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The Principles of Economics
With Applications to Practical Problems
by Frank A. Fetter
(New York: The Century Co., 1905)
(Special thanks to Neil Parille for making this possible)

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Frank A. Fetter (1863-1949)Frank Fetter's 1904 treatise, Principles of Economics, virtually impossible to find prior to this web edition, constructed a general theory of economics in the Austrian tradition that went unsurpassed until Ludwig von Mises's treatise of 1940, Nationaloekonomie. Yet Fetter, an American Austrian long before the interwar migration from Austria, has not received due recognition for his many contributions to the tradition.

Using the axiomatic-deductive method, he traced economic laws to individual human action, and demonstrated that just as the price of each consumer good is determined solely by subjective value, the rate of interest is determined solely by time preference. The rental price of each producer good is imputed to it by entrepreneurial demand and is equal to its discounted marginal value product. The capital value of each durable good is equal to the discounted value of its future rents. Fetter showed how this uniform, subjective theory of value implies the demise of socialist theories of labor exploitation, Ricardian theories of rent, and productivity theories of interest.

Building on his Austrian theory of capital, money, interest, and entrepreneurship, Fetter even developed a rudimentary theory of the trade cycle, arguing that the boom period is characterized by the artificial swelling of capital values as money and credit expand. The crisis follows when the inflation ceases which causes the mistaken capital values of the boom to suddenly correct downward and, in turn, results in the bankruptcy, unemployment, and retrenchment of the depression.

His work on capital and interest has yet to be surpassed or even fully appreciated, even by Austrians; much more than a correction of Eugen von Böhm-Bawerk's lapse into a productivity theory of interest, it is the foundation for all work on capitalization and the definitive refutation of the claim that productivity has any role in determining the interest rate.

Jeffrey Herbener
Grove City College 
Essay on Fetter
Fetter Bibliography


Part I
The Value of Material Things (1–169)
Division A—Wants and Present Goods
1.  The Nature and Purpose of Political Economy: Name and Definition; Place of Economics Among the Social Sciences; The Relation of Economics to Practical Affairs (3)
2.  Economic Motives: Material Wants, The Primary Economic Motives; Desires for Non-Material Ends, as Secondary Economic Motives (9)
3. Wealth and Welfare: The Relation of Men and Material Things to Economic Welfare; Some Important Economic Concepts Connected with Wealth and Welfare  (15)
4. The Nature of Demand: The Comparison of Goods in Man’s Thought; Demand for Goods Grows Out of Subjective Comparisons (21)
5. Exchange in a Market: Exchange of Goods Resulting from Demand; Barter Under Simple Conditions; Price in a Market  (30)
6. Psychic Income: Income as a Flow of Goods; Income as a Series of Gratifications (39)
Division B—Wealth and Rent
7. Wealth and Its Direct Uses: The Grades of Relation of Indirect Goods To Gratification; Conditions of Economic Wealth  (46)
8. The Renting Contract: Nature and Definition of Rent; the History of Contract Rent and Changes in It  (53)
9. The Law of Diminishing Returns: Definition of the concept of (Economic) Diminishing Returns; Other Meanings of the Phrase “Diminishing Returns”; Development of the Concept of Diminishing Returns  (61) 
10. The Theory of Rent: The Market Value of the Usufruct: Differential Advantages in Consumption Goods; Differential Advantages in Indirect Goods (73)
11. Repair, Depreciation, and Destruction of Wealth: Relation to its Sale and Rent: Repair of Rent-bearing Agents; Depreciation in Rent-Earning Power of Agents Kept in Repair; Destruction of Natural Stores of Materials (81)
12. Increase of Rent-bearers and of Rents: Efforts of Men to Increase Products and Rent-bearers; Effects of Social Changes in Raising the Rents of Indirect Agents (90)
Division C—Capitalization and Time-Value
13. Money as a Tool in Exchange: Origin of the Use of Money; Nature of the Use of Money; The Value of Typical Money (98)
14. The Money Economy and the Concept of Capital: The Barter Economy and its Decline; The Concept of Capital in Modern Business (108)
15. The Capitalization of All Forms of Rent: The Purchase of Rent-charges as an Example of Capitalization; Capitalization Involved in the Evaluating of Indirect Agents; The Increasing Role of Capitalization in Modern Industry  (118)
16. Interest on Money Loans: Various Forms of Contract Interest; The Motive for Paying Interest(131)
17. The Theory of Time-value: Definition and Scope of Time-value; the adjustment of the Rate of Time-discount (141)
18. Relatively Fixed and Relatively Increasable Forms of Capital: How Various Forms of Capital May Be Increased; Social Significance of These Differences (152)
19. Saving and Production as Affected by the Rate of Interest: Saving as Affected by the Interest Rate; Conditions Favorable to Saving; Influence of the Interest Rate on Methods of Production (159)

Part II
The Value of Human Services
Division A—Labor and Wages
20. Labor and Classes of Laborers: Relation of Labor to Wealth; Varieties of Talents and of Abilities in Men (173)
21. The Supply of Labor: What Is a Doctrine of Population? Population in Human Society; Current Aspect of the Population Problem (184)
22. Conditions for Efficient Labor: Objective Physical Conditions; Social Conditions Favoring Efficiency; Division of Labor (195)
23. The Law of Wages: Nature of Wages and the Wages Problem; The Different Modes of Earning Wages; Wages as Exemplifying the General law of Value (205)
24. The Relation of Labor to Value: Relation of Rent to Wages; Relation of Time-value to Wages; The Relation of Labor to Value (215)
25. The Wage System and its Results: Systems of Labor; The Wage System as it Is; Progress of the Masses Under the Wage System (226)
26. Machinery and Labor: Extent of the Use of Machinery; Effect of Machinery on the Welfare and Wages of the Masses (236)
27. Trade-Unions: The Objects of Trade-Unions; The Methods of Trade-Unions; Combination and Wages (245)
Division B—Enterprise and Profits
28. Production and the Combination of the Factors: The Nature of Production; Combination of the Factors (257)
29. Business Organization and the Enterpriser’s Function: The Direction of Industry; Qualities of a Business Organizer; the Selection of Ability (265)
30. Cost of Production: Cost of Production from the Enterpriser’s Point of View; Cost of Production from the Economist’s Standpoint (273)
31. The Law of Profits: Meaning of Terms; The Typical Enterpriser’s Services Reviewed; Statement of the Law of Profits (282)
3. Profit-sharing, Producers’ and Consumers’ Cooperation: Profit-sharing; Producers’ Cooperation; Consumers’ Cooperation (292)
33. Monopoly Profits: Nature of Monopoly; Kinds of Monopoly; The Fixing of a Monopoly Price (302)
34. Growth of Trusts and Combinations in the United States: Growth of Large Industry in the United States; Advantages of Large Production; Causes of Industrial Combinations (312)
35. Effect of Trusts on Prices: How Trusts might Affect Prices; How Trusts Have Affected Prices (323)
36. Gambling, Speculation, and Promoters’ profits: Gambling vs. Insurance; The Speculator as a Risk-taker; Promoter’s and Trustee’s Profits (333)
37. Crises and Industrial Depressions: Definition and Description of Crises; Crises in the Nineteenth Century; Various Explanations of Crises (345)

Part III
The Social Aspects of Value (357–563)
Division A—Relation of Private Income to Social Welfare
38. Private Property and Inheritance: Impersonal and Personal Shares of Incomes; The Origin of Private Property; Limitations of the Right of Private Property (359)
39. Income and Social Service: Income from Property; Income from Personal Services (370)
40. Waste and Luxury: Waste of Wealth; Luxury (381)
41. Reaction of Consumption on Production: Reaction Upon Material Productive Agents; Reaction Upon the Efficiency of the Workers; Effects on the Abiding Welfare of the Consumer (392)
42. Distribution of the Social Income: The Nature of Personal Distribution; Methods of Personal Distribution (402)
43. Survey of the Theory of Value: Review of the Plan Followed; Relation of Value Theories to Social Reforms; Interrelation of Economic Agents (412)
Division B—Relation of the State to Industry
44. Free Competition and State Action: Competition and Custom; Economic Harmony through Competition; Social Limiting of Competition (422)
45. Use, Coinage, and Value of Money: The Precious Metals as Money; The Quantity Theory of Money (431)
46. Token Coinage and Government Paper Money: Light-Weight Coins; Paper Money Experiments; Theories of Political Money (443)
47. The Standard of Deferred Payments: Function of the Standard; International Bimetallism; The Free-silver Movement in America (453)
48. Banking and Credit: Functions of a Bank; Typical Bank Money; Banks of the United States To-day (462)
49. Taxation in its Relation to Value: Purposes of Taxation; Forms of Taxation; Principles and Practice (471)
50. The General Theory of International Trade: International Trade as a Case of Exchange; Theory of Foreign Exchanges of Money; Real Benefits of Foreign Trade (480)
51. The Protective Tariff: The Nature and Claims of Protection; The Reasonable Measure of Justification of Protection; Values as Affected by Protection (491)
52. Other Protective Social and Labor Legislation: Social Legislation; Labor Legislation (504)
53. Public Ownership of Industry: Examples of Public Ownership; Economic Aspects of Public Ownership (514)
54. Railroads and Industry: Transportation as a Form of Production; the Railroad as a Carrier; Discrimination in Rates on Railroads (525)
55. The Public Nature of Railroads: Public Privileges of Railroad Corporations; Political and Economic Power of Railroad Managers; Commissions to Control Railroads (534)
56. Public policy as to Control of Industry: State Regulation of Corporate Industry; Difficulties of Public Control of Industry; Trend of Policy as to Public Industrial Activity…(544)
57. Future Trend of Values: Past and Present of Economic Society; The Economic Future of Society (555)

Questions and Critical Notes (565)
Index (595)