Bud 
 “Bil 
 
 University 
 
 Entered as sec 
 N un 
 
 NHE LIGRAR} 
 
 the State of New Yuvke"Budietinu 
 
 ass matter August 2, 1913, at the Post Office at Albany, 
 e act of August 24, 1912. Acceptance for mailing at 
 
 te of postage provided for in section 1103, act of 
 
 October 3, 1917, authorized July 19, 1918 
 
 Published Fortnightly 
 
 ALBANY, N. Y. _ September 1, ‘1924 
 
 LABUS FOR SECONDARY SCHOOLS 
 
 ECONOMICS 
 
 This ‘syllabus has been prepared by a committee; consisting of 
 Professor E. E. Agger of Columbia University; Edwin W. Hoote, g 
 of the DeWitt Clinton High School, New York City; Hxedér ‘tke iy 
 Williams of the Binghamton Central High School; and E. P. Smith, 9 
 of the State Department of Education. It is new insferm dnd the 
 method of approach represents an advance over earlier syllabuses. 
 
 Pit i is intended strictly for use in the fourth year of the high school. 
 JAMES SULLIVAN 
 
 Assistant Commissioner for Secondary Education 
 
 ALBANY 
 THE UNIVERSITY OF THE STATE OF ‘NEW YORK PRESS 
 
 1924 
 
 H159r-N24-2500( 3360) * 
 
THE UNIVERSITY OF THE STATE OZ: W YORK 
 
 Regents of the University 
 
 With years when terms expire 
 
 1934 CuHeEsTER S. Lorp M.A., LL.D., Chancellor - Brooklyn 
 1936 ApDELBERT Moot LL.D., Vice Chancellor - Buffalo 
 1927 ALBERT VANDER VEER M.D., M.A., Ph.D., L Albany 
 
 1925 CHARLES \B: ALEXANDER M.A. SLIZ Beis 
 
 Litt. ‘Deir Geis fs =) = SE 
 1928 Water Guest Ketioce B.A., LL.D, = = 
 1932 JAMES BYRNE(B-AY CL.Bo LED =) =e 
 1931 Tuomas J. Mancan M.A. - - - - - - 
 1933 Witiiam J. Wattin M.A. - - - - = - 
 1935 ‘WILLIAM -Bonpy M.A), EB. Pi). 
 1930 WitLtiam P. BAKer B.L., Litt Dol = \ae- 
 
 President of the University and Commissioner of Education 
 
 FRANK P. Graves PhD: Vata Dose De ieee 
 
 Deputy Commissioner and Counsel 
 
 Frank B. Gitpert B.A., LL.D. \ 
 
 Assistant Commissioner and Director of, Professional Education 
 
 Aucustus S. DowninG M-A., Pdi)! LiHiD. Ei 
 
 Assistant Commissioner for Secondary Education 
 
 JAMES SULLIVAN M.A., Ph.D. 
 
 Assistant Commissioner for Elementary Education 
 
 GeorceE M. Witey M.A., Pd.D., LL.D. 
 
 Director of State Library 
 
 James I. Wver M.L.S., Pd.D. 
 
 Director of Science and State Museum 
 
 JOHN M.\CrarKe Ph.D) .DiSci CED: 
 
 Directors of Divisions 
 Administration, LLoyp L. CHENEy B.A. 
 Archives and History, ALEXANDER C. Frick M.A., Litt.D., Ph.D. 
 Attendance, JAMES D. SULLIVAN 
 Examinations and Inspections, AVERY W. SKINNER B.A., Pd.D. 
 Finance, CLarK W. HALLIDAY 
 Law, Irwin Esmonp Ph.B., LL.B. 
 Library Extension, WiLt1AmM R. Watson B.S. 
 School Buildings and Grounds, FrRanK H. Woop M.A. 
 Visual Instruction, ALFRED W. ABRAMS Ph.B. 
 Vocational and Extension Education, LEwrs A. WILSON 
 
University of the State of New York Bulletin 
 
 Entered as second-class matter August 2, 1913, at the Post Office at Albany, 
 N. Y., under the act of August 24, 1912. Acceptance for mailing at 
 special rate of postage provided for in section 1103, act of 
 October 3, 1917, authorized July 19, 1918 
 
 Published Fortnightly 
 
 No. 811 ALBANY NScY . 
 
 September 1, 1924 
 
 INTRODUCTION 
 
 The proper teaching of economics like the teaching of any science 
 demands on the part of the teacher a thorough preliminary training 
 and a well-defined purpose to make the study one which shall 
 primarily train the pupil to think. 
 
 The object aimed at by the teacher should be to train the students 
 to understand the working of our present economic system. In 
 attaining this object each teacher must decide for himself the question 
 of method to be pursued. The necessity of relying upon available 
 textbooks restricts the teachers’ freedom in this respect, but within 
 the limits imposed by the particular text employed, the teacher must 
 work out that combination of “ deductive” and “ inductive ’’ method 
 which seems to him best adapted to his particular teaching problem. 
 
 Taught aright. economics gives a training supplied in like degree 
 by no other subject and is therefore essential to every complete 
 scheme of education. The training which it gives in the develop- 
 ment of the power to reason is not less valuable than that given by 
 the study of mathematics although they differ somewhat radically in 
 character. The reasoning of mathematics is rigid, inevitable: given 
 certain premises, certain conclusions must follow. The reasoning of 
 economics is probable reasoning: given certain data, certain results 
 probably will follow, for economics must allow at every turn for that 
 most variable element, human nature. The reasoning of economics 
 is therefore the reasoning commonly used in life and its data concern 
 every human being. This accounts for the special value of the 
 
 subject. 
 In the past the teaching of economics has suffered from a certain 
 lack of reality. ‘‘ Classical economics” grew out of a much simpler 
 
 economic system than that in which we now find ourselves. The 
 teacher must always remember that the economic world whose basic 
 principles he is seeking is not the world of Adam Smith in 1776 in 
 England, but that of the pupil now living here in New York State; 
 that the principles of economics are not like those of geometry, of 
 universal validity, but are valid only for communities of men of the 
 
+ THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 kind studied and at the time studied. The political economy of the 
 Hottentot is not the political economy of the citizen of New York 
 State. Teaching, therefore, must be concrete, every principle must 
 be tested by applying it to actual conditions in the local community. 
 If this be done, the student will not be guilty of the common fallacy 
 of setting practice over against theory. He will realize that every 
 sound theory is but an accurate. generalization of facts. There is no 
 opposition between fact and theory. Facts are useful only in so far 
 as they have a meaning for us. <A theory, on the other hand, is 
 nothing but an attempt to formulate the meaning that facts convey. 
 
 In order that a sense of reality may be secured, it is recommended 
 that there be a study wherever practicable of the industries of the 
 neighborhood, that visits be made to local establishments and that the 
 workings of economic principles be there tested, that the pupils be 
 required to read the financial and commercial columns of the news- 
 papers and especially of trade papers, and that the census reports 
 and bulletins and the various publications of the Department of 
 Commerce and Labor, of the Interstate Commerce Commission, of 
 the other federal departments, of the New York State Departments 
 of Labor, Banks, Insurance etc., be on file so that they may furnish 
 the material for many assigned lessons and recitations. 
 
 No subject requires the exercise of greater skill in adaptation on 
 the part of the teacher. It may be taught so as to test the acutest 
 mind, or made so simple that a child may understand its import. 
 The ways of approach are many. No two textbooks agree in the 
 order of the subjects treated or even in the context of the subject. 
 
 The following content and arrangement of topics 1s merely sug- 
 gested as one of the many ways of treating the subject. It pur- 
 posely avoids the old systems of categories and concepts in the 
 interest of a more realistic approach to present-day economic life. 
 It is based on the assumption that the end of the economic process 
 is the welfare of the group as a whole. Hence the functioning of 
 the process must be judged from this point of view. Most of the 
 available texts are built along classical lines rather than upon lines 
 as indicated here, but it is hoped that this very difference will afford 
 a stimulus and help broaden the outlook of the enterprising and 
 active-minded teacher. A more realistic and satisfying text can only 
 come through direct classroom experimentation. 
 
_— (? 
 
 SYLLABUS IN ECONOMICS 5 
 
 BIBLIOGRAPHY 
 
 It is highly desirable that every school have a working library of 
 some of the best books so that the teacher may go into the recitation 
 with a full, up-to-date knowledge, and that the pupils may gain other 
 points of view as well as those of the textbook and may cultivate the 
 
 habit of studying from all sides and intensively the questions which 
 
 come before them. <A judicious selection from the following books 
 
 is recommended as the beginning of such a library: 
 
 Adams, H.C. Description of Industry. Holt 
 
 —-—— Science of Finance. Holt 
 
 Adams & Sumner. Labor Problems. Macmillan 
 
 Beveridge, W.H. Unemployment. Longmans 
 
 Dorarty i,t. = irect and Indirect ‘Cost ‘of the’ Great “War. 
 Carnegie Endowment for International Peace 
 
 Economic History of the United States. Longmans 
 
 Burton, T. E. Crises and Depressions. Appleton 
 
 Carlton, F. T. History and Problems of Organized Labor. 
 Heath 
 
 Carver, T.N. Distribution of Wealth. Harvard Univ. Press 
 
 Cheyney, E.P. Industrial and Social History of England. Mac- 
 millan 
 
 Clark, J. B. Philosophy of Wealth. Ginn 
 
 ——— Essentials of Economic Theory. Macmillan 
 
 Clay, Henry. Economics for the General Reader. Macmillan 
 
 Commons, J. P. Trade Unionism and Labor Problems. Ginn 
 
 Davenport, H. J. Economics of Enterprise. Macmillan 
 
 Day, Clive. History of Commerce. Longmans 
 
 Dewey, D. R. Financial History of the United States. Long- 
 mans 
 
 Ely, R. T. Outlines of Economics. Macmillan 
 
 ——— Property and Contract. Macmillan 
 
 Escher, Franklin. Foreign Exchange Explained. Macmillan 
 
 Fisher, Irving. Purchasing Power of Money. Macmillan 
 
 Stabilizing the Dollar. Macmillan 
 
 Foster & Catchings. Money. Pollak Foundation 
 
 Friday, David. Profits, Wages and Prices. Harcourt 
 
 George, Henry. Progress and Poverty. Doubleday 
 
 Gide & Rist. History of Economic Doctrines. Heath 
 
 Hawtrey, R.G. Currency and Credit. Longmans 
 
 Hobhouse, L. T. Property and Its Duties. Macmillan: 
 
 Hobson, J. A. Evolution of Modern Capitalism. Scribner 
 
6 THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 Jenks, J. W. Trust Problem. Doubleday 
 
 Jevons, W. S. Money and the Mechanism of Exchange. 
 Appleton 
 
 Johnson, A. 8. Introduction to Political Economy. Heath 
 
 Johnson, E. R. American Railway Transportation. Appleton 
 
 ———— Ocean and Inland Water Transportation. Appleton 
 
 Jones, Eliot. ‘Trust Problems in the United States. Macmillan 
 
 Kemmerer, E. W. A B C of the Federal Reserve System. 
 Princeton University Press: si 
 
 Lough, W. H. Business Finance. Ronald 
 
 Marshall, L. C. Readings in Industrial’ society, i niga: 
 Chicago Press 
 
 Marshall & Lyon. Our Economic Organization. Macmillan 
 
 Marshall, Wright & Field. Material for the Study of Ele- 
 mentary Economics. Univ. of Chicago Press 
 
 Mead, E.S. Trust Finance. Appleton 
 
 Mitchell, W. C. Business Cycles. Univ. of California Press 
 
 Moulton, H. G. Financial Organization of Society. Univ. of 
 Chicago Press 
 
 National Bureau of Economic Research. Income in the United 
 
 tates. 
 
 Parker, C. H. Casual Laborer and Other Essays. Harcourt 
 
 Pigou, A.C. Wealth and Welfare. Macmillan 
 
 Rae, John. Contemporary Socialism. Scribner 
 
 Ripley, W. Z. Railway Problems. Ginn 
 
 —-—-— Trusts, Pools and Corporations. Ginn 
 
 Ryan, J. A. Distributive Justice. Macmillan 
 
 Scharfman, T. L. American Railroad Problem. Century 
 
 Seager, H. R. Social Insurance. Macmillan 
 
 ——--— Principles of Economics. Holt 
 
 Seligman, E.R. A. Essays in Taxation. Macmillan 
 
 —-—— Principles of Economics. Longmans 
 
 Semple, E. C. American History and Its Geographic Condi- 
 tions. Houghton 
 
 Skelton, O. D. Socialism: A Critical Analysis. Houghton 
 
 Stanwood, Edward. American Tariff Controversies in the 19th 
 Century. Houghton 
 
 Tannenbaum, Frank. Labor Movement. Putnam 
 
 Taussig, F. W. ‘Tariff History of the United States. Putnam 
 
 Tawney, R. H. Acquisitive Society. Harcourt 
 
 Van Hise, C. R. Conservation of Natural Resources in the 
 United States. Macmillan 
 
SYLLABUS IN ECONOMICS i 
 
 Van Metre, T. W. [Economic History of the United States. 
 Holt 
 Veblen, Thorstein. ‘Theory of the Leisure Class. Huebsch 
 Webb, 8S. & B. Industrial Democracy. Longmans 
 Whitaker, A.C. Foreign Exchange. Appleton 
 White, Horace. Money and Banking. Ginn 
 Willis, H. P. Federal Reserve. Ronald 
 
 Books of Help to Teachers 
 
 Clow, F. R. Economics as a School Study. Economic Studies, 
 v. Ili, no. 1, American Economics Association 
 
 Daggett, Stuart. Method and Scope of High School Economics. 
 History Teachers’ Magazine, October 1912 
 
 Haynes, John. Economics in the Secondary Schools. Houghton 
 
 Mead, A. R. General Plan for a Course in Economics. School 
 Review, April 1922 
 
 Nestor, I. F. Practical Economics in the High School.  His- 
 torical Outlook, February 1919 
 
 ——— Report on Economics in Secondary Schools. American 
 Economic Review, March 1918 
 
 Sullivan, James. Present Status of Teaching of Economics. 
 Association of History Teachers of Middle States and Mary- 
 land. Proceedings 1911 
 
 Tildsley, J. L. Economics and the Teacher of Economics in the 
 New ey Ore Gitvellich Schools.) sBulleting of High: !/Points, 
 Neey toityviarch 1O10 
 
. Digitized by the Internet Archive 
 in 2022 with funding from 
 University of Illinois Urbana-Champaign Alternates 
 
 https://archive.org/details/syllabusforsecon0Ouniv_1 
 
SYLLABUS IN ECONOMICS 9 
 
 SYLLABUS IN ECONOMICS 
 
 I How economic society is organized 
 
 A The place of the individual 
 
 The outstanding characteristic of modern economic society is 
 
 bo 
 
 the differentiation of function and extensive interchange 
 of commodities and of services. Each individual today 
 is a specialist. He sells his products or services m the 
 market and on the basis of the market valuation of his 
 contribution he normally claims a share of the total 
 social product. 
 
 His choice of occupation depends upon 
 a Inherited tendencies 
 
 b Education and training 
 
 c Environment 
 
 d Opportunity 
 
 e Ambition 
 
 Freedom of enterprise 
 
 Private ownership and management 
 Man a social being: 
 
 B The motives underlying our economic society 
 The work of the individual in his special field constitutes his 
 
 business activity. Economics is sometimes defined as 
 the social science of business. In his economic activity, 
 there are numerous and varied motives which act as 
 stimuli to the individual. 
 
 1 Self-interest 
 
 Pueronrs 
 b Power 
 c Fame 
 
 2 Altruistic, religious and ethical considerations 
 
 C The pecuniary nature of modern economic society 
 Modern economic activity is organized and controlled in 
 
 terms of money. Money income is the goal of the indi- 
 vidual in his business activity. The prospects of money 
 profit determine the character and the volume of pro- 
 duction in the different lines of business. Small output 
 and high prices may at times offer a better “ business ” 
 result than large supplies and low prices. 
 
 1 Dominance of money motive 
 
10 
 
 THE UNIVERSITY OF THE STATE OF NEW YORE 
 
 2 Contrast with medieval system, when emphasis was placed 
 on goods or services rather than on mere money return 
 
 3 Influence of price changes on profits 
 
 4 Possible opposition between individual business interest and 
 social interest 
 
 D The complexity of the modern economic process 
 
 The modern economic process is very complex. This com- 
 plexity grows out of the high degree of specialization or 
 division of labor which characterizes it. Specialization 
 has necessitated the development of many special ad- 
 juncts like banks for financing, complicated marketing 
 machinery, speculation etc. 
 
 1 ‘The scope of division of labor 
 
 2 The extent of exchange 
 
 3 Machinery for marketing 
 
 4 Machinery for financing 
 
 FE Cooperative character of modern economic organization 
 The increasing complexity of economic society strengthens 
 its essentially cooperative character. The higher the 
 degree of specialization for the individual, the greater ts 
 lis dependence on others. Mutual dependence neces- 
 sitates balanced and coordinated production. 
 
 F Fundamental social institutions 
 The whole economic society is based upon a number of im- 
 portant social institutions. These may be summarized 
 as private property, freedom for the individual in move- 
 ment, in bargaining, in contracting, and in other spheres 
 of activity relating to his economic life, and lastly, com- 
 petition. 
 1 Private property 
 a Property rights: acquisition, disposition by contract, 
 eift, bequest, use 
 b Development of the idea of private property 
 c Limits of private property rights 
 d Regulation and control of private property 
 2 Freedom of enterprise 
 a-Scope of individual freedom: movement, contract for 
 services, marriage etc. 
 b Development of freedom | 
 ¢ Social regulation necessary for the good of all, results 
 in greater freedom for the individual 
 
SYLLABUS IN ECONOMICS ll 
 
 3 Competition 
 a Meaning and nature of competition 
 b Competition and “ survival of the fittest ” 
 c Forms of competition 
 d Limits of competition 
 e Regulation of competition 
 
 G Purpose of economic system 
 The underlying purpose of the economic system 1s the pro- 
 motion of the welfare of the group. From the economic 
 point of view, this welfare is interpreted in terms of 
 maximum want satisfaction. Property, contract etc. 
 are social institutions conceived of in the interest of the 
 group rather than in that of the individual. No indi- 
 vidual rights can subsist if they are inimical to social 
 welfare. 
 1 Group welfare 
 2 Welfare and want satisfaction 
 3 Relation of social institutions to group welfare 
 4 Subservience of the individual 
 5 Dependence of group welfare on 
 Contentment of the individual 
 Training of the individual 
 Correct choice of vocation by individual 
 Efficient organization of the group 
 Leadership 
 Equality of opportunity 
 Just laws 
 1 Strong and trustworthy government 
 
 ene A Ee a 
 
 aa 
 
 II Economic organization and business 
 A Social significance of “business unit.” Production versus 
 profits in business 
 
 The business unit is the unit of social production. The 
 individual business man is interested in “ profits ” rather 
 than in production in the social sense. The activities of 
 the business man are controlled and regulated by com- 
 petitive marketing. Broadly our system assumes that 
 individual interests are best subserved by the promotion 
 of social interests. To this, however, there are often 
 serious exceptions. Some forms of advertising, for 
 example, may be individually profitable but socially 
 
 wasteful. 
 
12 THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 1 Controlling influence of competitive marketing 
 2 Relation between individual and social interest 
 
 3 Exceptions to rule of harmony between individual and 
 social interest 
 
 B Public enterprise 
 
 Some forms of production are withdrawn from the field of 
 private business and are publicly undertaken. The 
 reasons for this are varied, but they include the out- 
 standing public importance of some enterprises, the 
 large risk involved in others, or the heavy capital require- 
 ments of still others. 
 
 1 The scope of public enterprise 
 2 Conditions leading to public enterprise 
 o 
 
 Examples of public enterprise 
 a Post office 
 
 b Schools 
 
 c Roads and highways 
 
 C Public versus private enterprise 
 
 There is no necessary presumption in favor of any particular 
 form of procedure with respect to private versus public 
 enterprise. |The test’to’ be’ applied tis’ that ot social 
 utility. The form of enterprise which yields the greatest 
 social return will be preferred. 
 
 1 The advantages and disadvantages of public enterprise 
 2 The advantages and disadvantages of private enterprise 
 3 The circumstances controlling selection of procedure 
 
 D Vhe factors in production 
 
 All social. production requires the combination of the so- 
 called factors of production. ‘These are land and natural 
 resources, labor, capital and enterprise. 
 
 Leland , 
 
 Land and natural resources cover all the natural aids to 
 production. The chief social problem in connection 
 with natural agents is that of “conservation” by 
 which is meant an economic use based on future as 
 well as on immediate needs. 
 
 a Diminishing productivity 
 
 b Limited supply 
 
 c Conservation as a social policy 
 
 bd 
 
SYLLABUS IN ECONOMICS 13 
 
 2 Labor 
 
 All human services applied to production constitute labor. 
 While human services are necessary to production, it 
 must not be forgotten that human welfare is the end 
 of the whole productive process. Wealth production 
 at the expense of human welfare defeats its own end. 
 Important social problems in connection with human 
 labor as a factor in production have to do with popula- 
 tion increase, human efficiency and conservation of life, 
 emigration and immigration. 
 
 a Dependence of individual efficiency on 
 (1) Health 
 (2) Strength 
 (3) Inherited qualities 
 (4) Education and training 
 (5) Living and working conditions 
 (6) Social standards 
 (7) Ethical standards 
 
 b Dependence of group efficiency on 
 (1) Division of labor 
 (2) Direction of labor 
 (3) Cooperative effort 
 (4) Standard of production 
 (5) Labor policies 
 
 c¢ Supply of labor 
 
 (1) Growth of population 
 (a) Natural increase 
 (b) Immigration and emigration 
 (c) Conservation of life 
 (2) Limits of population 
 (a) Malthusian law 
 (b) Historical significance and criticism of the 
 Malthusian law 
 3 Capital 
 Capital is the product of man’s productive efforts saved 
 and employed for further production. It results from 
 a combined process of saving and investment. Capital 
 is necessary as a result of the division of labor or 
 specialization in industry. 
 a Forms 
 b Classes 
 
14 
 
 THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 c 
 
 (1) Free and specialized 
 (2) Fixed and circulating 
 
 Functions 
 
 d Advantages and disadvantages of capitalistic production 
 
 e 
 
 f 
 
 Origin and maintenance of capital — importance of thrift 
 Diminishing productivity and capital 
 
 a Need for cooperation through all stages of production 
 
 h 
 
 Necessary for continuous flow of goods 
 
 Enterprise 
 
 Enterprise concerns the coordinating and risk-assuming 
 
 factors. This grows in importance as economic 
 organization becomes more complex and as production 
 is increasingly in anticipation of demand. The appli- 
 cation of the different factors of production en- 
 counters the principle of “ diminishing productivity ” 
 or “diminishing returns.” This influences the pro- 
 portions in which the several factors of production are 
 combined. It was originally applied by the Classical 
 Economists to land alone. 
 
 a Function of enterprise 
 
 b The promoter, manager, director and stockholder 
 c The scope of the enterprise function 
 
 d Necessity and justification of enterprise 
 
 E Forms of business organization 
 
 The modern organization of business exhibits different forms. 
 
 bo 
 
 These are the individual, partnership and corporate 
 forms. Each form has distinctive advantages and dis- 
 advantages. The development of modern economic life 
 has, however, placed emphasis on the corporate form. 
 The corporate form has engendered serious social prob- 
 lems in the field of capitalization, management, relation 
 to employees, relation to the government, and relation 
 to the public. 
 
 The single entrepreneur 
 
 The partnership 
 a Advantages 
 b Disadvantages 
 
 The business corporation 
 a Advantages 
 b Disadvantages 
 
SYLLABUS IN ECONOMICS 15 
 
 (1) Irresponsibility i 
 (2) Absentee ownership 
 (3) Dominance of the motive of private gain 
 4 Cooperation 
 a Productive cooperation 
 b Consumers’ cooperation 
 
 F The division of labor 
 Underlying modern business organization is division of labor 
 
 within the social group. This appears in various forms: 
 functional, geographical and technical. All forms imply 
 individual specialization. Such specialization has dis- 
 advantages as well as advantages. 
 
 The scope of the division of labor 
 
 Advantages and disadvantages 
 
 ne 
 
 Division of labor and exchange 
 
 4a 
 
 Need for cooperation 
 
 G {nternational specialization and division of labor 
 
 Division of labor also characterizes nations and gives rise to 
 international trade. International trade is also based 
 upon individual division of labor but in its organized 
 form rests upon the law of comparative costs. 
 
 1 Absolute advantages 
 a When one nation produces what another can not 
 b When one nation produces more cheaply than another 
 
 2 Relative or comparative advantages 
 When a nation producing commodities more cheaply than 
 another, specializes in those in which it has the greater 
 advantage and imports those in which it has a lesser 
 advantage over other countries. 
 3 Laws of comparative costs 
 
 1s International trade 
 
 Absolute freedom of trade among nations rarely, if ever, 
 exists. Restrictions limiting this freedom are imposed 
 among nations resulting in a lack of perfect specializa- 
 tion in industry. The most important of these restric- 
 tions are tariffs. 
 
 1 Free trade 
 
 a Definition 
 b Advantages 
 
16 
 
 THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 (1) Directs labor and capital into those industries in 
 which a nation has an absolute or comparative 
 advantage and thus 
 
 (2) Increases productivity of labor 
 
 (3) Increases real wages 
 
 (4) Extends geographical division of labor 
 
 (5) Increases interdependence of nations 
 
 (6) Increases competition and helps to. break down 
 monopoly 
 
 c Disadvantages 
 
 (1) Tends to restrict a nation to a few industries 
 
 (2) Makes a nation dependent on others 
 
 (3) Difficult except by world agreement 
 
 2 Tariffs 
 a Kinds 
 (1) Protective 
 (2) Revenue 
 (3) Revenue with incidental protection 
 
 b Advantages of protective tariffs 
 (1) Develops infant industries 
 (2) Diversifies industry 
 (3) Secures economic independence of a nation 
 (4) Retards the action of the law of diminishing 
 returns 
 
 c Arguments urged to support protection 
 (1) Home market argument 
 (2) Increases employment 
 (3) Maintains high wages 
 d Disadvantages of protective tariffs 
 (1) Continued after needs for have ceased 
 (2) Make possible huge profits for a few 
 (3) Foster monopolies 
 (4) Increase cost of living 
 
 e Present tariff situation in the United States 
 3 Bounties 
 4 Subsidies 
 
 I Division of labor and “ roundabout” or delayed production 
 An economic system based upon specialization requires an 
 adequate supply of capital. Specialization gives rise to 
 “roundabout ” production, necessitates the tying up of 
 
 wealth. Wealth so tied up is capital and capital appears 
 
Roundabout production means the whole series of operations from 
 
 NOTE. 
 
 — 
 
 SYLLABUS IN ECONOMICS 17 
 
 in the two primary forms, “ fixed” and “ circulating.” 
 Capital assures continuity of production and_ steady 
 availability of final product irrespective of the degree of 
 
 ' specialization or of time involved in the process. Any 
 
 system based on specialization is thus “ capitalistic,” 
 whatever the form of ownership of capital. 
 
 the assembling of the raw material and the making of tools and building of 
 factories to the turning out of the desired product. It is roundabout because 
 instead of producing directly the things which we want, we must first create 
 the instruments and facilities with which to make them. 
 
 — 
 
 W bo 
 
 wn rae. 
 
 ‘“Round-about ” production and capital 
 pein echeeatae Clrctating: 
 Capital and continuity of production 
 Capitalism 
 
 Nature of capitalism 
 
 bd 
 
 capital 
 
 J Size of the modern business establishment 
 
 With the increasing importance of capital, business organi- 
 
 zations have grown in size. Despite this rapid increase 
 in the size of productive establishments, we have a 
 multitude of business units which are run on a small 
 scale. In general we may say that the size of a business 
 unit will depend on the nature of the business, the man- 
 aging ability of the entrepreneur and the advantages 
 which may be secured through extension. 
 
 1 Small scale versus large scale production 
 
 a Advantages 
 b Disadvantages 
 
 2 Most efficient size depends on 
 
 a Nature of the business itself due to the character of the 
 
 (1) Raw material 
 
 (2) Process of production 
 (3) Finished product 
 
 (4) Market 
 
 b Skill of the entrepreneur 
 
 Economies that may be secured 
 
 K Social regulation of business 
 
 Business prosperity and social welfare are mostly, but not 
 
 necessarily, harmonious. The test of social welfare 1s 
 want satisfaction. Social welfare may therefore require 
 social regulation of business. Examples of this are 
 
18 
 
 THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 found in pure food regulation, laws against monopolistic 
 practices, etc. 
 
 1 Meaning of laissez-faire 
 2 Laissez-faire and group welfare 
 3 Government regulation of business 
 
 III Business and prices 
 A The importance of price 
 The whole economic process today turns on prices. Prices 
 
 I 
 2 
 
 to the business man determine income from sales and 
 expenditures concerned in costs of production. Busi- 
 ness success thus depends upon prices and price move- 
 ments. Changes in prices have also profound social 
 consequences. 
 
 Price is the pivot on which production turns 
 Prices and business success 
 
 3 Dependence of profits upon prices 
 4 Effect of price changes on group welfare 
 
 a Prices and the cost of living 
 b Price changes and consumption 
 
 B Prices and money 
 The determination of prices 1s a matter of the utmost eco- 
 
 HO tO re 
 
 nomic wportance. Prices may be defined as value ex- 
 pressed in terms of money, but in this connection it must 
 be noted that the value of money is itself subject to 
 change. Changes in the value of money bring about 
 changes in price level as distinguished from changes in 
 individual prices. The statistical device, known as an 
 index number is employed to detect changes in the price 
 level. 
 
 Definition of prices 
 Instability of money value 
 Effect on prices of changing money value 
 
 4 Prices and the price level 
 
 5 
 
 Index numbers and their use 
 
 C Prices and markets 
 Prices are fixed or determined in markets. A market may 
 
 be defined as an area or place where offers to buy and 
 offers to sell are brought together. Some markets are 
 organized like the great speculative markets for securities 
 and for staple commodities, other markets like that for 
 foreign exchange are unorganized. 
 
SYLLABUS IN ECONOMICS 19 
 
 1 Definition of markets 
 
 2 Organized and unorganized markets 
 3 Speculation and markets 
 
 4 Legal regulation of markets 
 
 D Competitive market prices 
 
 Prices are usually said to be determined by “ demand” and 
 
 —_ 
 
 3 
 
 “supply.” Demand for goods depends upon desire 
 coupled with ability and willingness to pay. Changes in 
 demand tend directly to affect prices. Normally an 
 increase of price tends to lessen demand, while a decline 
 of price stimulates it. 
 
 The main factor on the supply side depends upon cost 
 of production. In the long run prices must be high 
 enough to cover costs of production, but costs of pro- 
 duction are not uniform for all producers. For the indi- 
 vidual producer the difference between cost of production 
 and selling price constitutes profit or loss. At a given 
 moment the costs of production of the least efficient 
 producer whose contribution to supply is, nevertheless, 
 necessary to satisfy demand at a given point, is said to 
 be the “ normal price ” at which level market price tends 
 to adjust itself 
 
 Under competitive conditions price tends downward 
 toward the cost of production of the most favored pro- 
 ducer. The long run tendency of price depends upon 
 the principles of cost operative in a given industry. 
 Costs may be constant, increasing or diminishing. 
 
 The market and demand and supply 
 The meaning of demand 
 Elasticity of demand 
 
 4 The meaning of supply 
 
 5 
 
 Elasticity of supply 
 
 E Monopoly price 
 
 Prices may be competitive or monopolistic. Competitive 
 
 prices assume numerous buyers and sellers. Monopoly 
 develops when there is a sufficient control of supply ma- 
 terially to influence prices. Competitive prices assume 
 a large number of offers to buy and offers to sell with 
 final price fixed at a point of equilibrium between de- 
 mand and supply. Monopoly price assumes regulation 
 of supply with a view to a fixing of price at the point of 
 
20 
 
 THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 highest net return to the monopolist. The point of 
 highest net return under monopoly depends upon elas- 
 ticity of demand and upon the different possibilities as 
 to costs that may characterize various industries. 
 
 1 Law of monopoly price 
 
 2 Operation of the law 
 
 F Classification of monopolies 
 
 There are various forms and types of monopolies and each 
 type must be appraised according to its nature and pur- 
 pose. Public monopolies like the post office may be 
 considered desirable. Similarly a private monopoly may 
 be based upon a patent right or a franchise or on a 
 similar grant. 
 
 1viegal 
 
 a Private 
 b Public 
 Z Personal 
 3 Natural due to 
 a Control of natural resources 
 b Nature of business 
 4 Capitalistic or industrial 
 
 G Capitalistic or industrial monopoly — the Trust 
 
 British. and American public opinion have been steadfastly 
 against monopoly. In the United States we have federal 
 and state laws against monopoly. Experience has shown 
 that some monopolies may be desirable, such as railroads, 
 telephones etc., and should be regulated rather than 
 destroyed. 
 
 1 Reasons for the growth of great combinations in the past 
 
 30 or 40 years 
 a The promoter 
 b The saving of wastes of competition 
 c The desire for monopoly gains 
 
 2 Policy of laissez-faire toward the early combinations con- 
 trasted with the present attitude which looks for regula- 
 tion; the “ rule of reason ”’ in applying Sherman Act 
 
 3 The forms of the so-called trust 
 
 a The great consolidated corporation 
 b The holding company 
 
 c Interlocking directorates 
 
 d Common holding of stock by few 
 
SYLLABUS IN ECONOMICS 
 
 IV Business and markets 
 A Marketing goods 
 
 The complexity of modern industrial organization with its 
 division of labor and specialization, emphasizes above all 
 the importance of the exchange of commodities and ser- 
 vices. It has made necessary an elaborate system of 
 marketing goods. 
 
 1 Reasons for exchange between persons and countries 
 
 2 Forms of exchange 
 
 a Barter 
 
 b Money 
 
 c Credit 
 
 3 Complexity of modern market 
 
 a Variety and grades of goods 
 
 b Number of producers and consumers 
 
 c Large area covered 
 
 d Employment of middlemen 
 (1) Wholesaler and retailer 
 (2) Commission merchant 
 (3) Brokers 
 
 e Influence of advertising 
 
 B Prices and risk 
 
 Prices are influenced by business risks. These are to some 
 extent cared for by insurance where the risks are recur- 
 rent and reasonably calculable. Risks of price fluctua- 
 tion are sometimes shifted through speculative under- 
 taking. | 
 
 1 Producers are specialists who anticipate demand and are 
 guided by market price 
 
 *2 The assumption of risk by speculators 
 a Beneficial when speculation tends to stabilize prices 
 b Harmful when speculation tends to make prices more 
 variable 
 3 The middleman as a risk taker 
 
 4 Insurance: life, fire, accident, health, industrial etc. 
 
 C The business cycle 
 
 An important phenomenon in connection with prices is the 
 ‘“business cycle.” This implies the rhythmic development 
 of business prosperity and depression. Starting from a 
 
THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 period of depression, the cycle moves through improvement 
 to a period of boom. The period of boom is brought to a 
 close by a crisis which is followed by a period of liquida- 
 tion and retardation culminating in stagnation and depres- 
 sion. Many “causes ” have been adduced to explain busi- 
 ness cycles, but most students recognize that they are highly 
 complicated phenomena. Various measures for alleviating 
 their effects and for controlling them have been suggested. 
 
 D Money and credit 
 
 The system of exchange characteristic of the modern eco- 
 nomic system rests upon money. Prices are money 
 prices. Modern monetary systems are complicated. 
 They are organized on a national basis and can be ex- 
 plained in detail only on the basis of the monetary his- 
 tory of individual countries. Broadly speaking, how- 
 ever, there are certain types of modern money; standard, 
 representative, fractional and credit money. Various 
 kinds of monetary standards have been devised. The 
 prevailing form has been the single metallic standard, 
 the metal involved being gold. Money is issued and 
 controlled today by governments, the issue of money 
 being regarded as a sovereign right. Governments have 
 often abused this right through the issue of irredeemable 
 paper money. ‘There are numerous problems connected 
 with money; the primary problems being security and 
 stability of value. . 
 
 Supplementing money in our modern system is credit. 
 Credit is much more significant than a mere medium of 
 exchange, but it is usually defined as a medium of ex- 
 change. Credit implies the transfer of economic goods 
 by the creditor and the assumption of an obligation to 
 pay at some future time by the debtor. Banks are the 
 most important credit institutions that we _ have. 
 Through the extension of credit they gather together and 
 apportion to use the community’s fund of capital. 
 
 1 Money 
 
 a Functions 
 
 b Qualities _ 
 
 ¢ Standard money 
 2 Credit 
 
 a Definition 
 
 b Kinds 
 
SYLLABUS IN ECONOMICS 23 
 
 (1) Personal 
 (2) Commercial 
 (3) Banking 
 c Instruments and their use 
 (1) Book 
 (2) Promissory note 
 (3) Checks 
 (4) Bonds, corporation and government 
 (5) Foreign and domestic bills of exchange 
 d Purposes of credit 
 (1) For consumption 
 (2) For production 
 3 Paper money 
 a Kinds according to reserve 
 (1) Representative or full value 
 (2) Partial reserve or convertible 
 (3) No reserve or fiat 
 b Source of issue 
 (1) Bank 
 (2) Government 
 4 Value of money 
 a Quantity theory 
 b Effect of price changes on various classes of people 
 c Inflation, Gresham’s law 
 d Present monometallic gold standard 
 
 E Banking 
 
 An indispensable adjunct to the business man is the modern 
 commercial bank. Here, he not only deposits cash but 
 also credit instruments, such as checks, notes, drafts etc., 
 to be collected by the bank through the machinery that 
 the banking world has set up as a result of long experi- 
 ence. Here he seeks loans to aid him to meet his obliga- 
 tions. These loans he receives either in cash or credit, 
 and with them he makes his payments and keeps pro- 
 duction going. The maintenance of a sufficient cash or 
 liquid reserve by a bank to meet the demands of the 
 borrowers is of first importance in sound banking policy. 
 
 1 Functions 
 
 a Deposit 
 b Loans and discounts 
 
bo 
 
 iOS) 
 
 eS) 
 
 THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 c Note issue (sometimes ) 
 d Collections 
 
 Nature of deposits 
 
 a Cash 
 
 b Credit through discounting 
 
 c Credit instruments 
 
 Deposit reserves; relation to demand deposits 
 a Legal 
 
 b Discretionary 
 
 The simple bank statement, showing the changes resulting 
 
 from 
 a The receipt of cash deposits 
 b The payment of cash to depositors 
 c The effect on deposits of a loan 
 d The effect on reserve ratio of a loan 
 
 e Other operations that will bring out the nature of the 
 
 work done by cash actually in the bank’s hands 
 
 Services of banks to productive enterprise 
 a Concrete examples of the use of bank credit 
 b Business man’s dependence on bank credit 
 
 Inflation and deflation of bank credit 
 
 Requirements of sound banking 
 a Sound deposit reserve policy 
 b Elastic currency 
 
 The banking system of the United States 
 
 a Defects of the old national banking system 
 (1) Inelastic note issue 
 (2) No rediscount market 
 (3) Decentralized reserves 
 
 b The Federal Reserve System 
 (1) Regional system 
 (2) Membership 
 (3) Organization 
 c Operation of the Federal Reserve System 
 (1) Rediscounting 
 (2) Issuing and retiring Federal Reserve notes 
 (3) Reserve requirements 
 (4) Federal Reserve Bank notes 
 (5) Clearing house function 
 (a) Regional 
 
 (b) Interregional through the gold settlement fund 
 
SYLLABUS IN ECONOMICS 25 
 
 d The control of the rediscount rate and its influence over 
 credit granted by banks 
 e Effect of credit on 
 (1) Demand for money 
 (2) Efficiency of money 
 f Restatement of the quantity theory of the value of money 
 involving the foregoing use of credit 
 
 F Foreign exchange 
 
 In foreign trade, business men depend on credit and credit 
 
 1 
 
 to 
 
 instruments and upon the service of banking institutions 
 to make and receive payments for their services and com- 
 modities. They are willing to pay money in one place 
 in order to establish an equivalent sum as a credit in 
 another country. This does away with the need and 
 expense of transporting money. The banks acting as 
 agencies for business men offset the claims of one coun- 
 try against them by the claims in their favor against this 
 country and ship gold only as a last resort. The buying 
 and selling of credit in another country, we call the 
 buying and selling of exchange. Domestic exchange is 
 governed by the same principles. 
 
 Origin of exchange 
 
 a Purchase of commodities — visible items 
 
 So 
 
 Payment for freight, insurance etc. 
 
 c Purchase of stocks, bonds and other instruments 
 d Interest and dividends 
 
 e Repayment of loans 
 
 f Travelers’ expenses 
 
 g Gifts and remittances 
 
 Instruments of exchange, how they arise through com- 
 mercial transactions 
 
 Settlement of exchange balance by shipment of gold 
 
 4 Normal rate of exchange for gold standard countries is 
 
 determined by mint ratio of standard gold coins of those 
 countries 
 
 Market rate is determined by 
 
 a Demand and supply 
 
 b Fluctuation between gold points 
 c Depreciation of local currencies 
 
26 THE UNIVERSITY OF THE STATE. OF NEW YORK 
 
 VY Division of social income 
 
 The use of the factors of production throughout the industrial 
 world each year results in an annual social income. The 
 division of this current product of industry among the 
 factors of production is known as distribution. The 
 amount to be thus distributed will depend on the pro- 
 ductivity of the agents, land, labor, capital and enterprise. 
 The Government also takes a portion of the annual social 
 income in the form of taxes. The individual landowner, 
 laborer, capitalist and entrepreneur receives a personal 
 share from this social income. 
 
 A Fundamental concepts of distribution 
 1 Nature of the social income 
 2 Real income and money income 
 “ 
 
 3 Social income less replacement fund equals net social in- 
 come to be distributed 
 
 B Kent, the return that accrues to the owner of a natural agent 
 of production 
 1 Value of land dependent on its productivity due to 
 a Natural advantages 
 6 Desirability of location 
 2 Origin of rent 
 a Effect of the operation of law of diminishing productiv- 
 ity as population grows 
 (1) Increases demand for land which 
 (2) Extends area of cultivation to the poorer lands 
 b Rent is the difference in productivity between a par- 
 ticular piece of land and the poorest piece now in use. 
 It is a differential return (the Ricardian formula) 
 c Market price of land depends on the economic rent, 
 which is the amount of this differential return 
 
 C Interest, a return for the use of capital 
 1 Reasons for payment of interest 
 a As a reward to the owner of capital for his abstinence 
 b Because capital is productive 
 c Payment exacted for risk 
 
 2 Rate of interest, a market price determined by supply and 
 demand of capital at a given time and place 
 
SYLLABUS IN ECONOMICS 27 
 
 3 Rate for 
 a Call money 
 b Long term loans 
 
 D Wages, the return to labor for its part in production 
 
 1 Productivity theory 
 2 Rate of wages determined at a given time and place by 
 demand and supply 
 3 Other influences affecting the rate of wages 
 a Custom 
 b Social esteem 
 c Danger and risk 
 d Regularity of employment 
 e Union regulations 
 
 Eo Pronts 
 
 Profits constitute the return to the entrepreneur for the 
 organization, direction and risks of productive enter- 
 prise. They are a residual share after rent, wages and 
 interest have been paid 
 
 1 Nature of profits 
 a Gains resulting from unforeseen circumstances 
 b Return due to differences in skill among rival entre- 
 preneurs 
 c Gains arising from monopoly 
 2 Profits must be sufficient to keep the entrepreneur from the 
 best alternative employment 
 
 3 Modern large scale production has magnified the rewards 
 of exceptional entrepreneurs 
 
 F Taxation 
 An increasing share of the social income is taken by the 
 Government in the form of taxes 
 
 1 Characteristics of a good tax 
 a Productive of revenue 
 b Based on ability to pay 
 c Certain 
 d Not easily evaded 
 e FXconomical to collect 
 f Convenient to pay 
 2 Kinds of taxes 
 a Direct payment 
 b Indirect payment 
 
THE UNIVERSITY OF THE STATE OF NEW YORK 
 
 3 Rates of taxation 
 a Progressive 
 b Proportional 
 
 4. Federal taxes and incidence of each 
 a Custom duties 
 (1) Ad valorem 
 (2 yor peciic 
 b Excise taxes (internal revenue ) 
 c Income taxes 
 d Inheritance tax 
 
 5 State and local taxes and incidence of each 
 a Income tax 
 -b Corporation tax 
 c Inheritance tax 
 d Stock transfer tax 
 e Motor vehicle tax 
 f Corporation organization tax 
 g General property tax 
 (1) Unequal assessment of property within a single tax- 
 ing district 
 (2) Unequal assessment of property among various 
 taxing districts 
 (3) Inequality of assessment between realty and per- 
 sonalty 
 fi Franchise tax 
 
 6 Advantages of a budget 
 
 / Effect of the financial policy of the Government upon the 
 citizen, as consumer and producer 
 
 G Labor 
 
 Modern industrialism has brought about concentration of 
 capital, large scale production, minute division of labor 
 and a distinct division of producers into two classes, the 
 employer and the employed. They are mutually de- 
 pendent on each other. Failure to recognize this 
 essential feature of modern industrialism is the cause of 
 much conflict between them over such matters as con- 
 ditions of employment, hours of labor, the wage con- 
 Ir CCE eer 
 
 1 Policies of labor unions regarding 
 
 a Admission to membership 
 b Wages 
 
bo 
 
 SYLLABUS IN ECONOMICS 
 
 c Collective bargaining 
 
 d Closed shop 
 
 e Hours of labor 
 
 f Restriction of output 
 
 g Limitation of apprentices 
 h Fraternal benefits 
 
 t Political labor party 
 Methods of industrial warfare 
 a Strikes and lockouts 
 
 b Boycotts and black lists 
 
 c Picketting 
 
 Methods of industrial peace 
 a Conciliation 
 
 b Arbitration 
 
 c Trade agreements 
 
 d State boards of conciliation and arbitration 
 
 e Federal Government activities 
 Methods of wage payment 
 
 i abime 
 
 b Piece 
 
 c Progressive 
 
 d Profit sharing 
 
 e Cooperation 
 
 Labor legislation 
 
 a Safety of employees 
 
 b Sanitation of work shops 
 ¢ Hours of labor 
 
 ad Night work 
 
 e Method of wage payments 
 One day’s rest in seven 
 Employer’s liability 
 
 en ae, 
 
 i Workmen’s compensation for accident 
 
 + Compulsory health insurance 
 7 Old age pensions 
 k Minimum wage 
 
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