PART III. 
ECONOMIC ASPECTS OF THE MANUFACTURED-GAS INDUSTRY. 
WHY ECONOMIC ASPECTS ARE CONTROLLING. 
Economics is the philosophy of human industry ; its function is to 
explain the “ why ” in man’s efforts to supply his material needs. 
Every industrial activity must ultimately answer the question “ Will 
or does it pay?” If it does not pay, it must eventually stop and the 
controlling factor is not engineering but the economic one of cost. 
Economic selection is, therefore, based on a long-run cost. All 
permanent future manufactured-gas development — especially in the 
curtailing of waste — must reckon with this basic principle. 
WHAT TERM “ COST ” MUST INCLUDE. 
Regardless of the academic conception of the word “ cost ” and 
the wide variation in its use, as applied to any enterprise, the word 
“ cost ” in the inexorable law of human experience must always in- 
clude the following: 
a. Ordinary routine operating expenses necessary for carrying 
on the project including the various species of taxes and insurance. 
b. Provision for the ultimate return to the owners of the value of 
the services or money put into the enterprise. 
c. Rental or hire of the money used in the enterprise, ordinarily 
called “ interest.” There is no mysterious reservoir of capital and 
all money used for the carrying on of an enterprise must ultimately 
come directly from some individual owner and this owner right- 
fully has the obvious right to receive a hire or rental for the use of 
this, his property . 16 This rental of capital is a debt which must be 
paid before there can be a profit and like wages is an element of cost 
and not a part of profit. 
DEFINITION OF PROFIT. 
After the above three groups of expenditures have been fully met, 
then what is left represents profit, but there is no profit until the 
above three groups have been fully met. On this conception the cost 
18 Large capital is steadily becoming more and more a mobilization of the savings of 
the small holder — the actual people themselves — and its administration becomes at once 
more sensitive to the moral opinions of the people in order to attract their support. — 
Herbert Hoover in American Individualism. 
19 
