Knowledge that Transforms

THE distinguished German economist and philanthropist, Professor Victor Bohmert, of Dresden, surprises us with the interesting discovery that even long before the time of Adam Smith "a scientific mind had not only reflected earnestly and ardently on economic problems in general, but had, in a logical manner, attempted to build up these thoughts rnethodically into a compact system." This is what Bohmert says in his pamphlet that lies before us: A Handbook of Political Economy of /he Year 1723, by tAn Unknown Writer. By the help of this pamphlet we will try to give some particulars concerning the work in question. This book of three volumes, published in France by an anonymous Germian, will certainly raise much discussion. Its title runs: Trai/e de z'a richesse des prinices et de leurs etats, et des moyens sinip/es et natlure/s poziryparzvenir. Par M. C. C. d. P. de B., Allemand, Paris, chez Theodore Legras. It is entirely unknown to the political economists and bibliographers of today. B6hmert's attention was called to it by the well-known economist Luigi Cossa who had found its name in a catalogue. He was luckily able to procure it and found it to be a work of some fifteen hundred pages. With regard to the personality of the author, Bohmert thinks he may have been an ambassador or other official from a German court living in Paris. This anonymous Franco-German remarks that by his work he wishes to make known to the intellectual world some facts, the knowledge of which is very interesting; further he wishes to give "all who come into close contact with princes and governments an opportunity of reflecting on matters very important for the preservation of the state." He adds moreover that these principles are by no means new, his method only being a new one. As the pioneer in economic science he had sought to lay down " fixed and certain principles which might serve as guides and rules for the purpose of regulating the economic relations of a country." He had also striven " to arrange these principles in a natural order and to connect them with each other by necessary deductions." We have, then, to deal with a work, curiously lost from sight, but most

IN this JOURNAL for March I895 the writer of the present article presented some results of an inquiry made by the comptroller of the currency,' concerning the proportion of credit-paper used in retail payments. An attempt was made to formulate a relation between population and proportion of credit-paper used. The data were so meager that the attempt seemed over-bold, and the conclusions but slenderly supported. Two years later a second set of data was secured, much more voluminous and more representative of the habits of the people in the use of credit-paper. Although the new data seemed to support the previous conclusions, they could in no sense be regarded as proving them, and it was a question whether it was worth while to present the new evidence. Further reflection, however, strengthens the writer's belief in the probable correctness of his first conclusions. This, together with the importance of the subject, must serve as his excuse for taking up the matter anew. The data obtained for these reports contained, among other things, a statement of the amount of deposits made in the banks which replied, on a selected day, together with the amount of these deposits made in the form of credit-paper.' The returns dealt separately with the returns of retail traders, wholesale traders, and "all others." The primary purpose of getting the data was to determine the extent to which creditpaper was used in payments. Obviously, if there is a definite relation between increasing population and the quantity of credit-paper it uses, a definite line could be drawn to represent this relation, using the population numbers as points on the axis of abscissas and the corresponding amiounts, or proportions, of credit-paper to indicate the values of the corresponding ordinates. Is it possible to use the data secured so as to show this, even in the roughest way? To get a true curve of such a relationship, if it exists, there are certain conditions necessary, whose importance is emphasized, if one may say so, by their absence from the statistics at hand. The

THE recent volunme by Professor J. B. Clark on Tue Distributiol of kVealtli is an important contribution to the literature bearing on the interest question. The author, in no uncertain manner, takes sides with those who find the explanation of interest in the productive character of capital. " Tue power of capital to create the prodzuct is, tle,,, thie basis of interest."' What may be called the instinctive or intuitive view of mankind is in line with tlis doctrine; since the inducement to create capital in the beginning was its productive efficiency. This samne productive efficiency has been the only economic inducement o employ capital. Indeed, the surplus product due to capital is the only economic justification of the existence of capital; and surely the basis of the remuneration of capital must lie in the circumstances that afford its justification. But Professor Clark has not been content to find merely the basis of interest in productivity. He has industriously sought to establish a formula that will quantitatively identify the rate of interest with the

FRANCHISES to public service corporations for the carrying on of public service industries have been granted liberally, even lavishly, by American communities. In many cases such franchises lhave been of great value immediately, and in other cases they have grown to have immense value in time, as the btusiness has increased in volume and the cost of rendering service has declined, without corresponding decrease in charges for service. There is rapidly growing in the public mind a conviction that the values and benefits inherent in public franchises of right belong to the public, and that such franchises ought not to be granted to private corp)orations on terms that carry to the recipient corporations values that miglht be reserved to the public itself, in one form or another. A franchise, as understood in this connection, is not the conferring of a right to be a corporation, but is a grant by public authorities to a private corporation or individual of a privilege to use public streets or ground for the carrying on of a business that could not be prosecuted but for such grant of privilege. Strictly, such a franchise ought not to be a thing of great value. It is contrary to correct notions of public policy that it should be so. It must be presumed that the corporation or individual securing a franchise or grant of special privilege to perform a public service obligates itself to render such service at reasonable rates. This is the view of the matter taken by the courts, which construe reasonable rates to be rates that will permit a reasonable profit on money invested in the undertaking. If this presumption were constantly adhered to in practice, franchises would not have enornmous value. The great value of a franchise is due to the very large earning power of the company holding the franchise; and this large earning power in turn is due usually to the maintenance of clharges for service