Economics in the Schools
[An address before the Candlelight Club of Oshkosh,
Reprinted from Land and Freedom, March-April 1937]
I have always liked the study of economics, although I am not enough
of a student to be called an expert. Economics is defined as the
science that treats of the production and distribution of wealth; that
is, the fundamtntal production of human livelihood. That would seem an
important subject for human beings to study. And because I think it is
not sufficiently studied nor very well taught, it seemed that this
would be a suitable occasion to offer some remarks on the subject. I
do not want the teachers of economics to become disturbed if there are
any here. They can answer that I am not qualified as a teacher of the
subject, and no offence will be taken.
Since the science has to do with the fundamentals of making a living,
it seems to me that the subject is at least as important as history or
geography, and can be studied by pupils of about the same maturity,
that is, not later than first or second year high school.
I suppose I lean toward the classical school, going back roughly to
Adam Smith. This school is based on the theory of natural law, and
growing out of that, natural rights. The modern school of economics
tends to a denial of natural law and natural rights; and base social
regulations on social experience and utility, a planned economy, and a
more or less Marxian attitude and socialistic leanings. The
President's "brain trust" was largely of this school; and
this teaching is now predominant in the universities. The President
should not be blamed, for he got his economics in the same school.
Prof. R. A. Seligman of Columbia University, perhaps the most
prominent of present day economists, says there are no natural rights,
but only "social utilities." I do not know what he thinks of
the Declaration of Independence, and its "unalienable rights"
of life, liberty and the pursuit of happiness.
The average man who has not studied economics knows something about
the subject, but not in any organized way. For instance, he knows that
he seeks to get the best wages he can for his work. That is an
expression of natural law. The economic formula is that "men seek
to satisfy their wants with the least exertion." This is a
natural law. For the wage earner the proposition can be turned around
in this way: Men seek to satisfy as many of their wants as possible
out of a given amount of work. That only means that men seek to secure
the best available wages. I think no one will deny that to be a
natural law. This law applies to all men, not alone to laborers. They
seek to gratify their desires with the least effort. All of us do so.
We invent a machine to save hand labor.
Now there is another natural law: The Creator made man a land animal.
By land I mean natural resources. Man must obtain his entire
sustenance (physical) from land. Following the urge of the law first
mentioned, men will see that land which will furnish the most generous
sustenance with the least labor. This may sound like ABC, but A B C is
taught in schools, very properly.
In time the best land is occupied and in use; and those coming later
must take the poorer land, and so on, as population increases, down to
the poorest land on which a living can be made. Men will not work on
land that will not keep them alive. The poorest land in use is called
marginal land; it has no selling or rental value.
This brings us to another natural law, the law of rent. A man has a
choice, to make a living off marginal land, or to lease better land
from some one who does not care to use it himself. If he takes the
better land he pays rent to the owner. The amount of rent depends on
the difference in productive value between the leased and the marginal
land, and introduces "Ricardo's Law of Rent" as follows: "Rent
is the excess value of any land over the poorest land in common use."
This also introduces the landlord. He is the man who has the better
land and collects rent. He makes no return to society for rent
received. He receives an amount in rent equal to the excess over what
the tenant would have earned had he chosen to work the marginal land.
As a corollary we can now see another natural law: That the tenant
user of land and the marginal user of land live on the same economic
level. They receive substantially the same income.
Now following this analysis a little farther, we can see another law
of nature, or perhaps another angle of the same law. I said the land
user has two choices. He may use marginal land to make a living, or he
may rent better land. As a matter of fact he has three options. His
third choice is to cease being a land user and work for wages, or in
giving of services in some form. As I said, all human sustenance comes
from the land, but most of it passes through several hands and several
processes before it is in the hands of the consumer. These middle- men
may also be classed as wage earners. For in economic definition there
are only three incomes, rent, interest, and wages. And wages is the
return for human effort in any productive activity.
Now you can see that the production from marginal, land determines
the income of a tenant land-user after rent is deducted. But you also
see that it determines the basic wages of the man who elects to work
for wages, or in giving service; since he also has the choice to work
marginal land or to rent land. It also determines the income of all
others engaged in productive or service- giving occupations.
But while marginal land determines basic wages, this must be
understood with its modifications, and they are many. Strong men,
competent men, skilled men, cunning men, unscrupulous men, can lift
themselves above the level of basic wage earners. Weak men, the
incompetent, the physically and mentally subnormal fall below the
basic wage earners. We hear of too many doctors, lawyers, dentists,
college graduates, those with ambition and sometimes ability to reach
the higher economic or wage levels. At the other end we hear of
increasing numbers of the unfit, the incompetent, the criminals, the
physically or mentally defective, whom society must care for in some
form. A few days ago I read of a plan in one of the Chinese provinces
to execute all narcotic addicts. Being humane, we place the classes
last referred to on a dole or in institutions.
Nevertheless, the basic rate of wages persists, fixed by the use
value of marginal land of which we have plenty in Northern Wisconsin.
As population increases, and men are driven more and more to less
productive land, poorer land, more distant land, less advantageous
land, the basic rate of wages is driven down. This is what Marx called
"The iron law of wages."
But Marx made the mistake of attributing the "Iron law of wages"
to Capital, not to land; and naturally his remedy for low wages,
unemployment and poverty followed: The public must take over Capital,
and operate ill capitalistic enterprises for the benefit of society.
This is Marxian doctrine, the foundation of Socialism and of
Communism, a planned economy. It is an artificial system. The natural
system is to leave capital in the hands of capitalists who have
produced it, and who can manage it much better than government can.
But we ire so involved in modern economics and its socialistic
features that we burden capital with all sorts of taxes, governmental
expenses, and regulations as to reduce [greatly its efficiency; while
we leave the landlord undisturbed in his unearned income.
This explains why the Christian Churches are so opposed to Socialism
and Communism The churches teach that pan is under the dominance of
the laws of God, that is, [natural law; while the others urge a "planned
economy," [that is the dominance of human laws, regulations,
arrangements and regimentation; that is why in Russia they discard
God, and seek to wipe our religion and its teachers, and to elevate
government and the wisdom of man as the I supreme law giver.
Using our human reason in the recognition of natural Baw, we cannot
deny that man was intended to live on and from land, following his
natural necessities. But there is no natural law that authorizes one
man to collect ground rent from any other man for the use of land in
making a living. Nature never issued a warranty deed, except to the
actual user of a piece of land while using it. The legal title deed is
a device of human law, and the law may be modified or repealed by its
creators as any law may.
But when economic reasoning led to this conclusion, perhaps less than
a hundred years ago, it did not sound so pleasant to certain
aristocratic classes nor so popular to college patrons and officers;
and in fact it doesn't today. So the modern school of economics
gradually grew up, and these natural laws were pushed into the
background, and with them certain questions of natural rights that
seemed to spring from them. It was not good form in certain circles to
dwell on them. It was like dwelling on certain natural rights of human
beings in slavery times and places.
And so the name of the science was gradually changed from the old
name of "Political Economy" to "Economics." The
old classification of land, labor and capital was changed by adding "entrepreneur"
meaning enterpriser, a fourth factor. Nothing was added, but it made
the science seem more ponderous, mysterious and occult, and the
professor of a heavy science entitled to a larger salary. With the
factors of production increased to four, there must be four items of
distribution, into rent, wages, interest and profits for the
entrepreneur. Now profits is not a term of economics, for it does not
classify anything; it may be rent or wages or interest, or a
combination of any two or of all three.
The new school next, or perhaps first, proceeded to abolish Capital,
which had and has a specific meaning as a scientific term; and land
was mixed in as a part of Capital; and also stocks and bonds; even
education and skill are often referred to as a man's capital; and
sometimes his family connections. None of these things are capital.
The science of economics like every other science requires its terms
to have definite and restricted meanings to avoid confusion.
We are considering education this evening. This is my contribution. I
want to see better and more general teaching of economics. I want to
present some questions to the teachers of that subject.
Should Ricardo's Law of Rent be taught thoroughly and generally to
all pupils, as geography and history are taught?
Should they be taught to examine intelligently into the proposition
that to raise the margin of production in land would increase wages
and reduce unemployment?
Should they be taught that the way to raise the margin is to abolish
landlordism, and that the landlord produces nothing and gives no
Should they be taught the theory of natural law? The theory of social
utility? The differences between the Classical School and the Modern
school of economics? Do our teachers dare teach these things?
Practically all of your pupils must work for a living. Their earnings
are governed by the produce of marginal land. The margin is being
lowered as population increases. We have now 6,000,000 to 8,000,000
unemployed in this country. Our statesmen, editors, teachers and
preachers do not seem to know or to agree about what to do. My opinion
is that if all of the six or eight million unemployed who are willing
to work could find a job at wages that allowed a decent American
standard of living, we would hear no more talk in this country of
Communism or Socialism. My question is, should economics be taught in
the schools, and to all the pupils, and at an early age? I believe
that a knowledge of this science properly taught to all the rising
generation will solve the problems of unemployment, wages, and the
rights of capital.