24 



SCIENCE 



[N. S. Vol. XXV. No. 627 



vantages and disadvantages are purely rela- 

 tive. The nations are in a mad race each 

 to excel the other. Their object being 

 purely one of relative advantage, such ad- 

 vantage can be shifted from one to the 

 other, but can not accrue to all. A general 

 increase in relative advantage is a contra- 

 diction in terms, so that in the end the 

 racers as a whole have only their labor for 

 their pains. 



An economic example of the same inter- 

 national character, and one which has re- 

 ceived very scant attention, is found in the 

 increase of the monetary metals. The 

 production and distribution of gold and 

 silver is the effect of individual action, 

 each person seeking his own best inter- 

 ests. Yet the aggregate effect upon these 

 individuals may be injurious. The in- 

 jury referred to is not the imaginary in- 

 jury of an 'unfavorable balance of trade' 

 which was the bugbear of the mercantil- 

 ists, but the exact opposite. A nation 

 which increases its stock of money is always 

 and necessarily a loser. This increase costs 

 the nation either labor of mining or com- 

 modities sent out of the country, and for 

 this cost there is no return whatever. To 

 assume that the increase of money is itself 

 a valuable return is to commit the fallacy 

 of inflationism. Money is a very peculiar 

 commodity. A general increase of other 

 commodities is an advantage to society, 

 but a general increase of money is not. 

 The inflationist reasons that if a govern- 

 ment can enrich one person by printing 

 paper money and bestowing it upon him, 

 it has only to do the same for everybody in 

 order to enrich the nation. The paper- 

 money delusion is too well understood to 

 require comment. It is, however, not al- 

 ways perceived that precisely the same rea- 

 soning applies to all inflation, even the in- 

 flation which nature herself creates when 

 she unlocks her hoards of buried treasure. 

 The United States now has $33 of money 



per capita as against $22 a few years ago, 

 but we are no better off on that account. 

 The smaller amount of money is as useful 

 in exchange as the larger amount. There 

 are, of course, transition evils in contract- 

 ing or expanding the currency, but so long 

 as the price level remains constant or cer- 

 tain, the absolute number of dollars of the 

 circulating medium is a matter of indiffer- 

 ence. It follows that any effort expended 

 in increasing the stock of money is wasted 

 effort, an effort without a return. This 

 waste is a necessary concomitant of mone- 

 tary individualism. 



A not dissimilar ease, and one which is 

 now causing much discussion, is that of 

 railroad rates. Those who have exam- 

 ined the working of competition in rail- 

 road transportation recognize the fact 

 that this competition is of the variety 

 called 'cut-throat' competition, and that no 

 stable or normal rates for transportation, 

 under which capitalists will consent to in- 

 vest in railway-building, can occur through 

 such competition. Those who advocate 

 competition as a cure for the evils of rail- 

 road rates do not appreciate the mechanics 

 of the problem. The effect of competi- 

 tion is to bring rates down to the cost of 

 operation; it leaves no provision for in- 

 terest on capital sunk in the enterprise. 

 If the cost of operation is one cent per ton- 

 mile, whereas two cents are required to 

 include enough revenue to pay interest on 

 original cost, rates under competition will 

 inevitably sink below the two-cent level to 

 the one-cent level. For if we assume that 

 the two-cent rate is for a moment the ruling 

 rate, it is clear that it would pay any indi- 

 vidual competitor to cut under that rate in 

 order to divert traffic away from his rivals. 

 But as soon as he cuts below it, all the 

 others must do likewise or lose their traffic. 

 This competition is merely self-defense, and 

 yet its ultimate effect is to injuz'e, not bene- 

 fit, all of the roads who engage in it. It is 



