We speak of Gross product and of Net product. Gross product is the value of the sum total of the objects produced; Net product is the value of the sum total of the objects produced less the cost of production. Net product is also called Profit. Cost of Production. The cost of production embraces all the various expenditures that have been made in order to produce. It includes the following items:

1. Wages paid for the labor employed in production, including salary paid the employer.

2. Rent paid for the use of land.

3. Interest paid for the use of the capital invested.

4. Taxes imposed on the articles produced, or on the industry itself.

5. Raw material.

6. Machinery and repairs.

7. Transportation to market, storage, advertising of goods. 8. Insurance.

All these items constitute the cost in private production. This cost must, first of all, be covered before there can arise any profit from the business, and it is this cost in private production which determines the prices of commodities.

The cost in public production is the cost borne by the state or nation considered as a whole. It will evidently be smaller than private cost, because in many of the items cited above the state does not suffer any loss. Thus, the money paid for rent, interest, and insurance generally remains within the state. It is transferred from one citizen to another. Taxes are a source of revenue to the state. The cost of transportation to market, storage, and advertising, which falls on certain individuals of the state, is a gain to other individuals within the same state. Practically, the only items that would enter into public cost might be reduced to:

1. The wear and tear on brain and muscle of those employed and the expense incurred in keeping laborers in condition.

2. The raw material used up in industry. There is a gradual exhaustion of the supplies furnished by nature.

3. The repairs of machinery and the replenishing of the circulating capital.

Productive Industries. As the world has progressed, productive industries have increased. At first society was very simple, and its wants were simple and easily satisfied. The industries needed to satisfy all the wants of primitive society were few. Hunting, fishing, the cultivation of the soil, in order to procure the food necessary for life, the making of clothing for wear, the construction of rude dwellings for shelter, constituted the first industries in society. Gradually people gathered into cities, and the wants of men increasing, new industries arose to supply these wants. There came about the development of industries, of arts and sciences, that we read of in the histories of the ancient peoples. Then a halt was called in the onward progress of the industrial world, and the long quiescence of the Middle Ages followed. The revival of modern industry began in the latter part of the eighteenth century, when what is known as the Industrial Revolution took place. Agriculture sprang into new life, new methods in the treatment of the soil were introduced, agricultural products commanded higher prices. In the manufacturing industries the domestic system had hitherto prevailed. Under this system material was given out by the manufacturers and carried to the homes of the laborers, where it was worked on for piece wages. Then the factory system was introduced, owing to the inventions in machinery which began in the last half of the eighteenth century. Industries increased throughout the world, domestic and international commerce opened up abundant markets for products, facilities of transportation brought the producer and the consumer in closer contact. The era of capitalism set in, and industries on a large scale, financed by accumulated capital, began to absorb and to replace small individual enterprises.

The industries engaged in production in the United States are countless. They may be classified as follows:

Plant industries, which include lumbering and the cultivation of the cereals, cotton, vegetables, fruits, sugar-producing plants,

-the sugar cane and the sugar beet, tobacco, forage products, like hay, grass, and clover.

Animal industries, engaged in the raising of sheep, hogs, cattle, poultry, bees, the silkworm, draft animals; fishing; the hunting of wild game and fur-bearing animals.

Mineral industries, which relate to petroleum, natural gas, bitumen, salt, fertilizers, — such as gypsum, phosphates, and marl, stone, cements, clays, iron, gold, silver, copper, lead, tin, zinc, mercury, aluminum.

Manufacturing industries, which are engaged in work upon the raw materials supplied by the preceding industries. It would be impossible to enumerate them here. Some of the principal manufacturing industries are the textile and clothing trades, metal-working, the building trades.

Commercial industries, including transportation by water and by land, telegraph, telephone, banking, wholesale and retail dealing. (Cf. A. P. Brigham, Commercial Geography.)

End of Production. The question may be asked: What is the end intended by production? If we look around us, we see marvelous activity existing among all classes of men, and all directed to the production of various utilities; we see millions of toilers going forth with each rising sun to help in the great work of production; we see innumerable machines running from morning till night intent on the same work. And at the sight we may well ask ourselves: What is the end of it all?

Is the end of production mere wealth for wealth's sake? the accumulation of money in the vaults of the national treasury or in the banks of corporations or of some few favored individuals? Surely that is an unwarranted limitation of the end of production. Production is but one element among many which make up the activity of the composite social system.

Now the end of the social organization is directly the temporal well-being of the producers and indirectly the common wellbeing of society. Production as one of the elements of the social mechanism should also tend to the well-being of the individual as well as to the well-being of society.

And still we may have the spectacle of a country with its production estimated at billions of dollars, with 70 per cent of its producers making but a scant subsistence. We may have the spectacle of a country where immoral tastes are created and encouraged by the production of obscene literature, of immoral statuary and pictures under the name of works of art, where production busies itself more with luxuries than with necessaries, where in the interests of production family life is destroyed, the sanctity of the Sunday ignored, and the elementary education of the child hindered.

Laws of Production. - These considerations lead us to the laws by which production must be regulated, if it would attain its twofold end the particular well-being of the producer, and the general well-being of society. They are the following:

I. Production should correspond to consumption, and should not excessively surpass the demand. The Liberal School declares that this matter will regulate itself automatically. And yet there have been commercial crises brought about by overproduction, which caused a glut in the market, the failure of many producers, and much misery among the laboring class who were thrown out of work. In some countries, production is regulated by syndicates composed of producers, who study the market and preserve an equilibrium between production and consumption.

2. Production of things injurious to health or morals should be prohibited, and production should be employed in satisfying the wants of men in the order of their importance, the necessaries first, then the decencies or comforts, and finally the luxuries.

3. Production should not oppose the moral interests of society by destroying family life, by infringing on the rest and sanctity of the Sunday, or by employing child labor and thus preventing the elementary education of children.

The state, by wise and moderate laws, should regulate these various matters. Hitherto the world has been dominated by the Liberal School, whose principle is that the state should not interfere at all in matters of production. This view is gradually

giving way to a more reasonable view of the functions of the state, and in recent years the state has passed wise and necessary laws affecting production and commerce. Witness the interstate commerce regulations, the child-labor laws, the coal strike interference, the pure food laws, the employers' liability act. (Cf. Antoine, Cours d'économie sociale, p. 304.)

Factors of Production.

We now come to consider each of the factors of production, — namely, nature, labor, and capital.

II. NATURE

Place of Nature in Production. - Nature is an essential factor in production. It must furnish the materials of all industries, the soil, the minerals hidden in the earth, and the forces which can be utilized by the intelligent power of

man.

Man creates nothing. He accepts the things which nature offers him, and uses them directly, as vegetables, fruit, coal, or indirectly, laboring on them as raw materials out of which he fashions other articles of use.

One of the primary objects which nature offers to man is land, and in regard to land the following points of physical geography enter into the calculations of economists. (Cf. Devas, Political Economy, 3d edit., p. 27.)

1. The character of the different parts of the earth as a dwelling place for man. Thus, climate has a perceptible economic influence on production. Those regions where a temperate climate prevails possess great advantages over others where severe cold benumbs or intense heat enervates the faculties. In very cold countries, the long winters and the deep snows and the scant vegetation are hindrances to plentiful production, whereas in very warm countries men are content to take what bounteous nature offers, and bestir themselves but little to turn to profit the abundant resources at hand. Moreover, in these latter countries there exists another impediment to enterprise in the violence of the physical forces, in the heavy rains, the dev