The cycle and order of economic study.

1. The beginning and end of economic study is man. Before leaving the more theoretical and abstracter part of the theory of value, it may be well, at the cost of some repetition, to restate and review the relations of the various parts of the argument. Intent on details of the theory of value the student is in danger of losing its broader perspective.

The proposition with which this section opens was accepted as our axiomatic starting-point. It was not so in the older political economy; men too often were looked upon rather as a means to an end, namely, the creation of wealth. This proposition refers to all classes, not to a small group of men. The aim of economic study is democratic, being the welfare of all men. Economics does not purpose, however, to explain man's action with reference to all things. It asks and attempts to answer the question: " Why does man attach value to certain things and actions; why does he measure them in certain ratios as expressed in terms of each other; and why do these ratios change with changing conditions?" This purpose has determined the order of our study. Beginning with an analysis of the nature of wants, and of the mental process of valuing consumption goods, the circle of inquiry widened to the problem of valuing things whose relation to wants is more remote and indirect (though not less important).

The problem of future uses, the major part of the theory of value, leads back to the question of the use man makes of things - a field claimed by the moralist, but one that cannot be neglected by the economist. Economics is not the whole science of social relations. It is a restricted part of the field. But it comes into relation with great practical ques-tions that touch all sides of life. Thus economics broadens and unites with the general stream of sociology. In the pursuit of our study one comes back to the starting-point and cause of value - human wants and the use made of wealth to gratify them. The circle is completed. We have surveyed, rapidly and imperfectly it is true, the whole range of economic inquiry.

2. The central point in economic study is the simplest problem of exchange value. The first look at the economic world reveals so many things that have relation to wants, and relations so complex, that the mind is confused. The object of science is to simplify; it seeks unity in the midst of chaos. Relations exist between wants and things that certainly never can gratify them directly. Where is the simplest aspect of the problem to be found? Evidently in the exchange of consumption goods, for these are in closest touch with wants. Out of the complex of direct and indirect goods, those few which are at the moment gratifying wants must be somewhat abstractly, but logically, set apart and studied. In the simplest problem, the exchange of the most typical consumption goods, is the key to the larger problem of value. If one could follow it step by step into its complexer rela-tions, he might hope to understand everything in economics]

The unit in value problems.

3. The problems of rent and of time-value are successive steps in the explanation of the exchange value of indirect agents. The term rent has been so variously defined that no caution to the student as to its use can be deemed superfluous. Until recently economists sought to confine the term to the income from natural resources (or land). Rent, in their conception, was the income from one group of goods, physically distinguishable from another group of goods, called capital, which were supposed to yield interest. That is, rent and interest was each supposed to bear much the same relation to a particular set of durable agents; the difference between them was primarily in_ihe agent that yielded them (though there were other complicating thoughts) rather than in the aspect of value they represented.

Former or conventional conceptions of rent and interest.

Rent and time-value as here used.

Rent as defined in this volume has the much broader meaning of the usufruct of any material agent as contrasted with the use-bearer. Usufruct is a conception most intimately related to that of consumption goods, but is logically one step further removed from want. Time-value, as here considered, is a broader conception than that of contract interest, for it has to do with the all-pervading element of time in its influence on value. Some rents are logically, and in practical business as well, not measured over periods of time, but at the moment of their accrual. The measurement of time differences is mainly required in setting a valuation upon a more or less permanent use-bearer. This process, which is capitalization, has only recently been recognized to be the discounting of all the future uses to their present worth. While in its essence this is merely a problem in exchange value, it is the highest, subtlest, and most' difficult of such problems. Its understanding presupposes rent, just as rent presupposes the analysis of wants and marginal utility. It is the outer zone of the value problem, carrying the thought of value years away (all but an eternity away) from present enjoyment.

Different stages in value.

While both rent and time value are widened so that each applies in some manner to all durable agents, it is a grave er-rorjto conclude hastily that the intention is to make synonymous the old terms rent and interest. Rent and time-discount remain essentially different stages in the value problem. Actual concrete net economic incomes as they arise are always rents. Interest never accrues in a concrete form except under the interest contract for a money loan (a contract income, not an economic income), and this evidently is a species of contract rent. Time-value is a phase of value connected logically with investment, or the calculation of future earning power; rents are both actual and expectative, or future, but as realized incomes they always express present earning power. Together, rent and capitalization embrace the whole problem of valuing durable material agents.

4. Wages and profits are of the same genus, the value of human services of different grades. The attempt has been made in the foregoing treatment to show the unity between the problems of wages and profits, and to point out the difference between the conditions that surround them. Through the common characteristic, social utility, the employer's service can be compared with the most ordinary or the most artistic labor. Profits and wages, therefore, are simply different aspects of the same question. A common power, or principle, is found in all objects of value, a power to gratify human wants. In the variety of human services and in material goods must be sought this unity.

The different kinds of services range from direct to most indirect goods. The commonest labor may serve welfare at the moment or may be embodied in a form to be used years later. In that light, wages seems a more complex problem than either rent or capitalization. But the moment the service embodies itself in a material good with future uses the general theory of capitalization applies to it.

Wages and profits related.