curities have not acquired the character of trust funds. Any such policy would mean that enterprise would come to a dead halt, for it would prevent rich men with money to spare from putting it into patents or enterprises promising great economies in production and benefits to the community, but not yet placed upon the solid investment basis of bank shares or railway bonds. The latter quality is acquired only by enterprises which have been subjected to the test of experience. Railway bonds themselves were an investment of a very uncertain character within the memory of many now living, but if the State had not permitted men with faith and foresight to invest in them we should be doing business still with the stage-coach and the post-road.

One of the primary lessons which the investor should be taught is the discrimination between different types of investment. He should learn that bonds have a prior lien over preferred stock and preferred stock over common stock. He should learn that these distinctions are

necessary to meet the requirements of different types of investors,—the holder of trust funds, who should invest only in bonds and tested preferred stocks; the man who is willing to take slight risks and therefore may invest in preferred stocks of slightly lower reputation; and the man who for the sake of possible larger gains, is willing and able to take large risks, and may therefore invest properly in the common stocks of untried "industrials" and undeveloped mines.

The investor should learn the lesson that he cannot reasonably expect all these qualities to be combined in one investment, that the securities which are absolutely safe are not usually the ones which are sold the cheapest and from which the largest returns may be expected. If the thousands of people who have within the past three years invested in some highly speculative common stocks, and have seen their prices decline 75 per cent in the market, have been advised by competent financiers that such stock was a safe investment for trust funds or

for those who could not afford to lose, they have just cause of complaint against their advisers; but if they had possessed a pittance of financial knowledge they should have known that the common stock of an untested enterprise, quoted far below par, could not in the nature of the case possess the character of a trust investment. It is difficult to see how legislation could protect such a type of investors from the consequences of their ignorance.

A sound economic education would teach the public that high returns almost inevitably mean risk, and that the man who buys securities which have not reached the basis of trust funds should not invest more than he can afford to lose. In simple terms, speculation by people of small means should be discouraged, while sound investment should be encouraged. There is undoubtedly in America too much reckless and uninformed speculation, especially on margins. "One of the things which surprised me most," said an English guest at a dinner

table in New York last winter, in response to a question as to what impressed him especially in the American market, "is the amount of business you do on borrowed money." He referred to the speculation on margins, which is so universal here among people of small means and which finds so slight a footing on the English stock exchanges.

It is likely to prove a task of Sisyphus to attempt to protect the public against foolish investments. Opportunities for investment will constantly assume new forms which will elude the most stringent law. The only thing which would finally extinguish speculation would be the reduction of all economic forces to certainties. This can never happen until economic efficiency attains its maximum development. It may attain this development in an ideal world, or it may attain it by the cessation of intellectual activity and enterprise in the existing world. The latter event-when inventions cease, no new enterprises are born, and nations begin living upon their capital, and falling be

hind their more ambitious rivals-is what is called by economists "the stationary state." Such a state in America would be the antithesis of the conditions of today; but one of the most effective conditions for bringing it about would be undue restrictions upon American ingenuity and enterprise with the object of protecting the reckless and improvident.,

Even in a stationary economic state, there would be alternating periods of business expansion and contraction. With such periods stocks would rise and fall. Even if new enterprises of merit were stifled by law or by lack of enterprise, fantastic projects would be conceived for absorbing saved capital, like "the tulip mania" in Holland and the South Sea bubble in England. All that can be done for the investor by positive law is to protect him against palpable fraud. He cannot be protected against himself if he chooses to embark in speculative enterprises. As President Roosevelt has so tersely said: "About all we have a right to expect from Government is