end does not necessarily come into view, at least not as a motive that guides the transactions from day to day. The matter is not so conceived in business transactions, it does not so appear on the face of the negotiable instruments, it is not in this manner that the money unit enters into the ruling habits of thought of business men. The all-dominating issue in business is the question of gain and loss. Gain and loss is a question of accounting, and the accounts are kept in terms of the money unit, not in terms of livelihood, nor in terms of the serviceability of the goods, nor in terms of the mechanical efficiency of the industrial or commercial plant. For business purposes, and so far as the business man habitually looks into the matter, the last term of all transactions is their outcome in money values. The base line of every enterprise is a line of capitalization in money values. In current business practice variations from this base line. are necessarily rated as variations on the part of other factors in the case, not as variations of the base line. The business man judges of events from the standpoint of ownership, and ownership runs in terms of money. 29. MONEY AND ECONOMIC ACTIVITY1 Writers upon money usually state that it performs three functions, serving as a common denominator of value, a medium of exchange, and a standard of deferred payments. To enumerate the functions of money in this fashion, however, is very far from suggesting the importance of the rôle which money plays in economic life. To understand this rôle attention must be fixed upon the complex mechanism of prices, rather than upon money itself. I may give here but a brief statement of the relations between prices and fundamental economic processes. From the point of view of the men who direct it, the production of wealth is nowadays a business process of selling goods for more than they have cost and is conducted for the sake of getting money profits. The technical processes involved in various departments of business, farming, manufacturing, transportation, and commerce are, in the eyes of the business men who direct them, simply subordinate parts of this business process: certain of the steps necessary to make profits 1 Adapted from Gold Prices and Wages under the Greenback Standard (1908), pp. 279-81, University of California Publications in Economics, I. by selling at prices which exceed the money cost. It is hardly too much to say that from the standpoint of the business men in control the production of wealth is simply an incidental feature in the business process of making money. Alongside these business enterprises incidentally concerned with the production, manufacture, and distribution of material goods stand the business enterprises concerned with finance: banks, trust companies, stock and bond houses-in short, the whole mechanism of the investment and money markets. These enterprises, like the preceding class, are conducted for the sake of pecuniary profits, and their profits depend on selling at prices higher than the prices paid. They represent the highest development and the most complex adjustment of the whole business organization, and all other enterprises are bound to them by the various forms of pecuniary obligations. The distribution of the wealth produced by enterprises of the first sort, supported by financial aid from enterprises of the second sort, is also effected by means of prices. Wages is the price paid for labor, interest is the price paid for the use of loans, rent the price paid for the use of material goods which must be returned without substantial deterioration, and profits is the residue of the aggregate prices received after the aggregate prices paid for the factors of production, for materials, etc., have been deducted. To the individual, indeed, economic welfare depends primarily upon the money income he is able to get under the conditions presented by the price system and upon the aggregate prices which he must pay for what he wishes to consume. Money prices, in brief, are the formal basis on which the economic relations of individuals in modern society are organized and the formal mechanism by which economic processes are carried on. 30. A PECUNIARY SOCIETY' By H. J. DAVENPORT Modern society is distinctly a pecuniary society, a society of business. Despite the fact that society was not always pecuniaryhas, indeed, been so only for the narrowest margin of years out of a long human history, and may remain so only for the next short swing of the pendulum in the life of man-the political economy that we must study today is the political economy of today. Mainly, under Adapted from The Economics of Enterprise, pp. 21-28. (The Macmillan Co., 1913.) I present conditions, we produce for the market, for exchange, despite the fact that a few generations ago the contrary was the truth. And at present we produce in the larger part for a competitive, impersonal world-market. This is the era of free individual initiative under private property for private gain. So far, indeed, is this the truth that even combination and monopoly may be regarded as merely secondary aspects of competition and of individual initiative. Strike this fact of competition at its very center of tone, and we discover that we are in a régime of price. Money is the focusing point of modern business affairs. It is the standard of values simply because in a society producing for exchange it is the one established intermediate commodity. Therefore, as medium of exchange, it is the standard of immediate and of deferred payments. Through credit the money economy lays hold upon even the distant future. Thus to object that more and more, as society has advanced from a society of isolated production through a barter economy to a money economy, it is now moving over into a credit economy, is really to assert merely that in new and marvelous ways money is taking on a still greater emphasis. More and more, and more and more exclusively, and over an everwidening field of human effort, human interests and desires and ambitions fall under the common denominator of money. Doubtless many of the best things in life do not get bought and sold. Some of them are not exchangeable; and not all things that could be transferred are men weak enough to sell or other men strong enough to buy. Not every man has his money price. But most good things do, in greater or less degree, submit to the money appraisal. Health is easier for him who can take his ease and who has the wherewithal to pay for good foods and medicines, to travel, to employ good nursing, and to command capable physicians and efficient surgeons. And, in their degree, also, love and pity and respect and place are bought and sold upon the market. It takes a goodly number of dollars to get a child safely born, and even more dollars to achieve for one's self a respectable burial. Much money is power over many things. Money is the standard of value in the sense that all values of all exchangeable things are expressed in terms of it. And this holds, not only of all commodities and services, but of all incomes and of all capitals. The capital of a banking house, or a factory, or a railroad company, is not a congeries of tangible things, but a pecuniary magnitude-so many dollars. All economic comparisons are made in money terms, not in terms of subsistence or of beauty or of artistic merit or of moral deserving. This same standard tends to become also the test and measure of human achievement. Men engage in business, not solely to earn a livelihood, but to win a fortune in a pecuniary sense. To win by this money test is to certify one's self tangibly and demonstrably as having scored in the most widespread and absorbing of competitions. Is one a great artist—what do his pictures sell for? Or what is the income of this leading advocate? or of that famous singer? How great are the author's royalties? The pecuniary standard tends to be carried over into non-pecuniary fields. It is almost past belief how far both in degree and in direction money valuations pervade all our thinking. Cheapness is prone to be synonymous with ugliness, richness with beauty, elegance with expensiveness. No one can tell for himself where the really aesthetic begins and the sheer pecuniary ends. In the field of morals, also, the so-called cash-register conscience is an actual thing. And one might go still further and note that almost all great political issues, and almost all absorbing social problems, and almost all international complications rest upon a pecuniary basis. Our national problems are tariff, labor unions, strikes, money, trusts, banking, currency, railroads, conservation of resources, shipping, taxation. Success in elections, in the selection of senators, in the making of laws, and in the selection of judges is prone to be desired for financial ends and to be decided by pecuniary means. Diplomatic complications hinge upon trade connections, the open door, fisheries and sealeries, colonies for markets, and spheres of influence for trade. Navies are trade guardians and trade auxiliaries. Eliminate from local politics the influence of the public-service corporation, of the contractor, and of the seekers for special pecuniary privileges, and what is left of the municipal problem will be mostly the pecuniary nexus of the slum with the ballot box, of the saloon with the police system, and of saloon and slum and brothel with the city hall. It is, in fact, the value problem-or more specifically and more accurately for present society, the problem of market price-that is the central and unifying problem of present-day economics. Price, then, must attend and characterize all things that are economic; and all things so attended are so far economic in character. And more things than those which accurately are material must fall within the scope of price. Price extends its sway to the utmost limits of whatever is property, tangible or intangible-whether material or immaterial. Property covers-and therefore price covers-debts, good will, franchises-everything that is bought or sold. Price includes also many non-property facts-human services, such as the goods for which payment is made to the actor, preacher, teacher, or singer. And, by the way, all efforts or processes are economically productive for which a price is so paid or which, directly or indirectly, enhance the price. Precisely because the present economic life is organized upon lines of private property, of pursuit of individual gain, and of production for exchange, it is inevitable that the center about which all economic activity revolves is the medium of exchange, the price standard. It is this fact which in turn fixes the problem of price as the central problem and the organizing interest of current political economy as a science. The proof of this is, however, mostly to be found in that constant return to the price problem which we find inevitable as we approach, one after another, the subordinate problems of the science. And these problems, in turn, declare their subordinate character by this very fact that they are only to be solved by an appeal to the analysis and the laws of price. In the fact that anything sells at all in the present economic order is implied its sale in terms of price. Wages, for example, are the price of the services of employed labor; profit, the price reward of the independent, selfemployed laborer (the entrepreneur, enterpriser, Unternehmer, or imprenditor); rent, the price commanded by property lent in time for hire; interest, the per cent which the time use of wealth, in terms of price, bears to the total price. Each of these is a price quantity or item, and each presents itself specifically as a problem of price adjustment. 31. THE ROLE OF MONEY IN ECONOMIC ORGANIZATION BY WALTON H. HAMILTON The institution of money is inseparably linked with the whole complex of our social arrangements. Its part in facilitating market. operations is so direct and evident that it is generally conceived of as a mere medium of established exchanges or a mere measure of predetermined values. Yet a little reflection shows that it permeates every aspect of economic life, conditions all economic activity, and brings to all things economic mutual commensurability. The "pecuniary unit," which is its chief manifestation, supplies one of the |