The basic facts of economics

by Louis F. Post

What do we see at this “store” but a complex aggregation and combination, in multitudinous and confusing variety, of the services of Man in producing Artificial Objects from and upon Natural Resources to ultimate consumers through channels of Trade and in terms of Money?

The number of those products here assembled, together with the complexity of the infinite detail involved in their production, would be bewildering were we to plunge into the ocean of particular facts unequipped with a clear mental grasp of the Basic Facts and their mutual Economic relations. For illustration, here is a barrel of potatoes to which the store clerk calls our attention with a view to delivering it to us in Trade for some of our Money.

Now, what could be simpler at first thought than a barrel of potatoes as an Economic fact? A farmer has “raised” the potatoes and brought them to market, where we may have them for their Money price. But what of the farmer’s “help”? and the plough with which he prepared the ground? the hoe or more modern implement he used in the processes of cultivation and of reaping the crop the horses or the motor he ploughed with? the building in which he stored the crop before marketing it? the wagon he carried it to market in? the transportation equipment with which it was carried from a larger market place to this retail store? the factories in which the barrel was promoted from lumber to its present condition of usefulness? the factories and stores and railroads and ships and wagons and tools? the banks and book-keepers and truckmen? All such factors must be taken into account, with many more, in their vast and various and intricate relationships, if we are to know the Economic history and to solve the Economic problems regarding even so familiar an Artificial Object as a barrel of potatoes on sale at a retail store.

Every one of those Economic details can be considered intelligently, readily and accurately, through the medium of the three Basic Facts, into one or another of which must fall, not only that barrel of potatoes and all the details of its production, but also the entire stock of the store, and of all other stores, and every Economic agency back of them to the very beginning of each productive process through which they have passed. All Economic details, the familiar and the unfamiliar, the obvious and the mysterious, the known and the unknown, generalize with precision into the three Basic Facts of Economics—Artificial Objects, Natural Resources and Man.

Natural Resources are the source and the indispensable condition at every stage, from beginning to end, in the production of every kind of satisfaction for human wants. Man is the active agent at all stages. Artificial Objects constitute the category into which each result generalizes at each stage of production. From Economic particulars we derive knowledge of Economic detail and skill in applying that knowledge; but only from their correct generalization can we derive Economic wisdom.

Thinking about the three Basic Facts is necessary to an understanding of their mutual relations; thinking from them is necessary to an understanding of the mutual relations of their constituent parts. Reversely, we must think from Man to Man-power of numerous kinds, both mental and physical; from Natural Resources to soil, minerals, air, water, building sites, and so on; from Artificial Objects to houses, tools, machinery, food, clothing, et cetera.

In another form of statement, the Economic student must know and understand the comprehensive categories or Basic Facts in order to grasp the Why of Economic adjustments, the natural relationship of Economic effects and causes. To understand the How, he must also know and understand the little facts of Economic specialization, such as the mutual relations of the details which go to make up those wholes—the particular facts, for instance, of agriculture or architecture or engineering or merchandizing or manufacturing or banking or professional service,—as well as their three comprehensive classifications or Basic Facts—Man, Natural Resources and Artificial Objects.

One of the deplorable tendencies in Economic study comes from a disposition among advanced students to think exclusively within such narrow fields as banking, manufacturing, transportation, merchandizing, the cotton trade, the silk industry or agriculture. All trustworthy Economic thinking must be from fundamentals—from Natural Resources, Man and Artificial Objects—to the minute details of the respective Economic specializations. All Economic specializations, to the uttermost of their Economic minuteness, are subject fundamentally and in their mutual relations to the natural Economic laws that govern the inter-relationship of the three Basic Facts—Artificial Objects, Man and Natural Resources.

That barrel of potatoes in the retail store may serve for an example.

The barrel itself, an Artificial Object, was produced by Man from antecedent Artificial Objects—staves and hoops. The staves and the hoops were produced by Man from preceding Artificial Objects—lumber and iron. The lumber and the iron had come from trees felled and ores extracted by Man; the trees were Natural Resources, unless cultivated by Man, in which case they were Artificial Objects produced from and upon Natural Resources (the earth) and descended from trees which in their earlier days were themselves Natural Resources. The iron ore was an Artificial Object produced by Man from Natural Resources known as ore deposits. So the barrel holding those potatoes at that retail store proves to be throughout its whole Economic history nothing but a combination of many kinds of Artificial Objects every one of which has been produced and all of which have been combined by Man from and upon and within the Natural Resources of earth and air and light and heat and electricity and other natural characteristics of the planet that Man inhabits.