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The Limits Of An Economic Society
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Leading Facts Concerning Money
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Effect Of Improvements In Methods Of Production
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Conditions Insuring Progress In Method And Organization


Effect Of Improvements In Methods Of Production








Displacement of Labor and Capital by Inventions

Inventions are
labor-saving. Employers are engaged in a race with each other in
reducing the outlays involved in producing goods, and a common way of
doing this is to devise machinery that will do what laborers have
heretofore done. The same thing is accomplished by developing cheap
sources of motive power or introducing new commodities which are good
substitutes for dearer ones. Mechanical automata have at a thousand
points taken labor out of human hands; electricity, which is
harnessing Niagara, may at some time harness waves and winds and
make them turn the literal wheels of mechanical progress. Such things,
by causing a given amount of labor to produce a larger amount of
consumers wealth, are product multipliers; but this is the same thing
as saying that they yield a given product at the cost of less labor,
and as we more commonly see their effect in this light, we call them
labor savers.

Why Labor Saving is not always and everywhere Welcomed

To an
offhand view it would seem that product multiplying is the greatest
blessing that, in an economic way, can come to humanity; and if
general and permanent effects be considered, it is so. The solitary
hunter who has to catch and club his game would get unqualified
benefit from the possession of a bow and arrows; the fisherman would
get the same benefit from a canoe, the cultivator of the soil from a
spade, etc. Society in its entirety is an isolated being and derives
similar gains from engines, looms, furnaces, steamships, railroads,
telegraphs, etc. Yet there are persons within the great social
organism to whom the benefit from one special improvement may be
small and the cost great. There are none who are not better off
because of all improvements past and present.

The General Demand for Labor not Lessened

It is a matter of common
experience that new machines are labor displacers. At its introduction
an economical device often forces some men to seek new occupations,
but it never reduces the general demand for labor. As progress closes
one field of employment it opens others, and it has come about that
after a century and a quarter of brilliant invention and of rapid and
general substitution of machine work for hand work, there is no larger
proportion of the laboring population in idleness now than there was
at the beginning of the period.

A Voluntary Reduction of Toil Desirable and Probable

A full study
of the effects of technical progress will show that there is never a
reduction of the general field for employment in consequence of it.
There is an increase of pay, and this causes a certain unwillingness
to work for as many hours as men formerly worked; and there is also a
change in the nature of the operations that labor performs, which
tends in the direction of more comfort and less painful toil. For the
famous statement of J. S. Mill that "It is questionable if all the
mechanical inventions yet made have lightened the day's toil of any
human being" we may safely substitute, "It is the natural tendency of
useful inventions to lighten the toil of workers and to give them,
withal, a greater reward for their work." Mechanical progress is the
largest single ground for hope for the future of laboring humanity,
and by its effects, direct and indirect, it has already insured a
great alleviation of toil, with an increase in its rewards. It has
helped to counteract the world crowding that for a century has gone on
and the diminishing returns from agriculture which the crowding
entails. Inventions may make disturbances, and their better effects
may be temporarily and locally counteracted; but a society where
competition rules is sure to secure the benefits in the end and does,
in fact, secure them in greater and greater measure as the years go
by. Such are some of the theses which research will justify.

Facts concerning Disturbances incidental to Progress

We have first
to take account of the disturbances. They are prominent in economic
discussion and constitute the subject of one of the grave indictments
brought against the system of competitive industry. They have actually
caused great hardships in the past, as skilled handicraftsmen have
seen machines come into use which, for rapidity and accuracy of work,
excel the best results that long apprenticeships formerly gave. Now
that machinery has possession of most of the field, there is no longer
the former opportunity for displacing hand workers; but the remainder
of hardships incidental to progress is not to be overlooked. This part
of the dynamic movement involves present local sacrifices for the sake
of future general gains. Here, therefore, there are developed
antagonisms of interest which may hinder progress and, if they were
extensive enough, might conceivably throw a doubt over the future of
the working class. While there is no great disposition to question the
ultimate benefit which mechanical progress insures, there is some
uncertainty as to the process by which this benefit is extended to
workers and there is a struggle to avoid the immediate cost. There is,
in some quarters, a disposition to rate the cost so highly as to draw
the inference that we need to adopt a socialistic plan of living for
the sake of enabling workers to avoid the hardships and secure the
benefits of "labor saving." It will appear, however, if we grasp the
essential facts of what we may call the dynamics of method, that the
tendency of it is to reduce the burdens which progress entails, and to
diffuse a large share of the benefits of it among the working class.
It will further appear that the socialistic plan of organizing
industry would at least throw a doubt over the progress itself.
Nothing, on the whole, puts the future of industry conducted on the
competitive plan in a more optimistic light than the fact of the
progress in productive methods which it insures. It is the strongest
guaranty of a "good time coming," in which all humanity will rejoice
when it comes and should rejoice by anticipation.

The Law that insures the Survival of Beneficial Processes Only

It
is self-evident that wherever there is a saving of labor needed to
make a given amount and kind of product, there is an increase in the
possible product that is created by the aid of a given amount of
labor. If workers themselves get a share of the gains, this fact will
show itself through that beneficent shortening of the working day to
which we have alluded. The men will be unwilling to stand the
weariness and the confinement of working through too many hours and
will be inclined to take more holidays and vacations; all of which,
when it comes about in a natural way, is an indication that the
industrial organism as a whole has put its hand on a new and powerful
lever and is enriching its members by means of it. It does, however,
have to change the character of its work, and this means that some
labor has to be transferred from one subgroup to another. The laborer
displaced by an invention at a particular point continues to be wanted
somewhere. When he and others have found their new employments, the
good result appears,--the increase and improvement of goods
produced,--and society as a whole then gets the benefit which would
come to an isolated worker who, without remitting his labor, finds his
appliances growing better and the fruits of his labor growing larger.
The collective body gets a greater income than before, and the workers
share in the gain.

Importance of the New Forms which the Social Income Takes

This
increasing income takes the form in which society now requires it, and
it is this which brings about the readjustment of labor--or the
changes in the amounts of labor used in particular subgroups--which
have caused hardship in the past.

Nature of the Incidental Evils to be Dreaded

The problem we have
to face is a danger that labor may be displaced either (1) from the
particular point within a productive establishment at which it is now
working, or (2) from the productive establishment as a whole, or (3)
from a subgroup, or (4) from the general group of which the subgroup
is a part. Out of industrial society in its entirety it cannot thus be
forced. There is a case in which the men whose crafts are supplanted
by machines may all stay where they are and operate the machines; but
that involves forcing other men to change their occupations. There are
more cases in which these men may stay in the mill or shop that
employs them, but not in the same department of it. There are still
more cases in which they may stay in their original subgroups, and in
a majority of cases they may stay in their general groups. In every
instance there are places for them in the working society.

Local Expulsions of Labor

When a single employer who is one of
many competitors in an industry adopts an important labor-saving
device, it may be possible for him to keep all his men employed and to
let the improvement show itself wholly as a means of increasing the
output. He may secure a machine which will do what twenty men formerly
did. If it were possible to cut the uppers of a dozen shoes by the
quick stroke of a single die, the machine that carried this armature
would do the work of perhaps twelve knives handled by that number of
skillful workmen. If the original number of men were retained in the
cutting department, and if each of them were furnished with the new
appliance, it would mean that twelve times as many uppers would be cut
as were cut before the change was made. There would, of course, be no
use in trying to do so much cutting of uppers for shoes, without doing
twelve times as much sewing, welting, making soles and heels, etc.,
and to secure all this at once would require a twelve-fold enlargement
of the manufacturer's plant. This is too much to secure at once. The
manufacturer might perhaps double the output of his mill and nearly
double the number of his employees, but that would require only two
of the twelve cutters he formerly had. The new workers would be in
parts of the mill other than the one where the great saving of labor
was effected. Ten men would be removed from the cutting department,
and the two left there would cut, by the aid of the new machines,
twice as many uppers as the whole number cut before, and that would
require the furnishing of a double number of all other parts of the
shoes and a double working force to make them. The ten men liberated
from the cutting department would be available for this purpose, and
new ones would be brought in and set sewing, pegging, lasting,
welting, etc. Within a single establishment, therefore, a radical
saving of labor at one point usually involves some shifting of labor
from that point to others, though it may increase the total number
employed in the establishment which secures the economical device.

The Effect on a Subgroup of an Improvement by One Entrepreneur

If
an employer who has this experience is one of a hundred in the
shoemaking industry and the only one who secures the cutting machine,
the market will receive as large an increase of the product as would
be involved by multiplying the output of his mill by two, without
requiring that the price should be more than slightly reduced. An
improvement which is monopolized for a time by a single entrepreneur
seldom renders it necessary to reduce the aggregate of the labor in
his employment. Far more often it makes it for his interest to
increase the number and to put new labor in every part of the plant
where no improvement in method has been made. It is often the fact,
however, that labor has to abandon other establishments in this
subgroup, and enough of it may do so to cause the amount in the
entire subgroup to become somewhat smaller by reason of an
improvement. In the case of a single employer there is a bare
possibility that no one should be moved, in consequence of an
economical invention, even from one part of the mill to another. The
manufacturer of our illustration might even keep his twelve cutters at
work after the introduction of the machines referred to and do twelve
times as much cutting, provided that he could quickly increase his
output of finished shoes to twelvefold its former amount. There are
practical reasons why he could almost never do this; but if he
actually did it, he might, by some reduction in the price of shoes,
find a market for this increased product. If the reduction of price
were great, some competitors would probably go at once out of the
business; but it is never the policy of a successful producer to make
unnecessary haste in reducing prices, and, as a rule, the reduction is
gradual. The increase of product from the very efficient mill must
cause a certain reduction in the rate at which it sells its goods, and
this is apt to force manufacturers who are particularly ill equipped
and cannot keep pace with the rate of improvement which their
enterprising competitor establishes to go out of business. They thus
relieve the market of so much of the product as they have contributed
and make a place for the increased output of the newly equipped mill.
In such a case the total output from the subgroup is not very greatly
increased, and the price of the product does not need to be greatly
reduced.

Standard Prices fixed by Cost in the most Economical
Establishment

It is a vitally important fact, as we shall soon
see, that the price of an article is, in a dynamic society, always
tending toward the cost of making it, not in the most inefficient
establishment, where it is produced "at the greatest disadvantage,"
but in the most efficient one of all. The ultimate effect of any great
improvement is naturally to close the shops of all employers who do
not adopt it or get an equivalent advantage of some kind. Ultimately
the whole subgroup will be in the state of efficiency it would have
reached if the improvement had been adopted by every entrepreneur on
its first appearance.

The Effect of an Improvement in Production which is quickly adopted
by a Whole Subgroup

When an improvement is immediately adopted, not
by one employer merely, but by all employers in a subgroup, it is
likely to cause a quicker displacement of labor from the subgroup as a
whole. A very economical machine introduced by its inventor or
manufacturer and quickly adopted by all employers at A'' would
nearly always force a certain number of laborers to leave that
industry and find employment elsewhere, if it were not for one
commercial fact, namely, the reduction in the price of the product and
the consequent enlargement of the demand for it.

How Labor may be displaced from a General Group

The amount of A'
that can be created depends on the amount of A that can be furnished
as material to be transformed into A', and also on the amount of
A' that will be taken for conversion into A''. This again depends
on the amount of A'' that will be accepted by employers at A'''
and sold in this last form to the consuming public. If the market for
A''' cannot be much increased by a moderate reduction of the price
of it, some labor may have to go into the group of B's or C's; and
in any case there must be new labor in A, A'', and A''' if the
product of A' is increased. We can now measure the difference
between the effect of the adoption of an improvement first by one
employer and much later by others, and that of the quick adoption of
it by all. In this latter case there is not much delay in increasing
the output of the goods, and the market for them does not have time to
grow larger because of the growth in the numbers and the wealth of the
community. Unless the present market will take an enlarged quantity of
the finished goods without requiring that the price should go below
the new cost of making them, some labor will have to leave the general
group.

How Patents may Cause an Increased Displacement of Laborers

What
we often see is the nearly simultaneous adoption of a labor-saving
device by all leading employers in one industry. Something like this
takes place when the makers of a valuable machine retain the patent on
it in their own hands, and press the sale of it on all the producers
who have use for it. In this case, however, the makers usually put the
price of the machine at a figure that, while it affords an inducement
to buy it, does not reduce the cost of the goods that it helps to make
enough to cause a great increase in the demand for them. The owners of
the patent on the new appliance charge for it "what the traffic will
bear"; and until the patent runs out, the users of the machine have to
sell their goods almost at as high prices as before. If the machine
enables one man to do the work of a dozen, eleven men must find other
things to do. They could find them in their own industry if the
product of it were enlarged in consequence of the use of the machine;
but if the high price of the patented machine prevents this, they must
go elsewhere. When the patent runs out, there is likely to be a
considerable enlargement of the industry, and how important this fact
is we shall soon see.

How Improvements which call Labor to a Particular Establishment may
displace Labor from a Group

Another typical case is afforded when
some one employer has for a time the exclusive use of a labor-saving
device, and pushes his production to the utmost in order to get the
full benefit from it. Here are seen the more characteristic effects of
such an improvement. It draws labor to the employer who for the time
being monopolizes the new instrument of production, but it turns
labor from the subgroup of which this employer is a member. He
enlarges his output and in time this reduces the price of the product.
In the field there are marginal mills, or those so antiquated, ill
situated, or badly run that, with their product selling at the former
price, they could barely hold their own; and now that the price is
reduced, they lose money by running. They have to cease operating, and
this makes practicable a further enlargement of the product of the
efficient mill. Much labor goes thither, but some part of that which
leaves the abandoned mills betakes itself to other subgroups. Not
often, indeed, does it have to go to other general groups. The cheap
transformation of the material A into A' enlarges the market for
A' and calls for more labor at A, and it involves more at A''
and A'''. If the change of method had been gradual, the growth of
the social demand for A''' would probably have precluded the need of
sending any labor out of the entire group of A's. Even a rapid
change often sends labor out of one subgroup into other subgroups of
that series rather than into other general groups.

An improvement that should reduce the cost of converting leather into
shoes would, by the sale of the shoes, call for more leather, more
cattle, more appliances, more tanning, and larger buildings for shoe
factories, furnished with more shoemaking machinery and greater motive
power, even though the particular machines which were improved by the
invention had become so much more efficient that no more of them were
needed. This depends on the extent to which a certain reduction of
cost of a product enlarges the market for it.

Principles Governing the Enlargement of the Effectual Demand for One
Commodity

In determining how much a reduction of the price of a
single article will at once enlarge the market for it, there are two
things to be considered, namely, the elasticity of the want itself to
which the article caters, and the extent to which an article catering
to a particular want may be substituted for other articles designed to
satisfy the same one. The desire for jewels and other articles of
personal adornment is very expansive, and a fall in the price of any
one article of this kind causes a relatively large increase in the
consumption of it. Since the want to which a costly ornament caters is
thus elastic, the cheapening of all articles that cater to this want
would enlarge the consumption of all of them. The cheapening of a
particular one of these articles, if there were in the market many
others of the same general kind, would cause that one to be
extensively used in preference to the others. By an enlargement of the
total amount of decorative articles used and by a relative favoring of
a particular one of them at the cost of others, the sale of that one
would be doubly increased. Cheaper diamonds might mean an increased
use of them without any large reduction in the use of other gems; but
if many other gems happened to be available for the purposes subserved
by the diamonds the use of these others would be curtailed and that of
diamonds would be disproportionately increased.

The Value of Goods as affected by the Existence of Castes

One of
the reasons why the market for jewels is thus elastic is the fact that
they serve as badges of caste, as only something of large cost can do.
If, therefore, all gems were to become much cheaper, two things would
happen: (1) relatively poor people would buy some of them--partly in
lieu of imitations and of cheaper real jewels; and (2) rich people
would have to buy more and costlier ones than were formerly needed, in
order to retain their positions in the social gradations. This
principle affects the consumption of a wide range of articles, the
possession of which seems, outwardly at least, to stamp the owners as
belonging in a certain stratum of society. It increases the demand for
fine clothing, furnishings, and equipage, multiplies social functions,
and induces participation in all manner of costly diversions. The
elasticity of the market for luxurious goods is, in general, greatly
increased by the action of this motive. The cheapening of them causes
them to be consumed by the lower classes and renders the use of
greater quantities or higher qualities of them a social necessity for
the higher classes.[1]

[1] It is also true that an entire variety of gems or other
things of this genus might, by mere cheapness, be branded as
too common to be used by the very wealthy, except for new and
inferior modes of adornment.

We shall soon see that a reduction in the cost of any one article
usually causes the use of it to trench on that of all manner of things
which are on the margin of consumption and are not similarly
cheapened.

Changes of Cost of Different Goods Never Uniform

The cost of all
articles is never reduced at the same time, and it is impossible that
all of them should remain in the same order of desirability in the
estimation of purchasers. Many things, however, are often cheapened at
the same time, though in different degrees. Whatever furnishes a very
common raw material at a lower cost than has prevailed, as did the
invention of the Bessemer process of steel making, makes everything
into which that material enters cheaper. By reducing the cost of
railroads and engines, cars and steamships, the Bessemer process
indirectly lowered the prices of goods that have to be carried, which
means practically everything. A cheap motive power acts in the same
way and lowers the costs of producing an unlimited number of goods.
Even in the case of such general improvements as this the reductions
of price are not uniform. Some goods are affected more than others.
Cheap steel lessens the cost of bridges more than it does that of
dwelling houses, and in the case of many improvements the effect is
confined to a limited class of products, if not to a single one.

How the Disturbing Effect of a Single Improvement is Limited

In
the case of consumers' goods improvements are going on so nearly
incessantly and at so many points that the effect is much the same as
if every invention cheapened most of them at once. Harmful
disturbances are reduced to minute dimensions by the multiplying of
the changes, each of which, if it occurred alone, would produce a
hurtful effect. Many inventions cancel one another's unfavorable
effects in a way that we shall later examine. What we now have to do
is to isolate a single productive change and see whether there are
forces working to reduce its own independent power to create
incidental disturbance. What limits the power of a single new and
economical process to eject laborers from their accustomed places of
employment? This question cannot here be answered in detail, but a
brief statement will cover the general principles involved. Obviously
the displacement varies inversely with the extent to which increased
cheapness enlarges the consumption of the article affected. If by
making one thousand men produce as much of the commodity as two
thousand formerly produced, you so reduce costs as to double the
consumption of the article, you keep all the men who formerly made it
in their accustomed places of employment. The elasticity of the want
itself to which the article caters is one of the two elements that
determine the increase in the consumption of it; but when this
increase is due to an extensive substitution of this article for
others in the purchasing lists of the consuming public, the result is
greatly to reduce the displacement of labor which the new and
economical method of production entails. Such substitutions are very
general and are a large factor in rescuing men from the hardship of
being forced out of the employments they are used to.

On what an Enlarging Market for Tools and Raw Materials
Depends

The market for raw materials and tools depends on that for
consumers' goods in their completed state. If A, the raw material,
enters only into A''', it can be sold in increasing quantities only
as A''' is thus sold. The chief fact about tools and materials is
that they may contribute to a large number of completed goods, and the
significance of this fact we shall soon see. The ultimate power to
find a market for all products of the lower subgroups depends on
finding one for the products of the uppermost ones--the A''',
B''', and C''' of our table. The laws which govern the market for
finished goods of declining cost have first to be studied.

The Effect of Substituting one Consumers' Good for Others

Reducing
the cost of everything would cause an absolute increase in the
consumption of everything; but reducing the cost of a single thing
always causes, as we have seen, a relative increase in the
consumption of that one product. While the demand for other articles
may not grow absolutely less, it becomes relatively less because of
the comparative cheapness of the one product.[2]

[2] It is worth noticing (1) that uniformly reducing the
cost of everything would cause comparative changes in
consumption. Anything which should take away a quarter of the
cost of every article in the entire list of social products
would increase the consumption of some articles more than
it would increase that of others. There is an extremely
theoretical case in which there might even be a lessening
of the effectual demand for a few things because a uniform
reduction of twenty-five per cent would cause other things
to be extensively substituted for them. This thinkable
possibility is not practically important.

A detailed study would show (2) that a reduction in the cost
of any single article in the entire list of social products
causes an increase in the consumption of commodities in
general. As an isolated man who has had to work hard for mere
food and content himself with a few comforts and no luxuries
will indulge in luxuries when food production becomes much
easier, so society as an organic whole will increase its
indulgences all along the line whenever the work of getting
any one thing is reduced and some working time is thus
liberated.

A substitution of one article for another in the lists of goods used
by the public is a universal phenomenon attending an improvement which
affects the production of one article only. When the cost of A'''
causes it to stand just outside of the purchase limit of a large class
of persons, a moderate reduction in the cost of it will make it a more
desirable subject of purchase than the articles which have stood just
within that limit, and it will be bought instead of one or more of
these things. The securing of new customers for a finished product by
means of a fall in the price of it is largely brought about by such
substitutions. When the new article is added to a consumer's list, the
one which has stood as his marginal or least desirable purchase is
taken off from it. It is the relative desirability of buying one or
the other of these articles that influences a buyer in his decision
between them, and that cannot fail to be changed by anything that
lowers the cost of one, leaving that of the other unchanged.

If the cost of a unit of each of ten articles be represented by the
lines falling from the letters A, B, C, etc., to the base of the
figure, a considerable fall in the cost of A would put it below the
cost of each of the other articles represented. If in the case of a
large class of persons who did not formerly buy any of the A it is
as desirable as any of these goods, it will take its place as the most
desirable subject of purchase instead of the least desirable.

Those whose available means enabled them to acquire all the articles
from J to B inclusive, but did not suffice for A, will now take
the A and omit the B. Those whose acquisitions stopped with C
will substitute A for that article, and in general every buyer of
any of these things who has not heretofore acquired A will now put
this in the place of the one which it was least worth while to
acquire.



Substitutions caused by a Cheapening of one Utility in an Article
which is a Composite of Several

When different goods cost unlike
amounts but are objects of equally strong desires, only one of them is
a marginal purchase, and the others afford a personal gain to the
consumer which is not offset by a cost. We have seen that this rule
applies to the different utilities in a single good. In the case of
every article several grades of which are sold, there is one component
element or one utility which is worth to the buyer exactly what it
costs, while the others afford a consumers' surplus. If the letters in
the diagram represent, not whole articles, but utilities in articles,
as discussed in Chapter VI, it will accurately express the essential
facts. In such cases, which are very numerous, it is only necessary to
reduce the price of the one utility which is now just worth its cost
in order to induce more consumers to buy the grade containing this
utility, instead of a lower grade of the same thing. In doing this,
they forego the purchase of something else altogether, or content
themselves with a lower grade of that other commodity. If jeweled
watch cases should become cheaper, some persons would substitute them
for plain cases and would forego buying, say, pictures which were just
within their purchase limit, or would content themselves with cheaper
pictures. This taking of one thing within the margin of consumption
and discarding others is far less frequently done than is the taking
of a lower grade of one kind of goods for the sake of securing a
higher grade of another.

Why Substitutions reduce the Displacements of Labor

The question
will, indeed, arise why the burden caused by the change may not be
merely transferred to men in industries the products of which are
displaced by the substitution. Something of this kind would occur if,
in consequence of the cheapening of one article, any one other were
generally discarded. The important fact is that it is not any one
thing, but a wide range of things which are consumed in smaller
quantities in consequence of the change; and the effect on the makers
of any one of them is small. If a thousand men begin to buy the A'''
of the table we have frequently used, some of them will forego B''',
some C''', and so on through the list; and the market for no one of
these things will be much affected. Moreover, the nearly universal
fact is that a man who begins to buy one article that he never before
used will save the price of it by contenting himself with a slightly
cheaper quality of a number of others. He will give up a dozen
utilities in as many entire commodities in order to be able to buy the
one entire commodity that he adds to his purchasing list. The
reduction of demand is so extensively subdivided that it causes
relatively few displacements of labor.

Substitution a Prominent Cause of Varying Sales of
Goods

Substitution is, then, the general rule whenever the
cheapening of a commodity wins new purchasers of it. This practice is
not indeed universal in the case of those who formerly consumed these
goods. Former purchasers of an article which has become cheaper may
make no change except to buy more of it or a better quality of it for
the same amount which they have been accustomed to spend for the
inferior quality. They are not then obliged to economize in any other
direction, and the change does not trench on their consumption of
other goods. On the other hand, it is sometimes the case that they
continue to use the original amount of the article that has become
cheaper and use the liberated means of purchase--the "money," as it
would ordinarily be termed--in buying other goods. The cheapening of
A''' thus even enlarges the demand for B''', C''', etc. There
are thus two cases in which a reduction in the cost of one thing would
not decrease the use of other things.

Substitution More General in the Case of New Consumers

The
substitution of a cheapened article for others is the dominant fact in
the case of new consumers of such an article, while an increased
consumption of other things sometimes occurs in the case of old
consumers. This does not have as large commercial effects as the other
change. If we produce cheaper shoes, we make it easier to acquire
good ones, and those who formerly contented themselves with an
inferior kind take a better one. That means that they add to their
purchase lists the higher utility which is present in the one grade
and absent in the other. They buy a new element in goods rather than
more of those goods, and while they may not always change their
consumption of articles of other kinds they more frequently do so.
Those who begin to use something which formerly they went without
altogether usually give up the use of some good or some quality in it,
or get on with a smaller quantity of it in order to make the new
indulgence practicable. The man who, when bicycles became cheap,
bought the first one he ever owned probably gave up some other
gratification.

How the Sale of Goods which wear out in the Using increases as the
Price Falls

When goods deteriorate as they grow older, users have
to buy new ones often if they are not willing to use those which are
worn out and inferior. If we want always to wear clothes of good
quality, we refrain from wearing a suit too long. We discard many
things when they have somewhat deteriorated, and this forces us to
buy, in a term of years, a larger number of them than we should
otherwise do. We discard carpets and upholstery early when they are so
cheap that we can afford to do so. We thus improve our goods
qualitatively by adding to them quantitatively.

Substitutions a Protection for Labor against Undue
Displacements

Now, not only are the substitutions we have cited of
commercial importance, but they act in the direction of retaining
labor in a group where "labor saving" has been effected. They help to
prevent this process from being equivalent to labor expelling in so
far as either a general group or a subgroup is concerned, since they
increase the social demand for the products of the group in question
and cause a relative diminution of the demand for other things. Quite
evidently there is, for these reasons, the more need for labor within
this group and less need of it elsewhere. Cheap shoes may thus never
mean fewer shoemakers and cheap watches may not ever mean fewer
watchmakers.

Substitutions of One Capital Good for Others

It is not merely in
the realm of consumption that the demand for a particular good may
increase greatly in consequence of cheapness. The same thing happens
in the realm of production, but here the substitution of one thing for
others is an even more prominent cause of the increased use of the
particular commodity. Aluminum and copper are rivals as carriers of
electrical power, with the advantage at present somewhat in favor of
copper. As soon as the cost of making aluminum shall be reduced by a
moderate fraction it will become the cheaper material for such uses
and, unless there is a fall in the price of copper, will thrust itself
into use for trolley wires and other conductors of electricity. The
possession of an enormous market by the one or the other material
depends on their relative costs, and these may easily so change as to
transfer most of the demand from the one material to the other. A
further fall in the cost of aluminum would make it available for
sheathing the hulls of ships and would bring it into general use for
many household implements, while a sufficient fall would make it a
leading building material and give it a limitless market for the
framing and finishing of substantial structures. In these various uses
it would substitute itself, not only for copper, but for steel, stone,
wood and other materials, and the change would be extensive enough to
give it an enormous market without requiring a correspondingly great
reduction in its cost. Lowering the cost of aluminum by a third might,
by merely making it the favorite carrier of electricity, multiply the
present use of it by ten, and lowering it by two thirds might multiply
the present use of it by a hundred. If this should take place, saving
labor would be anything rather than expelling it from its position in
the aluminum-making group. When less labor came to be needed for
making a ton of the metal, more labor would be used in the industry
that makes it.

So long as the substitution caused by the cheapening of aluminum
affected copper only it might be a serious matter for the producers of
copper; but when it came to replacing in some degree steel, stone,
brick, wood, and other materials, the effect would be so diffused and
subdivided as to create small disturbances in any one of these
industries.

Effects of Reduced Cost of Materials which already enter into Many
Finished Products

In the case of aluminum the prospect of a greatly
increased market brings with it the probability that it may come to be
a component element of products into which it does not at present to a
great extent enter. Such things as steel, stone, and wood already
constitute important components of more articles than can be counted,
and there is no great prospect that they will enter into a much
greater variety of products. In the case of these materials there is
a prospect that cheapness will show itself in reduced costs of the
finished goods that are made of them, and that these finished goods
will be used in greater quantities without substituting themselves for
other things in so drastic a way as that which we have described in
the case of aluminum. A reduction in the cost of steel would indeed
bring about a substitution of that material for others at every point
where the steel and something else are now on a plane in desirability.
The type of building that now is made with plain brick walls and
wooden floors, because that cheap mode of building enables it to earn
a slightly larger interest on its cost, would often be made with a
steel frame and concrete floors. At every such marginal point steel
would gain somewhat on its rivals in the extent to which it would be
used; but in addition to this enlargement of the market for it by
substitution, one might count on an increase in the use of it because
of an increase in the use of very many things that are already made of
it. Some of these cater to highly elastic wants, and persons who use a
quantity of them may be induced to use more without discarding
anything else. Such an absolute enlargement of consumption is highly
probable in the case of any material that enters into a vast number of
products, and this, together with the enlargements that come by
substitution, may suffice to create a great demand for the raw
material and call for as much labor in the subgroup that makes it as
was used before the improvement was made. In the case of the raw
materials of industry the resources for gaining an increased market by
substitution are:--

(1) The substitution of the material for others in uses different from
those in which it is now employed;

(2) The substitution of it for other materials in the marginal parts
of its present field, where it is already nearly as available as other
things;

(3) The substitution of the finished consumers' goods made of it for
other consumers' goods.

In addition to all these there is the direct increase in the use of
finished goods wholly or partly made of the material by persons who do
not, for this reason, discard any other goods.

This statement places the different influences in the order of their
relative efficiency in the majority of cases in which they act.

Effects of cheapening Tools of Industry

What is true of a raw
material which enters into many completed products is true of the
tools of industry which are used for many purposes. A turning lathe, a
planing machine, or a circular saw helps to make a large number of
products, and the assertions we have made concerning steel, stone, or
wood apply to it. As it becomes cheaper it gains an enlargement of its
market by a combination of the four influences just enumerated. It is
brought into new uses, is employed more in its present marginal uses,
and is required in greater quantity because its products are
substituted for other things and are also required in greater amounts
independently of these substitutions.

Cheap Motive Forces

Motive power is so nearly universal in its
applications that developing a cheap source of it is much like
improving the method of producing everything and securing a universal
increase of products. We shall see why such a general enlargement of
the output of all the shops creates no displacements of labor which
entail hardships. If the power is used more in the upper subgroups
than in the lower ones,--if it is more frequently available for
fashioning raw materials than for producing them through agriculture
or mining,--the development of it checks in some degree the drift of
labor from the lower subgroups toward the upper ones, which has been
referred to in an earlier chapter.

Utilizing the power of Niagara, that of Alpine torrents and other
unused streams, that of the waves of the sea, and that which has long
slumbered in the culm heaps of coal mines, will give increased
facility for producing nearly everything; and though the amount of the
enlargement of output will vary in different cases and some effect on
the movements of labor will be produced, few serious hardships will
result, and a majority of the persons who will suffer from these
changes at all will get an offsetting benefit from the enlarging
productiveness of industry.





Next: Further Influences Which Reduce The Hardships Entailed By Dynamic Changes

Previous: Perpetual Change Of The Social Structure



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