--- title: Improvement Era description: Monthly periodical of the Mormon church, 1897 onward. This library holds the issues of November 1897 to December 1930. authors: - Wanless, W. L. collections: - periodicals tags: - magazine - improvement-era periodical: Improvement Era volume: 25 number: 12 published: 1922-10 publisher: Young Men’s Mutual Improvement Associations publisher_place: Salt Lake City language: en type: magazine reference: 'W. L. Wanless, "Some Common Economic Fallacies", *Improvement Era* 25, no. 12 (October 1922): 1097–1103.' source: url: https://archive.org/details/improvementera25012unse transcription: Transcribed from the Internet Archive scan of each issue (the item for each issue is named in the issue's own source); unnumbered advertising leaves are omitted, printed page numbers are kept as page markers. identifier: improvementera25012unse start_page: 1097 end_page: 1103 rights: status: public-domain basis: US publication 1930 or earlier (published 1922-10) source: https://archive.org/details/improvementera25012unse publication_year: 1922 note: The Internet Archive item metadata carries a blanket "© Copyright by Intellectual Reserve, Inc." notice. The library owner judged it inapplicable because this issue was published in 1922, before 1931; a scan-level notice does not restore copyright. --- # Some Common Economic Fallacies Some Common Economic Fallacies By Prof. W . L. Wanless, of the Utah Agricultural College On several occasions during his recent visit to Utah, Dr. T. N. Carver, of Harvard University, pointed out the imperative need for clear economic thinking if we are to enjoy industrial progress and stability. That this is true would seem to be self- evident. But to anyone who has studied the history of economic development, the difficulties of getting people to think clearly along economic lines are equally evident. It is with the hope of aiding at least in some measure toward a better understanding of our economic life that the following paragraphs are written. One of the most persistent and most prevalent delusions, common in all stages of civilization, and especially so in our own, is that human happiness may be attained by merely chang- ing human institutions. From a time at least as early as that of Plato down to our own day, reformers almost without number would have ushered in a Utopia or a millennium by the simple expedient of transforming the character of the institutions of the time. The dismal failure attending all such shortcuts to human happiness teaches a vivid lesson, but it is a lesson lost upon the minds, of many a would-be reformer. We should not, of course, fail to appreciate the value and importance of our political, economic, religious, or other institutions. Their places of prom- inence in the environment of every man and woman is certain to give them influence in shaping human lives. But the re- former who pins his entire faith upon the efficacy of institutions will end by losing his entire faith in man. For it is not by the character of institutions that man can be improved or perfected. Change, if it is to come at all, must be change of our own selves. The trouble with the thinking of those who would revolu- tionize society by transforming its institutions is that they re- verse the order of things. Except as already noted, institutions do not make a community what it is, but rather they reflect or indicate what it is. If a society is highly developed in any phase of its life, its institutions will show that development. Thus democratic England or America will have social institutions differing widely from those of an aristocratic Russia. The point to be noted is that the development of successful or per- manent institutions usually follows and does not precede the 1098 IMPROVEMENT ERA development of the condition they reflect. Where for any reason the former precedes the latter the results are nearly always disappointing. The French Revolution will perhaps re- main the classical example of this fallacy, unless that distinction is surrendered to modern Russia. A few years ago in this coun- try, the direct primary was urged as a cure for that political apathy so pronounced among the rank and file of our citizenry. But has it worked? It has not, and is not likely to do so until, by some means, political or civic responsibility has been awak- ened in the minds of the mass of voters. When that change has come, the institutions reflecting it will come as gradually as the change. What then shall we say to those reformers who would uproot our present political and industrial institutions to sup- plant them with others requiring by their very nature infinitely greater enlightenment and responsibility on the part of the mass of people than those we already have? To ask the ques- tion is to answer it. Change must come and will come, but it will be through those orderly methods by which all permanent progress has been made. By just what forces these changes will be brought about, there is some difference of opinion. In the opinion of many, it will be through that kind of popular education which will not only make us efficient, but will also teach us to use the results of such efficiency in the interest of all. It is of course realized that the mania for forced changes in human institutions is not limited to the domain of economics, although most of the changes urged would have important eco- nomic consequences. There are, however, other misconceptions that are more purely economic in their bearing and origin. One of the common grievances against modern labor or- ganizations is that they persistently endeavor to restrict the output, acting upon the mistaken idea that there is only a limited amount of work to be done and that it is good policy for them to make it go as far and pay as much in wages as possible. In recent years, due to the increased strength of labor unions and a wider use of the piece rate system, a new element has been intro- duced— an evil for which employers are quite as much to blame as labor leaders. In many cases, where, acting under the stimulus of a pos- sible higher wage, workers have increased their output, employ- ers ha\e deliberately reduced the piece rate. This attitude, coupled with the general antipathy of labor leaders to any system which brings inequality among the rank and file, has served to create an antagonistic attitude against the piece-rate system, unless there is a definite understanding among the union SOME ECONOMIC FALLACIES 1099 members that the output shall not exceed a certain designated maximum — a maximum which can be attained by even the mediocre worker. Thus society is deprived of the value of the unusual efficiency and skill of thousands of its most efficient members. In one department of a large electrical manufactur- ing plant, turning out products used by nearly every family, the maximum output set by the union is about one-fifth what could easily be done by a good workman without any injury to his health or strength. In a Denver plant engaged in making a small tool used in a mining operation, a non-union man was employed. When he began he was green at the work, but he improved rapidly, and in a few days the foreman came to him and told him that he was killing the job. He thought the fore- man meant that he was not turning out the tools as fast as he should and he said, "I know I am green at it, but I am gaining. Last week I could make 30 a day, but yesterday I made 35 and I think I will soon make forty."' "Good," said the foreman, "25 is the stunt." The men, with the foreman in collusion, were deliberately restricting the output of the shop. Now, of course, those men thought they were doing some- thing that would benefit other workingmen; what they were really doing was raising the cost of a tool that other workingmen had to buy. To whatever extent that practice pervades industry it enters into the cost of living; it is a drag upon industry and an obstacle to progress. It is economically wrong and morally wrong, and it dwarfs the ability of the workers themselves. No man can be a full man, no man can do himself justice or come into his full powers unless he does his honest best, not merely for his employer, but for the community of which he is a part and which is his real paymaster in the end. Another self-satisfying delusion, which antidates the science of economics by centuries but still persists, is the "make-work" theory, or the idea held by some of those who have money that they should "put it in circulation" or "make work" for others, even if it leads to gross extravagance. No doubt many a feudal lord has solaced a none too sensitive conscience by this pet theory of the over-rich — especially that class whose riches do not stand for service rendered. The world doesn't need to have work "made" for it; the great problem of society is to save work and to make work more effective in order that there may be a greater supply of comforts for all. If there were a clearer understanding of the part which savings and investments play in the progress of society, and of the fact that unproductive, wasteful expenditures retard that progress, there would be less of the latter. There is much ignorance upon this subject among both the possessors of wealth and their critics. From the 1100 IMPROVEMENT ERA stand-point of the social good, there ought to be little difficulty in deciding as between ten thousand dollars for an elaborate dinner and investing the same amount in a useful productive enterprise. It should be noted, too, that they both "put money in circulation." Of all the misunderstandings which are rife today, there is perhaps none which is so exploited by the professional agitator as the contention that large privats fortunes and large individual incomes are ipso facto and unalterably detrimental to society. It is a well-known fact that in this country, as in all modern industrial countries, a very large portion of the wealth is owned by a very small percentage of the people, and a large part of the annual income goes to a small number of persons. Just what the proportions or percentages are is difficult to say, as they fluctuate from year to year. But regardless of the exact figures, it is not at all difficult for the cultivator of class hatred to convince a popular audience that the enormous income of Jones the capitalist represents just so much bread and butter taken from the tables of those whom he is addressing. _ He fails to add that by far the greater part of these large incomes (before so much was taken through taxation) flows back into and sup- ports the very industries which make our present standard of living possible. No investment can bring profits to the owner unless the public finds an advantage in using the product of such investment; the profits of the owner are certain evidence of gain to the user. Moreover, the profits of the owner, above what are consumed by himself and dependents, are put back into industry, and create new utilities, which in their turn, if successful', yield additional benefits to the public. It is the profits made by the introduction of new methods which finance more new meth- ods, a cumulative and never ending process. There is no other use to which surplus profits can be applied than to the further expansion of industry. The essential question, then, is whether the private owners personally absorb a larger share of these gains than they are fairly entitled to. That there are instances, all too numerous, of wanton extravagance and offensive ostentation on the part of rich men and women no one can deny. This is doubly unfor- tunate, since it not only entails economic loss, as we have seen, but furnishes much of the fuel for the flames of class hatred. But notwithstanding these cases, it is wrong to condemn rich people as a class, just as it would be wrong to condemn any other large group without discrimination. Whether from the motive of altruism or that of purely private gain, most capitalists in the very pursuit of profits become social benefactors. Logan, Utah Are You Honest? Ernest D. Partridge, of the Briglvam, Young University I am an honest man. I have always been honest. My father and my grandfather were honest. We are an honest family. I have always known that I was honest; but I did not know how hard it is to stay honest until I had passed through the experience related below. During the war I raised several "Dogie" lambs. After the war closed I decided to sell them as I had no suitable place in which to keep them. As luck, or ill luck, would have it, one of them was defective in its sight, which was of no consequence to me as this did not interfere with its feeding in good pasture; but it would of course be detrimental should the sheep be pas- tured on the mountains. Upon inquiry, I found the price of sheep to be from nine to sixteen dollars per head for young stock. Mine were young and in good condition, all except the "blind" ewe which, I ad- mitted, was a little below par. I decided that the seven head were well worth $50,00 which price in my judgment allowed a liberal discount for the defec- tive one. Right here the trouble began. Something kept saying to me, "The six good sheep are worth fully $60.00. You should put the price up to $75.00 for the seven. They are worth every cent of $65.00 and you may get an extra $10.00. Anyway, it is a good deal easier to come down in price than it is to go up. And, be- sides, you are going to let the buyer examine them for himself and take them upon his own recommendation. At this first thrust from the "Enemy" I batted my mental eye a few times. I have always detested the act spoken of as "Jewing down" as well as its never mentioned fore-runner, "Jewing up." I vigorously put my mental foot down upon this whole "Jewing" business, and decided upon $50.00 as an "honest" price. I felt good. I had won in the "preliminary." I had "quali- fied" to do an honest business among my neighbors; so the fol- lowing soon appeared in the local paper: "Seven sheep for sale cheap, call — " After two weeks of patient waiting the "ad" was taken out of the paper as no prospective buyer appeared. A month 1102 IMPROVEMENT ERA later the "ad" reappeared and soon brought results — a tele- phone call. "Are you the man who has some sheep for sale?" "Yes, come up and look them over." He came. "What are they worth?" "Fifty dollars," with confidence in my judgment and hon- esty. "Pretty high, isn't it?" "I think not. They will shear $15 worth of wool now." "I'll give you $45." ("Jewing" down. Too late to "Jew" up.) "I think they are worth $50." Good-bye.r- A few days later a friend called at the house. "I understand you have some sheep for sale." "Yes. Do you want to see them?" He examined them. "What do you hold them at?" "I am holding them at $50." "Is that the least you will take for them?" "Yes." "Well, if I decide to take them I will send for them." "A-hem, did you notice that one was blind?" (That was easy.) "No, is one of them blind? Well, I don't want a blind sheep." No sale. Later a farmer met me on the road. "Is it you who are advertising seven sheep for sale?" "Yes, sir." "Are they the ones you had out on your farm?" "The same." "What do you ask for them?" "Fifty dollars." "I did not notice them particularly, may I see them again?" "Certainly you may. They are at home. in the barn." While he was at the barn examining them, "Something" seemed to say, "Are you aoino; to tell him that one of them is blind? Don't be so foolish. You will surely lose the sale if you do " The man returned from the barn. "Well, they look good to me." He took out his check book. "Say — a-hem — did you notice that one is blind?" "No, is that so?" "You better go back and examine the small ewe." He did. "If I decide to take them, I will send for them." He did not. From this on, the matter became interesting — exciting — al- most tragic. Before another prospective buyer came, my bank account ran out. It was two weeks before pay day. To make ARE YOU HONEST? 1103 matters worse, a friend from whom I had borrowed $35 wanted his money. This was the first time in two years that he had needed it. O, if I could sell those sheep! A few days later the last prospective buyer returned with a friend. "I believe my friend here will buy your sheep." "Good! Just step out to the barn and examine them." The real battle with the "Something" now began. I soon realized that our past conflict had been but a few friendly(?) thrusts. I had made up my mind long ago that the "Golden Rule" was workable. That the intention of the Giver was that it should be lived up to. (How many today are living it?) Words may be put upon paper but emotions must be left to the imagination. I recalled my recent failures to sell the sheep. Why had I failed? In every case it seemed to be because I had tried to deal with the buyer the way I would like to be dealt with were / the buyer. Then there came to my mind the fact that I had no suitable place to keep those sheep; and no "$40 hay" to feed to them. And then there was my bank account — and my friend's money, and I concluded (almost) that it cer- tainly would be fair to allow the buyer to take or reject the sheep after he had had an opportunity thoroughly to examine them I was not forcing the sale upon him, certainly not. At thi? point in my conflict "David Harum" seemed to say to me: "Do unto others as they would do to you, but do it to them first." "But," I thought, "I am an honest man. I can't afford to do anything which would appear to be dishonest." I suppose the man who stood near while his friend went to examine the sheep, saw by my face the emotions I am leaving to the imagination of the reader, because he asked, "What is the matter with you?" "Did you tell your friend about the blind one?" "No, I didn't say anything about it," and glancing up I saw the other man returning from the barn. Something asked, "And now are you going to tell him that one of the sheep is blind?" A "Friend" seemed to ask,,' "If you were the buyer would you like to be told?" That was enough. I set my teeth and hissed the words to the prospective buyer: "Did you notice that one of the sheep was blind?" "No, I did not." "Well, go back and examine the small ewe." He did. "I expect to keep them around home so that won't make any difference with me. If your boy will drive them up to my place I will take them." He gave me his check and I won, but what a fight! Provo, Utah.