PRESIDENTIAL ADDRESS. 543 
without a curve, you could have got all that so quickly by logical cogitation? 
I agree it could have been done by hard thought, but what a help the diagram 
has been in thinking it out. It is like drawing a genealogical tree when you are - 
thinking out some complex problems of family relationship. A simple inspection 
of the figure also shows that an ad valorem tax on rent would not increase price 
or diminish production. 
Again, what is a monopoly? A monopoly is simply a power of stopping 
production at a point short of that which it would reach under conditions of 
free. production, sale and distribution. You can stop production by means of 
statutes regulating quantities produced, or by combinations to limit production, or 
to limit the supply of labour produced, or by statutes regulating the employment 
of capital, or by statutes fixing minima of wages, or in various other ways. If you 
exercise the power, then the state of things shown in fig. 8 comes into play. The 
quantity produced is reduced to OM’. The price rises from PM to P’M’, the 
surplus producers’ profit (including rent) rises from ANP to AQP’N’. So that 
profits, interest, and wages increase, but the consumers’ surplus enjoyment goes 
down from NPB to N’P’B. The limitation of output plays a far larger part 
in the regulation of prices than is commonly supposed. ‘Those who are engaged 
in the manipulation of the meat trade, and the bread trade, and the petroleum 
industry, the supply of machinery or other articles, do not usually advertise 
the means they have taken to limit supply, nor do trade unions publicly descant 
upon the means they adopt to limit the labour of adults or apprentices. It is 
no part of our business: here to discuss the necessity or the legitimate limits of 
such limitations. All that I am here to do is to show how useful diagrams are 
in explaining their effects. 
The monopoly controller seeks, of course, to make the area AQP/’N’ a 
maximum, arranging his price just in the way a milliner would do who had to 
eut the biggest square she could out of a remnant of cloth. How much reduc- 
tion of output and increase of price will the market bear? is the question that 
all monopolists present to themselves. 
I could go on with these curves through a great variety of questions. They 
become especially interesting where applied to show the effects of tariffs upon 
export and import trade, but I must forbear. 
My principal object has not been to introduce to the notice of the audience a 
subject already known to many of them, but rather to use it as an illustration 
of the truth that national economics is subject to laws—laws which, though 
complicated, are as exact and unfailing as the laws of physics, chemistry, or 
engineering, and which, if neglected by political engineers, will as certainly 
bring the State to ruin as the miscalculation of a mechanical engineer in design- 
ing a boiler, or of a civil engineer in designing a bridge. Whence, then, instead 
of consigning economics to Saturn, let us study it, not in a metaphysical or 
Aristotelian manner, using question-hegging epithets, or, on the other hand, in 
the manner of some moderns, as for example Ruskin, by replacing reason by 
sentiment ; but let us approach it in the spirit of positive science. 
