pursuit of empirical investigation would have no other result than to bring out, perhaps ten thousand or ten million times, the same familiar outward relations. The difficulty, and at the same time the scientific problem, is not in acquiring facts, but in mastering and correctly interpreting the facts long since acquired." He then illustrates this by reference to the theory of value. So much for the two divisions of economics (one of which Mr. Cleveland ignores), and the methods of reasoning used in each. It is now necessary to show the relation between these two classes, and the dependence of one method of reasoning on the other. It is well known that the Classical School of economists used mainly the a priori method of reasoning. The German-Historical School attacked this method and attempted to use the inductive method entirely. The discussion carried on in the magazine Science in 1886 reveals the attitude of recent economists toward these two schools. In general, it may be said that both schools of thought are given due praise, and that what is needed is a combination of the two. In combating the purely Historical School, A. T. Hadley says: "The man who tries to reason without rigid hypotheses cripples his powers of investigation. . . . Where the German School of economists has made any advance in the field of political economy itself, it has been done by an abandonment of the so-called historical method, and by a rigid application of deductive reasoning combined with careful verification." Boehm-Bawerk also brings out this point and says that: "It is noticeable that in questions which from their nature require abstract-deductive reasoning, the historical economists invariably have used, and still use, the very same abstract deduction which they, in words, repudiate." It is evident, therefore, that the inductive method is of little use, unless used in conjunction with the deductive. Furthermore, although Schmoller relegates to a despicable "little corner of the great structure of our science" all that can be accomplished by the deductive method, yet it is true that the deductive school uses to a great extent the results accomplished by the old classical economists as a foundation for its theories, and, in fact, could never have accomplished what it has, if it had not had such a foundation on which to build. The value of the deductive method of reasoning is too well understood to need defense here. What it has accomplished in other sciences, such as physics, chemistry, astronomy, etc., is well known. The theories of Adam Smith, Ricardo, and Mill have had great influence on the minds of the people in their practical life, and in shaping their legislation, and although many of their theories were fallacious, yet the science was in its infancy and has had to go through the same evolution and suffer from the same mistakes, as every science. It is not my purpose to lay undue stress on the value of deductive reasoning in economics, and to relegate the empirical method to a less prominent place than it now holds. Economists realize more than ever the results possible through careful investigation and research, and much progress has been made in this direction, especially during the last few years. It must be remembered that a hundred years ago there was a deplorable absence of statistical data, such as we have now, and that the inductive method could not have been used to such good advantage then as now. Furthermore, industrial conditions with which economists are now dealing, are of recent growth, and it takes time to investigate new and changing conditions so as to formulate. any general laws which may be applicable to them. All we desire is that the valuable results of the old school of economists shall not be set aside as useless, and that the science of economics shall not suffer in its reputation among business men as not taking into consideration the actual facts of business. Undoubtedly the majority of the readers of THE JOURNAL OF ACCOUNTANCY are business men, many of whom are too ready to criticise the work being done by economists, and it is only right that they should know the attitude of economists as revealed by the discussions on methodology of recent years. L. D. H. WELD, Instructor in Economics, University of Illinois. To the Editor: Dr. Cleveland's Response. In reply to the criticism of Mr. Weld, first permit me to correct what seem to be erroneous conclusions reached by Mr. Weld in the criticism of the paper entitled "What May Accountancy Teach Economics?" He states "Mr. Cleveland denounces the a priori method of reasoning." This is not intended. The endeavor is rather to point out that many economists have made an unscientific use of the method. Science employs both inductive and deductive reasoning. The use which science makes of the inductive method is: (1) to formulate a working hypothesis as a basis for systematic research; (2) to interpret facts scientifically established by means of research. What are known as the several schools of economists have not used deductive reason for purposes of research, but have developed a philosophy from assumed premises. Again, it is asserted that I have failed to realize that the field of economics embraces two great and distinct classes and doctrines, which may be termed "Social Economics" and "Industrial Economics." This is also an erroneous conclusion. In every relation discussed both of these interests have been specifically brought out. For example; in suggesting a basis for the classification of data pertaining to the economic activities of institutions, these institutions are considered of two kinds: (1) social and political institutions, in which are included the state, political parties, the school, the church and other cultural societies, the family, the fraternity, the club, etc.; (2) institutions organized for private gain, in which are included those having to do with organization and promotion, with investment and capitalization, with insurance and guaranty, and with operative activities such as extractive industry, manufacture, exchange, transportation, etc. In every economic relation adverted to, in the paper criticised by Mr. Weld, a distinction is made between the social and political on one side and institutions of private gain on the other. What I have attempted to indicate is (1) that there are distinct economic factors and economic relations to be scientifically considered; (2) that out of these economic relations different forms of income arise; (3) that for purposes of private income and social welfare certain economic institutions have been evolved; (4) that the data pertaining to these factors, relations, incomes and institutions, together with their functions and activities, are as accessible to students of economics, as are the data of botany, geology or astronomy; (5) that these data may be classified and coördinated, and that conclusions with respect to the whole field of economic activities may be scientifically established. These are the suggestions pertaining to economics. It is further indicated that the method of accountancy is the method of science; that the field of accountancy is necessarily limited to a diagnosis of conditions existing within particular institutions; that the field of economics is one of broad coördination in which accountancy stands in much the same relation as does the clinic to general medicine. The only question which is raised either by the paper itself or by the criticism offered by Mr. Weld is one that has been frequently discussed, viz.: Is the subject of economics one which lends itself to research, or must it remain an abstract philosophy? The paper is a plea for economic research. Many economists openly contend that theirs is not a research science, in which view Mr. Weld seems to share. F. A. CLEVELAND. To the Editor: The Fee Question Again. An editorial in the October number of THE JOURNAL, page 459, referring to the next convention of the American Association of Public Accountants makes mention of "three subjects of great professional interest; namely, advertising, audit companies and accountants' fees." The phrase might well have read (in one respect at least), "of paramount importance," as affecting the future of organized accountancy. The question of advertising may safely be left to each individual to decide for himself. It is well to remember, however, that we never see the profession of law or medicine advertised except in country places to help out a struggling local paper. Audit Companies can be left to chew their cud alone; and any individual or association of accountants will be wise if they refrain from injecting anything acrimonious into that cud. The question of fees, however, to be regulated by any organized accountancy board, overtops the other two. Such action would be impolitic and undemocratic. Who is to decide as to the ability of an accountant to earn a given sum for his services, more or less? Who shall define the class to which A. or B. shall be assigned and the sum they shall receive for their services? And are they to remain in that assigned class until promoted to the class of the Hereafter? And who are these men that are to decide this momentous question of the quality or quantity of gray matter possessed by their less (in their estimation) fortunate associates? The mere proposition savors of arrogance. No, each practitioner, in this as in any profession, must be allowed to regulate his fees for his own services. If he gets his price, well and good; if not, he must adopt the next best course. The adoption of a system of control of fees would prove a stumbling block in the advance of organized accountancy. From associated wage control to the control of a walking delegate is but a short step. Then what? BOSTON, MASS. Very truly yours, J. S. PARSONS. Errata. Members of the American Association of Public Accountants are requested to note the following corrections to the report of the annual meeting in the November number. On page 93 instead of "Illinois Society of Public Accountants," read "Illinois Society of Certified Public Accountants." On page 97 strike out the title "Massachusetts Association of Certified Public Accountants." On page 81 in the statement, "Mr. T. Cullen Roberts was nominated on behalf of the New Jersey State Society," read "Illinois" instead of "New Jersey." Mr. John B. Geijsbeek, of the Colorado Society of Public Accountantants, desires us to state that his remarks before the American Association, as given on pages 79 and 80, were incorrectly reported. Examination for the degree of Certified Public Accountant. July 27-28, 1906. PRACTICAL ACCOUNTING. Friday, July 27, 1906, from 1:30 p. m. to 6:30 p. m. 75 credits necessary to pass, out of a possible 100 credits. Detroit, Each complete answer will receive 16 2-3 credits. Do not repeat questions on examination papers but write answers only, designating the questions by number. The intelligence indicated by answers will be considered in marking the applicants, as well as the technical accuracy of such an swers. I. A corporation is organized under the laws of the State of Michigan, with Capital Stock $250,000.00, of which $100,000.00 is preferred and $150,000.00 is common stock, shares $100.00 each. The purchasers of preferred stock at par are to receive an equal amount of common stock free, all the preferred stock is subscribed and paid for, leaving $50,000.00 of common stock unsubscribed. It is found that the remaining common stock cannot be sold for sufficient cash for requirements and the holders of preferred stock donate to the Treasury $50,000.00 of their common stock. The common stock is sold at 50c on the dollar. Provide journal entries covering the above. 2. A gas company shows the following trial balance at the end of its first year of business: Manufacturing Labor... .$ 5,400.00 Capital Stock.. $ 500,000.00 Accounts Payable. 500,000.00 48,000.00 3,200.00 Gas Accounts 342,600.00 The inventory of Manufacturing Material is The inventory of Distribution Material is No other inventories of any description are carried. $1,390,600.00 .$20,000.00 4,000.00 The amount of gas manufactured during the year was 300,000,000 cubic feet. Amount sold, 270,000,000 cubic feet. Unaccounted for, 30,000,000 cubic feet. |