FOURTH LESSONTHE BASIC FACTS
Thepurpose of the preceding Lessons has been to pierce through the surface and the immediate subsurface of Economics down to the Basic Facts. On the surface, as we have seen, Economics appears to be the science of making Money, whereas Money is in fact only the medium and measure of Value in Trade. We have further seen that the immediate subsurface, Trade, consists apparently in exchanges of tangible commodities but essentially in interchanges of human service. We are now to inspect the Basic Facts.
The Basic Facts of Economics consist of natural groupings or categories of all the myriads of minor facts with which the science of Economics is concerned. Of those categories there are exactly three. By no possibility can there be more; by no possibility can there be less. Natural law fixes the number.
The first Basic Fact—not first in order of creation, but first in our perceptions of Economic necessity—is Man. Without Man, Economics could have neither incentive nor power, neither cause nor effect.
The second Basic Fact is Natural Resources, without which Man could not exist. Natural Resources comprise the surface of our globe, together with all natural objects external to Man and in their natural condition, upon the surface, under the surface, and above the surface, including the air surrounding the surface.
Through applications of the energies of the first to the offerings of the second, Artificial Objects are produced, and these constitute the third of the three.
To one or another of those three natural categoriesevery variety of detail that may be involved in any Economic problem must be assigned. Not so to assign those details to their appropriate categories is to invite confusion of thought and to risk arriving at false and socially dangerous conclusions.
The Economic student who mixes such Natural Resources as building sites with such Artificial Objects as buildings, or natural deposits of minerals with mining machinery, or natural surfaces with railway roadbeds and tracks and equipment, or farming tracts with farm improvements, or human slaves with real estate or stocks of merchandize or factory mechanisms, makes an inexcusable blunder.
Such mixtures may be unobjectionable in accountings of the assets of a private business for private purposes; but in general Economics they are perplexing and misleading. In this comprehensive social science every Economic detail must be classified in harmony with the three Basic Facts—Man, Natural Resources and Artificial Objects,—or confused thinking will result. To make those classifications, however, is to lay a firm foundation for correctly estimating Economic phenomena of all possible kinds and in all their relations.
The human factor, Man—an impossibility without Natural Resources in the comprehensive sense of that term,—applies his energies of mind and body to the Natural Resources of our terrestrial globe and its enveloping atmospheres, thereby producing and for his satisfaction consequently consuming every variety of Artificial object within the range of his Economic desires and his Economic capabilities. This is true of Man and of Man only.
Lower animals do not produce Artificial Objects. Do they cultivate? No. Do they design or invent? No. Do they Trade? No. Do they in any way improve?No. As was eloquently said by a distinguished Economist of the last century, “the sea-gull of the English Channel who poises himself above the swift steamer, wants no better food or lodging than the gulls who circled round as the keels of Caesar’s galleys first grated on a British beach.”
If wild birds make nests and wild animals make burrows or build dams, and wild bees make honey, so do wild berry bushes grow berries and wild apple trees bear apples; yet who would think of classifying wild fruits as Artificial Objects? Manifestly, uncultivated fruit is as truly in the category of Natural Resources as is the wild tree or bush that bears it. And how do wild animals and their characteristic products differ in that respect from wild fruit bushes and wild fruit trees? Evidently in no wise at all. Their products of nest and burrow and water-dam and all the rest, like the leafing and the fruitage of the tree and the bush, are natural objects. They are not artificial. An Artificial Object is a product of human invention and construction. For every purpose of Economic classification, wild animals, like wild trees and wild bushes and wild Nature in all its varieties, belong in the category of Natural Resources. When the wild trees or the wild bushes are cultivated, or the wild animals are domesticated, they pass into the category—as manifestly as buildings and farm produce do—of Artificial Objects drawn forth from and upon Natural Resources by Man.
If now we unravel the countless and confusing Economic phenomena of our world by assigning each miscellaneous fact as it faces us to its natural place in the three categories or Basic Facts, and then observe with common-sense acuteness the natural laws of cause and effect that govern the mutual relations of those Basic Facts, we put ourselves in position to solvecorrectly every Economic problem that can challenge solution. Not to do so is to invite confusion of thought and false conclusions. Those Basic Facts are the “Big Three” of the Economic universe.
Hints at all this came to us in passing through our Lesson on Economics, our Lesson on Money, and our Lesson on Trade. For confirmation of those hints and of the generalizations of the present Lesson, let us with Money in hand and Trade in mind visit one of the Trade terminals which are known in every-day speech as “retail stores.”
What do we see at this “store” but a complex aggregation and combination, in multitudinous and confusing variety, of the services of Man in producing Artificial Objects from and upon Natural Resources to ultimate consumers through channels of Trade and in terms of Money?
The number of those products here assembled, together with the complexity of the infinite detail involved in their production, would be bewildering were we to plunge into the ocean of particular facts unequipped with a clear mental grasp of the Basic Facts and their mutual Economic relations. For illustration, here is a barrel of potatoes to which the store clerk calls our attention with a view to delivering it to us in Trade for some of our Money.
Now, what could be simpler at first thought than a barrel of potatoes as an Economic fact? A farmer has “raised” the potatoes and brought them to market, where we may have them for their Money price. But what of the farmer’s “help”? and the plough with which he prepared the ground? the hoe or more modern implement he used in the processes of cultivation and of reaping the crop the horses or the motor he ploughed with? the building in which he stored the crop before marketing it? the wagon he carried it tomarket in? the transportation equipment with which it was carried from a larger market place to this retail store? the factories in which the barrel was promoted from lumber to its present condition of usefulness? the factories and stores and railroads and ships and wagons and tools? the banks and book-keepers and truckmen? All such factors must be taken into account, with many more, in their vast and various and intricate relationships, if we are to know the Economic history and to solve the Economic problems regarding even so familiar an Artificial Object as a barrel of potatoes on sale at a retail store.
Every one of those Economic details can be considered intelligently, readily and accurately, through the medium of the three Basic Facts, into one or another of which must fall, not only that barrel of potatoes and all the details of its production, but also the entire stock of the store, and of all other stores, and every Economic agency back of them to the very beginning of each productive process through which they have passed. All Economic details, the familiar and the unfamiliar, the obvious and the mysterious, the known and the unknown, generalize with precision into the three Basic Facts of Economics—Artificial Objects, Natural Resources and Man.
Natural Resources are the source and the indispensable condition at every stage, from beginning to end, in the production of every kind of satisfaction for human wants. Man is the active agent at all stages. Artificial Objects constitute the category into which each result generalizes at each stage of production. From Economic particulars we derive knowledge of Economic detail and skill in applying that knowledge; but only from their correct generalization can we derive Economic wisdom.
Thinkingaboutthe three Basic Facts is necessaryto an understanding of their mutual relations; thinkingfromthem is necessary to an understanding of the mutual relations of their constituent parts. Reversely, we must think from Man to Man-power of numerous kinds, both mental and physical; from Natural Resources to soil, minerals, air, water, building sites, and so on; from Artificial Objects to houses, tools, machinery, food, clothing, et cetera.
In another form of statement, the Economic student must know and understand the comprehensive categories or Basic Facts in order to grasp the Why of Economic adjustments, the natural relationship of Economic effects and causes. To understand the How, he must also know and understand the little facts of Economic specialization, such as the mutual relations of the details which go to make up those wholes—the particular facts, for instance, of agriculture or architecture or engineering or merchandizing or manufacturing or banking or professional service,—as well as their three comprehensive classifications or Basic Facts—Man, Natural Resources and Artificial Objects.
One of the deplorable tendencies in Economic study comes from a disposition among advanced students to think exclusively within such narrow fields as banking, manufacturing, transportation, merchandizing, the cotton trade, the silk industry or agriculture. All trustworthy Economic thinking must be from fundamentals—from Natural Resources, Man and Artificial Objects—to the minute details of the respective Economic specializations. All Economic specializations, to the uttermost of their Economic minuteness, are subject fundamentally and in their mutual relations to the natural Economic laws that govern the inter-relationship of the three Basic Facts—Artificial Objects, Man and Natural Resources.
That barrel of potatoes in the retail store may serve for an example.
The barrel itself, an Artificial Object, was produced by Man from antecedent Artificial Objects—staves and hoops. The staves and the hoops were produced by Man from preceding Artificial Objects—lumber and iron. The lumber and the iron had come from trees felled and ores extracted by Man; the trees were Natural Resources, unless cultivated by Man, in which case they were Artificial Objects produced from and upon Natural Resources (the earth) and descended from trees which in their earlier days were themselves Natural Resources. The iron ore was an Artificial Object produced by Man from Natural Resources known as ore deposits. So the barrel holding those potatoes at that retail store proves to be throughout its whole Economic history nothing but a combination of many kinds of Artificial Objects every one of which has been produced and all of which have been combined by Man from and upon and within the Natural Resources of earth and air and light and heat and electricity and other natural characteristics of the planet that Man inhabits.
So, also, of the potatoes in the barrel.
And like that barrel and those potatoes, the retail store in which we find them was itself produced through many Economic specializations and many stages of industrial progress, each of which, from the extraction of iron from natural mineral deposits and the taking of timber from natural forests, was a production by Man of Artificial Objects from and upon and within the sphere of Natural Resources down to the placement of that artificial structure, the retail store, upon its Natural-Resource site at an advantageous point for delivering finished products to ultimate consumers.
As to that barrel of potatoes and that retail store upon the floor of which it rests, so of all Economicphenomena. They belong respectively, according to their respective Economic characteristics and pursuant to natural law, in one or another of the three categories or Basic Facts which we have respectively identified as Natural Resources, Man, and Artificial Objects.
Pursuant to natural law? Certainly. But where do we get any natural law in Economics? To quote a sarcastic attempt at refutation, “Do we pick it off the trees?” Yes, some of it we pick off the trees. Who can intelligently observe the growth and fruitage of a tree without recognizing operations of natural law? How do trees grow except by operation of natural law? And except by operation of natural law, how do men’s bodies grow? Is it enough to answer that the growth of the body is a problem of physical science, which is subject to natural law, whereas Economic science contemplates a lawless lot of phenomena? Or men’s minds, do they unfold without the aid of any natural laws of human mentality? And what of social or mass mentality—shall we call it “public opinion” or “herd instinct”?—how does that phenomenon originate and develop except through processes of natural law?
As with a tree, so with the whole physical universe, inclusive of the human body. And as with the human body, the physical body and the social mass, so with the mental equipment. Must not all, for their very existence and for their development also, be dependent upon and in all their activities responsive to natural law in one or another of its jurisdictions—responsive happily or unhappily according to their degree of conformity or defiance, of devotion or indifference?3
3For an extended and impressive discussion of the application of natural law to Economics, see “Natural Law in Social Life”, by W. R. Lester, M. A., published by The United Committee for the Taxation of Land Values, 11 Tothill Street, London, S. W. 1, England. For a specific application to the coal industry, see minority report on the bituminous coal problem by Warren S. Blauvelt (formerly of Terre Haute, Ind., latterly of Troy, N. Y.) in the Proceedings of the National [American] Conference on Social Work at its fifty-third session in 1926.
3For an extended and impressive discussion of the application of natural law to Economics, see “Natural Law in Social Life”, by W. R. Lester, M. A., published by The United Committee for the Taxation of Land Values, 11 Tothill Street, London, S. W. 1, England. For a specific application to the coal industry, see minority report on the bituminous coal problem by Warren S. Blauvelt (formerly of Terre Haute, Ind., latterly of Troy, N. Y.) in the Proceedings of the National [American] Conference on Social Work at its fifty-third session in 1926.
Individual activities, whether physical or mental, if that discrimination be permitted, assuredly work out well or ill as they harmonize or run counter to natural law. This must be true also of social activities. The choices made by human beings, and the influences which affect their choices, operate to produce harmony or discord in Economic relationships in so far as they harmonize or are in conflict with natural Economic law.
Economics being the science of a certain range of social activities, “the science of mankind making a living,” as it has been aptly called—a science, and not a mere collection of odds and ends of information—the same conclusions must be true of the science of Economics as of the physical sciences. Both are scientific in so far and only in so far as they are within range of natural law.
It is, indeed, a common contention in scholastic Economic circles that the science of Economics is not governed by natural law as the physical sciences are. The answer would seem to be conclusive, in so far as that contention is true, that Economics cannot be a science at all.
Nor are some of the Economics of modern universities strictly scientific. They disclose a tendency to confuse business customs with Economic science as if they were identical. This characteristic of those “business colleges” of a previous generation seems to have charmed the “scientific” Economists of some of our universities. But Economic science and business customs or arts are not identical. Business arts and customs which conflict with natural Economic law are as certain to culminate in disaster as is the life of a man who, approaching a wide and deep chasm, attempts to walk across it without a bridge. Such a bridge cannot be created, it must be produced in accordancewith natural physical law. The same is true of Economic processes. As physical science cannot create, but can only discover and apply natural physical laws, neither can Economics create, but must be content to discover and apply natural Economic laws.
The contention that Economics is not subject to natural law may be fairly regarded as a lineal descendant of the social doctrine that there are no natural rights in human relationships, but that human rights are only conventional. This is the lawless and vicious doctrine upon which slavery and every other form of social larceny have rested, from that form which held the Forty Thieves together, to that modern policy of “get what you can and keep what you get.”
Economists who can offer any other effective process for satisfying Economic desires than by the production of Artificial Objects from and upon Natural Resources and in accordance with natural laws, Economic as well as physical, would thereby kill every inference that may be correctly drawn from any contention in these pages. But until that miracle has been performed it behooves all advanced students of Economics to think, and to think clearly, without active prejudice or indolent confusion, upon the natural phenomena of the Economic realm. Give to those phenomena whatever name you please—my name for them is “natural law”—the fact nevertheless remains, a Basic Fact in Economics, that no Man nor any number of Men can produce Artificial Objects to or from any stage of the productive process except from and upon Natural Resources.
Natural law in Economics is not comparable with “common law” in the sense of a coordination and sanctioning of social customs. Nor is it “business law” in the sense of a clutter of commercial customs. And of course it is not “statutory law” in the sense of commandsfrom political authorities to obedient citizens. In Economic science, as in every other science or art worthy the name, natural law uniformly and inexorably governs the relationship of cause and effect.
Browning struck a key-note when in his “Abt Vogler” he wrote of the “manifold music” evolved by bidding the organ obey,that—
... “effect proceeds from cause,Ye know why the forms are fair, ye hear how the tale is told;It is all triumphant art,but art in obedience to laws.”
... “effect proceeds from cause,Ye know why the forms are fair, ye hear how the tale is told;It is all triumphant art,but art in obedience to laws.”
... “effect proceeds from cause,Ye know why the forms are fair, ye hear how the tale is told;It is all triumphant art,but art in obedience to laws.”
... “effect proceeds from cause,
Ye know why the forms are fair, ye hear how the tale is told;
It is all triumphant art,but art in obedience to laws.”
If any Economic experiment “works” (as a pragmatist might say of it), why does it work? What other explanation can there be than that it “works” because it is a correct adaptation of cause to effect in obedience to mandates of natural Economic law.
Consumption of food is a natural effect of the natural necessity for food—a natural law. Production of food is a natural effect of the natural need of food for consumption—a natural law. Resort to Natural Resources as the sole source and foundation from and upon which to produce food is a natural effect caused by the natural need for food—a natural law.
Nor can natural law be limited to the individual man any more than it is to trees. Associated man also is governed by it. It is the latter relation that distinguishes it as Economic. From the natural desire of individual man for production from and upon Natural Resources, social Trade develops, not arbitrarily but as a natural consequence of a related natural cause. Let thoughtless students and professors of Economics who deny natural Economic law—the normal conditions of cause and effect that govern cooperative mankind in making a living—explain Economic phenomena, if they can, without reference to Economic cause and effect, or Economic cause and effect with natural Economic law left out.
Natural Economic law might, perhaps, be given another and more accurately descriptive name. Yet its existence and its potency for good results or bad, according to obedience or indifference to it, are beyond all possibility of denial by any Economic student who knows what it means and who, thinking with clarity, speaks with a sense of responsibility. Its name, “natural law,” is simply a common and convenient term, whether truly descriptive or not, for indicating the undeniable fact that in Economics as in every other science, identical effects invariably proceed from identical causes.
Most plainly and incontestably is that observation true with reference to the three Basic Facts in Economics. That they are no haphazard phenomena in their mutual relations or otherwise must be inferred from universal experience. Artificial Objects for human use are produced by Man, and only by Man, from and upon and only from and upon Natural Resources. Man does not create. He produces, which means that he adapts. And in his processes of adaptation or production, he succeeds to the degree that he conforms to natural conditions over which he has no control except by conformity. Call those conditions by whatever name we may, they have all the characteristics of natural law, or natural orderliness, over which Man has no other powers of command than by adaptation of natural means to artificial ends. Natural law would therefore seem to be the most appropriate name—law beyond the control of Man except by his adaptation of natural resources to artificial effects.
Questions of natural law or no natural law in Economics aside, however, we are confronted by facts which common-sense minds cannot escape. Even if there be no natural laws of Economics—a contention that would seem to demand more imagination thanthought,—it is none the less a fact that Artificial Objects never have been produced, are not produced now, and in all probability never will be produced on our revolving globe, except by Man and from and upon Natural Resources. Also it is a fact, whether subject to Natural Law or not, that Man cannot live without Artificial Objects, nor without Natural Resources from and upon which to produce and consume those objects. These facts recognized, disputes over the existence or non-existence of natural law in economics are mere mental gymnastics which may be ignored without prejudice to the essentials of any contention in these pages.
The process of human adaptation of Natural Resources to Artificial effects—or, to use the Economic term, the process of Production,—no matter how complex, is continuous from original conceptions in the human mind to completion and delivery of products to ultimate consumers by the human mind and hand.