Economics, an introduction for the general reader
I offer two pleas in extenuation. The first is that nearly all existing introductions to the subject are intended primarily for the University student. The pious wish is generally expressed that they may be of use also to the general reader, but the general reader's special needs and opportunities are seldom borne in mind. His needs are different, inasmuch as he has not the guidance of a teacher and the leisure of the student; on the other hand, his opportunities are some compensation for these disadvantages, since he has usually a practical interest in the economic system and an experience of its working, which the academic student lacks.
It seemed, therefore, worthwhile to try to do for the economic organization as a whole what Bagehot and Mr Hartley Withers have done for a part of it, the credit system — to explain the principles of its construction and working in the language of ordinary life, and with reference to the experience and interests of the ordinary man. While it would need a Bagehot to succeed, I hope that the mere attempt will have done something to make it easier for the general reader to perceive the bearing of economic studies on the political and social problems in which he is interested.
Economics is the study of business in its social aspect; the word " business " is being used in its broadest sense, to cover all lawful ways of making a living. It will help us to reach a clear understanding of the scope and objects of the study if we take an example of the simplest kind of business transaction, and remind ourselves of the social arrangements which make the transaction possible.
We will take the purchase of a woollen shirt, the price of which is ten shillings. We notice first of all that it is not made in the home, as it would have been a couple of generations ago; it is less trouble to buy it from an outfitter. The outfitter did not make it; he bought his stock of shirts from a shirt manufacturer, or possibly from a warehouseman who bought them from a manufacturer.
When we say the shirt manufacturer " made " the shirts," however, we do not mean that he made the material of which the shirts are made; he may have done so, but more probably his business wari confined to " making up " material which he bought from a piece-merchant or flannel manufacturer. From other merchants or manufacturers, he would buy the thread, buttons, and material for collar bands.
The flannel manufacturer would use several kinds of yarn in making his flannel, and each of these yams would be spun from several kinds of wool. The origin of the shirt, then, which we obtained by the simple process of handing
Some contents:
Chapter X. — Banking and Credit
1. The Cancelling of Indebtedness by the use of Credit
Instruments ......
2. The Creation of Credit by Banks
. The Cash Reserve ......
. The Cash Reserve ......
4. The Social Utility of the Credit System
Chapter XI. — ^The Level of Prices and Foreign Exchanges
1. The Measurement of Changes in the Level of Prices
2. Causes of Changes in the Level of Prices ^.
3. The Law of Comparative Cost Y . . .
4. Imports paid for by Exports ....
6. The Balance of Trade and the Level of Prices
6. The Balance of Trade and the Level of Prices
J Chapter XII. — The Circulation of Weamph
L Wealth and Production .....
2 Income and Capital ......
2 Income and Capital ......
3. Spending and Saving ......
4. The National Dividend or Income. 237^
y Chapter XIII. — Unemployment and Over-Production
1. Imperfect Co-operation between Specialists . . 244
2. Imperfect Anticipation of Demand 248
3. Cycucal Tr.\de Fluctuations .... 252
.Chapter XIV. — Value
Value and Price
2. The Labour Theory of Value
3. The Cost of Production Theory of Value
4. Decreasing, Increasing, and Constant Cost "^.
5. Influence of Competition and Monopoly on Value
Chapter XV. — Value {continued)
1. Relation of Utility to Value
2. The Marginal Utility Theory of Value
3. The Law of Supply and Demand.
Chapter XVI. — Wages
1. Wages and Income . . . . .
2. Wages and Labour Cost . . . .
3. Wages and Trade Unionism
Chapter XVII. — Wages {continued)
L The Subsistence Theory of Wages
2. The Wages Fund Theory of Wages
3. Productivity Theories of Wages...
4. The Influence on Wages of the Standard of Life
5. The Influence on Wages of the Volume of the
National Dividend . .
i^. The Influence on Wages of Inequality op Opportunity
7. Summary ........
7. Summary ........
Chapter XVIII. — Interest and Profits
L The Dist^ction between Profits and Interest
2. Why is Interest paid ?.....
3. What determines the Rate of Interest?
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