Supply and Demand | Page 2

CHAPTER VI
LAND
§1. THE SPECIAL CHARACTERISTICS OF LAND
§2. THE SCARCITY ASPECT
§3. THE DIFFERENTIAL ASPECT
§4. THE MARGIN OF TRANSFERENCE
§5. THE NECESSITY OF RENT
§6. THE QUESTION OF REAL COSTS
§7. RENT AND SELLING PRICE

CHAPTER VII
RISK-BEARING AND ENTERPRISE
§1. PROFITS AND EARNINGS OF MANAGEMENT
§2. THE PAYMENT FOR RISK-BEARING
§3. MONTE CARLO AND INSURANCE
§4. RISK UNDER LARGE SCALE ORGANIZATION
§5. THE ENTREPRENEUR
§6. RISK-TAKING AND CONTROL

§7. GENERAL ANALYSIS OF PROFITS

CHAPTER VIII
CAPITAL
§1. A REFERENCE TO MARX
§2. WAITING FOR PRODUCTION
§3. WAITING FOR CONSUMPTION
§4. CAPITAL NOT A STOCK OF CONSUMABLE GOODS
§5. THE ESSENCE OF WAITING
§6. INDIVIDUAL AND SOCIAL SAVING
§7. THE NECESSITY OF INTEREST
§8. THE SUPPLY OF CAPITAL
§9. INVOLUNTARY SAVING
§10. INTEREST AND DISTRIBUTION

CHAPTER IX
LABOR
§1. A RETROSPECT ON LAISSEZ-FAIRE
§2. IDEAS AND INSTITUTIONS
§3. THE GENERAL WAGE-LEVEL

§4. THE SUPPLY OF LABOR IN GENERAL
§5. THE APPORTIONMENT OF LABOR AMONG PLACES
§6. THE APPORTIONMENT OF LABOR AMONG SOCIAL
GRADES
§7. THE APPORTIONMENT OF LABOR AMONG OCCUPATIONS
§8. WOMEN'S WAGES

CHAPTER X
THE REAL COSTS OF PRODUCTION
§1. COMPARATIVE COSTS
§2. THE ALLOCATION OF RESOURCES
§3. UTILITY AND WEALTH
§4. CRITERIA OF POLICY

SUPPLY AND DEMAND

CHAPTER I
THE ECONOMIC WORLD
§1. Theory and Fact. The controversy between the "Theorist" and the
"Practical Man" is common to all branches of human affairs, but it is
more than usually prevalent, and perhaps more than usually acrid in the
economic sphere. It is always a rather foolish controversy, and I have

no intention of entering into it, but its prevalence makes it desirable to
emphasize a platitude. Economic theory must be based upon actual fact:
indeed, it must be essentially an attempt, like all theory, to describe the
actual facts in proper sequence, and in true perspective; and if it does
not do this it is an imposture. Moreover, the facts which economic
theory seeks to describe are primarily economic facts, facts, that is to
say, which emerge in, and are concerned with, the ordinary business
world; and it is, therefore, mainly upon such facts that the theory must
be based. People sometimes speak as though they supposed the
economist to start from a few psychological assumptions (e. g. that a
man is actuated mainly by his own self-interest) and to build up his
theories upon such foundations by a process of pure reasoning. When,
therefore, some advance in the study of psychology throws into
apparent disrepute such ancient maxims about human nature, these
people are disposed to conclude that the old economic theory is
exploded, since its psychological premises have been shown to be
untrue. Such an attitude involves a complete misunderstanding not
merely of economics, but of the processes of human thought. It is quite
true that the various branches of knowledge are interrelated very
intimately, and that an advance in one will often suggest a development
in another. By all means let the economist and psychologist avoid a
pedantic specialism and let each stray into the other's province
whenever he thinks fit. But the fact remains that they are primarily
concerned with different things: and that each is most to be trusted
when he is upon his own ground. When, therefore, the economist
indulges in a generalization about psychology, even when he gives it as
a reason for an economic proposition, in nine cases out of ten the
economics will not depend upon the psychology; the psychology will
rather be an inference (and very possibly a crude and hasty one) from
the economic facts of which he is tolerably sure.
But the purpose of economic theory is not merely to describe the facts
of the economic world; it is to describe them in their proper sequence
and true perspective. It must begin with those facts which are most
general and which have the widest possible significance. Those are not
likely to be the facts which our practical experience forces most
insistently upon our notice. For it is the particular and not the general,

the differences between things rather than their resemblances, that
concern us most in daily life. Nor are we likely to find the universal
facts which we require in the sphere of public controversy. We must
rather look for them in the dark recesses of our consciousness, where
are stored those truths which are so obvious that we hardly notice them,
which are so indisputable that we seldom examine them, which seem so
trite that we are apt to miss their full significance.
§2. The Division of Labor. There is one such truth in the economic
sphere which it is essential to appreciate vividly and fully, with the
widest sweep of the imagination and the sharpest clarity of thought.
Man lives by cooperating with his fellow-men. In the modern