The Suntory and Toyota International Centres for Economics and Related Disciplines

Einführung in die Grundlagen der Nationalökonomie by Richard von Strigl; Die Lehre vonder Wirtschaft by Wilhelm Röpke; The Groundwork of Economic Theory by J. Watson;Elements of Economic Theory by Erich RollReview by: F. BenhamEconomica, New Series, Vol. 4, No. 16 (Nov., 1937), pp. 470-472Published by: Wiley on behalf of The London School of Economics and Political Science and TheSuntory and Toyota International Centres for Economics and Related DisciplinesStable URL: http://www.jstor.org/stable/2626889 .

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470 ECONOMICA [NOVEMBER

proportions of the factors affect the quantity of output ? It is then easy to show how much an additional unit of a factor adds to output and thereby, whether under perfect or imperfect competition, to receipts, and to apply the principle that the entrepreneur will try to equate marginal costs with marginal revenue.

Perhaps Professor Fraser's dislike of " productivity " is connected with his view that there is no " law" of diminishing returns. But there is. Given the state of technical knowledge, and the absence of relevant indivisibilities, then after a point an increased proportion of one factor in a combination of factors will reduce the marginal product of that factor. This is as certain as the law of gravity, which does not cease to be a law because feathers fly upward.

But these are minor points. I would urge all serious students of economics to read this work and especially, perhaps, the excellent chapter on capital.

F. BENHAM.

Einfiihrung in die Grundlagen der Nationalokonomie. By RICHARD VON STRIGL. Vienna: Julius Springer. 1937. viii + 223 PP.

Die Lehre von der Wirtschaft. By WILHELM R6PKE. Vienna: Julius Springer. I937. vi + 195 pp. Rm. 5.70.

The Groundwork of Economic Theory. By J. WATSON. London: P. S. King & Son. 1937. x + I96 pp. 9S.

Elements of Economic Theory. By ERICH ROLL. London: Oxford University Press. 1937. viii + 276 PP. 5s.

Each of these four books is of high quality. I have no substantial criticism to offer of anything contained in them. My criticism is that each falls short of perfection, as a complete introduction to beginners, because it does not contain enough. Each writer seems to have set himself a kind of economic problem of his own: that of covering the field as well as he can within so many thousand words. Each has solved it, in his own way, very well. But the problem should never have been set. A review must be brief because the editor says so, but an author can make his book as long as he pleases: for him words are not scarce. In my view, the notion that an elementary book must be brief is a delusion. An advanced work, building on established conclusions and using concepts familiar to its readers, can afford the luxury of compression, but an introduction is written for readers quite new to the subject, so that everything must be carefully explained. Each of these books suffers, in one way or another, from being too short.

What should an elementarv book on economics contain ? First, it should explain the nature of the economic problem. It should show that all wants cannot be fully satisfied and that a community must somehow decide how to use its limited resources, many of which

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I937] BOOK REVIEWS 471

are capable of alternative uses. It should discuss the production function and should show how wants can be more fully satisfied by taking advantage of division of labour, improvements in technical knowledge, and more capitalistic methods of production. All this is true however a community may be organised. Second, it should show how the economic problem is solved under capitalism. It should show how prices of all kinds are formed and how they are related to one another. It should explain the part played by the price-mechanism in directing men and other resources into those channels where their contribution to output is valued most highly. It should give some account of how the system responds to changes in tastes or in technique or in supplies of factors. If the resulting picture is to be at all life-like, some account of the part played by the State and other institutions, together with a certain amount of descriptive material and a number of illustrations from actual events, must be included. Third, I think a writer should remember that many people agree with Marshall that the question of poverty lends to economics its highest interest. He should say something about the influences affecting the wealth of nations. He should discuss the main factors, such as inheritance, giving rise to inequality of income. Finally, he might well say something about the possibilities and limitations of social reform. At any rate, he might consider the economic effects of certain leading types of State action, and how economic problems might be solved under some system other than capitalism.

All this forms a large programme and unless a book is fairly long something: must inevitably be sacrificed. Some topics must be left out or dismissed far too briefly, or description and illustration must be cut down. Yet description is sometimes essential to give body to the bare bones of analysis. For instance, it seems to me a distinct weakness that none of these books discusses the supply of money within the framework of some existing monetary and banking system, or the demand for it in relation to the other types of assets available.

Professor Roll, possibly reflecting that he has already written a book about money, says practically nothing about money or banking or international trade, and Mr. Watson, who for all I know intends to write one, does the same. This at least saves space.

Professor Roll begins with an excellent account of the economic principle and then discusses its working and problems of change. His book is very readable. If he had maintained this form over a course about three times as long he would have written a fine text- book. He has failed only because the task is impossible within 8o,ooo words.

Mr. Watson perhaps escapes our strictures. For although he claims that his book is intended for students in the early stages of economic studies and that no previous knowledge of economic theory is assumed, he also says "It has throughout been my aim to proviide,

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472 ECONOMICA [NOVEMBER

not indeed a substitute for the standard works on economics, but rather a short introduction and guide to their understanding and appreciation." He considers a closed community, free from monetary disturbances, and confines himself to a thorough and systematic account of equilibrium analysis, without any padding or trimmings. His book is easily the stiffest of the four, and his style the most grumous. " In order to restrict the treatment to a length permitting a readier comprehension of the whole I have frequently resorted to brief tabulation," he explains. This work can doubtless be recom- mended to " serious students who do not shrink from the effort of sustained attention and systematic thought ", but I would advise them, pace Mr. Watson, not to take it at too early a stage.

As far as I can judge, the style of the two books written in German is excellent. They both attempt to cover the whole field. Of the two, Professor R6pke's very interesting study gives more space to the. inequality of incomes and to social reform, and includes a brief discussion on communism. It may be thought that an elementary book should say nothing about policy, restricting itself to an account of how the economic system actually works. I agree that it is an abuse of trust for a writer to advocate policies, such as large expendi- ture on public works during any slump in any country, about which economists are not agreed and on which experience is far from con- clusive, in an introductory book. But surely he should point out, for example, that if the distribution of property were different the whole system of prices and incomes would be different. There is a danger that a bald account of how prices are formed in an imaginary capitalist community will leave the impression that all attempts at intervention of any kind are misguided. In my view, all these books might have devoted more space to a discussion of the foundations and effects of monopoly power, as distinct from the theory of monopoly price.

Professor Strigl pays less attention than Professor Ropke to ques- tions of policy and welfare, but this enables him to discuss analytical problems more fully. Yet even he leaves out some questions of importance. He gives a fairly long discussion of import duties, but says nothing about import quotas or exchange control. He discusses taxation at some length without pointing out that if some industries expand and others contract (whether due to taxation or to other causes) relative factor-prices may be substantially changed. Never- theless if one of these four books had to be chosen as the best I think I should vote for his admirable little treatise.

F. BENHAM.

The Trade Cycle. By R. F. HARROD. Oxford University Press. IOS.

To many readers of ECONOMICA Mr. Harrod's new book will already be familiar, It has been extensively reviewed elsewhere, has attracted

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