THE RESTRICTION OF OUTPUT 
 
 BY 
 
 CHARLES WOODY THOMPSON 
 
 THESIS 
 
 FOR THE 
 
 DEGREE OF BACHELOR OF ARTS 
 
 IN 
 
 ECONOMICS 
 
 COLLEGE OF LIBERAL ARTS AND SCIENCES 
 
 UNIVERSITY OF ILLINOIS 
 
 1922 
 
i 
 
 I 
 
 I 
 
 \ 
 
UNIVERSITY OF ILLINOIS 
 
 p-i \ 
 
 V 
 
 Augu_s_t __11_ 192^- __ 
 
 THIS IS TO CERTIFY THAT THE THESIS PREPARED UNDER MY SUPERVISION BY 
 
 C.}aajpl^s_3Ip_Qdy_ -Tiiompimn 
 
 ENTITLED Ths_.Hesii:iatXon-Qf-Qu.tput 
 
 IS APPROVED BY ME AS FULFILLING THIS PART OF THE REQUIREMENTS FOR THE 
 DEGREE OF Ba£Llje_lor_^f__Axt5. 
 
 Approved : 
 
 
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TABLE OF CONTENTS 
 
 puge 
 
 Statement of the Problem 1 
 
 The Factors of the Problem, Capital and Labor 1 
 
 Aspects, Individual and Social 3 
 
 Restriction by Capital 3 
 
 Restriction by Labor 5 
 
 Doctrines underlying Restriction by 5 
 
 Labor. 
 
 1. 
 
 Make -work 
 
 5 
 
 2. 
 
 V/ork-fund 
 
 7 
 
 3. 
 
 Lump-of-labor 
 
 7 
 
 The Pr 
 
 'ssent Money Regime 
 
 8 
 
 Motives for Restriction 
 
 8 
 
 1. 
 
 Reduce Unemployment 
 
 1C 
 
 2. 
 
 Increase Povver of Labor 
 
 11 
 
 3. 
 
 Make-work 
 
 11 
 
 4. 
 
 Fear of Overproduction 
 
 11 
 
 5 . 
 
 Labor as a Commodity 
 
 12 
 
 Methods 
 
 12 
 
 1. 
 
 Make Labor Scarce 
 
 13 
 
 2. 
 
 '‘Common Rule" 
 
 13 
 
 3. 
 
 Restriction of Quality 
 
 14 
 
 4. 
 
 Union Rules 
 
 14 
 
 
 a. Limitation of Performance 
 
 14 
 
 
 b. Collective Bargaining 
 
 15 
 
 
 c. Opposition to Machinery 
 
 16 
 
 Summary of the Policy of Restriction 
 
 
 
 
 by Labor. 
 
 16 
 
 Economic Results 
 
 
 
 
 18 
 
 Result 
 
 of 
 
 such a Policy 
 
 to Wages 
 
 18 
 
 Result 
 
 of 
 
 such a Policy 
 
 to Capital 
 
 18 
 
 Conclusion 
 
 
 
 
 19 
 
Digitized by the Internet Archive 
 in 2016 
 
 https://archive.org/details/restrictionofoutOOthom 
 
THE RESTRICTION OF OUTPUT 
 
 It ia a -vilely observed phenomenon that a portion of a 
 stock of goods may be worth more than the entire stock. Another 
 recog'nizcd fact is that most people -will exert themselves as little 
 as possible, (l) Thus the tendency in such a case may be for one 
 to produce only a portion of the entire stock for distribution. 
 
 The returns from this portion may be higher to the individual. Sup- 
 pose, however, that a group of persons were engaged in producing, at 
 a given time, the entire stock. Then if that output were curtailed, 
 so as to try to make the remaining portion more valuable than the 
 vvhole, some of the -workers ’would probably loss their employment. 
 
 It makes no differe'nce whether capital or labor directs such a 
 method; the result will be the saiue . This is what is meant by 
 restriction of output. (2) 
 
 There are two factors in the restriction of output, cap- 
 ital and labor. Capital or capitalistic enterprisers have been 
 much interested in such a method. It has been established beyond 
 a shadow of a doubt that such restriction exists. The practice of 
 letting -potatoes rot, or bananas spoil is prima faci e evidence of 
 restriction by the distributors. Likewise, similar methods are 
 known to be employed by both the capitalists and the manuf ac turers . (3 ) 
 
 w 
 
 Gide and Rist, History of Economic Doctrine . p.518. 
 
 (3) 
 
 This doctrine also goes by other names, viz; Limitation of out- 
 put, limitation of work, restriction on performances. Often the 
 discussion of such a topic is made under technical names such as in 
 the Webbs, Industrial Democracy , p. 704-714. In this discussion, 
 "limitation” and "restrict ion” will be used interchansreably . 
 
 (3) 
 
 See the account of the Coffee Valorization plan in Brazil, to 
 maintain prices in Marshall, Wright and Field, Materials for 
 Elementary Economics , p.439. 
 
The otner factor in restriction is labor. From this 
 angle the problem assumes a vifell knov/n aspect. The question of 
 restriction of output is widely discussed from the point of labor, 
 and more particularly organized labor. The press now and then is 
 full of accusations against labor and its policies. Such rules as 
 those which the Flint Glass workers formerly enforced, (l) or as the 
 Cnicago Building Trades adopted before 1902,(3) or the demands of 
 the coal miners in the summer of 1932, illustrate very graphically 
 the problem from this standpoint, (d) 
 
 In all these instances, capital and labor have as the 
 immediate goal their own betterment. This leads us to the next 
 step in the analysis of the problem of the restriction of output. 
 
 In all questions of this sort, it is necessary to distinguish 
 between two aspects. They are the individual and the social view- 
 points of the problem. 
 
 From the individual viev/point, the policy of restriction 
 may be perfectly justifiable. The laborer sees that it may increase 
 his wages, may give him steadier work, or may permit his unemployed 
 brethren to get work. From the viewpoint of the trade union, the 
 policy of the restriction of output is legitimate. It temporarily 
 may make them more work or higher wages. From the viewx:)oint of 
 the capitalist such a policy is above reproach. It may make him 
 more profits. Most individuals measure the returns of their 
 actions in the terras of their own personal interest. If it brings 
 
 TT) ^ 
 
 Renort of U. S. Industrial Commission. Vol.VII, p.l65. 
 
 (2) — 
 
 For a treatment of the Chicago Buildings Trades Dispute see; 
 Commons, Trade Unionism and Labor Problems, First Series, p.96. 
 
 ( 3 ) 
 
 See the Report of U. S. Industrial Commission for instances of 
 restriction of output. Vol.XVII. 
 
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 th$m added wealth and enjoyment, it is excellent. 
 
 This species of narrow mindedness, so common in this v/orld, 
 must give way to the social viev/point, however, in the consideration 
 of this type of problem. If any organization or individual limits 
 output, and gains by it, the consuming public pays for the gain. 
 
 They are deprived of something. Doctrines or p>ractices, however 
 good for a class, must never remain operative if they bring harm to 
 the social group. In this discussion, Marshall's dictum should be 
 remembered. "It is necessary to adhere to general reasoning, for 
 a direct appeal to experience is difficult; and, if made lightly, it 
 can but misleads" (l) 
 
 Having distinguished tne point of view from which this 
 problem is to be considered, the first and older factor that has 
 restricted output is capital. The capitalist or producer, in order 
 to effectively curtail his production with profit to himself, must 
 have a virtual monopoly of the market. Thus he can control supply 
 without fear of competition. "The monopolist will normally endeav- 
 or to fix his output at such a point that, given the existing state 
 of demand, he will secure the highest possible net return." (3) 
 
 He can increase his gross receipts by increasing output, up to a 
 certain point, yet the increase vtfill not be in proportion to 
 increase in output, because of a lov;er price of the extra goods. ^ 
 This added output v;ill mean an increase in his aggregate expenses 
 of production. "In fact, it may often happen that the fact that 
 
 ID 
 
 Marshall, Principles of Econowiics. p.700. 
 
 (3) 
 
 Ely, Outlines of Economics . p.301. 
 
 Also see, Seager, Principles of Economics , p.333, for a discussion 
 of net returns. 
 
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 generally sxpanled, the higher vifill be the monopoly prioe v/hich vjill 
 yield the largest net returns.” (l) 
 
 Monopoly price tends, generally, to be a high prioe. 
 Monopoly is formed for the purpose of profits. This is borne out 
 by the decisions of the courts, the findings of the Industrial Com- 
 mission, and the orders of the regulatory bodies. 
 
 To summarize, such a policy is a narrow one, beneficial 
 from an individual viewpoint only. Socially, it is harmful, 
 because many people are deprived of commodities v/hich they would 
 otherwise use and enjoy. Hov/ever, in actual practice, it is irapos- 
 ible to determine the absolute point of maximum returns. It can 
 only be approximated, and is usually, therefore, belov/ the maximum. 
 But the fact still remains that the methods above theoretically dis- 
 cussed apply, in general, to the practices of the monopolies as they 
 actually exist. (3) ^ 
 
 An examination of the doctrines underlying the methods and 
 motives of restrioi:ion of output by labor will indicate the founda- 
 tion upon which such a policy is defended. The laborer thoroughly 
 believes in the make work theory. "According to his philosophy, a 
 snow storm blockading a city is an advantage to vvorkmen, as it 
 'makes work' for snow ahovelers." (3) This doctrine grows out of 
 the neglect of keeping in mind the goal for which work aijiis. We 
 <;ork for the fulfillment of human wants; work is only a means to an 
 
 m ^ 
 
 Ely, Qutl ines of Economics . p.203. 
 
 ( 3 ) 
 
 A fuller treatment on the economic effects will be found in the 
 last section, p.18,19. 
 
 (3) 
 
 Fisher, Elementary Pr inc iples of Eoonomics . p.4ol. 
 

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 end. Aimless work produces no goods; oonsc-iUently, it adds nothing 
 to the store of human wealth. Destruction of goods, in order to 
 make work is entirely fallacious because such a practice, althougn 
 it may lead to the benefit of some, produces nothing with v/hich to 
 pay for that v;ork. Any such pay received may deprive others of 
 some of their share in the national dividend, A Robinson Crusoe 
 would not make v/ork for himself by destroying the berries that he 
 picks, nor would he destroy half of his bucketful if the whole were 
 necessary to keep him, because he thought that the other half was 
 more valuable. Our present industrial organization and methods of 
 exchange do not alter this necessary relation between satisfaction 
 and efforts. The directness is only removed, thus making it 
 difficult; to discern that relation at a superficial glance. Fisher 
 says, ”'It is almost as crude an error to suppose that workmen can be 
 enriched by 'making work' for themselves as that they can be enriched 
 by issuing paper money," (l) Work and money are merely a means to 
 an end, and we must not confuse our vision, but rather fix it upon 
 the end, and hold it there. No matter how complex is the organiza- 
 tion of society, none of us can escape the simple truth that our 
 iVell-being depends on the gred.test possible output at a minimum cost. 
 By this we can thus minimize the effort by which goods are obtained, 
 and maximize the final satisfaction of life. (3) It is as impos- 
 sible to produce v/ealth by any method based upon the make work 
 ioc trine as it is to make gold from the baser metals. History 'will 
 
 m 
 
 Fisher, Elementary Principles of Economics. p,451, 
 
 (a) 
 
 Report of the U. S. Industrial Commission. Vol.XIX, p.830. 
 

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 ehov'(/ us to be as futile in our efforts to do so, as she nov/ shov/s 
 the Alchemists to have been three hundred years ago. 
 
 Another of the doctrines of labor is the work fund theory. 
 The reasoning underlying this doctrine is as follows; there is a 
 certain amount of work to be done, v/hatever the price may be. Thus 
 labor can adopt any method they desire in doing this work. This 
 doctrine is false. As Professor Marshall points out, "the demand 
 for v/ork comes from the national dividend: that is, it comes from 
 vvork. The less demand there is of one kind, the less demand there 
 is for v/ork of other kinds: and if labor were scarce, fewer enter- 
 prises would be undertaken." (l) Such doctrines as these have 
 taken a fascinating hold upon labor and their leaders, and the 
 sooner they are disillusioned, the better, 
 
 A third doctrine that has led labor astray is that of the 
 lurnp-of-labor . Nothing makes employers more indignant than 
 restraints upon output based upon this doctrine. As Mr. Hobson 
 says, "Restriction of output is based upon the ' lump-of- labor ' falla- 
 cy; the false notion that there exists an absolute limited amount 
 of employment, and that if the stronger or quicker men do more than 
 their share, the others will go short." (2) It is evident that the 
 above arguments are very closely related. The work fund doctrine 
 takes in the cost; i.e., that the vVork will be done irrespective of 
 it. The latter theory, on the other hand, takes in consideration 
 only the lii.iitation aspect of the whole affair, laying the stress 
 
 TP 
 
 Marshall, Princi'oles of Economics . p.S97. 
 
 (a) 
 
 Hobson, Wealth and Work . 
 
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- 8 - 
 
 upon the amount, (l) 
 
 Either doctrine is fallacious on the saiae grounds; namely, 
 that labor cost, or v;ages, coines from the national dividend, and not 
 from any given amount of v/ork determined before hand. If any group 
 of persons does succeed in restricting output, it is a logical con- 
 clusion that they are not making work or giving employment, but 
 rather are they depriving some one else of some part of his due 
 share in the national dividend. If these arguments used by labor 
 are analyzed in the light of a practical example , their fallacy 
 
 can be plainly seen. A Robinson Crusoe ’.vould not restrict his out- 
 
 % 
 
 put for any reason. If he needed a bucketful of berries, he would 
 not destroy half of them in order to make more work. If he needed 
 them on a certain day, neither would he prolong his labors to the 
 next, in order to make his work last. The destruction of naif his 
 
 efforts would not increase the value of the others in such a manner 
 
 that the half would satisfy his v/ants as the whole had done. In 
 the light of present day conditions of distribution and production, 
 the example of Robinson Crusoe is in no way altered. The basic 
 
 principles still hold. V/e are only farther removed. We must, as 
 
 Crusoe, labor sufficiently to produce for ourselves the necessities 
 of life, and, as Crusoe would have immediately felt, restriction 
 of output will eventually affect us. 
 
 4 - 
 
 The whole problem is aggravate! oy the system of economy 
 under which we live. It is essentially one of money as an expres- 
 
 IT) ^ 
 
 For some defense of labor methods see, Adams and Sumner, Labor 
 Problems . p.234. 
 
-9- 
 
 sion of all wealth and labor, (l) As such it is a common fallacy 
 to regard money only as vvealth. Viewed from a scientific viev/point, 
 no one v/ill deny that money has some intrinsic value, but it vvill, 
 in itself, satisfy but few wants. It is rather a measure of value, 
 a medium of exchange. The average individual, however, notices 
 that money is all povverful, that money can be increased or decreased 
 at -will. He then thinks that wealth can be created. From this 
 he reasons that since ne can hoard money and since it purchases the 
 satisfaction of his desires, he can curtail the araount of production. 
 But if money were removed from this earth and sent to Mars, it would 
 not buy anything. The gold and silver would make ornaments, and 
 the paper, good bonfires. It is necessary to realize that money 
 is only a convenient medium to facilitate exchange. A reflection 
 behind the scenes will reveal the startling fact that it is the 
 goods themselves, and not money that constitutes wealth. 
 
 Vie-.v'ed from this angle, it becomes evident that the 
 national income is made up of the sum total of all our efforts. 
 
 Any restriction will cut down the dividend to be distributed, and 
 eventually rest upon us. (2) 
 
 Having examined the doctrines underlying any argument for 
 restriction of output and having pointed out many of the numerous 
 fallacies behind these doctrines, the next question is the methods 
 used by labor to restrict output. It will be necessary to divide 
 
 IT) 
 
 Fisher treats this point in ais Elementary Principles of 
 Economics . p.451. He says that work and money are merely a means 
 to an end. 
 
 ( 2 ) 
 
 Marshall, Principles of Economics . Bk.VI, Ch.VIII. 
 
\ 
 
- 10 - 
 
 the follov«ring disouaaion of labor's efforts to limit output into 
 two parts; namely, immeiiate motives for such a policy, and the 
 methods used to carry out that policy. 
 
 The first of the motives is to reduce the amount of 
 unemployment, (l) Hecht, in one of his discussions says, ”It is 
 true that any section of labour virhich restricts its production may 
 avoid unemployment in its trade." (2) This is obviously true. 
 
 But they do so only at the expense of the rest of society. The 
 coal miners, for example, can do this because coal is now one of the 
 first necessaries of life, and any restriction of it would be borne 
 by the consuming public. "But if all trades restrict their output 
 in the hope of distributing the work better (to the unemployed), 
 they v/ould find they had merely less v/ork to distribute, and instead 
 of raaking work for the unemployed, they v;ould unmake the v/ork of a 
 considerable portion of those employed." (b) This idea of giving 
 work to the unemployed is primarily based upon the make-v/ork and the 
 lump-of-labor doctrines. The instigators of such a doctrine have 
 in mind the erroneous idea that work can be made for the unemployed 
 by sharing that of the employed with him. This is based upon the 
 lump-of-labor doctrine. (4) But, since restriction lowers the 
 dividend to labor, it vjill cause more unemployment. 
 
 The second motive for restricting output is, that such a 
 
 TTl 
 
 The laborer dreais unemployment; therefore, he opposes labor 
 saving devices. Taussi??:, Pr inciioles of Economics . LiL,272. 
 
 ( 2 ) 
 
 Hecht, The Real Wealth of Nations, u.310. 
 
 ( 3 ) 
 
 Rae, Eivht Hours for Work, id. 214. 
 
 (4) 
 
 See page 7, 
 
- 11 - 
 
 policy auf^inents and increases the po^er of labor, (l) The report 
 of the Industrial Commission, in one place indicates that the one 
 doctrine underlying all such action of limitations was "that the 
 price of labor power may be increased by diminishing the amount that 
 is brought to market." (2) 
 
 Thirdly, labor has in its mind, in limiting output, the 
 idea of making more work. Of course this is fallacious. The lit- 
 tle boy 'Who destroys a plate glass 'Window does not increase the na- 
 tional dividend because his destruction makes more work for the 
 glass makers. He has actually destroyed something from the store 
 of wealth. So any method that has as its purpose that of making 
 work, either for the v/orkers themselves or for outsiders, is entire- 
 ly fallacious. (3) Labor, and capital as well, will in the long 
 run, lose by such practices. No one can expect that the normal 
 demand of consuiuption goods 'vvill continue after the means of sat- 
 isfying that demand are restricted. ( 4) 
 
 Another motive for restricting output is the fear of 
 overproduction and consequent unemployment. But the wrong solu- 
 tion is employed. Such tactics as restriction produce more unem- 
 ployment. There are other factors that need to be considered. 
 
 
 
 Report of the U. S. Industrial Commission. Vol.XVII, PLX 
 
 ( 1 ) 
 
 Howell, Conf 1 iot of Cap ital and Labor , p. 193-300, substantiates 
 this by saying that since capital by its po ;er can v/ith-holi goods 
 from the market, laoor po’ver is justified in restricting effort to 
 make .work for others. 
 
 (3) 
 
 Ho .V ever, Howell thinks that labor is justified in making work. 
 
 ( 4 ) 
 
 Rae, Ei,3:ht Hours for Work . p.215. 
 
— 1 
 — X 
 
 The fault usually lies with capital. It does not follow, however, 
 that labor can cure the malady by any such uneconomic methods as 
 restriction of output. An opium fiend would not recover oy having 
 v/hisky administered instead. It would be just as illogical to 
 adopt restriction as a remedy for overproduction as to try to pre- 
 vent drunkenness by arrests. The evil must be got at from the 
 bottom. The whole system needs, perhaps, a house cleaning. Tne 
 make-’work and the lump-oi-labor arguments both underly this idea 
 of prevention of overproduction. They labor under the incorrect 
 notion that v/ork must be curtailed during prosperous years, in order 
 to have something to do during years of depression. As a final 
 word, let i t be added that "constancy of employment is dependent on 
 the organization of industry and trade, and upon the success with 
 which those who arrange supply are able to forecast coming movements 
 of demand and of price.” (l) 
 
 Finally, labor is viewed as a commodity and as such should 
 be bargained for. (3) Thus the increased speed of the worker 
 decreases the market value of the unit. This would be true if 
 there was only a limited amount of work. But wiiere production de- 
 pends upon effective demand, and the lower the price, the greater 
 the demand, the more efficient workers a producer has, the more he 
 can meet this lov/, effective demand. If all his workers be effi- 
 cient, they may have steady employment indefinitely. 
 
 A treatment of the methods of labor is easier than that 
 of discovering the /notives that underly them. It has the same re- 
 
 ITT 
 
 Marshall, Principles of Economics, p.697. 
 
 ( 3 ) ^ 
 
 Report of the U. S. Industrial Commission. Vol.XIX, p.317. 
 

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-13- 
 
 lation a.3 cause and effect. Either may be perfectly visible, yet 
 no apparent antecedent or consequence can be discerned. Behind 
 every method adopted to restrict output, it may be said that there 
 are three motives; first, to increase wages; second, to give more 
 employment; or third, to make the ;;ork last. Any other motives 
 suggested have their final effects in these three. 
 
 The first method employed is to make labor scarce, and 
 thus to check the supply of labor, (l) But in case this lessens 
 
 7 
 
 the output, the result v/ill eventually follov; that the national 
 dividend will be diminished, and therefore the return to labor will, 
 contrary to expectation, be diminished. This obviously may not 
 happen if a small group obtains control of output, for they may 
 seemingly prosper. But when the day of general restriction comes, 
 the results will be, as we have seen, detrimental to the well-being 
 of labor. The Webbs have called this method, the ’’Device of the 
 Restriction of Numbers.” This is an appropriate appellation, for 
 it suggests its result, ’’The Device of the Resfcriotion of Numbers 
 by baulking the free selection (of the more efficient workers )... by 
 stereotyping processes and restricting output, lo-wers the level of 
 productive efficiency all around." (S) 
 
 The second method of restriction is seen in the enforce- 
 ment of the "common rule" i.e. the enforcement of certain regula- 
 tions pertaining to all work done by the members of a labor union. (3) 
 
 m — 
 
 Marshall makes these tvvo distinct points. See Principles of 
 
 Economics, Bk.VI, Oh. VIII. 
 
 
 
 Webb, Industrial Democracy . p.710. However, the Webbs believe 
 in moderate restriction. 
 
 (3) 
 
 See Webbs' "Common Rule'.’’. See the Webbs' for a fuller treatment 
 of the Device of the Restriction of Numbers. Industrial Democracy, 
 p. 702-739. 
 
-14- 
 
 Wages are often held to a restrictive standard by it. Tne common 
 v/age induces laxity and indolence. Then production falls behind; 
 output is restricted. In this case, such a rule is vicious. It 
 
 keeps do’,.'n the more alert, it discourages and drives out industry, (l) 
 
 Yet the device of the common rule is good. When applied moderately 
 it has unquestionably helped labor in its uphill fight. (2) The 
 danger, however, is in the fact that it is so easy for such rules to 
 be excessively restrictive in their operation. 
 
 The next powerful weapon in the nan Is of labor is the 
 restriction of the quality of the work performed. One method of 
 accomplishing this is a strict enforcement of the common standard 
 of payment. (3) The more efficient lag, and the less efficient 
 
 grow v/orse. Another form of quality restriction is the appliccition 
 
 of preference rules in the hiring of new workers. If the union in 
 question follo.vs a policy of exclusion in membership, the poorer 
 and less efficient members vvould be employed in a period of expan- 
 sion. These are a few of the ways of restricting quality. The 
 broader subject of union rules will be treated more tnoroughly in 
 the following paragraphs. 
 
 An examinit ion of the union rules will reveal something 
 of the practice of restricting work. All tne fallacious doctrines 
 treated above underly tnem. One of the most conspicuous of all 
 rules and the one that calls fortn the greatest amount of indignation 
 is the one limiting the performance of an operation to a prescrioed 
 
 IT5 ^ 
 
 Marshall, Principles of Economics. p.SSS. 
 
 ( 2 ) 
 
 Webb, Industrial Democracy. 0.712 . 
 
 (3) ^ ‘ 
 
 Report of the U. S. Industrial Commission, Vol.XIX p.817. 
 
 He oh t . The Real Wealth of Nations. p.300. 
 

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-la- 
 
 amount of v/ork to be done in a day or ueek. (l) It is an establish- 
 ed fact that such practices exist. Plumbers have been known to 
 finish in three and four hours, work supposedly requiring eight 
 hours. They then loafed a half day, getting pail for all eight 
 hours. Such methods as these are like sand in the vjheels of indus- 
 try. They rest upon the fallacious doctrine of lump-of- labor theory, 
 that the fast v/orkers v^ill soon exhaust the amount of work to be 
 done. (2) 
 
 The method of collective bargaining is often injurious to 
 output. (3) The unreasonable demands, sometimes made, lessen the 
 amount of output. "il^hen s\ich is the case, labor may lose by it. 
 
 Ihe laborer should and must be protected from any and all unreason- 
 able demands made upon him by his employer, yet he must not be al- 
 lowed to jeopardize his and his employer's well-being by any uncall- 
 3d-for demands. If the idea underlying this method be that of 
 naking high -wages, by spreading out the v/ork over depression to 
 avoid unemployment, the result may be that unemployment may increase. 
 If goods be ’Withheld, some will be deprived. Others will be forced 
 to pay more; oonsequently, abstaining from less necessary purchases. 
 Borne of these workers in the less necessary industries will be 
 forced out of work, and they may cease buying of the restricted 
 article. The result then strikes home; some of the restricting 
 
 m 
 
 Report of the U. S. Industrial Commission. Vol.XIX, p.817. 
 
 Commons, T rade Unionism anl Labor Problems . Series I, The 
 Chicago Buildings Trades Dispute. 
 
 [ 2 ) 
 
 Hobson thinks the amount of work at any one time is limited, so 
 they are ri^ht. Work and Wealth. 
 
 ( 3 ) 
 
 Hobson, Work a'nd Wealth . 
 

 
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- 16 - 
 
 v/orkers may be released. Thus it is a vicious circle. The cur- 
 tailment of the national dividend usually strikes the instigators 
 sooner or later, (l) 
 
 A third form of the labor union's attempt to restrict out- 
 put is in the strenuous fight they have made against machinery. 
 
 This has resulted at various times in riots, and destruction of 
 machines. When the machines were installed, the men did their very 
 best to injure them, and to hinder their efficiency. Seeing that 
 this had failed, the last stand of labor in its uneconomic fight is 
 to limit the number of machines one man is allowed to tend. The 
 pressmen accepted machinery, imposing such rules. This is justi- 
 fiable to a certain moderate point, but beyond this the rule is 
 unreasonable, and leads to destruction. The fight against machin- 
 ery is a losing one. True its introduction may cause readjustment, 
 but in the long run the worker vvill profit by its changes. 
 
 There is much, however, to be said in favor of labor 
 unions. It is true that they have been pushed unmercifully beyond 
 the limit of human endurance. No one denies tnis; every one admits 
 it is wrong. The "rusher" and "company man" are injurious to la- 
 bor and society. The defense of this limitation rests upon two 
 points; (2) first, colleotive bargaining necessitates that one should 
 not underbid another; and second, the employer desires to rush 
 his work to such a point that men wear out and are scrapped pre- 
 
 TTl 
 
 Collective bargaining is given in the Repo rt o.f the U. S. 
 Industrial Commission, Vol.XVII, p.LVIII. 
 
 (2) 
 
 Report of the U. 3. Industrial Commission. Vol.XVII, p.LVIII. 
 
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-17- 
 
 maouroly. (l) The labor leaders are loud in their condemnation 
 of the practices of some employers, and the number of their sug- 
 gested remedies is limitless. They can not be blamed oecause they 
 ha7e been taught that supply and demand are the all pov/erful forces; 
 a lessened supply raises the demand; also, the price. (3) This 
 is wrong. Restriction does not usually deprive any potential 
 market. It deprives actual demand; consequently, supply and de- 
 mand do not balance. The fault lies not in the supposed influence 
 of supply and demand, but from a failure to oonsiier the relation 
 of the tv/o. As has oeen sail, ’'methods of raising wages which 
 
 make for a higher standard of comfort by means that lessen rather 
 than promote efficiency, are so ant i-soc la-1 amdshor.t- sigh ted as .to 
 invoke a speedy retribution." (3) ‘ Socially, any restriction upon 
 
 perforraance that does not permanently lessen output, is proper, and 
 should be encouraged by all •chinking people. The problem of 
 restriction of output by no means bars social progress. Its full 
 understanding only 3hov;s the pitfalls to be avoided, because the 
 adoption of any such policy of restriction may result in worse 
 conditions than those started v/ith. 
 
 nr 
 
 "Closer study of the details of modern industry has revealed the 
 fact that in some trades, the sweated traries especially, the work 
 people are driven to work beyond their strength by ’’rushers' and 
 'leaders' by the 'minute' and 'task' systems, and other semi- 
 disreputable devices." In defense of labor the authors say, "The 
 arguments of the trade unionists are not altogether foolish, and 
 these praoices cannot be condemned off hand by reference to some 
 broad general philosophy of life." Adams and Sumner, Labor 
 Problems . p.364. A defense of labor can also be found in Taussig, 
 Principles of Economics, Vol.II, p,372. 
 
 ( 2 ) 
 
 Hecht, The Real Wealth of Nations. p.310. 
 
 (3) 
 
 Marshall, Principles of Economics . p.700. 
 
OTO' 
 
 
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-18- 
 
 The economic results are far reaching. From the individ- 
 ual 's point of vievi/j the result may he excellent. His v\)ages may 
 increase, and he may be able to buy a vacuum cleaner and a Ford 
 automobile. Socially, however, the problem assumes a different 
 light. Any small group may maintain such methods, but sooner or 
 later, they v/ill break down due to competition, regulation or 
 substitution. Furthermore, the workers as a whole may try such 
 a policy. If this happens, wages will be lowered, because the 
 national dividend v;ill decrease, and profits and wages fall. 
 
 "There is an idea that there exists some force able to keep up the 
 normal consumption of society after its normal production is allowed 
 to fall." (l) Of course this is false, =tnd viewed in the light 
 of this analysis there can be only one result of a general limita- 
 tion of work; naiiiely, a fall of wages. 
 
 Since profits come out of the national dividend, any low- 
 ering of that share by either capital or labor will tend to dis- 
 courage the use of capital. Assuming this limitation to exist in 
 one country, the consequence would be the exportation of capital 
 to other more profitable places. Any such policy usually falls 
 first upon the capitalist. As capital is very mobile, it will 
 move out to the better fields. More than this, it may drive the 
 capitalist and well-to-do people abroad. Especially will the 
 entrepreneur, \7ho delights in conquering the difficulties of 
 industry, and who is most im 3 :>ortant to the working people in 
 general, be the first to depart. It is this individual who in- 
 
 TTl 
 
 Rae, E i;rh t Hours for Work . p.315. 
 
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-19- 
 
 jraaaes the national dividend and thus raises wa^es. (l) 
 
 Reflection throughout this discussion shov/s that the 
 policy of restriction of output is detrimental to the economic and 
 social tfellbein';^. From the standpoint of social development and 
 progress, nothing can be more disastrous than a general application 
 of this doctrine. Its application by either capital or labor af- 
 fects three parties; the employer, the employee and the public. 
 
 The employer may lose profits; the employee, visages; a.nd the public 
 nay suffer a restriction of consu-mption goods. Upon the quick ac- 
 tion of the public depends the overthrow of such a mal-praotice . 
 
 Marshall, Pr inc Iples of Economics . p.i398. 
 
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BIBLIOGRAPHY 
 
 Works referred to in this Paper 
 Adams and Suraner. Labor Problems. 
 
 Commons^ John R. Trade Unionism and Labor Problems, 
 
 First Series. 
 
 Elementary Principles of Economics. 
 History of Economic Doctrines. 
 
 The Real Wealth of Nations. 
 
 Work and Wealth. 
 
 Conflicts of Capital and Labor. 
 Industrial Commission, Reports of U. B. Vols. VII, VIII, 
 
 XVII, XIX. 
 
 Fisher, Irving. 
 Gi ie and Rist. 
 Hecht, John B. 
 Hobson, J. A. 
 Howell, George. 
 
 Marshall, Alfred Principles of Economics. 
 
 Marshall, V/riglit and Field. Materials for the Study of 
 
 Elementary Economics. 
 
 Rae, John. Eight Hours for Work. 
 
 Seager, Henry R. Principles of Economics. 
 
 ^Taussig, F. W. Principles of Economics. 
 
 Webb, Sidney and Beatrice. Industrial Democracy. 
 
- V 51 
 
 
 
 
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