4. Aim, of science of business is the subject of Volume 2 in the Modern Business Texts and is generally known as economics or political econ omy. In this chapter we need consider only its pur pose and scope and the importance of its study in re lation to human welfare and business prosperity.
It is the aim of economics to explain the phenomena of business. It sets forth the laws governing prices, values, wages, rent, interest. In other words, it seeks to explain the production and consumption of wealth, by wealth being meant anything that has value and is, therefore, marketable.
Economics is the business man's science. It is the one above all others that he should master, for it treats of things which are part of his daily life. He must be familiar with the laws which determine the prices at which he sells his goods and the rates of wages which he must pay for labor ; otherwise lie works in the dark and will not be able to foresee changes.
5. The must be borne in mind that the economist as a man of science is especially con cerned about the causes of existing phenomena. He looks for the principles underlying economic condi tions and business events of today. Having found these he may then go further and become an economic or social reformer, showing how business conditions might be changed for the better. The man who is merely an economist is not qualified to serve society as a reformer. The moment he proposes changes be is invading the domain of sociology, for there can be no change in our economic system -which does not run counter to custom and involve social consequences.
For example, free trade and protection do not con stitute a purely economic question. It is an issue that cannot be settled right if certain social, ethical and political considerations are left out of account. It is quite possible that an economist who had upheld the economic advantages of free trade would, if he as sumed the responsibilities of statesmanship, become an ardent protectionist. He would, of course, be ac cuSed of' inconsistency, whereas the truth might be that in his position as statesman he had discovered that for his country there existed in favor of a protective tariff certain broad considerations which he bad not taken into account as an economist.
6. is interesting and profitable to note the influence of environment upon economic thought. Among the ancient Greeks and Romans
there was no such science as economics. No philoso pher in those days gave any thought to the phenomena of what we call business. The reason is found in their ideals and environment. They loved the arts, litera ture, sports, war. Slaves supplied them with the necessaries, comforts and luxuries of life. Business to them was of small consequence. Its transactions, therefore, received no attention from philosophers. They did not seem to deserve the notice of wise men.
In the Middle Ages, however, after the downfall of the Roman Empire, men lived under an entirely dif ferent environment. The freemen of the feudal age declined to work in the gold and silver mines of Europe, as slaves had been compelled to do in the earlier ages. Since the conquering legions of Rome brought no more of the precious metals into Europe, and as the church absorbed large quantities of them for the purposes of ornamentation, they became gradu ally scarcer and scarcer during the Middle Ages and greatly incre.ased in value. Rulers found it difficult to keep within their kingdoms an adequate supply of the precious metals and numerous laws were passed for the prevention of their export, it being often made a capital offense.
As a result of this condition men got into the habit of thinking of gold and silver as being the most im portant commodities in the world, and toward the end of the Middle Ages publicists and scholars began to write books and pamphlets on the subject, their gen eral aim being to show how a nation or a city might best increase and conserve its store of the precious metals. Tbere grew up an overwhelming sentiment in favor of a tariff on imports. A nation's exports should be large and its imports small in order that there might be a so-called "favorable" balance of trade which must be paid in gold or silver. These first pro tectionists, it should be noted, had not in mind the building up of home industries, but the enlargement of their country's stock of precious metals. They were not known at the time as economists, but histori ans now group them together as the first school of political economy and call them the "Mercantilists" because of their faith in the value of trade.