Evening star., 1938-03-23
Illusions of Economists
Who Are All Out of Step

To the Editor Of The Star:
It has been said that II all our econ
omists, professionally speaking, were
stood end to end they'd reach to no
conclusion. The reason for this, may
suggest, is that they are like the good
Irish Biddy who was watching her son
Mike marching proudly down the street
in the holiday parade. "Wud ye look"
she said. "An' they're all out Of step
except Mike!"
The science" of economics has been
basing it's whole point Of view on the
Marshallian fallacy that graph erected
to show the relation between monetary
prices and sales of goods under none
tary system Of exchange discloses the
elasticity" Of demand for the goods
only, ignoring the obvious fact that
money has also been sold" at price"
in terms of goods just as surely as
goods have been sold at money price.
The value of money is and always has
been entirely an abstraction, i.e., not in
trinsic as that Of the goods, and there
fore wholly ephemeral in it's stability
and effect on prices. This situation has
led economists to conjure up all sorts
of illusions to the effect that the whole
platoon of prices is out Of step-except
the only begotten offspring Of a hui
man, trading economy, money.
This has been the philosophy UNDER
lying the persistent attempts of history,
eliminating just now in farm "produc-
ton control" to "fx" prices by attempts
to discipline the demand and supply Of
changes in its price, however, this does
not affect all prices of goods alike and
simultaneously. as Mark Sullivan as
sumes it should in his column of March
10. If Mr.. Sullivan had spent his life
running a farm instead of writing
about it, he'd know this only too well,
and could never have made the mistake
he does of insisting that farmers should
lower their prices in time of monetary
stringency along with the prices of
durable goods, just as he would also
know that wheat is not harvested in
October anywhere on earth-another
mistake he made while ago in oppos-
ing benefit" payments.
This same money illusion" pervades
other fields of price analysis as well,
such as the Interpretation of the Shift
ing and incidence of taxation. Along
with the income tax the public has been
fed. by Seligman of Columbia Univer-
sity and Wall Street, the idea that taxes
are not always distributed in the price
structure. But as has just been pointed
out by kendrick of Cornell lAmer. Econ.
Review for December) taxes collected
IN money cannot fail to affect the price
OF something sooner or later. If they
do not affect the price of products di-
rectly then they affect the price OF
services and securities upon which busi-
ness is based.
The survival of an intelligent civiliza-
tlon hinges far less upon the difference
between the outward forms of democ-
racy and dictatorship than it does upon
the ability of government to finance
itself and. at the same time, the COM
merce whose equity it is supposed to
assure. The financial ague with which
we are afflicted will yield far more readi-
~ to an ounce of prevention supplied by
lntelllgent, democratic monetary meth
ods than it will to the pound of cure
involved in the "econostrums" of die
tated production and prices. 1t does no
good to camouflage these with ref
erenda' or other democratic forms. for
they are only suppressing the symptoms,
nst curing the disease. Maiorities can
be fooled-can fool themselves-not
some OF the time only, but, for political
purposes, all of the time.
ALDEN A. POTTER.