dity is regulated by the cost of producing that portion whose cost of production is the highest. The price of vessels is regulated by the cost of producing those vessels whose cost of production is the highest. If the price were less, the vessels built under the most disadvantageous circumstances would cease to yield the ordinary rate of profit to capital and the average rate of wages to labour. But it must be remembered that at the same time the manufacturers who are carrying on business under more favourable circumstances are realising exceptionally large profits. There is therefore every inducement for them to increase the supply. If this increased supply takes place, or if there is a decrease in the demand, the equalisation between supply and demand is effected by a lowering of the price. Under these circumstances the most heavily burdened part of the ship-building trade ceases to be profitable and gradually ceases to exist. This describes what actually took place in 1870 in the London ship-building trade. The poor rates and other charges were so enormously high in the east end of London, that when the exceptional demand for vessels caused by the American war fell off, and the price of vessels consequently declined, the ship-building trade of London was virtually destroyed: such vessels as were required being built on the Tyne and the Clyde. Every ship-building yard that was closed hastened the closing of the rest in the same locality; for by throwing hundreds of artisans out of employment pauperism was increased and the amount of the poor rate was necessarily augmented. The burdens on the depressed industry thus speedily accumulated, and gradually but surely the ship-building trade declined on the Thames. The incidence of poor rates in such a case as this is borne by the capitalists and labourers engaged in the depressed industry, and the poor rate may be perhaps in such an instance accused of causing more misery than it alleviates. It is a most serious national misfortune when the amount of the poor rate is so great as to maim or destroy a once prosperous branch of industry. No remedy for this paralysing influence of the poor rate can be provided by the well-meant

efforts of private charity. No permanent benefit will result from individual exertions or legislative enactments unless they tend to weaken the causes which produce pauperism.

QUESTIONS ON CHAPTER III. On Taxation.

I. Why is taxation necessary?

2.

Ought any class of persons who avail themselves of the protection which a State affords to enjoy immunity from taxation?

3. Enumerate Adam Smith's four canons of taxation. 4. In what manner only can the first canon be observed? 5. Why is the non-observance of the second canon detrimental to trade?

6. Illustrate the importance of the third canon.

7. Point out the connection between the third and the fourth canon.

8. Describe the utility of bonding houses.

9. What is the effect of the use of the bonding house on the price of the commodities lodged therein?

IO. In accordance with the fourth canon, ought taxes to be levied on raw material or on manufactured commodities? II. Why does a tax on raw material increase the price of the manufactured commodity by an amount far exceeding the revenue yielded to the state.

12. Why would direct taxation on commodities sold in shops be impracticable?

13. Which is the most obvious way of carrying out the fourth canon?

14. What is the difference between direct and indirect taxation?

15. What is meant by the incidence of taxation?

16. What is the income-tax?

17. Ought temporary and permanent incomes to be taxed at the same rate?

and

18. Give illustrations shewing that temporary permanent income ought to be taxed at the same rate if the income-tax is fixed in amount and permanent.

19. Why would it be impracticable to adjust the incometax according to the capitalised value of each income?

20. Why does the income-tax press more severely on the possessor of a small income than on the possessor of a large income?

21. What remedy has been suggested for this inequality?

22.

What modification of this plan has been adopted? 23. Is the income-tax invariably a direct tax?

24. When income-tax is paid out of capital, on whom does the tax chiefly fall?

25. Is the opportunity of evading the payment of the full amount of income-tax, which some people avail themselves of, a valid objection to the tax?

26. It has been laid down as an axiom, that each ought to contribute to the imperial exchequer a certain fixed proportion of his superfluities. What effect would this rule have in deciding what commodities should be taxed? 27. Who bears the incidence of all taxes levied on land? 28. What is the land-tax?

29. Describe its magnitude in England and in India. 30. What important principle is recognised by the existence of a land-tax?

31. Explain the economic perfection of a land-tenure in which all rents are paid to the State.

32. What would be the consequence of the land-tax exceeding the economic rent?

33. In what manner has Mr Henry George proposed that the State should appropriate the land of England.

34. What are tithes, what was their original purpose, and by whom are they now frequently owned?

35. What are the main provisions of the Tithe Commutation Act?

36. What effect has this Act had on the amount of the tithes?

37. Who bears the incidence of poor rates in the case of house property?

38. Prove that the occupier of the house bears part of the incidence of the poor rate.

39. Who bears the incidence of the poor rate levied on trade premises?

40. What is the effect of an excessive poor rate in depressing industry?

41. Describe the decline of the ship-building trade on the Thames.

42.

When the burden of the poor rate is such as to destroy a branch of industry, on whom does the real burden fall?

I. It was said that tax-payers were never asked by the collector whether they approved of this or that application of public money; but do not the tax-payers then control the national expenditure? have they not a right to do so? How far does the parliamentary suffrage confer this power on the tax-payers?

2.

Were the taxes on hair powder and on windows direct or indirect?

3. Mr George contends that land being a gift of nature to mankind cannot properly become private property: but that the result of human labour can alone with justice thus be owned by individuals. Apply this theory to :

(1) The fen lands of Cambridge which previous to drainage were useless swamps.

(2) Wild roots and fruits.

(3) A brick field.

(4) A cart-load of brick earth.

(5) The same earth when converted into bricks.

(6) Gold and silver when found, as sometimes happens, in valuable nuggets without labour.

(7) The cultivated terraces on Swiss mountains where the earth has been carried up in baskets by men and women.