The Principles of Economics Part 56

See our summary of the present situation, _American Economic a.s.sociation_, 3d ser., Vol. II, p. 241 (1900).

Alfred Marshall's effort to save the older conception by compromise on a "quasi-rent" doctrine has many supporters, but this doctrine is examined in detail and criticized adversely by the writer in an article ent.i.tled "The Pa.s.sing of the Old Rent Concept," _Quarterly Journal of Economics_, Vol. XV, pp. 416-455 (1901). For both negative and positive reasons for a change in the concept, see _The Relations between Rent and Interest_, before cited (in note to ch.

8).

CHAPTER 11. REPAIR, DEPRECIATION, AND DESTRUCTION OF WEALTH

1. What is the difficulty in the definition: Rent is the payment for the original and indestructible powers of the soil?

2. If the value of improvements on land is all counted, is there anything over? Examples.

3. What is stumpage? Does it differ from rent?

4. What do you know about the methods of renting mines?

5. What methods are adopted to keep up the efficiency of factories?

NOTE.--Compare and note the inconsistent use of the term "rent" by Ricardo, pp. 34-5 and 45-6, McCulloch's edition.

See also article, "Depreciation," in _Palgrave's Dictionary_.

CHAPTER 12. INCREASE OF RENT-BEARERS AND OF RENTS

1. What are the most obvious ways of increasing the productiveness of land?

2. How does a new railroad affect the value of the land it pa.s.ses through?

3. How would the rent of a rocky island be affected if it became a summer resort?

4. Mention any cases you may have seen where a greater value was imparted to land by a newly discovered use.

5. A tunnel was made to drain a mine; the stock doubled in price. Was it really the stock, the old mine, or the new hole in the mountain-side that had increased in value?

6. Criticize the statement that, in an economic sense, land is a "fixed stock for all time."

NOTE.--The changes which the rent concept is undergoing can be traced in the work of Alfred Marshall. See _Principles of Economics_, Bk. V, ch. IX on "Quasi-rent," and ch. X on "Situation Rent," and Bk. VI, ch. IX, Secs. 6-7, in which Marshall modifies the older conception of rent. This is discussed in "The Pa.s.sing of the Old Rent Concept," cited above (in note to ch. 10).

CHAPTER 13. MONEY AS A TOOL IN EXCHANGE

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

2. What functions does money perform in society?

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

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

5. 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?

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

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

CHAPTER 14. THE MONEY ECONOMY AND THE CONCEPT OF CAPITAL

1. Are national bonds or promissory notes, wealth?

2. Is it money or things that the borrower wants?

3. If you were starting a factory on credit, would you rent the machines or buy them with borrowed money? Why?

4. When a man says he has a certain capital invested in his business, does he mean to include the value of the land and buildings?

5. What is the meaning of the phrase, "a capitalistic age"?

NOTE.--We are indebted to the economic historians for a better understanding of the important influence money has had on economic organization. See Hildebrand's notable article in the first number of the _Jahrbucher_, and Ashley, _English Economic History_. J. B. Clark was the first among contemporary economists to emphasize the value concept of capital. The scholarly and judicial article by Irving Fisher on "Precedents for Defining Capital" in _Quarterly Journal of Economics_, May, 1904, makes possible better understanding and agreement on the subject. I am pleased to say that in this article, and in personal correspondence, Professor Fisher disavows the interpretation I had thought (see "Recent Discussion,"

etc.) that his words required. His conception of capital is thus, in essentials, the one here employed, differing from it not in thought, but merely in terminology. Professor Fisher's original studies of the capital concept, in the _Economic Journal_ in 1896-7, are indispensable to an understanding of the development of this important phase of the new economic theory. The connection between the conclusions of economic history and the value concept of capital in economic theory has been made by the author in essays before cited under chapters 6 and 8: "Recent Discussion of the Capital Concept"; "The Next Decade of Economic Theory," and "The Relations between Rent and Interest."

CHAPTER 15. THE CAPITALIZATION OF ALL FORMS OF RENT

1. What relation is there between the rate of interest and the price of land bearing a given rental?

2. If a $100 share of railroad stock sells at par when interest on loans is at 5%, what will be its price when interest rises to 6%? When interest falls to 4%?

3. If a business is very successful and its dividends double, what will be the effect on the selling price of its stock?

NOTE.--The subject is almost foreign to the standard works on economics, which have continued to look upon capital as primary, and its income as derived. Numerous recent articles will be found, however, dealing with concrete problems where the logical and the practical views are seen to be the same; _e.g._, W. Z. Ripley, _Quarterly Journal of Economics_, Vol. XV, p. 106 (1900), article on "The Capitalization of Public Service Corporations"; also article in _Engineering News_, Vol. XXVIII, p. 492 (November, 1892).

CHAPTER 16. INTEREST ON MONEY LOANS

1. Some money-lenders in cities get 10% a day from fruit-vendors for the advance of small sums of money, and the losses are very slight.

p.a.w.nbroking pays frequently 25 to 100% per year. In these cases what affects the rate of interest?

2. Through what agency does the Western farmer borrow Eastern capital?

3. How do Englishmen invest in American railroads?

4. In what ways can a lender collect a high rate of interest without appearing to do so?

5. What would be the effect upon the rate of interest in a new state if it pa.s.sed a law preventing the collection of loans by outside lenders?

6. Why has interest been about 10% in the West, 7% in the Central States, 5% in New York, 4% in Germany?

7. What is the money market? Who are the buyers and sellers, and what do they buy and sell?

8. In a panic, interest rises on short loans and prices fall, while it is almost impossible to borrow money; does this show that the amount of money determines the interest rate?