other things in the interest of general social welfare so long as such activities do not infringe on the inalienable rights of self-government. The American theory of self-government applies, of course, to the normal citizen. It does not apply to abnormal people. Defective, delinquent, and dependent people, the insane, the criminals, the paupers, are subnormal and are not citizens in the real sense. These are wards of the Government, and it is the function and duty of the Government to care for its wards under whatever restrictions that may be necessary. If any group of people are unable to make a living under our system of freedom, they are subnormals and the Government should take care of them. But this is charity, and in the administration of this charity industry should not be demoralized by confusing charity with legitimate wages.

This theory of government comprehends a certain economic system, and this is the American system of industry; and the American theory, as I shall use it, means the industrial theory that has its foundation in the Constitution and in the Declaration of Independence, according to my interpretation.

Governments can't make or change natural laws, but they can antagonize and defeat the ends of natural laws or they may cooperate with them. The American system of industry attempts to free the individual from every man-made regulation and law possible on the theory that the regulation of business by the natural law of competition and the natural law of demand and supply, under a state of individual freedom, is more conducive to social welfare than any artificial regulation that can be devised by man. Hence they limited government in the regulation of business to the one function of keeping the field clear for the unrestricted operation of the natural laws of competition and demand and supply. The American system of government is preeminently a system of regulation by natural laws. It is only in fields that can not be kept open to these natural laws, as monopolies, that the Government is justified in exercising additional regulation.

The law of demand and supply under a state of freedom regulates the prices of commodities and services on the basis of their value and thereby regulates the relative amounts of production in the various fields in a way that is highly conducive to material welfare. When relatively too much is produced in any field the price of the product falls. When relatively too little is produced in any field the prices go up, and this attracts workers from the fields of smaller demand to the fields of larger demand. Again, when too many workers get in a certain field wages fall, because the people don't want their products. This falling of wages is a danger signal to all the boys and young men and others who are counting on entering this field to keep out and go where society needs them, where they can produce the things the people want and need. When workers obey these warnings of oversupply of goods and services the prices of goods and services in these depressed fields are soon restored to normal. Anything that obstructs such adjustment produces trouble in industry. Under the American theory they must adjust themselves to this natural law or accept the inevitable consequences of lower prices and lower wages. There is no other constitutional remedy under our theory of government.

Senator WHEELER. Let me interrupt you right there. Under our theory of government we do regulate by giving a high tariff to some industries, do we not?

Mr. DYER. Yes.

Senator WHEELER. You think that is wrong, do you?

Mr. DYER. In theory I am not a protectionist. However, I think it would do a whole lot more harm than to destroy protection, since we have built our industry on it. However, protection does not give any special advantage to a man who is manufacturing in a protected industry.

Senator WHEELER. You say it does not?

Mr. DYER. No, sir.

Senator WHEELER. Let me get that statement again.

Mr. DYER. I would like to explain that.

Senator WHEELER. I just want to get your statement again.

Mr. DYER. I said protection does not give any special advantage to a man who is manufacturing in a protected industry. I would like to explain that.

Senator WHEELER. All right.

Mr. DYER. If men engaged in protected industries could make bigger dividends than the folks engaged in unprotected industries, why, of course, under the law of supply and demand capital would flow in there and soon destroy it. Where you have free competition for men in industry and for capital, men in protected fields can not have any advantage for long. Of course, anybody who knows anything about business knows that capital flows to the field of superior investment advantages and dividends. Therefore, while I am not a protectionist, I say a man in a protected industry has no superior advantage by being in that field, over another.

The operation of this law is constructive and highly beneficial to general material welfare, since it tends to keep every man where he is most needed, where he can earn most in the production of the things that the people want.

Profits and the income on capital are regulated by these natural laws in the same way that wages and the prices of commodities are regulated.

Senator WHEELER. Do you think they regulate the prices, for instance, that we are paying for power in this country?

Mr. DYER. Yes, sir; I mean, under a state of freedom. If there is any monopoly it does not.

Senator WHEELER. How many industries in this country to-day are there that are in a state of freedom?

Mr. DYER. I think there are very few monopolies in this country to-day.

Senator WHEELER. Very few?

Mr. DYER. Very few.

Senator WHEELER. You do not think the Standard Oil is a monopoly?

Mr. DYER. I can think of a good many to give you

Senator WHEELER (interposing). You do not think there is a monopoly in steel in this country?

Mr. DYER. I say very few. I could not answer that question, because I am not familiar with those fields.

Senator WHEELER. I want to take up a few of these outstanding industries in this country and get your views.

Mr. DYER. Yes, sir.

Senator WHEELER. You do not think there is any monopoly in the manufacture of woolen goods in this country?

Mr. DYER. I do not think so.

Senator WHEELER. You say you do not think there is any monopoly in oil?

Mr. DYER. I do not know about oil.

Senator WHEELER. You do not think there is any monopoly in steel?

Mr. DYER. Just to give you my opinion without studying it much-and that is not worth much, where you have not studied the business but my general impression is, Senator, there is a better basis for business-I think that question would be answered if you let me read a little further.

Senator WHEELER. I want to get that particularly.

Mr. DYER. I say, it will be answered. I do not care to anticipate what is in my statement. I will answer it, if you will let me. Senator WHEELER. All right.

Mr. DYER. When relatively too much capital is invested in any field dividends begin to fall, and this is sufficient warning to those who contemplate entering this field to keep out and a warning to those in the field that some of them should withdraw as soon as possible. In this way normal dividends are restored. When dividends run up in any field, capital is quick to rush in and it is not long till they are brought back to normal. All of this talk about capital being able to make enormous dividends by its inherent power to control production cost and prices is pure myth under conditions of free competition. The unthinking are led into this fallacy because they do not discriminate between real dividends paid for the exclusive use of capital, and dividends plus the amount earned by superior business direction which often is added to dividends and the two together go out to the public as dividends.

Senator WHEELER. Let me ask you a question: How long have you been an economist at the university there?

Mr. DYER. Over 25 years.

Senator WHEELER. Över 25 years at the Vanderbilt University? Mr. DYER. Yes, sir.

Senator WHEELER. And prior to that time what was your business? Mr. DYER. I came from the University of Chicago down there. I came there from the University of Chicago, where I graduated; I came to the Vanderbilt University.

Senator WHEELER. Is it not a fact that you were a professional humorist on the stage before you became an economist?

Mr. DYER. No, sir. That is the first time I heard of that. I would be much flattered to think that.

Senator WHEELER. I rather gathered you were.

Mr. DYER. No, sir. Sometimes in my speeches-and I have been a public speaker for a good while-sometimes folks laugh at things I say, and sometimes they do not. I am not a professional humorist. Senator WHEELER. I thought you were.

Senator HAWES. They laugh at things Senators say sometimes. Mr. DYER. Yes, sir.

Senator WHEELER. Senators are supposed to be possessed of a sense of humor. They could not remain Senators if they were not. Mr. DYER. Coming now to your question. Capital has been dethroned. There was a time, while capital was scarce, when it did have the power to monopolize and control a field of industry. But that day is gone. Capital can't control anything to-day. No man, no group of men, can get together enough capital to control any important field of industry. Henry Ford, with his unlimited capital, can't even control the field of cheap automobiles.

This bill provides that the price of coal shall be fixed on a basis of fair wages to labor and a fair return on capital. To fix prices so every coal company could make a stipulated dividend, regardless of efficiency, on the capital invested would be about the most stupid and the most unjust thing that could be done in regulating business.

Senator WHEELER. Let me ask you a question. Assuming that I wanted to go into the State of Montana and build a railroad, do you think I could go in there and get capital to build a railroad in competition with the other railroads?

Mr. DYER. If it were a paying proposition, they would rush to you. Capital is looking for profitable investment.

Senator WHEELER. Just answer my question. Do you think it would be possible for me to go into the State of Washington with a view of establishing a power plant in opposition to the power plants owned by the trusts to-day?

Mr. DYER. If power has a monopoly, I don't know. I said in the beginning I did not know. But there are very few monopolies. As a matter of fact, capital is so plentiful now in this country that capitalists will not allow anybody to make a big dividend. Money is plentiful. In fact, it is such a drug on the market that capitalists are seeking places to put it.

Senator WHEELER. Do not you know that it is true as a practical proposition that you could not go into New York and raise any large sum of money for the establishment of any new industry which would be in competition with the power interests or with the railroads or with many other lines of industry in this country to-day?

Mr. DYER. In the first place, the railroads are under the Government, and the Government and the Interstate Commerce Commission would not allow it.

Senator WHEELER. No; but I am asking you if you do not know, as a practical proposition, that you could not go into New York and borrow the money to start in one of these lines of industry if you wanted to?

Mr. DYER. No; I don't know that at all. I would have to get a good deal of evidence on that before I would accept it too.

Senator WHEELER. You could get plenty of it if you tried to. Mr. DYER. But I do know this: And I think every man who knows anything about business knows that business men on account of the enormous capital to-day, are looking for opportunities to make fair dividends, and if there is any field where dividends are above the average capital will rush into that field unless it is a monopoly, and bring them down. That is a law of business, and that is the reason that a man in a protected industry can not have an advantage. If he had it capital would rush in and bring down his dividends.

Senator WHEELER. If he has not any advantage, why does he want the tariff?

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Mr. DYER. His industry might go down if he did not have the tariff. No man wants his industry destroyed. But that does not mean that he is making any larger dividends than men in other fields. Understand, Senator, I am not a high protectionist.

Senator WHEELER. I thought you were.

Mr. DYER. No; I am a Democrat.

Senator WHEELER. You would never know it from your statements. Mr. DYER. I think my interpretation of Jefferson would give me good grounds for my thought.

Senator WHEELER. Some of us do not interpret him that way.

Mr. DYER. That is true. There are all sorts of Democrats now, and all sorts of Republicans. I am a good Jeffersonian, I think.

This would mean that the efficient would be docked and the inefficient rewarded. Suppose this principle had been applied to the automobile business in the early days of that industry, and it is just as logical to apply it to the automobile business as it is to the coal business. The automobile industry is operating under the American theory of freedom in industry, and, if this bill goes through, the automobile business may be the next to be put under the direction of a political commission.

Senator WHEELER. Senator Couzens is not any longer interested in the automobile business, so he does not particularly care.

Mr. DYER. Suppose a political commission had dictated to Henry Ford and General Motors how to run their business, what economies to introduce, what machinery to use, how much to charge for their cars, and where to maintain markets, as this bill proposes for the coal business, and then had limited Ford and others to a "fair" dividend on the capital invested? Old Ford cars-there would not be any new Fords-would be selling for, perhaps, $2,000 to-day, and Henry Ford would be a little-known, small manufacturer. Such a principle penalizes efficiency and great public service, and rewards inefficiency and industrial parasitism.

The application of such a principle would tend to drive both brains and responsible capital to other fields, and leave this great vital essential industry in the hands of the inefficient and the irresponsible. The very obvious purpose of this bill is to repudiate the standard of value fixed by the law of demand and supply, as applied to labor in the coal mines, and substitute for this a standard fixed by the needs of the employees known as a fair" wage.

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Under the American system of freedom of industry there is but one standard of value and this applies to everything. It applies to all commodities and to all services. It is the standard fixed under the operation of the law of demand and supply. The value of a commodity is what it will sell for on an open market. The value of labor or any other service is what it will bring on an open market.

It is true that labor is not a commodity in every particular. But there is no essential difference between labor and a commodity with reference to their valuation on an open and free market. A commodity-a bushel of wheat or a bale of cotton-is fundamentally the stored-up labor, and when the farmer sells a bale of cotton he is as really and truly selling his labor as the man who sells his services to dig coal, and the two valuations are fixed by the same law.