Actual investigations of prices confirm the theoretical argument made above. The average prices of spot wheat in September, October, and November - just after harvest, when the ordinary farmer is compelled to sell - have been nearer the average price for the entire year, since the speculative wheat market has become highly organized, than in the forties and fifties when wheat was sold like any other farm product. And there are reasons for the belief that speculation has not only equalized yearly fluctuations, but that the leveling has been up, not down, in the interest of the farmer who is compelled to sell after harvest, as opposed to the wealthier miller or trader who in the past carried over a supply for the lean months. "It is not uncommonly stated that in the last few years futures in the wheat market have not, in the long run, stood enough above 'spots to cover all the expenses of carrying. Some suggested reasons for this are: cut charges for storage; the failure of outside speculation to maintain the market against hedging sales; the fact that the great elevators will buy wheat and carry it for what they can get, and perform the functions of both carrier and trader for the commission of one. In any case, the tendency is to bring all prices together.” 1 Not only does "speculation" tend to equalize price fluctuations between different points of time and between different markets, but it serves the exceedingly useful purpose of providing a "body of professional risk takers" whose function is to protect the actual merchandiser from many of the speculative risks inherent in modern business. This protection against risk is secured for the most part through "hedging." which has been defined "as a purchase or sale for future delivery intended to offset and thereby to protect an actual transaction in merchandise." The terminal grain elevator which has accumulated a large amount of grain sells a corresponding amount for future delivery and thereby eliminates nearly all of the speculative risks involved in its bushess. The miler who has taken a contract to deliver four at some time in the future hedges by 18 C Pay ate Sanct end Penčna Ezhovore që the Umand Stats a 131 buying future wheat sufficient to produce the flour called for in his contract. The country grain buyer who knows that an interval of time must elapse between the purchase of grain and its sale at the point of destination finds similar protection in a "future" which permits him to specialize in the distributive function of getting grain from the producer to the ultimate consumer with a minimum of speculative danger. There are similar operations in the cotton market. Speculation in the narrow sense, and even more truly the highly-organized market which we associate it with, are responsible for a certain amount of harmful gambling which should be suppressed; but in their ultimate economic effects they are highly useful institutions designed to concentrate the uncertainties and risks inherent in the very nature of production for a future market. And it is important to note that hedging, the transaction by which risks are eliminated for those who prefer to specialize in the less dangerous types of profit-seeking, would be impossible without the more speculative traders who practically bet on future fluctuations of prices. To steady and reduce these fluctuations, provide a certain market, and eliminate the exploitation of the ignorant by the expert traders, speculation and the market mechanism which it requires seem to be necessary and inevitable. QUESTIONS 1. Make a list of the economic factors which regulate the size of farms. Is the average farm likely to grow larger or smaller with the passage of time? Is the narrow economic conclusion concerning the size of the farm, based upon maximum net profit to the individual farmer, subject to modification by reason of social or moral considerations? 2. Has the net effect of the rural exodus been favorable or unfavorable to agriculture and the agricultural classes? to society generally? 3. Does the increase of tenancy in the Southern states represent progress or retrogression? in the North Central states? 4. Under what conditions is the cash rental superior to share tenancy? Would the "corn rent" - a sliding rental varying with the price of farm products — be superior to both? Are short leases better than long leases for the landlord? 5. Do the farmers in your locality suffer from the lack of credit facilities? Have they any difficulty in finding safe and convenient investments for their savings? 6. What is the advantage of specialized farming over diversified farming? Do we imply, when we advocate diversified farming, that the farmer should "buy nothing that he can raise or make for himself"? 7. Is speculation a "necessary" or an "unnecessary evil"? Is it an evil? REFERENCES BRACE, H. H. The Value of Organized Speculation. Commissioner of Corporations. Report on Cotton Exchanges, Part v. CARVER, T. N. Principles of Rural Economics. Eleventh Census. Real Estate Mortgages; Farms and Homes; Proprietorship and Indebtedness. Twelfth Census. Vol. v, Agriculture; Supplementary Analysis, "The Negro Farmer," pp. 511-579 Thirteenth Census. Vol. v, Agriculture. COULTER. J. L. Cooperation among Farmers. FMERY, H. C. Speculation on the Stock and Produce Exchanges of the United States. HAGGARD, H. R. Rural England. HERRICK, M. T., and INGALLS, R. Rural Credits: Land and Cooperative. JFSB, L. The Small Holdings of England. MARSHALL, ALFRED. Principles of Economics, 5th ed., Bock vi. Chap. x. U. S. Department of Agriculture. Year Book: The Crop Reporter. ROGERS, A. S. L. ROWNTREE, B. S. The Badiness Side of Agricmiare. Land and Labour: Lessons from Belgiam. Tutor, H. C. Apricalară" Economics; and "The Decline of Landowning Farmers in England.” Fionn of ke University of Wisconsin, No. 96. WARREN, G. F. From Menagemen Wria L. P. H. The Matag of Firm Prod BUGS. CHAPTER XXX SOCIALISM Socialism Defined. Socialists seek the establishment of industrial democracy through the instrumentality of the State. Our political organization is to become also an economic industrial organization. Socialism contemplates an expansion of the business functions of government until the more important businesses are absorbed. Private property in income-yielding capital and land is to be abolished. Socialists make no war upon capital; what they object to is the private capitalist. They desire to socialize capital and to abolish capitalists as a distinct class. Their ideal, then, is not, as is supposed by the uninformed, an equal division of existing wealth, but a change in the fundamental conditions governing the acquisition of incomes. Socialists usually say that labor creates all wealth. Land and capital, they hold, are merely passive factors of production, and their owners ought not to receive a share of the product unless they personally are useful members of the community. Labor is the active factor, and all production is carried on for the sake of man. Land and capital are simply the tools of man. Socialists admit that the owners of these tools must receive a return for them when industry is organized as it is now; hence they desire that these tools should become public property. They wish to make of universal application the command of the Apostle Paul, " If a man will not work, neither let him eat." Distributive Justice. Socialists, in common with a great many other people who do not accept their attitude toward the organization of industry, desire distributive justice. As to what constitutes justice they are not wholly agreed, but there is among them a tendency to accept equality of needs rather than productivity as a basis. Some, it is true, have advocated an almost mechanical equality, but most socialists today would regard the question of a precise standard for the distribution of income as not of present importance. They are simply agreed in this, that the distribution of the present day is wholly unjust. They think that men today do not have equal chances in life and that there is too much special privilege. The rewards, they think, today go to those who are shrewd and cunning, who are skillful in manipulating stocks and bonds, or who are favored by inheritance with a good start, rather than to those who render great social service. The inventors, poets, authors, scientists, skilled mechanics, and factory managers, they allege, are the large producers, but they do not get the big prizes. Varieties of Socialism. The foregoing characterization applies to most persons who have been called socialists, but the genus contains a number of species which should be distinguished. 1. One group has been called " Utopian." This first group contains those who have become impressed with the evils of the present competitive system and propose the collective ownership of the means of production as a remedy, in much the same spirit with which a physician writes a prescription to cure his patient. There have been many attempts to picture to us how smoothly things would proceed if men could only be persuaded to adopt the collective ownership of land and capital. As a type of this class we may take Robert Owen. His life was contemporaneous with the Industrial Revolution in England, he himself being a successful manufacturer. He saw with his own eyes the evils of unrestricted competition, and was filled with an earnest desire to better the condition of the working classes. He is remembered as a factory reformer and promoter of voluntary coöperation, but yet he regarded these efforts as not sufficiently radical. He thought human nature must be reformed by careful training from childhood in an atmosphere of association, instead of in the self-seeking, commercial atmosphere which surrounded him. He spent his large fortune in an attempt to carry out his ideas regarding the reconstruction of |