DISPOSITION OF THE SOCIAL SURPLUS The entire product of industry is distributed among those who have helped in the production, or have otherwise established a recognized claim to a share in it. Every producer receives a mini mum share sufficient to cover actual costs, and if in a favorable economic position, a share also in the surplus. This surplus arises from the in creased efficiency of labor, the invention of machinery, the discovery of natural resources, the accumulation of capital, the development of new kinds of human ability, the substitution of a more economical diet, a removal to more favor able environment, and the various other ways of reducing costs and increasing utilities. There is a surplus as soon as industry provides more than enough to replace all costs, giving to each producer the amount of his investments, includ ing the cost of subsistence during production. Even in an undeveloped state of industry, nature 375 may be so liberal that there is a surplus in agri culture or in mining. The commercial nations secure a surplus by carrying products to places where they have greater value ; and the improve ment of the industrial organization, by introdu cing the division of labor, machinery, and superior management, gives a greater surplus still. While these changes are in progress there are also so cial changes which enable people to do equal work with less loss of vitality, and, on the other hand, to obtain greater enjoyment from equal quantities of goods. The surplus is increased as much by these social changes as by the ma terial changes which directly affect the making of goods.
One who turns his attention to the subject of economics, as soon as he understands its scope, naturally asks himself two questions : Where do goods come from ? What becomes of them ? In answering the first question we soon learn they do not come as a rule from the labor of the person who has possession of them, or, at least, not exclusively from his labor. Hundreds of laborers, many of them skilled mechanics, others inventors, others travellers, still others farmers, miners, and merchants, have cooperated to make the goods in question. It may be that the one who now has them has performed labor which is an equivalent for all of this labor previously expended by others, so far as there are any liv ing claimants for an equivalent ; but nature has also contributed, permanent improvements made by past ages have been utilized, inventions for which the patent has long since expired, and methods of work suggested by the bright minds of previous generations, have since become the common property of mankind. So the answer
to the question where goods come from is not so simple as it appears. It is found only in a full study of the whole field of economics. One of the first things learned about it is that for many items in their present utility you cannot find any person who can claim to have incurred a corresponding cost, and therefore that society has on its hands a surplus to be distributed otherwise than in accordance with the law of costs.
The answer to the second question : What becomes of the goods produced by society ? will bring this out still more clearly. In fact, goods are distributed in two quite distinct ways. If the entire product of industry were exactly large enough to replace actual costs, the distribu tion of wealth would be a simple matter. Each producer would receive from the product suffi cient to cover his costs ; the laborers and man ager enough to purchase the food and shelter absolutely needed to keep themselves in work ing condition, capitalists enough to maintain their capital, landowners enough to replace the losses from cultivation. Such minimum shares are a condition of the continuance of indus try. As a rule we use the word wages to des ignate the income of laborers, interest that of capitalists, and rent that of landlords. But where there are only minimum shares, as above described, there is no interest, for this includes only the return obtained for the use of capital, and of course there is no interest unless the capitalists receive something more than the amount which they have invested. Similarly, there is no rent under such circum stances, for there is no income deserving this name until the landlords secure from the mere possession of land more than enough to cover the expenses of keeping it in cultivation. In a state of slavery, even wages are absent, and we may therefore readily imagine industries which only replace costs, giving to each class of pro ducers a minimum share sufficient for that pur pose, but not sufficient to afford any surplus.