67. NATURE OF MODERN PRODUCTION.--In the study of modern production two fundamental facts confront us. The first is that the economist does not define production as merely the making of material objects.

We desire material objects only if they will satisfy our wants. Since, also, the satisfaction of wants is the important thing, it is clear that the performance of a service, such as teaching or painting, may be more important than the manufacture of a material object which no one wants. Production may thus be defined as the satisfaction of human wants. The manufacturer of a material object is productive only if that object is wanted by someone; he who supplies personal or professional service is productive if that service satisfies the wants of someone.

The second fundamental fact which confronts the student of modern production is the complexity of our industrial system. Three hundred years ago most of the commodities in daily use were made, either in the home and by the family members, or by small groups of artisans working together under relatively simple conditions. To-day production is a vast and complicated process. To the eye of the untrained observer a great ma.s.s of factories, farms, railroads, mills, machines, ships, and busy laborers appears without order and, often, without purpose. The task immediately before us is to a.n.a.lyze this ma.s.s, and to point out the nature of the various factors which contribute to the productive power of a community.

68. NATURE A FIRST FACTOR IN PRODUCTION.--Nature is defined by the economist as inclusive of all of the materials and forces furnished in the form of land and its products, oceans, lakes, rivers, rain, humidity, and climate. Since Nature is rather a vague term, and since, also, the economist looks upon land as the most important element in Nature, we may lump together all of the materials and forces of Nature and apply the term "land."

Taken in this sense, land is clearly of great importance in production. We build houses and factories upon it, we use it as a basis of transportation, we harness its motive power, and we make extensive use of the innumerable raw materials which it furnishes.

Without land there could be no production, in the sense in which the economist understands the word.

69. MAN'S LABOR A SECOND FACTOR IN PRODUCTION.--Something besides land, or Nature, is necessary before our wants can be satisfied.

Nature is often careless of our needs and desires. True, she offers us berries, coal, firewood, and many other commodities which are practically ready to use, but even these articles will not satisfy our wants unless we go to the trouble to secure possession of them. In an important sense Nature is pa.s.sive, and if she is to furnish us with a living, we must engage in labor. This labor may be mental or physical, the important point being that it is effort undertaken to increase our control over Nature. Savages are content to use products in substantially the form in which Nature provides them; civilized peoples work over the products of Nature until the utility or want- satisfying power of those products has been greatly increased. Man's living improves as he progresses from indolence to hard physical labor, then from hard physical labor alone to a combination of physical and mental labor intelligently directed.

70. CAPITAL A THIRD FACTOR IN PRODUCTION.--Land to furnish raw materials, and man to make use of those materials,--what more is necessary? Nothing else would be necessary if all of Nature's gifts were readily accessible, and if man unaided could make the best use of them. But Nature hides or disguises many of her treasures, and man is physically weak. Hence he has. .h.i.t upon the device of making tools to help him in his contest with Nature. During the period of the Industrial Revolution many simple tools were supplanted by complicated devices run by power and called engines and machines. To the economist tools and similar devices are a form of capital, capital being defined as inclusive of everything which man has created, or caused to be created, in order to help in further production. [Footnote: Land has not been created by man but is a gift of Nature. Land, therefore, is not a form of capital.]

The fashioning of hammers and saws, the construction of railways, and the manufacture of machinery, all these operations create capital. The systematic creation and use of capital is one of the distinguishing features of modern civilization. The laborer alone can produce little; aided by capital he can produce much. Capital is not important if one is willing to live like a savage; on the other hand, it is indispensable if one wishes to enjoy the benefits of civilization.

71. COoRDINATION A FOURTH FACTOR IN PRODUCTION.--Land, labor, and capital are factors in production. Two hundred years ago nothing else was essential to production. The average individual had his own land, produced his own tools or capital, and relied chiefly or entirely upon his own labor.

But the Industrial Revolution enlarged and complicated production. It created an industrial system in which the individual is generally a specialist, producing a surplus of his one product, but dependent upon numerous other persons for most of the things which he personally consumes. To-day, for example, there are numerous individuals raising cattle, the hides of which are to be made into shoes; other individuals are perfecting means of transportation so that those hides may be carried to market; still other persons concern themselves only with the building of factories or with the manufacture of machines with which to work those hides into shoes. These various individuals and groups may never see each other, nevertheless they aid one another.

The secret of this often unseen and unconscious cooperation is that there are individuals who specialize in the work of connecting up, or coordinating, the other factors which are necessary to the production of shoes. These individuals, about whom we shall have more to say in the next chapter, const.i.tute an important economic group. They coordinate, in the example given above, the cattle grower, the railroad manager, the tanner, the factory builder, and the manufacturer, and thus make possible a kind of national or even international cooperation which would otherwise be impossible. Those whose function it is to promote this cooperation are, therefore, indispensable factors in modern production.

72. GOVERNMENT A FIFTH FACTOR IN PRODUCTION.--A cursory examination of modern industry would convince the observer that land, labor, capital, and coordination are important factors in production. There is, in addition, a factor which is so fundamental, and of such essential value, that it is sometimes overlooked altogether. This is the work of the government in protecting productive enterprises. Government aids in production by suppressing theft, violence, and fraud; by allowing individuals to engage in helpful businesses; by enforcing contracts entered into legally; and by punishing many kinds of monopolistic abuses. [Footnote: We shall take up the problem of monopoly in Chapters XXVII and XXVIII.] The whole fabric of American prosperity is built upon the foundation of law and order.

73. SUMMARY AND FORECAST.--Production in the economic sense consists in doing that which will satisfy human wants. Modern production is a vast and complicated process, involving the cooperation of five factors: land, labor, capital, coordination, and government. In a later chapter we shall find that there are wide differences of opinion as to the relative importance of some of these factors. We shall find, indeed, that the most vital economic problems which confront American democracy depend for their solution upon a clear understanding of the facts stated or implied in this chapter. The student ought not, therefore, to accept hastily the statement that land, labor, capital, coordination, and government are necessary in production, but ought rather to reason out just how and why each is actually helpful in American industry.

QUESTIONS ON THE TEXT

1. What are the chief reasons why men work?

2. Describe the "old way of getting a living."

3. Just what is meant by the "new way of getting a living"?

4. What were the chief effects of the Industrial Revolution?

5. What is the economist's definition of production?

6. Just how does Nature help in production?

7. Explain the relation of Nature to land.

8. Show how man's labor is necessary in production.

9. What is the nature and function of capital?

10. Discuss coordination as a factor in production.

11. Name a fifth factor in production.

REQUIRED READINGS

1. Williamson, _Readings in American Democracy_, chapter vii.

Or all of the following:

2. Carver, _Elementary Economics_, chapters ix-xiii.

3. Adams, _Description of Industry_, chapter v.

4. Ely, _Outlines of Economics_, chapter viii.

5. Smith, _Wealth of Nations_, Book I, chapters i and ii.

QUESTIONS ON THE REQUIRED READINGS

1. What instinct in man gives rise to the division of labor? (Smith, chapter ii.)

2. Name and distinguish between the two kinds of division of labor.

(Carver, pages 77-82.)

3. How does pin making ill.u.s.trate the principle of the division of labor? (Smith, chapter i.)

4. How does the meat packing industry ill.u.s.trate the principle of the division of labor? (Ely, page 125.)

5. To what extent does the cotton mill ill.u.s.trate the principle of the division of labor? (Ely, pages 124-125.)

6. What are the three fundamental advantages which result from the division of labor? (Smith, chapter i; Carver, pages 75-76; Ely, page 126.)

7. What are the effects of the complex division of labor upon the worker? (Ely, pages 127-128.)

8. Describe the chief sources of power utilized by man. (Carver, chapter x.)

9. Discuss the origin of capital. (Carver, chapter xi.)

10. What are the two factors which give value to land? (Carver, page 111.)

11. Explain the statement that thousands of individuals cooperate to furnish the humblest workman with food and clothing. (Smith, chapter i.)

12. What is the secret of modern industrial efficiency? (Adams, page 87.)

TOPICS FOR INVESTIGATION AND REPORT

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