x.

1

Assuming a community to consist of z similar establishments each with one employer and x employés; he considers the question whether, if an additional employer be taken on, the consequent increment to the total product is greater or less than the remuneration of the average entrepreneur. He assumes that the population zx is constant. He assumes also, as I understand, that the play of competition will bring 1 about a determinate value of z and (To fix the ideas, we may suppose that the entrepreneur's remuneration is totally unmixed with rent, so that it is open to any worker to transform himself into an entrepreneur, the difference of remuneration compensating for the efforts, and sacrifice attending the transformation.) Professor Chapman rightly states that the answer to the question put is affirmative or negative according as Increasing or Diminishing Return acts. But the sense in which these terms are to be taken is not, I think, stated with sufficient precision. In my view the only appropriate sense is a certain one of the subordinate varieties which the secondary definition may present, as above shown in the case of plural factors. Professor Chapman's theorem holds good if by Increasing Return it is meant that (az with x) produces more than a times the product of (z with x). But the theorem does not hold good if by Increasing Return it is meant that (az with ax) produces more than a times (z with x).5

terms defined as here (Prof. Chapman professes agreement with our definition, loc. cit., p. 53), and the subjects are terms more general than the subjects of the propositions here contemplated; of which a specimen has been cited, ECONOMIC JOURNAL, xxi. p. 350. Compare Prof. Chapman's distinction between the "abstract" and "realistic " statement, in his Outlines of Political Economy (1911), p. 105 and context.

1 As to the play of competition in such a case I may refer to my observations on entrepreneur's profits in ECONOMIC JOURNAL, Vol. xxi. p. 146, and elsewhere. It may be as well to remark that the supposition now made in a parenthesis for the sake of illustration is not necessary for the argument.

2 Loc. cit., p. 363.

3 As p. 524, par. 1 (op. cit.) must, I think, be interpreted. As p. 526 note, last par., may, I think, be interpreted.

• Let f(z,x)—or, for short f—be the product of any single firm varying with z the number of employers (determining the intensity of specialisation) and with x the number of workmen in a firm. The remuneration of an entrepreneur, say e, may be written

'df

where stands for the partial differential coefficient of f(x,x)-differentiated with respect to the explicit x only, not the x implicit in (in virtue of the equation zx=c, assumed by Prof. Chapman). Let F(2,x)—or, for short F-denote the total product=zf(x,8). Then the increment of the total product due to taking on another entrepreneur-who may be regarded as a small dose" Az added to the

The primary definition is not germane to the question above stated. It will be required if the question is what is the value of z for which the total product is a maximum? But we may go some way towards answering that question without being able to ascertain the character of the Return in the primary sense; if we make the probable assumption that the product of a firm always increases (in virtue of intensified organisation) with the increase of the number of firms ceteris paribus. For then, as x is increased (from the value determined by competition), the product of the community would continually increase, as far at least as the point at which the entrepreneur's remuneration dwindles to zero.

Accordingly the increment due to taking on an additional entrepreneur is, or is

not, greater than e, according as

df

(d) is positive or negative. But this condition

is identical with the condition that Increasing Return acts in the special sense defined by the condition that

F(az,x) > a F(2,x); z varying independently of x.

For, put a=1+8, 8 being small (and positive). The above written condition then becomes B22

822 (1/2) > 0, or (d) positive.

dz

dz

But the condition on which the theorem depends is not identical with the definition of Increasing Return in other senses.

For suppose that

tive and possibly be so large that although the above condition be fulfilled, yet

may be negative, and therefore the theorem (in the proposed sense of the dz term) untrue.

Still less can Increasing Return be here interpreted as importing that F(4, ax)>aF(x). 'df should be positive

For that condition is resolvable into the condition that

REVIEWS

The Future of Trades-Unionism and Capitalism in a Democracy. By CHARLES W. ELIOT, LL.D., President-Emeritus of Harvard University. Being the Larwill Lectures for 1909. (New York and London: Putnam. 1910. Pp. 128.)

THE two lectures which make up this little volume ought to be read by anyone who wishes to understand certain featuresand those quite important features-of American industrial life. Dr. Eliot, who has but recently retired from the presidency of Harvard University, after a long administration which has made a broad and deep mark on the educational history of the new world, is, it need hardly be said, one of the most distinguished figures in the United States. Such a man intelligent citizens all over the country want to see and hear. And an opportunity is given by foundations, like the Larwill lectureship at Kenyon College, which are being endowed in every direction. Dr. Eliot is probably a little tired by this time of talking about purely educational questions: the public will listen with interest to anything he may care to say on any subject of the day; and accordingly, without any experience which can be supposed to fit him peculiarly to deal with industrial problems, Dr. Eliot proceeds to state his views on trade unionism and capitalism.

It is just this absence of special knowledge which makes the book so valuable, not as a positive contribution to the solution of modern difficulties, but as an historical document. "This," some future historian of America will say, "is how a publicspirited and high-minded citizen could still think and speak in the year 1909. In the spirit of a book like this is to be found no small part of the explanation of the peculiar character which labour troubles assumed in that period."

Throughout Dr. Eliot displays a confident knowledge of what "Democracy" means and aims at and intends; of Democracy's principles and purposes-a knowledge exactly comparable to the acquaintance which the clergy have sometimes been charged

with claiming with Providence. With standards thus assumed, he proceeds to measure the shortcomings of trade unionism and of capitalism as he understands them. But the fact is that he has too little perception of actual industrial conditions ever to come to close quarters with the problem he touches. And, as a result, the reader is pulled up again and again by what seem like examples of an almost pathetic ignorance, until one reads further and comes upon some utterance in a precisely opposite sense, with no sort of attempt to bring the apparent contraries into something like harmony. Just two examples will suffice: On p. 65 we are told that "to defeat competition in any way is to inflict a serious injury on society "; and we can conjecture how this sentence will be quoted in every legislature of the Union. But on p. 81 we are also told "Democracy does not believe in competition without limit"! Or, again, "the professional man or the artist has the joy of personal achievement. . . . Now every successful artisan ought to win that joy. . . . The trades-union doctrine of the uniform wage stands squarely in his way." This is on p. 27; but on p. 92 we are reminded that "the extreme division of labour and the prevailing use of mechanical power have reduced the educational effect of the single workman's job. by making his actual performance monotonous and in a high degree repetitive." It does not seem to occur to the lecturer that the trade union policy of a standard wage and the consequences of modern machinery have any sort of relation to one another.

Dr. Eliot's general attitude throughout is that of the fine and idealist individualism which has hitherto been the characteristic note of American political philosophy, but which nowadays, by the self-righteousness which it inspires in employers, stands increasingly in the way of a good understanding between employers and employed. His remedy for the conflict of labour and capital is that trade unionism should abandon all its specifically industrial activities-the strike, the closed shop, the boycott, and the union label, are all included in a common condemnationand that capital shall pursue a policy of what the French call "patronage." He advises, for instance, the establishment of a pension system which shall, inter alia, make it "the interest of the employee to remain long in the service of the same employer" (p. 88). But is such paternalism reconcilable, in the long run, with "Democracy" as working men, and not Dr. Eliot, understand it?

W. J. ASHLEY

The Labour Exchange in relation to Boy and Girl Labour. By FREDERICK KEELING. (London: P. S. King.)

Juvenile Labour Exchanges' After-Care. By ARTHUR GREENWOOD. (London: P. S. King.)

THESE two unpretentious little books are the outcome of the remarkable change which has recently overtaken the attitude of public opinion towards the questions surrounding the entry of boys and girls into industrial life. The examination which fourteen years ago was given the problem in Mr. and Mrs. Webb's "Industrial Democracy" had apparently little effect in arousing a sense of its gravity, and apart from the excellent work done by some skilled employment committees, it was allowed to slumber till the Reports of the late Poor Law Commission. Both the Majority and Minority of that body laid special emphasis on the effect of certain types of boy labour in contributing to unemployment among adults. Since then we have had reports from the Education Committee of the London County Council, the Consultative Committee of the Board of Education, the Committee on Partial Exemption, and the Committee on Street Trading, dealing with different aspects of the same topic. And now Mr. Keeling and Mr. Greenwood give us two surveys of the situation as it is to-day. Both of them have had exceptional opportunities for studying it at first hand; they write with the practical object of telling us what is being done now, and what should be done next, and their books should be invaluable to members of Education authorities and advisory committees concerned with the juvenile departments of Labour Exchanges.

With the position from which they start, that there is an urgent need to organise the entry of young persons of both sexes into industry, there will be general agreement. It is very

difficult for most working-class parents to place their children in the occupation for which they are best fitted, still more difficult for them to exercise any supervision over their industrial life when it has once begun, or to move them from one occupation to another if the first choice (when there is any choice) proves a mistake. Mr. Keeling does well to remind us of the organisations at work in Germany to deal with these difficulties. I remember asking the manager of a large German Labour Exchange how he dealt with the large number of casual labourers who presumably applied for work, and being told "in this country we do not let our children become casual labourers," an answer which, if not quite true to fact, did at any rate represent a point