Chapter 7 WHAT IS MEANT BY PRODUCTION

63. WHY MEN WORK.-Ultimately everyone depends upon work for his living. Young children commonly live upon the earnings of their parents; most normal adults, on the other hand, depend upon their own efforts for their living. Since every individual probably works because of a combination of motives, it is possible somewhat to analyze the reasons why men work. The most fundamental reason for working is in order to preserve one's life. This assured, the individual is in a position to work in order to preserve the lives of those who are near and dear to him.

When the necessities of life have been provided, work is commonly continued for the sake of acquiring comforts or luxuries.

Under a well-regulated legal system these efforts of the individual also benefit the community, but until he is able to support himself and his family, the average individual does not consciously make the public interest the chief end of his labors. However altruistic a man may be, he will not be able to labor consistently in behalf of others, unless he will thereby serve his own interests as well, or unless his personal needs have already been met.

64. THE OLD WAY OF GETTING A LIVING.-The economic history of eighteenth century England illustrates two rather distinct methods of getting a living, one of which may be called the old, and the other the new. Up to about the middle of the century, the masses of Englishmen, in common with the people of other countries, got a very poor living. Most common necessities were made in the home and for purely family use. Shoes, clothing, tools, and similar articles were produced laboriously and on a small scale. In comparison with industrial conditions in the nineteenth century, there was at that time little industrial co?peration [Footnote: By co?peration is here meant simply the working together of different persons or groups of persons. Co?peration in this sense is to be distinguished from co?peration as discussed in Chapter XII.], little division of labor, little suspicion that men were, in spite of hard work engaged in for long hours, getting a very poor living. The trouble was, partly, that men had not yet fully realized the possibilities of helping one another, and partly that they were ignorant of how to make Nature really an efficient aid in getting them a living.

65. THE NEW WAY OF GETTING A LIVING.-After the middle of the eighteenth century the invention of a series of remarkable machines enabled Englishmen greatly to increase their productivity, first in the manufacture of textiles, and later in numerous other industries. By subdividing their labor more and more minutely, and by each specializing in the particular type of work which he could do best, men found that their total output could be greatly increased. This complex division of labor, made possible by the use of water and steam power to run machines and to move vehicles of transportation, reduced the difficulty of getting a good living, that it constituted a veritable revolution in industry. Indeed, this change is known in history as the Industrial Revolution.

66. EFFECTS OF THE INDUSTRIAL REVOLUTION.-In the last century and a half the Industrial Revolution has spread to every important civilized country in the world, everywhere encouraging the application of machine methods to more and more industries. This change from production on a small scale, and often by hand, to large-scale production in factories equipped with complex machines, has had important results. It has so increased our control over Nature that even the humblest workman of to-day enjoys many comforts denied kings a few centuries ago. On the other hand, the Industrial Revolution has tended to create a numerous class which depends entirely upon wages, and to set off against this class an employing group which possesses and controls most of the income-producing equipment of industry. The significance of this last development will become clearer as we go along.

67. NATURE OF MODERN PRODUCTION.-In the study of modern production two fundamental facts confront us. The first is that the economist does not define production as merely the making of material objects. We desire material objects only if they will satisfy our wants. Since, also, the satisfaction of wants is the important thing, it is clear that the performance of a service, such as teaching or painting, may be more important than the manufacture of a material object which no one wants. Production may thus be defined as the satisfaction of human wants. The manufacturer of a material object is productive only if that object is wanted by someone; he who supplies personal or professional service is productive if that service satisfies the wants of someone.

The second fundamental fact which confronts the student of modern production is the complexity of our industrial system. Three hundred years ago most of the commodities in daily use were made, either in the home and by the family members, or by small groups of artisans working together under relatively simple conditions. To-day production is a vast and complicated process. To the eye of the untrained observer a great mass of factories, farms, railroads, mills, machines, ships, and busy laborers appears without order and, often, without purpose. The task immediately before us is to analyze this mass, and to point out the nature of the various factors which contribute to the productive power of a community.

68. NATURE A FIRST FACTOR IN PRODUCTION.-Nature is defined by the economist as inclusive of all of the materials and forces furnished in the form of land and its products, oceans, lakes, rivers, rain, humidity, and climate. Since Nature is rather a vague term, and since, also, the economist looks upon land as the most important element in Nature, we may lump together all of the materials and forces of Nature and apply the term "land."

Taken in this sense, land is clearly of great importance in production. We build houses and factories upon it, we use it as a basis of transportation, we harness its motive power, and we make extensive use of the innumerable raw materials which it furnishes. Without land there could be no production, in the sense in which the economist understands the word.

69. MAN'S LABOR A SECOND FACTOR IN PRODUCTION.-Something besides land, or Nature, is necessary before our wants can be satisfied. Nature is often careless of our needs and desires. True, she offers us berries, coal, firewood, and many other commodities which are practically ready to use, but even these articles will not satisfy our wants unless we go to the trouble to secure possession of them. In an important sense Nature is passive, and if she is to furnish us with a living, we must engage in labor. This labor may be mental or physical, the important point being that it is effort undertaken to increase our control over Nature. Savages are content to use products in substantially the form in which Nature provides them; civilized peoples work over the products of Nature until the utility or want- satisfying power of those products has been greatly increased. Man's living improves as he progresses from indolence to hard physical labor, then from hard physical labor alone to a combination of physical and mental labor intelligently directed.

70. CAPITAL A THIRD FACTOR IN PRODUCTION.-Land to furnish raw materials, and man to make use of those materials,-what more is necessary? Nothing else would be necessary if all of Nature's gifts were readily accessible, and if man unaided could make the best use of them. But Nature hides or disguises many of her treasures, and man is physically weak. Hence he has hit upon the device of making tools to help him in his contest with Nature. During the period of the Industrial Revolution many simple tools were supplanted by complicated devices run by power and called engines and machines. To the economist tools and similar devices are a form of capital, capital being defined as inclusive of everything which man has created, or caused to be created, in order to help in further production. [Footnote: Land has not been created by man but is a gift of Nature. Land, therefore, is not a form of capital.]

The fashioning of hammers and saws, the construction of railways, and the manufacture of machinery, all these operations create capital. The systematic creation and use of capital is one of the distinguishing features of modern civilization. The laborer alone can produce little; aided by capital he can produce much. Capital is not important if one is willing to live like a savage; on the other hand, it is indispensable if one wishes to enjoy the benefits of civilization.

71. CO?RDINATION A FOURTH FACTOR IN PRODUCTION.-Land, labor, and capital are factors in production. Two hundred years ago nothing else was essential to production. The average individual had his own land, produced his own tools or capital, and relied chiefly or entirely upon his own labor.

But the Industrial Revolution enlarged and complicated production. It created an industrial system in which the individual is generally a specialist, producing a surplus of his one product, but dependent upon numerous other persons for most of the things which he personally consumes. To-day, for example, there are numerous individuals raising cattle, the hides of which are to be made into shoes; other individuals are perfecting means of transportation so that those hides may be carried to market; still other persons concern themselves only with the building of factories or with the manufacture of machines with which to work those hides into shoes. These various individuals and groups may never see each other, nevertheless they aid one another.

The secret of this often unseen and unconscious co?peration is that there are individuals who specialize in the work of connecting up, or co?rdinating, the other factors which are necessary to the production of shoes. These individuals, about whom we shall have more to say in the next chapter, constitute an important economic group. They co?rdinate, in the example given above, the cattle grower, the railroad manager, the tanner, the factory builder, and the manufacturer, and thus make possible a kind of national or even international co?peration which would otherwise be impossible. Those whose function it is to promote this co?peration are, therefore, indispensable factors in modern production.

72. GOVERNMENT A FIFTH FACTOR IN PRODUCTION.-A cursory examination of modern industry would convince the observer that land, labor, capital, and co?rdination are important factors in production. There is, in addition, a factor which is so fundamental, and of such essential value, that it is sometimes overlooked altogether. This is the work of the government in protecting productive enterprises. Government aids in production by suppressing theft, violence, and fraud; by allowing individuals to engage in helpful businesses; by enforcing contracts entered into legally; and by punishing many kinds of monopolistic abuses. [Footnote: We shall take up the problem of monopoly in Chapters XXVII and XXVIII.] The whole fabric of American prosperity is built upon the foundation of law and order.

73. SUMMARY AND FORECAST.-Production in the economic sense consists in doing that which will satisfy human wants. Modern production is a vast and complicated process, involving the co?peration of five factors: land, labor, capital, co?rdination, and government. In a later chapter we shall find that there are wide differences of opinion as to the relative importance of some of these factors. We shall find, indeed, that the most vital economic problems which confront American democracy depend for their solution upon a clear understanding of the facts stated or implied in this chapter. The student ought not, therefore, to accept hastily the statement that land, labor, capital, co?rdination, and government are necessary in production, but ought rather to reason out just how and why each is actually helpful in American industry.

QUESTIONS ON THE TEXT

1. What are the chief reasons why men work?

2. Describe the "old way of getting a living."

3. Just what is meant by the "new way of getting a living"?

4. What were the chief effects of the Industrial Revolution?

5. What is the economist's definition of production?

6. Just how does Nature help in production?

7. Explain the relation of Nature to land.

8. Show how man's labor is necessary in production.

9. What is the nature and function of capital?

10. Discuss co?rdination as a factor in production.

11. Name a fifth factor in production.

REQUIRED READINGS

1. Williamson, Readings in American Democracy, chapter vii.

Or all of the following:

2. Carver, Elementary Economics, chapters ix-xiii.

3. Adams, Description of Industry, chapter v.

4. Ely, Outlines of Economics, chapter viii.

5. Smith, Wealth of Nations, Book I, chapters i and ii.

QUESTIONS ON THE REQUIRED READINGS

1. What instinct in man gives rise to the division of labor? (Smith, chapter ii.)

2. Name and distinguish between the two kinds of division of labor. (Carver, pages 77-82.)

3. How does pin making illustrate the principle of the division of labor? (Smith, chapter i.)

4. How does the meat packing industry illustrate the principle of the division of labor? (Ely, page 125.)

5. To what extent does the cotton mill illustrate the principle of the division of labor? (Ely, pages 124-125.)

6. What are the three fundamental advantages which result from the division of labor? (Smith, chapter i; Carver, pages 75-76; Ely, page 126.)

7. What are the effects of the complex division of labor upon the worker? (Ely, pages 127-128.)

8. Describe the chief sources of power utilized by man. (Carver, chapter x.)

9. Discuss the origin of capital. (Carver, chapter xi.)

10. What are the two factors which give value to land? (Carver, page 111.)

11. Explain the statement that thousands of individuals co?perate to furnish the humblest workman with food and clothing. (Smith, chapter i.)

12. What is the secret of modern industrial efficiency? (Adams, page 87.)

TOPICS FOR INVESTIGATION AND REPORT

I

1. Visit a factory, mill or shop in your vicinity and study the organization of the plant with regard to the application of the principle of the division of labor. Secure the amount of output per man by dividing the total product by the number of workmen co?perating in its production. Compare the output per man under these conditions with the probable output per man if each workman were working separately, without material assistance from other workmen.

2. Study, both by inquiry and by observation, the effects of the division of labor upon the health and spirits of the workmen in the factory, mill or shop visited.

3. Classify the industries in your locality on the basis of whether they rely chiefly or entirely upon human, animal, water, steam or electric power. Why does each industry not utilize some other form of power than that actually used?

4. Classify some of the familiar occupation groups in your community according as they derive their incomes chiefly or entirely from land, labor, capital, or the process of co?rdinating land, labor, and capital. Test the productivity of each group by the standard advanced in section 67 of the text.

5. Attempt to show to what extent each of the five factors of production has contributed toward the erection and furnishing of your schoolhouse.

II

6. The Industrial Revolution in England. (Ely, Outlines of Economics, chapter iv. Cheyney, Introduction to the Industrial and Social History of England, chapter viii.)

7. Colonial industries. (Lessons in Community and National Life, Series A, pages 73-83; Series B, pages 17-25; Series C, pages 17-25. See also Bogart, Economic History of the United States, chapter iv.)

8. The Industrial Revolution in the United States. (Bogart, Economic

History of the United States, chapter xii. Ely, Outlines of

Economics, chapter vi. Marshall and Lyon, Our Economic

Organization, chapter viii.)

9. The significance of the cotton gin. (Consult an encyclopedia.)

10. Cyrus McCormick and the reaper. (Consult an encyclopedia.)

11. The story of a loaf of bread. (Wood, The Story of a Loaf of Bread. Additional material on this subject may be secured by writing to the International Harvester Company, Chicago.)

12. The story of iron and steel. (Smith, The Story of Iron and Steel, pages 23-126.)

13. Development of business organization. (Lessons in Community and National Life, Series A, pages 169-178.)

14. Economic work of the United States government. (Dryer, Economic Geography, chapter xxxiii.)