Thorstein Veblen
The Modern Point of View and the New Order.
IV. FREE INCOME

The Dial. A Fortnightly (New York)
Vol. LXV (June 20 to December 28, 1918)

No. 778, Nov., 30, 1918, pp. 482-488.
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[482]

The Modern Point of View and the New Order

IV. FREE INCOME

NDUSTRY of the modern sort mechanical, specialized, standardized, drawn on a 
large scale is highly productive. When this industrial system of the new order 
is not hindered by outside considerations it will yield a very large net return 
of output over cost counting cost in terms of man power and necessary 
consumption; so large, indeed, that the cost of what is necessarily consumed in 
productive work in the way of materials, mechanical appliances, and subsistence 
of the workmen is inconsiderable by comparison. The same thing may be described 
by saying that the necessary consumption of subsistence and industrial plant 
amounts to but an inconsiderable deduction from the gross output of industry at 
any given time. In fact, so inordinately productive is this familiar new order 
of industry that in ordinary times it is forever in danger of running into 
excesses and turning out an output in excess of what the market that is to say 
the business situation will tolerate; so that there is commonly a large volume 
of man power unemployed and an appreciable proportion of the industrial plant 
lying idle or half idle. It is quite unusual, perhaps altogether out of the 
question, to have nearly all the available plant and man power running at full 
capacity even for a limited time. In ordinary times unemployment is chronic, 
being only a question of more or less.

It is, of course, impossible to say how large, the net aggregate product over 
cost would be counting the product in percentage of the necessary cost in case 
this industrial system were allowed to work at full capacity and with free use 
of all the available technological knowledge. There is no safe ground for an 
estimate, for such a thing has never been tried, and no near- approach to such a 
state of things is to be looked for under the existing circumstances of 
ownership and control. Even under 'the most favorable conditions of brisk times 
the business situation will not permit it. There will at least always be [483] 
an indefinitely large allowance to be reckoned for work and substance expended 
on salesmanship, advertising, and competitive management designed to increase 
sales. This line of expenditures is a necessary part of businesslike management, 
although it contributes nothing to the output of goods, and in that sense it is 
to be counted as a necessary deduction from the net productive capacity of the 
industrial system as it runs. It would also be extremely difficult to make 
allowance for this deduction, since much of it is not recognized as such by the 
men in charge and does not appear on their books under any special descriptive 
heading. In one way and another, and for divers and various reasons, the net 
production of goods serviceable for human use falls considerably short of the 
gross output, and the gross output is always short of the productive capacity of 
the available plant and man power.

Still, taken as it goes, with whatever handicap of these various kinds is to be 
allowed for, it remains patently true that the net product greatly exceeds the 
cost. So much so that whatever is required for the replacement of the material 
equipment consumed in production, plus "reasonable returns" on this equipment, 
commonly amounts to no more than a fraction of the total output. The resulting 
margin of excess product over cost plus reasonable returns on the material 
equipment is due to the high productive efficiency of the current state of the 
industrial arts, and is the source of that free income which gives rise to 
intangible assets. The distinction between tangible assets and intangible is not 
a hard and fast one, of course, but the difference is sufficiently broad and 
sufficiently well understood for use in the present connection, so long as no 
pains is taken to confuse these terms with needless technical verbiage.

To avoid debate and disgression it may be remarked that "reasonable returns" is 
also here used in the ordinary sense of the expression, without further 
definition, as being sufficiently understood and precise enough for the 
argument. The play of motives and transactions by which a rough common measure 
of reasonable returns has been arrived at is taken for granted. A detailed 
examination of all that matter would involve an extended digression, and nothing 
would be gained for the argument.

According to the traditional view, which was handed on from the period before 
the coming of corporation finance, and which still stands over as an article of 
common belief in the certified economic theories, "capital" represents the 
material equipment, valued at its cost, together with funds in hand required as 
a "working capital" to provide materials and a labor force. On this view 
corporation securities are taken to cover ownership of the plant and the needed 
working capital; and there has been a slow-dying prejudice against admitting 
that anything less tangible than these items should properly be included in the 
corporate capitalization and made a basis on which to issue corporate 
securities. Hence that stubborn popular prejudice against "watered stock" which 
corporation finance had to contend with all through the latter half of the 
nineteenth century. "Watered stock" is now virtually a forgotten issue. 
Corporation finance has disposed of the quarrel by discontinuing the relevant 
facts. There is still a recognized distinction between tangible assets and 
intangible; but it has come to be recognized in corporation practice that the 
only reasonable basis of capitalization for any assets, tangible or intangible, 
is the earning-capacity which they represent. And the amount of capital is a 
question of capitalization of the available assets. So that, if the material 
equipment, for instance, is duly capitalized on its earning-capacity, any 
question as to its being "watered" is no longer worth pursuing, since stock can 
be said to be "watered" only by comparison with the cost of the assets which it 
covers, not in relation to its earning-capacity. The latter point is taken care 
of by the stock quotations of the market. On the other hand, intangible assets 
neither have now nor ever have had any other basis than capitalization of 
earning-capacity, and any question of "water" in their case is consequently 
quite idle. Intangible assets will not hold water.

Corporation finance is one of the outgrowths of the new order. And one of the 
effects wrought by corporation finance is a blurring of the distinction between 
tangible assets and intangible inasmuch as both are now habitually determined by 
a capitalization of earning-capacity, rather than by their ascertained cost, and 
it is difficult, if not impossible, to draw a hard and fast line between that 
part of a concern's earning-capacity which is properly to be assigned to its 
plant and that which is due to its control of the market. Still, an intelligible 
distinction is maintained in common usage, between tangible assets and 
intangible, even if the distinction is somewhat uncertain in detail; and such a 
distinction is convenient, so long as too sharp a contrast between the two is 
not insisted on.

The earning-capacity of the tangible assets is presumed to represent the 
productive capacity of the plant, considered as a mechanical apparatus for the 
production of goods or services; it is presumed to rest on the market value of 
the mechanical output of the plant. The plant is a productive factor because and 
in so far as it turns to practical account the state of the industrial arts now 
in use the [484] community's joint stock of technological knowledge. So soon, or 
so far as the plant and its management falls short of meeting the ordinary 
requirements of this current state of the industrial arts, and of making use of 
such technologcial knowledge as is commonly employed, the whole works ceases by 
that much to be a productive factor. The productive efficiency, and the 
productive value, of any given item of industrial equipment is measured by its 
effective use of the technological knowledge current in the community for the 
time being. So also, the productive value of any given body of natural resources 
land, raw materials, motive power is strictly dependent on the degree in which 
it fits into the industrial system as it runs.

This dependence of productive value on conformity to and use of the state of the 
industrial arts is constantly shown in the case of land and similar natural 
resources by the fluctuation of rental values. Land and other resources will be 
more valuable the more suitable they are for present and prospective use. The 
like is true for the mechanical equipment, perhaps in a more pronounced degree. 
Industrial plant, for instance, is always liable to depreciation by obsolescence 
in case the state of the industrial arts changes in such a way that the method 
of work embodied in any particular article of equipment is displaced by new and 
more suitable methods, more suitable under the altered circumstances. In such a 
case, which is of very frequent occurrence under the new order of industry, any 
given plant, machine, or similar contrivance may lose all its value as a means 
of production. And so also, on the other hand, a given plant, as for instance a 
given railway system or dock, may acquire additional productive value through 
changes in the industrial system which make it more suitable for present use.

Evidently the chief, or at least the indispensable, element of productive 
efficiency in any item of industrial equipment or resources is the use which it 
makes of the available technological knowledge; and evidently, too, its earning-
capacity as a productive factor depends strictly on the same fact the usufruct 
of the state of the industrial arts. And all the while the state of the 
industrial arts, which the industrial equipment so turns to account for the 
benefit of its owner, continues to be a joint stock of industrial knowledge and 
proficiency accumulated, held, exercised, increased, and transmitted by the 
community at large; and all the while the owner of the equipment is some person 
who has contributed no more than his per capita quota to this state of the 
industrial arts out of which his earnings arise. Indeed, the chances are that 
the owner has contributed less than his per capita quota, if anything, to the 
common fund of knowledge on the product of which he draws by virtue of his 
ownership, because he is likely to be fully occupied with other things such 
things as lucrative business transactions, for instance, or the decent 
consumption of superfluities.

And at this point the difference between tangible assets and intangible comes in 
sight, or at least the ground of the habitual distinction between the two. 
Tangible assets, it appears, are such assets as represent the earning-capacity 
of any mechanically productive property; whereas intangible assets represent 
assured income which cannot be assigned to any specific material factor as its 
productive source. Intangible assets are the capitalized value of income not 
otherwise accounted for. Such income arises out of business relations rather 
than out of industry; it is derived from advantages of salesmanship rather than 
from productive work; it represents no contribution to the output of goods and 
services, but only an effectual claim to a share in the "annual dividend" on 
grounds which appear to be legally honest, but which can not be stated in terms 
of mechanical cause and effect, or of productive efficiency, or even in any 
terms that involve notions of physical dimensions or mechanical activity.

When the theoreticians explain and justify these returns that go to adroit 
salesmanship, or "managerial ability," as it is also called, it invariably turns 
out that the grounds assigned for it are of the nature of figures of speech 
metaphor or analogy. Not that these standard theoretical explanations are to be 
set aside as faulty, inadequate, or incomplete; their great volume and sincerity 
forbid that. It is rather that they are to be accepted as a faithful account of 
an insubstantial fact in insubstantial terms. And they are probably as good an 
account of the equitable distribution of free income as the principles of the 
modern point of view will tolerate.

But while intangible assets represent income which accrues out of certain 
immaterial relations between their owners and the industrial system, and while 
this income is accordingly not a return for mechanically productive work done, 
it still remains true, of course, that such income is drawn from the annual 
product of industry, and that its productive source is therefore the- same as 
that of the returns on tangible assets. The material source of both is the same; 
it is only that the basis on which the income is claimed is not the same for 
both. It is not a difference in respect of the ways and means by which they are 
created, but only in respect of the ways and means by which these two classes of 
income are intercepted and secured by the beneficiaries to whom they accrue. The 
returns on tangible assets are assumed to be a return for the productive use 
[485] of the plant; returns on intangible assets are a return for the exercise 
of certain immaterial relations involved in the ownership and control of 
industry and trade.

Best known by name among intangible assets is the ancient rubric of good-will, 
technically so called, which has stood over from before the coming of the new 
order in business enterprise. This has long been considered the original type-
form of intangible assets as a class. By ancient usage the term denotes a 
customary preferential advantage in trade; it does not describe a body of 
benevolent sentiments. Goodwill has long been known, discussed, and allowed for 
as a legitimate, ordinary, and valuable immaterial possession of men engaged in 
mercantile enterprise of all kinds. It has been held to be a product of 
exemplary courtesy and fair dealing with customers, due to turning out goods or 
services of an invariably sound quality and honest measure, and indeed due to 
the conspicuous practice of the ordinary Christian virtues, but chiefly to 
common honesty. Similarly valuable, and of a similarly immaterial nature, is the 
possession of a trade secret, a trade-mark, a patent right, a franchise, any 
statutory monopoly, or a monopoly secured by effectually cornering the supply or 
the market for any given line of goods or services. From any one of these a 
profitable advantage may be derived, and they have therefore a market value. 
They afford their possessor a preferential gain, as against his competitors or 
as against the general body of customers which the state of the industrial arts 
and the strategic organization of business throws in his way. After the analogy 
of good-will, it has been usual to trace any such special run of free income to 
the profitable use of a special advantage in the market, which is then appraised 
as a valuable means of gain and comes to figure as an asset of its possessor. 
But all this goes to explain how these benefits go to these beneficiaries; it 
does not account for the fact that there is produced a net output of product 
available for free distribution to these persons.

These supernumerary and preferential gains, "excess profits," or whatever words 
may best describe this class of free income, may be well deserved by these 
beneficiaries, or they may not. The income in question is, in any case, not 
created by the good deserts of the beneficiaries, however meritorious their 
conduct may be. Honesty may conceivably be the best policy in mercantile 
pursuits, and it may also greatly serve the convenience of any community in 
which an honest merchant is found; yet honest dealing, strictly speaking, is an 
agency of conservation rather than of creation. A trade secret may also be 
profitable to the concern which has the use of it, and the special process which 
it covers may be especially productive; but the same article of technological 
knowledge would doubtless contribute more to the total productivity of industry 
if it were shared freely by the industrial community at large. Such 
technological knowledge is an agency of production; but it is the monopoly of it 
that is profitable to its possessor as a special source of gain. The like 
applies to patent rights, of course. Whereas monopolies of the usual kind, which 
control any given line of industry by charter, conspiracy, or combination of 
ownership, derive their special gains from their ability to restrain trade, 
limit the output of goods or services, and so "maintain prices."

Intangible assets of this familiar kind are very common among the business 
concerns of the new order, particularly among the larger and more prosperous of 
them, and they afford a rough measure of the ability of these concerns 
profitably to restrict production. The very large aggregate value of such assets 
indicates how imperative it is for the conduct of industrial business under the 
new order to restrict output within reasonable limits, and at the same time how 
profitable it is to be able to prevent the excessively high productive capacity 
of modern industry from outrunning the needs of profitable business. For the 
prosperity of business it is necessary to keep the output within reasonable 
limits; that is to say, within such limits as will serve to maintain reasonably 
profitable prices; that is to say, such prices as will yield the largest 
obtainable net return to the concerns engaged in the business. In this 
connection, and under the existing conditions of investment and credit, 
"reasonable returns" means the same thing as "the largest practicable net 
returns." It all foots up to an application of the familiar principle of 
"charging what the traffic will bear"; for in the matter of profitable business 
there is no reasonable limit short of the maximum. In business the best price is 
always good enough; but, so also, nothing short of the best price is good 
enough. Buy cheap and sell dear.

Intangibles of this kind, which represent power to control the rate or volume of 
output, are altogether the most common of immaterial assets, and they make up 
altogether the largest class of intangibles and the most considerable body of 
immaterial wealth owned. Land values are of much the same nature as these 
corporate assets which represent capitalized restriction of output, in that the 
land values, too, rest mostly on the owner's ability to withhold his property 
from productive use and so drive a profitable bargain. Rent is also a case of 
charging what the traffic will bear; and rental values should properly be 
classed with these [486] intangible assets of the larger corporations, which are 
due to their effectual control of the rate and volume of production. And apart 
from the rental values of land, which are also in the nature of monopoly values, 
it is doubtful if the total material wealth in any of the civilized countries 
will nearly equal the total amount of this immaterial wealth that is owned by 
the country's business men and investors. Which evidently comes to much the same 
as saying that something more than one-half of the net product of the country's 
industry goes to those persons in whom law and custom vest a plenary power to 
hinder production.

It is doubtful if the total amount of this immaterial wealth exceeds the total 
material wealth in the advanced industrial countries, although it is at least 
highly probable that such is the case, particularly in the richer and more 
enlightened of these countries as, for instance, in America or the United 
Kingdom, where the principles of self-help and free bargain have consistently 
had the benefit of a liberal that is a broad construction. The evidence in the 
case is not to be had in such unambiguous shape as to carry positive proof, for 
the distinction between tangible assets and intangible is not consistently 
maintained or made a matter of record. So, for instance, it is not unusual to 
find that corporation bonds railroad or industrial which secure their owner a 
free income and are carried as an overhead charge by the corporation, are at the 
same time alien on the corporation's real property; which in turn is likely to 
be of less value than the corporation's total liabilities. Evidently the case is 
sufficiently confusing, considered as a problem in the economic theory of 
capital, but it offers no particular difficulty when considered as a proposition 
in corporation finance.

There is another curious question that will also have to be left as a moot 
question, in the absence of more specific information than what is yet available 
more a question of idle curiosity, perhaps, than of substantial consequence. How 
nearly is it likely that the total gains which accrue to these prosperous 
business concerns and their investors from keeping the output within profitable 
limits will equal the total loss suffered by the community as a whole from the 
incidental reduction of the output? Net production is kept down in order to get 
a profitable price for the output; but it is not certain whether the net 
production has to be lowered by as much or more than the resulting increased 
gain which this businesslike strategy brings to the businesslike strategists. 
The strategic curtailment of net production below productive capacity is net 
loss of the community as a whole, including both the business men and their 
customers; the gains which go to these business concerns in this way are net 
loss to the community as a whole, exclusive of the business concerns and their 
investors. The resulting question is, therefore, not whether the rest of the 
community loses as much as the business men gain that goes without saying, since 
the gains of the business men in the case are paid over to them by the rest of 
the community in the enhanced (or maintained) price of the products but rather 
it is a question whether the rest of the community, the common man, loses twice 
as much as the business concerns and investors gain.

The whole case has some analogy with the phenomena of blackmail, ransom, and 
similar enterprises that aim to get something for nothing; although it is 
carefully to be noted that its- analogy with these illegitimate forms of gainful 
enterprise must, of course, not be taken to cast any shadow of suspicion on the 
legitimacy of all this businesslike sabotage that underlies this immaterial 
corporate capital and its earning-capacity. In the case of blackmail, ransom, 
and such like illegal traffic in extortion, it is known that the net loss 
suffered by the loser exceeds the net gain which accrues to the beneficiary, by 
as much as the cost of enforcement plus the incidental inconvenience to both 
parties to the transaction. At the same time, the beneficiary's subsequent 
employment and consumption of his "illgotten gains," as they are sometimes 
called, whether he consumes them in riotous living or in the further pursuit of 
the same profitable line of traffic all this, it is believed, does not in any 
degree benefit the rest of the community. As seen in the perspective of the 
common good, such enterprise in extortion is believed to be quite wastefully 
disserviceable.

Now, this analogy may be taken for what it is worth; "analogies do not run on 
all-fours." But when seen in the same perspective, the question of loss and gain 
involved in the case of these intangible assets and their earning-capacity falls 
into something like this shape: Does the total net loss suffered by the 
community at large, exclusive of the owners of these intangibles, exceed two 
hundred per cent of the returns which go to these owners? or, Do these 
intangibles cost the community more than twice what they are worth to the 
owners? the loss to the community being represented by the sum of the overhead 
burden carried on account of these intangibles plus the necessary curtailment of 
production involved in maintaining profitable prices. The overhead burden is 
paid out of the net annual production, after the net annual production has been 
reduced by so much as may be necessary to "maintain prices at a reasonably 
profitable figure."

A few years ago any ordinarily observant person [487] would doubtless have 
answered this question in the negative, probably without hesitation. So also; 
any ordinarily intelligent votary of the established order, as, for instance, a 
corporation lawyer, a commercial trade journal, or a trade-union official, would 
doubtless, at that period, have talked down such a question out of hand, as 
being fantastically preposterous. That would have been before the war experience 
began to throw light into the dark places of business enterprise as conducted 
under the new order of industry. Today it is to be admitted with such emotion as 
may come to hand this question is one which can be entertained quite seriously, 
in the light of experience. In the recent past, as matters have stood up to the 
outbreak of the war, the ordinary rate of production in the essential industries 
under businesslike management has habitually and by deliberate contrivance 
fallen greatly short of productive capacity. This is an article of information 
which the experience of the war has shifted from the rubric of "Interesting if 
True" to that of "Common Notoriety."

The question as to how much this "incapacity by advisement" has commonly 
amounted to, may be attempted somewhat after this fashion. Today, under 
compulsion of patriotic devotion, fear, shame, and bitter need, and under the 
unprecedentedly shrewd surveillance of public officers bent on maximum 
production, the great essential industries controlled by the vested interests 
may, one with another, be considered to approach perhaps even conceivably to 
exceed a fifty per cent efficiency, as counted on the basis of what should 
ordinarily be accomplished by use of an equally costly equipment having the 
disposal of an equally large and efficient labor force and equally good natural 
resources, in case the organization were designed and managed with an eye single 
to turning out a serviceable product, instead of, as usual, being managed with 
an eye single to private gain in terms of price.

To the spokesmen of "business as usual" this rating of current production under 
the pressure of war needs may seem extravagantly low; whereas, to the experts in 
industrial engineering, who are in the habit of arguing in terms of material 
cost and mechanical output, it will seem extravagantly high. Publicly, and 
concessively, the latter speak of a twenty-five per cent efficiency; in private, 
and confidentially, they appear disposed to say that the rating should be nearer 
to ten per cent than twentyfive. To avoid any appearance of an ungenerous bias, 
then, present actual production in these essential industries may be placed at 
something approaching fifty per cent of what should be their normal productive 
capacity in the absence of a businesslike control looking to "reasonable 
profits." It is necessary at this point to call to mind that the state of the 
industrial arts under the new order is highly productive beyond example.

This state of the case, that production in the essential industries presumably 
does not exceed fifty per cent of the normal productive capacity, even when 
driven under the jealous eye of public officers vested with power to act, is 
presumably due in great part to the fact that these officers, too, are capable 
business men; that their past training and present bent is such as has been 
given them by long, exacting, and successful experience in the businesslike 
management of industry; that their horizon and perspective in all that concerns 
industry are limited by the frame cxf mind that is native to the counting-house. 
They, too, have learned how to think of industry and its administration in terms 
of profit on investment, and, indeed, in no other terms that being as near as 
their daily work has allowed them to take stock of the ways and means of 
industry. So that they are still guided, in some considerable part, by 
considerations of what is decent, equitable, and prudent in the sight of 
conservative business men; and this bias necessarily goes with them in their 
dealings with those ubiquitous, intricate, and systematic dislocations of the 
industrial system which have been found profitable in the management of industry 
on a footing of competitive sabotage. They still find it reasonable to avoid any 
derangement of those vested interests that live on this margin of intangible 
assets.

In so characterizing the situation there is, of course, no inclination to impute 
blame to these businesslike officials who are patriotically giving their best 
abilities and endeavors to this work of enforcing an. increased production in 
the essential industries and diverting needed labor and materials from the 
channels of waste; nor is it intended to cast aspersions on the good faith or 
the honorable motives of those grave captains of industry whom the officials 
find it so difficult to divert from the business man's straight and narrow path 
of charging what the traffic will bear. "They are all honorable men." But like 
other men they are creatures of habit; and their habit of mind is the outcome of 
experience in that class of large and responsible business affairs that lie 
somewhat remote from the domain of technology, from that field where the 
mechanistic logic of the industrial arts has something to say. It is only that 
the situation as here spoken of rests on settled usage, and that the usage is 
such as the businesslike frame of mind is suited to; at the same time that this 
businesslike usage, of fixed charges, vested interests, and reasonable profits, 
does not fully comport with the free swing of the industrial arts as [488] they 
run under the new order of technology. Nor is there much chance of getting away 
from this situation of "incapacity by advisement," even under pressure of 
patriotic devotion, fear, shame, and need, inasmuch as the effectual public 
opinion will scarcely entrust the conduct of its serious interests to any other 
than business men and business methods.

To return to the argument. It may be conceded that production in the essential 
industries, under pressure of the war needs, rises to something like a fifty per 
cent efficiency. At the same time it is presumably well within the mark to say 
that this current output in these essential industries will amount to something 
like twice their ordinary output in time of peace and business as usual. Onehalf 
of fifty per cent is twenty-five per cent; and so one comes in sight of the 
provisional conclusion that under ordinary conditions of businesslike management 
the habitual net production is fairly to be rated at one-fourth of the 
industrial community's productive capacity presumably under that figure rather 
than over.

In the, not unusual, absence of all reflection this crude estimate may seem 
recklessly hasty; perhaps it may even be thought scandalously unflattering to 
our substantial citizens who have the keeping of the community's material 
welfare; but a degree of observation and reflection will quickly ease any 
feeling of annoyance on that score. So, for instance, if the account as 
presented above does not appear to foot up to as much as the conclusion would 
seem to require, further account may be taken of that side-line of business 
enterprise that spends work and materials in an effort to increase the work to 
be done, and to increase the cost per unit of the increased work, all^for the 
benefit of the earnings of the concern for whose profit it is arranged. It may 
be called to mind that there still are half a dozen railway passenger stations 
in such a town as Chicago, specially designed to work at cross purposes and 
hinder the traffic of competing railway corporations; that on the basis of this 
ingeniously contrived retardation of traffic there has been erected a highly 
prosperous monopoly in the transfer of baggage and passengers, employing a large 
equipment and labor force, and costing the traveling public some millions of 
useless outlay yearly, with nothing better to show for it than delay, confusion, 
wear and tear, casualties and wrangles, twenty-four hours a day; and that this 
arrangement is, quite profitably, duplicated throughout the country as often and 
on as large a scale as there are towns in which to install it. So again, there 
is an exemplary weekly periodical of the most widely reputable and most 
profitable class, with a circulation of more than two million, which habitually 
carries some sixty to eighty large pages of competitive advertising matter, at a 
time when the most exacting economy of work and materials is a matter of urgent 
and acknowledged public need, with nothing better to show for it than an 
increased cost of all the goods advertised, most of which are superfluities. 
This, too, is only a typical case, duplicated by the thousand, as nearly as the 
businesslike management of the magazines and newspapers can achieve the same 
result. These are familiar instances of business as usual under the new order of 
industry. They are neither extreme nor extraordinary. Indeed the whole business 
community is run through with enterprise of this kind so thoroughly that this 
may fairly be said to be the warp of the fabric. In effect it is an enterprise 
in subreption; but in point of moral sentiment aijid conscious motive it is 
nothing of the kind.

All these intricate arrangements for doing those things that we ought not to 
have done and leaving undone those things that we ought to have done are by no 
means maliciously intended. They are only the ways and means of diverting a 
sufficient share of the annual product to the benefit of the legitimate 
beneficiaries. But this apparatus and procedure for capturing and dividing this 
share of the community's annual dividend is costly one is tempted to say unduly 
costly. It foots up to, perhaps, something like one-half of the work done. And 
yet, as a business proposition it seems sound enough, inasmuch as the income 
which it brings to the beneficiaries will presumably foot up to something like 
one-half of the country's annual production.

There is nothing gained by finding fault with any of this businesslike 
enterprise that is bent on getting something for nothing, at any cost. After 
all, it is safe and sane business, sound and legitimate, and carried on 
blamelessly within the rules of the game. One may also dutifully believe that 
there is really no harm done, or at least that it might have been worse. It is 
reassuring to note that at least hitherto the burden of this overhead charge of 
fifty per cent, plus has not broken the back of the industrial community. It 
also serves to bring under a strong light the fact that the state of the 
industrial arts as it runs under the new order is highly productive, 
inordinately productive. And, finally, there should be some gain of serenity in 
meditating on how singularly consistent has been the run of economic law through 
the ages, and recalling once more the reflection which John Stuart Mill arrived 
at some half a century ago, that "hitherto it is questionable if all the 
mechanical inventions yet made have lightened the day's toil of any human 
being."

THORSTEIN VEBLEN.
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