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Popular Science Monthly/Volume 81/September 1912/The Revival of Economic Orthodoxy

THE REVIVAL OF ECONOMIC ORTHODOXY
By Professor S. M. PATTEN

UNIVERSITY OF PENNSYLVANIA

TO the student of thought, it is interesting to see how long a theory persists after its foundations have been undermined. One can almost say of theories that, like superstitions, they never die. They have at least nine lives and are killed again and again before their adherents can give them up. And the worst of it is that disproved theories have an especial attraction for the best minds. It is not poor thinkers, but good ones, that try to square a circle or to create perpetual motion. Old thought is also well-formulated thought. It has a complete terminology and its shades of meaning can be expressed with accuracy. New thought must use terms that are unfamiliar to the public or are twisted somewhat from their popular meaning. A logical thinker let loose on a new topic can play havoc with the printed page of his opponent who has the facts but does not have the language to express his view. Only when one has tried to state some new thought does he realize how poor & vehicle language really is. He finds that most words are synonyms used to express old ideas in many ways. None of them are free from implications that turn the reader back to the older view instead of helping him to break new ground. New thought does not get into the printed page until long after it is a reality to those who study nature instead of books.

This statement has been provoked by an article entitled "A Bugbear to Reformers" in the May number of this magazine. If Professor Carver had put his article in an economic journal, his readers would understand what he has omitted or covered up. He choses, however, to appeal to a less specialized audience and talks in terms of analogies, instead of stating the economic facts. Reformers, he says, deny that water runs down hill. This kind of talk has a familiar ring. It is the way orthodox economists of a preceding age reasoned. They rarely stated or even knew the facts. They routed their opponents by a free use of analogies drawn from the physical sciences. While this sort of reasoning fell for a time into disrepute, it has of late shown a renewed vigor because some of the new economists have pushed so far ahead as to be on unstable ground. A reaction has set in and on the tide of the reverse movement some expect a return of the good old days when economists talked of the law of gravitation, the rise and fall of tides, the equilibrium of physical forces and like analogies, instead of squaring their theories with the facts. This gives Professor Carver his chance to question the sanity of those who reject his favorite doctrines.

At first thought, scientists may favor a settlement of economic problems by the use of familiar ideas involving no economic knowledge, but in the end it will prove a mistake to appeal from adverse economic opinion to those versed in physical science. The orthodox economists were city people who let their imagination have free play in agriculture. One of their pictures was that of a vast plain of identical soil and climate. After picturing this world, they asked what motive can any one have to move from one part to another? To this Professor Carver replies, "whenever agricultural populations tend to spread, it is either a sign of insanity on their part or of diminishing returns on land."

To deny this, an economist does not have to pump water up hill. He questions the picture on which the law of diminishing returns is based. The principal that Professor Carver overlooks is the localization of soils, climates and products. The various geological deposits are irregularly placed and the climates found in different localities are even more diverse. Animal and plant life have been localized so that each locality yields different products or the same product at varying costs. No acre can yield as much return to labor as if it were spent on many acres or in many localities. Conversely, no race living on one article of food or using one kind of clothing or shelter can be as vigorous as those who supply themselves with a greater variety. The spread of population is due to this fact. The more climates, soils, animals and plants utilized, the better the living and the lower the costs.

A primitive community does not, as Professor Carver assumes, use a single soil and some one food. It is as complex as a modern state. The bottom land is used for plowing, the upland for grazing. There are wood lots, fishing places and an open region where wild game roams. Men go farther for goods in the modern than in a primitive world, but this does not imply diminishing return. When they herded sheep in an adjacent mountain valley, the effort then needed to get a pound of wool was greater than it now is to bring it from Australia. We have increased the distance traveled, but we have reduced the cost. Every spread of population has brought increasing returns because it has helped men to utilize the natural resources of the various localities. Is a community wise or foolish which uses different soils and climates instead of confining itself to one? Can two communities with different soils and climates exchange commodities to mutual advantage? If they can, there is a valid reason for the spread of population. Such a movement is not as insane as it seems to those who do not appreciate the localization of resources.

Professor Carver asks why England should not get all her agricultural products from her own soil. The obvious answer could be found in any economic text-book. England has great stores of coal and iron, while other regions have none, or what they have is of inferior quality. This localization of resources makes an exchange of products advantageous, and in such an exchange the lighter and more easily moved products are transported. This fact has been greatly to the advantage of England. Food has come to her instead of coal, iron, cotton and wool going elsewhere to be worked up. This advantage is now lost and there is a spread of industry to other nations, much to the disadvantage of England. The pressure that is now producing so much poverty in England is not due to diminishing returns, but to a more natural distribution of industry. Another reason for the movement of food to England has been the unstable political conditions elsewhere. If Russia will not protect industry, her food goes to countries where it is favored. The diminishing returns thus caused are felt, not in England, but in Russia. England gains by trade with inferior nations and has her profits raised thereby. It is not England but the inferior nations that pay the cost of transportation.

Professor Carver asks why does urban population grow, and again answers—the law of diminishing returns. The real reply is that urban population grows because the scale of production is increasing. Centralized industry yields a greater return than localized workers receive. He also asks why it is necessary to change our habits, eating, for example, more oatmeal and less beef? In replying, he is as far off here as in his other answers. It is not the poor who cut down the amount of meat they eat. It is the more intelligent, and they do it because a varied diet gives them more energy. That the English eat beef and wheat bread is not due to their superiority as food, but to historical conditions. English habits are social survivals, not physiological necessities. The English eat meat for the same reasons that the Jews refuse pork. If these old dietary laws prove anything, it is that the law of diminishing returns is a social tradition and not a physical law. Why, he also asks, are inventions and improvements made unless it be to enable increasing populations to avoid the law of diminishing returns? Inventions are not made to support increasing population: population increases because inventions have been made. I can point to forty instances where the increase of population has followed inventions. I doubt if he can point to one where the increase of population came first. Growing population is an effect, not a cause. Men make improvements to increase their product. The economy of effort is a psychic tendency, not a physical fact. We get inventions as men move up in the scale of existence, not as they move down.

Two fundamental facts are thus involved in the relations of men to nature. The resources of the world are localized and population must spread to utilize them. This natural spread is limited by the cost of transportation. On the other hand, the economy of effort demands the concentration of population. Inventions and large-scale production give advantages to centralized industry. When population does not spread, we may be sure that centralized production is overcoming the disadvantage of transporting goods. If X represents the cost of moving goods and Y the advantage of centralized production, the equation that results is X < Y, that is, the effort of moving goods from place to place is less than the advantages in production and consumption that such a movement brings. Greater returns, greater population and its wider distribution go together. The one society into which we are blending will utilize the world more fully than the many local societies of the past have done, and at the same time its members will be a multitude so vast that the underpopulation of the present can be readily seen.