I. Human Factors
The Productive Process is accomplished by Man’s exertions, mental and physical, each of those forms of exertion being dependent upon the other.
In that connection Man is governed by natural law, a manifest law of human nature. It resembles the familiar law of external nature in obedience to which physical force advances along the line of least resistance. The former, the Economic law, may be concisely, accurately and indisputably expressed in these terms: Men seek to satisfy their Economic desires with the least exertion.
The validity of that generalization is sometimes questioned on the basis of the fact that men often seek to satisfy their desires with excessive exertion. But is that true? Is it not at best only apparently true? Although for the purpose of satisfying a desire for something, one were to walk three miles when he might reach his goal and satisfy his desire by a shortcut only one mile long, but which is unknown to him or is haunted by a dreadful ghost or infested with predatory men or savage animals, or so reputed to be, he would nevertheless be seeking to satisfy his desire with the least exertion. To risk contact with a ghost or a robber or savage beasts would add much more to his exertion mental and physical, than a walk of three miles for the satisfaction of a desire that might be satisfied by a walk of one. The statement that men seek to satisfy their desires with least exertion is to be read with the interpretation that they do so with the least known and the least dreaded exertion; also that the desire may include effort for the sake of effort, for effort desired as in exercise for health’s sake or exertion for the sake of play.
The Economic principle that men seek to satisfy their desires with least exertion does not imply that all men, or any of them know what the least possible exertion is. It is least only in their more or less biased or ignorant judgment. There is no contention that they do satisfy their desires with least exertion. The contention is that they naturally seek to do so. Critics of this natural law of Economics should have a care lest they fail to “see the forest for the trees.”
Like the principle in physics to which it is analogous this law of Economics involves the element of least resistance. As in physics the line of least resistance may not be a straight line, although that is its tendency, so in Economics it may not be a direct line. Nor may it be the same line from generation to generation. Precisely as in physics physical obstacles may divert a line from direct to crooked, so in Economics such obstacles as customs, habits, superstitions and ignorance may cause analogous diversions. But as the physical line of least resistance, though not always the shortest by foot rule measurement, is the shortest considering obstacles, so the Economic line of least exertion is as straight as habit, custom, superstition, advice, ignorance, and other obstacles permit.
Let the principle be tested by Money measurements. Will any sane man pay $100 to satisfy any Economic desire of his which he knows he can satisfy as perfectly for $75, or $80, or $90, or even more than $90 so it be less than $100? Certainly not. Then the Economic law in question may be expressed in terms of Money. Instead of saying that men seek to satisfy their Economic desires with least exertion, we may express the same natural law by saying that men seek to satisfy their Economic desires at the lowest Money cost. Both statements have the same meaning. The only difference between them is that the latter is expressed in terms of Money measurement whereas the former is expressed in terms of human effort.
Another familiar demonstration of this natural Economic law that men both individually and in the mass seek to satisfy their Economic desires with least exertion, is the human craving for Labor-saving invention. Could any more comprehensive exemplification of the natural law in question be demanded? Why does mankind crave Labor-saving methods for producing Artificial Objects from and upon Natural Resources, if there be no law of human nature which impels mankind to seek satisfaction of Economic desires with least exertion? John Orr concisely sums up this Economic law in these words: “Very strong and deep is the desire of men to find the easiest way of doing things.”[4]
[4] “Short History of British Agriculture,” By John Orr. Oxford University Press, 1922.
The earliest expression of this principle was by Henry George in 1879. Alluding to Political Economy, the term by which Economics was then identified, he wrote: “It lays its foundations upon firm ground. The premises from which it makes its deductions are truths which have the highest sanction; axioms which we all recognize; upon which we safely base the reasoning and actions of every-day life, and which may be reduced to the metaphysical expression of the physical law that motion seeks the line of least resistance—viz., that men seek to gratify their desires with the least exertion.”[5]
[5] “Progress and Poverty: An Inquiry into the Cause of Industrial Depressions, and of Increase of Want With Increase of Wealth. The Remedy.” By Henry George. New York: D. Appleton and Company. 1883.
In the Economic realm all human exertion is usually and appropriately distinguished by the technical term “Labor.” This Economic term for human exertion in the production of satisfactions for human wants has been much abused by colloquial interpretations. So interpreted, Labor is often limited in meaning to the exertions of persons hired in “lower class” pursuits for fixed “wages.” For somewhat “higher” grades of service, “salaries” instead of “wages” are paid. For self-employers still other terms are colloquially used, such as “profits” for the services of merchants and manufacturers and contractors; “fees” for the services of lawyers and physicians; “commissions” for the services of salesmen and brokers; and “discounts” for the services of bankers. Those verbal variations are of course admissible for such secondary purposes as private business may require; but for fundamental or general Economic distinctions which concern the whole human family, they are recklessly undiscriminative and hopelessly confusing. This lack of discrimination is attributable to a tendency in Economic study toward devotion to infinite detail regardless of precise generalization.
The result is a confusion of fundamentally different objects in messy categories, such as Labor with Labor-products; such as Labor-products with Natural Resources; such as income from Natural Resources with income from Labor—as, for instance, “Land” (Natural Resources) with “Capital” (Artificial Objects). It is like thinking of oil and water as a chemical compound when they happen to be in the same receptacle.
Fundamental conclusions in Economics cannot be based upon unassorted details. Students must concentrate their study upon the big facts, the Basic Facts, those primary categories which distinctively classify the whole swarm of secondary facts. Well enough it may be not to start out with assumed principles, nor with the scientific substitute known as “hypotheses;” but all rational study of Economics must begin with the Basic Facts and proceed thence to a consideration of details with reference to their basic relations.
The distinctive phase of the present Lesson with reference to human exertion is exertion of the Economic type. Whatever its kind as matter of secondary classification, all human exertion comes within the meaning of the comprehensive Economic term for human service, which, as already stated, is Labor.
No more truly in the Labor category are the services of “wage-workers” than are those of farmers, of manufacturers, of merchants, of brokers, of bankers, of architects, of lawyers, of physicians, of engineers, of authors, publishers, teachers, or the services of any other useful workers who participate in the intricate processes of Economic production. All are within the Labor category. Be the Economic service whatever it may which any human being—from inventor to chattel slave—contributes to the satisfaction of human wants, such service belongs in the same basic category with every other Economic service. Consequently, it must be identified in fundamental Economic classification by the same technical term.
What term may be best for that purpose is of minor importance, if of any importance at all, since names are for identification rather than description. Consequently, the technical term Labor, adopted long ago by Economists of the highest rank to identify human service in Economics, is fully justified regardless of its descriptive qualities. Even as a descriptive term, what other word could better identify human service as a whole?
Among the outstanding minor classifications of Labor is Business, and to this another attaches which some advanced students in Economics classify by itself fundamentally. The latter is the service of the “entrepreneur” or “enterpriser.” As a secondary classification this distinction is probably useful; but for comprehensive Economic study it is as useless as “carpenter” or “bricklayer” would be. Worse yet, it is misleading.
The “enterpriser” is a worker whose compensation for service is not fixed but depends upon the profitableness of the enterprise he pursues, which may be any business venture from mining or manufacturing to merchandizing, and in any capacity from employer seeking “profits” to salesman on “commission.” To eliminate this type of Economic service from the fundamental Labor category in Economic science is not only useless and misleading but also absurd. The fact that the “enterpreneur’s” service may or may not prove profitable to himself—the fact, in other words, that when he enters upon an enterprise he “takes chances” as to compensation—does not alter the Economic character of his functioning. He is none the less nor any the more in the Man category of Economics in contradistinction to the Natural Resource category and the Artificial Objects category. The only Economic difference, essentially, between him and the “common laborer” or “wage-worker”—except that one may be more serviceable than the other, individual for individual—is that the compensation of the “common laborer” or “wage-worker” is nominally secured by contract, whereas the “enterpriser’s” is contingent; and this difference is not fundamental. To take the “enterpriser” out of the Labor category in Economics by assigning him to a fourth fundamental category, is to trifle with Economic classifications. Why extend the basic categories of Economics from Natural Resources, Artificial Objects and Man, to Natural Resources, Artificial Objects, Man and Enterprisers?
A similar classification of Business itself—which, by the way, is usually managed by “enterprisers”—would likewise be absurd and trifling as well as confusing. What is legitimate Business but human service? And what else in Economic classification fundamentally can human service be but Labor? Business is in the Man class of Economics in contradistinction to the Natural Resource class and the Artificial Objects class. No other fundamental classifications are possible. Consequently, the activities of Business classify themselves naturally in the domain of Economics as Labor.
And so of the professions.
So, too, of every other kind of human service in the Productive Process, whether the service take on such direct forms of Production as making Artificial Objects and such as delivering them from hand to hand or place to place, or such indirect forms as promoting the comfort, the enjoyment, the health, the education, the cleanliness or what not (provided it be Economically legitimate), of such human workers as literally do make or deliver Artificial Objects. All are in the Labor category.
Labor comprises, too, the serviceable operations of partnerships as such; also of corporations, of chambers of commerce, of labor unions; the services of schools and churches and theaters and social clubs; of political parties and religious societies—every kind of corporate service, in short, including the service of governments—to the extent that such service contributes, in addition to the contributions of its constituents in their individual capacities, to the production of Artificial Objects.
And Production—let the reference to this fact be not overlooked—comprises Delivery throughout the whole Productive Process to and including its termination in delivery to ultimate consumers. Railway workers and sailors and storekeepers and household servants and waiters at hotels and restaurants and all their Economic associates from employer to “menial,” are producers as truly as are farmers, mechanics or manufacturers.
Human services of the corporate type, as well as those of the individual distinctively, are too numerous and too intricately woven together to permit of detailed consideration here. It is enough to note that far and away as some of them may at a glance seem to be from the Productive Process in Economics, they will be found upon intelligent inquiry—except as they may be more or less perverted in operation—to be in the Economic category of Labor. That is to say, they are human factors in the Production of Artificial Objects from and upon Natural Resources.
One kind of corporate service, a comprehensive kind, should perhaps be given brief special consideration for the double purpose of illustrating the Productive functions of every variety of corporate service and of explaining the Economic characteristics of that outstanding one of all. This particular kind is Government.
The “business” of Government, to use a colloquialism, the Labor of Government, to use the technical Economic term, is comprehensive and effective in the Productive Process to the degree—a reservation that applies to all other subclassifications of Labor, from the lowest grade of “hired man” to the most powerful partnership or corporation, from the most awkward apprentice to the shrewdest business “enterpriser,”—that its functions are wisely and fairly devoted to the task.
Governments are legislative, executive and judicial agencies of social wholes. It is their function to contribute service to the production of Artificial Objects by preserving public order, defining and protecting private rights, distinguishing and conserving common rights, and managing or providing for the management of common affairs. To the degree that governments faithfully exercise their legitimate public functions and refrain from interfering with legitimate private functions, they contribute to the Productive Process. This is demonstrated by observable Economic results. Wherever Government approximates a realization of its functions, Economic conditions are manifestly better than where it neglects or abuses them. Evidently, then, Government is a form of human service which, like all other human service forms, belongs as an Economic factor in the Labor category.
And as with Governments, so is it with all other organizations in so far as their organic activities tend to promote good order, fair dealing, righteous social adjustments, peace, and general Economic prosperity.
The essential considerations with reference to Labor may be compactly summarized in these terms: (1) Labor can create nothing; it can only produce, by altering the forms and locations of natural substances. (2) Nothing but Labor can so produce. (3) Labor is therefore the sole directing factor in the production of Artificial Objects from and upon Natural Resources.