FOREWORD TO ECONOMISTS AND TEACHERS The general texts in political economy from the middle of the nineteenth century have been to a remarkable degree conventionalized. The ambition of successive writers has been "to modernize Mill" rather than to modernize economics. Books continue to appear, repeating with little essential change the theoretical system of the English classical school. Their innocuous references to more recent constructive crit icism have little purpose but to evidence the erudition of the authors and their spirit of Christian charity.
Meantime, from 1870 on, critical studies had shown not only the historical relativity but the logical fallacy of a large part of the older treatment. A body of esoteric economic doctrine developed, discussed only by the initiated, and merely hinted at in undergraduate instruction. So far as this newer thought affected the presentation of economics in the general texts and to college classes it was only in negative and superficial ways, such as substituting the novel soporific locutions of the marginal utility school for the older catchwords of "cost of production." Indeed, it was impossible for the individual teacher of economics to incorporate the newer ideas into his elementary courses, except in this desultory way, until they had been put into more positive, systematic, and teachable form. It seems to have been for lack of this essential develop ment that many virile teachers have made the laudable tho vain attempt to teach the fundamental to beginners by a method misnamed inductive. This has involved a false analogy with the natural sciences, in which induction is the method of advanced research, and not of elementary instruc tion.
The author's "Principles of Economics" published in 1904 was the imperfect result of a decade of labor and experimenta tion to accomplish this neglected task. No enumeration will be made here of the features in which the treatment differed from preceding texts except to call attention to some of the novel terms and conceptions that since that time have gained a considerable measure of acceptance : psychic income, the renting contract, the relation of repairs and conservation to the land supply, time-preference, the investment concept of capital, the capitalization theory of interest, the volitional theory of population, and the psychological theory of crises. The aim was to present a unified theory of distribution, in hich value, rent, wages, and interest were treated merely different manifestations of a general theory of value, not as separate laws each of a different nature. Despite the limitations in this pioneer attempt, it was cordially received, and especially by many of the younger progressive economists. While the parts which treat of these subjects have remained substantially unchanged for eleven years, the book has run through five different impressions and editions.
The present text on Economic Principles seeks to carry forward to their logical conclusions the ideas of that part of the earlier book which dealt with the fundamentals in the theory of distribution. The changes are numerous both in the general plan and in details. The work has been animated by the conviction that there is a body of economic principles which is, or ought to be, capable of systematic statement for college students and for the general reader, and that a grounding in principles and a discipline in the power of clear analysis of economic concepts is an essential preparation for the satis factory study of the so-called practical question& The first purpose of the author has been to make the state ment of principles fit the practical needs of our society as it is now, in America, and as it is developing, rather than as it was in England in 1815. At the same time he has extended
the scientific analysis by replacing the cruder physical classi fication of economic factors into land, capital and labor, with the classification of the essential economic qualities of agents (as, analogously, physics treats of the properties of mechanics, heat, light, motion, etc., and not of sticks, coal, gas, bullets, etc., as such). Further, he presents here a quite new statement of the theory of value, one in accord with the modern voli tional psychology, thus eliminating entirely the old utilitarian ism and hedonism which have tainted the terms and con ceptions of value ever since the days of Bentham. The basis of value is conceived to be the simple act of choice and not 1 a calculation of utility. Even the phrase "marginal utility" is definitely abandoned.
The more thoro analysis of the economic properties of goods and actions has shown the need of new terms and of new definitions for old terms, as in the cases of usance, the sepa rable use, rent, labor-income, time-preference, capital, interest, abstinence, consumptive, durative, and many other expressions. It is hoped that this revision of fundamental concepts, as well as the new treatment of enterprise and profits, the fuller statement of the capitalization theory of interest, and the separation of the dynamic from the static theory, will be found helpful to teachers and acceptable in the end to all economic students.
A clear distinction is drawn throughout this volume be tween value and price in one class of cases and between/ value and utility in another. Each of the first four parts bek gins with the individual aspect of the problem of choice (sub jective value) and concludes with the study of the com mercial or price aspect. The fifth part deals with which, as the investment function, is purchaser of uses and services and the payer of the various contractual incomes, —the reward of which, therefore, from its very nature, can be only of a non-contractual character. The distinction be tween value and utility marks the contrast between the per sonal, acquisitive, aspects of value, which are the subject of the first five parts, and the "utility" and social welfare aspects which are treated in part six.
A number of the practical applications of the principles have been reserved for a second volume, which will deal with the facts, theories, and public policies relating to money, bank ing, international trade, labor organization, the trust problem, taxation, insurance, ete.
I cannot undertake to express individually my many obliga tions to fellow teachers, to graduate students, and to other friends for the stimulation, appreciation, and cooperation that have so greatly aided in the development of this work. I must, however, gratefully make an exception in the case of my colleague Professor W. M. Adriance, to whom is due a special acknowledgment for his numerous and valuable criticisms and suggestions.
F. A. F. Princeton, N. J.