This section is from the "Economics In Two Volumes: Volume I. Economic Principles" book, by Frank A. Fetter. Also available from Amazon: Economic
§1. Introduction: static and dynamic problems of economics. § 2. A static economy. § 3. Dynamics and the social point of view. § 4. Rhythmic change and cumulative change. § 5. Some forces making for change. § 6. Population-change as a dynamic force. § 7. The Malthu-sian doctrine. § 8. Tendency versus actuality. § 9. Food limit versus moral restraint. § 10. Inadequate recognition of psychic factors. § 11. The overplus of blossom. § 12. Limit of the food supply. § 13. Eater and eaten. § 14. Features of the biologic stage. § 15. Primitive populations in the biologic stage. § 16. War and the pressure of population.
§ 1. Introduction: static and dynamic problems of economics. We have now to shift our point of view from that we have held thus far and, in concluding this volume, we are to survey our subject more broadly and with a somewhat different purpose. Our study of value began with individual choice and we have followed this process of individual choice in its manifold workings in the various problems of value and price. Men in their economic affairs are never absolutely at rest either in mind or in body. (See Chapter 4, especially section 6 on changes of desires and of valuations.) Desires wax and wane every day, and each day goods for daily existence and gratification must be secured through the labor and wealth of the community, even in the most unchanging form of society. Each individual is seeking to find the best adjustment for himself - a never-ending process. If for a moment (and in so far as) this is attained, there results an equilibrium for each individual, where he has no motive to change.
This process of the individual's adjustment is a part of a larger adjustment; his change goes on within a larger process of change, that of society as a whole. There is a real need, however, to distinguish in many economic problems between that play of individual motives and forces which merely results in maintaining a status quo, and that which transforms the whole society into, or carries it to, a different condition. The one is a static adjustment, the other a dynamic adjustment, or process. To draw an analogy: the human body between about the ages of twenty and forty is constantly renewing itself, is the seat of ceaseless processes, yet is comparatively static, is changing only slowly. Earlier was the dynamic period of childhood's growth, and later will be that of age's decline. So an economy may through long periods show slight changes, and again, rapid changes either upward or downward in respect to any feature.
Where the whole economic situation is one of balanced forces, giving a comparatively stable adjustment of labor and wealth, and of prices, it is a static situation. And an economic society where this stable condition is normal is a static economy.1
§ 2. A static economy. Let us form a picture of a static economy. The number of persons is unchanged from generation to generation. Each year the number of births is just balanced by the number of deaths. The average natural ability of the new born must be just equal to that of the deceased, and that this should be so, either there must be no differences whatever in the natural ability of the families, or each class and family of the population must contribute in the same ratio to the number of surviving children. The industrial education and training of each oncoming generation is the same as that of the last, and this extends to every faculty of the mind and habit of life that affects thrift, industry, and choice of goods. Minor variations in particular families might offset each other and maintain an unchanged average. The population of a static economy is in quantity and quality like a reservoir of water fed by a pipe at an even rate and having an outlet of just the same capacity, so that the level and quality remain unaltered.
1 See note on Definitions at end of chapter.
In a static economy the production of goods from year to year is the same in kind, quality, and quantity. Seasonal changes within the year cause many values to move up and down, but such changes as this - each year the same and completing their cycle within the year - are accounted a mark of a static rather than of a dynamic economy.
The area of land as well as the kinds of resources and the ease with which they are obtained, are unchanging. This means that they are used in an absolutely durative manner. Technic is stationary; the same kinds of tools, processes, and methods pass from father to son. Abstinence is solely of the conservative kind. Under these conditions the "normal" equilibrium of prices of commodities, labor of all sorts, uses of goods, capitalization, and rate of interest would be unchanging. Not that this equilibrium is maintained in a mechanical, automatic manner, in which men have no part. These levels of values and prices can be maintained only as a result of ceaseless choices, bids, and efforts on the part of all the members of the community. Men in a static society, each seeking to make advantageous choices, are just as much active factors in maintaining a level of prices as are men in a highly dynamic state. But given the static conditions of population, culture, resources, and technic, the subjective and objective conditions combine to give a static level of values.
Such a state of human society in this absolute degree never has been known, but it has been more or less approximated in many times and places. Examples are many primitive societies, such as the Esquimaux, native Australians, etc., continuing unchanged for many centuries; ancient Egypt and medieval Europe. Until the twentieth century China, indeed the Orient generally, has been synonymous with the unchangeable in social and economic conditions. "Better fifty years of Europe than a cycle of Cathay." Many features of a static society are present everywhere much of the time. This conception is a type or norm by which we can study and judge the effect of each kind of forces separately, and not as they occur in haphazard combinations.
§ 3. Dynamics and the social point of view. Heretofore our study has been purposely confined as far as possible to the static aspects of the value and price problems. We were bent upon tracing the process by which individuals adjust their funds of wealth and labor to a general economic situation or level of valuation which they find and which they must accept as a fact given. We have recognized, however, that the individual finds himself compelled, again and again, to adjust his choices to a somewhat altered general situation, or in turn, may, by his action (discovery, invention, enterprise) start new forces into motion which will eventually alter the situation further. In the foregoing discussion of value and price, this distinction between static and dynamic forces, problems, principles, and societies has been more than implied. We have repeatedly referred to the more or less general changes as influencing the personal gains and losses of individuals, and even of whole classes of society. (See Chapter 27, section 13, note.) But in these references the purpose was still primarily to show the effects upon individual fortunes. We have now to take the larger view, and to consider these changes with reference to the effects upon the whole body of society.
Any state of economic forces may be studied in relation to value and price. If the situation were quite static, the price of every factor would be unchanging. A new cumulative factor would carry the level up or down in the period of dynamic change. There it would remain until other forces again raised it or lowered it to a new level, permanent so far as that one force can determine it.