the established rules of decency have rendered necessary to the lowest rank of people."

Comforts. The dividing-line between necessaries and comforts is not easy to find. Comforts are not necessary for existence, nor, perhaps, for self-respect, yet most people regard comforts as essential to a reasonable standard of living. A straw hat in August is not a necessity and its absence would not be seriously felt, but most men regard it as almost a necessity. A second suit of clothes may not be a necessity, but would be a comfort. Pictures to adorn the walls and cushions for the chairs might also be classified as comforts, though if unusually fine they might be luxuries.

Luxuries. Luxury may be defined as any article which ministers to comfort or pleasure, and yet is not necessary to life or to what is regarded as an ordinary degree of comfort. Luxury does not increase one's ability, although the desire to secure luxuries may be a motive to economic activity. The saying is old and true that the luxuries of one generation are the necessaries of the next, which means that increased production makes it possible to satisfy new wants without sacrificing essentials. What is a luxury for one person may be a necessity for another. An old and valuable violin might be a luxury for an amateur, but a necessity for a professional violinist. An automobile is a necessity for many physicians but may be a luxury for a college professor. One class of luxuries deserves condemnation and to this class belong those luxuries which gratify only the sense of vanity and vulgar display.

* Adam Smith, The Wealth of Nations.

Luxuries do Not Increase Demand for Labor.-We frequently hear the remark that the lavish expenditure of money for a ball or some other luxury is not without its advantages; it gives employment to labor. This is quite analogous to the oft-heard statement that the burning of a building means that masons and carpenters will now have a job. In the case of the house, society is poorer for the loss of the house, even though the insurance company pays the loss and in this case the insurance company must restrict its investments elsewhere to pay the loss. In the case of luxury there is a demand for the labor which produced the luxury, but the expenditure probably would have been made elsewhere if not for luxury, and even if the money had remained in the bank, the bank could have loaned it for some useful purpose.

This whole subject is discussed most entertainingly by Doctor R. T. Ely...

"Shallow as he was, Frederic Bastiat undoubtedly said many good things, and is entitled to our gratitude for having cleared up, as no one else, some of the first principles of economics. Perhaps one of his happiest efforts was his exposition of the difference in industrial society between that which is seen and that which is not seen. A worthy shopkeeper, Jacques Bonhomme, is enraged because his careless son breaks a pane of glass, while the spectators who gather around the scene offer this consolation to the father: 'It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken.' Who among my readers has not heard similar expressions of opinion? And how many of them are there who do not

feel that there is a certain justice in the view of the indifferent but good-natured spectators? . . .

66

'Jacques Bonhomme, the shopkeeper, was just on the point of ordering a new pair of shoes for his wife, for which he expected to pay six francs. These shoes he is now unable to order on account of his loss, and the shoemaker misses his opportunity to earn six francs. This is what is not seen, but it is beyond all controversy that no additional employment has been given to labor because the careless son broke the pane of glass. . . . My good friend who spends two hundred dollars on a single dress sees employment given. She does not perceive that if she had given twenty calico dresses to as many poor old ladies, quite as much work would have been given to sewingwomen. Extravagance finds no justification on the plea that it gives employment to labor." *

Family Budgets. A family is, among other things, a business concern and as such it should keep an account of income and expenses. A well-managed family, from a business point of view, will calculate its income and apportion its expenses so that they will fall within the income. This calculating of income and arranging of expenses is called making a budget. A budget should always include savings, and a budget makes savings possible by eliminating much foolish spending. If the average family could see the total amount spent yearly upon matters of little importance, it would speedily effect a reform. Unfortunately few families keep accurate accounts of their expenses; they know some of the great expenses such as those for rent and fuel, but most families could only roughly estimate such

* Problems of To-Day, chap. XV.

major expenses as those for food and clothing. Not only are the facts unknown to many families, but the investigator finds that his inquiries are resented.

In 1857, Doctor Ernst Engel, the well-known Prussian statistician, published the result of his investigations in reference to family budgets. The following table shows the facts which Doctor Engel's studies disclosed:

From the above table it will be seen that a German laborer with an annual income of $1,000 might be expected to spend $620 for food, $160 for clothing, $120 for rent, $50 for fuel and light, etc., $20 for education, $10 for taxes, $10 for care of health, and $10 for personal services. A man with an income of $3,000 per year would spend $1,650 for food, $540 for clothing, $360 for rent, $150 for fuel and lights, etc., $105 for education, $60 for taxes, $60 for care of health, and $65 for personal services. A person with an income of $10,000 per year would be expected to spend $5,000 for food, $1,800 for clothing, $1,200 for rent, $500 for fuel, etc., $550 for education, $300 for taxes, $300 for care of health, and $350 for personal services.

Engel's Law. From these investigations Doctor Engel derived the following four deductions which are known as Engel's Law:

As the income increases, the relative expenditure for subsistence becomes smaller.

2. The percentage of expenditure for clothing is practically the same, no matter what be the income.

3. The percentage of expenditure for rent, and for fuel and lights is constant.

4. As the income increases, the percentage spent for education, amusements, health, etc., constantly increases. Since Doctor Engel's day many investigations of family budgets have been made, among the most notable those of the United States Bureau of Labor in 1891, which included over 2,000 families, and the investigation of 1903, which included over 11,000 families.

AMERICAN FAMILY BUDGETS

From the Annual Report of the Bureau of Labor for 1903

These budgets and others seem to show that in America

Doctor Engel's conclusions hold in reference to expendi