MICHIGAN ACADEMY OF SCIENCE. 17 



turies. I'reseut day husbaudmeii, iu general, must reckon with the 

 business side of their productive enterprises. 



II. 



The financial status of any business may be determined by tak- 

 ing an inventory at the beginning and at the end of the year; the 

 gain or loss may then be determined by the difference between the 

 net assets of these two periods. Without this inventory method, 

 annual losses of labor income, interest on investment, and tangible 

 assets may be overlooked. Particularly is this true of the farm- 

 ing business, since a considerable part of the living comes directly 

 from the farm. Thus the farmer may be getting the necessities of 

 life at the expense of his capital without immediately being cog- 

 nizant of it. 



The farming class, however, is not the only derelict group of pro- 

 ducers from a business standpoint. Only a few of the 22,000 mer- 

 cantile and manufacturing establishments that failed last year 

 had an adequate system of accounts. Out of 66,000 concerns doing 

 a business of over |100,000 each last year, according to Mr. Ed- 

 ward N. Hurley, vice-chairman of the Federal Trade Commission, 

 30,000 failed to charge off directly anything for depreciation.^ 

 Thus, they arbitrarily marketed their goods at cut-throat prices. 



While the farmer's competition, for the most part, does not 

 take the form of an arbitrary quoting of prices, yet, through a 

 misinterpretation of results attained, or more especially because 

 of a lack of records for the determination of specific costs, his 

 productive effort maybe extended toward increasing the supply 

 of an already unprofitable market. The unprofitableness of this 

 action is further increased by reason of the relative inelasticity of 

 the demand for many of his products. 



Farm products, in general, are selling today below marginal cost 

 of i)roduction, assuming a reasonable cycle of productive activity, 

 if the wages of the operator be measured by tenant's wages. Farms 

 are being operated in many parts of the United States that give 

 little or no labor income and some are not even paying a reasonable 

 rate of return on the investment. If the farm business be con- 

 ducted for profit and not for pleasure, an actual known loss loould 

 certainly suffice to curtail the output. Of course, the so-called un- 

 earned increment is, in njany instances, a conscious compensating 

 element of advantage which tends to offset the relatively low labor 



*An Address lefo e the Annual Meeting of tlie Rubber Club of America, at the Waldorf 

 Hotel, New York City, Feb. 2, 1916. 



