Essentials of Economic Theory: As Applied to Modern Problems of Industry and Public PolicyClark, John Bates
General
Essentials of Economic Theory: As Applied to Modern Problems of Industry and Public Policy
Clark, John Bates
Economics
This remains true only while currency continues to be in
its normal state and all other static adjustments continue complete.
_Influences that disturb the Static Equilibrium._--It might seem that
the influences that disturb such a static equilibrium are too numerous
to be described; and yet these changes may be classed under five
general types:--
1. _Growth of Population._--The supply of labor is increasing, and
this fact of itself calls for continual readjustment of the group
system.
2. _Increase of Capital._--The amount of capital is increasing, and
this change also disturbs the static equilibrium and calls for a
rearrangement. As far as wages and interest are concerned, the effect
of this latter change is the opposite of that which follows an
increase in the amount of labor. When people become more numerous,
other things remaining equal, their individual earning capacity
becomes smaller. The increase of capital reduces the earning power of
each unit of the supply of it and depresses the rate of interest; but
it raises the rate of wages, for it causes labor itself to act more
efficiently.
It is to be noted, indeed, that when new laborers enter society they
become consumers as well as producers, and this affects the utility
and the value of goods. When more people use a given amount of
consumers' wealth, values, measured in ultimate units of utility or
disutility, rise. An increase of capital does not directly neutralize
this effect, since it does not change the number of consumers; but it
multiplies commodities and brings down their utilities and their
values. The rise of "subjective" values which follows an influx of
laborers is an indication of diminished wealth per capita, and the
reduction of values which follows an influx of capital is a sign of
increased wealth per capita.
3. _Changes of Method._--Changes take place in the methods of
production. New processes are devised, improved machines are invented,
cheap motive powers are utilized, and cheap and available raw
materials are discovered, and these changes continually disturb the
static state. There are certain to be improvements on the older
methods of production, for a law of the survival of the fittest
insures this.
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