THE LESSON RESTATED
ECONOMICS, as we have now seen again and again, is a science
of recognizing secondary consequences. It is also a science of
seeing general consequences. It is the science of tracing the
effects of some proposed or existing policy not only on some
special interest in the short run, but on the general interest in the
long run.
This is the lesson that has been the special concern of this
book. We stated it first in skeleton form, and then put flesh and
skin on it through more than a score of practical applications.
But in the course of specific illustration we have found hints
of other general lessons; and we should do well to state these
lessons to ourselves more clearly.
In seeing that economics is a science of tracing consequences,
we must have become aware that, like logic and mathematics, it
is a science of recognizing inevitable implications.
We may illustrate this by an elementary equation in algebra.
Suppose we say that if x = 5 then x + y = 12. The "solution" to
this equation is that y equals 7; but this is so precisely because
the equation tells us in effect that y equals 7. It does not make
that assertion directly, but it inevitably implies it.
What is true of this elementary equation is true of the most
complicated and abstruse equations encountered in mathematics.
The answer already lies in the statement of the problem. It must,
it is true, be "worked out." The result, it is true, may sometimes
come to the man who works out the equation as a stunning
surprise. He may even have a sense of discovering something
entirely new—a thrill like that of "some watcher of the
skies, when a new planet swims into his ken." His sense of
discovery may be justified by the theoretical or practical consequences
of his answer. Yet the answer was already contained in
the formulation of the problem. It was merely not recognized at
once. For mathematics reminds us that inevitable implications
are not necessarily obvious implications.
All this is equally true of economics. In this respect
economics might be compared also to engineering. When an
engineer has a problem, he must first determine all the facts
bearing on that problem. If he designs a bridge to span two
points, he must first know the exact distance between these two
points, their precise topographical nature, the maximum load
his bridge will be designed to carry, the tensile and compressive
strength of the steel or other material of which the bridge is to
be built, and the stresses and strains to which it may be subjected.
Much of this factual research has already been done for
him by others. His predecessors, also, have already evolved
elaborate mathematical equations by which, knowing the
strength of his materials and the stresses to which they will be
subjected, he can determine the necessary diameter, shape,
number and structure of his towers, cables and girders.
In the same way the economist, assigned a practical problem,
must know both the essential facts of that problem and the valid
deductions to be drawn from those facts. The deductive side of
economics is no less important than the factual. One can say of
it what Santayana says of logic (and what could be equally well
said of mathematics), that it "traces the radiation of truth," so
that "when one term of a logical system is known to describe a
fact, the whole system attaching to that term becomes, as it
were, incandescent."1
Now few people recognize the necessary implications of the
1George Santayana, The Realm of Truth (1938), p. 16.
economic statements they are constantly making. When they
say that the way to economic salvation is to increase credit, it is
just as if they said that the way to economic salvation is to
increase debt: these are different names for the same thing seen
from opposite sides. When they say that the way to prosperity
is to increase farm prices, it is like saying that the way to
prosperity is to make food dearer for the city worker. When
they say that the way to national wealth is to pay out governmental
subsidies, they are in effect saying that the way to
national wealth is to increase taxes. When they make it a main
objective to increase exports, most of them do not realize that
they necessarily make it a main objective ultimately to increase
imports. When they say, under nearly all conditions, that the
way to recovery is to increase wage rates, they have found only
another way of saying that the way to recovery is to increase
costs of production.
It does not necessarily follow, because each of these propositions,
like a coin, has its reverse side, or because the equivalent
proposition, or the other name for the remedy, sounds much
less attractive, that the original proposal is under all conditions
unsound. There may be times when an increase in debt is a
minor consideration as against the gains achieved with the
borrowed funds; when a government subsidy is unavoidable to
achieve a certain military purpose; when a given industry can
afford an increase in production costs, and so on. But we ought
to make sure in each case that both sides of the coin have been
considered, that all the implications of a proposal have been
studied. And this is seldom done.
The analysis of our illustrations has taught us another incidental
lesson. This is that, when we study the effects of various
proposals, not merely on special groups in the short run, but on
all groups in the long run, the conclusions we arrive at usually
correspond with those of unsophisticated common sense. It
would not occur to anyone unacquainted with the prevailing
economic half-literacy that it is good to have windows broken
and cities destroyed; that it is anything but waste to create
needless public projects; that it is dangerous to let idle hordes of
men return to work; that machines which increase the production
of wealth and economize human effort are to be dreaded;
that obstructions to free production and free consumption increase
wealth; that a nation grows richer by forcing other
nations to take its goods for less than they cost to produce;
that saving is stupid or wicked and that squandering brings
prosperity.
"What is prudence in the conduct of every private family,"
said Adam Smith's strong common sense in reply to the sophists
of his time, "can scarce be folly in that of a great kingdom."
But lesser men get lost in complications. They do not reexamine
their reasoning even when they emerge with conclusions
that are palpably absurd. The reader, depending upon his own
beliefs, may or may not accept the aphorism of Bacon that "A
little philosophy inclineth men's minds to atheism, but depth in
philosophy bringeth men's minds about to religion." It is certainly
true, however, that a little economics can easily lead to
the paradoxical and preposterous conclusions we have just
rehearsed, but that depth in economics brings men back to
common sense. For depth in economics consists in looking for
all the consequences of a policy instead of merely resting one's
gaze on those immediately visible.
In the course of our study, also, we have rediscovered an old
friend. He is the Forgotten Man of William Graham Sumner.
The reader will remember that in Sumner's essay, which appeared
in 1883:
As soon as A observes something which seems to
him to be wrong, from which X is suffering, A talks
it over with B, and A and B then propose to get a law
passed to remedy the evil and help X. Their law
always proposes to determine what C shall do for X
or, in the better case, what A, B and C shall do for X.
. . . What I want to do is to look up C... I call him
the Forgotten Man. . . . He is the man who never is
thought of. He is the victim of the reformer, social
speculator and philanthropist, and I hope to show
you before I get through that he deserves your notice
both for his character and for the many burdens
which are laid upon him.
It is a historic irony that when this phrase, the Forgotten
Man, was revived in the 1930s, it was applied, not to C, but to
X; and C, who was then being asked to support still more Xs,
was more completely forgotten than ever. It is C, the Forgotten
Man, who is always called upon to stanch the politician's
bleeding heart by paying for his vicarious generosity.
Our study of our lesson would not be complete if, before we
took leave of it, we neglected to observe that the fundamental
fallacy with which we have been concerned arises not accidentally
but systematically. It is an almost inevitable result, in fact,
of the division of labor.
In a primitive community, or among pioneers, before the
division of labor has arisen, a man works solely for himself or
his immediate family. What he consumes is identical with what
he produces. There is always a direct and immediate connection
between his output and his satisfactions.
But when an elaborate and minute division of labor has set in,
this direct and immediate connection ceases to exist. I do not
make all the things I consume but, perhaps, only one of them.
With the income I derive from making this one commodity, or
rendering this one service, I buy all the rest. I wish the price of
everything I buy to be low, but it is in my interest for the price
of the commodity or services that I have to sell to be high.
Therefore, though I wish to see abundance in everything else,
it is in my interest for scarcity to exist in the very thing that it is
my business to supply. The greater the scarcity, compared to
everything else, in this one thing that I supply, the higher will
be the reward that I can get for my efforts.
This does not necessarily mean that I will restrict my own
efforts or my own output. In fact, if I am only one of a
substantial number of people supplying that commodity or
service, and if free competition exists in my line, this individual
restriction will not pay me. On the contrary, if I am a grower of
wheat, say, I want my particular crop to be as large as possible.
But if I am concerned only with my own material welfare, and
have no humanitarian scruples, I want the output of all other
wheat growers to be as low as possible; for I want scarcity in
wheat (and in any foodstuff that can be substituted for it) so that
my particular crop may command the highest possible price.
Ordinarily these selfish feelings would have no effect on the
total production of wheat. Wherever competition exists, in
fact, each producer is compelled to put forth his utmost efforts
to raise the highest possible crop on his own land. In this way
the forces of self-interest (which, for good or evil, are more
persistently powerful than those of altruism) are harnessed to
maximum output.
But if it is possible for wheat growers or any other group of
producers to combine to eliminate competition, and if the
government permits or encourages such a course, the situation
changes. The wheat growers may be able to persuade the
national government—or, better, a world organization—to
force all of them to reduce pro rata the acreage planted to wheat.
In this way they will bring about a shortage and raise the price
of wheat; and if the rise in the price per bushel is proportionately
greater, as it well may be, than the reduction in output,
then the wheat growers as a whole will be better off. They will
get more money; they will be able to buy more of everything
else. Everybody else, it is true, will be worse off: because, other
things equal, everyone else will have to give more of what he
produces to get less of what the wheat grower produces. So the
nation as a whole will be just that much poorer. It will be poorer
by the amount of wheat that has not been grown. But those who
look only at the wheat farmers will see a gain, and miss the more
than offsetting loss.
And this applies in every other line. If because of unusual
weather conditions there is a sudden increase in the crop of
oranges, all the consumers will benefit. The world will be
richer by that many more oranges. Oranges will be cheaper.
But that very fact may make the orange growers as a group
poorer than before, unless the greater supply of oranges compensates
or more than compensates for the lower price. Certainly
if under such conditions my particular crop of oranges is
no larger than usual, then I am certain to lose by the lower price
brought about by general plenty.
And what applies to changes in supply applies to changes in
demand, whether brought about by new inventions and discoveries
or by changes in taste. A new cotton-picking machine,
though it may reduce the cost of cotton underwear and shirts to
everyone, and increase the general wealth, will mean the employment
of fewer cotton pickers. A new textile machine,
weaving a better cloth at a faster rate, will make thousands of
old machines obsolete, and wipe out part of the capital value
invested in them, so making poorer the owners of those
machines. The further development of nuclear power, though
it can confer unimaginable blessings on mankind, is something
that is dreaded by the owners of coal mines and oil wells.
Just as there is no technical improvement that would not hurt
someone, so there is no change in public taste or morals, even
for the better, that would not hurt someone. An increase in
sobriety would put thousands of bartenders out of business. A
decline in gambling would force croupiers and racing touts to
seek more productive occupations. A growth of male chastity
would ruin the oldest profession in the world.
But it is not merely those who deliberately pander to men's
vices who would be hurt by a sudden improvement in public
morals. Among those who would be hurt most are precisely
those whose business it is to improve those morals. Preachers
would have less to complain about; reformers would lose their
causes; the demand for their services and contributions for their
support would decline. If there were no criminals we should
need fewer lawyers, judges and firemen, and no jailers, no
locksmiths, and (except for such services as untangling traffic
snarls) even no policemen.
Under a system of division of labor, in short, it is difficult to
think of a greater fulfillment of any human need which would
not, at least temporarily, hurt some of the people who have
made investments or painfully acquired skill to meet that precise
need. If progress were completely even all around the
circle, this antagonism between the interests of the whole
community and of the specialized group would not, if it were
noticed at all, present any serious problem. If in the same year
as the world wheat crop increased, my own crop increased in
the same proportion, if the crop of oranges and all other agricultural
products increased correspondingly, and if the output of
all industrial goods also rose and their unit cost of production
fell to correspond, then I as a wheat grower would not suffer
because the output of wheat had increased. The price that I got
for a bushel of wheat might decline. The total sum that I
realized from my larger output might decline. But if I could also
because of increased supplies buy the output of everyone else
cheaper, then I should have no real cause to complain. If the
price of everything else dropped in exactly the same ratio as the
decline in the price of my wheat, I should be better off, in fact,
exactly in proportion to my increased total crop; and everyone
else, likewise, would benefit proportionately from the increased
supplies of all goods and services.
But economic progress never has taken place and probably
never will take place in this completely uniform way. Advance
occurs now in this branch of production and now in that. And if
there is a sudden increase in the supply of the thing I help to
produce, or if a new invention or discovery makes what I
produce no longer necessary, then the gain to the world is a
tragedy to me and to the productive group to which I belong.
Now it is often not the diffused gain of the increased supply
or new discovery that most forcibly strikes even the disinterested
observer, but the concentrated loss. The fact that there
is more and cheaper coffee for everyone is lost sight of; what is
seen is merely that some coffee growers cannot make a living at
the lower price. The increased output of shoes at lower cost by
the new machine is forgotten; what is seen is a group of men and
women thrown out of work. It is altogether proper—it is, in
fact, essential to a full understanding of the problem — that the
plight of these groups be recognized, that they be dealt with
sympathetically, and that we try to see whether some of the
gains from this specialized progress cannot be used to help the
victims find a productive role elsewhere.
But the solution is never to reduce supplies arbitrarily, to
prevent further inventions or discoveries, or to support people
for continuing to perform a service that has lost its value. Yet
this is what the world has repeatedly sought to do by protective
tariffs, by the destruction of machinery, by the burning of
coffee, by a thousand restriction schemes. This is the insane
doctrine of wealth through scarcity.
It is a doctrine that may always be privately true, unfortunately,
for any particular group of producers considered in
isolation—if they can make scarce the one thing they have to
sell while keeping abundant all the things they have to buy. But
it is a doctrine that is always publicly false. It can never be
applied all around the circle. For its application would mean
economic suicide.
And this is our lesson in its most generalized form. For many
things that seem to be true when we concentrate on a single
economic group are seen to be illusions when the interests of
everyone, as consumer no less than as producer, are considered.
To see the problem as a whole, and not in fragments: that is
the goal of economic science.
ECONOMICS, as we have now seen again and again, is a science
of recognizing secondary consequences. It is also a science of
seeing general consequences. It is the science of tracing the
effects of some proposed or existing policy not only on some
special interest in the short run, but on the general interest in the
long run.
This is the lesson that has been the special concern of this
book. We stated it first in skeleton form, and then put flesh and
skin on it through more than a score of practical applications.
But in the course of specific illustration we have found hints
of other general lessons; and we should do well to state these
lessons to ourselves more clearly.
In seeing that economics is a science of tracing consequences,
we must have become aware that, like logic and mathematics, it
is a science of recognizing inevitable implications.
We may illustrate this by an elementary equation in algebra.
Suppose we say that if x = 5 then x + y = 12. The "solution" to
this equation is that y equals 7; but this is so precisely because
the equation tells us in effect that y equals 7. It does not make
that assertion directly, but it inevitably implies it.
What is true of this elementary equation is true of the most
complicated and abstruse equations encountered in mathematics.
The answer already lies in the statement of the problem. It must,
it is true, be "worked out." The result, it is true, may sometimes
come to the man who works out the equation as a stunning
surprise. He may even have a sense of discovering something
entirely new—a thrill like that of "some watcher of the
skies, when a new planet swims into his ken." His sense of
discovery may be justified by the theoretical or practical consequences
of his answer. Yet the answer was already contained in
the formulation of the problem. It was merely not recognized at
once. For mathematics reminds us that inevitable implications
are not necessarily obvious implications.
All this is equally true of economics. In this respect
economics might be compared also to engineering. When an
engineer has a problem, he must first determine all the facts
bearing on that problem. If he designs a bridge to span two
points, he must first know the exact distance between these two
points, their precise topographical nature, the maximum load
his bridge will be designed to carry, the tensile and compressive
strength of the steel or other material of which the bridge is to
be built, and the stresses and strains to which it may be subjected.
Much of this factual research has already been done for
him by others. His predecessors, also, have already evolved
elaborate mathematical equations by which, knowing the
strength of his materials and the stresses to which they will be
subjected, he can determine the necessary diameter, shape,
number and structure of his towers, cables and girders.
In the same way the economist, assigned a practical problem,
must know both the essential facts of that problem and the valid
deductions to be drawn from those facts. The deductive side of
economics is no less important than the factual. One can say of
it what Santayana says of logic (and what could be equally well
said of mathematics), that it "traces the radiation of truth," so
that "when one term of a logical system is known to describe a
fact, the whole system attaching to that term becomes, as it
were, incandescent."1
Now few people recognize the necessary implications of the
1George Santayana, The Realm of Truth (1938), p. 16.
economic statements they are constantly making. When they
say that the way to economic salvation is to increase credit, it is
just as if they said that the way to economic salvation is to
increase debt: these are different names for the same thing seen
from opposite sides. When they say that the way to prosperity
is to increase farm prices, it is like saying that the way to
prosperity is to make food dearer for the city worker. When
they say that the way to national wealth is to pay out governmental
subsidies, they are in effect saying that the way to
national wealth is to increase taxes. When they make it a main
objective to increase exports, most of them do not realize that
they necessarily make it a main objective ultimately to increase
imports. When they say, under nearly all conditions, that the
way to recovery is to increase wage rates, they have found only
another way of saying that the way to recovery is to increase
costs of production.
It does not necessarily follow, because each of these propositions,
like a coin, has its reverse side, or because the equivalent
proposition, or the other name for the remedy, sounds much
less attractive, that the original proposal is under all conditions
unsound. There may be times when an increase in debt is a
minor consideration as against the gains achieved with the
borrowed funds; when a government subsidy is unavoidable to
achieve a certain military purpose; when a given industry can
afford an increase in production costs, and so on. But we ought
to make sure in each case that both sides of the coin have been
considered, that all the implications of a proposal have been
studied. And this is seldom done.
The analysis of our illustrations has taught us another incidental
lesson. This is that, when we study the effects of various
proposals, not merely on special groups in the short run, but on
all groups in the long run, the conclusions we arrive at usually
correspond with those of unsophisticated common sense. It
would not occur to anyone unacquainted with the prevailing
economic half-literacy that it is good to have windows broken
and cities destroyed; that it is anything but waste to create
needless public projects; that it is dangerous to let idle hordes of
men return to work; that machines which increase the production
of wealth and economize human effort are to be dreaded;
that obstructions to free production and free consumption increase
wealth; that a nation grows richer by forcing other
nations to take its goods for less than they cost to produce;
that saving is stupid or wicked and that squandering brings
prosperity.
"What is prudence in the conduct of every private family,"
said Adam Smith's strong common sense in reply to the sophists
of his time, "can scarce be folly in that of a great kingdom."
But lesser men get lost in complications. They do not reexamine
their reasoning even when they emerge with conclusions
that are palpably absurd. The reader, depending upon his own
beliefs, may or may not accept the aphorism of Bacon that "A
little philosophy inclineth men's minds to atheism, but depth in
philosophy bringeth men's minds about to religion." It is certainly
true, however, that a little economics can easily lead to
the paradoxical and preposterous conclusions we have just
rehearsed, but that depth in economics brings men back to
common sense. For depth in economics consists in looking for
all the consequences of a policy instead of merely resting one's
gaze on those immediately visible.
In the course of our study, also, we have rediscovered an old
friend. He is the Forgotten Man of William Graham Sumner.
The reader will remember that in Sumner's essay, which appeared
in 1883:
As soon as A observes something which seems to
him to be wrong, from which X is suffering, A talks
it over with B, and A and B then propose to get a law
passed to remedy the evil and help X. Their law
always proposes to determine what C shall do for X
or, in the better case, what A, B and C shall do for X.
. . . What I want to do is to look up C... I call him
the Forgotten Man. . . . He is the man who never is
thought of. He is the victim of the reformer, social
speculator and philanthropist, and I hope to show
you before I get through that he deserves your notice
both for his character and for the many burdens
which are laid upon him.
It is a historic irony that when this phrase, the Forgotten
Man, was revived in the 1930s, it was applied, not to C, but to
X; and C, who was then being asked to support still more Xs,
was more completely forgotten than ever. It is C, the Forgotten
Man, who is always called upon to stanch the politician's
bleeding heart by paying for his vicarious generosity.
Our study of our lesson would not be complete if, before we
took leave of it, we neglected to observe that the fundamental
fallacy with which we have been concerned arises not accidentally
but systematically. It is an almost inevitable result, in fact,
of the division of labor.
In a primitive community, or among pioneers, before the
division of labor has arisen, a man works solely for himself or
his immediate family. What he consumes is identical with what
he produces. There is always a direct and immediate connection
between his output and his satisfactions.
But when an elaborate and minute division of labor has set in,
this direct and immediate connection ceases to exist. I do not
make all the things I consume but, perhaps, only one of them.
With the income I derive from making this one commodity, or
rendering this one service, I buy all the rest. I wish the price of
everything I buy to be low, but it is in my interest for the price
of the commodity or services that I have to sell to be high.
Therefore, though I wish to see abundance in everything else,
it is in my interest for scarcity to exist in the very thing that it is
my business to supply. The greater the scarcity, compared to
everything else, in this one thing that I supply, the higher will
be the reward that I can get for my efforts.
This does not necessarily mean that I will restrict my own
efforts or my own output. In fact, if I am only one of a
substantial number of people supplying that commodity or
service, and if free competition exists in my line, this individual
restriction will not pay me. On the contrary, if I am a grower of
wheat, say, I want my particular crop to be as large as possible.
But if I am concerned only with my own material welfare, and
have no humanitarian scruples, I want the output of all other
wheat growers to be as low as possible; for I want scarcity in
wheat (and in any foodstuff that can be substituted for it) so that
my particular crop may command the highest possible price.
Ordinarily these selfish feelings would have no effect on the
total production of wheat. Wherever competition exists, in
fact, each producer is compelled to put forth his utmost efforts
to raise the highest possible crop on his own land. In this way
the forces of self-interest (which, for good or evil, are more
persistently powerful than those of altruism) are harnessed to
maximum output.
But if it is possible for wheat growers or any other group of
producers to combine to eliminate competition, and if the
government permits or encourages such a course, the situation
changes. The wheat growers may be able to persuade the
national government—or, better, a world organization—to
force all of them to reduce pro rata the acreage planted to wheat.
In this way they will bring about a shortage and raise the price
of wheat; and if the rise in the price per bushel is proportionately
greater, as it well may be, than the reduction in output,
then the wheat growers as a whole will be better off. They will
get more money; they will be able to buy more of everything
else. Everybody else, it is true, will be worse off: because, other
things equal, everyone else will have to give more of what he
produces to get less of what the wheat grower produces. So the
nation as a whole will be just that much poorer. It will be poorer
by the amount of wheat that has not been grown. But those who
look only at the wheat farmers will see a gain, and miss the more
than offsetting loss.
And this applies in every other line. If because of unusual
weather conditions there is a sudden increase in the crop of
oranges, all the consumers will benefit. The world will be
richer by that many more oranges. Oranges will be cheaper.
But that very fact may make the orange growers as a group
poorer than before, unless the greater supply of oranges compensates
or more than compensates for the lower price. Certainly
if under such conditions my particular crop of oranges is
no larger than usual, then I am certain to lose by the lower price
brought about by general plenty.
And what applies to changes in supply applies to changes in
demand, whether brought about by new inventions and discoveries
or by changes in taste. A new cotton-picking machine,
though it may reduce the cost of cotton underwear and shirts to
everyone, and increase the general wealth, will mean the employment
of fewer cotton pickers. A new textile machine,
weaving a better cloth at a faster rate, will make thousands of
old machines obsolete, and wipe out part of the capital value
invested in them, so making poorer the owners of those
machines. The further development of nuclear power, though
it can confer unimaginable blessings on mankind, is something
that is dreaded by the owners of coal mines and oil wells.
Just as there is no technical improvement that would not hurt
someone, so there is no change in public taste or morals, even
for the better, that would not hurt someone. An increase in
sobriety would put thousands of bartenders out of business. A
decline in gambling would force croupiers and racing touts to
seek more productive occupations. A growth of male chastity
would ruin the oldest profession in the world.
But it is not merely those who deliberately pander to men's
vices who would be hurt by a sudden improvement in public
morals. Among those who would be hurt most are precisely
those whose business it is to improve those morals. Preachers
would have less to complain about; reformers would lose their
causes; the demand for their services and contributions for their
support would decline. If there were no criminals we should
need fewer lawyers, judges and firemen, and no jailers, no
locksmiths, and (except for such services as untangling traffic
snarls) even no policemen.
Under a system of division of labor, in short, it is difficult to
think of a greater fulfillment of any human need which would
not, at least temporarily, hurt some of the people who have
made investments or painfully acquired skill to meet that precise
need. If progress were completely even all around the
circle, this antagonism between the interests of the whole
community and of the specialized group would not, if it were
noticed at all, present any serious problem. If in the same year
as the world wheat crop increased, my own crop increased in
the same proportion, if the crop of oranges and all other agricultural
products increased correspondingly, and if the output of
all industrial goods also rose and their unit cost of production
fell to correspond, then I as a wheat grower would not suffer
because the output of wheat had increased. The price that I got
for a bushel of wheat might decline. The total sum that I
realized from my larger output might decline. But if I could also
because of increased supplies buy the output of everyone else
cheaper, then I should have no real cause to complain. If the
price of everything else dropped in exactly the same ratio as the
decline in the price of my wheat, I should be better off, in fact,
exactly in proportion to my increased total crop; and everyone
else, likewise, would benefit proportionately from the increased
supplies of all goods and services.
But economic progress never has taken place and probably
never will take place in this completely uniform way. Advance
occurs now in this branch of production and now in that. And if
there is a sudden increase in the supply of the thing I help to
produce, or if a new invention or discovery makes what I
produce no longer necessary, then the gain to the world is a
tragedy to me and to the productive group to which I belong.
Now it is often not the diffused gain of the increased supply
or new discovery that most forcibly strikes even the disinterested
observer, but the concentrated loss. The fact that there
is more and cheaper coffee for everyone is lost sight of; what is
seen is merely that some coffee growers cannot make a living at
the lower price. The increased output of shoes at lower cost by
the new machine is forgotten; what is seen is a group of men and
women thrown out of work. It is altogether proper—it is, in
fact, essential to a full understanding of the problem — that the
plight of these groups be recognized, that they be dealt with
sympathetically, and that we try to see whether some of the
gains from this specialized progress cannot be used to help the
victims find a productive role elsewhere.
But the solution is never to reduce supplies arbitrarily, to
prevent further inventions or discoveries, or to support people
for continuing to perform a service that has lost its value. Yet
this is what the world has repeatedly sought to do by protective
tariffs, by the destruction of machinery, by the burning of
coffee, by a thousand restriction schemes. This is the insane
doctrine of wealth through scarcity.
It is a doctrine that may always be privately true, unfortunately,
for any particular group of producers considered in
isolation—if they can make scarce the one thing they have to
sell while keeping abundant all the things they have to buy. But
it is a doctrine that is always publicly false. It can never be
applied all around the circle. For its application would mean
economic suicide.
And this is our lesson in its most generalized form. For many
things that seem to be true when we concentrate on a single
economic group are seen to be illusions when the interests of
everyone, as consumer no less than as producer, are considered.
To see the problem as a whole, and not in fragments: that is
the goal of economic science.
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