV, V.

QUESTIONS.

1. What are the functions of money?

2. What are the principal things besides money uses that cause a
demand for gold and silver?

3. Why do you value money? Do you value it more than the things it
buys?

4. When goods are exchanged for money or money for goods, what is the
gain?

5. If money is a tool, what does it make?

6. When gold comes out of the mine is the gain to the community
greater or less than when the same value of grain is harvested?

7. Are men wealthy in proportion to the money they have? Are
countries?

8. Would a nation be poorer, if, like Sparta, it prohibited all money?

9. Is a community poor because it has little money in circulation or
does it have little money in circulation because it is poor?

10. Could a country better do without money, horses, or roads?

11. Why does nearly all the gold produced in California leave the
state? What keeps any of it there?

12. The mint price of an ounce of gold, .900 fine, is alike at San
Francisco and Philadelphia, $18.604. Why is gold ever shipped from
California to New York?

13. Does gold cost the day-laborer as much in California as in New
York?

14. Note any habits of friends that result in their carrying more or
less money than others of the same income.

15. What determines the amount of money needed by different persons,
towns, states, and nations?

16. Give examples of things that increase the demand for money.

17. On an isolated island would it make any difference as to the value
of money if there were but one gold-mine or several competing ones,
supposing that the output were the same?

18. What per cent. of the total money in the world is the yearly
output of gold; of silver; of gold and silver? Stat. Abst.

19. Is the value of gold and silver due to the action of government?

20. In what ways may the government determine the value of the
monetary standard?

21. If all the different denominations of media of exchange were
doubled in number, exchanges remaining unchanged, what would be the
effect upon prices?

22. Is it true of all commodities that changes in supply affect their
value proportionally? Is it true of money? If in your opinion there is
any difference, explain it.

23. If the amount of coal in a country should be increased twenty-five
per cent., in what percentage would you expect the value of coal to
change? Give reasons. If the amount of money in a country should be
increased twenty-five per cent., in what direction and in what
percentage would the value of money change? Give reasons. (In each
case the condition is "other things being equal.")

24. If in a given community all watch cases were made of gold, and
each case contained one ounce of gold, would you expect the value of
watch cases to fall by exactly one-half if the number of watch cases
in the community were doubled, all other things remaining the same? If
in another community (at another time) all exchanges were made
exclusively by the use of gold coins, each containing an ounce of pure
gold, would you expect that prices in general would be exactly doubled
in case no change occurred in the community except a doubling of the
number of coins in circulation?

25. Why might an increased resort to barter produce upon the general
level of money prices effects similar to those produced by an
increased use of credit media of exchange?

26. What gives rise to the belief sometimes held that money is an
invariable standard of value?

27. Define depreciation and appreciation of the currency. What causes
may produce either? What are the effects of either? More generally,
what determines the value of the currency?

28. If gold were to become as plentiful as iron, would it be worth
more or less than iron?

29. A nation having no foreign trade had originally in circulation
1,000,000 coins, each called a florin, and each containing an ounce of
pure metal. To this original coin circulation the government adds
500,000 florins each containing one-half ounce of pure metal, and at
the same time the government adds to the circulation 600,000 florins
in the shape of inconvertible paper. Both the half ounce florin and
the paper florin are by law made legal tender for a full weight
florin. In the absence of any tendency to discriminate between
accepting different kinds of florins in domestic trade, and with no
other changes in the money situation except such as are necessitated
by the aforesaid additions to the circulating medium, tell, first,
what ultimately will be the number of florins in circulation, and give
your reasons; and tell, second, of what kinds of florins and in what
proportions the ultimate circulating medium will be composed.

30. Assume a country using gold alone as money and having in
circulation 2,000,000 coins, under a system of free coinage. What
would be the effect of closing the mints and issuing 1,500,000 new
coins containing nine-tenths as much gold as the coins above
mentioned, assuming that the number of goods exchanged remains the
same? Explain clearly. What is the total quantity of such new coins
the government can issue and keep in circulation? Explain clearly.

31. A country using gold money as its sole medium of exchange, under
free and gratuitous coinage, makes the following change: it imposes a
seigniorage charge of ten per cent., but without giving up free
coinage or reducing the amount of fine gold in the coin. To what
extent and in what direction will the value of money change, if at all

(a) if the number of goods exchanged gradually increases five
percent.;

(b) if the number of goods exchanged gradually increases
twenty-five percent.?

Give your reasons clearly.

CHAPTER 5

FIDUCIARY MONEY, METAL AND PAPER

REFERENCES.

*_Jevons_, chs. VIII, XVII, XVIII.

*_Johnson_, chs. XIII-XVI.

_Kemmerer, E. W._, Modern currency reforms. 1916.

*_Phillips_, chs. IV, V, XII.

_United States Director of the Mint_, Annual reports.

_Walker_, chs. VIII-XII.

_White_, Bk. II, chs. III-VI.

QUESTIONS.

1. When 5160 grains of standard gold (i.e., by weight nine-tenths
fine, with the other tenth composed of the alloy used in gold coin of
the United States) sell in New York for $201.25 has the money
"saturation point" been reached or exceeded, and will bullion be taken
to the mint or coin melted down or exported?

2. Define legal-tender as applied to money. What is meant by fiat
money?

3. Is a United States standard silver dollar commodity or fiduciary
money? What determines its value? Of what importance is its legal
tender quality?

4. Is the provision of law whereby the fractional silver coins of the
United States are of less proportionate silver content than the
standard silver dollar necessary to-day? Is it useful? Give your
reasons.

5. Under what conditions will "bad money" fail to displace "good
money" from circulation?

6. Under what circumstances will money that is not in fact convertible
into other money have greater value than the material of which it (the
first mentioned money) is made? Give an example from the monetary
experience of the United States.

7. In a country which has hitherto had free and gratuitous coinage of
gold, the government institutes a seigniorage charge of five per cent.
by reducing to that extent the amount of gold put into each coin; the
gold withheld by the government is not coined. What will be the effect
of this seigniorage charge upon (a) prices in that country, (b) the
comparative value of the gold in a new coin and the same weight of
uncoined gold? Make your reasoning clear.

8. If a nation's entire money circulation consisting of 1,000,000
coins, all of them debased by a seigniorage charge of 50 per cent.,
were at once increased by the government's putting into circulation
300,000 pieces of inconvertible paper money, each piece of the same
denomination as each coin, what effects might be anticipated on the
basis of Gresham's law or otherwise, it being presupposed that the
full amount of full weight coin required to conduct the nation's
exchanges is only 900,000? Give your reasons.

9. A certain island has no silver mines and no foreign trade. It
effects all its exchanges by the actual use of silver coin whose
coinage is free and gratuitous. It has no banks, and does not resort
either to barter or to credit. Silver is also used in the shape of
plate in the island. Originally it had 100,000 silver coins in
circulation, each containing one ounce of pure silver. After a certain
date, as these coins were paid into the government treasury for taxes,
at the rate of 5,000 one-ounce coins per week, the one-ounce coins
were melted and the resulting bullion was recast, each new coin
weighing 2 ounces and bearing the same name as the original one-ounce
coins. Thereafter all coins struck at the island Mint contained two
ounces of silver, and at that standard coinage continued free and
gratuitous. When the government first pays out the new 2-ounce
pieces, will they remain in circulation with the old one-ounce coins
and have the same purchasing power? Give reasons.

10. If the above-described process of reminting 5,000 one-ounce coins
per week continues for twelve weeks and then stops, how many old and
how many new coins will at the end of the twelfth week be in
circulation? Reasons.

11. The government of the island of Guernsey having no money, issued
paper-notes to pay for the building of a market. They circulated and
were gradually taken up as the market earned its cost, during ten
years. When they were all redeemed and burned, the island had the
market free of cost. Explain how this could be done. (From Sumner's
Problems in political economy.)

12. Suppose a nation has 1,000,000,000 gold coins, each weighing one
ounce (Troy) as its only circulating medium. Suppose that the
government enacts that henceforth coins will be uttered containing
only 99 per cent. as much pure gold as heretofore, the government
taking one per cent. for its own use.

Suppose "other things remain the same." What effect will this action
have on the number of coins circulating?

Will prices be affected?

Now suppose the demand for money increases. Will bullion owners bring
their bullion to the mint for coinage?

Suppose this government had continued to utter coins of the same
weight and fineness as before, but had kept back one per cent. of the
bullion brought to the mint for its own use. Answer these three
questions in the light of this supposition.

13. Tabulate the index numbers, the greenback price of the gold
dollar, and the gold price of the greenback dollar, from 1861 to 1879.

14. Show the difference between convertible and inconvertible money.

15. Contrast the position of the commodity money theorists with that
of the fiat money theorists.

16. In a gold-standard country, one-half of whose monetary circulation
consists of silver dollars (which are unlimited legal tender) and of
silver certificates payable on demand in silver dollars (and supported
dollar for dollar by silver dollars in reserve), and whose mints are
closed to the free coinage of silver, how would the money value of the
silver dollars and silver certificates be affected if the gold price
of silver should fall (1) 10 per cent.? (2) 50 per cent? (3) 5 per
cent.? How would it be affected if the value of gold should fall 10
per cent? (Free coinage of gold is assumed). Explain the principles
involved in your answer.

CHAPTER 6

THE STANDARD OF DEFERRED PAYMENTS

REFERENCES.

_Fisher, Irving_, Appreciation and interest. A. E. Assn. Pubs., 11:
331-442. 1896.

_Fisher, Irving_, A remedy for the rising cost of
living--standardizing the dollar. A. E. Rev., 3 (no. 1, supp.):
20-28. 1913. Round table discussion of above, 29-51.

_Fisher, Irving_, Objections to a compensated dollar answered. A. E.
Rev., 4: 818-839. 1914.

*_Jevons_, ch. XXV.

*_Johnson_, chs. XI, XII, XVII.

_Kinley, David_, Objections to a monetary standard based on index
numbers. A. E. Rev., 3: 1-19. 1913.

*_Materials_, 787, 788 (extract from _Brown, H. G._,), 788, 789
(extract from _Clark, W. E._, in "How to invest when prices are
rising." 1912).

_Noyes, A. D._, Forty years of American finance. 1909. Chs. I-III.

_Patterson, E. M._, Objections to a compensated dollar. A. E. Rev.,
3: 863-874. 1913.

*_Phillips_, chs. VI, VII, XIII.

_Taussig, F. W._, The plan for a compensated dollar. Q. J. E., 27:
401-416. 1912-1913.

_United States Bureau of Labor Statistics_, Bul. 173. 1915.

_Walker_, chs. III, VI, VII.

QUESTIONS.

1. In which year between 1890 and the present year would a fixed
salary of $1,000 have gone farthest? In which year would its
purchasing power have been least? If a sum of $1,000 loaned in 1897
was returned in 1902, what was the difference in its purchasing power
on its return and when it was loaned?

2. Will a day's work of a common laborer buy more to-day than it would
a half century ago? Why?

3. The Bureau of Labor's index number for 1912 was 133. What was the
percentage change in the value of money from the base period to 1912?
Give your reasons and your work.

4. _Average prices for
years 1860-65._ _Prices for 1900._
Coffee, lb. $ .12 $ .18
Coal, ton 3.00 3.60
Sugar, lb. .08 .06
Wool, lb. .30 .20
Wheat, bu. .80 .90

Upon the basis of the prices of the above commodities estimate the
general price level for 1900, showing the percentage of its decline or
advance from the basal price level. Indicate some of the causes which
may have brought about this decline or advance.

5. At a given time the following commodity prices prevailed: cotton
(raw), $.10 per lb.; wheat, $1.00 per bu.; sugar, $.07 per lb.;
potatoes, $1.00 per bu.; beef (for roasting), $.25 per lb.; shoes,
$5.00 per pair; cotton cloth of a standard grade, $.12 per yd.; woolen
cloth of a standard grade, $1.25 per yd.; men's hats, $4.00, and coal,
$7.00 per ton.

At a later date the prices of the same commodities were respectively
as follows: $.13, $1.05, $.06, $1.10, $.30, $5.75, $.15, $1.20, $4.50
and $6.50.

Tabulate these facts and compute index numbers, which will show:

(1) changes in the price level of all ten commodities.

(2) changes in the price level of the articles of food.

(3) changes in the price level of the articles of clothing.

6. In the preceding exercise, do the data afford sufficient grounds
for saying that the cost of living has moved either upward or
downward?

If an affirmative answer be assumed, what has been the change in the
value of money?

7. Assign to each of the commodities listed above a "weight" which
represents, in your opinion, its importance as an article of popular
consumption. Using this system of weights compute index numbers to
show changes in the price levels of the same groups of commodities.
How does the weighting affect your first conclusions regarding the
changes in the cost of living? What is the importance of a system of
weighting?

8. If the world's annual production of gold should suddenly increase
five-fold, what would be the probable effect: upon the welfare of a
stock exchange speculator as compared with the welfare of a teacher;
upon the welfare of the creditor class as compared with that of the
debtor class; upon prices?

9. What is the function of the standard of deferred payments? What is
that standard now in America? What change in it has lately been going
on? How is this affecting the incomes of various classes?

10. What ought to be the characteristics of a standard unit of value?

11. Can you get a kind of money that will make the things that are
sold, dearer, and the things that are bought, cheaper?

12. Is the fact of one man's gain and another man's loss by chance of
any economic or political importance?

13. If every piece of money should miraculously be doubled in a night,
whose interests would be affected?

14. Compare the effect of an increasing gold output upon the price of
outstanding bonds with its effect upon the price of common stock
already issued.

15. X is an isolated industrial country with a certain volume of
money. Its government on a given day doubles the amount of currency.
What will be the effect upon the rate of interest.

(a) of long-time loans,

(b) of short-time loans, and

16. The rate of interest on long-time investments in a certain
isolated community has been six per cent. The amount of money in this
community is increased so as to raise the general level of prices by
100 per cent. Assuming that the increase in money has come wholly from
the more copious output of money-metal from the mines, to what extent
will this rise in the general level of prices affect the rate of
interest when thereafter capital is loaned for long-time periods?

17. Could a railway in the United States advantageously float a large
issue of 20-year bonds in the year 1916? Give reasons for your answer.
Show clearly what you mean by "advantageously." Would a railroad wish
to float such an issue if it could? Why?

18. Is there anything in the nature of mining that keeps the ratio of
the supply of gold and silver nearly uniform?

19. Some say Providence has indicated gold and silver as the materials
for money. How has this been done?

20. What are the main reasons given for the ratio of 16 to 1?

21. Does the principle of the substitution of goods have any bearing
on the value of metals under bimetallism?

22. What is the theory of money held by bimetallists?

23. "Inasmuch as gold (before 1848) was more valuable on the world's
market than at the French mint, relatively to silver, it was
impossible that gold should circulate in France." Is this a necessary
conclusion?

24. What arguments advanced in favor of bimetallism in 1896 are
inapplicable to-day?

25. What is the extent of the influence one nation can have on the
ratio of the two precious metals?

26. How would the adoption of international bimetallism to-day at the
ratio of 32 to 1 affect (a) the circulating medium, (b) the standard
of value in different countries? Consider both the immediate and the
eventual results.

27. What would have happened if a free silver law had been enacted in
the United States in 1900?

28. Would an ideal monetary standard always measure the same quantity
of goods?

29. A owes B a long term debt, which falls due just before the
commencement of a commercial crisis; would it be to the advantage or
disadvantage of A if the contract called for payment in terms of a
tabular standard?

30. Why has not the tabular standard of deferred payments come into
common use? Is the tabular standard sound or unsound in principle?
Would your answer apply to the labor standard?

CHAPTER 7

THE FUNCTIONS OF BANKS

REFERENCES.

_Cleveland, F. A._, Funds and their uses. 1902.

_Conant, C. A._, History of modern banks of issue. 5th ed., 1915.

_Dunbar, C. F._, Theory and history of banking. 2d ed., 1901.

_Fisk, A. K._, The modern bank. 1903.

_Holdsworth, J. T._, Money and banking. 1914.

_Kinley, David_, The specie reserve in a banking system. J. P. E.,
20: 12-24. 1912.

*_Phillips_, chs. IX, X.

_Scott, W. A._, Money and banking. 1903.

_Veblen, T._, Theory of business enterprise. 1904.

*_White_, bk. III, chs. I-III.

QUESTIONS.

1. What does a bank do for a community?

2. What are the functions performed by a bank?

3. What are the sources of income to a bank?

4. Explain the most important ways in which the deposits of commercial
banks originate; and state which of these ways creates the greatest
amount of demand liabilities of the banks.

5. Do all banks issue notes? Why?

6. What is the advantage to a bank of the right to issue bank notes?

7. How does the issue of bank notes differ from the lending of funds
to depositors?

8. Can a bank that issues its own notes afford to lend cheaper than
the ordinary capitalist?

9. Two men A and B have notes each for $1000 discounted at the same
bank. A is credited on the bank's books with the right to draw $950. B
receives $950 in the circulating notes issued by this bank. Are the
bank's liabilities increased to precisely the same extent by the two
transactions? Does either transaction immediately lessen the bank's
cash reserve?

10. The following are the items of a report of a National Bank:
Capital stock, $50,000; Cash on hand and in banks, $77,066.21;
Circulation, $49,400; Bills payable, $10,000; United States and other
bonds, $239,050; Deposits, $465,417.41; Surplus and net undivided
profits, $30,952.58; Loans and investments, $289,653.78.

(a) Separate and arrange these items in accordance with a regular bank
statement and prove your answer.

(b) Show how these items illustrate the essential functions of a bank,
explaining in detail the nature of these functions.

11. Sort out from the following items the resources and liabilities
and show the equality of total resources and total liabilities:

Unpaid dividends $ 782.00
Reserved for payment of taxes due 10,000.00
Undivided profits 85,228.57
Capital stock 500,000.00
Surplus fund 250,000.00
Cash items (checks to be presented for settlement in next
day's exchanges) 280,347.43
Loans and discounts 2,782,713.15
U. S. legal tender notes and notes of national banks 435,296.00
Specie 278,304.48
Deposits 4,057,934.61
Overdrafts (checks paid in excess of deposits) 2,842.10
Due from banks and bankers 370,142.02
Real estate 43,900.00
Mortgage owned 1,000.00
Bonds 709,400.00

12. Classify the following items as resources or liabilities of a
national bank and give reasons for your classification of the 1st,
4th, 6th, and 7th: (1) Capital stock, $50,000; (2) Real estate,
furniture, fixtures, etc., $15,046.14; (3) Cash, $69,343.34; (4)
Surplus and net undivided profits, $19,257.43; (5) United States
bonds, $108,951.50; (6) Loans and discounts, $242,546.36; (7)
Deposits, $301,679.91; (8) Circulation (i.e., notes outstanding),
$64,950.

Prove that your classification is correct by balancing the account.
Then show the changes made in the account by the following
transaction: The bank loans $25,000.00 for 90 days at 6 per cent.
interest, and the borrower draws out one-half the amount, with which
he is credited after the bank has made the proper deduction for
interest.

13. The week's averages of the New York banks for the third week in
May compare as follows in 1905 and 1904:

1905. 1904.
Loans $1,120,426,800 $1,056,553,500
Deposits 1,165,151,700 1,100,586,100
Circulation 45,308,300 36,480,400
Specie 215,174,200 210,002,800
Legal tenders 84,333,700 78,143,000

Explain why loans and deposits in the above table show practically the
same increase from 1904 to 1905.

14. How would the balance sheet of a commercial bank issuing an
ordinary asset bank-note currency stand after the following
operations?

The bank opens business with a paid-up capital of $2,000,000 and a
surplus of $400,000. It spends $50,000 in its own bank notes for
furniture and fixtures. It discounts at six per cent. for various
customers $4,000,000 of 60-day notes and bills receivable, the
borrowers taking one-fourth of the proceeds in cash, one-fourth in the
bank's own bank notes, and leaving the balance on deposit. Customers
cash checks on their accounts for $600,000 receiving two-thirds of the
amount in the bank's own bank notes and the other third in coin and
other kinds of "lawful money." Other customers make deposits of
$900,000, of which one-third is in "lawful money," one-third in the
bank's own bank notes, and one-third in the checks of other depositors
in the same bank. The bank buys at par $1,200,000 of railroad bonds,
paying for them in its own bank notes. It pays with its own bank notes
expenses for wages, stationery and taxes to the amount of $10,000. (b)
What percentage of reserve is it carrying at the end of these
operations?

15. Statement of a national bank.

LIABILITIES | RESOURCES
$ Thousand | $ Thousand
Capital, 464. | Loans and discounts, 708.
Surplus, 203. | Over-drafts, .1
Undivided profits, 53. | Bonds to secure circulation
Circulation, 404. | (par value) 450.
Deposits, 419. | Other stocks and bonds, 163.
Due banks, 29. | Due from reserve agents, 105.
| Due from banks, 21.
| Banking house, 32.
| Current expenses and taxes, 3.
| Checks and cash items, 4.
| Exchange for Clear. House, 11.
| Notes of other banks, 15.
| Gold, 30.
| Silver, .9
| Legal tenders, 9.
| Redemption fund in U. S. T. 20.
------- | -------
1,572. | 1,572.

What can you learn from this statement about the kind of business
which the bank is carrying on, and its power to withstand a financial
storm?

16. How would the balance sheet of a commercial bank stand after the
following operations? The bank begins business with a paid-up capital
of $300,000 and a surplus of $60,000. It discounts for customers
$600,000 of four-months notes and bills receivable, at 6 per cent.,
the borrowers taking one third of the proceeds in cash (i.e., lawful
money), and leaving two-thirds on deposit. Customers deposit $200,000,
of which one-half is in cash, one-quarter is in checks drawn on this
bank, and one-quarter is in checks drawn on other banks.

17. Suppose that this bank now reorganizes as a national bank and, to
secure the privilege of note issue, buys United States 2 per cent.
bonds of a par value of $90,000 at $102. These bonds it deposits with
the Treasurer of the United States and receives the full amount of
national bank notes to which it is entitled. Depositors withdraw by
check $180,000, the bank giving them $45,000 in its notes and the
balance in lawful money. A dividend of 2 per cent. is declared, and is
paid, one-half in lawful money and one-half in the form of deposits.
Present the balance sheet.

CHAPTER 8

BANKING IN THE UNITED STATES BEFORE 1914

REFERENCES.

_Hollander, J. H._, Security holdings of national banks. A. E. Rev.,
3: 793-814. 1913.

_Kemmerer, E. W._, Banking reform in the United States. A. E. Rev.,
3 (no. 1, supp.): 52-63. 1913. Round table discussion of above,
64-88.

_Kemmerer, E. W._, Seasonal variations in the New York money market.
A. E. Rev., 1: 33-49. 1911.

_National Monetary Commission_, Report. 1912. In Sen. Doc. 243, 62d
Cong., 2d Sess.

_Phillips_, ch. XXX.

*_Source Book_, 324-336 (extract from National Monetary Commission
Report), 314-323 (extract from 1910 report of the Comptroller of
the Currency).

_Sprague, O. M. W._, Proposals for strengthening the national
banking system. Q. J. E., 24: 201-242, 634-659; 25: 67-95.
1909-1911.

_United States Comptroller of the Currency_, Annual reports.

*_White_, bk. III, chs. IV, XV, XVII, XX, XXI, and appendices A and
B.

_Willis, H. P._, The banking question in Congress. J. P. E., 20:
869-885. 1912.

QUESTIONS.

1. Explain the method followed by national banks in issuing bank
notes. Why did the banks often find it more profitable to use their
money in other ways than by issuing bank notes? Ref.: Discussion in
various reports of Comptroller of the Currency.

2. Section 28 of the National Bank Act of June 3, 1864, after
providing that a national banking association may hold real estate
"necessary for its immediate accommodation in the transaction of its
business" and such other real estate and mortgages thereupon as it may
have taken to secure debts previously contracted, provides that "Such
associations (national banks) shall not purchase or hold real estate
in any other case or for any other purpose...."

(a) What is the reason for the above provision?

(b) Would it be wise to make a similar prohibition on savings banks?

3. Describe the clearing house and define its economic advantages.

4. If there are twenty banks in a town and no clearing house, how many
collections would have to be made by all the banks daily assuming that
each day depositors of each bank receive checks on the other nineteen
banks?

5. Does a clearing house enable the banks that belong to it to get
along with a smaller cash reserve?

CHAPTER 9

THE FEDERAL RESERVE ACT

REFERENCES.

_Conway, Thomas, Jr._, The financial policy of the Federal reserve
banks. J. P. E., 22: 319-331. 1914.

_Federal Reserve Board_, The Federal Reserve Bulletin. Monthly.

*_Phillips_, ch. XXXI.

_Scott, W. A._, Banking reserves under the Federal Reserve Act. J.
P. E., 22: 332-344. 1914.

_White_, bk. III, ch. XXII and appendices D and E.

_Willis, H. P._, The Federal Reserve Act. A. E. Rev., 4: 1-24. 1914.

QUESTIONS.

1. Name and contrast the different kinds of banks in the United
States.

2. How are notes issued under the Federal Reserve Act?

3. If on a given date the surplus reserve (i.e., the reserve in excess
of the legal minimum reserve required by law to be held against
deposits) of the New York Associated Banks amounts to $11,000,000, and
the deposits on the same date amount to $1,164,000,000, what is the
total cash reserve held by the banks on said date? What would it have
been in 1912?

4. The "New York Times" of December 8, 1916, said:

"The rediscounting of commercial paper at the Federal Reserve Bank of
New York by some of the city's largest banks on Wednesday had the
effect yesterday of improving general money market conditions. Call
loans which were made at 15 per cent. on Monday, and as high as 10 per
cent. on Tuesday, and touched seven per cent. Wednesday, were placed
yesterday at from three to five per cent. Most of the loans were made
at four and one-half per cent., the renewal rate, and the closing
quotation was three per cent. Time money rates were easier."

Explain the process of rediscounting here referred to. In just what
way did the rediscounting operations relieve the call money market?
Do you consider that this use of the rediscounting facilities provided
by the Federal Reserve System was in accord with sound banking
principles? Was it the best possible use of the rediscounting
mechanism? For suggestions see the "New York Times" of December 5,
1916, under the heading "Financial Markets."

CHAPTER 10

CRISES AND INDUSTRIAL DEPRESSIONS

REFERENCES.

_Dewey, D. R._, Financial history of the United States, 4th ed.,
1912. Ch. X.

_England, Minnie T._, Promotion as the cause of crises. Q. J. E.,
29: 748-767. 1914-1915.

*_Hamilton_, Readings, 91-93, 93-95, 95-98.

_Hobson, J. A._, Evolution of modern capitalism. Ed., 1912. Ch. 7.

_Jones, E. D._, Economic crises. 1900.

_Juglar, C._, and _Thom, C. W._, A brief history of panics and their
periodical recurrence in the United States. Ed., 1916.

*_Materials_, 391-396.

_Mitchell, W. C._, Business cycles. 1913.

_Moore, H. L._, Economic cycles: their law and cause. 1914.

_Nelson, S. A._, The A B C of Wall Street. 1900.

_Patterson, E. M._, The theories advanced in explanation of economic
crises. A. A. A., 59: 133-147. 1915.

*_Phillips_, chs. XXVIII, XXIX.

*_Source Book_, 138-156.

_Sprague, O. M. W._, The crisis of 1914 in the United States. A. E.
Rev., 5: 499-533. 1915.

_United States Bureau of Labor_, Annual report for 1886.

QUESTIONS.

1. What is a financial crisis? An industrial depression?

2. Describe the trade, banking and price conditions which obtain just
preceding, during and immediately following a crisis.

3. State clearly and explain the movement of prices of stocks, bonds,
mortgages, land, commodities generally, wages and interest rates on
long time and short time loans, before, during, and after a crisis.

4. Tabulate for a series of years covering periods of prosperity and
depression, the prices of stocks, bonds, real estate, and of some
commodities.

5. What economic changes occurred in your own community in the panic
of 1893-94, or in the years 1903-04, or in 1907-08?

6. Is it possible that the amount of all goods produced shall be in
excess of the community's power of consumption?

7. "As the average American can produce far more than he can consume,
it has been proved repeatedly that as long as the sale of his products
is confined to the home markets, over-production is certain to be a
natural consequence of every prolonged period of activity. For half a
century, therefore, with regularly recurring seasons of surplus
production, there came those inevitable commercial crises which
emphasized with increasing force the necessity for foreign markets."
(This passage is taken from a reprint of a speech of a congressman.)

Criticize the view as to the cause of commercial crises expressed in
the above statement.

8. Is a crisis caused by too much or too little money, or by some
other influence?

9. If there were twice as much money in the world, would panics take
place?

10. In a period of depression is there less money than usual in the
country? In the banks?

11. In what ways and to what extent are trade conditions apt to be
affected by:

The increasing gold supply?

The trust movement?

Increasing armies and navies?

The agricultural situation?

12. Explain the difference in the motive of the borrower at ordinary
times and in times of panic.

13. How are loans affected when the reserve limit as established
either by law or custom is reached in England, Germany and the United
States?

14. What in your opinion is the correct explanation of crises?

15. In what ways is business affected by the condition of the crops?
Within what limitations? In the case of which crops is the connection
closest?

16. What element of security is furnished by clearing houses during
panics?

17. Describe the method used by the banks in meeting demands of
depositors during the panics of 1893 and of 1907. (Dunbar is
especially valuable. Also O. M. W. Sprague, History of crises under
the National Banking System, pub. by Nat. Monetary Com.)

CHAPTER 11

INSTITUTIONS FOR SAVING AND INVESTMENT

REFERENCES.

_Chamberlain, Laurence_, Principles of bond investment. 4th ed.,
1913.
The work of the bond house. 1913.

_Devine, H. C._, People's coöperative banks for workers in towns,
and small holders, allotment cultivators, and others in country
districts. 1908.

_Dexter, Seymour_, A treatise on coöperative savings and loan
associations. Ed., 1894.

_Fisher, Irving_, _Kemmerer, E. W._, _Brown, H. G._, and others, How
to invest when prices are rising. 1912.

_Guenther, Louis_, Investment and speculation. 1916. (La Salle Uni.)

_Hamilton, J. H._, Savings and savings institutions. 1902.

_Johnson, A. S._, Influences affecting the development of thrift. P.
S. Q., 22: 224-244. 1907.

_Kemmerer, E. W._, The United States Postal Savings bank. P. S. Q.,
26: 462-499. 1911.

_Kniffin, W. H._, The savings bank and its practical work. 1912.

*_Phillips_, ch. XVI.

_Wolff, H. W._, A coöperative bank handbook. 1909.
Coöperative banking. 1907.
People's banks. 3d ed., 1910.

QUESTIONS.

1. What are the nature and purpose of legislation restricting the
investments of savings banks?

2. What are these restrictions in this state? In your own state? In
those states which are regarded as having the most highly developed
laws in this field?

3. Is legislation in this field to be considered as subsidizing
certain types of private enterprise? If so, is it socially
justifiable?

CHAPTER 12

PRINCIPLES OF INSURANCE

REFERENCES.

_Gephart, W. F._, Principles of insurance. 1913.

_Gephart, W. F._, Insurance and the state. 1913.

_Huebner, S. S._, Life insurance. 1915.

_Huebner, S. S._, Property insurance. 1913.

_Statistical Abstract of the United States._

_Valgren, V. N._, Farmers' mutual fire insurance in Minnesota.
Q. J. E., 25: 387-396. 1910-1911.

_Willet, A. H._, Economic theory of risk and insurance. 1901.

_Zartman, L. W._ (Ed.), Fire insurance. Ed., 1915.

_Zartman, L. W._ (Ed.), Life insurance. Ed., 1915.

QUESTIONS.

1. What are the conditions of economically sound insurance? Give at
least two examples.

2. What is the essential economic difference between gambling and
insurance?

3. Give examples showing the difference between a gambling house and
an insurance company?

4. Investors in Russian bonds are said to take out policies of
insurance payable to themselves in the event of the Czar's death,
their object being to guard themselves against loss by the
depreciation of their Russian securities in case of political
disturbances that might emerge upon a change of rulers.

(a) Do you regard such insurance as gambling or legitimate speculation
from the standpoint of either insurer or insured?

(b) Do you regard the issue of such policies on the part of the
insurance companies as "sound"?

5. Ought lotteries to be permitted by law?

6. Suppose 1,000 owners of 1,000 buildings worth $7,000 each wish to
insure themselves against fire. If the risk for the class of buildings
involved in such that seven out of 1,000 burn each year, what annual
payment from each owner would be necessary to insure all against total
loss--expenses of management, interest, etc., being ignored? (F. M.
Taylor.)

7. Suppose that a corporation owns 500 buildings worth $100,000 each;
that to insure against fire in an ordinary company would cost $250 for
each building; and that the corporation is convinced that by the
expenditure of $10,000 the fire loss can be reduced to an average of
one building every three years. Would it pay the corporation to insure
with some company? (F. M. Taylor.)

CHAPTER 13

INTERNATIONAL TRADE

REFERENCES.

_Bastable, C. E._, The theory of international trade. 1897.

_Brown, H. G._, International trade and exchange. 1914.

_Clare, G._, The A B C of the foreign exchanges. 1895.

_Escher, Franklin_, The elements of foreign exchange. 2d ed., 1911.

_Goschen, Viscount_, The theory of the foreign exchanges. 1898.

_Johnson, E. R._, Probable changes in the foreign trade of the
United States resulting from the European war. A. E. Rev., 6 (no.
1, supp.): 17-25. 1916. Round table discussion of above, 26-49.

_Johnson, E. R._, _Van Metre, T. W._, _Huebner, G. G._, and
_Hanchett, D. S._, History of domestic and foreign commerce of the
United States. 1915.

*_Source Book_, 337-346.

_Willis, H. P._, Transportation and competition in South American
markets. A. E. Rev., 2: 814-833. 1912.

QUESTIONS.

1. Is it bad policy to let the people of a suburban village spend
money in the city for things that could be produced at home?

2. Is it bad policy for California to buy New England manufactures?

3. Give examples of the industrial advantages of America as compared
with Europe.

4. Is the alleged superior efficiency of the American workman over the
competing workman of Europe connected in any way with the principle of
proportionality?

5. Community A has lands that can produce wheat at a cost of 60 cents
per bushel, corn at 40 cents per bushel and potatoes at 40 cents per
bushel. Community B can produce wheat at 70 cents per bushel, corn at
45 cents per bushel and potatoes at 42 cents per bushel. Supposing
that each community can raise just enough of these foodstuffs for its
own use, will there be any incentive for them to exchange these
products?

6. "A man is of all sorts of luggage the most difficult to be
transported." What is the bearing of this fact upon the theory of
international trade?

7. Can a country have a persisting excess of merchandise exports over
merchandise imports? If so, under what conditions?

8. If foreign exchange suddenly rose several cents, while imports and
exports remained the same, to what causes might it be due?

9. If as the result of a year's foreign trade nation A obtains from
other nations $10,000,000 in gold coin in settlement of the balance of
international indebtedness, to what extent does that sum measure the
gain of nation A from international trade? Reasons.

10. The statistics of exports and imports of the United States for the
year 1908-1909 show an excess of exports over imports of $351,000,000
in merchandise; $12,000,000 in silver and $48,000,000 in gold. Explain
clearly how the United States could have had an excess of exports of
merchandise, silver and gold in the same year.

11. If demand exchange on London were selling at $4.835 in New York,
would that indicate anything as to the relative values of our imports
and exports? Would gold be shipped under these conditions and if so in
which direction? Explain.

12. Explain clearly the condition of commerce under which demand
sterling bills of exchange will sell at $4.875 in the New York
exchange market.

13. If the merchandise imports from England to the United States
equalled the exports from the United States to England, what would be
the state of exchange on London? Would there be any greater advantage
to either of the countries engaged in trade?

14. What effect on exchange has the holding of American bonds abroad?

15. If large shipments of wheat are made to England, will bills of
exchange on London be higher or lower in New York?

16. When in New York a sight draft on London for £5000 sells for
$24,150, in which direction are gold remittances likely to be moving?
Give reasons.

17. If England sells $10,000,000 worth of our securities to Americans,
what is the effect on exchange rates?

18. Show what, in a gold-producing country, would be the relations and
interaction of new gold supply, prices, relative amounts of imports
and exports, and rate of exchange. (Sumner.)

19. A nation with _n_ dollars in circulation has to pay a war
indemnity of _n_ dollars to another country having the same
circulation. How much money will each then have, and what will be the
effect on prices, foreign trade, rate of exchange? (Davenport.)

20. Suppose an increase in the volume of our currency, due to a new
issue of silver, what would be the effect upon international trade?
Would this effect be lasting? Would your answer depend at all upon the
condition of our currency at the time the increase occurred?

21. If through the improvement of our banking and currency system a
much larger percentage of the business of the country comes to be done
through the use of credits (rather than money) as the medium of
exchange, what will be the effect on (a) the quantity of money in
circulation, (b) the general level of prices, (c) the composition of
the country's media of exchange, (d) the international movement of
gold, (e) the interests of debtors and creditors, respectively?

22. Each one of two countries, A and B, can, by the application of a
given amount of labor to its material resources, produce any one or
all of the commodities M, N, O, P, Q, R and S, as exhibited in the
following table:

_Commodity._ _Country A._ _Country B._
=M= 50 tons 60 tons
=N= 1000 yards 1100 yards
=O= .25 bales 20 bales
=P= 900 bushels 800 bushels
=Q= 600 ounces 650 ounces
=R= 5000 gallons 5000 gallons
=S= 2500 pounds 2000 pounds

(a) In the absence of restrictive legislation is each country likely
to produce all of these commodities for itself? Why or why not?

(b) If conditions are such as to lead to the territorial division of
labor, which commodities are most likely to be produced in each
country?

CHAPTER 14

THE POLICY OF A PROTECTIVE TARIFF

REFERENCES.

_Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902.
Pt. II.

_Daniels, W. M._, The elements of public finance. Ed., 1911. Pt. II,
ch. VII.

_Johnson, E. H._, The effect of a tariff on production. Q. J. E.,
18: 135-137. 1903-1904.

_Patten, S. N._, The economic basis of protection. 1890.

*_Source Book_, 347-357, 358-360.

_Wallace, H. B._, A balanced tariff. A. E. Rev., 2: 568-575. 1912.

QUESTIONS.

1. Can it be of advantage to trade freely with one nation if general
free trade is bad?

2. If there were no legal bar to a tariff between the states, would a
tariff probably be imposed? If so, would it be a wise measure?

3. Discuss the contention that a protective tariff by helping to keep
out imports of foreign goods tends to maintain a favorable balance of
trade.

4. "The territorial distribution of money is both a determined and a
determining factor in international trade."

Explain the meaning of this statement and show its relation to the
"favorable balance of trade" argument for protection.

5. An Englishman gave this argument for protection: "If an Englishman
buys a frying pan from a German for a shilling (24 cents), then
England gets the frying pan and Germany gets the shilling, whereas if
an Englishman buys the frying pan from an English manufacturer for 13
pence (26 cents), England gets both the frying pan and the 13 pence.
The increase in price benefits England because the money remains
within the country, instead of going abroad to increase the wealth of
foreign nations." Give your opinion of this argument.

6. Discuss this statement: "The American people send abroad over
$100,000,000 a year to pay for imported sugar. To meet this bill
requires the wheat crop of over 7,100,000 acres. But all the sugar now
imported could be grown on 1,700,000 acres in beets or cane. In other
words we are throwing away the product of approximately 5,400,000
acres of land by not growing our own sugar."

7. A New York daily has contended that "Of course, we should be the
gainers if every pound of it (raw cotton) were exported in
manufactured form. Every process through which the raw material passes
in its conversion into fabrics would mean employment for American
wage-earners."

Discuss the proposition that the aggregate for the labor of American
wage-earners is less if we export raw cotton than if we should
manufacture the raw cotton in this country for export.

8. Assuming that an import duty on tea, if sufficiently high, would
create a tea growing industry in the United States capable of
supplying the whole domestic demand, trace the various economic
effects of such a duty.

9. Who gained when Hawaiian sugar (before annexation) was admitted
free of duty, while other sugar was taxed?

10. If the owners of marble quarries can show that their net income is
30 per cent. greater by reason of the protective tariff upon foreign
marbles, does this show that the tariff increases the wealth of the
protecting country?

11. State any proposition which you think that you can maintain about
the relation between high or low wages and international competition.
Maintain your proposition.

12. What do you say to the plan of so adjusting duties on imports as
to equalize the "labor cost" of imported and domestic commodities,
through the levy of duties which will just offset the higher wages
paid by the American employer?

13. Is a high rate of money wages an obstacle to the successful
conduct of industry in competition with countries where money wages
are low?

14. What was the argument originally used as to the comparative wage
levels here and abroad so far as the starting of certain industries in
this country was concerned? Compare this argument with the current
protectionist argument as to the relation between the tariff and the
present general wage level in the United States.

15. What help should the law of wages give in explaining the present
inequality as among the wage scales in Germany, France, England and
the U. S.?

16. If it would pay us to admit goods free, may we be justified in
taxing them to force concessions from the other country?

17. What conditions as to consumption and production at home and
abroad would be most favorable to the shifting of an import duty on a
manufactured article entirely to the consumer?

18. (a) A and B are two tropical islands inhabited by friendly peoples
and producing the same commodities. The climate, soil and topography
of A are such that all kinds of products can be produced there with
less effort than they can be produced in B. Could there be any
incentive for the people of A to trade with the people of B?

(b) Debarring all feelings of hostility and of sentimental
attachment to home, is there any reason why the people of B should
not all emigrate to A?

(d) Suppose A were discovered after a strong civilization had
grown up on B. Might conditions be such that A could with
advantage to itself exact a protective tariff?

CHAPTER 15

AMERICAN TARIFF HISTORY

REFERENCES.

*_Blakey, R. G._, The new revenue act. A. E. Rev., 6: 837-850. 1916.

_Curtis, J. F._, The administrative provisions of the revenue act of
1913. Q. J. E., 28: 31-45. 1913-1914.

_Hoffmann, I. N._, Customs administration under the 1913 tariff act.
J. P. E., 22: 845-871. 1914.

_McKinley, Wm._, History of tariff legislation, 1812-1896. 1896.

_Sumner, W. G._, History of protection in the United States. 1877.

_Taussig, F. W._, How tariffs should not be made. A. E. Rev., 1:
20-32. 1911.

_Taussig, F. W._, Tariff History of the United States. 6th ed.,
1914.

_Taussig, F. W._, The tariff debate of 1909 and the new tariff act.
Q. J. E., 24: 1-38. 1909-1910.

*_Willis, H. P._, The tariff of 1913. J. P. E., 22: 1-42, 105-131,
218-238. 1914.

QUESTIONS.

1. In the light of American tariff history what would you say were (1)
the principal advantages and (2) the principal disadvantages of a
highly protective tariff as a primary source of public revenue?
Illustrate your points by historical references.

2. If other countries can carry our commerce cheaper than we can do it
ourselves and if the citizens of this country can invest their money
with greater profit in other industries, what are the advantages and
disadvantages of allowing those countries to carry our commerce?

3. Tabulate and diagram the values of the imports and of the exports
of the U. S. to and from Europe, N. A., S. A., Asia, Oceanica and
Africa for the latest five years reported. Discuss the question of
American exports and imports in a paragraph not exceeding 200 words in
length. Stat. Abst. (under Progress of U. S.).

4. Make a list of the ten leading articles exported from and the ten
leading articles imported into the U. S. for the latest year
available. What do these show as to the position of the U. S. in
international commerce? Stat. Abst.

CHAPTER 16

OBJECTS AND PRINCIPLES OF TAXATION

REFERENCES.

*_Bullock, C. J._, Selected readings in public finance. 1906. Chs.
VIII, IX.

The growth of federal expenditures. P. S. Q., 18: 97-111. 1903.

*_Daniels_, Pt. II, chs. I-IV.

_Edgeworth, F. Y._, The subjective element in the first principles
of taxation. Q. J. E., 24: 459-470. 1909-1910.

*_Plehn, C. C._, Public finance. 3d ed., rev and enl. 1913. Pts. I,
II.

_Round table discussion of taxation._ A. E. Assn. Bul., 4th ser., 1
(no. 2): 333-346. 1911.

_Seligman, E. R. A._, Essays in taxation. 8th ed., 1913.

QUESTIONS.

1. Does taxation ever infringe on the right of private property?

2. What is it a citizen gets in return for his taxes?

3. Is there any relation between the taxes paid and the benefits
secured from government?

4. In what ways may we understand the proposition that taxation should
be proportioned to ability?

5. It is claimed by some that the use by the government of indirect
taxes increases existing inequalities in the personal distribution of
wealth. What reasons may be given for or against this opinion?

CHAPTER 17

PROPERTY AND CORPORATION TAXES

REFERENCES.

_Brooks, R. C._, The German imperial tax on the unearned increment.
Q. J. E., 25: 682-709. 1910-1911.

_Bullock_, Chs. XI, XV.

_Compton, W. M._, Recent tendencies in the reform of forest
taxation. J. P. E., 23: 971-979. 1915.

*_Hamilton_, Readings, 560, 561.

_Robinson, M. H._, The Federal corporation tax. A. E. Rev., 1:
691-723. 1911.

*_Source Book_, 130-137.

_Tucker, R. S._, The British taxes on land values in practice. Q. J.
E., 29: 794-819. 1914-1915.

_United States Bureau of Corporations_, Report on the taxation of
corporations. Pts. I-IV. 1909-1912.
Special report on taxation. 1913.

_Young, A. N._, The single tax movement in the United States. 1916.

QUESTIONS.

1. A recent newspaper item says: "This is the year real estate is
assessed. Turn the cow loose in the front yard, tear down the fence,
make things look generally dilapidated, for it will be money in your
pocket." What does this indicate regarding taxation?

2. The parts of an estate divided into fifteen equal shares by expert
real estate agents were soon after assessed variously from $900 to
$2850 for purposes of taxation. What does this indicate? (From
Sumner's Problems.)

3. Explain how and why the general property tax has been breaking down
in the United States with reference to the taxation of public service
corporations.

4. What is meant by the separation of state and local revenues? What
advantages do the advocates of separation claim for their plan? What
is your judgment with reference to its advisability?

5. What is meant by the proposition that a single tax on land values
is paid for all time by the one who owns the land at the time the tax
is first imposed?

6. How does Massachusetts tax interstate railroads running through the
state? What defects, if any, do you see in the Massachusetts plan?

7. Can taxation be used to secure some of the profits of large
corporations?

CHAPTER 18

PERSONAL TAXES

REFERENCES.

_Adams, T. S._, The effect of income and inheritance taxes on the
distribution of wealth. A. E. Rev., 5 (no. 1, supp.): 234-244.
1915.

The place of the income tax in the reform of state taxation. A. E.
Assn. Bul., 4th ser., 1 (no. 2): 302-321. 1911.

*_Blakey, R. G._, The new income tax. A. E. Rev., 4: 25-46. 1914.

_Bowley, A. L._, The British super-tax and the distribution of
income. Q. J. E., 28: 255-268. 1913-1914.

*_Bullock_, chs. XII, XVI.

The taxation of property and income in Massachusetts. Q. J. E., 31:
1-61. 1916-1917.

_Daniels_, Pt. II, ch. VIII.

_Grice, J. W._, Recent developments in taxation in England. A. E.
Rev., 1: 488-504. 1911.

_Hill, J. A._, The income tax of 1913. Q. J. E., 28: 46-68.
1913-1914.

_Seligman, E. R. A._, The income tax. Ed., 1914.

_Smith, R. H._, Distribution of income in Great Britain and
incidence of the income tax. Q. J. E., 25: 216-238. 1910-1911.

_West, Max_, The inheritance tax. 2d ed., 1908.

QUESTIONS.

1. What is the present status of the inheritance tax in the American
commonwealths?

2. Discuss the proposition that income is the normal source of
taxation.

3. Outline the history of income tax legislation by the federal
government. What were the conditions which led to the income tax
legislation of 1913?

4. What conception of income does the recent income tax embody?
Illustrate some peculiar distinctions resulting from this use of
"income."

5. What is your opinion concerning the justice of progressive
taxation?

6. Name the two principal arguments in favor of progressive taxation.
Which two arguments in favor of progressive taxation do you consider
the strongest and why? Which two arguments against progressive
taxation do you consider the weakest and why? To what kinds of taxes,
if to any, is the principle of progression inapplicable and why?

CHAPTER 19

METHODS OF INDUSTRIAL REMUNERATION

REFERENCES.

*_Adams, T. S._, and _Sumner, H. L._, Labor problems. 8th ed., 1914.
Chs. IV, IX, X.

_Commons, J. R._ (Ed.), Trade unionism and labor problems. 1905. Ch.
XI.

*_Commons, J. R._, and _Andrews, J. B._, Principles of labor
legislation. 1916. Ch. II, secs. 1-3.

_Cross, Ira B._, Coöperation in California. A. E. Rev., 1: 535-544.
1911.

_Fay, C. R._, Coöperation at home and abroad. 1898.

_Gilman, N. P._, Profit-sharing between employer and employee. 1889.

_Hoxie, R. F._, Why organized labor opposes scientific management.
Q. J. E., 31: 62-85. 1916-1917.

_Round table discussion._ Industrial efficiency and the interests of
labor. A. E. Rev., 2 (no. 1, supp.): 117-130. 1912.

_Schloss, D. F._, Methods of industrial remuneration. 3d ed., 1898.

_Virtue, G. O._, Coöperative coopers of Minneapolis. Q. J. E., 19:
527-544. 1904-1905.

_Wolff, H. W._, Neglected opportunities of coöperation. Econ. Rev.,
16: 190-206. 1906.

QUESTIONS.

1. With increasing division of labor is there greater or less
opportunity for the payment of laborers according to the piece-wage
plan?

2. Discuss the following statement: Under the piece-work system the
foreman looks out for the quality and the operative for the quantity
of the work; under the time-wage system the foreman looks out for the
quantity and the laborer for the quality of the work.

3. What remedy has the foreman for an inefficient laborer working
under the time-wage system?

4. Is time- or piece-work best adapted to the following kinds of
laborers: coal-miners, coopers, farm-hands, printers, engravers,
shoe-factory hands, railroad brakemen, telegraph operators?

5. Since under the piece-work system a man is paid only for what he
does is there any reason for discharging a workman employed under this
plan whose efficiency falls below the average?

6. Describe any case of profit-sharing you may have seen in operation.

7. In the case of a coöperative general store do economic profits
emerge? If so, where do they go?

8. If you have seen a coöperative store in operation tell what was its
success.

9. Compare and explain producers' and consumers' coöperation, showing
the difficulties and advantages.

CHAPTER 20

ORGANIZED LABOR

REFERENCES.

*_Adams_ and _Sumner_, chs. VI, VII.

_Barnett, G. E._, National and district systems of collective
bargaining in the United States. Q. J. E., 26: 425-443. 1911-1912.

_Barnett, G. E._, The dominance of the national union in American
labor organization. Ibid., 27: 455-481. 1912-1913.

_Carlton, F. T._, The history and problems of organized labor. 1911.

_Commons_, chs. II, VI.

*_Commons_ and _Andrews_, Ch. III, sec. 1.

_Groat, G. G._, An introduction to the study of organized labor in
America. 1916.

_Hoxie, R. F._, Scientific management and labor. 1915.

_Hoxie, R. F._, The truth about the I. W. W. J. P. E., 21: 785-797.
1913.

_Hoxie, R. F._, Trade unionism in the United States: general
character and types; the interpretation of union types. J. P. E.,
22: 201-217, 464-481. 1914.

_Lewis, H. T._, The economic basis of the fight for the closed shop.
J. P. E., 20: 928-952. 1912.

_McCabe, D. A._, The standard rate in American trade unions. 1912.

_Mitchell, John_, Organized labor. 1902.

*_Source Book_, 214-227 (extract from McCabe).

_Webb, Sidney and Beatrice_, Industrial democracy. 1897.

_Wolman, L._, The boycott in American trade unions. 1916.

QUESTIONS.

1. Are the opportunities for workmen to rise to the rank of masters as
great as formerly?

2. What are the chief causes of the origin and rise of trade unions?
Distinguish between a trade union and a labor union.

3. What are the conditions favorable to national agreements between
trade unions and employers' associations? Explain clearly the bearing
of each of these conditions.

4. Describe the practices included under the term "direct action," and
contrast with the methods of collective bargaining and legislation.

5. Are strikes becoming more or less frequent and important in your
state? In answer to this question give figures from 1881 on if
obtainable, showing number of strikes; establishments affected and to
what extent; loss in wages and to employers. Diagram the figures.
Ref., U. S. Bu. of Labor, Annual report, 1906.

6. Do trade unions increase or decrease the number of strikes?

7. If you were an officer of a trade-union, would you begin a strike
when trade was good or when it was poor?

8. Does it make any difference in the permanence of an increase of
wages brought about by a strike, whether the employer is one of the
more successful or one of the less successful in that business?

9. Give examples of the different kinds of boycott. What seems to be
the attitude of the federal courts as to the lawfulness of boycotts?

10. Is there any similarity between the methods of trade unions and
the etiquette of the medical and the legal professions?

11. Some trade unions limit the number of apprentices in their trades.
Is this a justifiable policy on their part?

12. Of the methods employed by trade unions to raise the wages of
their members, which are prejudicial and which are not prejudicial to
the interests of the rest of the community, including non-union labor?
Give reasons.

13. Can wages be affected by the "collective bargaining" of trade
unions and if so indicate in that connection a justification (if one
exists) for trade union organization.

14. If a trade union sets a minimum rate of wages lower than the
competitive market rate would be in the absence of organization, which
rate would the members receive? State the facts from the Source Book
which lead you to your answer.

15. Have trade unions raised or lowered the wages of non-union labor?

16. What is the attitude of American trade unions toward efficiency
systems as attempts to introduce improved methods of production (not
systems of payment)?

CHAPTER 21

PUBLIC REGULATION OF HOURS AND WAGES

REFERENCES.

_Abbott, Edith_, Progress of the minimum wage in England. J. P. E.,
23: 268-277. 1915.
Women in industry. 1915.

*_Adams_ and _Sumner_, chs. II, VIII, XII, secs. 1-4, 9, XIII, sec.
2.

_Barnett, G. E._, and _McCabe, D. A._, Mediation, investigation and
arbitration of industrial disputes. 1916.

_Clark, V. S._, The labor movement in Australasia. 1906.

_Commons_, chs. VII, VIII, XVIII, XXI.

*_Commons_ and _Andrews_, chs. III, secs. 2, 3, IV, V.

_Compton, W. M._, Wage theories in industrial arbitration. A. E.
Rev., 6: 324-342. 1916.

_Hammond, M. B._, Judicial interpretation of the minimum wage in
Australia. A. E. Rev., 3: 259-286. 1913.

_Hammond, M. B._, Wages boards in Australia. Q. J. E., 29: 98-148,
326-361, 563-630. 1914-1915.

_Holcombe, A. N._, The legal minimum wage in the United States. A.
E. Rev., 2: 21-37. 1912.

_Kelley, Florence_, Minimum-wage laws. J. P. E., 20: 999-1010. 1912.

_Millis, H. A._, Some aspects of the minimum wage. J. P. E., 22:
132-155. 1914.

_Mote, C. H._, Industrial arbitration. 1916.

_Persons, C. E._, Women's work and wages in the United States.
Q. J. E., 29: 201-234. 1914-1915.

_Suffern, A. E._, Conciliation and arbitration in the coal industry
of America. 1915.

_United States Bureau of Labor Statistics_, Bul. 175. 1915. Summary
of report on woman and child wage-earners.

_Webb, Sidney_, The economic theory of a legal minimum wage. J. P.
E., 20: 973-998. 1912.

_Wise, E. F._, Wage boards in England. A. E. Rev., 2: 1-20. 1912.

QUESTIONS.

1. If you can do more work in two hours than in one, can you do more
continuously in sixteen consecutive hours than in eight?

2. What determines the maximum study time for the earnest student?

3. When does an industrious man stop working on his own farm, and why?

4. If production is reduced one-fourth by shorter hours, is "work
made" to that degree for the unemployed?

5. Defend the minimum wage policy from the workman's point of view,
and state the employers' objections thereto.

6. Suppose it were proposed to establish by law a universal nine-hour
day for men.

(a) Under what conditions would you consider such a law socially
beneficial?

(b) What other agencies might accomplish the ends which such a law is
designed to effect?

CHAPTER 22

OTHER PROTECTIVE LABOR AND SOCIAL LEGISLATION

REFERENCES.

*_Adams_ and _Sumner_, chs. V, sec. 3, XII, sec. 5, XIII, sec. 3.

_Addams, Jane_, Child labor legislation, a requisite for industrial
efficiency. A. A. A., 25: 542-550. 1905.

_Commons_, chs. XIV, XIX, XX, XXII, XXIII, XXVI, XXXVIII.

*_Commons_ and _Andrews_, Chs. VI, VII, IX.

_Fisher, W. C._, The field of workmen's compensation in the United
States. A. E. Rev., 5: 221-278. 1915.

_Leiserson, W. M._, The movement for public labor exchanges. J. P.
E., 23: 707-716. 1915.

_Pigou, A. C._, Unemployment. 1914.

_Rubinow, I. M._, The problem of unemployment. J. P. E., 21:
313-331. 1913.

_Rubinow, I. M._, Subsidized unemployment insurance. Ibid., 412-431.
1913.

_Sumner, H. L._, and _Merritt, E. A._, Child labor legislation in
the United States. 1915.

_United States Bureau of Labor Statistics_, Bul. 159. 1915.

QUESTIONS.

1. What classes of economic goods or services are regulated by law and
why?

2. Is there any likeness between trade-unions and tariffs? Between
tariffs and factory legislation?

3. What reasons are given in justification of laws closing barber
shops on Sundays?

4. May a person owning a lot on a residence street of a city erect a
glue factory on it?

5. What have you noted as to the benefits or hardships of restricting
child labor in factories?

6. In what kinds of social legislation is the federal character of our
government a serious bar to experimentation? Show clearly the reasons
why.

7. If population became stationary, neither increasing nor decreasing
in numbers, and if methods were discovered which would render possible
the production of the same amount of wealth per year as at present
with only half the force of laborers employed, and if the average
labor day were not shortened, would there not be a great and
apparently permanent lack of employment? Discuss thoroughly and give
reasons for your answer.

8. In what sense is the "unemployment," so manifest in a period of
industrial depression, evidence that the number of workers is "in
excess of the work to be done"?

CHAPTER 23

SOCIAL INSURANCE

REFERENCES.

_Adams_ and _Sumner_, ch. XII, secs. 6-8.

_Baldwin, F. S._, Old age pension schemes: a criticism and a
program. Q. J. E., 24: 713-742. 1909-1910.

_Commons_, ch. XXV.

*_Commons_ and _Andrews_, ch. VIII.

_Foerster, R. F._, The British national insurance act. Q. J. E., 26:
275-312. 1911-1912.

_Frankel, L. K._, and _Dawson, M. M._, Workingmen's insurance in
Europe. 1910.

_Henderson, C. R._, Industrial insurance in the United States. 1909.

_Lewis, F. W._, State insurance. 1909.

_National Civic Federation, Social Insurance Department_, Report of
the committee on preliminary foreign inquiry. 1915.

_Rubinow, I. M._, Standards of sickness insurance. J. P. E., 23:
221-251, 327-364, 437-464. 1915.

_United States Bureau of Labor_, Annual reports, 1908, 1909.

_Warren, B. S._, and _Sydenstricker, Edgar_, Health insurance. 1916.

QUESTIONS.

1. Are industrial accidents more frequent in low paid or in high paid
occupations?

2. Suggest advantages and disadvantages of a general system of
compulsory industrial insurance for old age, sickness and accidents.
What are the essential differences between these three forms of
insurance?

3. Show to what extent a system of workingmen's insurance has been
developed in one of the following countries: Germany, France, Italy,
England. In the development of a general system of workingmen's
insurance in the U. S., which one of the above forms will probably
first come in? For what reasons has a system of this kind not been
developed in the U. S.? Henderson, C. R., Industrial insurance.

CHAPTER 24

POPULATION AND IMMIGRATION

REFERENCES.

*_Adams_ and _Sumner_, ch. III.

*_Commons_ and _Andrews_, ch. II, sec. 4.

_Fairchild, H. P._, Immigration. 1913.
The standard of living--up or down? A. E. Rev., 6: 9-25. 1916.

_Fetter, F. A._, Population or prosperity. A. E. Rev., 3 (no. 1,
supp.): 5-19. 1913. (Presidential address before the American
Economic Association, 1912, much of which is incorporated with
chap. 24 in the text.)

_Goldenweiser, E. A._, Walker's theory of immigration. Am. J. Soc,
18: 342-351. 1912-1913.

_Hall, P. F._, The recent history of immigration and immigration
restriction. J. P. E., 21: 735-751. 1913.

*_Hamilton_, Readings, 384-386, 392-395.

_Husband, W. W._, The significance of emigration. A. E. Rev., 2 (no.
1, supp.): 79-85. 1912. Round table discussion of above, 86-88.

_Jenks, J. W._, and _Lauck, W. J._, The immigration problem. 1912.

_Lauck, W. J._, The vanishing American wage-earner. Atlan. Mo., 110:
691-696. 1912.

*_Materials_, 146-156.

_Mayo-Smith, Richmond_, Statistics and economics. 1899. Bk. I, ch.
V.

_Mayo-Smith, Richmond_, Statistics and sociology. 1895. Bk. I, chs.
V-VII.

_Millis, H. A._, Some economic aspects of Japanese immigration. A.
E. Rev., 5: 787-804. 1915.

_Page, T. W._, The distribution of immigrants in the United States
before 1870. J. P. E., 20: 676-694. 1912.

_Page, T. W._, Some economic aspects of immigration before 1870.
Ibid., 20: 1011-1028; 21: 34-55. 1912, 1913.

_Roberts, Peter_, The new immigration. 1912.

_Ross, E. A._, The old world in the new. 1914.

*_Source Book_, 187-198. (Extract from Jenks and Lauck.)

_Warne, F. J._, The tide of immigration. 1916.

QUESTIONS.

1. Tabulate and chart the changes that have taken place in our
immigration in regard to (1) amount, (2) character. What problems are
presented by these facts? Stat. Abst.

2. Explain the terms "the new immigration" and "the old immigration,"
and give the important statistical facts regarding them.

3. Show the application of the doctrine of population to the present
problem of immigration and wages in America.

4. Do the figures on immigration show anything as to the need of
legislation restricting immigration?

5. What has been the effect of the recent immigration into the United
States upon the use of machinery?

6. Apply the theory of wages to explain the effect of present
immigration on the wages of unskilled or slightly skilled workers.

7. If the supply of labor of any class were to be decreased ten per
cent., would wages rise in like proportion?

8. Is immigration now adding to the general welfare in the United
States? State the facts and general economic principles on which you
base your answer.

9. If there is an immigration of half a million workers annually into
a country for a period of ten years--during which no new natural
resources are made available, would wages in that country be affected?
If so, of what classes of workers? What would be the effect on the
amount of income received by land owners?

10. Explain how the general principles of price-determination hold in
the determination of wages. Show how these principles apply when there
is extensive employment of southern and eastern Europeans. (See Source
Book.)

11. If in a given labor market the number of laborers increases while
the number and technical efficiency of indirect agents remains
unchanged, what change, if any, will result in the average rate of
wages? What change, if any, will there be in the return to the
indirect agents?

12. Is common, unskilled labor "scarce" (in any reasonable sense of
the word) in China? in the United States?

CHAPTER 25

AGRICULTURAL AND RURAL POPULATION

REFERENCES.

_Carver, T. N._, Selected readings in rural economics. 1916.

_Carver, T. N._, The work of rural organization. J. P. E., 22:
821-844. 1914.

_Coulter, J. L._, Agricultural development in the United States,
1900-1910. Q. J. E., 27: 1-26. 1912-1913.

_Hibbard, B. H._, Tenancy in the north central states. Q. J. E., 25:
710-729. 1910-1911.

_Hibbard, B. H._, Tenancy in the north Atlantic states. Q. J. E.,
26: 105-117. 1911-1912.

_Hibbard, B. H._, Tenancy in the western states. Q. J. E., 26:
363-376. 1911-1912.

_Hibbard, B. H._, Tenancy in the southern states. Q. J. E., 27:
482-496. 1912-1913.

_Hoagland, H. E._, The movement of rural population in Illinois. J.
P. E., 20: 913-927. 1912.

_Nourse, E. G._, Agricultural economics. 1916. (A large volume of
readings, well selected and edited.)

_Round table discussion._ The decline of the rural population. A. E.
Rev., 2 (no. 1, supp): 51, 52. 1912.

_Round table discussion._ Rural conditions in the south. Ibid.,
48-50. 1912.

_Taylor, H. C._, Agricultural economics. 1905.

_Vogt, P. L._, The farmer's labor income. A. E. Rev., 6: 808-822.
1916.

QUESTIONS.

1. Cite any instances you have noted of local changes of population
distribution as between country and city. What are the chief facts of
interest in these cases? What forces can you assign as causes of the
changes? Has agricultural activity been accelerated or retarded? Has
it received a set-back?

2. A wealthy metropolitan banker purchases a large country estate in a
section in which farming is practically on a subsistence basis and in
which in recent years many farms have been abandoned. He applies labor
and materials lavishly to the soil, sparing no expenditures for
purposes which will assist in the production of crops of the best
quality. Under what conditions can this be profitably done? What will
be the probable effect on local agriculture, (a) if the entire product
of the estate is consumed upon it? (b) if a substantial part of the
product is marketed in competition with that of the local farmers?
What changes are likely to occur with reference to the occupation of
the local population? With reference to its migration?

3. Why is it that immigrants are now taking up the farms of New
England which have, in some cases for years, been abandoned by native
farmers? Is the fact that they are doing so an argument for or against
the restriction of immigration?

4. What is the general tendency of immigrants in the matter of
settlement in urban and rural communities?

5. If it is true that the relative decline of the agricultural
population of the United States can be explained by the operation of
purely economic forces, on what grounds is there justification for
complaint as to the evils of concentration of population in cities?

CHAPTER 26

PROBLEMS OF AGRICULTURAL ECONOMICS

REFERENCES.

_Carver, T. N._, Selected readings in rural economics. 1916.

_Coulter, J. L._, Marketing of agricultural lands in Minnesota and
North Dakota. A. E. Rev., 2: 282-301. 1912.

_Goldenweiser, E. A._, The farmer's income. A. E. Rev., 6: 42-48.
1916.

_Huebner, G. G._, Agricultural commerce: the organization of
American commerce in agricultural commodities. 1915.

_International Institute of Agricultural Statistics Year Book._
Monographs on agricultural coöperation in various countries. 1916.

_Kemmerer, E. W._, Agricultural credit in the United States. A. E.
Rev., 2: 852-872.

*_Materials_, 407, 408, 409.

_Metcalf, R._, and _Black, C. G._, Rural credit coöperation, and
agricultural organization in Europe. 1915.

_Olmsted, V. H._, The purchasing power of farm products. United
States Dept. of Agric., Report, 1912.

*_Phillips_, ch. XXVII. On agricultural credit.

_Powell, F. W._, Coöperative marketing of California fresh fruit. Q.
J. E., 24: 392-418. 1909-1910.

_Putnam, G. E._, Agricultural credit legislation and the tenancy
problem. A. E. Rev., 5: 805-815. 1915.

_Putnam, G. E._, Farm credit in Kansas. Ibid., 27-37. 1915.

_Putnam, G. E._, The federal rural credit bill. Ibid., 6: 770-789.
1916.

_Shaw, A. W._, Some problems in market distribution. Q. J. E., 26:
703-765. 1911-1912.

*_Source Book_, 34-47, 48-57, 75-80, 81-90.

_Warren, G. F._, Farm management. 1913. (Treats primarily the
problem of the individual farm, but also many of the broader
economic questions.)

_Weld, L. D. H._, The marketing of farm products. 1916.

QUESTIONS.

1. Why has the corporate form of business organizations not been as
extensively introduced into the farming industry as into other
industries?

2. Discuss the following statements quoted from an article on the
Federal Farm Loan Act of 1916. "There was no necessity for any kind of
federal legislation affecting the land credit problem of
land-owners.... There is, however, the more pressing problem ... of
making the conditions of country life more attractive to the _younger_
generation of farmers. In accomplishing this end some form of land
purchase legislation is needed." Amer. Econ. Rev., 6: 789. 1916.

3. How do urban and rural districts differ in their preference for and
use of different kinds of bank credit?

CHAPTER 27

THE RAILROAD PROBLEM

REFERENCES.

_Brown, H. G._, The competition of transportation companies. A. E.
Rev., 4: 771-792. 1914.

_Brown, H. G._, Transportation rates and their regulation. 1916.

_Clark, J. M._, Some neglected phases of rate regulation. A. E.
Rev., 4: 565-574. 1914.

_Dixon, F. H._, The Mann-Elkins Act, amending the act to regulate
commerce. Q. J. E., 24: 593-633. 1909-1910.

_Dunn, S. O._, Railway discrimination. J. P. E., 20: 437-461. 1912.

_Gephart, W. F._, The place of the canal in a national system of
transportation. A. E. Assn. Bul., 4th ser., 1 (no 2): 188-196.
1911. Round table discussion, 197-203.

_Hadley, A. T._, Railroad transportation. 1884.

_Hammond, M. B._, Railway rate theories of the interstate commerce
commission. Q. J. E., 25: 1-66, 279-336, 471-538. 1909-1910.

_Johnson, E. R._, American railway transportation. 3d ed., 1908.

_Johnson, E. R._, Inland waterway policy. A. E. Assn. Bul., 4th
ser., 1: 166-174. 1911.

_Johnson, E. R._, The principles of governmental regulation of
railways. P. S. Q., 15: 37-49. 1900.

_McFall, R. J._, Railway monopoly and rate regulation. 1916.

_Materials_, 627, 628.

_Meyer, B. H._, Certain considerations in railway rate making. A. E.
Rev., 4 (no. 1, supp.): 69-80. 1914. Round table discussion of
above, 81-100.

_Prouty, C. A._, Railway discriminations and industrial
combinations. A. A. A., 15: 41-50. 1900.

_Ripley, W. Z._, (Ed.), Railway problems. 1907.

_Ripley, W. Z._, Railroads: rates and regulation. 1912.

_Ripley, W. Z._, Railroad overcapitalization. Q. J. E., 28: 601-629.
1913-1914.

_Ripley, W. Z._, Railroads: finance and organization. 1915.

*_Source Book_, 361-367, 368-378, 379-382.

QUESTIONS.

1. Why is transportation a greater problem in the United States than
in Europe?

2. Show in what way natural waterways have determined the location of
leading cities in America.

3. Give examples of cities whose growth has been caused by railroads.

4. Upon what considerations are commodities classified for shipment by
railroads? Is classification unfair discrimination? Illustrate by an
example.

5. What classes of interests are affected by increasing the minimum
weight for carloads? Explain in each case whether the effect is
favorable or unfavorable and the reasons therefor.

6. Does cost of service have anything to do with the rates charged by
railroads?

7. Give an example of a blanket rate territory and the reasons
therefor.

8. What is the "long and short haul" clause of the Interstate Commerce
Act? Explain why railroads make rates which contravene the terms of
this clause, and why the government should forbid the railroads to
make such rates.

9. A railroad connecting two competitive points charges one-fourth of
a cent per ton mile on grain shipments from its inland terminus, while
it charges one cent per ton mile on grain shipments from
non-competitive territory. What considerations have probably led to
the establishment of the above rates?

Might not the railroad increase its net revenue by raising the rate on
through traffic to one-half cent per ton mile and lowering the local
rate to three-fourths of a cent per ton mile?

10. The rate on corn in carload lots from Omaha, Neb. to Newport News,
Va. is 10 cents per hundred pounds. From the Omaha region there are
competing carriers to the Gulf and other Atlantic ports. The rate on
corn in carload lots from points in Virginia to Newport News over the
same route is 12 cents per hundred pounds. Could not the local rates
be lowered if the carriers advanced the rates on the long-distance
haul?

11. What cases have you seen where the railroads impose unjustly on
the public?

12. Give instances you have seen or heard of where two shippers paid
different rates for the same service.

13. Do you know any large cities that are more favorable shipping
points than neighboring towns?

14. What legal rights do the builders of a railroad have that are not
enjoyed by all citizens?

15. Can you see any clear distinction between the public nature of a
railroad and that of a horse and carriage?

16. What harm can there be in the acceptance of passes by judges,
legislators, and other public officials?

17. Ought the law prohibit the sale of tickets by "scalpers"?

18. If your neighbor rides on a pass and you pay your fare, are you
helping to pay for his ride?

19. Why should preachers get half-fare rates?

20. What are the chief reasons for the governmental regulation of
railways?

21. Why does the question of the control of the railways in the
interest of the public present especial difficulties in America?

CHAPTER 28

THE PROBLEM OF INDUSTRIAL MONOPOLY

REFERENCES.

_Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902.

_Collier, W. M._, The trusts. 1900.

_Cotter, A._, The authentic history of the United States Steel
Corporation. 1916.

_Hobson, J. A._, The evolution of modern capitalism. Ed., 1912. Ch.
V.

_Jones, Eliot_, The anthracite coal combination in the United
States. 1914.

_King, W. I._, The wealth and income of the people of the United
States. 1915.

_Meade, E. S._, The economics of combination. J. P. E., 20: 358-372.
1912.
Trust finance. 1903.

_Montague, G. H._, Trusts of to-day. 1904.

_Ripley, W. Z._, Industrial concentration as shown by the census.
Q. J. E., 21: 651-658. 1906-1907.
(Ed.), Trusts, pools and corporations. Ed., 1916.

*_Source Book_, 255-264. (Extract from United States Commissioner of
Corporations, Report on the transportation of petroleum.)

_Stevens, W. S._, Classification of pools and associations. A. E.
Rev., 3: 545-575. 1913.

_Stevens, W. S._, (Ed.), Industrial combinations and trusts. 1913.

_Stevens, W. S._, A group of trusts and combinations. Q. J. E., 26:
593-643. 1911-1912.

_Stevens, W. S._, The powder trust, 1872-1912. Ibid., 444-481.
1911-1912.

_United States Commissioner of Corporations_, Report on the
transportation of petroleum. 1906.

_Willoughby, W. F._, The integration of industry in the United
States. Q. J. E., 16: 94-115. 1901-1902.

QUESTIONS.

1. What large trusts have recently been formed?

2. State the motives for forming trusts, separating those which are
socially beneficial and those which are anti-social.

3. Enumerate the advantages possessed by a "trust" over a small
competitor, and indicate which of these are the results of large scale
production and which are due to the possession of monopoly power.

4. Are there any conditions under which a combination would be a more
economical unit of production and distribution than a single plant
large enough to secure all advantages to be obtained from mere
quantity of output? If so, state them clearly.

5. Explain carefully the causes and limits of the advantages of large
production. Give three examples of industries in which the advantages
are seen.

6. Have you observed the growth of any local industry from a small
beginning to large proportions? If so, how do you account for it?

7. What is the largest manufacturing establishment in your home town?
Would a number of smaller establishments of the same sort and with the
same aggregate capacity succeed as well? Why?

8. What relation has improved transportation and other means of
communication to trusts?

9. What are the chief methods by which trusts or combinations have
sought to make economies in management?

10. Describe the characteristic features of the pool, the trust and
the holding company.

11. Describe any agreement of which you know, made between merchants
or manufacturers for the purpose of regulating prices. Did prices go
up or down as a result?

12. What is a simple price agreement? How does it differ from a pool?
Is there any difference in the matter of legality? Reasons.

13. What are the limits to the price-fixing and profit-earning powers
of monopolies? Are there any other conditions which will tend to check
the indefinite growth of combinations?

14. Explain and illustrate by a concrete example the circumstances
relating to cost of production which tend to make a monopoly price
lower than the previous competitive price for the same article. No
reference is here intended to local or temporary cuts in price by
monopolies which are intent by such means on capturing a local market.

15. If all trade is exchange, do not the members of a trust reduce
their income when they raise the price of their products by artificial
agreement?

16. Five plants engaged in the production of a given article in
different parts of the United States are combined under the ownership
of a single corporation formed for this purpose. Before the
combination these five plants produced 75 per cent. of the total
output of the article in question, each producing approximately 15 per
cent.; the remaining 75 per cent. was produced by seven plants, no one
of these turning out more than 5 per cent. of the total output. Each
of the first five plants was large enough to secure all known
economies in the costs of transforming the raw material into the
physically finished product, and each was running to its full
capacity. The aggregate net earnings of the five plants were
$1,000,000 a year. The cost of reproducing these five is $14,000,000.
The new corporation issues and pays to the owners of the properties
taken over $10,000,000 in 5 per cent. first mortgage bonds, $6,000,000
in cumulative preferred stock, and $8,000,000 in common stock.

What will determine whether this combination possesses monopoly power?

Is the corporation overcapitalized? If so, to what extent? State
clearly what you mean by overcapitalization?

Is it probable that the earnings of the new corporation will be
greater than the aggregate earnings of the five plants, if the price
of the product is not increased? If so, how will this increase be
gained?

If there is an increase in earnings, how will the price of each of the
three kinds of securities of the corporation be affected?

17. Suppose that the effective demand for a certain kind of goods in
the country as a whole will vary in the following manner with the
price changes indicated:

$1.00 1,000,000 units
1.10 900,000 units
1.20 800,000 units
1.30 700,000 units
1.40 600,000 units
1.50 500,000 units
1.60 400,000 units
1.70 300,000 units
1.80 200,000 units

There are ten companies each producing 100,000 units at a cost of 90
cents (including all costs but an allowance for dividends on
investment) this giving just enough of a margin to each company to
cause it to continue in the industry. What immediate effect on prices
could a combination consisting of six firms have, assuming that the
cost per unit of product and that the output of the independents
remain unchanged? Show for each of the prices indicated what the
amount of the margin made by the four independent competitors
(altogether) and by the combination would be. What less immediate
effects would be likely to follow, and why?

18. Is granting patents an interference with trade similar to tariffs?

19. Is it right that the lucky inventor of a popular toy should make
$100 a day from it?

20. Is it right that an inventor should by patent laws be able to keep
the profits of his business high?

CHAPTER 29

PUBLIC POLICY IN RESPECT TO MONOPOLY

REFERENCES.

_Anderson, B. M., Jr._, Competition versus monopoly the issue of the
campaign. Independent, 73: 997-1002. 1912.

_Bolen, G. L._, Plain facts as to the trusts and the tariff. 1902.

_Brown, W. J._, The prevention and control of monopolies. 1915.

_Clark, J. B._, The problem of monopoly. 1904.

_Clark, J. B._, and _J. M._, The control of trusts. Ed., 1914.

_Clark, J. M._, Rates for public utilities. A. E. Rev., 1: 473-487.
1911.

_Collier, W. M._, The trusts. 1900.

_Davies, J. E._, Trust laws and unfair competition. 1916.

_Durand, E. D._, The trust problem. 1915. See also Q. J. E., 28:
381-416, 664-700. 1913-1914.

_Durand, E. D._, The trust legislation of 1914. Q. J. E., 29: 72-97.
1914-1915.

_Ely, R. T._, Monopolies and trusts. 1900.

_Gray, J. H._, The control of public service corporations.
A. E. Rev., 4 (no. 1, supp.): 18-44. 1914. Round table
discussion of above, 45-68.

_Hotchkiss, W. E._, Recent trust decisions and business. A. E.
Rev., 4 (no. 1, supp.): 158-172. 1914. Round table discussion
of above, 173-195.

_Jenks, J. W._, The trust problem. 1900.

_Knauth, O. W._, Capital and monopoly. P. S. Q., 31: 244-259. 1916.

_Knauth, O. W._, Competition and capital. Ibid., 30: 578-590. 1915.

_Knauth, O. W._, The policy of the United States toward industrial
monopoly. 1914.

_LeRossignol, J. E._, Monopolies past and present. 1900.

_Orth, S. P._ (Ed.), Readings on the relation of government to
property and industry. 1915.

_Ripley, W. Z._, (Ed.), Trusts, pools and corporations. Ed., 1916.

*_Source Book_, 383-385. The Sherman anti-trust act.

_Stevens, W. S._, The Clayton act. A. E. Rev., 5: 38-54. 1915.

The trade commission act. Ibid., 4: 840-855. 1914.

_United States Industrial Commission_, Report. 1898-1901. 19 vols.

_Wright C. W._, The economics of governmental price regulation. A.
E. Rev., 3 (no. 1, supp.): 126-131. 1913. Round table discussion
of this paper and that of J. M. Clark, 132-142.

_Wyman, Bruce_, Control of the market. 1911.

QUESTIONS.

1. What is the trust problem?

2. Does the public consider the growth of trusts to be good or bad?
What do students of the question think of it?

3. Which one of the following views do you think to be nearest the
truth and why? (a) The trust is a natural and inevitable outcome of
modern conditions and is a distinct economic gain. (b) The trust is a
result of special privileges and corporate abuses. (c) The trust is
the greatest invention of this or any other age.

4. Would it be a good thing for society if a trust made great
economies in production, crowded out its smaller competitors, and
maintained prices just where they were before, dividing among its
shareholders the amounts saved?

5. How would the effects on society be different if prices were
reduced by better organization and the prevention of waste?

6. If it could be shown that trusts have lowered prices, should that
fact exempt them from all interference from legislation?

7. Describe briefly the "unfair practices" of monopolistic
corporations. What specific features of the recent railroad and trust
legislation are aimed at the prevention of these practices?

8. Is it good public policy to allow a trust to undersell its smaller
competitor in one district while it keeps up its prices elsewhere?

9. Are most positive laws intended to hinder competition or make it
freer?

10. Copy from the statutes of two states far apart, those sections
that pertain to anti-trust or anti-monopoly legislation. Note the
general nature of this legislation, special features, penalties for
violations, etc., and discuss.

11. What are the main provisions in one of the following: (a) Sherman
Anti-Trust Law, (b) Massachusetts Business Corporation Law, (c) The
New Companies' Acts, England, (d) German Company Law.

12. Abstract and discuss the Northern Securities decision. Do you see
any arguments to be advanced for pooling? Do you think the decision
effective in stopping pooling? Ripley (Ed.), Trusts, pools and
combinations.

CHAPTER 30

PUBLIC OWNERSHIP

REFERENCES.

_Bemis, E. W._, (Ed.), Municipal monopolies. 1899.

_Brooks, R. C._, Municipal Affairs, 5: 1-346. 1901. (An exhaustive
and well-arranged bibliography on all aspects of municipal
problems.)

_Dewsnup, E. R._, The attitude of the state toward railways, a
discussion of the question of nationalization. A. E. Assn. Bul.,
4th

_Fairlie, J. A._, Recent extensions of municipal functions in the
ser., 1, no. 2: 175-187. 1911. (Vol. of Papers and discussions.)

United States. A. A. A., 25: 299-310. 1905.

_Guyot, Yves_, Where and why public ownership has failed. Trans. by
H. F. Baker. 1914.

_Knapp, M. A._, Government ownership of railroads. A. A. A., 19:
61-73. 1902.

_National Civic Federation_, Report on municipal and private
operation of public utilities. 1907. 3 vols. (A monumental study
by an American delegation, which visited many cities of Europe and
America; favorable, in the main, to extension of municipal
ownership.)

_Winchell, B. L._, Drift toward government ownership of railways.
Atlan. Mo., 110: 747-758. 1912.

QUESTIONS.

1. Does every government enterprise necessarily narrow the field for
private enterprise and diminish the amount of competition?

2. What forms of state activity favor survival of unfit men and bad
traits of character? What forms help the fittest to survive?

3. What are municipal franchises? Where are they?

4. Why does the public consent to grant patents or public franchises?

5. What kinds of municipal industries have you seen in operation? How
successful were they?

6. What are the main arguments for and against the city ownership and
control of gas and waterworks? What troubles arise from city politics?

7. Name the industries that are owned and controlled by towns and
cities of which you have a personal knowledge.

Which of them are most satisfactory in your judgment? Which the least
so?

8. What is the public sentiment in your home community as to the
ownership of industries by the town or city?

CHAPTER 31

SOME ASPECTS OF SOCIALISM

REFERENCES.

_Brooks, J. G._, The problem of syndicalism. A. E. Rev., 4 (no. 1,
supp.): 115-130. 1914. Round table discussion of above, 131-157.

_Clark, J. B._, Social justice without socialism. 1914.

_Ensor, R. C. K._, (Ed.), Modern socialism. 2d ed., 1907.
(Selections from socialistic sources.)

_Gladden, Washington_, Tools and the man. 1893. (One example of a
large number of American books appealing for the application of
Christian ethics to social questions.)

_Hillquit, M._, History of socialism in the United States. 1903.

_Hillquit, M._, Socialism in theory and practice. 1909.

_Hinds, W. A._, American communities. 2d ed., 1908. (Describes many
experiments, all failures; by a sympathizer with socialism.)

_Kirkup, T._, Inquiry into socialism. 3d ed., 1907. (A
sympathetic, but not a partizan statement.)

_Lockwood, G. B._, The New Harmony movement. 2d ed., 1907.

_Martin, John_, An attempt to define socialism. A. E. Assn. Bul.,
4th ser., 1 (no. 2): 347-354. 1911. Round table discussion of
above, 355-367.

_Menger, A._, The right to the whole produce of labor. Trans. 1899.
(Masterly criticism.)

_Rae, John_, Contemporary socialism. 3d ed., 1901. (Standard work
by a non-socialist.)

_Schaeffle, A._, The quintessence of socialism. Ed., 1898.
(Exposition by a non-socialist, so favorable that it is used by
the socialists as a tract.)

_Spahr, C. B._, Present distribution of wealth in the United States.
1896.

_Spargo, John_, Socialism. 1906. (Pro.)

_Walling, W. E._, Socialism as it is. 1912. (Pro.)

_Walling, W. E._, and others, The socialism of to-day. 1916. (A
source book.)

_Watkins, G. P._, Growth of large fortunes. 1907.

_Wells, H. G._, New worlds for old. 1908. (An appeal for juster
distribution; Fabian school.)

QUESTIONS.

1. In the last analysis is there anyone--retired capitalist or
unskilled day-worker--whose title to the real income he receives is
derived solely from the property he owns, or solely from the labor he
performs?

2. What is it to earn a living? How many people do it?

3. If capital is needed in production why is the question of justice
raised when its use is paid for?

4. What is the doctrine of economic harmonies? Give three examples
(distinct in kind) in modern legislation which run counter to this
doctrine, with the justification for each of these.

5. Define charity. Apply the general principles of charity to free
schools, free libraries, and free clothing to school children.

6. What is economic freedom? How different from political freedom?

7. Is custom a better regulator of economic action than competition?

8. What are vested rights? Do they ever stand in the way of progress?
Examples.

9. Distinguish between the socialistic and the competitive principles
of distribution.

10. What classes of thinkers are most inclined to take up socialism?
(Classes considered socially, industrially, as to race, as to economic
and historical training.)

11. If socialism reduced the total product, would it still be
desirable because of the better distribution?

12. What effect would it have if the state should make laborers work
for unsuccessful employers at lower wages than for successful ones? Or
should reduce rents for the less capable merchants and manufacturers?

13. Is there any rule for determining the limits of state
interference?

14. If you had the power, what single public measure that you believe
would be practicable and effective would you put on the statute books,
in order to make a juster division of the social income? Give reasons.

15. The wealth of the United States increased from $7,000,000,000 in
1850 to $188,000,000,000 in 1912. How was this wealth distributed
according to (a) the socialistic theory of value? (b) the single tax
theory? (c) the theory of value under competitive conditions?

16. What are the chief ways in which the rule of competitive value has
been nullified in this period.

17. Would socialism guarantee steadiness or regularity in economic
activity, thus eliminating the phenomena of economic crises and
depressions?

18. In what way does taxation now shift the distribution of real
incomes as among persons? By what other methods and in what degree
could such taxation be extended?

* * * * *

TRANSCRIBER'S NOTES

1. All errors and inconsistencies in spelling, punctuation,
italicization have been retained, except as noted below.

2. On p. 9, the title 'The geography of commerce' had a lower case 't'
in 'The' in the original.

3. On p. 10, the question 'What is meant by the "Factory System"?'
appeared in the original as 'What is meant by the "Factory System."'

4. On p. 12, the question 'What are the principal things besides money
uses that cause a demand for gold and silver?' had a full stop (period)
instead of a question mark in the original.

5. On p. 15, in the phrase 'piece of the same denomination' the original
had 'demonination'.

6. On p. 17, in the reference to 'chs. VI, VII, XIII.', the name
'Phillips' was not italicized in the original.

7. In the table at the top of p. 18 labelled 'Average prices for', there
was no comma after 'Wool' in the original.

8. On p. 18 the penultimate sentence in question 7, with the phrase
'weighting affect your first', lacked a question mark in the original.

9. On p. 21 question 9, about 'Two men A and B', had 'transacton'
instead of 'transaction' in the original.

10. On p. 23, question 17, 'Suppose that this bank...', had two full
stops (periods) instead of one after '$102'.

11. On p. 38, the hanging indent after the reference beginning 'Virtue,'
was a regular indent in the original.

12. On p. 42, in the reference beginning 'United States', the
abbreviation 'Bul.' was italicized in the original, although it was not
italicized in its other occurrences.

13. On p. 44, the word 'and' in the reference beginning 'Warren, B.' was
italicized in the original.

14. On p. 46, the hanging indent after the reference to 'The work of
rural organization' was a normal indent in the original.

15. On p. 47, the author of 'Tenancy in the southern states', B. H.
Hibbard, was shown as H. E. Hibbard in the original.

16. On p. 49, the question 'How do urban and rural...' had a full stop
(period) instead of a question mark in the original.

17. On p. 53, presumably either the phrase 'these five plants produced
75 per cent.' was meant to be 'these five plants produced 25 per cent.'
or the phrase 'the remaining 75 per cent.' was meant to be 'the
remaining 25 per cent.'

18. On p. 55, the initials of LeRossignol were not italicized in the
original.

19. On p. 56, the phrase 'its prices elsewhere' was 'its prices
elsewere' in the original.

20. On p. 58, in the question about the 'doctrine of economic
harmonies', the word 'justification' was 'justificaton' in the original.

21. On p. 59, the question about 'unsuccessful employers' had
'unsuccesful' in the original.

22. The phrase 'land owners' occurs once in the text; the word
'land-owners', broken across lines, occurs once. This discrepancy has
been retained, with the word 'land-owners' rather than 'landowners'
being arbitrarily chosen for the latter.

*** End of this LibraryBlog Digital Book "Manual of References and Exercises in Economics - For Use with Volume II. Modern Economic Problems" ***

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