TRUSTS. I. An economic unit is an ag gregate of land, labor and capital united to gether by more or less permanent bonds and operating under the guidance of some direct ing mind or minds. Economic units differ in size, in the character of the work done and in the relative amount of the co-operating ele ments employed, but all are alike ih one respect, viz., all are destroying natural resources and using up human energy in order to produce commodities and services necessary for human existence or human pleasure. Under the capi talistic system, each economic unit is controlled and directed by certain persons called proprie tors, who, generally speaking, own the land, hire the labor and reap the benefits that arise from producing the commodities or services at less than the costs incurred. Under such cir cumstances, the proprietors naturally try to form economic units of such size and such character as to secure a minimum of costs for a given benefit or a maximum of benefits for a given cost or costs. In this connection, three facts should be borne in mind; first, it is al ways much easier to form and to operate small economic units than large ones; second, in cer tain kinds of work, larger units are necessary, in many kinds, the larger units are more pro ductive and therefore more profitable Tor their proprietors; third, economic units may be united Into compound economic units, or systems, of such size and character that all or nearly all the advantages which" might have been obtained by the creation of large size units at the outset are gained by the process of uniting or amalgamat ing existing economic units at any time after their formation. In view of the above condi tions it is not only natural but in most cases extremely desirable that proprietors should start out in a modest way, compare costs and re sults in the small and large units operating in the same particular field and attempt to ad just the size of the operating units according as the small or large are found to be more pro ductive.
An increase in the size of the units and in the scale of the operations may be secured either by adding more land, labor and capital to existing units or by uniting existing units into systems as above stated. The former proc ess secures the requisite size by growth, the latter by union. Generally speaking, wherever conditions have changed in such a way that the larger units possess advantages over the smaller ones, both processes are going on side by side, some proprietors employing one, others the other, the choice being determined partly by the mental and moral characteristics of the proprietors, partly by the peculiar conditions of the industry in which the transition from small scale to larger scale production is economically demanded. Whatever the conditions in the in
dustry and whatever the character of the pro prietor, the process of securing the readjust ment of size by growth is accompanied by con• sequences of which the proprietors as a class are cognizant. To convert all of the small economic units into large units is of course impossible except in a very rapidly growing field. Some of the economic units must there fore remain small, and smallness under such circumstances means economic death. To avoid such disastrous consequences the proprietors may prefer to join together into unions, thus securing certain of the advantages of size with out at the same time facing a competitive strug gle that must inevitably result in the complete annihilation of those units that for any reason are left behind. The unions thus formed may be composed of any number of economic units from two to the total number in existence. Unions composed of a relatively small number of economic units are co-operative agencies for performing in common certain functions that otherwise would have been performed by each member separately. They, therefore, are institu tions possessing distinct economic advantages to society by reason of their efficiency and also by reason of the competition which they foster and preserve. Unions composed of a large number of economic units, while possessing the advantages that grow out of co-operative ac tion, may gain by virtue of the union a very different kind of power, viz., the power of monopolistic control over the goods and serv ices which they respectively produce. In the latter case the organizations thus created are enabled not only to retain for the proprietors all the benefits arising from the co-operative action which follows, but further to gain an additional advantage in the enhanced price which they are in a position to obtain for their goods and services.