Month: July 2017

 

J. Laurence Laughlin published an abridged version of John Stuart Mill’s Principles of Economics in 1884 after five years of using Mill’s Principles as his political economy textbook at Harvard. He added “critical, bibliographical, and explanatory notes, and a sketch of the history of political economy”. Given Laughlin’s important role as founding head of the department of political economy at the University of Chicago, his selection of 310 examination questions provides us a convenient list of economic concepts and ideas that were taught in a first course in economics at a leading American university in the 1880s.

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APPENDIX II.
EXAMINATION QUESTIONS.

The following problems and questions have been arranged to indicate to the reader the character of examinations set by English [See Milnes’s “Problems in Political Economy.”] and American universities. They have been taken in each case from papers actually given. It is hardly necessary to state, perhaps, that these questions do not exhaust the subject, and are only some of a kind of which many more might be added:

 

Definitions.

1. Define briefly, Fixed Capital; Unproductive Consumption; Law of Diminishing Returns; Effective Desire of Accumulation; Law of Increase of Labor; Communism; Wages Fund; “Wages of Superintendence; Real Wages; Value; Price; Demand; Medium of Exchange; Gresham’s Law.
2. Explain carefully the following terms: Productive Consumption, Effectual Demand, Margin of Cultivation, Cost of Production, Value of Money, Cost of Labor, Wealth, and Abstinence.
3. Explain the following term: Real Wages, Fixed Capital, Allowance System, Margin of Cultivation, Price, Demand, Medium of Exchange, Seignorage, Value of Money, and Bill of Exchange.
4. Define Supply, Value of Money, Productive Consumption, Cost of Production, Cost of Labor, Exchange Value, Law of Production from Land, Rate of Profit, Capital, and Gresham’s Law.
5. Define Political Economy: State the parts into which it may be divided, and show how they are mutually related.

 

Labor.

6. Distinguish between direct and indirect labor, and give an illustration of the distinction.
7. Apply the distinction between productive and unproductive labor, and productive and unproductive consumption, respectively, to each of the following persons: a tailor, an architect, an annuitant, a sailor, and a brick-layer.
8. Is an actor to he classed as a productive laborer? The inventor of a machine? A confectioner?
9. In which of the two classes of laborers, productive and unproductive, would you place the following?

(1.) The officers of our Government.
(2.) The maker of an organ.
(3.) An organist.
(4.) A schoolmaster.
(5.) An artist.
(6.) He who makes an article for which there is no use.

10. Classify as productive or unproductive the following laborers: a clergyman, musical-instrument maker, actor, soldier, and lace-maker.

 

Capital.

11. Explain fully what you understand by capital, and what function it discharges in production. Consider whether or not the following ought to be included in capital: (1) the original and acquired powers of the laborer, (2) the original properties of the soil, (3) improvements on land, (4) credit, (5) unsold stock in the hands of a merchant, (6) articles purchased but still in the consumer’s hands.
12. Does a national loan add to the capital of a country?
13. Inquire how far, or in what cases, or in what sense, it may be said that a common dwelling-house, an hotel, a school-house, a police-station, a theatre, and a fortification, constitute part of the capital of the country.
14. Discuss carefully the question whether money lying in a bank (or corn lying in a granary) is always capital, or whether its economic nature depends upon the intentions of the owner.
15. Are railway-shares, stocks of wine, wheat, munitions of war, and land, to be considered capital, or not?
16. Explain fully whether you consider that United States bonds are capital or not.
17. Is an investment in government funds capital, or not? Give your reasons.
18. In what manner does a large expenditure for military purposes affect the operations of capital and labor?
19. Distinguish between wealth and capital. Show that there is no assignable limit to the employment of capital in bettering the condition of the members of a community.
20. “If there are human beings capable of work, and food to feed them, they may always be employed in producing something.” Explain the meaning of this fully.
21. What is meant by saying wealth can only perform the functions of capital by being wholly or partially consumed?
22. Explain and illustrate the statement that demand for commodities is not demand for labor.
23. Show that expenditure of money does not necessarily increase the demand for labor.
24. In what way would a general demand for luxuries affect productive laborers and the wealth of the community?
25. In a community where capital is all employed, what would be the effect if one employer gradually withdrew some of his capital, and spent this for personal luxuries?
26. It is contended that “the demand for commodities, which can only be got by labor, is as much a demand for labor as a demand for beef is a demand for bullocks.” Criticise this position.
27. “It is often said that, though employment is withdrawn from labor in one department, an exactly equivalent employment is opened for it in others, because what the consumers save in the increased cheapness of one particular article enables them to augment their consumption of others, thereby increasing the demand for other kinds of labor.” Point out the fallacy.
28. A college undergraduate, with the applause of shopkeepers, bought twenty waistcoats, under the plea that he was doing good to trade. Examine the economical soundness of his act.
29. A man invested a portion of his capital in a loan to a state which subsequently repudiated its debts. The man thereupon gave up his carriage, discharged superfluous gardeners, and reduced the number of his domestic servants. Examine the effect of these changes on the employment of labor in the district where he resides.
30. In the sixteenth century a great change in the mode of expenditure took place. Retainers were dismissed, households were reduced and a demand for commodities was substituted for a demand for labor. How would this change affect wages, and why?
31. It is supposed by some persons that expenditure by the rich in costly entertainments is good for trade. What is your opinion on the subject?
32. A is an absentee who spends his income abroad. B spends his income chiefly on American pictures and other works of art. C spends most of his income on American servants. D saves and buys United States bonds. E employs most of his income in the production of manufactures. Explain the various effects of these different modes of expenditure on the amount of wealth in the United States, and on the working-classes of the country.
33. Compare the economic effects of defraying war expenditure (1) by loans, (2) by increased taxation.
34. Define the term capital, and distinguish between fixed and circulating capital, giving instances of each.
35. Distinguish between fixed and circulating capital, and point out how far, or in what manner, each of the following articles belongs to one kind or the other: a dwelling-house, a crop of corn, a wagon, a load of coal, an ingot of gold, a railway-engine, a bale of cotton goods.
36. Of the following, which would you class under fixed and which under circulating capital: cash in the hands of a merchant, a cotton-mill, a plow, diamonds in a jeweler’s shop, a locomotive, a nursery-gardener’s seeds, greenhouses, manures; a carpenter’s tools, woods, nails?
37. If in a country like this a large amount of capital becomes fixed in the building of railroads, what effect will this change taken by itself have upon the laboring-class, supposing the capital to be (1) domestic, or (2) borrowed wholly or in part from abroad?
38. “What conclusion is reached by Mr. Mill respecting the objections to the use of labor-saving machinery?
39. Is the extension of machinery beneficial to laborers?
40. What is “the conclusive answer to the objections against machinery”?

 

Efficiency of Production.

41. Explain briefly the chief causes on which the productiveness of labor depends.
42. What are the principal ways in which advantage arises from the division of labor?
43. What are the principal advantages of division of labor? In what cases and why is it better to carry on a productive enterprise on a large scale?
44. Under what circumstances, and in what callings, can the division of employment be carried out to the fullest extent?
45. Show how the amount of available capital and the extent of the market for products limit division of labor.

 

Population.

46. Give a brief statement of Malthus’s theory of population, explaining the different checks on population in different stages of civilization.
47. Enunciate Malthus’s law of population, and give an outline of the reasoning by which he established it. Give an account of any objections that have been brought against Malthus’s position, and criticise those objections.
48. When the growth of population outstrips the progress of improvements, what are the means of relief for the laborer?
49. Does the increased facility of emigration nullify the Malthusian law of population in your opinion or not, and why?
50. Explain the law of diminishing return and the Malthusian doctrine of population; and trace the connection between them.

 

Increase of Production.

51. Compare the motives to saving in the case of savages, and of a country like the United States. State the causes of diversity in the strength of the effective desire of accumulation.
52. Capital is said to be accumulated by saving; what is saving? Is hoarded money a saving while hoarded?
53. How far does the increasing productiveness of manufacturing industry tend to neutralize the effect on profits of the diminishing productiveness of agricultural industry?
54. “What conclusion as to the limit to the increase of production does Mr. Mill deduce from his investigation of the laws of the various requisites of production?

 

Property.

55. “What are the essential elements of property? Are the grounds of property in land the same as those of property in movables?
56. Give what you conceive to be the chief arguments in favor of the institution of private property, as opposed to common ownership.
57. What arguments does Mr. Mill suggest in favor of some redistribution of landed property?
58. What are the economic arguments for and against Communism?
59. In what way, and by what means, do Socialists want to alter the present distribution of wealth?
60. Sketch the principal forms of Communistic and Non-communistic Socialism.
61. Should the power of bequest be limited?

 

Wages.

62. On what, according to Mill, does the rate of wages depend? Hence, show the fallacy of the popularly proposed remedies for low wages.
63. State and examine the principal theories which have been put forward as to the circumstances which regulate the general rate of wages, saying which you deem to be correct, and why so.
64. Mr. Thornton argues that the wages-fund is neither “determined” nor “limited”: not “determined,” because there is no “law” to compel capitalists to devote any portion of their wealth to the payment of labor, nor are they morally “bound” to do so; and not “limited,” because there is nothing to prevent them from adding to the portion of their wealth so applied. Criticise this argument, and, if you dissent from Mr. Thornton’s view, state the causes which “determine” and “limit” the fund in question.
65. State precisely what you mean by the “wages-fund,” and explain the conditions on which its growth depends.
66. Explain generally the circumstances which determine the rate of wages. Mention some of the reasons why wages should be higher in one occupation than in another.
67. In what way does dearness or cheapness of food affect money wages?
68. What determines —

(1.) The general rate of wages in a country?
(2.) The relative rates of wages in different employments?

69. What causes different rates of wages in different employments, and by what methods might wages be raised?
70. How do you explain the fact that some of the most disagreeable kinds of labor are the most badly paid?
71. What, according to Mr. Mill, are the most promising means for the improvement of the laboring-classes?
72. In the Island of Laputa a law was passed compelling each workman to work with his left hand tied behind his back, and the law was justified on the ground that the demand for labor was more than doubled by it. Examine this argument.
73. Some coal-workers are calling for a diminution of the output of coal, so as to keep up their wages. Examine how far, if at all, this result would follow from their proposed action.
74. Discuss any remedies for low wages that have been or might be suggested.
75. Why are the wages of women habitually lower than those of men?

 

Profits.

76. What is the cause of the existence of profits? And what, according to Mr. Mill, are the circumstances which determine the respective shares of the laborer and the capitalist?
77. (1.) What is the lowest rate of profit which can permanently exist? (2.) Why is this minimum variable?
78. Analyze the remuneration received by any of the following: (1) the proprietor of a cotton-mill managing his own mill; (2) a merchant conducting his own business; (3) a railway shareholder; (4) a holder of government funds.
79. Into what portions may we divide the return which is usually called profit? Which of these portions would he received by a merchant carrying on business with borrowed capital?
80. Analyze the payment called profits into its various elements. Point out in what respects the earnings of the employer differ from or resemble the wages paid to other classes of laborers.
81. It is asserted that “profits tend to an equality.” What conditions must be satisfied before this position can be maintained?
82. How is the alleged tendency of profits to equivalence in different employments to be reconciled with the notorious difference in the profit of different individuals?
83. “Which one of the elements in profit has the greatest effect on its amount? Explain by comparing the causes which regulate each element.
84. How does Mill reconcile the high wages in America with Ricardo’s law of profits?
85. Explain the proposition that the rate of profits depends on the cost of labor, stating carefully what elements are included in cost of labor.
86. Explain what connection there may be between an increase of population and any of the elements entering into cost of labor.
87. What effect would an increase or diminution of population have upon cost of labor?
88. Explain Mill’s view as to the cost of labor being a function of three variables, considering the passages in which he says, 1. “If without labor becoming less efficient its remuneration fell, no increase taking place in the cost of the articles composing that remuneration;” 2. “If the laborer obtained a higher remuneration, without any increased cheapness in the things composing it; or if, without his obtaining more, that which he did obtain would become more costly”: profits in all these cases would suffer a diminution; and discussing — Firstly, if the remuneration of labor falls, what can the cost of the articles composing that remuneration signify to the capitalist? Secondly, if the laborer gets a higher remuneration, what can the increased cheapness of the things composing it signify to the capitalist?
89. Is the contest between capital and labor permanent and fundamental? If not, give your reasons for your answer.
90. What is the effect on wages and profits of the introduction of machinery?

 

Rent.

91. “What connection exists between the law of Malthus and Ricardo’s doctrine of rent?
92. “What is the reason why land-owners can demand rent?
93. Explain and illustrate the distinction between rent and profits. In what cases are they nearly indistinguishable?
94. It has often been observed that in America land is much less highly cultivated than in England. Explain the economic reasons for this.
95. How does the theory of rent apply in a country like the United States, where the farmer owns his land instead of hiring it?
96. How is it that some agricultural capital pays rent, even if resort is not had to different grades of land?
97. Give a brief description of the theory of rent, and point out to what payments not usually called rent the theory may be applied.
98. State briefly Ricardo’s theory of rent, and show that, if it be true, the following statements of Adam Smith must be false:

“The most fertile coal-mine regulates the price of coals at all the other mines in the neighborhood.”
“In the price of corn one part pays the rent of the landlord, another pays the wages, and another the profit of the farmer.”

99. Why does the farming business pay rent, and the cotton business (ground-rent excluded) pay none? Define rent.
100. “As population increases, rents estimated in corn increase, and the price of corn rises; rents, therefore, doubly tend to increase.” Prove this.
101. Professor Rogers adduces, in refutation of the common theory of rent, the fact that land near New York pays a high rent, while land of the same natural fertility in the Western States pays no rent. How far do you admit the force of this objection?
102. Examine the following doctrine:

“If invention and improvement still go on, the efficiency of labor will be further increased, and the amount of labor and capital necessary to produce a given result further diminished. The same causes will lead to the utilization of this new gain in productive power for the production of more wealth; the margin of cultivation will be again extended, and rent will increase, both in proportion and amount, without any increase in wages and interest. And so, . . . will . . . rent constantly increase, though population should remain stationary.” — Henry George, “Progress and Poverty” (p. 226).

103. What answer is made to Mr. Carey’s objection to Ricardo’s theory of rent, that in point of fact the poorer, not the richer, lands are first brought under cultivation?
104. Explain how land, “even apart from differences of situation, . . . would all of it, on a certain supposition, pay rent.”
105. Explain clearly how it is possible for the land of a country which is all of uniform fertility to pay rent.
106. “If the earth had a perfectly smooth surface the same everywhere, and if it were all tilled and cultivated in exactly the same way, there would be no such thing as rent.” Examine this proposition.
107. Show that rent does not increase the price of bread.
108. How is it shown that “rent does not really form any part of the expenses of production or of the advances of the capitalist?”
109. (1.) What connection exists between the price of agricultural products and the amount of rent paid? (2.) Can rent affect the price?
110. “Rent is the effect and not the cause of price.” Prove this.
111. Does rent enter into the cost of production of the following commodities or not, and why: Corn, cloth, the wine of the best vineyards?
112. “Rent arises from the difference between the least fertile and the most fertile soils, and from the fact that the former have been taken into cultivation. . . . Rent is the difference between the market price of produce and the cost of production.” Harmonize these statements.
113. In order that the actual payments made by farmers to landlords should generally correspond with “economic rent,” what conditions must be observed?
114. “What is assumed, as to competition, in all Mr. Mill’s reasoning on wages, profits, and rent? Explain its action in each case.

 

Value.

115. Enumerate, compare, and criticise any opinions known to you which have been held concerning the nature, origin, or measure of value in exchange.
116. Define precisely what it is which gives value to objects, and point out the causes which vary the value of the same object under differing circumstances.
117. Do men dive to the bottom of the sea to get pearls because they are valuable; or are pearls valuable because men must dive to the bottom of the sea to get them?
118. There are three forms of difficulty of attainment. State the law of value applicable to each.
119. Explain the exact economic meaning of the words supply and demand.
120. When it is said that the value of certain commodities depends upon supply and demand, what is meant by demand?
121. If the supply of all commodities were suddenly doubled, would any changes in their relative values ensue or not, and why?
122. State the laws which regulate the permanent and temporary values of agricultural products.
123. How far does the value of commodities depend on the quantity of labor required for their production?
124. Has the term exchange value any precise meaning when we are comparing times or places very remote from one another?
125. What is meant by the natural (or normal) price and the market price of commodities? To what extent can they differ?
126. Does a general rise of wages raise the prices of commodities in general or not, and why? Does it tend to cause any change in the relative prices of commodities or not, and why?
127. Suppose that wages were double, would the values of commodities be affected? What would be the effect on prices and profits of such an increase of wages?
128. Are wages and profits influenced by prices?
129. Can employers recoup themselves by a rise of prices for a rise of—

(a.) Wages in particular employments?
(b.) General wages? How does this question bear on the efficacy of trades-unionism?

130. Do values depend on wages?
131. Explain the following statement: “It is true the absolute wages paid have no effect upon values; but neither has the absolute quantity of labor.”
132. Explain the statement that “high general profits can not, any more than high general wages, be a cause of high values. … In so far as profits enter into the cost of production of all things, they can not affect the value of any.”
133. Explain fully why it is that capitalists can not compensate themselves for a general high cost of labor through any action on values and prices.
134. “The value of a commodity depends on its cost of production.” Under what conditions is this true, and what causes interfere with it?
135. Describe the hindrances which impede the free movement of capital to those fields which apparently offer the highest return for its employment.
136. Give J. S. Mill’s analysis of the “cost of production,” and also Professor Cairnes’s, with the arguments for and against each.
137. Analyze cost of production. What is its connection with cost of labor?
138. Give an analysis of cost of production of any commodity.
139. Show carefully the distinction between wages, cost of labor, and cost of production.
140. Define clearly value, price, real wages, and cost of production.
141. Define real wages, money wages, cost of labor.

 

Money.

142. Point out the difference between the scientific and popular conceptions implied in the terms wealth and money.
143. Show the fallacy of confounding capital with money. Can there be a glut of capital?
144. “What is money? To what sort of necessity does it owe its existence? What articles have been used for money? Enumerate the qualities which render a commodity fit to serve as money.
145. “What are the qualities requisite in any commodity in order that it may serve as money?
146. Distinguish accurately between the functions of money.
147. How far is a fixed standard of value possible?
148. “What effect does the great durability of gold and silver have upon the value of money?
149. How far does the law of demand and supply govern the value of money?
150. Explain fully how it is that the value of the precious metals is affected by “questions of quantity only, with little reference to cost of production.”
151. What is to be said to the following: “Some political economists have objected altogether to the statement that the value of money depends on its quantity combined with the rapidity of circulation; which, they think, is assuming a law for money that does not exist for any other commodity”?
152. Under what conditions is it true that the “value of money is inversely as its quantity”?
153. Explain carefully the following: “The average value of gold is made to conform to its natural value in the same manner as the values of other things are made to conform to their natural value.”
154. In what various meanings is the phrase “the value of money” used? How far does the value of money in each of these meanings depend on (1) the cost of production, (2) supply and demand?
155. Are the values of gold and silver subject to exactly the same natural laws as other commodities?
156. Give the explanations and qualifications required to render the following proposition true: “The quantity of coin in every country is regulated by the value of the commodities which are to be circulated by it.”
157. “Would the world be richer if every individual in it suddenly found the quantity of money in his possession doubled?
158. How far, or in what way, do you consider it correct to say that the general level of prices in a country depends upon the quantity of gold coin existing in that country?
159. A single good harvest causes a considerable fall in the value of wheat; but a great addition to the year’s supply of gold from the mines produces little effect on its general value. How do you account for the difference?
160. Show the effect of establishing a double standard.
161. Show how Gresham’s law is illustrated by the history of the currency in the United States between 1834 and 1873.
162. What effect had the discovery of gold in this century upon the coinage of the United States?
163. What is the system upon which the small silver currency of the United States is coined and issued?
164. State briefly the aim of the United States coinage act of 1853.

 

Credit.

165. How do you define credit? Form a classification of credit documents.
166. It has been said that “credit is capital.” Is this so or not?
167. Define capital, and examine the meaning of the term in the following statements:

(a.) Demand for commodities can not create capital.
(b.) Credit is not a creation, but a transfer of capital.
(c.) Wages depend upon the proportion between population and capital.

168. State the law of the value of money which governs general prices. What change is to be made in the statement, if credit is to be taken into consideration?
169. What is the part which instruments of credit, other than banknotes, play in the exchange of commodities?
170. Mention some of the principal features of a credit crisis.
171. What are inconvertible notes? What objections are thereto currency of this description?
172. Can an inconvertible currency be made to maintain the same value as a convertible currency, and, if so, how? Supposing that it can, what objections are there, nevertheless, to it?
173. “Nothing is subject to more variation than paper money, even when it is limited, and has no guarantees; for this simple reason, that, having no value of its own, it depends on the idea that each person forms of those guarantees.” Comment on this passage.
174. How is it that a bad dollar does the work of buying as well as a good one until it is found out? Is it that it makes no difference whether it is made of gold or not?
175. To what extent is a government capable of giving fictitious value to a paper or a metallic currency?
176. In a country with an inconvertible paper currency, how can it be determined whether the issues are excessive or not, and why?
177. What will be the effect if the circulating medium of a country is increased beyond its natural amount —

(1) when the medium is coin?
(2) when it is coin and convertible paper?
(3) when it is inconvertible paper?

178. What is the error involved in the assumption, frequently made by writers and public speakers, that the currency of a country ought to increase in like ratio with its wealth and population?
179. On what does the desire to use credit depend? What connection exists between the amount of notes and coin in circulation and the use of credit?
180. Compare the advantages and disadvantages of a metallic and paper currency.
181. A member of Congress advocated expansion of the paper currency by the following argument: “Our currency, as well as everything else, must keep pace with our growth as a nation. . . . France has a circulation per capita of thirty dollars; England, of twenty-five; and we, with our extent of territory and improvements, certainly require more than either.” State your opinion of this argument.
182. Trace the effects, immediate and ultimate, on general prices of (a) an extended system of credit, (b) an enlarged issue of paper money, and (c) an addition to the stock of precious metals, respectively.
183. What is the error in the common notion that “a paper currency can not be issued in excess so long as every note represents property, or has a foundation of actual property to rest on”?
184. Explain the action of the check and clearing-house system, and state what is meant by the restoration of barter.

 

Over-Production.

185. State the relation between supply and demand as aggregates, e. g., between the aggregate supply of commodities in a given community and the aggregate demand for them, and show the bearing of the principle involved on the doctrine of “general over-production.”
186. Prove that the increase of capital and the extension of industry can not lead to a general over-production of commodities.
187. What is the error of those who believe in the danger of overproduction?
188. Distinguish “excess of supply” from a “commercial crisis.”
189. Give the substance of Mill’s examination of the theories of excess of supply.
190. “When production is fully equal to consumption, every discovery in the arts, or in mechanics, is a calamity, because it only adds to the enjoyment of consumers the opportunity of obtaining commodities at a cheaper rate, while it deprives the producers of even life itself.” Discuss this opinion of Sismondi.
191. Explain the difference in the theories of Dr. Chalmers and Mr. Mill on over-production, and the excess of supply.

 

Peculiar Cases of Value.

192. It costs as much to produce straw as to produce grain; how, then, do you explain the comparatively low value of straw?
193. Suppose a considerable rise in the price of wool to be foreseen, how should farmers expect the prices of mutton to be affected, and why?
194. Explain the operation of the laws of value by which the relative prices of wool and mutton are regulated.

 

International Trade and Values.

195. What is the meaning of the statement that “it is not a difference in the absolute cost of production which determines the interchange [of commodities between countries], but a difference in the comparative cost”?
196. What are the advantages which a country derives from foreign trade?
197. Explain clearly the following passage: “We may often, by trading with foreigners, obtain their commodities at a smaller expense of labor and capital than they cost to the foreigners themselves.”
198. Is there any essential difference between trade between country and country, and trade between county and county, or even between man and man? What is the real nature of trade in all cases?
199. Why is it necessary to make any different statement of the laws of value for foreign than for domestic products? What is the cause for the existence of any international trade?
200. How would a serious decline in the efficiency of England, as compared with other countries, in the production of manufactures affect the scale of money incomes and prices in England, and why?
201. Mr. Mill refers the value of home products to the “cost of production “; of foreign products to the “cost of acquisition.” Examine the truth of this distinction.
202. It is said that in the home market the value of commodities depends on the cost of production, in the foreign market on the cost of acquisition. Comment on this distinction.
203. Is the cost of production the regulator of international values?
204. Discuss the following statement: “International value is regulated just as inter-provincial or inter-parishional value is. Coals and hops are exchanged between Northumberland and Kent on absolutely the same principles as iron and wine between Lancashire and Spain.” — Ruskin, “Munera Pulveris,” p. 84.
205. “What determines the value of imported commodities?
206. “Why does cost of production fail to determine the value of commodities brought from a foreign country? Does it also fail in the case of commodities brought from distant parts of the same country?
207. It is on the matter of fact that there is not much migration of capital and labor from country to country that Mr. Mill has based his whole doctrine of “international trade and international values.” Explain and comment on the above statement.
208. “What are the causes which determine for a nation the cost of its imports?
209. It follows from the theory of international values, as laid down by Mill, that the permanent residence of Americans in Europe may enhance the cost of foreign imports to Americans residing at home. Explain in what way.
210. Suppose two countries, A and B, isolated from the rest of the world, and a trade established between them. In consequence of the labor of A becoming less effective, the cost of production of every article which can be produced in that country is greatly increased, but so that the relation between the costs of any two articles remains the same. “What, if any, will be the effect of the change on the trade between A and B? Does your answer depend upon your using the phrase “cost of production” in a sense different from that given to it by some economists?
211. Show that every country gets its imports at less cost in proportion to the efficiency of its labor.

 

Foreign Exchanges.

212. “What is the ordinary limit to the premium on foreign bills of exchange, and why?
213. What are the chief effects on the foreign exchanges which are produced by the breaking out of a war? Account for the fact that in 1861 the exchanges on England in America fell considerably below specie point.
214. Suppose that the next harvest in England should be very defective, and extraordinary supplies of American grain needed, now would this probably affect the price of bills of exchange between England and America, and the profit on the exportation of English manufactures to the latter, and why?
215. Trace the process by which the precious metals spread from the mines over the world.
216. Suppose the exchange between England and the United States to be heavily against England, how will this fact affect the export and import trade between the two countries, and why?
217. “What is meant by exchanges being against a country?
218. Enumerate the principal circumstances which affect the rate of exchange between two countries. How is the par of exchange ascertained?
219. In what way are gold and silver distributed among the different trading countries? Between different parts of the same country?
220. Trace the effects of large and continuous issues of inconvertible paper currency on the prices of commodities, on importation and exportation, and on the foreign exchanges.
221. State the conditions under which international trade can permanently exist. “What will be the ultimate effect of a large movement of foreign gold upon prices, imports, and exports in the receiving country?
222. State the theory of the value of money (i. e., “metallic money”), and clear up any apparent inconsistencies between the following statements: (1.) The value of money depends on the cost of production at the worst mines; (2.) The value of money varies inversely as its quantity multiplied by its rapidity of circulation; (3.) The countries whose products are most in demand abroad and contain the greatest value in the smallest bulk, which are nearest the mines and have the least demand for foreign productions, are those in which money will be of lowest value.
223. The effects of the depreciation of the paper currency in the United States are thus described by Mr. Wells: “It renders it impossible to sell abroad the products which have cost too much at home, and invites from other countries the products of a cheaper labor paid for in a sounder currency. It exaggerates imports, while destroying our ability to pay in kind.” State how far you agree with the deductions here drawn, assigning your reasons where you differ.
224. “When the foreign exchanges are manifestly against a country, and a balance of indebtedness is the cause, the equilibrium can be restored in two ways. State and explain the operation of each.
225. What are the conditions which determine for a country a high range of general prices? How far is this advantageous?
226. “What is the effect of the imposition of a tribute by one country on another upon the course of trade between them, and the terms on which they exchange commodities; and why?
227. For what reasons may a nation’s exports habitually exceed or fall short of its imports?
228. Explain the real and nominal exchange.
229. Expound Mr. Mill’s theory of the influence which a convertible currency exercises on foreign trade.
230. “What is the effect of a depreciated currency on (1) foreign trade, and (2) the exchanges?

 

Interest.

231. How does the general rate of interest determine the selling price of stocks and land?
232. Is there any relation between the rate of interest and the value of money?
233. What are the relations of interest and profit? On what causes does the rate of interest depend?
234. “High interest means bad security.” Comment on this saying.
235. Is the rate of interest affected by the supply of the precious metals?
236. What determines the rate of interest on the loanable funds? Is the “current [or ordinary] rate of interest the measure of the relative abundance or scarcity of capital”?
237. What are the chief causes that determine the rate of interest?
238. If it be true that in America every man, however rich, is engaged in some business, but that in England many rich men have no trade or profession, how is the rate of interest in each country affected in consequence, and why?
239. How does a fall in the purchasing power of money tend to affect, if at all, and why, (1) the rate of interest, (2) the price of land, (3) the price of government bonds, (4) the price of gold and silver ornaments and plate?

 

Foreign Competition.

240. Explain the grounds of Mr. Mill’s proposition that general low wages never caused any country to undersell its rivals, nor did general high wages ever hinder it from doing so. If you think the proposition needs qualification, give your reason.
241. (1.) What is the true theory of one country underselling another in a foreign market? (2.) What weight should be attributed to the fact of generally higher or lower wages in one of the competing countries?
242. Discuss the question whether a high rate of wages necessarily lays the commerce of a country under a disadvantage with reference to a country where the rate of wages is lower.
243. What are the conditions under which one country can permanently undersell another in a foreign market?
244. Point out distinctly the connection between the money wages of laborers in the United States and the productiveness of the soil.
245. In the Eastern States iron-molders earn from fourteen to seventeen dollars a week; in California their wages run from twenty-one to twenty-seven dollars. Account for this variation.

 

Progress of Society.

246. What are the reasons for the change in the normal values of manufactured and of agricultural commodities, respectively, during the progress of society?
247. Wages and profits in different employments and neighborhoods are not uniformly proportional to the efforts of labor and abstinence of which they are the respective rewards. Classify the circumstances which prevent this correspondence, and show how far their effect is likely to be reduced (a) by general economical progress, and (b) by the extension of the division of labor.
248. What is the law of diminishing returns? Can you point out any connection between this law and the following phenomena? —

(a.) Density of population.
(b.) Rate of wages.
(c.) Rate of profits in different countries.

249. Sketch the influence on rents and profits of an increase of population and capital concurrently with a stationary state of the arts of production.
250. Is there reason to believe that Mr. Mill has underrated the powers possessed by man of extending the area of production and facilitating the market of food? If such a statement has been made, to what extent is his theory of population modified, and the risks he had indicated rendered distant?
251. Compare the effects on rent, profits, and wages, of a sudden improvement in the production (a) of food, (b) of some manufactured articles largely consumed by the working-classes.
252. Trace the connection between Ricardo’s theory of rent and the decline in the general rate of profits as a country increases in population. Explain clearly the connection which exists between wages and profits.
253. What effect is produced upon rents, profits, and wages, respectively, in a country like France, where population is stationary and capital advancing?
254. If capital continued to increase and population did not, explain the proposition that “the whole savings of each year would be exactly so much subtracted from the profits of the next and of every following year,” if improvements were stationary.
255. How does social and industrial progress tend to affect the prices of land, raw produce, and manufactures, respectively, and why?
256. The capitalized value of land rises, in the progress of society, from two causes — from one which affects land in common with all investments; from another which is peculiar to land.
257. “The tendency of improved communications is to lower existing rents.” How far is this true, and in what directions is it true?
258. What would be the effect on profits, wages, and rents of an improvement in a manufactured article consumed by the laboring-class?
259. Explain the doctrine of the tendency of profits to a minimum, the cause of that tendency, and the circumstances which counteract it.
260. What was Adam Smith’s doctrine as to the decline of profit in progressive communities? Criticise his argument.
261. Mention some of the principal causes which, in the ordinary progress of society, respectively tend to increase or to reduce the current rate of profits.
262. Why do profits tend to fall as population increases, and how may this result be retarded or prevented?
263. What is the effect of a general rise of money wages, apart from the consideration of a greater efficiency of labor, in prices, profits, and rent? Give reasons for your answer.
264. How does the general progress of society in wealth and industrial efficiency tend to affect the rate of wages, the rate of profit, and the rate of rent, respectively?
265. What is the general effect of the progress of society on the landowner, the capitalist, and the laborer?

 

Future of Laboring-Classes.

266. Examine the influences of machinery on the economic condition of the working-classes.
267. Mention and discuss some of the popular remedies for low wages, and especially the effect of the subdivision of landed property among peasant proprietors.
268. Explain briefly what is meant by co-operation, and indicate the more prominent forms assumed by the co-operative movement.
269. What is meant by the co-operative system of industry? Show ways in which this system may affect, for good or for evil, the productiveness of labor; and mention any moral benefits, or the opposite, in which it may be expected to issue.
270. What are the difficulties in the way of co-operation for the production of salable objects?
271. Explain the advantages of industrial partnership, in which the employés share, in proportion to the wages received, half the profits of the business beyond a certain fixed minimum which is assigned to the employers.

 

Taxation.

272. How is the state justified in undertaking any manufacture or service which might be performed by private enterprise?
273. Enumerate Adam Smith’s canons of taxation.
274. Examine the argument in favor of the resumption by the state of what is called the unearned increment in the value of land arising from the development of society.
275. A picture by Gainsborough and a house in Broadway are sold in the same year at the same price; at the end of fifty years each sells for five times its first cost. Is there any, and, if so, what, reason why the increase should be sequestrated for the public benefit in the one case and not in the other?
276. Explain the incidence of taxes laid on wages.
277. “Why should a tax on profits, if no improvements follow, fall on the laborer and capitalist?
278. Explain what effect, if any, will be produced on the price of corn by —

(1) a tax upon rent;
(2) a tithe;
(3) a tax of so much per acre, irrespective of value;
(4) a tax of so much per bushel.

279. On whom does a tax of a fixed proportion of agricultural produce fall?
280. Discuss the question whether the income-tax ought to be a tax upon income and property, or upon expenditure.
281. Discuss the expediency of a graduated income-tax.
282. State the arguments which you think strongest both for and against exempting savings from the income-tax.
283. Explain the conditions which should he observed in imposing taxes on commodities.
284. What taxes does a tradesman get back in the price of the articles he sells, and what does he not?
285. Test by Adam Smith’s four maxims of taxation the policy of indirect taxes on the necessaries of life.
286. All indirect taxation violates Adam Smith’s fourth canon.
287. Discuss the following:

“A man with $100,000 in United States bonds comes to Boston, hires a house . . .; thus he lives in luxury. … I am in favor of taxing idle investments such as this, and allowing manufacturing investments to go untaxed.”

288. Compare the advantages and disadvantages of direct and indirect taxation.
289. On what principles is this country now taxed?
290. Explain the arguments for and against the policy of maintaining a surplus for the purpose of redeeming a national debt.
291. In estimating the ability of the United States to pay its public debts, it is usual to include among the data of the question the increased productiveness of industry in that country. How far is this a pertinent consideration?

 

Protection.

292. Mention some of the principal arguments brought forward in favor of protective tariffs.
293. Connect the principle of the division of employments (or labor) with the policy of free trade and the functions of government.
294. Sketch the effects of discriminating duties, including the operation of the corn laws.
295. Examine the following argument, emending, if you think it necessary, the free-trader’s doctrine on the point raised: The free- trader’s belief is that a customs duty is added to the price of the article upon which it is imposed. If the article is imported, according to his theory, the increase of the price goes into the public treasury; if the article is made in the country, the increase of the price goes into the pocket of the producer. But in the former case there is no protection; and competition will prevent the latter. Therefore protection does not increase the price of the protected article. If a customs duty is imposed upon a commodity, and its price is not raised in consequence, what inference can you draw?
296. Under what circumstances did Mr. Mill think nascent states might be justified in adopting a policy of protection? Criticise his opinion, and, if you agree with it, give some examples of its application.
297. American protectionists allege that the high rate of wages prevailing in the United States disables them from competing with “the pauper labor”of Europe. Examine the grounds of this statement, and consider how far it forms a justification for protection to American industry.
298. A high rate of wages indicates, not a high, but a low cost of production for all commodities measured in which the rate of wages is high.
     Explain and prove this proposition, and illustrate it from the circumstances of the United States.
299. State under what limitations the proposition is correct, that profits vary inversely with wages. Explain the circumstances which cause both a higher rate of wages and profits to prevail in a young country, such as the United States, than in England.
300. In America wages are much higher than in England, yet the general rate of profits is higher also, according to Mr. Mill. How do you reconcile the two facts?
301. Examine the following:

“It seems to me that protection is absolutely essential to the encouragement of capital, and equally necessary for the protection of the American laborer. … He must have good food, enough of it, good clothing, school-houses for his children, comforts for his home, and a fair chance to improve his condition. To this end I would protect him against competition with the half-paid laborers of European countries.” — Congressional Globe.

302. An American newspaper has said of the burning of Chicago: “The money to replace what has been burned will not be sent abroad to enrich foreign manufacturers; but, thanks to the wise policy of protection which has built up American industries, it will stimulate our own manufactures, set our mills running faster, and give employment to thousands of idle working-men.” Comment on this passage.
303. On whom does a tax on imports, if not prohibitory, fall?
304. In what cases would duties on imported commodities fall on the producers?
305. Are taxes on imports in any way paid by foreigners?
306. Discuss the effects of duties on exports.
307. Trace the effects of duties on the importation of raw materials, and distinguish, with examples, between duties that violate and duties which do not violate the principle of free trade.
308. Is it possible for any country by legislative enactments to engross a larger share of the advantages of foreign trade than it would naturally have? Discuss the question fully.
309. “Those are, therefore, in the right who maintain that taxes on imports are partly paid by foreigners; but they are mistaken when they say it is by the foreign producer. It is not on the person from whom we buy, but on all those who buy from us, that a portion of our customs duties spontaneously falls.” Explain and examine the reasons for this conclusion.
310. State the principle which determines the relation between the amount of a country’s imports and that of its exports, and show how this relation is affected by a system of protective duties.

 

Source: Appendix II in Principles of Political Economy by John Stuart Mill. Abridged, with Critical, Bibliographical, and Explanatory Notes, and a Sketch of the History of Political Economy by J. Laurence Laughlin (New York: Appleton, 1884), pp. 637-658.

Image Source: James Laurence Laughlin. University of Chicago Photographic Archive, apf1-03687, Special Collections Research Center, University of Chicago Library.