BOOK V. FACTORS OF PRODUCTION

CHAPTER XVII

THREE FACTORS OF PRODUCTION

FOR the three factors of the production of wealth, we may select the following passage from the "Great Learning":

The superior man must be careful about his virtue first. Having virtue, there will be the man. Having the man, there will be the land. Having the land, there will be the wealth. Having the wealth, there will be its use. Virtue is the root, and wealth is only its outcome.1

stance.

This principle is originally applied to the ruler. If a ruler has virtue, he can rule the man, hold the land, accumulate the wealth, which means here, capital, and have many things for use. But this principle can be applied to everybody, generally. Take the business man, for inHe must possess some virtue first, either physical, mental or moral-the word virtue is used in its broad sense. If competition were perfectly free, he would get wealth in proportion to the virtue he possessed. If he have no virtue at all, or if he, in some way, fail to show his virtue (such as being able to work, and not working. at all), he would be an outcast, and he could not get any wealth by himself. In society, there is no such person. If there is any, he cannot live very long. The loafer, the

1 Classics, vol. i, p. 375.

parasite, and the thief, although they are bad men, still have some particular virtue for getting wealth. Therefore, virtue is the root, and wealth is only its outcome.

Thus, according to the "Great Learning," the factors of production are three. The first is the man who has any virtue; the second is the land, and the third is capital. All the three factors belong to the productive sphere. Then the word "use" appears. With the word "use," consumption begins.

The principle of dividing the productive factors into three is a general economic principle. It can be applied even to a single man in savage life. First, he himself must be a human being. Second, he must live on some kind of land, and use either fishing land or hunting land. Third, he must have some kind of capital to help his fishing or hunting. In primitive life, the capital must be subordinate to the land, because he can live without capital, but he can never live without land. In social life, land is only a part of capital, and man can have many other capital goods without owning land. Therefore, in social life, there are only two factors-man and capital goods. But, in Confucius' time, it was not so. Under the tsing tien system, every man accepted a portion of land, otherwise he could have no other capital goods, or very few. Therefore, land was a separate factor, and played the most important part among all capital goods. Moreover, in economic dynamics, the difference between land and artificially made goods becomes prominent, because land is not made and not perishable. The "Great Learning" is correct in treating these three factors separately.

Taking a nation as an economic unit, this principle is still more true. The first element of the wealth of a nation is man, the second is land, and the third is capital. Unoccupied land never can form a nation, unless it belongs

to man. Those who have merely perishable capital goods never can form a nation, unless they own some land. There are the stateless people, who have men, land, and capital, but have no nation. But there is no nation that has neither men, nor land, nor capital.

According to the order of the " Great Learning," we shall discuss human beings first, and then nature. In other words, we shall make the man precede the land. It is true that the land is not made by man, even existed before man. But it is equally true, that the land is useful to man simply because man comes into it, otherwise the whole world is only a wilderness. Economics is not a natural science, but a human science. We should care for the man first. Moreover, since human power has been developed, nature is subject to man. All the natural forces are only machines, helping to produce wealth, but the real ruler of the natural world is man. For these reasons, we shall dis

cuss man before discussing land.

This order has produced a special economic influence upon the Chinese. Why does China have a large population? Why do the Chinese like to have even more children than their fortune can support? Why do Chinese scholars never think of such a theory as limiting the population? It is because the "Great Learning" states that man is the first factor of production. According to this principle, land and capital both come after man. This principle is familiar to all the Chinese. They have a proverb: "Money is made by man." For their greetings, their first phrase is "increasing sons," and the second is "accumulating capital." When a new year comes, the people write or say, "The man and the capital both are successful." They are very glad to have more members in a family, in a community, or in the whole nation, not only for social pleasure, but also for economic production,

because they think that man is the chief productive factor. This is undoubtedly due to the influence of the "Great Learning."

Henry George says: "It is not the increase of food that has caused this increase of men; but the increase of men that has brought about the increase of food. There is more food, simply because there are more men.'

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Such And the

a theory is the common idea of the Chinese. Great Learning," in putting man before land and capital, has exactly the same theory.

In the very beginning of the subject of political economy, the first part of his General History of Institutes, Tu Yu (died 1363 A. K. or 812 A. D.) also enumerates the three factors of production. He says:

The grain is the controller of the life of man; the land is the ground upon which the grain is grown; and the man is the object for which the ruler administers his government. Storing the grain, the national reserve will be abundant; distinguishing the land for agricultural purposes, the food will be sufficient; and making an investigation of the men, the service of the public labor will be equal. When a ruler understands these three things, it is called a good government.

His statement is from the standpoint of a ruler, but the three things are common to all economic life. The word grain is the chief representative of capital, which we shall discuss later; while the words land and man have no need of explanation. Therefore, according to Tu Yu also, the factors of production are three,—namely, capital, land and man. His order is just the reverse of that of the "Great Learning." But they are essentially th same, because he names them in the order of a climax, while the "Great Learning" does the opposite.

1 Progress and Poverty, p. 97.

CHAPTER XVIII

LABOR-POPULATION

I. IMPORTANCE OF POPULATION

SINCE man is the first factor of production, we should first discuss man in the collective sense-that is, the population. The Analects tells us, "To anyone bearing the tables of population, Confucius bowed forward to the crossbar of his carriage.' This shows that Confucius attached much importance to the tables of population. Chu Hsi com

ments:

The action of Confucius was due to the importance of the number of people. Man is the most intelligent of all the creatures, and the people are regarded as the heaven of the emperor. Therefore, according to the Official System of Chou, when the number of people was presented to the emperor, he accepted it kneeling. How should one whose position was lower than that of the emperor not give respect to the number of population?

From the example of Confucius, the Chinese always think that population is the chief element of the national assets.

The Official System of Chou has many passages in regard to population. We shall select only a few of them. Among the duties of the vice-president of the department of people are these he shall investigate the number of males and

1 Classics, vol. i, p. 236.