amount is required that a very much larger proportion has to be taken from the rich who have a wider margin - as compared with the poor that it is usual to take from them under normal taxes. When loans are employed, therefore, it is almost certain to happen in practice that the money raised afterwards to pay interest and repay principal upon them will be taken from the poor in much larger quantities than it is received by them. The annual transfer of resources to serve the war debt is thus in considerable measure a transfer from poorer persons to richer persons. Obviously that fact involves a large subjective burden to posterity as a whole; for the simple reason that a poor man is injured much more when a shilling is taken from him than a rich man is benefited when a shilling is given to him. This is, perhaps the chief practical objection to financing wars by internal loans to any greater extent than is absolutely necessary. But this element of subjective burden on future generations, tho it is almost certain to be associated in fact with the loan method, arises out of the way in which, as a matter of fact, governments choose to distribute normal taxes, and is not inherent in the method itself. In a purely abstract comparison between that method and the levy method, it should, therefore, be left out of account.

So far I have considered only the direct objective burden, and the subjective burden arising out of this, which is borne by future generations. It has to be added in conclusion that the loan method also strikes at the future in an indirect way. It does this because it involves in the future large and continuous taxation to provide funds for the service of the debt. The fact that taxes raised for this purpose represent merely a transfer and not a using-up of resources, does not warrant the inference that they are innocuous to production. On

the contrary, it is impossible to raise large sums of money by taxes which have to be continued year after year, and the impact of which, therefore, everybody anticipates and prepares for, without in one way or another hampering production, discouraging industry and driving capital and ability to seek investment elsewhere. The extent to which these things happen depends, of course, partly on the scale of taxation that is necessary, partly on the kind of taxes which the government chooses to impose, and partly on the comparative position of the particular country under review and other countries in the matter of tax rates. But to some extent they are practically certain to happen. In this way future generations will be hit by the aftermath of a policy of finance by loans. Nor can it be justly replied that a policy of finance by levies will hit them to an equal extent because it will discourage industry and drive capital away during the war itself, thus injuring the equipment which is left to the country after it. For, during a war, not only are special motives of patriotism at work to maintain industry and government restrictions to prevent the export of capital and brains; but also, wars being short, taxes levied in war time are not expected to continue as ordinary taxes are and are not capable, therefore, of reacting so strongly upon production. In any complete comparison of the effect upon future generations of financing war by levies or by loans a very important place must be assigned to this last element in the account.

A. C. PIGOU.

CAMBRIDGE, ENGLAND.

WAGE THEORY AND THEORIES

SUMMARY

Labor-purchase theory of wages, 256. — A Crusoe or collective analysis, 257; inapplicable for competitive purposes, 258; but invoking the selective working of the iron law, 261.- Property as affecting iron law, 262.- Predation and survival, 263. Minima of living and death rate, standard of living and birth rate, as bearing on wages, 264.- Both the minimum and the standard doctrine are cost doctrines for the supply of men who have no costs of production, 265. - Bearing of numbers on per capita product, 268. — Flexibility of standards of living, 270. Population limited by increasing product, 271.-The causal nexus, 272. -Wage-fund theory, 274.- Labor-pain theory, 278.- Productivity theories, 280; in ethical implications, 280; in distributive precision, 282.- Surplus-value theory, 286.- Reconstruction, 288.— Production in competitive meaning, 288.- No outlook for higher wages at expense of employers, 288.- Possible lines of amelioration, 289. Institutional conditions and competitive processes as affecting (1) the distribuend, (2) the distribution rations, 291.- Conclusion, 297.

THE environment of the group is its habitat; of each individual, the habitat plus the other members of the group. For group purposes, therefore, human labor applies itself mainly to effecting desirable changes in the habitat and desirable responses from it. From the point of view of the individual the desirable results, the economic returns which he achieves, may accrue either from the habitat or from the other individuals — desirable results for him, irrespective of whether they are beneficial or desirable either for the habitat or for other individuals. In strict analysis also, it is possible from the point of view of the group to regard as economic production such results of human effort as achieve desirable modifications in the group or in members of the group, and to regard as productive from the individual

point of view such modifications of other individuals in the group as are desirable for the particular individual concerned.

Looked at in the large, therefore, and seen from the group point of view, it is not irrational to regard as a wage whatever returns nature awards to human effort. This view conceives of production as a sort of exchange process, almost a contractual relation, in which man as laborer serves the environment as employer-effort applied for product promised, labor performed against products returned. "Labor was the first price, the original purchase money that was paid for all things in the barter between man and nature, a relation of quid-pro-quo, in which relation, however, the advantages accruing to the employer are not quite so obvious as those obtained by the employee.

For the isolated economy, at any rate, the essential relations in the case need not be misreported through this implicit personification of the environment. How the trade shall go off, and with what advantages to Crusoe as laborer, must, as obviously as rationally, be affected not merely by the vigor and seriousness of Crusoe's effort but also by the intelligence and skill by which Crusoe - not Crusoe's employer is able to direct the effort. On the other hand, the quality of the environment will have much to say for the response that it makes the benefits that are in prospect from it, the wages that it can furnish and pay. The greater the results achieved by Crusoe the higher obviously are the wages that the environment returns, it being taken to promise always the maximum wage possible of payment by it, in view of the results achieved within it and for it the more for the laborer as he produces more, a perfect working out of the specifications of the productivity theory of distribution - if only, mark, it

could be safely assumed that the environment itself is always void of productive efficiency in its own behalf, and if therewith there could be any coöperating productive factors achieving together a joint product — and thus any distributive problem at all.

Nor is there any valid objection to this same manner of thinking as extended to cover any group economy taken as collectively organized. And thus it has happened that out of the biological fact that no more individuals of any species can live within any given habitat than the habitat can supply with nutriment, a law of wages has been deduced. In truth, the iron law of wages necessarily emerges so soon as it is assumed that there is no limit upon the reproduction of human beings other than the food limit or, it may be, than the raw material limit. But even so, the group supply of food, however scant, need not accrue through any sort of wage relation, or by virtue of any effort or sacrifice put forth or of any return received thereon. If only all competitive implications are rigorously excluded the product may be sheer gratuity. The traditional rats in the barn, considered as a group, need no more dig or delve than spin or weave. The group income is pure environmental bounty as distinguished from wages. But none the less this food limit remains the multiplication limit - the death rate finally equating against the birth rate in such fashion as to fix in permanent stability the number of individuals in the group.

But so soon as the group is regarded distributively, with a membership inevitably committed to the struggle for life, and as, therefore, competitive in its organization or its anarchy, all deductions from the group or collective point of view come promptly under question. The competitive hunt for food need not be taken to increase