3. Economic production (in contrast with technical or merely formal production) is such a change in goods as is attended by an increase in value. It is often well to contrast form, appearance, imitation, with the thing itself, the reality. Men sometimes go through the forms of study when their eyes and thoughts are wandering; through the form of getting a college education when they are simply having a good time. Likewise in production there is the form and the reality. The young lady just out of boarding-school rarely produces a masterpiece with the tubes and brushes that Raphael might have used. The justification for amateur work is to be found in the doing and not in the market value of the result. Blue rosebuds, painted with loving if unskilled touch on red velvet slippers, may bloom into a romance and happiness; but to the economist this appears to be a consumption of good pigment for amusement, not a creation of value. The difference between the form and value of productive effort becomes, in the study of business organization, a most essential question. The significance of leadership and control of industry is found in this fact that economic goods may be united to produce results having either a less or a greater value than the materials that are used.
Acquisition vs. social production
4. Individual acquisition may be contrasted with social production in cases where the individual increases his wealth at the expense of others, without adding to value. Most economic efforts increase the income of the individual and the income of society at the same time. The fruits of the field and the uses of machines are net additions to current income; they are not merely subtracted from the income of one and added to that of another. The increase of products by labor may depress somewhat the exchange value of competing labor, but the general welfare is furthered by the greater abundance. With very slight qualification it is true that in these cases the good of each is the good of all. But in some forms of human effort, social and individual interests clash. When two men bet, one gains and the other loses. The gambler's gain is a loss not only directly to his beaten opponent but indirectly to society. Certain forms of speculation approach dangerously near to the appropriation of the goods of others, and others become outright stealing, or cheating so nearly like stealing that it would be treated as a crime if discovered. But many a man prowls along the border-line of crime all his life and succeeds in making large gains without falling into the clutches of the law. Cheating that can be detected, and outright stealing, are prohibited by the law not because the burglar is an idler; he loses sleep; he has his trials too. The pursuit of burglary requires courage, effort, and ingenuity, but society does not reward these as virtues nor recognize as production the transfer of wealth from the bank-vault to the pocket of the burglar. It is the aim of social institutions to harmonize individual and social interests in the pursuit of wealth, to force men into lines of action where individual acquisition adds to the sum of social utilities. But there are many marginal cases where human justice discriminates only in a bungling way, and many controverted questions arise at the meeting-point of ethics, economics, and law.
Industries are socially more or less productive
5. In this sense, productive industries may be distinguished from unproductive ones. The old distinction between productive and unproductive labor rested on the idea that production must be embodied in material and lasting form. We have rejected this for the thought that the tests of production are to be found in feeling, not in outward things. The distinction, therefore, between productive and unproductive labor must now be of a very different kind. Viewed from the social standpoint, the efforts of men may be seen to be directed along more or less productive lines. Enterprise and effort shade off from the more to the less productive, from the extreme where the value is a net addition to wealth, through other cases where one's gain is partly at the cost of others, to fraud and crime where there is merely a transfer of ownership.
§ II. COMBINATION OF THE FACTORS
The factors of production defined
1. The various parts, materials, and agents that unite to form products are called the factors of production. In a general sense every separate thing that enters into industry is a factor; as, in agriculture, for example, the seed, plows, fields, fences, barns, cattle, labor. But usually in economic discussion, these numerous factors are grouped in large classes. The main factors are two, variously named as man and nature, or labor and material agents, or humanity and wealth. Rejecting, as we have, the old view as to the nature of consumption goods and as to the nature and possibility of the distinction between "land" and artificial capital, we class under wealth all material economic agents whatsoever. The discussion of labor and wages has broadly laid down the principles that apply to the value of human effort, but the factor of directing energy presents in modern society so many important features that it calls for special and fuller consideration.
Progressive stages of control over natural conditions
2. The economic progress of society has been marked by decreasing dependence on the bounties and chances of nature and by increasing control of natural forces by man. Various stages of progress in human history have been recognized. First is the stage of appropriation—the stage of hunting, or of fishing, or of gathering fruits. Man in this stage is still an animal in his economic methods, not guiding and controlling nature, but merely gathering what nature chances to bring forth. The limitations to man's powers in this stage are marked. There is excess of supply and waste at one season, scarcity and great suffering at another. With such crude utilization of the bounties of nature, a vast area will support but a small population. When sheep and cattle have been domesticated, and where there is a large area for grazing, industry rises to the pastoral stage. While still dependent on nature's bounties for the feeding of his cattle, man is hourly intervening to increase, regulate, and improve the supply of food and materials. Famines are more rare, economic welfare is greater, a greater population is nourished on the same area. The agricultural stage begins whenever man plants seeds, trims, tends, and increases by his care the supply of vegetable food. This is a still greater intervention in the course of nature. Man anticipates the future, directs forces, and groups materials to his purpose of getting a regular food-supply. He is thus himself forced into settled life, begins hand-production, and makes the first steps in commerce. Then gradually comes the industrial stage, in which control over nature grows, supplies increase, machinery and motive forces are utilized, and humanity is in the full tide of industrial development. These are not sharply marked changes, but throughout all there is a growth of security, of certainty, and of productivity. With man's increasing power and foresight, chance is lessened, for directing energy takes its place.