This section is from the "Economics In Two Volumes: Volume I. Economic Principles" book, by Frank A. Fetter. Also available from Amazon: Economic
§ 4. The single consumptive use. The distinction between consumptive and durative uses should be kept clearly apart from that between direct and indirect uses. As a matter of fact, directness of use is essentially a technical rather than an economic quality. It is equally important to keep the matter of the "timeliness" of a use distinct from either "directness" or "consumptiveness." In connection with timeliness arises the very subtle problem of capital-value, which will be discussed at some length in Part IV of this book. Wrapped up with the question of durability is a problem to which we must give earlier consideration - the problem of usance-value. This will be taken up in Chapter 13. Our immediate task, however, is a somewhat further consideration of the nature of the distinction between consumptive and durative uses.
We have been employing the words consumptive and durative as contrasted terms. Strictly speaking, however, consumptive and durative uses shade into each other by almost imperceptible gradations. Even most of the more fleeting uses continue through an appreciable period of time. The great majority of goods in which man is interested are more or less durable in character. The things which may reasonably be said to have consumptive uses - that is, things which are consumed at a single use - are relatively few, tho absolutely numerous and important. Food, for example, is consumed at a single use; illuminants and fuel can be used but once; cut flowers quickly wither and fade. The materials of which these things were composed are dissipated in sewage, garbage, rubbish, dust, ashes, carbonic acid gas, etc., and can be reassembled - if at all - only with difficulty.
§ 5. No economic goods absolutely durable. At the other end of the scale are things which render their services for an extremely long period of time. All earthly things, however, wear out, change, or decay. Whenever man's hand is withheld, nature takes possession of his work, regardless of his purposes. Dust gathers on unused clothes, and moths burrow in them. Shut up a house, and windows are shattered, roofs leak, and vermin swarm. To close a factory is to hasten the time when buildings and machinery will be piled upon the rubbish heap. The most magnificent and solid works of man have crumbled under the finger of time. The earth is strewn with ruins of gigantic engineering works, aqueducts, canals, temples, and monuments, whose restoration would be no less a task than was their first building. Everywhere vigilance and repairs are the conditions of continued uses of wealth. There are, thus, no economic goods which as usable wholes are absolutely durable. When we divide uses into those which are consumptive and those which are durative, we mean simply that the duration of the goods yielding the former is relatively brief, whereas the latter endure through a relatively long period of time. The line of demarcation between the two is not absolute or sharp.
§ 6. Inevitable depreciation. Changes go on in the substance of things which cannot be prevented by any attention to repairs. The wood in a framework will decay, the metals crystallize. There is also an unpreventable wear of parts that can not be replaced without replacing the whole machine. It is the aim of the modern manufacturers to make machines like the wonderful one-horse shay, every part of equal durability. The development in America of the system of " interchangeable parts" has greatly simplified and cheapened repairs, and has lengthened the working life of machines; nevertheless they go at last to the scrapheap. This general depreciation appears to be nearly avoided in large factories where there is serial replacement of the parts, but occasionally some invention or some improvement of process necessitates an almost completely new equipment. An old man said to me when I was a boy: "I built this house and have lived in it forty years; it was well built, has been repainted regularly, has never been allowed to leak a drop, and it is as good as it ever was. I see no reason why it could not be kept to eternity if always kept in repair." But the same could not be said of the house now. There is a termination of the use-bearing power of nearly all kinds of goods, by this natural decay or by technical progress, and they have to be replaced by new stuff and by new forms.
§ 7. Using up of agricultural land. Even land, which men are prone to think of as everlasting, is in some of its most important uses subject to constant wear and loss of its valuable qualities. In agriculture the land furnishes not only standing room and a surface exposed to air, sun, and rain, but a store of materials fitted to nourish vegetation. Under the proper conditions of heat, moisture, and texture of soil, the plants, through the aid of bacteria, select and take up partly from the air but mostly from the soil, the chemical elements needed for their growth. Cultivation of the soil is regrouping and collecting the fertile elements, but harvesting the crop is extracting them from the soil. This process can not be continued indefinitely unless these elements are restored to the land. The barbarian lacked the forethought and patience to preserve the land, and his methods of agriculture used up the soil. After a few years he moved on, burned and cleared out another little space in the midst of the forest. The progress of men toward a settled life and a permanent agriculture has been accompanied step by step by the introduction of conservative (dura-tive) methods of using the arable land. The temptation to revert to improvident methods has again and again shown itself as a result of the demoralization of war, of invasion by less advanced peoples, or of the opening of great areas of new lands.1
§ 8. Artificial durability of agricultural land. When a method of permanent agriculture has become firmly established in a community, guarded by ancient customs and by very careful contracts between tenants and landlords, agricultural estates, as wholes, are given artificially an appearance of great durativeness, altho the land, excepting as bare surface, is being repaired and remade continuously. The uses of the farm are estimated as a net sum, after deducting the cost of all the repairs. Agricultural land has constituted in western Europe in recent centuries the most permanent body of wealth, and thus it came to be looked upon mistakenly as a most perfect type of durative goods. Land-sites for residence and business uses, merely as standing room, are in most locations among the most durative of all forms of wealth; on the contrary, mineral deposits constitute a strikingly consumptive form of use-bearer.
§ 9. Varying rates of depreciation of machinery. There is a great difference in the length of the economic life of manufacturing appliances. The building is fairly durable; yet in good business practice an average depreciation-rate of 11/2 per cent a year is allowed to offset a reduction in its value of over 50 per cent in thirty years, after providing insurance against the chance of loss by fire. Machinery differs greatly in durability; well-made, substantial machinery depreciates about 5 per cent yearly. The engines and boilers depreciate more rapidly than the running gear; the loose tools have to be replaced every second to fourth year; while the materials consumed in the industry must be repaired and replaced at every repetition of the process of manufacture. If a factory is to be maintained in its efficiency in a way to afford its owner a continuing income, everything about it must be from time to time repaired and replaced.
1 See ch. 35 for further remarks on the destruction and conservation of farm lands.
§ 10. Repair of tools and machinery. Separate tools are dependent for their usefulness on substance and form, and they gradually undergo changes which consume them - by decay, rust, wear, breakage, etc. They thus as a class are looked upon as consumptive agents. Yet the whole groups, the parts of which can be separately repaired, may be given artificially a large measure of durativeness.
The railway unites in a large degree the use of land surface with that of durable forms of metals. The roadbed, which is but the natural surface excavated or filled to a more suitable grade, is the most permanent part; yet every frost weakens, every rain undermines, a portion of it. Earthquake, landslide, and flood fill up the ditches, or tear down the embankments. Constant work is needed to keep it fit and safe for use. On the roadbed is the track, slightly less permanent, more frequently changed. The ties rot, and even the steel rails must be replaced in twenty or thirty years. The rolling-stock is still less durable, and the different parts vary in length of life. It is said that the wheel-tires of a locomotive are renewed four times, the boiler three times, and the paint seven times, before the machine as a whole is rejected as entirely worn out. The oil used on the bearings, which is a necessary part of the running machine, has to be applied every day.
§ 11. Economy of repairs. In general the maintenance of repairs in durative agents is a large part of the practical art of the business manager, whether husbandmen or artizan. It is an art calling for as much judgment and skill as does any part of the management. The neglect of repairs may have different results in the different parts of the enterprise. Failure to replace separate, worn-out tools, while not preventing the future restoration of the plant to its full efficiency, causes the factory as a whole to be less efficient. Each part of the entire outfit being needed in due proportion,2 the want of any one tool causes a loss of the efficiency of the factory as a whole disproportionate to the missing tools. Failure to apply seed to the land causes the land as a whole to be useless for that year's crop. The seed is a necessary part of the productive field, considered as a unit, and its annual application is closely analogous to repairs. In other cases, neglect of repairs increases the expense of repairs and cuts off future incomes. The adages, "A stitch in time saves nine," and "An ounce of prevention is worth a pound of cure," must be acted upon in every industry. The neglect to repair a roof causes damage to an amount many times the cost of a new roof. Failure to replace a bolt costing five cents may result in the rack and ruin of a machine worth many dollars. A handful of earth on a dike may save a whole country from destruction. In every business that is to be continued it is true that neglect or postponement of repairs causes a falling off of the value of the uses, usually far outweighing the temporary saving in cost.3
Neglect of repairs may be economical, however, when industrial changes have first reduced the demand for the agent and consequently the value of its uses. When the line of travel changes, it does not pay to keep an old hotel up to the same state of repair as when it had a great patronage. Old factories sometimes may better be allowed to depreciate, while the price of repairs is invested in more prosperous industries. In a declining neighborhood the houses fall into decay, the owners seeing that "it would not pay" to keep them up.
§ 12. Production as betterment and repair of nature. Let us take a general view of the topics of this chapter. The one general method of industry from the advent of man upon the earth to the present moment has been that of appropriating natural objects as they are found in the world. Man takes these objects, improves them where he can, destroys (consumes) some in the using, and repairs others as they wear out. That is all that "production of material goods" as an economic act ever can be - appropriating, bettering, conserving, and repairing natural objects. Production is drawing out, leading forth something that is already there. The supplies of goods were at first conditioned and limited by the soil and climate, by flora and fauna. Man's part in "production" consisted at first in picking the fruits and in killing the animals which nature had produced. Gradually, however, man has intervened more and more at earlier stages of the natural processes, has guided and aided them.
2 See below on proportionality, ch. 12.
The attempt has been made to divide economic goods into two classes, ascribing to the one class permanency and calling them the natural agents (the unproduced goods) ; and to the other the possibility of indefinite increaseableness, the artificial agents (the produced goods). This is a futile distinction to apply to goods in modern industrial countries, and it obscures the true nature of production. We take the original stuff of which everything is composed, whether arable field or house or watch-spring, as we find it in nature. Nearly everything not now underground (even land surface for business buildings, for residence, and for agriculture) is more or less artificial, that is, has in some degree been altered by man's action in leveling, digging, shaping, fertilizing, etc. The minerals beneath the surface of the earth remain most truly " natural" until they are appropriated, when many of them as elaborated articles become the most artificial of all material goods.
Instead, therefore, of trying to classify concrete goods as artificial and natural, it is better to make a continuity classification and to distinguish the consumptive and durative qualities of goods which are found in varying degrees in all agents. "We shall later see how, in a variety of ways, men take account of these differing qualities and adjust their acts and their valuations accordingly.