DISCUSSION OF SCIENCE LEGISLATION 15 



days of the U. S. it took the labor of nearly all the people to maintain the 

 people at a relatively low standard of living. Our agricultural and indus- 

 trial resources have now grown to such a degree that only a very small 

 proportion of the people, smaller than ever before, can produce the neces- 

 sities of life for the whole population. In a depression it is thus possible 

 to have a greater fraction of unemployment than in the early days. It is, 

 therefore, necessary to modify or control the capitalist system in such a 

 way as to give it more stability and above all, to prevent the threat of 

 widespread unemployment. If we are to have continued progress and keep 

 our lead over other nations, especially in such things as the atomic bomb, 

 it is essential that our modifications of the system should not stifle incen- 

 tives or initiative. 



A guiding principle which the Government could well adopt in estab- 

 lishing control over our capitalist system, including industry, labor, agri- 

 culture, etc., would be that the control is needed primarily in those cases 

 where there is a conflict between private interest and public interest. In 

 general, the profit motive on the part of individuals and industries has 

 been in the public interest and has led to progress. Government control is 

 needed particularly where the profit motive is distinctly contrary to pubHc 

 interest. 



We have inherited from our past (personal liberty, freedom of thought, 

 free enterprise, patents, etc.) a system of incentives more effective than 

 that existing in any other nation, but the obvious necessity of government 

 control of some features of our capitalist system has frequently led to 

 attacks of the capitalist system as a whole : attacks on its good as well as 

 its bad features. Let me give a list of some of the things which are now 

 tending to restrict or even suppress incentives. In giving this list I do not 

 at present wish to favor or oppose any of them. I want merely to call 

 attention to the effects they are having upon incentives. 



Anti-Trust Laws. The tendency has been to regard all monopolies as 

 evil, forgetting that in certain cases (telephone, railroads, etc.) monopolies 

 are necessary and beneficial when properly controlled. 



Taxation. Individual income taxes, and especially the high surtax rates, 

 have been based on the so-called democratic principle that taxes should 

 be paid in accord zvith the ability to pay. If this principle were carried to 

 its logical conclusion all incomes above an average of perhaps $5,000 per 

 year would automatically go to the government nearly destroying incen- 

 tives. A much more reasonable principle for taxation would be that taxes 

 would be distributed according to the best public interest. With such a 

 principle the importance of retaining incentives would be recognized. The 

 95 percent excess profits tax for corporations almost wholly destroys the 

 incentive to start new enterprises or to increase the efficiency of old ones. 



