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
br /> 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.