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Old-fashioned political economists had an idea that wealth was material things used to promote the welfare of human beings. They got confused in their idea of capital, which in some way they thought ought to be wealth used to get profit. New-fashioned economists saw that the

confusion sprang from the idea of value, and Professor vznis cepura ? Clark made easy the true distinction by his terms “capital und in den dute goods” and “capital.” Capital goods are identical with

wealth, but capital is the value of that wealth.

But here a new confusion arises. The older economists tried to distinguish between land, capital, and labor. But, if capital is value of wealth, then anything having value is capital. Professor Irving Fisher, in his volume on The Nature of Capital and Income (1906), carries the idea to its logical fulness, and wealth becomes land, capital goods, and human beings, while capital becomes their value. The issue now is made clear. The older economists were | working on a serious social problem,--that of earned and j unearned incomes. They carried everything back into

. 1 terms of cost, effort, enterprise, sacrifice, abstinence, and distinguished the income that corresponded to cost "from that which came as a surplus above cost. They were political economists.

But value does not correspond to cost. A surplus also has value. The business man buys and sells at a valuation anything that the law makes property. He is not con

1 Pages 5, 67.

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cerned with the political problem of earned and unearned wealth. The new economists, following him, carry everything forward into terms of income, capitalizing alike that which corresponds to cost and that which is a surplus. They are business economists.

A system of social philosophy seems to reach abstract perfection just after society has begun to knock out its props. Before business economy had perfected this the

ory of capital value, the legislatures had begun in earnest ? to bring business down to cost value. Even the Supreme

Court of the United States has sustained a case where through a State law a property earning 18 per cent. on some $900,000 was reduced to one earning six per cent. on some $300,000. The court decided that the latter was a reasonable income on the reasonable value of the property. This I understand to be the idea of the public in rate regulation, and especially in the laws designed to get at the "physical value” of the property of public service corporations. In the common sense view the "true value” of property is its cost of reproduction, less depreciation, plus its value “as a going concern”; that is, the labor, sacrifice and effort required to construct the property and build up the business. But in the business view the value is the capitalization of its income. One is political economy, the other is business economy.

Doubtless there is room enough for a philosophy of business economics. Indeed, scarcely a greater service could have been performed than that of working out to logical exactness the tenets of such a philosophy. It enables us more clearly to distinguish the true nature of political economy. This is especially called for when business economy sets itself up as the real political economy. The work of Clark, Fetter, and Fisher, is admirable and indispensable, not only in its own sphere of business economics, but also as a contrast to the sphere of political economics. When Fisher has carried it out to its logical perfection and has

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Stanislaus Co. v. San Joaquin and K. River Canal and Irrigation Co., 192 U.S. 201.



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boldly accepted all of its implications, we are in a position
to discover those grounds on which it is able for a time to
pass off as political economy. Naturally enough, these
grounds are found in a double use of terms. So precise a
thinker as Fisher has of course taken precautions against
this fallacy, but his precautions are found not in his pri-
mary terms, but in his secondary terms. While capital
value is clearly distinguished from capital goods and the
term “capital” is confined to the former, yet the primary
terms of “wealth," "service," and "property," on which his
structure of capital rests, are palpably ambiguous. I do not
refer to his inclusion of human beings under the terms
"wealth” and “capital.” While this is startling, it is ad-
mirably logical, but is secondary to the double sense in which
property, wealth, and services are employed.

Wealth is material things which are owned. They are
owned because they promise to yield desirable services to
the owner. Property is the right to have these future ser-
vices, if they materialize.

No exception can be taken to this sequence. But it includes only one-half of the idea of property,—the inclusive half. Property is also exclusive,—the right to withhold services and to prevent them from materializing. And this is the all-important half of property from the business standpoint. Were there no buying and selling, then the only significant right of property would be the right of the owner to use up and personally enjoy the services of his wealth. But, where these services are yielded in order to be sold, the significant thing is the right to hold back the services until others consent to pay the price demanded. In modern society the “right to the uses of wealth,” accurately speaking, pertains only to that moiety of wealth that has passed into the hands of the prospective consumer,-the right to eat the loaf of bread he has bought, the right to ride in his own carriage, to wear his own suit of clothes. But the sense of the phrase is wholly different when the wealth is made to be sold and is in course of exchange. It is not the mere option of

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using it or selling it that exhausts the definition of property. Much more is the right to bargain, to withhold, even to compel others through their necessities to give over the services of their wealth. This is the essence of the power to turn utility into value. And if the term “property" can be defined in its primitive sense of enjoying the uses of wealth, and then be employed in its business sense of requiring others to pay a price for enjoying those uses, we can reason about business economy as tho it were political economy. The result is seen in the terms “wealth” and “service."

A paper manufacturer “is offered a round sum" by his competitors, “if he would close his mills.” This he did, and “the contract which he made with his rivals constituted a kind of property for them; the wealth by means of which his promise was made good was evidently his own person together with his plant; and the service performed was the inactivity of both.” Thus a paper mill yields the “services of wealth” when it is making paper and when it is not making paper.

A copyright is “the right to a similar refraining from or restraining of competition.” “It would have been property of great value to the publishers of the Encyclopædia Britannica if they could have prevented the pirating of their work in this country. The wealth underlying this property right is the wealth which, if employed in the specified line, would enter into competition with the property owner. It mainly consists of the persons and plants of possible competing publishers." Thus my piratical Britannica at thirty dollars would still have yielded its services if it had never been printed and published and if I had paid a hundred dollars for the original Britannica.

And so on. The brick-layer performs services when he lays bricks and when he is out on a strike. Running a loom is a service and keeping it idle is a service. Ploughing

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a corn is a service and letting the field run to weeds is a service. This identification of the negative, or exclusive,

1 The Nature of Capital and Income, p. 28.

2 Page 19.

side with the positive, or inclusive, side of property is seen in the paragraph on good will. Good will is merely the right to a tacit, loose, and contingent promise of support and patronage, less cost. True, but good will is also the prohibition on others from using a certain name or mark as a means of reaching the public.

So with a street railway franchise. It is the right to use the streets for transportation purposes. True, but the franchise is also the ability de facto to keep competitors from selling that kind of transportation to the public. No doubt, in all of these examples, Fisher is merely endeavoring to show that property, even in its most abstract and “intangible" form, always refers to some underlying wealth. Wealth yields services or uses, and a perfect right is the right to the chance of obtaining some or all of the future services of one or more articles of wealth." This identity of property and wealth causes no confusion where only the positive, or inclusive, side of property is involved. Thus a “promise," a debt, or bond secured by a mortgage, is simply a claim upon the earnings or wealth of the debtor. Irredeemable paper money and the taxing power of the government are claims on the general wealth of the community. In these and similar cases the several

property rights are merely devices for apportioning the mallayan services of wealth among different proprietors. The con

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fusion arises in the other cases where property is used in its exclusive or prohibitive sense. But it is the latter sense that underlies the entire book on The Nature of Capital and Income. For it is not wealth, or “capital goods," with which he is dealing, but it is the value of wealth, or 'capital value." This is the business man's “capital.” But capital in the sense of value is based on property in the exclusive sense, just as capital in the sense of goods or wealth is identical with property in the inclusive sense. It is the property right to withhold or prohibit the use and even the production of wealth that enables the owner to exact a value in exchange for what he owns. And the

Page 28.

? Page 25.

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