the limits set by these normal needs of the industrial organism, the result, according to the common analysis, will be to lower the rate of interest. This lower charge for the use of capital, reduces the expenses of production and results in a general fall in the prices of commodities. The checks to over-saving and over-production upon which political economy relies, are thus, two: (1) a fall in the rate of interest which will check accumulation by weakening the motives to saving; (2) a fall in prices which will stimulate consumption to keep pace with the increased production.

The critics alluded to question the efficiency of these checks and maintain (1) that increasing the stock of capital leads to increased speculation rather than to a lower rate of interest, and (2) that lower interest charges are not reflected in lower retail prices but lead only to increased extravagance on the part of retailers in advertising, etc. Since the volume of consumption can only be affected through changes in retail prices, they conclude that increased production due to increased capital will not find an outlet in increased consumption.

For these reasons, they assert that capital may be accumulated in excess of the needs of the industrial organism for productive wealth, and that consumer's goods may be produced in excess of the effective consuming will of the community. That these phenomena actually arise they regard as conclusively demonstrated by the repeated occurrence of commercial panics and business depressions.

This analysis, overlooks certain important considera

tions. In the first place, although it is undoubtedly true that increasing the fund of capital encourages speculation at the same time that it forces down interest, yet this does not modify the conclusion that adding to capital automatically sets in activity causes tending to substract from capital. Increased speculation means simply an increased proportion of losing investments and hence of positive destruction of capital. It acts therefore as a direct check to the excessive stimulation of productive wealth just as a lower rate of interest acts as an indirect check through its influence on the motives which lead to saving.

Secondly, it is not true that a lower rate of interest is not reflected in lower retail prices. Although retail prices respond less rapidly than wholesale prices to changes in the expenses of production, yet observation and statistics both conform the opinion that they do fall as wholesale prices fall.

The fact that more is now spent for advertising purposes than formerly, does not mean that competition between retail dealers no longer acts through prices. Consumers can afford to pay larger advertising bills because in this way they concentrate production and reduce its expenses to a minimum.

Moreover, the tendency at present seems to be rather in the direction of more effective price competition between retail dealers than in the reverse direction. This tendency shows itself in the increasing number of large department stores which supply all kinds of articles to consumers and content themselves with a narrow margin

of profit of large sales. It appears also in the increasing number of coöperative distributive stores which bridge over the gulf separating producers and consumers and enable the latter to reap the advantages of any increase in the efficiency of the former.

Such statistics as we have, contradict the theory that retail prices do not fall in response to reductions in wholesale prices. The report compiled by Professor Falkner for the finance committee of the Senate, on wholesale and retail price variations in this country, shows that during the years 1889 to 1891, wholesale prices fell on an average .33 of one per cent., while retail prices fell .64 of one per cent. A detailed examination of the report shows that retail prices fell very generally as wholesale prices fell, but that they responded less readily to a rise in wholesale prices.

The strongest proof adduced in support of the view that over-saving and over-production occur, however, is the existence of commercial panics. Such disturbances are said to be due to over-production. Obviously, overproduction, if it did not occur would result in business panic. As a matter of fact, a careful study of the more important panics of recent times, reveals other more probable causes.

There are always slight discrepancies between production and consumption in particular parts of the industrial field. A panic arises when these particular discrepancies are aggregated and a serious lack of adjustment between producing power and consuming ability results.

This may be brought about by a change of tariff

policy, a flurry in credits, a foreign war, a domestic crop failure, or any other of a great many causes which have in times past singly or together brought about industrial disturbances.

If panics are due to over-saving and over-production, it behooves the exponents of this view to show that these phenomena really preceded any important panic. This they have failed to do.

Discussion.

Professor Bemis: This paper appears to admit the theoretical possibility of too much saving-a notable admission, which I will not here discuss—but holds that it would not be likely to occur, because, in various ways, saving will be checked.

Instead of the fall in interest diminishing saving, however, as contended in the paper, saving may be even stimulated by a desire to retain a fixed income and by the development of foresight and of the desire for social prestige and power. Dr. Seager also holds that saving will be checked by increased consumption by the masses as their wages rise or prices fall. prices fall. But in the manufacturing industries, statistics of the last two censuses, perhaps not very reliable, quoted by Carroll D. Wright in his recent work on the Evolution of Industry in the United States, appear to indicate that wages are becoming a less and less proportion of the product, because, in spite of the fall in interest rates there has been a rapid rise in capital per worker. This antagonizes the famous claim of Bastiat and Atkinson that labor gets an

increasing-relative as well as absolute-share of the increasing product and would lead to the conclusion that the wage worker can hardly increase his consumption enough to answer Dr. Seager's anticipations, if I understood him aright.

COST, SINGULAR AND PLUral.

BY PROFESSOR W. G. LANGWORTHY TAYLOR, UNIVERSITY OF
NEBRASKA.

My observations run along similar lines to those of Professor Patten of yesterday afternoon, and are motived by a somewhat similar stimulus, namely: expressions in current literature derogatory of the usefulness of the marginal theory of value-expressions which have magnified the cleft that can be, perhaps, introduced into that subject, so as to go almost to the extent of denying the possibility of generalization in economic theory-and actually reaching the conclusion that the only solution of the question of deferred payments lies in considering which classes in the community it is expedient to favor. Now of course that is very different from the ordinary concept of an economic norm, or economic law. An economic norm should be such a rule that while it does not, perhaps, favor the immediate interests of different persons, as viewed by those persons themselves for the moment, at the same time it is a rule which ultimately and in the long run is for the greatest benefit of each and of all. Of course that would be hard to prove ab