THE PRINCIPLES OF ECONOMICS

WITH APPLICATIONS TO PRACTICAL PROBLEMS

BY

FRANK A. FETTER, PH.D.

PROFESSOR OF POLITICAL ECONOMY AND FINANCE,
CORNELL UNIVERSITY

NEW YORK
THE CENTURY CO.
1904

Copyright, 1904, by
The Century Co.

The DeVinne Press


TO THE STUDENTS
OF THREE UNIVERSITIES
—INDIANA, STANFORD, AND CORNELL—
FOR WHOM, WITH WHOM, AND BY WHOSE AID
THIS BOOK CAME TO BE WRITTEN

CONTENTS

PART I

PAGE
The Value of Material Things 1-169


DIVISION A—WANTS AND PRESENT GOODS

CHAPTER

1 The Nature and Purpose of Political Economy: Name and Definition; Place of Economics Among the
Social Sciences; The Relation of Economics to Practical Affairs 3

2 Economic Motives: Material Wants, The Primary Economic Motives; Desires for Non-material Ends,
as Secondary Economic Motives 9

3 Wealth and Welfare: The Relation of Men and Material Things to Economic Welfare; Some Important
Economic Concepts Connected with Wealth and Welfare 15

4 The Nature of Demand: The Comparison of Goods in Man's Thought; Demand for Goods Grows Out
of Subjective Comparisons 21

5 Exchange in a Market: Exchange of Goods Resulting from Demand; Barter Under Simple Conditions;
Price in a Market 30

6 Psychic Income: Income as a Flow of Goods; Income as a Series of Gratifications 39


DIVISION B—WEALTH AND RENT

7 Wealth and Its Direct Uses: The Grades of Relation of Indirect Goods to Gratification; Conditions of
Economic Wealth 46

8 The Renting Contract: Nature and Definition of Rent; The History of Contract Rent and Changes
in It 53

9 The Law of Diminishing Returns: Definition of the Concept of (Economic) Diminishing Returns; Other
Meanings of the Phrase "Diminishing Returns"; Development of the Concept of Diminishing Returns 61

10 The Theory of Rent: The Market Value of the Usufruct: Differential Advantages in Consumption
Goods; Differential Advantages in Indirect Goods 73

11 Repair, Depreciation, and Destruction of Wealth: Relation to its Sale and Rent: Repair of Rent-bearing
Agents; Depreciation in Rent-earning Power of Agents Kept in Repair; Destruction of
Natural Stores of Material 81

12 Increase of Rent-bearers and of Rents: Efforts of Men to Increase Products and Rent-bearers;
Effects of Social Changes in Raising the Rents of Indirect Agents 90

DIVISION C—CAPITALIZATION AND TIME-VALUE

13 Money as a Tool in Exchange: Origin of the Use of Money; Nature of the Use of Money; The Value of
Typical Money 98

14 The Money Economy and the Concept of Capital: The Barter Economy and its Decline; The Concept of
Capital in Modern Business 108

15 The Capitalization of All Forms of Rent: The Purchase of Rent-charges as an Example of Capitalization;
Capitalization Involved in the Evaluating of Indirect Agents; The Increasing Role of Capitalization
in Modern Industry 118

16 Interest on Money Loans: Various Forms of Contract Interest; The Motive for Paying Interest 131

17 The Theory of Time-value: Definition and Scope of Time-value; The Adjustment of the Rate of Time-discount 141

18 Relatively Fixed and Relatively Increasable Forms of Capital: How Various Forms of Capital May
Be Increased; Social Significance of These Differences 152

19 Saving and Production as