themselves. In pure economic theory the work of Karl Marx, although brilliant and subtle, will probably live only because of its critical character; but in economic method and in social philosophy, Marx will long be remembered as one of those great pioneers who, even if they are not able themselves to reach the goal, nevertheless blaze out a new and promising path in the wilderness of human thought and human progress. The economic interpretation of history, in emphasizing the historical basis of economic institutions, has done much for economics.

On the other hand, it has done even more for history. It has taught us to search below the surface. The great-man theory of history, which was once so prevalent, simplified the problem to such an extent that history was in danger of becoming a mere catalogue of dates and events. The investigation of political and diplomatic relations indeed somewhat broadened the discipline and for a long time occupied the energies of the foremost writers. The next step in advance was taken when, under the influence of the school of historical jurisprudence, more attention was paid to the relations of public law, and when political progress was shown to rest largely on the basis of constitutional history. The study of the development of political institutions gradually replaced that of the mere record of political events. Legitimate and indispensable as was this step, it did not go far enough. Those writers, still so numerous, who understand by history primarily constitutional history, show that they only half comprehend the condition and the spirit of modern historical science.

The newer spirit in history emphasizes not so much the constitutional as the institutional side in development, and understands by institutions, not merely the political institutions, but the wider social institutions of which the political form only one manifestation. The emphasis is now put upon social growth, and national as well as international life is coming more and more to be recognized as the result of the play and interplay of social forces. It is for this reason that history is nowadays at once far more fascinating and immeasurably more complicated than was formerly the case. History now

seeks to gauge the influence of factors some of which turn out to be exceedingly elusive. It attempts to introduce into the past the outlines of a social science whose very principles have not yet been adequately and permanently elaborated.

Whatever be the difficulties of the task, however, the new ideal is now more and more clearly recognized. In the formulation of this new ideal the theory of economic interpretation has played an important, if not always a consciously recognized, rôle. It is not that the historian of the future is to be simply an economic historian, for the economic life does not constitute the whole of social life. It is, however, the theory of economic interpretation that was largely responsible for turning men's minds to the consideration of the social factor in history. Marx and his followers first emphasized in a brilliant and striking way the relation of certain legal, political and constitutional facts to economic changes, and first attempted to present a unitary conception of history. Even though it may be conceded that this unitary conception is premature, and even if it is practically certain that Marx's own version of it is exaggerated, if not misleading, it is scarcely open to doubt that through it in large measure the ideas of historians were directed to some of the momentous factors in human progress which had hitherto escaped their attention. Regarded from this point of view the theory of economic interpretation acquires an increased significance. Whether or not we are prepared to accept it as an adequate explanation of human progress in general, we must all recognize the beneficent influence that it has exerted in stimulating the thoughts of scholars and in broadening the concepts and the ideals of history and economics alike. If for no other reason, it will deserve well of future investigators and will occupy an honored place in the record of mental development and scientific progress.

EDWIN R. A. SELIGMAN.

THE

PATTEN'S THEORY OF PROSPERITY.1

HE student of economics will rejoice to find that in The Theory of Prosperity Professor Patten has returned to the field of economic theory, where his vigorous independence of thought had already achieved so much. In wealth of ideas and in depth of analysis, this latest work of Professor Patten's may fairly be considered his best. Iconoclastic in the extreme, it attacks and overthrows many accepted doctrines of economic theory. Yet its general effect is rather to supplement and complete current theory than to displace or destroy it.

Instead of a colorless unit of humanity, actuated solely by a blind desire for goods and the utilities they embody, Professor Patten postulates a man whose character is modified by every change in the environment; whose labor is something pleasurable in itself, not a pain to be recompensed with goods; whose final aim is not the mere acquisition of commodities, but an adaptation of himself to his environment which may harmonize effort and its results. Yet he remains an economic man, subject to economic law.

The Theory of Prosperity consists of two parts which are largely independent of each other. The first, "Income as determined by Existing Conditions," is a purely economic study, which endeavors to picture the distribution of wealth in society as it exists. The second part, "Income as determined by Heredity," is a sociological essay and aims to set forth the part that economic forces have played in the making of man and society.

In Professor Patten's view, the classification of incomes under wages, interest, profits and rent had significance only so long as the recipients of these incomes formed distinct social classes. "As these differences between landlord and manager, laborer and capitalist pass away, the terms rent, profit, interest and wages cease to be clear demarcations of income, and must be newly defined or entirely discarded." Were it not for the existence of subjective costs, all income might be regarded as a surplus, as reward for productive effort or as return on investments. Subjective cost is, in

1 The Theory of Prosperity. By Simon N. Patten. New York, The Macmillan Company, 1902. 237 PP.

Professor Patten's opinion, a disappearing factor in economic life. Accordingly, he proposes a classification of income based upon the three points of view from which it may be regarded, instead of upon the social classes which receive it.

Fortunately for the reader whose mind does not readily leave its accustomed environment, Professor Patten has not carried out his plan consistently. The first three chapters of the work are virtually devoted to wages, rent and profit and interest, not to all income regarded as wages, interest or rent. It is for this reason that it is possible to regard The Theory of Prosperity as supplementary to existing theoretical systems, in spite of the numerous novel positions which are maintained.

The point of the first chapter, "Work and Pay," is the rejection of subjective cost as the determinant of wages. Labor, even in the final hour, is not normally painful to the normal man. Where the laborer is a virtual slave, toil may be so prolonged as to become painful. But the maximum product is obtained, in the long run, when exertion ceases before the setting in of the drain of energy that weariness and pain signify. The free laborer should produce goods without subjective cost. Indeed, his work should be a pleasure to him, since one of the most urgent of needs is the expending of the surplus energy that rest and the consumption of goods create. It is true that much work is disagreeable; but for this, non-economic elements are usually to be blamed. Manual labor is a hardship because of the low esteem in which it is held. Those who engage in an occupation when weakened by disease and dissipation impute their misery to the toil which they perform. They would, however, be no less wretched in idleness.

When these facts are taken into account, it becomes evident that the element of pain has been given too prominent a position in economic theory. An explanation of wages which rests upon the balancing of pleasures against pains cannot lay claim to universal validity. What the modern wage earner really weighs against the goods which an additional hour would furnish is the pleasure of freedom to rest and to consume what he has already earned. Sacrifice of pleasure, not endurance of pain, is the normal cost of the final hour of work.

The key to the chapter on "Monopoly Advantage" is the predominant position of the consumer in Professor Patten's system. The theory which regards cost as the standard to which prices are made to conform under the pressure of competition, is declared to be

insufficient to explain the facts of modern industry. Producers do not compete; prices do not fall to costs. Yet there is a force which holds prices down and another which sustains them. These forces reside in the consumer. The consumer has the power of selecting from among several kinds of goods which will satisfy the same want; he has the power of selecting from among several wants the one which is to be satisfied. If any good rises in price, consumption is shifted to other goods. Thus prices are kept down, quite without regard to competition. But the consumer also raises prices against himself. The growth of new wants compels him to curtail the consumption of goods which satisfy old wants, in order to employ a part of his income in the satisfaction of the new. The margin of consumption is accordingly raised, and with it prices. Unfortunately, the author has not worked out the complicated movements in production which would have to take place before the raising of the margin of consumption would raise price. Hence he seems to maintain the somewhat anomalous position that the price of a commodity rises because demand for it is curtailed.

Again, the consumer controls what Professor Patten calls the "fixed income" the sum of payments to industrial factors which must be made if production is to continue. The standard of living decides how much the laborer must be paid if he is to give his services; standards of consumption set the reward that owners of other economic agents must receive if they are to permit their property to be fully utilized. Finally, the character of the consumer fixes the volume of "free income," the surplus which favored producers receive. Given the standards of consumption and the extent to which the power of substitution is developed, and the free income is a perfectly definite quantity. The consumer can get none of it. Monopolies may struggle for it; what one gains, another loses. A monopoly, however powerful, can secure nothing which is not a part of this fund. Yet, even here, the consumer is "the adjuster of the effects of the struggle." If a powerful monopoly raises the price of its products, the consumer meets the drain upon his income by spending less upon other commodities. The price of these falls, and the part of the monopoly surplus which connected itself with them now shifts to the more powerful producer.

The chapter on "Investments" contains an exceedingly suggestive explanation of interest. Here again the laws of consumption are brought into a predominant position. Like the Austrian economists, Professor Patten regards the overvaluation of present goods or the