he uses the very quantities that he wants to find as known quantities. ng (a + y) = q (a + y) ; While this error renders useless the formula Vap, yet it enables us to see why Thünen did not proceed to obtain the formula in the manner indicated by Komorzynski, and shows us the continuity in his work. In the part of his work based upon actual conditions (§ 13) he obtains the formula z = n[p−(a + y)] p―(a+y); and in another part he states that it is to the advantage of the laborer to have the relation of wages and interest such that he can obtain the maximum income from his surplus when that surplus is placed at interest,- that is to say, it is to the advantage of the laborer to have yz obtain a maximum value. Now, Komorzynski holds that in these few facts we have the data with which to obtain the formula for natural wages, and that Thünen need not have carried his work farther; for, he says, if it is to the advantage of the laborer to have yz obtain a maximum value, then, since z = P(a+y), his q(a+y) interests will be subserved when [p-(a+y) obtains a maxq (a + y) imum value, which is the case when (a+y)=√ap. But Komorzynski assumes that the value of q in the above expression is known; and, in making this assumption, he has fallen into error. In § 13 the denominator of the expression for interest is obtained by dividing a definite amount of capital, Q, by the rate of wages. ng or ૨ = Q=nq (a+y). Hence nq is unknown as long as (a + y) is unknown; and, when nq is known, (a+y) is known, because their product is the definite quantity Q. Since, then, the value of q depends upon the value of (a + y), it is an error to attempt to find the value of the unknown quantity (a+y) in the above expression by assuming that q is known. a+y Thünen's method of obtaining the formula leads us to believe that he foresaw this difficulty. His sole object in trying to reduce the co-operation of capital in production to terms of labor was to enable him to proceed with his work by considering nq a known quantity. When he attempted to find the expression for natural wages by assuming that a number of laborers combined to lay out a marginal farm, he did not begin by assuming that the value of the farm equalled Q, and by dividing that quantity by the rate of wages obtain nq; but he began by supposing that nq equalled the number of men required to lay out the farm. Knapp and Komorzynski* notice that he changed his method of obtaining nq, and, without seeing his purpose, charge him with inconsistency. By following his work, however, we find that he had a definite purpose in view; for, assuming that nq is known, he obtained an expression that is identical in form with the above expression from which Komorzynski obtains the formula Vap, but differs from it, in that nq, according to Thünen, is a known quantity. Thünen's theory is valuable,t because it marks a decided reaction against the teachings of the classical economists, and yet at the same time avoids the extravagant doctrines of the socialists. His specific contribution to the theory of natural wages does not consist in his mathematical formulas, nor, indeed, in any positive conclusions that he obtains, but rather in his designation of the factors that must be considered in any scientific theory of natural or just wages. What these factors are can best be seen by contrasting Thünen's theory with that of the classical economists. 1. While the classical economists treated labor throughout as a mere commodity, Thünen regards the laborer as a man, and considers his wages as the means of satisfying *Knapp, pp. 15, 25. Komorzynski, pp. 55, 56. † It must be remembered that the first edition of Der naturgemässe Arbeitslohn appeared in 1850. For valuable suggestions concerning Thünen's contribution to Natural Wages, compare Schumacher's Ueber J. H. v. Thünen's Gesetz vom naturgemässen Arbeitslohn, pp. 18, 19; Mithoff (in Schönberg, Handbuch, Band 1), p. 640; Schmidt, pp. 2, 16. his wants. The work that he undertakes is to find the wages that are agreeable to the nature (naturgemäss) and to the destiny of man. 2. While the classical economists regarded solely the operation of natural law, Thünen considers the equity in the case. He believes that natural wages exist in the isolated state when these two conditions are realized, (a) when the laborer receives the same income from his surplus when that surplus is placed at interest as the capitalproducer receives from his surplus when that surplus is embodied in a marginal farm; (b) when the laborer receives the maximum income from his surplus.* Here Thünen makes a crude attempt to find an equitable basis for the division of the product of labor between the laborers and the owners of capital invested in concrete forms. 3. While the classical economists considered only the requirements of the laborer as limited by his surroundings, and disregarded the product of labor, Thünen holds that there can be no scientific theory of wages that does not make wages depend upon product. The fundamental idea in the formula Vap is that wages must vary with the product. A scientific theory of natural wages must regard the laborer as a man, consider the rights of the laborer and of the capitalist, and make the wages of the laborer depend upon his product. JOHNS HOPKINS UNIVERSITY. H. L. MOORE. *These two characteristics of natural wages are definitely stated, p. 204. RISK AS AN ECONOMIC FACTOR. THE word risk has acquired no technical meaning in economics, but signifies here as elsewhere chance of damage or loss. The fortuitous element is the distinguishing characteristic of a risk. If there is any uncertainty whether or not the performance of a given act will produce a harmful result, the performance of that act is the assumption of a risk. It is obvious that risks may vary in the degree of danger which is present between absolute certainty of harm as one limit and almost absolute certainty of security as the other limit. If one were to jump from a precipice at a great height, he could not be said to take a risk. His destruction would be certain. On the other hand, it is doubtful whether there is any such thing as absolute certainty. Neither life nor possessions are ever removed from all possible peril. Even when it is certain that an unfavorable event will happen, a risk may exist, because the time of the occurrence is uncertain. Death is a certainty for all, but the time of death is among the greatest of uncertainties. Again, the fortuitous element may be one of degree. It may be certain that an injury will be wrought by a certain force or action, while it is uncertain how much injury will be done. Mangoldt, who, so far as I know, is the only writer who has attempted to distinguish economic risks from other risks, says that a distinction must be made between mere irregularities (Unregelmässigkeiten) of results and economic risks. The champagne-maker, for instance, must reckon that a greater or less number of bottles will break. Very true; but, if there is an uncertainty how many will break, there is a risk, and why it should be excluded from economic risks I cannot see. There is no occasion for *Die Lehre vom Unternehmergewinn, von Dr. H. von Mangoldt, p. 82. 1 any distinction between risks which are economic and those which are not. Every risk to a human being comes within the scope of economics. Risk is universal. Life and happiness are perpetually hazarded. The dangers of death of supporter, fire, hail, earthquake, failure of crops, diseases of persons and stock, accidents to persons and property, bankruptcies, panics, deterioration and unprofitable sale of property, are, to a certain extent, unavoidable. Be as careful as we may, the very air we breathe may be freighted with disease germs. We abide in a perpetual state of risk. To escape from one peril is only to encounter another. There is, then, a certain minimum amount of risks which a person must bear. There is a class of risks of which we cannot say that they are "assumed." The owner of wealth must, if he is rational, invest it in some productive enterprise, unless, under the circumstances, he decides to consume it; and, wherever it is invested, there will be some risk that part of it will be lost by the dishonesty of others, the deterioration in value of the property in which it is embodied, or in a change of value of the standard of deferred payment. If he thinks to escape by hoarding it in the shape of specie, robbery is to be feared, to say nothing of the opportunities of gain which are given up. If he decides to consume the wealth at once, he runs the risk of coming to poverty. We may, however, assume that, by investing his money in government bonds or some other extremely safe security, he reduces the risk to which his property is subjected to a minimum. For taking this minimum of risk, he can obtain no compensation. So of the risks to life and health. The safest possible productive activity is carried on under circumstances of some danger, but the risk is no greater in some kinds of employment than would be the risk of not engaging in productive activities |