The following quotation points out an error that might be made from too hasty reasoning by example:—
On August 23d the Southern Railway, which since 1902 had been paying 5 per cent. annual dividends on its preferred stock, voted to reduce those dividends from a 5 per cent. annual rate to one of 3. Five days later, on August 28th, the Erie Railroad, which had been paying 4 per cent … announced that it would pay no cash dividend this time, but would issue to the amount of the usual 4 per cent. dividend, what it called dividend warrants, which were practically notes at 4 per cent. redeemable in cash in 1907.
It was natural that this action regarding dividends should have awakened much uneasiness…. To predict a similar cutting of dividends by other railway companies would, however, be unwarranted. The case of the Southern Railway and the Erie was peculiar. Each had been classed among the financially weak railways of the country. Both were reorganized from absolute railway wrecks, and in each the new scheme of capitalization was proposed to the markets at a time when recovery from the depression of 1893 had not made such progress as it had achieved when the greater companies, like the Union Pacific, were reorganized. The result was that, with both these railways, provisions of working capital and adjustment of liabilities to the possible needs of an active industrial future were inadequately made. [Footnote: Alexander D. Noyes, The Forum, October-December, 1907, p.198.]
An excellent illustration of how to refute argument by generalization is found in the following quotation. It has been said that since England finds free trade beneficial, the United States should adopt the same policy. Mr. Reed, a leading advocate of protection, points out the weakness of this argument.
According to the usual story that is told, England had been engaged with a long and vain struggle with the demon of protection, and had been year after year sinking farther into the depths, until at a moment when she was in her distress and saddest plight, her manufacturing system broke down, "protection, having destroyed home trade by reducing," as Mr. Atkinson says, "the entire population to beggary, destitution, and want." Mr. Cobden and his friends providentially appeared, and after a hard struggle established a principle for all time and for all the world, and straightway England enjoyed the sum of human happiness. Hence all good nations should do as England has done and be happy ever after.
Suppose England, instead of being a little island in the sea, had been the half of a great continent full of raw material, capable of an internal commerce which would rival the commerce of all the rest of the world.
Suppose every year new millions were flocking to her shores, and every one of those new millions in a few years, as soon as they tasted the delights of a broader life, would become as great a consumer as any one of her own people.
Suppose that these millions, and the 70,000,000 already gathered under the folds of her flag, were every year demanding and receiving a higher wage and therefore broadening her market as fast as her machinery could furnish production. Suppose she had produced cheap food beyond all her wants, and that her laborers spent so much money that whether wheat was sixty cents a bushel or twice that sum hardly entered the thoughts of one of them except when some democratic tariff bill was paralyzing his business.
Suppose that she was not only but a cannon shot from France, but that every country in Europe had been brought as near to her as Baltimore is to Washington—for that is what cheap ocean freights mean between us and European producers. Suppose all those countries had her machinery, her skilled workmen, her industrial system, and labor forty per cent. cheaper. Suppose under that state of facts, with all her manufactures proclaiming against it, frantic in their disapproval, England had been called upon by Cobden to make the plunge into free trade, would she have done it? Not if Cobden had been backed by the angelic host. History gives England credit for great sense. [Footnote: Thomas B. Reed, Speech in House of Representatives, Feb. 1, 1904.]
ARGUMENT FROM ANALOGY. When two instances of objects which are unlike in themselves, but which perform similar functions or have similar relations, are compared for the sake of showing that what is true in one case is true in the other, the process is called argument from analogy. The following quotation is a good illustration of this kind of argument:—