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Rural Wealth and Welfare: Economic Principles Illustrated and Applied in Farm Life

by Geo. T. Fairchild · English · Gutenberg #32158 · 609,811 chars · public domain (US)

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Title: Rural Wealth and Welfare: Economic Principles Illustrated and Applied in Farm Life

Author: Geo. T. Fairchild


        
Release date: April 28, 2010 [eBook #32158]
                Most recently updated: June 16, 2020

Language: English

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*** START OF THE PROJECT GUTENBERG EBOOK RURAL WEALTH AND WELFARE: ECONOMIC PRINCIPLES ILLUSTRATED AND APPLIED IN FARM LIFE ***





                         The Rural Science Series

                          Edited by L. H. Bailey

                         Rural Wealth and Welfare

         Economic Principles Illustrated and Applied in Farm Life

                                    By

                         Geo. T. Fairchild, LL.D.

                                 New York

                          The MacMillan Company

                      London: MacMillan & Co., Ltd.

                                   1900





CONTENTS


Dedication
Preface.
Introduction. General Welfare.
Part I. Productive Industries: Analysis of Aims, Forces, Means and
Methods.
   Chapter I. Aims Of Industry.
   Chapter II. Forces In Production Of Wealth.
   Chapter III. Labor Defined And Classified.
   Chapter IV. Capital Defined And Classified.
   Chapter V. Personal Attainments.
   Chapter VI. Combination Of Forces For Individual Efficiency.
   Chapter VII. Methods Of Association.
   Chapter VIII. Exchange: Advantages, Limitations And Tendencies.
   Chapter IX. Value The Basis Of Exchange.
   Chapter X. Exchange—Its Machinery.
   Chapter XI. Banks And Banking.
   Chapter XII. Deferred Settlement And Credit Expansion.
   Chapter XIII. Technical Division Of Labor.
   Chapter XIV. Aggregation Of Industry.
   Chapter XV. Special Incentives To Production.
   Chapter XVI. Business Security.
Part II. Distribution of Wealth for Welfare.
   Chapter XVII. General Principles Of Fair Distribution.
   Chapter XVIII. Wages And Profits.
   Chapter XIX. Conflict Between Wage-Earners And Profit-Makers.
   Chapter XX. Proceeds Of Capital: Interest And Rent.
   Chapter XXI. Principles Of Interest.
   Chapter XXII. Principles Of Land Rent.
Part III. Consumption of Wealth.
   Chapter XXIII. Wealth Used By Individuals.
   Chapter XXIV. Prudent Consumption.
   Chapter XXV. Imprudent Consumption.
   Chapter XXVI. Social Organization For Consumption.
   Chapter XXVII. Economic Functions Of Government.
   Chapter XXVIII. Economic Machinery Of Government.
Conclusion.
Index.
Advertisements.






DEDICATION


To The Thousands Of Students In Agricultural Colleges
With Whom I Have Studied Economic Questions
During The Past Thirty-Five Years

This little volume is thankfully dedicated

In Remembrance Of
Many Pleasant Hours

Geo. T. Fairchild





PREFACE.


In giving these pages to the public I offer no apology for a restatement
of fundamental principles always requiring adjustment to new life and
circumstances; but economic literature has usually dealt too exclusively
with the phenomena of manufactures and commerce to gain the sympathy of
rural people. An experience of more than thirty years in handling such
subjects at the Michigan and Kansas Agricultural Colleges, together with
the expressed confidence of former pupils whose judgment I trust, has led
me into the effort to bring the subject home to farmers and farmers’
families in this elementary way.

I have carefully refrained from quotations, or even references to works
consulted, for the obvious reason that such formalities would distract the
attention of most readers from the direct, common-sense thinking desired,
and render the style of the book more complex. I hereby acknowledge my
debt to the leading writers of past and present upon most of the topics
treated, not excluding any school or party.

The statements of facts I have taken from best authorities, with care to
verify, if possible, by comparisons. Many data have been diligently
compiled and rearranged for more exact presentation of facts, and the
phenomena of prices of farm crops have been analyzed with especial care.
The necessities of the printed volume have to some extent obscured the
charts by reduction, but I trust they may be intelligible and interesting
to all students of agricultural interests.

No attempt has been made to argue or to expound difficulties beyond a
simple statement of principles involved, and the spirit of controversy has
been absent from my thoughts throughout. Whatever bias of opinion may
appear is without a tinge of bitterness toward those who may differ. I
trust that men of all views may recognize in these pages the wish of their
author to have only truth prevail.

In offering this volume to farmers I do not assume that all questions of
wealth and welfare can be settled by rule. I hope to point out the actual
trend of facts, the universal principles sustained by the facts, and means
of most ready adjustment to circumstances in the evolutions of trade and
manufacture. The business sense of farmers is appealed to for the sake of
their own welfare. Several important questions of rural welfare have been
touched only suggestively because the limits of the volume could not admit
of fuller treatment.

My gratitude is offered especially to Professor Liberty H. Bailey, of
Cornell University, to whose suggestion and patient attention the
existence of this volume is due.

George T. Fairchild.

BEREA COLLEGE, KENTUCKY,
March 1, 1900.





INTRODUCTION. GENERAL WELFARE.


_Elements of welfare._—The welfare of communities, like that of
individuals, is made up of health, wealth, wisdom and virtue. If we can
say of any human being that lie is healthy, wealthy, wise and good, we are
sure of his satisfaction so far as it depends upon self. When a community
is made up of individuals kept in health and strength from birth to old
age, sustained with accumulated treasures, wise enough to use both
strength and wealth to advantage, and upright, just and kind in all human
relations, our ideals of welfare are met.

These are four different kinds of welfare, each of which is essential, and
only confusion of thought follows any attempt to treat them all as wealth,
however they may be intermingled and exchanged. Health is essential in
gaining a full measure of wealth and wisdom, and perhaps in maintaining
genuine character; but a healthy life gives no assurance of complete
welfare. The facts concerning health in a community make a distinct
subject of study for promotion of welfare, and we call it public hygiene.
The science of education deals with ways and means of securing public
wisdom. The science of government includes all facts relative to public
virtue. So the facts by which we know the nature and uses of accumulated
wealth in any community make a distinct study under the name economic
science; it deals with certain definite groups of facts. To call
everything good “wealth” and everything evil “ilth” adds nothing but
confusion to our thoughts.

_Mutual welfare._—Every human being in society is directly interested in
the study of wealth as related to his own and his neighbors’ welfare. No
one can understand his relations to those about him in the family, the
neighborhood, his country and the world without some understanding of the
sources and uses of wealth all about him. His very industry gains its
reward by certain means in society depending upon economic principles. His
motives for accumulating wealth have a distinct place. His uses of
accumulated wealth are a part of the general facts which make wealth
desirable. So the study of wealth in society must be everybody’s study, if
each wishes to do best for himself or for his neighbors. In such study of
welfare every one finds his interests completely blended with the
interests of others. His existence is part of a larger existence called
society, from which he receives himself in large measure and most of his
satisfaction; to which he contributes in like measure a portion of its
essential character and future existence.

The old idea that one gives up freedom of self for the advantages given by
society has no foundation in fact, because we are born into our place in
society without power to escape its advantages, disadvantages or
responsibilities. The maxim “Each for all and all for each” is thoroughly
grounded in the constitution of man; his needs and abilities enforce
society and insist upon community of interests. Even personal wealth
confers little welfare outside of its relations to other human beings. The
whole progress of the human race tends toward acceptance of the clear
vision of Tennyson, where


    “All men find their good in all men’s good,
    And all men join in noble brotherhood.”


Each stage in the progress of the conquest of nature to meet human wants,
from the gathering of wild fruits, through hunting and fishing,
domestication of animals, herding, and tillage of permanent fields, to the
manufacture of universal comforts and tools, and to general commerce, has
made more important the welfare of neighbors. Even the wars of our century
are waged in the name of and for the sake of humanity. The study of
individual welfare involves the public welfare. Welfare of a class is
dependent upon the welfare of all classes. Wealth of individuals is
genuine wealth in connection only with the wealth of the world. Welfare
without wealth would imply the annihilation of space, of time, and of all
forces acting in opposition to wishes.

_Wealth in farming._—The subject of the following pages is wealth, how it
is accumulated, how distributed to individual control and how finally
consumed for the welfare of all concerned. But special reference is made
to the sources of wealth as a means of welfare in rural life, and to the
bearing of definite economic principles upon farming, especially in these
United States of America. Farming is, and must always remain, a chief
factor in both wealth and welfare, and its relations to the industry of
the world grow more important to every farmer as the world comes nearer to
him. We cannot now live in such isolation as our fathers loved. The
markets of the world and the methods of other farmers all over the world
affect the daily life of every tiller of the soil today. Commerce in the
products of farm and household reaches every interest, when the ordinary
mail sack goes round the world in less time than it took our immediate
ancestors to go as pioneers from Massachusetts to Ohio. It seems possible
to show from the experiences of farm life the essential principles of
wealth-making and wealth-handling, including the tendencies under a
world-wide commerce. These every farmer and laborer needs for his
business, for his home, and for his country.

Nature Of Wealth

_Wealth defined._—If we look at the objects which men number in speaking
of their wealth, we shall soon find the list differing in important
particulars from the list of things which they enjoy. All enjoyable things
contribute to welfare, but not all are wealth. Some, like the air and the
sunshine, if never lacking, cannot be counted, _because no storing against
future need is practicable_; but the fan that cools the air and the coal
that gives heat are counted when they are stored as means of meeting
future wants. If we could not foresee wants of ourselves or of those
dependent upon us, we could not gather means of supply for those wants. If
we had all wants supplied at a wish or a prayer, we should have no
incentive to store. The pampered child whose every wish is met has no
clear conception of wealth or its uses. Let him be without a meal, and he
seeks provision for the future by an effort to save what is left over from
his last meal and by exertion to add to his store in anticipation of want.
Thus wants, to be met only by exertion, are the foundation of the
universal ideas of wealth, and whatever we have stored as a provision
against wants becomes our wealth. If hunger were our only desire, our
wealth would include only stores of food, conveniences for storing, means
of increasing the store, and means of utilizing the articles to be eaten.
Each desire adds to the range of articles which may enter our list of
objects of wealth until enumeration is impossible. None of these, however,
will be stored as wealth beyond the limits of anticipated use: if so
stored, they add nothing to the supposed wealth. An isolated family, able
to consume only thirty bushels of potatoes in a season, is not more
wealthy from having three hundred bushels stored: the wealth is measured
by actual relations to wants not otherwise supplied. Even in a populous
city, the three hundred bushels of potatoes become a store of wealth only
when other people need them and _are able in turn to meet other wants of
the owners_.

Indeed, we soon come to estimate any object of wealth according to its
power, directly or indirectly, to meet the first want that comes. A
cherished memento of friendship may be ever so gratifying, and yet find no
place in our account of wealth, because it can serve no purpose in meeting
other wants.

Any object of wealth may cease to be counted, not because it has changed,
but because wants have changed. The last year’s bonnet goes for a song,
because the fashion changes; the reaper rots behind the barn or at the
roadside, because the harvester is wanted in its place. So the wealth in
any object is limited by its relation to the present or prospective wants
of its owner, and his control to meet these wants. The wealth of any
community is its store of material objects suited to the current wants or
fitted to exchange with other communities for more suitable articles of
use. We estimate it only by thinking of uses in producing pleasure or
preventing pain, its limitations in quantity to a certain range of wants,
and its control for use or transfer by an owner.

_Wealth distinguished from power._—Wealth is not to be confused with power
of other kinds. Power may be for future exertion; wealth is the result of
exertion. Power may take any form of welfare,—health, wisdom, character,
as well as wealth. So no personal abilities can be counted as wealth,
however useful they may be as means of gaining it. Jenny Lind’s abilities
as a singer may have been better than wealth; but exertion of those
abilities in the United States enabled her to carry back to Europe wealth
of which she had none before coming. The ingenuity of Elias Howe exerted
upon the sewing machine has been an immense source of wealth and welfare
to the world, but it alone could not secure him daily food. Your words and
my music combined in a song fit to tickle the fancy of the multitude may
transfer wealth to our pockets, but it was in neither the words nor the
music, nor yet in the song, and still less in the power to contrive them.
If wealth in material things had not been in possession of the multitude,
the same sweet sounds might have given satisfaction to the crowds without
an idea of wealth in the transaction. Much of the welfare of the world is
from exertion of powers entirely independent of wealth. The chief joys of
home are not measured by the wealth in our tenement. The chief welfare of
society is only incidentally connected with wealth.

Chart No. I

_Fluctuation of Farms and Farm Interests since 1850_

At the top is shown the relative size of farms at the close of each census
period, with the number of acres tilled and untilled. The lower part of
the chart shows the changes in different farm interests, especially in the
amount and character of capital employed and the number of people engaged
in agriculture. Assuming the conditions of 1850 to be par, the increase or
decrease is shown for each kind of live stock, the number of farms, the
total farm population, and the number of farm managers, as well as the
valuation of real estate and of live stock. To illustrate, take No. 4, the
number of cattle, excluding the cows. In 1860 there were 1.5 times as many
as in 1850. In 1870, on account of the consumption and disturbance of the
war, the number was reduced to 1.4 times as many. In 1880 there were more
than 2.3 times as many, and in 1890 there were 3.48 times as many. In a
few instances the estimate for 1897, though not an accurate enumeration,
is added for comparison. A careful study of these various changes will
show that while the total population in 1890 was only 2.7 times the
population of 1850, the total number of people employed in farm
occupations of every kind was 2.88 times as great; although the number of
independent farmers was only 2.28 times as great. The total value of real
estate in farms was over four times as great, and the total value of live
stock exactly corresponded. The number of cows, sheep and hogs had not
kept up with the population; while the number of beef cattle and horses
and mules had increased much more rapidly. The fact that the value of live
stock had increased in much greater proportion than the numbers shows that
there has been great improvement in the individual character of the
animals. That the average wealth of farm proprietors is more than
three-fourths as large again is shown by comparison of the number of
farmers with the value of the farms. That the number of mules, cattle and
hogs actually decreased between 1860 and 1870 indicates the enormous
consumption of the armies in the Civil War.

                                 [Chart.]

  Chart I. Showing the rate of increase in farms and farm live stock as
             compared with population. See explanation, p. 8.


Chart No. II

_Progress of the United States in Farm Crops since 1850_

This chart indicates to the eyes facts shown by the census reports as to
the relative increase or decrease of certain staple crops in comparison
with the population. Assuming the conditions of 1850 to be par, the
several lines indicated by numbers show the ratio of the several crops to
the crop of 1850. Thus the wheat crop in 1860 was nearly .75 greater than
in 1850; in 1870 it was 2.87 times as great; in 1880 it was nearly 4.6
times as great; only a little greater in 1890, but in 1897 was nearly 6
times as great. It should be remarked that the census returns are founded
upon the crop of the previous year, and therefore, will not exactly
correspond with current estimates. At a glance it will appear that rye,
buckwheat, sweet potatoes, sugar and rice have nowhere nearly kept up with
the increase of population, while all the other crops have been
considerably in excess. The barley crop could not be shown upon the chart
for want of room, but is more than fifteen times as great. The cultivation
of fruits is estimated to be twenty times as great, although the census
returns give insufficient figures for accuracy. It is evident that the
people of the United States demand a better living, as well as raise more
profitable crops, than in 1850. Some striking illustrations of the effects
of the Civil War are seen in the falling off of many crops during that
period. Only oats, wheat and potatoes increased beyond the increase in
population. Most of the others actually diminished; and the staple
products of the southern states prior to the war have scarcely as yet
regained their previous standing. This is accounted for in part by the
immense destruction of capital, but in larger part by the entire change in
conditions of plantation cultivation.

                                 [Chart.]

   Chart II. Showing the rate of increase in total crops for the given
                     period. See explanation, p. 10.


_Wealth in material objects._—Our attention is called to wealth in
comparing two material objects of desire. One has more uses, more
important uses, more rare uses, than another; or one is less easily
obtained than another. In either case we prize that one in store, as the
more important. We compare two farms, as material aids to different
owners, and call both wealth in different degrees. We note the condition
of two countries as to all the machinery of industry, and know that one
has greater wealth than the other. We compare the accumulations of this
generation with those of our fathers, and rejoice in our advance in wealth
as one important form of power to gain a genuine welfare. Thus, in
comparing our country’s inventory by the census of 1890 with that of 1850,
we find that while its people are only 2.7 times as many, there are 3.15
times as many farms of exactly the same number of acres, though more of
each is cultivated, and that the value of property used in farming is more
than four times as great; so we know that the farmers have increased in
wealth and welfare as compared with our fathers. See Charts I and II.

_Rural wealth analyzed._—A brief analysis of rural wealth in any
established community will help to understand the meaning of the word and
its relation to welfare. First may be named the farm fields and
plantations brought by exertions continued through long years from raw
forest or prairie to present tilth and productiveness. An English farmer,
when asked how long it took to establish a certain permanent pasture,
replied, “Three hundred years.” Second, all fences, drives and farm
buildings, for convenience of handling and storing produce and stock.
Third, all the tools and implements of the trade. Fourth, all domestic
animals of every kind, and all attendants of their sustenance and growth,
including feed and manure. Fifth, all contrivances for marketing and
preparing for market. Sixth, all highways between neighbors and toward
market. Seventh, all local elevators, stock-yards and depot facilities.
Eighth, the homes, with all material comforts and utensils. Ninth, any
store of provisions in cellar, pantry, smokehouse or bin. Tenth, all
personal belongings for clothing, adornment and enjoyment. Eleventh, the
family libraries and associated treasures. Twelfth, any actual store of
gold, silver or other current wealth available for future wants. This does
not include notes, mortgages, bonds, or any other promises to pay, nor
certificates of stock in any business enterprise, because these are mere
titles to wealth supposed to exist elsewhere,—as distinct from the wealth
as the deed is from the farm. Thirteenth, any peculiar advantages of
location, scenery, pure air, pure water and agreeable temperature, that
are controlled by owners for personal advantage or enjoyment, and can be
objects of desire to others. Fourteenth, any “good will” attached to, and
part of, particular farms, due to long established methods and facilities
in preparing or marketing produce. If such “good will” is attached to a
person rather than to the place, it is not wealth, but power.

The last two are seldom distinctly enumerated by the assessor, yet they
are clearly estimated in any exchange of places or transfer of titles.
They are owned, used and transferred like other forms of wealth, and save
future exertions to obtain them. All these are wealth because they
contribute to welfare through being accumulated materials to meet future
wants, and are to be measured in any estimate by their relation to the
wants they will satisfy and the exertions they will save.

_Future wants certain._—Wants and exertions are readily seen to be at the
foundation of all ideas of wealth as indicated above. If we are uncertain
as to the continuance of any wants or uncertain as to the conditions for
meeting those wants, we stop accumulation of materials for satisfying
them. Exertion stops unless the satisfaction to be gained by our effort is
foreseen with a reasonable certainty. The farmer is never absolutely sure
of returns for his labor upon the cornfield; but he is reasonably certain,
and is absolutely certain that the crop will not come without labor. This
assumed continuance of individual wants and their relations gives the
grand motive for wealth gathering.

The means of protection and support for physical life will be needed by
ourselves and our children. Tools of better form and machinery of better
manufacture will be needed to reduce exertion in future. Reduced exertion
for a given satisfaction will mean a fuller supply of things we are going
to need still. If these wants are fully met, we are going to have leisure
to satisfy larger and higher wants. It is the certainty that each advance
of wealth will bring advancing wants to consume more wealth, that gives a
genuine motive to activity in gaining wealth, i.e., in accumulating the
things to be used. The degree of uncertainty in all future plans leads to
over-estimating the importance of gold, diamonds or any forms of wealth
that can most easily be transferred between places or individuals, or be
turned to account in each change of necessities.

_Ownership._—The importance of wants and exertion emphasizes the
importance of the individual self in all ideas of wealth. The _ownership_
of one’s _own_ abilities and their products is absolutely essential to his
care for accumulation, and that care is in proportion to his security in
such ownership. Directly or indirectly, every exertion and every sacrifice
must depend upon confidence that it will bring its object; but
wealth-getting has no object without control, in some measure, of results.
This fact makes individual ownership an essential to the highest exertion,
a natural sequence to the right of liberty.

Property rights are grounded in the general and individual welfare, as
shown in human nature and in the progress of the world along the line of
protection to property. Those communities are most happy which best
protect individual property. As J. E. Thorold Rogers remarks, “Sacredness
is accorded to private property, because society prospers by it.” Even
theorizers who denounce individual property-holding found their argument
upon the equity of individual rights in property. War is less harmful than
anarchy, because it ensures a measure of control. Slavery has sometimes
been less injurious than war in giving security to enjoy a portion of
self. But a conquest of freedom by bloodshed is worth its cost in
self-control. Civilization advances as individual responsibility for
property, as well as everything else, is recognized.

Christianity is ideally practical in upholding every man’s right to
self-control in the interest of all. It distinguishes equity from equality
in distribution of all good, wealth included. Public property is rightly
public when the wants and energies of all the community are best provided
for by such common ownership. Proof in each particular case is essential
against the presumption that individual needs are the best impulses to
provision for welfare. Even common property is limited necessarily to the
numbers who can use it. No property or wealth can exist for anybody
without the control of some human individuals for whom it is accumulated.

_Wants individual._—We are likely to lose sight of the essential
individuality of wants and exertions which make wealth possible, because
in any community exchange of services modifies the direct relation of each
man’s wants to his accumulations. Assuming that others, wanting food, will
exchange clothing for it, one man stores food alone, but in quantities far
beyond his own need, measuring its relation to all his material wants
through the wants and exertions of others. He feels even more sure of the
continued activity of wants and powers among a multitude than if he had
but one neighbor; but individuals, after all, must need his products and
exert themselves to meet the need, or all his calculations fail.

_Progress in welfare._—Economic progress must show a larger welfare to
individuals of the community. The familiar figure by which a commonwealth
is compared to an animal organism fails to include the important fact that
the individuals of the commonwealth furnish the only reason for the
existence of the commonwealth itself, as well as its only means of
existence. The cells of the animal, or even the most important organs,
have no reason for existence in themselves. Each individual man furnishes
the reasons for his activity, and the needs of individual men furnish the
only reason for having a commonwealth.

We can speak of progress, then, only when these individuals secure a
better use of wealth in some way. It may be by accumulation through saving
from the full years for the empty, as older communities can endure a
drought with little suffering, while pioneers are ruined. It may be by an
increased product for a given exertion, as illustrated by every
labor-saving implement upon the farm or in the factory. It may be by
lessening exertion for a given product, as in the devices of kitchen and
dairy to make tasks lighter. It may be in better distribution of the total
product through readier and fairer exchanges of services or products, as
happens with every improvement in transportation and every means for
fairer understanding in a bargain. Lastly, it may be in more economical
expenditure for common wants, as in maintaining government machinery.
Usually, progress has been marked along several of these lines at once, if
not all of them. There is reason in the statement of Charles Francis Adams
that the last century far exceeds the gain of a thousand years before.

_Production, distribution, consumption._—Full consideration of rural
wealth as related to welfare must first give the principles upon which
wealth is produced, including exchange with all its machinery; for the
marketing of produce is today one of the chief steps in securing wealth by
farming. The thrifty farmer of today is the man of most business tact and
energy, who uses most approved means of raising, handling and marketing
his goods.

It also requires a careful study of principles upon which any product of
exertions, where more than one person has contributed toward the whole,
can be fairly shared between the producers, however they have helped. A
farmer is as thoroughly interested in problems of rent, interest and
profits, if not in wages, as any other worker for wealth or welfare.

It further involves the study of economic uses for wealth, private and
public, since no wealth has found the true reason for its existence till
the uses to which it is put are known. This includes all questions upon
the economic functions of government, the ends to be served, and the
raising and handling of revenues. If any patriots need to know for what,
how and in what measure their country is dependent upon their own
resources, it is the farmers, whose homes make the bulk of the land we
love, whose children furnish the bone and sinew of industry, and whose
interests are most sensitive to misdirected energy in public
administration.

_Security in stable government._—Agriculture, of all industries, can
flourish in that country alone where personal and property rights are
fully understood and respected, where claims are equitably adjusted by a
stable government, and where taxes are properly apportioned and revenues
economically expended.





PART I. PRODUCTIVE INDUSTRIES: ANALYSIS OF AIMS, FORCES, MEANS AND
METHODS.




Chapter I. Aims Of Industry.


_Production defined._—A very little thought shows that men produce nothing
in the sense of creating. All production is simply overcoming obstacles to
satisfaction of wants as we find these obstacles in space, time and form
or substance of natural objects. In doing this we are confined to mere
ability to move things. The very highest effort of man’s energy today but
proves the saying of Lord Bacon, “All that man can do is to move natural
objects to and from each other: nature working within accomplishes the
rest.” This is fully illustrated in farm operations. The bringing together
of soil, seed, sunshine and shower, according to their natures, secures
the product of nature—a crop. Moving food and water to the steers, or the
steers to food and water, under proper conditions of warmth, air and
exercise, produces beef. To know how and when and where to move things so
that nature may meet our wishes by what always happens under the same
circumstances, would be to have all the arts of life; in short, production
is the art of moving things. But we distinguish different kinds of
production according to the direct results expected from our motion, as
reducing space and time, modifying the form, or changing the substantial
qualities of things handled.

_Transportation in production._—The change of place necessary to bring
together wants and those things which satisfy them is a method of
producing wealth most apparent everywhere. The bringing of wild fruits
from the forest or the swamp to the home gives them worth. The mere
transportation, change of place, gives them an importance they did not
have on the trees or bushes. In this transportation we put the energy
necessary to take grain from the fields all the way to the bake-ovens, and
finally to our mouths, or to carry the milk from the stable or yard in
pail, can, wagon, train, delivery cart and bottle, to the lips of the
child whose life it maintains. Every kind of material or force expended in
this process of overcoming space is used in the idea that the object is
worth the expenditure in the place finally reached. If the motion stops
anywhere along the way, the wealth is not obtained, or at least is held
only in expectation until the motion can be completed. While each of fifty
individuals may give a hand, and pass his claim to the next for a
consideration, the wealth is all the way increasing in anticipation, as
the object comes nearer its use.

In this progress time as well as space is an important obstacle to be
overcome, and we employ all means of increasing speed, or preserving
against what we call “the ravages of time,” i. e., the operation of
injurious forces acting in time upon most material substances. The methods
employed for storing, curing and forcing to maturity the various forms of
food needed in a community are aimed at meeting this obstacle, and add to
its final worth; indeed these may be the means of giving value to all the
other efforts in transportation, as in moving beef from Kansas City to New
York, or fresh fruit from San Francisco to Boston.

In the same process of putting things where they are needed, all merchants
are engaged. Without the store, the order upon the shelves, the ready
attendant and his despatch in meeting your demand, the pounds of sugar or
salt essential to your comfort could not be had for love or money. These
efforts are an essential part in the motion between wants and objects to
satisfy them. Much of this kind of motion we include under the name
commerce, though that word more directly implies the exchanges involved.
The machinery of commerce is chiefly the means of bringing things wanted
to the people who want them.

Much, however, of the exertion required in all industries, especially in
farming, is simply “to fetch and carry.” It will emphasize this fact to
study, while you eat a piece of cherry pie, the processes involved in
bringing it from the treetop, grainfield, dairy and cane-field, through
mill and store and pantry and oven, to your plate. Transportation cuts a
tremendous figure in production of wealth. In the first stages of social
life it is almost the whole. The hunter talks of “bringing in” his game.
Australians, Hottentots and Digger Indians lived by carrying themselves
from one supply of food to another.

_Transformation in production._—Much of the material gathered by us needs
some change of form to suit our wants. An ax-helve has in it the original
wood of the young hickory brought from the forest, but its form is
fashioned by effort with ax, drawshave, scraper and sandpaper, until it
satisfies the judgment of an expert chopper. This transformation is
employed in any industries where wood, ivory, the metals and other
minerals are shaped by tools, or by molding, or pressing or bending, to
our wishes. Most fabrics are materials put into form. The word manufacture
covers most of such work where materials are manipulated by shaping; but
it also includes many operations with a different aim, to change the
substance itself.

_Transmutation in production._—Men have found that two metals, tin and
copper, melted together produce brass, different in qualities from either.
Farmers have for many centuries contrived, by keeping nature’s forces
under control in the wheat field, to combine certain elements of the soil,
including its moisture, into grain. The single seed has multiplied a
hundredfold through being placed in favorable conditions, with the raw
materials at hand in the fertile soil.

The process of maintaining animals with suitable food for the production
of milk or flesh is similar. The combination of flour, water, salt and
yeast, by heat, first mild and then intense, into a loaf of bread is a
good illustration of a change of qualities by rearrangement of the
elements of a substance. It is sometimes called transmutation, and comes
the nearest possible to creation of material things. The chemist’s
laboratory exists for making such new combinations, and many of the arts
produce materials, like steel, which would not exist without such
combination. But many have seen in the art of agriculture a most prominent
illustration of transmuting coarser elements into products adapted to
human wants for food, shelter and adornment. All such work, however, is
done by bringing objects and forces into such contact that chemical or
vital changes will take place while we wait.

_Production extended._—In all these three directions, or in any
combination of them, transporting, transforming and transmuting materials,
men seek the production of a supply for meeting anticipated wants, and so
contribute directly or indirectly to welfare. No one way of producing what
men need, where they need it, and when they need it, has any superior
claim to the name production. All are making the material yield up welfare
to the one who needs it, and produce wealth just so far as their services
are necessary in bringing the welfare. If ever any step in the process
becomes useless, it ceases to be productive of wealth and becomes waste.
The inventive powers of mankind are always at work to shorten the
processes and hasten the advantages of production. Men study the minutest
workings of nature to find the conditions under which she does her part of
the work. The application of such minute knowledge is a chief part of
every art. This is also the object of science; for, as Guizot says, “It
only began to have a well defined existence when it confined itself to
seeking the ‘how’ rather than the ‘why’ of nature’s workings.” This
purpose sustains in the United States more than fifty agricultural
experiment stations, united in a great organization, to find how the
natural forces used by farmers do their work.

This prophecy of a noted economist is warranted: “Probably the greatest
economic revolution which the youth of today may in his old age behold,
will be found in this all-important branch of our industries.” When we
know how nature works, we can adjust our little motions in time and place
to promote that work; we shall have the art of moving things to suit our
needs. Nothing can be truer than Tennyson’s line, “We rule by obeying
nature’s powers.”




Chapter II. Forces In Production Of Wealth.


_Nature._—When men learn to meet their wants by exertion in accord with
nature’s ways, they are said to use the forces of nature in production of
wealth. Every accumulation of materials for satisfying future needs
implies some control over natural objects. If advantage is taken of
natural motions or other activities to bring about larger accumulation,
the man whose plans secure this has gained control over, and so
property-rights in, the natural force which he has harnessed. The wind
caught by a sail and the water controlled by a dam contribute to the
power, and indirectly to the wealth, of the man who contrives to make them
move things for him. The directive actions of men necessarily appropriate
the natural objects which they use, together with all the qualities of
those objects.

_Energy._—Human exertion produces wealth, as we have seen, whenever it
anticipates and provides for future wants by securing at hand the things
to be used. So far as this anticipation includes control of forces or
qualities in nature, these natural agencies contribute to wealth of
individuals or communities. So voluntary human exertion is combined with
involuntary forces of outside nature to give wealth. No amount of gold in
Alaska is wealth until some human ability has appropriated it to human
uses; but the mere fact of locating a claim for mining purposes gives the
prospector advantage over any other man because of his foresight. So every
activity of nature may become a factor in wealth by human ingenuity in
making it useful.

_Natural forces._—Such natural agencies for producing wealth are seen in
the simple properties of material bodies, such as the metals or woods or
grains or fruits or flowers possess. We secure these properties for our
uses. Gravity, sound, heat, light, electricity, chemical affinity,
crystallization, even life itself, are names for certain forms of energy
in nature which men are using more or less to meet their wants. Whenever
exertion is needed to provide for using these, the thought of wealth is
connected with the forces themselves. The fish in the sea and rivers
become wealth to one who has caught them, and even more distinctly the
property of the community which has protected them in breeding. Sunlight
may reach all alike in welfare, but the man who has contrived to make it
print pictures for him has made sunlight into wealth in the picture.
Equally so the farmer’s energy and contrivance use the properties of soil
and climate and the vital energies of seeds to make wealth in a crop.

_Control for welfare._—As each individual worker gains control over any of
these properties or forces he advances in wealth and welfare. It becomes
his own means of meeting wants. If all individuals in a community share in
such control, they think of the good things as part of the general
welfare, and do not enumerate them in anybody’s wealth except when
comparing their own condition with that of another community. Advantages
of this kind constantly tend to become more universal, and so to count
very little in individual wealth. Many advantages of civilization today
belong to all the world alike, so that nature seems to meet our wants
gratuitously; but the story of progress shows that these are gifts
inherited from the wealth of past ages. The human exertion which they once
cost is overlooked in the ease of the present. Mere fire was once a
treasure to be cherished and kept at much expenditure of strength and
foresight. Now we kindle a fire so easily that nobody thinks of it as a
part of the world’s wealth.

_Land as a force._—Land represents a combination of natural energies and
properties so important as to be named sometimes as a distinct force in
production. It implies, first, needed space for various kinds of exertion
in both country and town. Second, it includes all mineral, vegetable and
animal bodies that are found above, on or under the surface. Third, it is
soil, an essential part of a farmer’s equipment in using nature’s
processes of growth.

As most of these properties of land can be put to use only by repeated and
continued exertion in the same place, a large portion of the earth is
necessarily apportioned to individual control, i. e., to the ownership of
those who can direct its uses, and so it becomes wealth. The sea in most
of its uses to men requires no such local control, and so is not owned by
a nation even; but the harbors, ships and wharves, the oyster-beds and
fishing banks, soon become the property of some body of men that will make
and keep them useful. Even a pathway over the high seas may yet be
controlled for the safety of the huge steamers that dash across.

Land, except when used for absolutely universal welfare, must be under
individual control, and even then other individuals may have the right of
way because of its necessity in the common use. Peculiarities of property
in land arising from limitations in quantity or quality will be spoken of
under _Scarcity Prices_ and _Rent_. They differ from similar questions as
to any other form of property only because this form of property seems
more permanent. Any force of nature brought under control by individual
effort contributes to wealth of individuals till all gain equal control.
Peculiarities of climate affect the quality of wool, cotton, grains and
fruit, and even the beef and mutton raised under it. But these effects we
connect with the land. Such peculiarities also affect manufactures of
various kinds, and so location has value.

_Effort for gain._—Voluntary human effort is always made with the
expectation of gain from its exertion; otherwise it would not be made. As
Guizot says, “Our ideal is to procure the maximum of utility with the
minimum of effort.” The exertion is always counted in the cost of any
product, whatever the natural forces employed. If the crop fails, or the
product is unsalable, the effort has lost its expected reward, and
prospective losses are estimated with more or less care in judging whether
a product is worth the exertion. The half crop of a droughty year costs as
much as the full crop of a plenteous year, and compensation for the loss
is expected from the surplus of the full crop.

In estimating the exertion given, all human energies are counted, whether
they belong to the present, like muscular power, good eyesight, quick
intelligence; or to the past, like dexterity from training, superior
knowledge, accumulated tools, established character. If the immediate
exertion is most prominent, the word labor includes the whole exertion. If
tools and machinery are used, capital is a contributor to the product and
takes its share. If skill or knowledge or character become important,
personal attainments are a chief cause of the product, and so a chief
claimant in the reward.




Chapter III. Labor Defined And Classified.


_Labor defined._—Exertion of any kind for meeting individual wants we call
labor, whether it simply gathers food from the forest, or contrives the
most intricate machinery for satisfying wants that may take years to grow.
Exertion that has no end beyond itself, no matter how severe it may be, we
call play, and consider it important in public welfare only as it aids in
health and morals. Labor is separated, too, from all exertions to destroy
or injure the welfare of others, if we can see their object. Any person
claiming to labor professes to have given his exertions for the
satisfaction of somebody’s wants without doing violence to the welfare of
others in the community. Whenever we do not assume this we concede a state
of war, violence and destruction taking the place of production and
accumulation. These may require exertions usually classed with labor; but
are punished instead of being rewarded, unless we can establish their
final advantage in a larger welfare for humanity, or in defense of
society.

_Productive labor._—The various classifications of labor serve merely to
call attention to peculiar relations implied in the results. If exertion
results in giving additional wealth, or power to produce wealth, it is
called productive labor; but if it contributes only to immediate comfort
or pleasure or safety it is called unproductive. The distinction is useful
so far as it enables us to be prudent in adjusting energies to meet real
wants. All labor is maintained by the product of exertions. Any labor
expended without a product must be provided for by an increased product
from some other form of labor. A farmer may sustain life upon the food he
raises; but the wife who makes his house a home cannot live on the product
of her labors. She may add to the value of some products directly, as in
turning milk into butter, and raw materials into palatable food; but her
chief energy may be in getting satisfaction for the household out of
materials gained by her husband. Both are essential to the welfare of
either, and prudence requires a proper adjustment between them. A force of
physicians may be needed to keep a community in working condition; but if
a whole community tried to live as doctors some other community must
furnish the material wealth to sustain them.

Any increase of labor upon material products, either directly or
indirectly, may increase ability to meet future wants, while increase of
labor upon present uses of wealth may diminish ability for the future. The
wealth of a community is the product of all the labors that contribute to
make material nature useful. This classification is important in studying
the question of productive consumption of wealth, but does not decide
which gives best results. It is a serious error to assume that the worker,
whose labor is directly applied to materials, gives to our wealth all its
value. If several men are building a house, one may contribute as much to
the building by cooking for the rest as if he worked in turn in the
construction. In the same way all the household, if well ordered, aid
toward the result of their united labors. The physician who shortens the
illness of a farmer contributes his share toward raising the farmer’s
crop. The lawyer who makes property safer, and the minister who gives
stronger motives for exertion, are sharers in the force that brings the
product.

_Physical, mental, moral labor._—The classification of labor according to
the powers employed serves to call attention to the wide range of
exertions rightly classed as labor. If the exertion is chiefly muscular,
labor of hands, shoulders, legs or any part of the body, it is properly
called physical. If the main effort is that of the intellect in planning,
inventing, contriving ways and means, or in remembering, counting or
thinking of any kind, it is just as truly labor, but mental. If the chief
exertion is in the good will that resists temptations, guards interests,
controls violence and folly, secures order and devises liberal things for
society, the labor is moral. Moral labor is often recognized in wages,
faithfulness being more important in some services than in others, and
paid for. Mechanical devices for promoting honesty or watchfulness may
save, in part, moral labor.

This view of labor helps us to see the wide range of efforts that unite in
production of wealth, since all the energies of a man may be employed in
his work. The successful farmer is one who makes the most of all his
abilities—his muscles, his mind and his heart—and his hard work is far
from being confined to his hands. The three kinds of labor are combined in
some proportion in every life, but the best and most productive life his
most room for hard thinking and self-control.

_Operative, executive, speculative labor._—In the advancing complexity of
society a still more important classification of labor is apparent. If a
man’s effort of any kind is simply to follow directions in an established
routine, it is called operative labor, and the laborer becomes an
operative. He works usually by the day, hour or piece, under a foreman or
overseer. Beyond the task set for him, he has no thought nor will. Over
him is a director—the foreman, overseer, contractor or boss—whose chief
effort is to carry forward to completion some plan committed to him as a
trust. The foreman’s labor is largely mental and moral in adjusting tasks
and keeping the operatives, “the hands,” well employed. This is well named
executive labor, and requires peculiar abilities and character.

Still farther away from the mere task is the effort that devises the plan;
adjusts part to part, decides upon materials suitable for each part,
establishes the ideal of excellence for every part and for the whole, and
foresees its actual uses. Invention of every kind illustrates the exertion
of foresight in planning, but such exertion is not confined to technical
invention. The farmer who lies awake nights to plan his year’s work so
that he may have the largest returns for his undertakings in marketable
products, gives the same kind of effort as the inventor. A good name for
this is speculative labor,—an exertion to foresee and provide for future
needs of society.

In much of farm life all these are mingled: the same man devises the plan,
executes his own ideas, and performs the tasks himself. But every one
realizes the difference of success growing out of the planning. Many a
good man needs to follow another’s plans, and not a few “work better for
others than they can for themselves.” In some great undertakings the
projector and planner, the contractor and overseer and the worker of
details are necessarily separated. This may be well illustrated in the
construction of a great building, for which an architect gives all
attention to a plan, and may require a considerable force of assistants
and draftsmen to embody his ideas on paper; then contractors, one or
several, secure material, employ men and direct them in placing materials
in form and combination to suit the plans; but a host of workmen move as
directed at the will of a foreman to pile brick, mortar, stone, iron or
timber according to the plan. The labor of the architect makes possible
the entire structure—makes the work for all that enter into his labors.

This classification into speculative, executive and operative labor helps
to a fair estimate in sharing the proceeds of combined labors, and gives a
proper importance to the inventive and foreseeing energy which causes the
growth of civilization. _That form of exertion which has done most to meet
the world’s wants is speculative labor._

_Invention in farming._—A capital illustration of speculative labor,
productive in the highest degree, is the invention of reaping machinery.
The inventor has gained riches by his contrivance, but the world has
gained far more by his foresight and ingenuity. Similar energy has been
put into all labor-saving machinery, and still plays an important part in
devising the best uses for it.

Every farmer has a similar need of planning for every field he plows.
There is a certain draft for each horse, a certain speed for the plow, a
certain adjustment of harness to the team, which gives a full return for
the force employed. A failure to find this causes waste. All the effort of
scientific research into causes and conditions of growth or disease of
plants and animals is speculative labor, out of which the next advance of
agriculture must come. The mere operative power of a laborer can be
supplanted by brute force or by machinery, but nothing can ever supplant
the intelligent foresight that invents, plans and devises the end to be
reached, and the ways and the means for reaching it.

The very foundation of any success in farming is clear foresight and
distinct planning for a succession of crops, each to be tended, harvested,
stored and marketed in the very nick of time. The best energy of every
farmer is properly given to finding what crop to raise, how and when to
have it ready for the world that is going to need it. He best meets his
own daily wants when “Mr. Contrivance” stands by him in all his efforts.
This contrivance is the chief exertion of a successful farmer’s life.




Chapter IV. Capital Defined And Classified.


_Capital distinguished from wealth._—Whenever material wealth is used not
directly in meeting present wants, but to produce more wealth suited to
future wants, it is called capital. Any store of good things devoted only
to meeting wants as they come is thought of as wealth, as well as possible
capital, since at any time it may be made the means of creating other
wealth to more than take its place. The distinction grows wholly out of
the uses of wealth, not its forms. A horse used, or to be used, as a force
in production by drawing loads is counted as capital; but if used for mere
pleasure-riding is only wealth, which leaves no material return when
consumed. Thus the same horse may, in the hands of a breeder, a trainer,
or a liveryman be capital, but in the hands of a fancier or a pleasure
seeker be only wealth, to be used as wanted.

Wealth in dwellings or public buildings constructed for enjoyment rather
than protection of a working community is not capital, and may be
destroyed by fire or storm without serious disturbance of industry. The
loss is bravely met, the hardship endured and extra energy put into
restoration. A farmer may lose a fine house and by living in less comfort
for a time restore it, while the loss of his teams or his barns may
cripple his industry. In the great Chicago fire of 1871 the wealth
destroyed is estimated at $50,000,000, while the loss of actual capital
may have been only $5,000,000. An energetic use of the capital remaining
wrought apparent wonders in the restoration of wealth. Indeed, the total
capital of our country is supposed to be only three times the annual
product of industry, though a century of labor could not restore it if
destroyed entirely, because effective tools would be wanting.

The capital of an individual is such a portion of his wealth as he is
using to maintain and increase his wealth. The capital of a country
includes all the farms, so far as they are made such by improvements
directly or indirectly, including all ways and means of communication and
transportation, for roads contribute to all goods drawn over them; all
buildings devoted to systems of production, including necessary protection
of laborers themselves; all tools, machines and contrivances for power;
all animals employed in connection with industry; all materials of
construction or growth; all materials consumed in securing and maintaining
power, as fuel, lubricating oil, etc., or in performing operations of
manufacture, as dye stuffs; subsistence for the workers, the brutes they
use, and the families which keep up the life and comfort of the people;
the necessary stock in trade, that all wants may be readily supplied; all
the machinery of trade for ready transfers, including any actual wealth in
form of money; all the governmental machinery for protection and
maintenance of order, as a first essential to wealth-producing.

All these are more simply grouped in their different relations to labor
under three classes: first, as sustaining labor by food, clothing,
protection and material on which to work; second, as aiding efficiency by
tools, machines and stored up forces; third, as stimulating exertion by
reducing present anxieties and arousing more far-reaching plans for future
undertakings, illustrated by possession of satisfactory stocks of goods or
comfortable homes for families.

_Capital a time-saver._—All these forms of wealth serve in production by
extending the possible waiting between an effort of any kind and the
greater satisfaction secured by it. No community could begin farming as a
business until it had secured housing and seeds and tools and provisions
in some form for most of a year’s sustenance. All the capital that
constructs a great thoroughfare is used in getting ready to satisfy wants
in many future years. Capital furnishes subsistence for laborers of every
kind during those years of waiting for a product. This is true capital,
because the object of its use is a greater product of wealth; but the
product may be long delayed. So all accumulated wealth in every form
represents sustained labor during the past. Professor Taussig estimates
the accumulation of subsistence in all existing goods at five years of
labor for the community. The total value of farms in our country is just
about five times the average annual product of the farms, though a large
portion of the land is unused.

_Capital circulating or fixed._—A further distinction is desirable between
capital in food, fuel or stock in trade, which may be turned at a single
use into new wealth, and capital in buildings, bridges, roads and farms,
which may be used many times in adding new wealth before they entirely
disappear or give place to new forms of capital. The first is called
circulating capital, and the last fixed capital.

The degree of permanence in fixed capital is indefinite of course—even
drains vary in permanence—and the line between the two is not always
easily drawn, yet the distinction is real. Most men distinguish “the
plant” in any enterprise from “the current supplies,” and realize that
some fit proportion exists between them. A farm well equipped can not be
handled to advantage without a proportional investment in current
supplies. Many a renter cannot pay his rent for want of means to work his
farm profitably. If the farm were given him, he would still be hampered by
the same lack of consumable goods to turn at once into larger products.
Many a “land poor” farmer would gain at once by exchange of acres for more
“current supplies” for his farming, such as food for help, feed for teams
and stock, seed or fertilizers for his crops, or young stock to consume
the raw product of his fields. In the fourteenth century the stock of
European farms was worth three times the value of the farms. Similar
conditions are found now in some newer portions of the United States. It
is impossible to estimate exactly the existing ratio between fixed and
circulating capital from statistics at hand. Farmers in older, more
developed regions can use, without suffering, a larger per cent of fixed
capital than pioneers can, because the circulation is more rapid. For the
same reason the raising of staple annual crops gives place to double
cropping, dairying and full feeding as land grows more valuable, frequent
returns serving instead of large circulating capital.

In general, the wealth of a community is better judged by its fixed
capital, while its thrift is known from its circulating capital. Fixed
capital is always secured by consumption of circulating capital. The
extension of railroads always implies great reduction of ready supplies.
Money _between_ individuals and communities ranks as circulating capital,
but _within_ any community the stock of money needed for domestic trade
may be thought of as a permanent machine. Even machinery may be
circulating capital in the hands of one who manufactures or sells it,
though fixed when located in its work, and for the whole community is
“fixed” as soon as its destined use is determined by its form. Thus the
distinction, though real, is flexible. Its importance in discussing the
industries of a country, or in understanding the relations of various
industries to each other and to the world, will appear later in the book.

_Capital unproductive._—Capital is sometimes said to be unproductive in
contrast with _productive_, although the very nature of capital requires
productiveness. The occasion for this distinction is in the fact that
means devoted to future production of wealth in a particular way may be
years in returning the product; the destination is evident and the return
confidently expected, yet the owner is without income or near prospect of
income. Such ventures are seen in the reclaiming of waste lands by
drainage, the equipment of extensive mines, and the construction of dykes
and levees. Land held for sale or use in the indefinite future is a most
common illustration of unproductive capital.

If wealth in some readily exchangeable form is intended for productive
use, but is held for a satisfactory opportunity, it is sometimes called
free or _floating capital_. It may be available for any temporary use, and
so afloat among a variety of investments. Some great enterprises, like the
building of the Suez canal, are begun in view of attracting floating
capital. Borrowers generally look to such accumulations for their supply
of funds.

_Capital in farming._—A clear view of the uses of capital may be gained
from estimating the needs of a young farmer just starting out for himself.
For all his equipments he must depend upon the time and effort of somebody
embodied in form of tools, material and sustenance, for capital in any
form is simply this. A farm of 160 acres improved, or already out of the
crude pioneer stage, represents about ten years of one man’s time, say
$3,000. A house suitably furnished for himself and his young wife means
three years of time, $1,000. His barns and corrals and intersecting fences
cost two years of time, $600. His team and stock and the necessary tools
make nearly three years of time again, $900. Seed, feed, provisions,
clothing, insurance and wages for help, all to be used before his first
year’s crop is sold, require at least $500 worth of time, or nearly two
years more. The needed capital for such a farm thus represents full
eighteen years of the time of an able-bodied man, or $6,000. If we add to
this the cost of bringing to mature age and intelligence the three able
and efficient workers needed to manage and work that farm, we shall credit
the past, without counting the time and energy of the young people
themselves in growing and learning and gaining their skill, with thirty
years of labor; $10,000, put into the farm and its occupants as they stand
ready for a year’s work. This accumulation is likely to show all the forms
of capital described.

_Capital conservative._—Capital, especially in fixed forms, being in its
nature the conserving of energy, is necessarily an incentive to
conservatism in society, since any great and sudden changes in the habits
of a community involve rapid consumption or destruction of capital.
Capital is said to be “timid.” This statement means simply that all owners
and users of capital who realize the time required for accumulating it
hesitate to risk its destruction in doubtful enterprises, uncertain
confidence or venturesome experiments in government or financiering. War,
riots, or even revenue laws, may destroy fixed capital that has been the
growth of a century. A small change in tariff laws has rendered useless
immense factories. For the same reason farmers, having so large a fixed
capital in farms and farm machinery, do not take kindly to political
changes involving doubtful consequences. States where the capital is still
circulating may readily venture upon experiments financial or political,
since little time is lost even in destructive results. People in new
countries take risks readily because they have less to risk.




Chapter V. Personal Attainments.


_Accumulated energies._—The force accumulated through personal effort in
training, education and discipline is similar to capital in the fact that
it represents a period of time between the effort and its full
accomplishment, and that it is devoted to production of wealth. It differs
from capital in being immaterial human energy, exceedingly useful in
combination with capital, but a part of the laborer, not his tools. It is
gained by devoting time, attention, thought and practice to acquiring
methods of greatest efficiency in any act of labor. It requires surplus
energy in labor at any task to gain, not only the material result, but
power to do the same task better and more easily next time. All the time
expended in acquiring such powers is put into the value of what is finally
produced. Any peculiar tact or ability developed becomes an essential part
of individual powers, and its product, like that of any form of exertion,
becomes the property of the individual.

In this way, not only is the cost of gaining skill or education, or of
establishing habits, returned in the product, but often a considerable
increment, or gain, from the larger demand for such abilities. A skilled
artisan’s labor meets more urgent demands for its use.

_Skill._—If this extra exertion takes the form of training muscles, nerves
and brain to act with speed and accuracy as judgment directs, we call the
attainment _skill_. Even if the action required is simple, dexterity comes
only by practice, and in special cases may multiply the product many
times. Two men may shear sheep with equal accuracy, but one has three
times the speed of the other. His skill secures employment at three times
the wages of the other, with profit to the employer, because the extra
speed saves room, attendance and risk over employing three men at
one-third the rate. The shearer profits by the rarity of his skill in
getting the wages of three men, with the support of but one, and in more
constant employment. When the operation is more complex, and success
involves larger interests, skill counts indefinitely more, and as society
grows complex the room for exercise of skill becomes larger and more
varied. The wide difference between pioneer farming and market-gardening
illustrates this. The history of agriculture shows the slow development of
skill in the furrow, the ditch and hedge, and in the handling and breeding
of stock. Farmers once barely scratched an acre a day with their rude plow
and were long in learning the use of a harrow. No attempt, according to
Professor Rogers, to improve the breeds of cattle and sheep appeared
before the eighteenth century in England. Most early improvements in
farming skill came from the industrious monks, whose intelligence fostered
skill.

The advantage given by skill perpetuates skill from generation to
generation through aptitude and superior training, and so the people of a
neighborhood or a country may inherit such power in contrast with other
regions. “Yankee ingenuity” has become proverbial through such natural
extension.

_Discipline._—Education serves the same purpose by acquisition of
knowledge in such ways as to give wisdom in its application. It involves
an exercise of intelligence to the establishing of sound judgment. Broader
than skill in its range, it increases the possibilities of skill as
storage of power. The skill of the surgeon would never have existed but
for the brightening of his intelligence by education. The electrician’s
training depends upon a broad foundation of education in knowledge of the
matters he handles so dextrously. In farming, this source of stored up
power has until very recently been ignored. While men in many professions
were multiplying their individual power by spending youth in school, the
farm boy would be simply trained at the plow, without the enlargement of
practice in thinking required elsewhere. Such education has become at
length, like skill, a requisite of each generation in order that our
civilization may be maintained. For this the states build and the nation
sustains agricultural colleges.

_Character._—Just as important, though often overlooked in enumerating
economic forces, is the acquired personal habit of self-control. Without
it both skill and education avail but little, and it may do its work
independently of both. “Tried and trusted” expresses our estimate of the
importance of long practice of virtue in meeting obstacles. The formation
of habits—personal, business and moral,—is a matter of time and
discipline. It costs exertion through a series of years; but the power
accumulated may be needed only once, in some great emergency.

The character of the workman, the tradesman and the farmer enters more or
less into the product of his toil and gives it value. Though I may not
care from whence come the shoes I wear, or the butter I eat, I do care for
the genuineness of both, for which I must depend upon the genuine
character of the makers and sellers of both. This, too, is maintained from
generation to generation by its successful use in acquiring both power and
wealth. It cannot be had without the expenditure of time, energy and means
of the fathers and mothers of one age upon their successors.

_Importance of attainments._—All these personal attainments, whether
confined to individuals or extended over whole communities, must be
reckoned among producing powers and reckoned with in estimate of earnings.
A community deficient in either is low in ability to supply its own wants
or the world’s wants, and no amount of material capital can take their
place. They are superior to capital in being less destructible by fire or
flood, and more easily turned to account in new enterprises as needed. No
capital is perpetual, even in most fixed forms, nor is any personal
attainment sure to remain of direct use; but the latter has a larger
expectation of usefulness and greater permanence in the economy of
nations.




Chapter VI. Combination Of Forces For Individual Efficiency.


_Ideal manliness._—Every community has highest efficiency and best
civilization when each individual member has the largest range of
abilities to meet wants, and the largest range of wants to be met. An
ideal civilization involves the distinct aim of gaining for each mature
person in any association the fullest development of all abilities and all
materials and tools for their use. This is amply illustrated in a family
of well grown, well trained, well educated, trustworthy men and women with
sufficient capital under control to maintain the highest activity of every
personal power and attainment. Childhood and old age must always be
provided for by exertions of those whose abilities are in their prime, and
accidental weakness of every kind is met from the same strength.

Any mature person is best equipped for productive industry when, sound in
both body and mind, he has the accumulated energy of the past for his use
in the shape of capital and hereditary traits, together with skill,
education and established character. Such a man is recognized at once to
have his place among “the heirs of all the ages in the foremost files of
time.” Any people claiming leadership among nations must depend upon its
representatives of such a fully equipped body of men for that leadership.

_From savage to enlightened._—The increasing importance of such full
manliness, as society becomes more complex in both wants and efforts, is
easily seen. In ruder life muscular energy and endurance, with some slight
ingenuity, are sufficient to meet the ruder needs, with some chance of
saving for future wants of a growing family, which will continue the same
round of muscular contest with savage conditions.

The American Indians have given the fairest exhibition of the kind of
welfare which such exertion and accumulation afford. The weak disappear
quickly, because the strong have too little surplus of energy to care for
them. Among those left, both burdens and means of satisfaction are quite
equally distributed, because of essentially equal powers of exertion. But
in older and more civilized communities large portions of the people are
dependent upon the rest for knowledge, ingenuity and skill to keep the
very much larger supply of material needed for maintaining the
civilization. At this stage of progress a man with only muscular
development finds himself entirely dependent upon some one else for the
plans by which all must live. A savage cannot share equally with the wise
man either in the burden of caring for the community or in the welfare
which the community enjoys.

It is easy to see that the relative importance of accumulated wealth in
the shape of capital or of skill or of the character which results from
generations of training, becomes more and more distinct as the community
becomes more developed. Any man, then, who is lacking capital, skill and
morals, or all three, is in some respects like the savage, and will find
his equals among the savages. For this reason a pioneer country affords
opportunity for a youth without skill or personal attainments of any kind
“to grow up with the country;” and the famous advice, “Go west, young man,
go west,” applies strictly to such a youth, and with less and less
directness in proportion as the young man has control of himself and of
accumulated wealth.

A simple diagram (Chart III) may illustrate the progress of civilization
from the general poverty and inefficiency of rude pioneer life to the
power of a thoroughly organized and developed community. The poor man, in
the sense of one whose abilities are undeveloped and who has no visible
means of support, is relatively less able to care for himself in the
enlightened community than in the ruder pioneer life. In this sense, and
this alone, the poor man grows poorer with advancing civilization. This
may easily be seen by comparing a thrifty farming community of today and
all the accumulated stock, machinery and tools of the farms, with the same
community sixty years earlier, when all was practically wilderness. A
strong man with an ax and a hoe could enter the wilderness anywhere and
live nearly as well as any of his neighbors. Such a man in the higher
country life of our times must work for some one else at wages, or must be
supported at public expense. In either case he feels his poverty. At the
same time, the extreme of suffering is less likely to be reached in the
richer community. The poorest man has comforts of which the pioneers never
dreamed. Even a tramp can live on the fat of the land, but not by his own
exertions. The failure of a crop in the pioneer country means starvation
for a large portion of the few inhabitants. A failure in the older
community means suffering for a few in diminished food and clothing, but
all live on the accumulations of the past.

                                 [Chart.]

 Chart III. Illustrating the relative importance of labor and saving, in
    the progress of civilization from its beginnings in pioneer life.


_Developing civilization._—This essential advantage of accumulating power
in individuals, as civilization advances, is necessarily connected with
the very nature of civilization and growth. As no conceivable device can
make a babe as efficient as a man, so no contrivance, political or social,
can make an undeveloped man equal to a fully developed one.

The intense community of interests in high civilization makes even more
important the individual abilities of each sharer in those interests. For
this reason every device for universal education, development of skill and
strengthening of character, and every check upon deterioration of personal
strength or wisdom or virtue is to be considered. Any neglect of the
individual in his development of personal attainments retards the
development of the community. Any device for the equal distribution of
wealth which does not increase individual thrift in the use of wealth at
least retards the growth of the community, and may very quickly reduce the
power of the community as a whole until it reaches the inefficiency of
savage life.

All true charity, even equity, requires that the object of distribution of
wealth shall be the greater efficiency of each individual. If there shall
ever be a community of individuals gaining equal enjoyment, it will be
made up of those possessing essential equality in personal powers and
attainments, and in accumulated capital as well.




Chapter VII. Methods Of Association.


_Simple association._—While the absolute equality of individuals referred
to in the preceding chapter is practically impossible, the community of
interests as civilization advances becomes much closer through various
plans of association of individuals in common work. Indeed, the community
is a community because a multitude of individuals work together. The
simplest form of association is seen where men work in gangs, all acting
alike, as in lifting a log or a rock, hoeing the field, or in building an
embankment by shoveling. Among farmers the habit of exchanging work, so
common in pioneer settlements, illustrates the advantage of combination.
This may be called simple association, by which many hands make light
work.

_Complex association._—A more complex association is found in even the
rudest settlement when one man undertakes a particular kind of labor for
all his neighbors, they in turn doing a different kind of work for him. A
farmer in a new settlement found the children of himself and neighbors
without a school, and agreed for several winters to teach a school as many
days as his neighbors would chop in his clearing. This association cleared
the land and supplied the school. Such exchanges of labor develop rapidly
in every growing community and form the basis of a most extensive
commerce. When “Adam delved and Eve span” the family was far better
provided for than if both had undertaken to delve and spin. The fair
exchange of products makes each man’s product more useful to both himself
and his neighborhood. Such association is less noticeable in a community
of farmers, where all are seeking essentially the same products, than in
almost any other community. Yet the presence of the blacksmith, the
shoemaker, the wagonmaker and the tailor contribute very largely to the
comfort of all concerned.

One chief disadvantage of farms remote from villages is the want of ready
exchange, or association by different employments. The part which such
exchange plays in the accumulation and distribution of the wealth of the
world is so great that several chapters will be needed to present its
importance. The study of exchanges is sometimes thought to cover the whole
question of wealth. It is often treated as separate from production. But
its advantages and disadvantages are most easily seen by considering all
its bearings upon the increased product of a multitude of workers.

_Compound association._—A still closer association, sometimes called
compound association, is found where several workers combine efforts of
different kinds in a single finished product. It is easily illustrated in
an ordinary dairy, where one of the family drives up the cows, another
does the milking, another sets the milk and cares for the purity of all
utensils, another perhaps skims the milk and churns the butter, and still
another works and packs it. All this labor of many hands has its
importance represented in the butter packed for use. The particular
advantages of this division of labor will be treated in a future chapter.

_Aggregation of forces._—A still further advance in association appears
when many laborers in many ways, with multitudes of tools and machinery,
are combined in a huge establishment in such a way as to employ all
efficiently. This is illustrated in the so-called bonanza farms of the
west, but more distinctly appears in the great manufactories, or in any
extensive coöperation or great enterprise. A study of these will also
require a future chapter.

While all these methods of association blend with and into each other in
every kind of community, a careful analysis of each is necessary to a full
understanding of their relation to welfare. For this reason it is best to
analyze and illustrate each by itself. The succeeding chapters will take
up all the intricacies of exchange before presenting the special
advantages and disadvantages of technical division of labor and of great
corporations.




Chapter VIII. Exchange: Advantages, Limitations And Tendencies.


_Exchange in production._—The immense importance of exchange in promoting
the welfare of communities is easily granted, and is illustrated in every
village store or even in every simple farming community. Today the market
for farm products is easily felt to be the most important consideration,
and weighs in every farmer’s mind when buying or selling his farm. When a
state like Kansas raises from six to ten times as much wheat as its people
can use, exchange is evidently an essential factor in every farmer’s
welfare.

The multitude of everyday wants in most households supplied only through
commerce shows the extent and importance of this exchange of labor
throughout the world. The great advantages, however; may be seen by a
little more careful analysis of the growth of individual powers under a
ready system of exchange. Every laborer becomes effective by experience in
some particular industry. A thousand years will not perfect a single
worker in any of the thousands of employments needed to supply his wants.
Every farmer knows the weakness of a beginner in farming, coming from any
other business; and without exchange, every workman must always be a
beginner in everything. Exchange is one of the chief motives to
accumulation, since others’ wants as well as our own are kept in view. The
“hand to mouth” liver is almost always a man of all work, thinking little
of exchange. It is especially a stimulant to saving, since it makes
capital itself more useful and brings it directly into competition with
all other forces. Products stored in the granary have their significance
because of exchange.

Still more important is the cultivation of special abilities, impossible
without exchange. The indefinitely varied powers of human nature are made
most useful where each can devote his talent to a definite business; and
usually the talent best fitted to a business is attracted toward it.
Habits, too, which are the chief labor-saving characteristics in human
nature; become all-important, and enable an individual to do a large part
of his work with the least possible care. The routine of everyday life is
followed with little effort or pain. The more regular the routine the
easier it is to follow.

A still greater advantage to communities is found in the enlargement of
the range of wants in all individuals. The superiority of enlightened men
over savages is largely due to their greatly increased needs, since
necessity, the mother of invention, compels exertion and finds the way to
satisfaction. It seems, however, that exchange contributes most
extensively to welfare by combining individuals into a community, and
smaller communities into a larger, until the whole world is brought into
sympathy. Thus every human being gains the advantage of growth in mind and
character through some contact with every other human being within the
commercial world. If ever a reign of peace and plenty shall extend over
the world, no one doubts the importance of commerce and intimate exchange
in bringing that time. The full advantage of free exchange in promoting
human welfare cannot be over-estimated.

_Exchange limited by powers._—With all its advantages, there are certain
obstacles in the way of its extension, always more or less effective in
limiting its range. A community can have few exchanges among individuals
if all are busied in the same or similar trades. A farming community has
little need of buying and selling among the farmers. A horse trade or an
exchange of one brute for another may supply all necessities. In larger
communities similar limitations are found where abilities are similar, or
where habits in education, government or religion are very uniform. In
such cases opportunities for exchange are limited, and commerce itself
grows slowly.

The story of pioneer settlements is uniformly one of slow and uncertain
commerce for want of the variety in wants and abilities which makes the
very foundation of exchange. Sometimes “day’s work for day’s work” is the
limit of exchange throughout a whole region or country. In the world at
large limitations often arise from hostile feelings between nations, and
as yet the highest freedom of exchange between people under different
governments has seldom been reached. The United States affords the
brightest example of people with varied characteristics developed through
the stimulating effect of ready exchange.

_Commerce over-estimated._—So rapid has been the advancement of systems of
exchange within the last half century that men are prone to over-estimate
the importance of commerce and its interests. The amount of wealth in
motion exaggerates the importance of wealth itself, so that multitudes
overlook the foundation in productive industry, and become mere bettors
upon the market, attempting to catch a part of the moving wealth as it
passes. Any speculation in mere commercial transactions may become a very
serious obstacle to legitimate industry by its effect upon both the
industry itself and the incentives to industry among the people. This
danger is increased by the greatly extended interest in exchange among the
rural population.

Scarcely a farmer in our country is beyond the effect of any extensive
commerce throughout the world. The crops of South America and of the
Russian plains are now as important to a farmer of Dakota as his own,
since all must find a common market in the manufacturing countries of
Europe. Speculation on the Chicago Board of Trade is likely to be as
interesting to a farmer in Nebraska as to members of the Board. He is even
tempted to try his hand at speculation, either directly through a
commission house or indirectly through the marketing of his grain. In
either case he is caught by the dangerous motion of modern commerce. The
chief remedy for these tendencies must be found in a wider acquaintance
with the facts of commercial life and a clearer perception of what is
genuine commerce.

Every farmer needs to distinguish, and distinguish carefully, the actual,
necessary machinery of trade and the principles underlying it, that he may
appreciate the genuine and oppose the false. On this account several
chapters are given to questions of exchange, with an effort to bring into
more prominent light the ways in which all commerce affects the farmer’s
life.




Chapter IX. Value The Basis Of Exchange.


_The nature of value._—Perhaps no question in the discussion of wealth is
of greater importance than the nature of value. Certainly the measurement
of value in all our property is the basis of all exchanges, of all book
accounts, and of all inventories. The worth of any piece of property in
such estimates always involves some comparison, either of things possessed
or of exertion required or of satisfaction yielded. In comparing an apple
and a peach, both equally attainable, we may value the peach most highly
because it gratifies desires in higher degree. Thinking of future uses, we
may value the apple more highly because it will keep longer, and so be
available for future wants. In considering all the kinds of satisfaction
to be provided for, we may think of the peach as desired by more people
who are likely to render us service, and therefore more readily
exchangeable, and so of higher value. Again, the peach may be at the top
of the tree and the apple within reach, in which case we may think whether
the peach will give enough greater satisfaction to make it worth the
greater exertion to get it. In this way a single individual, who has wants
to be gratified only by exertion, forms an idea of value as founded upon
some relation between his wants and his powers, between the desires to be
gratified and the qualities of the object expected to give satisfaction.

Since wealth always implies an accumulated store of good things, every one
comes to think of the worth of his accumulation as estimated by what it
will do at any time, in any place, in satisfying any need. So, most
naturally, we associate our ideas of value with trade. An exchange of
horses brings in not only the present qualities of each horse for present
service, but all the qualities and circumstances affecting the
possibilities of disposing of the horse whenever something else is needed
more. An expert judge of horses not only knows when the horse is sound in
wind and limb, and what are the signs of docility, speed, etc., but also
what the rest of the world considers the qualities of a satisfactory
horse. In all experience peculiar circumstances, varying the relation
between wants and satisfaction, affect immensely our estimate of value.
When an ancient king shouted, “My kingdom for a horse!” he was doubtless
moved by the uselessness of a kingdom to one about to lose his life in
battle for want of a horse and also by the difficulty at that particular
moment of gaining a horse.

In ordinary experience everybody estimates value by some comparison with
what he can obtain in exchange. A picture of a friend may be priceless in
two senses: first, of so great importance to its owner that nothing can
buy it; second, of so little importance to anybody else that nobody will
give anything for it. In any inventory of wealth the picture could not be
counted; it is valueless. But in any judgment of personal welfare it may
be beyond price. So, in the universal experience, the term value has come
to be used as essentially connected with exchanges and with property as
stored to meet all kinds of wants.

_Value in services._—In a similar way experience has developed the idea of
value with reference to services. A service may be invaluable, as when a
physician saves the life of his patient, but the value of that service is
estimated by the return expected in the community where the physician and
his patient live. Many services of highest usefulness and most important
in welfare cannot be valued in terms of wealth, because no wealth can
secure them. Love and patriotism and philanthropy cannot be had for
wealth. But in comparison of two services rendered for hire, both are
measured by their general utility, either directly or indirectly, and even
this estimate is modified by the readiness with which either service can
be secured. One who seeks the service of an artist who stands alone among
ten thousand people, may be willing to give the services of a thousand
other men, which can be had for a trifle, because they are everywhere
abounding.

_Essentials of value._—Experience seems, therefore, to settle upon three
conditions for value in any article of wealth or any service rendered.
First, the article or service must have utility—that is, it must be useful
in satisfying somebody’s wants, either present or future. Second, those
wants must be of such a nature that effort on the part of some human being
will be necessary to gratify them. Nothing which can be had at all times
by mere desire of it can have value. Third, the object must be of such a
nature as to command other services or exchange of other wealth. For this
reason it must be transferable from one owner to another.

_Utility as related to value._—While utility is a basis of all values, it
is not the chief element in measuring the value of wealth. The things of
highest utility, like air and water, have no value as long as trifling
exertion will bring them. Even land is without appreciable value so long
as any person can obtain it by settling upon it.

In general, we measure utility by the relation between the nature of any
object and human nature as expressed in wants. A bushel of wheat has
utility equal to the number of loaves of bread it will furnish to hungry
humanity. In this respect every bushel may have the same utility as every
other. This would be true if every bushel of wheat was wanted by hungry
people able to exert themselves in securing it; but if five bushels of
wheat are sufficient for each human being in a year’s supply of bread, a
distribution to all the world of more than five bushels to each would make
some of the wheat useless. So if the world’s product of wheat more than
supplies the world’s want, the extra amount will be without utility unless
some means of storing against future want is devised. In that case the
utility of the stored portion will be lessened by the extra exertion
required to store it until the need comes. One may be glad to pay
twenty-five cents for a good dinner, but an equally good dinner offered
immediately afterwards will have no utility, unless he can save it for
supper. If the dinners offered are so many as to imply that several will
be useless, the value of each is likely to be affected by this estimate of
lost utility in some. Dinners in that case are liable to be furnished for
what they are worth for cold suppers.

If any article of commerce, like wheat, has its highest utility in one way
of meeting wants, as in bread, that utility will have a strong influence
upon value as long as the supply of wheat is not too great for this want.
If the supply of wheat should be so great that only a small portion could
be used for bread, other utilities would be sought. It would be used for
feeding hens, and perhaps for cattle feed. If still the amount is too
great to be consumed, it might be used for starch. In this case the least
useful portion is likely to furnish the estimate of value for the whole.
Both the raiser of wheat and the user will consider the lowest use as the
probable basis for sale.

Before the opening of the Erie canal a farmer in northern Ohio drew a load
of wheat twelve miles in hope of a market. The dealer said: “It isn’t
worth anything, since nobody has any use for it. If you had a load of
sand, I could pay you for that, to fill the mud-hole in front of my
store.” Since the utility of some wheat was nothing, the value of all
wheat tended to nothing. On the other hand, if wheat is scarce in the
community, it will be used only to meet the wants of the delicate or the
fastidious, whose comfort and life may depend upon it. In that case its
general value will be estimated by its higher utility, whatever other use
it is put to. That is called a final utility, which, in any particular
case, is the lowest use implied in consuming the supply. And this final
utility is the only one influencing the estimate of value.

It is possible, therefore, that the total utility of anything, like a
paper of tacks, for instance, may be greatly increased, since it has
indefinitely more uses than when tacks were first made. Yet the supply of
tacks is so enormous that to consume them we must use them for trifling
purposes; and therefore their value is a trifle. When we have water to
throw away, its value is nothing. When water is limited to culinary uses,
its value is considerable. When water is sufficient only to slake extreme
thirst, its value is beyond price. Even the prospect of a future supply
diminishes the utility of any commodity, since time is an important
element in satisfaction. Thus a store of potatoes in early spring, however
well preserved, has its final utility lowered, and therefore its value
lessened, by the prospect of new potatoes.

On the other hand, the present value of a field of grain or the young
orchard is dependent upon its utility in meeting a future want. Everything
which enhances prospective utility of any article enhances its value; and
everything which diminishes the chance of such utility, like bad weather,
insects or plant diseases, diminishes the present value. In this way risk
diminishes the value of wealth subject to it and increases the value of
wealth which has passed by it.

In general, the usefulness of anything is no criterion for measuring
value, because other elements of value are more important. Henry C. Carey
says, “Utility is the measure of man’s power over nature; value is the
measure of nature’s power over man.” This may be a striking way of saying
that great utility implies a discovery of uses, while great value often
indicates only difficulty in securing what has great usefulness.

_Exertion as related to value._—Since utility, however essential to value,
is not its measure, we are led to consider whether the exertion required
to obtain any article desired may not measure its worth. This is certainly
a matter of prime consideration, and many have been led to suppose the
cost of production, by which is meant all the exertion necessary to bring
any commodity to its final consumer, to be the sole and absolute measure
of value.

This supposition, if ever correct, is subject to great modifications. None
know better than farmers that a bushel of wheat from one field may have
cost twice as much as a bushel from another field, without any possible
distinction in value. Every mechanic knows that what he has accomplished
with great exertion may have been duplicated by some labor-saving device
with half the exertion, the two values being essentially equal. Nothing is
more common than to find articles in the market sold without regard to
cost because they are superseded by more desirable articles. Indeed, the
most ardent defender of cost as the sole basis of value is obliged to
notice multitudes of exceptions to the rule. Yet it must be granted that
only those articles involving effort in securing them have value at all,
and in general the amount of effort actually put forth has some relation
to our estimate of value.

In general, men do not exert themselves more than necessary to meet wants,
and in any exchange with others estimate the value of what they have
produced by the exertion expended. Yet, as products of the same kind
exchange in the same market without regard to their individual cost, it is
evident that some other principle must be discovered. Nevertheless, no
farmer will continue indefinitely the raising of a crop which brings in
the market less than a fair average return for his labor in raising it. In
a series of years he expects his wheat to return a fair compensation for
labor expended. In the same way every manufacturer expects a full return
for all cost of all his efforts, and would not continue his work from year
to year without such expectation. Moreover, when for any reason the market
value of anything is much above its cost, somebody is ready to increase
the supply of that particular article, and more will add their efforts in
the same direction until its value approaches nearly the general cost of
production as compared with the cost of other products selling in the same
market.

_Normal value._—In this way the cost of production is said to fix the
normal value of any article of commerce capable of production in
indefinite quantity and within limited time. For this reason farmers are
interested in finding the average cost of production of wheat, corn, etc.,
within a region supplying their market. They are even interested in
knowing the conditions for wheat raising in India, South Africa and
Australia, since the cost of production there may influence the value of
wheat throughout the world. The normal value of products capable of
indefinite multiplication tends always toward the value of the least
costly. This is shown in the effect of labor-saving machinery upon the
value of cloths and other goods. It is equally true in agriculture that
wheat raising upon cheap land with extensive use of machinery and
economical methods of culture and harvesting brings down the normal value.
So long as more land can be applied to wheat raising with these
advantages, the less productive methods may be too costly for the market.

On the other hand, if any production cannot be largely extended so that
the supply in market barely meets the requirements of purchasers, the
tendency of normal values is toward the cost of the most costly part of
the product required to meet wants. This is because the supply is kept up
only by the exertion of the greater amount of labor as well as the less.
If farmers in western prairie country can raise corn at an expense of 15
cents per bushel, as they can upon an average, so long as that region can
raise all the corn required no less productive region can force the normal
price above what will keep western farmers raising corn. When the western
crop fails, the price is far above normal value, and may even go above the
cost of the most costly corn in market, under a principle called the law
of supply and demand.

Since improvements in method so constantly lessen the normal value of
products, Mr. Carey made the effort to measure value by “cost of
reproduction,” meaning, I suppose, that any article produced at any time
and place is likely to bring in any market a price equal to the cost of
similar articles produced under the most improved methods anywhere used in
the present. This, of course, does not apply to articles not desired in
the present, because deteriorated or out of fashion or less useful than
some new device for a similar use, but only to those articles of full
utility in having all the qualities needed to meet the desire of
purchasers. Even a diamond like the famous “Kohinoor” would have its
almost priceless value reduced to the cost of securing similar jewels
equally desirable if a process of crystallizing carbon were suddenly
discovered. It is easy to see, then, that cost measures value only so far
as it is directly connected with the available supply in any market. Under
ordinary circumstances the supply cannot be increased unless the cost is
met, but the rule is modified by any peculiarity of season, or conditions
of trade, or production by cheaper methods or cheaper labor, or by the
changing wants of a community. The application of all these influences may
be studied under the so-called law of supply and demand.

_Supply and demand; markets._—The law of supply and demand is only a
statement of the general fact that market value tends to increase with
increase of demand and to decrease as the supply to meet the demand
increases. It must be understood that a market means a particular spot
where buyers and sellers of any article of commerce meet at a particular
time. The supply is the amount offered for sale at a given price. The
demand is the amount buyers will purchase at the same price.

Thus, if on a certain day sellers offer in Chicago 10,000 hogs, with a
willingness to take $5 per cwt., they represent the supply. If on the same
day in the same place buyers are willing to take 10,000 hogs at $5 per
cwt., $5 will be the market price, and the supply and demand will be
equal. If, however, only 5,000 hogs would be bought at $5 per cwt., 5,000
hogs will be without buyers, and their owners will seek, by lowering the
price, to find buyers at $4.50 per cwt., if necessary. Since all the
sellers will feel the same pressure, the tendency of market value will
immediately be downward. Buyers willing to pay $5 per cwt., finding many
sellers, will expect a reduction in price, and the price will certainly go
down until the hogs purchased equal the entire supply. And that will not
be until the buyers are stimulated by reduction of price, so that as many
hogs are wanted as there are for sale. If that point is reached at a price
of $4.50 per cwt., the market value is found there. The limit of time
within which this reduction takes place will depend upon the ability and
willingness of sellers to wait. If the product offered is perishable, or
costly in keeping on the market, the reduction will be speedy. Otherwise
it may be held indefinitely with the hope of compelling buyers to come to
the higher prices, in which case it is practically taken out of the
market. Only those commodities are practically in the market which are
held for sale at the market price. Only those buyers practically enter the
market who are able and willing to give the market price.

_The higgling of the market._—The process of reaching an agreement between
buyers and sellers is called the higgling of the market, and represents
the conflict between the wishes of sellers to get the most possible for
their products, and the wishes of buyers to get the most possible for
their money. In fact, both buyers and sellers have the same motive: to
make their own exertions go as far as possible in supplying their own
wants. The fact that money enters into the transaction makes no difference
with the bargain. Two farmers trading horses have exactly the same desire:
to get the full worth of the horse to be given. A genuine bargain usually
benefits both parties. Even in a horse trade each owner expects to be
benefited by the exchange; and only a jockey seeks that benefit in taking
advantage of his neighbor’s ignorance or inexperience.

So, in the general market, every seller gains what he desires more than
what he possesses, and every buyer has exactly the same experience. Two
friends may exchange books if either would be benefited by the exchange.
In that case the one gaining the less valuable book gains the satisfaction
of giving to his friend. Both are still profited, one by the larger value
received, and the other by the pleasure of giving. In such an exchange no
basis of value is reached, but in any ordinary bargain the final
adjustment will be as nearly as possibly upon the test of value in the
market. Between one buyer and one seller, the bargain is likely to turn to
the advantage of the one who is quickest to discover the weakness of the
other. If two persons are discussing the price of a house for which the
seller wishes $1,000, but will sell for even $600, and for which the buyer
hopes to give only $600, but will pay even $1,000, the seller will
gradually lower his price, and the buyer gradually raise his offer until
one or the other discovers the working of his neighbor’s mind. These are
the natural conditions for sharp bargaining.

In the larger market the interests of a multitude of buyers and a
multitude of sellers have weight, and no shrewdness can prevent a
settlement upon such a price as comes nearest to satisfying all parties.
The so-called law of supply and demand is a brief statement of the fact
that sales cannot be made in open market above the mark where buyers and
sellers agree, and that mark is essentially the price at which all who are
willing to buy at the price current are met by those who are willing to
sell at the same current price. With reference, then, to all articles sold
in open market, it is safe to say that the only test of value is the price
which the public is willing to pay. So universal is the acceptance of this
principle in practical affairs that everybody estimates the value of his
property by the price at which it will sell. Any appraiser or assessor who
should adopt a different principle would be considered wholly
untrustworthy.

_Freedom in markets._—In this higgling of the market it is absolutely
necessary that buyers and sellers have essential freedom of choice and
fairly equal information. There may be conditions of law preventing free
competition, as under the regulation of prices attempted in various
countries prior to the present century. In England, during nearly four
centuries, limits of prices for nearly every article of food and clothing
were named by law. Yet in every instance the conditions of the market were
stronger than the laws, and the restriction upon free competition and free
discussion of prices actually destroyed the open market. The conditions of
a bankrupt sale at auction reduce the competition to a struggle between
buyers. In this case a very slight collusion between the buyers may
destroy the market. This is frequently illustrated in the sale of real
estate after foreclosure of mortgages. The unnatural conditions of auction
at any price are so evident as to make common the secret employment of
sham bidders, shrewd enough to push actual buyers as far as they will go
without preventing the sale. Somewhat similar conditions may exist in a
great cattle market, in which immense quantities of cattle are delivered
by owners, while the number of buyers is few. The great packing houses
have the advantage of being almost the sole bidders for what must be sold
at their price. These conditions, however, are not made by the packing
houses, but by the large supply subject to immediate sale. Such conditions
are much more noticeable in the market for ripe berries, when a slight
excess of supply makes these perishable products of trifling value.

Conditions on the other extreme, from scarcity of supply and anxiety of
buyers, may also interfere with a free market. Any scarcity in food
products leads to an anxiety on the part of consumers to buy and an equal
disposition on the part of owners to hold for higher prices. In this case,
while the law of supply and demand is still active, the effects are quite
out of the ordinary course. Thus, for a long time it has been estimated
that a scarcity of one-tenth in the natural supply of wheat raises the
price three-tenths, scarcity of two-tenths raises the price eight-tenths,
scarcity of three-tenths raises the price one and six-tenths, scarcity of
four-tenths raises the price two and eight-tenths, and scarcity of
one-half makes the price of the half-crop four and a half times greater. A
decrease in the supply of less essential foods evidently cannot have equal
effect. Thus, a scarcity of sugar, causing increased price, will directly
reduce consumption of sugar, so that the limit may be easily reached. The
same conditions may exist with reference to meats, since a high price
diminishes the demand from the disposition of people to eat less meat.
Indeed it has passed into almost a proverb that dear bread makes cheap
meat, for the reason that few will diminish the supply of daily bread, but
the mass are willing to lessen the meat diet to save expense.

Similar conditions, affecting every market for any commodity, may easily
be discovered. Yet in spite of all these extreme fluctuations, no better
test of value has been suggested than the market price in open,
unrestrained competition of buyers and sellers.

_The market price._—In the discussion of value so far, the term market
price has been used because perfectly familiar to everyone. It is
necessary, however, to call attention to the fact that price always
indicates an estimate of value in units of current money. If that money
itself has a fluctuating value, the same article may have at different
times different prices with the same value, or the same price with
different values. Thus market prices in our country during and after the
civil war, in which a paper currency gave the unit of prices, cannot
safely be compared with each other, and can far less be compared with
prices upon a specie basis.

Even the reduction to a so-called gold basis may give misleading ideas in
regard to the market, since a new element of speculation in gold enters
into the calculation. In all the accompanying illustrations of fluctuating
prices, this particular abnormal condition has been carefully excluded.
Any fluctuations in the value of money metals, necessarily affecting the
relation of market price to market value, will be treated under standards
of price in Chapter X.

_Prices of farm products; the crop year._—The actual fluctuations of
market prices under the law of supply and demand can be most clearly seen
by a careful study in the same definite market during a period of years.
For illustration here the staple products of the farm have been chosen,
and the markets of Chicago and New York, as most truly representative,
have furnished the facts for study. These facts are presented to the eye
directly by a series of charts, each of which has been most carefully
prepared from official records, and gives within narrow limits a large
range of investigation. In every case involving annual crops, it seemed
necessary to rearrange statistics so as to cover the actual year affected
by the crop in question. September 1 was chosen as the beginning of each
year, because that date is nearest the time when the new crop of the
season appears in market and directly affects the price of such products
in store. All calculations upon live stock have been brought to the same
basis, for the reason that the supply of marketable stock is largely
dependent upon the supply of feed for stock. It seems very desirable that
all statistics in regard to markets and productive industry should be
brought to a uniform year. The year given in these charts seemed best to
suit the subjects treated. It is possible, however, that for all data
convenience would settle upon July 1, the beginning of the fiscal year in
the United States, as the best for beginning the universal statistical
year. Each chart in the series, of course, requires its particular
explanation.

The fluctuations of supply and prices for series of years are exhibited in
the Charts 4, 5, 6, 8, 9 and 12, and these are explained in detail at the
close of the chapter.

_Fluctuations with season._—Every product of the farm is known to have
conditions favorable or unfavorable from the mere changes of season
affecting the prospective supply. Conditions equally dependent upon the
seasons have something to do with demand. The result of both combined is
worthy of study by farmers and dealers in farm produce, that all may get
the full benefit of such knowledge as the study affords. For this purpose,
charts showing the annual fluctuations of staple products in the leading
markets have been carefully prepared. These may have a greater usefulness
than simply to illustrate the law of supply and demand, since it is within
the possibility of actual practice to in some degree modify by provident
foresight the extremes of fluctuation. It is hoped that the suggestiveness
of these charts may help the most enterprising farmers to adjust their
practice to conditions of market.

Charts Nos. 7, 10, 11 and 13 illustrate the fluctuations as related to
seasons.

_Law of diminishing returns._—In considering the value of farm products,
it is necessary to notice a natural tendency in all products of the earth
toward greater cost of effort in production. This is called the law of
diminishing returns, and is illustrated in every industry where the
accumulations of nature are depended upon for making labor effective.
Hunting, fishing and mining afford familiar illustrations of more work of
the same kind for equal product.

Agriculture, however, gives the most extensive available illustration of
the facts grouped under this law. In the first place, the farmer is
subject to it by mere location. The product of a field near his house and
barn costs less exertion than the product of a more distant field. In the
second place, he is likely to have chosen for his first efforts in crop
raising the land most readily yielding its fertility in crops. If he
extends his operations to less productive soil, he must work more for the
same product. In the third place, if a certain amount of work upon a
certain field will give him twenty bushels of wheat, he must give a good
deal more than twice as much work in the way of tillage and manufactured
fertilizer to make a crop of forty bushels. The proof of this is clear in
the disposition of farmers to buy more land instead of to increase labor
upon a limited space possessed.

A specific statement of the law of diminishing returns is that _in the
cultivation of land an increased amount of effort under usual conditions
fails to give a correspondingly increased amount of produce_.

_Exceptions to law of diminishing returns._—Exceptions to this law are
easy to find, as where the first selection of land in a new country has
had reference rather to safety from wild beasts and savages or malarial
diseases than actual store of fertility. Another exception is found in any
new country, where imperfect adjustment of labor to conditions of soil and
climate are liable at the outset to prevent the full use of natural powers
of the soil. So evident are these two exceptions in imperfectly developed
agriculture that some have disputed the general fact, yet all must admit
the certainty of diminished returns from multiplication of the same kind
of efforts upon the same space, and general proof is abundant in all long
settled communities.

_Effect of improved farming._—Counteracting this tendency to diminishing
returns, and in many instances more than overcoming the difficulty, is a
tendency toward improved methods in farming by more perfect application of
labor to the soil, better developed crops, better adaptation of live stock
to culture, improved machinery of every sort, and more extended range of
operations in farming, reducing the restraints of space by improved
transportation and more economical use of natural fertilizers; in short,
by any improvement through which labor is made more directly effective in
either quantity or quality of agricultural products. The whole story of
the development of agriculture in all these ways furnishes abundant
illustration of this counteracting tendency. In some regions it has more
than counter-balanced the tendency to diminishing returns. Various staple
products, like wheat, show in their diminishing value the advance in
methods of culture and adjustment of labor to production.

_Diminishing values._—The above is only a particular illustration of the
general tendency of all values to diminish with every improvement in
tools, machinery, economy of materials and saving of time, as the world
gains wisdom in applying labor to the meeting of material wants. With
every discovery of more perfect power or better use of natural forces,
like electricity, or easier ways of handling raw materials, as in
developing aluminum from crude clay, the value of the product quickly
diminishes.

A familiar illustration is found in the manufacture of steel. The
so-called Bessemer process, introduced some thirty years ago, reduced the
actual labor of making steel from iron by more than one-half. Improved
furnaces and greatly enlarged operations have reduced still further the
labor involved, until now steel often takes the place of iron, and the
value of all such products is greatly diminished. This is easily
illustrated by comparison of prices during a series of years, as shown in
chart No. 14. That this reduction in price is not the result of poorly
paid labor, but of better returns for labor expended, is evident to any
one investigating the tendency of wages or of living among wage-earners,
or of the general improvement in welfare of communities where these
labor-saving methods are applied. Any hardship connected with these
diminished values falls chiefly upon the laborers who fail to adjust their
work to the improved method. But even they gain for the diminished value
of their product a larger return on the whole through exchanges than the
higher values had brought them before.

                                 [Chart.]

   Chart IV. Comparison of the numbers of live stock with increases in
              population and mileage of railroad, 1860-1898.


CHART NO. 4

_Numbers of live stock compared with increase of population and mileage of
railroad, 1860 to 1898, in the United States_

_Explanation._—This chart exhibits to the eyes a comparative increase of
(1) population, (2) sheep, (3) hogs, (4) railroad mileage, (5) beef
cattle, (6) cows, (7) horses, (8) mules. The figures followed in making
this chart are taken from the best estimates available, chiefly from the
reports of the United States Department of Agriculture. It shows that
railroad mileage has increased faster than the population, with some
slight exceptions, and its fluctuations mark quite distinctly the periods
of financial speculation and distress. The great fluctuations in the line
of sheep raising may be seen to have some correspondence with special
tariff legislation. The striking opposition of hog raising to sheep
raising is in accord with the universal experience that farmers easily
turn from one to the other. The rapid development immediately following
the civil war represents the restocking of farms and the great expansion
in farm industry so noticeable during that period. The falling off in
numbers of live stock during the last five years is evidently a reaction
from a very apparent over-production in many directions during the
previous ten years. The miles of railroad are shown in thousands, the
population and live stock in millions.

                                 [Chart.]

Chart V. Showing the acreage and yield of Indian corn, wheat, and oats in
                the United States, 1862-1897. Pages 84-87.


CHART NO 5.

_Acreage and yield of corn, wheat and oats, 1862 to 1897, in the United
States_

_Description._—This chart is intended to show the fluctuations from year
to year in acres devoted to the three staple crops, together with
fluctuations in the corresponding years in yield of each. Figures on the
right show the number of millions of acres. Figures on the left give
millions of bushels. Continuous lines show the acreage. Dotted lines show
the yield. For convenience of comparison, the line of increasing
population is added. The broken lines indicate what might have been the
consumption of each of these staples within our own country, if the people
had used throughout all the years as much of each as during the five years
of plenty from 1888 to 1892. Lines marked 1 tell the story for corn; those
marked 2 for wheat; and those marked 3 for oats. In comparing the number
of acres as given on the right with the number of bushels as given on the
left, it will be seen that an average yield of corn is assumed to be 25
bushels per acre; an average yield of wheat, 12 bushels; and an average
yield of oats, 28 bushels. The variations of the dotted lines above or
below the continuous line show whether the yield was greater or less than
these averages. The average assumed is evidently too high for the oats.

_Explanation._—Several important facts are shown. First, there has
evidently been a very great increase in the amount of these staple crops
in proportion to the population, with a recent tendency toward reduction.
Second, all three have exceeded the needs for domestic consumption, and at
the same time; while it is evident that the rate of consumption in the
early years could not have been equal to that of recent years. This
appears very striking with reference to corn. An explanation of the
increased consumption of corn may be found in its larger use for fattening
pork and beef for export as well as for domestic consumption. It has also
entered quite largely, through improved manufacture of meals, starches and
syrups, into table use. The consumption of oats is known to have greatly
increased in its use for breakfast food. The per capita consumption of
wheat, while slightly increased in some quarters through the cheapening of
flour, has been diminished by the larger use of corn and oats, and a far
greater variety of table food. Quite probably, however, the data as to
corn raising in the first few years of this period are not complete. The
years of the war made such statistics difficult to obtain. The difficulty
with reference to wheat raising was by no means as great, since the wheat
raising regions were more directly accessible. Third, the seasons of
abundance and those of poor crops can easily be seen. It is evident that
while the three crops are not always poor together, they are too
frequently so to balance each other in meeting the risks of farmers.
Fourth, it appears that the fluctuations in yield are much greater in late
years. This is accounted for by the greatly increased proportion of lands
cultivated upon the plains of the western states and subject to greater
fluctuations of climate. It will be noticed that the acreage frequently
falls off in the years showing inferior yield. This shows that sowing and
planting have frequently been affected by unpropitious weather. In fact,
wheat fields have frequently been plowed up in the spring and not counted
in return of acreage. Reductions in the acreage of wheat, however, appear
frequently succeeding an immense crop. This indicates the effect of low
prices. Fifth, the bearing of the total product upon the prices of these
staples, while suggested by the greatly increased amount, will be more
clearly seen by reference to Chart No. 6.

                                 [Chart.]

  Chart VI. Fluctuations in prices of wheat, Indian corn and oats in New
                      York, 1878-1898. Pages 87-91.


CHART NO. 6

_Fluctuation of prices of wheat, corn and oats in New York, 1878 to 1896._

_Explanation._—This chart exhibits the average price of each of these
three staples in September, December and May of each year. These months
are chosen as giving without too great complication the widest range with
reference to a particular season. September gives usually the price of the
first of the new crop; December shows usually the fullest marketing of
crops; May marks the month of largest speculation with reference to the
incoming crop. Corn is less distinctly affected by these peculiarities,
being subject to different conditions of the weather as well as of
marketing. But the correspondence in price to a certain extent is easily
perceived at a glance. The reason for this correspondence is partly in the
uniform effect of seasons, as shown in Chart No. 5, and partly in the fact
that either of the crops may supplement, in certain respects, a deficiency
in either of the others.

_Wheat prices._—With reference to wheat, No. 1 in the chart, further
particulars as to prices are shown. The horizontal line in each year gives
the average price of the year; the diagonal line gives the extremes of
prices, highest and lowest, within the twelve months from September to
September again. The dot within the circle gives the estimated average of
farm prices on the first of December, as given by the Department of
Agriculture. The relation of this, somewhat constant, to the New York
price for December, as given in the line directly above it, may be of
interest as showing the average actual expense of bringing wheat from all
over the United States to the New York market. Where the difference of the
two prices is more than an average, a speculative turn in the market
during December is indicated, the farm price being fixed on the first day
of December. The same fact of speculation is also shown in years where the
diagonal line is longer than usual.

_Special variations._—At the top of the chart is shown the world’s visible
supply of wheat for each year, each horizontal line indicating 500,000,000
bushels. The shaded portion gives the amount exported by the United States
and the part above the shaded portion indicates the amount consumed or
stored within the country. Thus, in the year 1894-5 the total wheat crop
of the world was 2,672,000,000 bushels, of which the United States
furnished 460,000,000, 144,000,000 of this amount being exported. This
year marked the lowest price of wheat in the record, together with the
largest crop in the world, though not in the United States. A
proportionally small amount exported explains the falling out of the
bottom of the wheat market. By reference to Chart No. 5, it will be seen
that while the wheat crop of that year was considerably above the average,
the corn crop and oat crop were far below the average. This explains the
fact appearing in Chart No. 6, that the price of wheat was lower than the
price of corn at the beginning of that year. It is probable that the use
of wheat as a substitute for corn in feeding stock actually saved the
wheat from a still lower price. The crop of 1891, the largest on record in
the United States, was accompanied by a moderate crop in the rest of the
world following two other moderate crops, indeed two short crops, for the
entire world. The large amount of wheat exported explains the reason why
the fall of prices was not greater in this country. That the price did not
fall faster was due to the fact, remembered by many, that farmers, as well
as speculators, held to the crop with the expectation of larger demand
from abroad. When the crop of 1892 was felt to be still larger throughout
the world, the price fell rapidly, in spite of a smaller crop in the
United States. But when the prospect of an inferior crop in this country
for 1893 was felt in the spring, the price rose a trifle. Yet as soon as
the harvests of the world showed an enormous crop outside the United
States, the price dropped again. The crop of 1889 was a short one in the
world, and apparently should have affected the price of wheat in this
country more than appears; but when the total amount exported is seen to
leave more than an average crop in store, it is easy to see why the price
in this country did not rise. The explanation of this small exportation is
in the fact that the greater part of the shortage in yield was in
countries like Russia, from which no demand was felt, because the people
simply went without. The starvation of people in such countries affected
the demand for wheat in this country only so far as our benevolence
enlarged the market. The peculiar shape of the line of wheat prices in
1889 without any correspondence in prices of corn and oats is due to a
speculative movement for December wheat in Chicago. The attempted corner
in wheat failed suddenly, or it might have produced a line similar to that
of 1897-8, due to the famous long-continued Leiter corner.

_Sources of information._—The object of this chart, taken altogether, is
to show the general law of market prices as governed by supply and demand
from the actual facts in the market for wheat. The facts are taken from
the best records available. The prices are from the daily record of the
Produce Exchange of New York. The average price for the year and the
fluctuations within the year are given for the period from September 1,
when the new crop appears, to the August following, this being the period
actually corresponding in market with a year represented by the crop
figures. The estimate of the world’s crop since 1885 is taken from
carefully prepared statistics in the United States Department of
Agriculture. The estimates prior to that date do not include the entire
world, because no statistics can be reached, but they do include the most
careful estimates of all countries whose product entered into the world’s
market. No effort has been made, for fear of complicating the chart, to
show a similar correspondence between supply and price in reference to
corn and oats. The tables following, however, give data for such
comparison with reference to this country alone. The export of corn and
oats has been too limited to play any great part in modifying prices.

                                 [Table.]

    Table of production—wheat, corn, oats, 1878 to 1897. (Figures give
                           millions of bushels)


CHART NO. 7

                                 [Chart.]

    Chart VII. Annual fluctuations in the price of wheat in New York,
                           1878-1897. Page 91.


_Annual fluctuations in the price of wheat. Highest year, lowest year, and
average of twenty years in New York, 1878 to 1897_

_Explanation._—This chart is intended to show the tendencies of the market
for wheat from month to month throughout the market year. In the center is
given the averages of highest prices and of lowest prices for each month
in the New York Produce Exchange during the period from September, 1878,
to August, 1897, inclusive. The horizontal lines between the averages of
extremes give the average price for the twenty years in the several
months. The diagonal lines give for each month the extreme fluctuation
during the twenty years. Above the lines of averages are given the
fluctuations by months in the year 1881-2, the year of highest prices. The
upper of the two continuous lines gives the top prices of the month and
the lower the bottom prices. The short horizontal lines give the average
price for each month; and the double horizontal line across the chart
represents the average price for the year. Below, the fluctuations in
wheat prices for 1894-5, the year of lowest prices, are shown in the same
way. At the top of the chart are given, in millions of bushels, the
receipts of wheat in New York. The shaded double column in the center
under each month gives the average receipts for twenty years. To the left,
a single column shows the receipts for 1894-5. To the right, a single
column gives the receipts for 1881-2. Since the receipts at New York are
chiefly for export, the general correspondence between receipts and prices
is rather a result of a larger application of supply and demand than an
exposition of it. The chief use of the chart is to show the fluctuation of
prices under varying local conditions. The figures on the left give the
price per bushel, and the figures on both left and right at the top
indicate millions of bushels.

CHART NO. 8

                                 [Chart.]

       Chart VIII. Prices of wheat in England, 1300-1890. Page 93.


_Prices of wheat in England for 600 years, 1300 to 1900_

_Description._—This chart is to show at a glance the history of the wheat
market in England for the past six hundred years. The record of the first
four hundred years is taken from Rogers’ “Agriculture and Prices.” That
for the eighteenth century, less complete, is taken from Schoenhof’s
“History of Money and Prices.” The nineteenth century record is from the
report of the statistician of the United States Department of Agriculture.
All are reduced with care to the basis of bushels and dollars and cents.
The figures on the right and left show the price per bushel in United
States money.

_Explanation._—The heavy horizontal lines show the average price during a
period of ten years, though in a few instances the period is longer. The
diagonal lines show the extremes of fluctuation during the period which
they cover. During the first two hundred and fifty years the coinage of
England made the shilling in which prices were reckoned a much larger
unit, practically three times as great as at present. The dots within
circles indicate where the horizontal lines might have been had the unit
been always the same. The same dots crossed cover a period of forty years
in which prices are somewhat uncertain, from transition between the old
standard and the new. The beginning of the nineteenth century shows a
remarkable condition of the wheat market, due chiefly to the wars in which
England was engaged, together with issues of paper money affecting the
standard of value. The record is especially interesting from showing,
first, the great fluctuations natural from unequal seasons; second, the
gradual increase in cost of production under the law of diminishing
returns; third, the effects of changes in money legislation; fourth, the
effect of extra consumption in times of war; and fifth, the effects of the
present world-wide commerce in overcoming the law of diminishing returns.
A more complete record for the eighteenth century would add to the
interest, if not to the effectiveness of the chart.

_Relation to wages._—For convenience of comparison, the average price of
wheat in France during periods of twenty-five years, as given by
Schoenhof, is added by dotted horizontal lines. The double line across the
chart indicates the range of average day’s wages of house mechanics in
England, without indicating the extreme of fluctuations. It seems evident
that wages and subsistence have something in common.

CHART NO. 9

                                 [Chart.]

    Chart IX. Prices of hogs and hams in Chicago, 1884-1907. Page 95.


_Prices of live hogs and green hams in Chicago, 1884 to 1897_

_General description._—This chart exhibits the fluctuations in prices of
live hogs and green hams as shown by reports of the Chicago Board of Trade
from September, 1884, to August, 1897, together with the visible supply of
live hogs in the market from month to month and for the entire year. The
figures to right and left give dollars per cwt. of live hogs, and per
barrel of green hams. The figures upon the upper third of the chart, right
and left, indicate the number of thousands of live hogs received in
Chicago during the successive months, as indicated by the dark lines. The
figures at the top of the chart under the date line give the number of
thousands of hogs received during the entire year. The year is taken from
September to August following, because the hog crop is in large measure
dependent upon the corn crop coming into use in September.

_Prices of live hogs._—No. 3, irregular line, gives the fluctuation of top
prices in every month from September, 1884, to August, 1897, for fat hogs.
The total range is between $3.30 per cwt. in September, 1896, and $8.80 in
February, 1893. A somewhat striking general correspondence is readily seen
between this line of prices and a line connecting the ends of the lines
indicating the monthly supply of live hogs at the top of the chart. The
average price of the year is easily seen to be low when the supply for the
year is high, and high when the supply is low, though in some instances
the effect of an increased supply is evidently anticipated in the prices.
Thus, an increase of 2,000,000 of hogs in 1889-90 over the supply in
1888-9 is anticipated by falling prices during the early part of 1889. In
a similar way, the effect of a diminished supply in the summer of 1895 is
not so marked upon the prices as might have been the case had not the
prospect been strong for a large supply in the fall of 1895. Whatever
influence the local manipulation of the market may have had, it is
perfectly evident that conditions of supply and demand have overwhelming
influence.

_Prices of green hams and mess pork._—No. 2, giving the range of prices
per barrel of green hams, shows fluctuations in some respects
corresponding to the prices of live hogs, but with variations due in a
measure, undoubtedly, to speculative interests in these products. The
range is from $6.60 in December, 1897, to $13.80 in May, 1893,
corresponding with the range in the prices of live hogs. Were there room
upon the chart, it would be easy to show an almost exactly corresponding
fluctuation in the prices of mess pork, which article is one affected
largely by speculation, though even that speculation is dependent upon
prospective supply and demand. The prices of mess pork at the New York
Produce Exchange during the same period ranged from $9 a barrel in 1885-6
to $15.80 and $15.60 in 1887-8, $14.20 in 1889-90, $11.75 in 1891, $14.20
in 1892, $22.60 in 1893, and gradually down to $7.25 in 1896-7.

CHART NO. 10

                                 [Chart.]

 Chart X. Prices of hogs and pork at Chicago, 1892-3 and 1896-7, highest
                        and lowest year. Page 98.


_Prices of hogs and pork products at Chicago Board of Trade for 1892-3 and
1896-7, the highest year and the lowest year_

_Annual fluctuation, 1892-3._—This chart presents a comparison between the
prices of live hogs, fresh hams and mess pork in the year of highest
range, with the prices of the same in the year of lowest range. The
figures on the left indicate the prices per cwt. of live hogs and per bbl.
of green hams and mess pork. No. 1 gives, in the dotted line above the
date figures, the highest price of mess pork in each month of the year,
while the dotted line below the date figures gives the lowest price for
the corresponding months. The range in any month is found in the distance
between the heavy dots on the line following the name of the month. Thus
the highest price in April, 1893, is $19.35, and the lowest price in the
same month, $15.50. The range throughout the year is from $21.80 in May to
$12 in August. No. 2 gives the same facts with reference to the prices per
barrel of green hams; and No. 3 gives the corresponding facts as to prices
of live hogs.

_Annual fluctuation, 1896-7._—Nos. 4, 5 and 6, marked by more distinct
lines, show the range of prices for these three related articles of
commerce for the year 1896-7. No. 4 gives the prices of green hams, which
in this year averaged higher than the prices of mess pork, although the
fluctuations of mess pork are the greater. At the top of the chart are
given in thousands the number of live hogs received in Chicago during the
two years.

On the right of each month are the numbers for 1892-3; on the left the
numbers for 1896-7. The lines connecting the shaded portion show the
fluctuations from month to month in the supply. A general, though not a
perfect, correspondence is perceptible.

CHART NO. 11

                                 [Chart.]

Chart XI. Annual fluctuations of prices of pork in Chicago, 15 years. Page
                                   100.


_Annual fluctuations in pork prices in Chicago—average of fifteen years_

_Average annual fluctuations._—This chart is intended to show the annual
range of prices as shown by reports of the Board of Trade of Chicago, from
September, 1883, to August, 1897. The figures, right and left, give prices
per cwt. of live hogs, and per barrel of green hams and mess pork. The
figures opposite the shaded lines at the top indicate receipts of live
hogs in thousands, by the average in each month, for the fifteen years.
The year is taken from September to August following, for correspondence
with the crop year, as in previous charts.

_Explanation._—No. 1 gives in the upper continuous line the average of top
prices for mess pork in successive months; and in the lower line the
average of bottom prices for the same months. The long, diagonal lines
show the extreme of fluctuations in each month during the entire fifteen
years. Thus the lowest price reached during the month of April in any year
was $8.05, while the highest was $25.50. The lowest price in November of
any year was $6.40, while the highest price in the same month was $15.50.
No. 2 gives in the same way the average of top prices and bottom prices
during the fifteen years for green hams; and by its diagonal lines, the
extremes of fluctuation. No. 3 presents a corresponding showing of average
top and bottom prices of live hogs, with extreme fluctuations. No. 4, at
the top of the chart, gives the average receipts of live hogs in Chicago
during the several months of the year, counted in thousands.

The supply of hogs.—The correspondence between the receipts of live hogs
and the average market price in each month is worthy of study. Every
farmer can see in what months of the year the market is fullest. It is
also evident that the fluctuations in mess pork are much more extensive
than in live hogs or fresh products. This is doubtless due to the
possibility of speculation in a product which can be held for future
market. Nevertheless, it is quite evident that the prices of mess pork
have some direct connection with the supply available.

CHART NO. 12

                                 [Chart.]

  Chart XII. Prices of cattle and beef in Chicago, 1884-1897. Page 103.


_Prices of cattle and mess beef in Chicago, 1884 to 1897_

_Description._—This chart is planned to show the prices of cattle and the
prices of mess beef from month to month from September, 1884, to August,
1897, together with the supply of cattle received in Chicago in each month
and for each year. The figures right and left on the lower part, give in
dollars the prices per hundred pounds live weight, and per barrel of extra
mess beef. Above, to right and left, the figures indicate thousands of
live cattle received in Chicago.

_Explanation._—No. 1 gives the lowest price in successive months of lowest
quality of beef steers. No. 2 gives the highest price in successive months
for stock cattle. No. 3 gives the highest price in successive months for
best quality of beef steers. No. 4 shows the fluctuations in the highest
price per barrel of extra mess beef from month to month. No. 5 shows, by
length of lines in each month, the receipts of cattle in Chicago by
thousands. No. 6 gives the number of thousands of cattle received in each
year. As in previous charts, the year runs from September 1 to August of
the year following, though the relation of the beef market to the crops of
the year is not so marked as that of the pork market. Although the
correspondence in prices between these various parts of the cattle trade
is not absolute, it is too striking to be consistent with independence of
causes. The price of stock cattle has some elements not found in the price
of beef cattle; and the price of lowest quality of beeves for canning
purposes is naturally more uniform than any other prices.

CHART NO. 13

                                 [Chart.]

 Chart XIII. Annual fluctuations in prices of cattle and beef in Chicago,
                           1883-1897. Page 104.


_Annual fluctuation in prices of cattle and beef, Chicago, 1883 to 1897_

_Explanation._—This chart is intended to illustrate the changes of prices
in successive months upon the average of fifteen years, as to stock
cattle, beef steers, mess beef and beef hams. The data are taken from the
daily records of the Chicago Board of Trade, from September, 1883, to
August, 1897. The figures to right and left indicate prices in dollars per
hundred pounds live weight, and per barrel of beef products. No. 1
indicates the range of prices for beef hams. The upper line gives the
average of highest prices in each month for fifteen years. The lower line
gives the average of lowest prices for the same period. The diagonal lines
give the extremes of prices within the fifteen years.

_Mess beef and beef steers._—No. 3 gives the average of highest and lowest
prices for mess beef. Nos. 4 and 6 give respectively the average of
highest and lowest prices for beef steers. The diagonals give the extremes
for beef steers during the entire period. No. 5 gives the average of
highest prices for stock cattle.

_Supply of cattle._—In the center, No. 2, is given the average receipts of
cattle in the Chicago market for each month. The unshaded portion at the
end of the lines, represents the average reshipment of cattle. Thus
September, on the average, brings 265,000 cattle to Chicago and reships
90,000; while October brings nearly 283,000 and reships 82,000.

_Peculiarities of mess beef market._—It will be noticed that the prices of
beef hams give an annual curve, entirely distinct from either of the
others. This indicates the fluctuation in demand entirely out of keeping
with the supply. It is quite possible that the opening and closing of
navigation upon the Great Lakes may be an important influence. Certainly
the change of the season between cold and heat is an important element,
since the lowest month, and that of least fluctuation, is December. The
month of highest prices is August, and those of greatest fluctuation are
May, June and September. The curve of prices for mess beef has a fair
correspondence with the numbers of cattle slaughtered in Chicago. The line
indicating top prices of beef cattle has peculiarities of its own, because
it stands for quality as well as quantity, representing the fancy lots,
which are necessarily somewhat more irregular than the average. The line
of prices for stock cattle is evidently affected by the variations in
demand by feeders. The line of lowest prices for beef cattle, No. 6, is
quite probably affected by quality as well as supply.

CHART NO. 14

                                 [Chart.]

Chart XIV. Wholesale prices of iron, kerosene, etc., New York, 1867-1896.
                                Page 106.


_Prices of iron, kerosene, etc., 1867 to 1896_

_Description and Explanation._—This chart gives the prices from year to
year for steel rails, bar iron, pig iron and nails in the New York market,
each dot indicating the average for the year. The average prices for the
corresponding years for refined kerosene are also shown. No. 1 gives
prices per ton of steel rails, into which enters all the influence of the
improved methods of manufacture. No. 2 represents the prices of bar iron
per ton, less affected by improvements but influenced by the substitution
of steel. No. 3 gives the prices of nails per thousand pounds. For
comparison with the other prices of iron, the prices of nails must be
doubled. All will realize the immense improvements made in the manufacture
of nails. No. 4 gives the prices per ton of pig iron. It is evident that
all these forms of iron and steel have stood in the market under the same
general influences, with slight modifications from special characteristics
of production or use. No. 5 gives the average price in each year for one
hundred gallons of refined kerosene oil. The price per gallon can be found
by reading the figures as cents instead of dollars. In the same way the
price of ten pounds of nails can be found. It should be said, however,
that all these prices are the wholesale prices, retail prices being
subject to local influences, sometimes even to custom, which prevents
their adhering closely to the prices in larger markets.

_Even monopoly affected._—These articles have been chosen as illustrating
the essential law of prices even under the advance of combination of
capital upon an enormous scale. The iron industries and the Standard Oil
Company come nearest, perhaps, to fulfilling the conditions of monopoly
found anywhere. Yet the actual effect of improved methods in great
combinations is seen to have reached the mass of the people in spite of
any tendency to sustain prices by combination. A line, No. 6, indicating
the general trend of wages for farm hands in the North, is added to more
clearly indicate the distribution of welfare through such improvements in
method. For still other purposes, the fluctuating price of silver bullion
is shown in line No. 7.




Chapter X. Exchange—Its Machinery.


_Free communication._—From what has been said in the preceding chapter as
to the nature of value and price, it will appear that the most fundamental
condition for ready exchange is perfectly free communication between
individuals as to wants and abilities to meet wants. There is implied,
also, an absolute protection of property rights and of equity in dealing
through the laws and customs of the community. No one acquires property
for the purpose of exchange unless he can foresee the possibility of
carrying out the exchange at any future time. He must also feel that he is
protected by surrounding circumstances from misinformation as to values.
In short, any community is ready for free exchange among its members only
when it maintains the conditions for fair competition. To this fairness of
competition many things contribute, aside from the governmental machinery.
There can be little trade without a common language, and the full
advantages of common speech are reached through every facility for ready
communication between all the individuals of the community. An universal
press, postal facilities, telegraph and telephone systems have all grown
up in meeting this need.

The same is true of established market places, boards of trade and produce
exchanges. Not only does the multitude of exchanges in one place lessen
the cost of such exchanges, but these make it possible for multitudes to
reach a fair understanding of what is wanted and what is offered in any
line of production. This need accounts for the tendency so frequently
noticed to establish great centers of trade in particular commodities. The
world wants a fair understanding of what the world contains, and these
methods of bringing together buyers and sellers are the natural outgrowth
of this need.

_Full statistics._—The same end is served still more fully by frequent
publication of price-lists, and a daily record of the transactions in any
market gives information which every dealer can use to advantage. Public
statistics, carefully and honestly prepared, serve both buyers and sellers
of any article of commerce. The farmer needs as much as anybody the
fullest information as to what his fellow farmers have to sell, whether
they are immediate neighbors or in distant parts of the world. The price
of wheat on any farm ought, if perfect understanding is reached, to
conform to the general law of supply and demand throughout the world, and
the yield of wheat in Russia, India and South America affects the value of
every bushel raised in our country.

Every advance in the perfection of statistics and the rapidity of
collection makes more certain the bargain of every producer and consumer.
People have sometimes opposed the gathering of statistics for fear that
large dealers and speculators may take unfair advantage from such
information. But a careful consideration will show that managing of the
market depends chiefly upon want of information on one side of the
bargain. If farmers were as thoroughly informed as to the crops of the
world as carefully collected statistics might make them, no false rumors
could mislead them in selling their produce. The evident tendency toward
more stable markets, as shown by the records of the last twenty years, is
accounted for partially, at least, by the more perfect information
available. If farmers themselves would take interest in furnishing
accurate estimates of the extent and condition of every product held for
sale, they would in the long run reap the highest advantages of clearly
understanding the supply and demand in the markets of the world. This
would do more to destroy the demoralizing force of mere speculation than
any possible legal enactment.

_Ready transportation._—An equally important part of the machinery of
exchange is easy transportation. Every improvement in the transportation
of persons or products not only lessens the cost of the article when
delivered, but increases the actual stability of price and range of the
market.

The pioneer farmers of northern Ohio found absolutely no market for their
wheat until the opening of the Erie canal. Farmers upon western prairies
found corn their cheapest fuel until railway transportation brought coal
mines and corn fields into closer relations. The rural community which
takes pains to have good roads not only lessens the cost of hauling grain
to market by saving friction and toil, but actually enlarges its market at
home. Hard roads enable them to do four times the work they can do on soft
roads. In the same way any improvement of railroads, construction of pipe
lines for gas and oil, or introduction of pneumatic tubes, for mails and
light packages in cities, directly spreads the range of market for the
products of every individual laborer and makes more sure the returns for
any effort he may give in production. Perhaps this is even more easily
seen by considering how the world’s markets are opened by improvement in
water transportation. Water freight on a bushel of wheat from Chicago to
New York from 1865 to 1874 averaged over twenty-two cents; from 1885 to
1894 it was less than seven cents.

The universality of markets for all kinds of products is clearly shown by
realizing what we have within reach of every country community today. Such
easy transportation adds to the productive abilities of every person. Over
ordinary roads the cost of transporting wheat two hundred miles is equal
to its value at the end of the journey. Corn will usually pay its way not
more than half that distance. So in countries where railroads do not exist
the people consume only what they themselves produce, or devote themselves
to very few products, and so occupy only a portion of their time. In the
best developed regions of our country, every family can reach a steady
supply of all kinds of goods, and can know that every article produced has
its proper place in the market without waste. The cost of delivering bread
in Boston is greater than the cost of carrying the flour in it two
thousand miles. This ready transportation leads to more complete and more
definite occupation and so to larger returns in the way of satisfaction
from all efforts. The extended market gives added value to all permanent
or fixed capital. It makes both farms and homes more useful, if full
advantage of such improvements is taken. At the same time, values of land
tend toward an equality throughout the world.

_Diminishing cost of transportation._—That the cost of transportation
keeps diminishing in spite of combinations of capital to prevent it, and
in spite of local legislation restricting it, proves that the increasing
perfection of machinery and the accession of capital in railroads and
waterways are stronger than the purposes of men. That freights are
regulated by “what the traffic will bear” is merely another way of saying
that transportation comes under the universal law of values—what the
service is worth in the market, or what people are willing to give for it.
According to good authority, the net profit of carrying one ton of freight
one mile has fallen in twenty-five years from one cent to less than
one-ninth of a cent. The same principle fixes a classification of freight
according to service. We can afford to pay more for carrying valuable
produce than for carrying cheaper products. It also leads to special rates
for developing traffic, as illustrated in rates on baled alfalfa hay from
western plains to Chicago.

Wise managers, if not misled by speculation in stocks, care more for
enlarging traffic than for immediate returns upon a smaller bulk, because
the bulk of profit is greater. A good illustration of development of a
special traffic is found in the milk trains running two hundred or three
hundred miles to supply the city of New York. The railroads are compelled
by the needs of the traffic to carry the milk cheaply enough to prevent
its being made into butter and cheese. Laws regulating this charge are
effective, because such a necessity exists in the nature of the case.

_Weights and measures._—Another important growth in the machinery of trade
is found in standards of quantity,—weights and measures of every kind. It
is scarcely possible to realize the uncertainty of exchange without exact
weights and measures. The story of the Indian trader who bought furs by
weight, putting his hand upon the scales for one weight and his foot for
its double, illustrates how uncertain such judgments of quantity may be
without system. The present names of weights and measures indicate their
origin in similar ways.

Measures have usually been connected with some part of the body: as
“finger,” used one way in measuring the load of a gun and another on a
stocking; “hand,” still used in measuring the height of horses; “span,”
once considered sufficiently definite for any measurement; “foot,” now
made to conform to an accurate system; and “pace,” still used in many
communities. Connected with the arm, are “cubit” and “yard.” Many ladies
still measure their dress goods by arm’s lengths. For small measures,
“grain” and “barley-corn,” still used as names, indicate dependence upon
average quantity in articles of general growth.

Today all civilized governments settle upon a definite system of measures
and weights, all accurately connected with each other and with some
precise dimension in nature supposed to be invariable. Our common yard is
distinctly associated with a pendulum vibrating seconds; and in the great
decimal system, adopted by most countries in Europe, and likely to be
reached in all countries, the whole is connected with a measured meridian
upon the earth’s surface. Care is then taken to have standard measures and
weights prepared in such a way as to be free from all effects of any
change of temperature, and legal enactments distinctly define each measure
and weight, actually punishing one for the crime of using false weights or
measures. Units of quantity thus enter into all our calculations and form
an essential basis of all exchange. Cheating in measure and weight grows
less and less possible with this clear understanding of exact units. The
New York Legislature has defined the size of fruit packages, and the
Massachusetts poultry raisers ask a law requiring eggs to be sold by
weight.

_Metrical system._—If the whole world should unite on a single decimal
system of measures and weights, like that now used in most of Europe, all
would be gainers from the reduction of misunderstandings and
miscalculations increasing the cost of exchange. The difficulty of
adopting a new system arises chiefly from the absolute importance of any
system and the unconscious use of that to which people are already
accustomed, together with its application in a thousand unthought of ways
to every tool and every rule. That the advantage of a uniform decimal
system would more than balance the difficulty of change, no student of the
subject now doubts. Some have estimated the saving at nearly one-half of
the present clerk hire. Our government has already taken steps for such a
change, though years may be required to accomplish it.

_Standards of quality._—The machinery of exchange also involves standard
units of quality, but these must vary with every different kind of
commodity. Custom has given rise to all sorts of devices for expressing
degrees of fineness, strength and hardness, as well as more delicate
qualities of flavor and odor. Boards of Trade often establish offices of
inspection with brands upon grains, flour, butter, pork, etc., and these
become definite parts of a contract which the government rightly enforces.
Private trade-marks and brands, if honestly used, become a prominent
element in exchange. These are protected rightly by being filed with the
government, which secures to the originator his sole use of such a proof
of quality.

In some articles of trade, when a whole community is interested, the
government goes further and undertakes inspection and branding by an
official. This in most states applies to kerosene oil, first for public
safety, but afterwards for protection of exchange. Laws regulating the
quality of fertilizers are based upon the necessity of knowledge, that
bargains may be fair; and in many parts of our country now the branding of
ground feeds, with an analysis of their qualities, is deemed an essential
of safe bargaining. The extent to which this effort to establish the
certainty of qualities may need to be carried can be estimated by the
recent agitation over adulterations of food products. All believe that, as
buyers, they have a right to know the quality of what they buy. It is
conceivable that markets may some time establish a system of terms,
descriptive of qualities, almost as definite as weights and measures. All
this contributes to fair competition in exchange.

_Standards of value._—More important still in the machinery of exchange is
a standard unit of value. We have seen that value in any article of
commerce can be fixed in terms of any other article, but prices remain
indefinite so long as there is want of universal appreciation or appraisal
in essentially the same terms and ideas. The tendency toward definite
prices in well understood units of value is as clearly perceptible in the
progress of commerce as is the tendency toward definiteness in weights and
measures.

In early ages almost any article of common use, so that its qualities
might be generally understood, has served as a standard of value, in terms
of which all wealth has been estimated. Communities engaged in grazing
counted all their wealth by cattle. Homer’s heroes wore armor valued in
cattle, and early Roman coins bore the images of cattle, while the very
name of Roman coins, _pecunia_, is supposed to have been derived from the
name of the flock. Communities of fishermen for a long period have
estimated wealth in dried fish. More mechanical peoples have used some
article of manufacture, like nails in some Scottish villages and the
country cloth of western Africa. Sometimes a single prime article of
export has served the purpose, like tobacco in the colony of Virginia and
dried hides on the plains of South America. In most of pioneer America the
hunters’ pelts have served the same purpose, the average “coonskin” having
a value which all could understand. As communities became more wealthy the
display of wealth in ornaments made of precious metals and in precious
stones has led to the use of these as standards of value. American Indians
used their wampum, and African tribes employed peculiar shells. But as
commerce increased, embracing wider regions, gold and silver became the
staple article of value everywhere, since these, so easily tested for
purity, could have their value estimated definitely by weight. Thus the
standard unit of value has been definitely connected with standard
weights.

_Coinage._—Gradually these weights, for greater ease of transfer and for
clearer understanding of values, became the basis of coinage. The stamp of
the coiner became a certificate of quality and quantity, and finally, as
in the case of weights and measures, governments assumed the whole
responsibility for fixing the weight and fineness of coins, and reduced
all coinage to system, that every citizen might know the value of the unit
in which he estimates any article of commerce.

The early coins were definite weights of gold, silver or copper, and in
many countries coins still bear the names that indicate their original
weight. Yet arbitrary rulers have often sought to cheat their subjects by
issuing coins of lighter weight and baser metal. The French livre, now the
franc, is one seventy-second of its original value. English coins were
debased ten times between the years 1299 and 1601 to exactly one-third of
their original value. The loss from such debasement falls almost wholly
upon the poor, whose wages fail to buy the usual food and clothing. Henry
VIII reduced the coins of his realm again and again, until it would have
taken five years’ revenue of Elizabeth’s reign to restore the currency.
Elizabeth chose to take the standards as she found them, but to establish
an absolute degree of purity and fix by law the weight of each coin in the
system. The standard of purity since maintained in England is 22 carats,
or eleven-twelfths fine, and weights have been maintained in spite of
several efforts to reduce them. Other nations have taken similar steps
with varying standards of purity: .835 in the Latin union, .9 in the
United States, and over .96 in most coinage of western Asia. In this way
the standard of value for every citizen of a country is as clearly defined
as the standard of weight, and every transaction in trade, with every
account of such transaction, involves that unit.

_United States coinage._—A brief statement of the system of coinage now
established in the United States may illustrate the definiteness of the
standards of value. The United States mint at Philadelphia and its
branches at New Orleans, Denver, San Francisco and Carson have the sole
authority for making coins. Any effort at coinage by outside parties is
criminal. The mint receives the gold and silver by weight and assay of
purity, melts and refines and mixes with alloy, to bring the mass to
required fineness, nine-tenths pure, and casts the metal into bars called
bullion. These bars are then most carefully assayed, and, if found of
exact standard purity, are rolled and drawn into plates the thickness of
the coins desired. From these plates disks are punched by machinery, each
disk being weighed, and if found too light thrown aside, if too heavy
reduced by filing, until every disk represents exactly the required weight
of the coin desired. The disks then pass through a milling machine which
raises the edges, and when cleaned by dilute acid and carefully dried, are
stamped by a steel die with some device covering both surfaces completely.
This effectually gives the seal of the nation to the purity and weight of
the coin, and, since it covers the whole surface, prevents the possibility
of reducing that weight without marring the coin.

_United States standards._—The system of coinage in the United States
since 1873 embraces standard coins of gold, silver, nickel and copper, but
gold alone actually furnishes the standards of value, all other coins
being at present subsidiary. Gold is coined for individuals free; that is,
a certain weight of metal presented at the mint is assayed, to determine
the exact weight of pure gold, and an equal weight of pure gold is
returned to the owner in coin. Sometimes a slight charge for the expense
of coinage is made and called seigniorage. At present no such charge is
made, for the reason that when a nation bears the cost of coinage, foreign
coins are kept from circulation, and its own coins are current everywhere.

The standard unit of value for the United States is 25.8 grains of gold
nine-tenths fine, and this is called a dollar, although no coin of this
weight is at present struck. In actual practice, the standard is shown in
the ten-dollar piece, or eagle, weighing 258 grains. The half eagle (five
dollars) and the quarter eagle (two dollars and fifty cents) indicate upon
their face their relation to the principal coin. The double eagle, or
twenty-dollar piece, is coined for greater convenience. These coins
connect all the currency of the country directly with the market value of
commodities in the world, through gaining their value directly from the
market value of gold, where gold is bought and sold. Thus gold furnishes
the standard of value with which all other values are compared.

Silver coins of the United States are made from silver purchased by the
government. The dollar, adopted from the Spanish rix-dollar, itself
derived from the German thaler, is by law a coin of 412-½ grains of silver
nine-tenths fine. This silver dollar has a story of its own, which will be
given later, and does not form a part of the system of 1873. The half
dollar, the quarter dollar, and the dime, for fractional currency, are
proportional parts of 385.8 grains of silver nine-tenths fine. These are
about five per cent less in weight than the proportional parts of the
silver dollar. The original purpose of this reduced weight was to prevent
the consumption of these coins in ordinary uses by making them worth on
the face a little more than their bullion value. These fractional coins
are legal tender in the courts to the amount of five dollars. In nickel
and copper coins no effort has been made for many years to maintain a
standard of value, the amount of metal in any of them being far less in
value than their face. They are legal tender only to the amount of
twenty-five cents.

_Fluctuation of standards._—In the study of the precious metals as the
standard of prices, it is necessary to remember that the value of these
metals, like that of all products of labor, is subject to considerable
fluctuations. The very fact that gold and silver are durable metals, not
easily consumed or readily worn away, tends to make the increased product
in a series of years less and less valuable. While the ordinary increase
in product may be provided for by increased demand through extended
exchange, the very improvements in the machinery of exchange, especially
the extension of general credit, operate in the opposite direction.

It is certain that the value of gold and silver within one hundred years
after the discovery of America, when European nations took possession of
accumulations among the inhabitants of Central and South America,
diminished to a little more than one-fourth of the value previous to that
discovery. It is estimated that the value of gold since the discovery of
1849, in California, followed by the opening of mines in Australia and
South Africa, has been reduced to little more than three-fifths of its
value in 1850. This estimate is based upon careful comparisons between
what an ounce of gold in 1850 would buy of some hundred staple products,
and what the same ounce of gold will buy today of the same hundred
products. The test is a somewhat uncertain one, from the fact that many
products are much more affected by improved methods of production than
others, and changes of habits and customs among the people greatly affect
the prices by changing demands. The combination of a large number of
products being less likely to be affected than any one, the comparison is
worthy of some confidence. Nevertheless, it is possible for two different
persons, making different selections for comparison, to arrive at very
diverse results. If the selected articles are those of ready manufacture
where improved methods have most largely entered, the value of gold will
seem to have increased; if, on the other hand, the selected articles are
raw materials, in which the law of diminishing returns gives greater cost
of production, the value of gold will seem to have diminished.

A test easily applied, though not absolutely correct, is in the amount of
labor of the most common sort which an ounce of gold would pay for at the
different periods compared. Careful comparisons show that an ounce of gold
today buys more of all sorts of manufactured articles and more of most
articles of food, though less of the better class of meats and less of
labor, than ever before. This fluctuation in the value of gold has its
chief importance in connection with long extended credits, though its
influence is felt in other directions through a common system of accounts,
in which the standard unit of some system of coinage is the sole basis of
comparisons. If the standard unit is growing less valuable, in a series of
years the book-keeper will show a constantly increasing total of wealth;
if, on the other hand, it is growing more valuable, the books will show an
apparent loss. Were a perfectly uniform standard possible, all interests
would be best provided for.

_Ratio of silver to gold._—More directly important in its effect upon
exchanges is the unequal fluctuation of gold and silver when both are made
the standard of value. That silver and gold are from independent sources,
subject to variations of their own in product and processes of extraction,
makes it impossible that they should sustain always the same ratio to each
other in value.

A careful study of the subject by Professor Rogers shows that early in the
thirteenth century one pound of gold was worth ten pounds of silver, at
the close of that century would buy twelve and one-half pounds of silver,
and in the middle of the fourteenth century bought thirteen and
three-fourths pounds; but in the fifteenth and sixteenth centuries, after
the new world was pillaged, one pound of gold bought from ten and one-half
to twelve pounds of silver. In the seventeenth century fifteen pounds of
silver went for one pound of gold, and in the eighteenth, fifteen and
one-half pounds. Early in the nineteenth century the ratio was fixed in
this country at sixteen of silver to one of gold, and that estimate was
assumed to be essentially correct as late as 1877, when a pound of gold
would exchange in the market for three and one-half pounds of platinum,
seven pounds of aluminum, sixteen pounds of silver, seventy-one pounds of
nickel, 942 pounds of tin, 1,696 pounds of copper. Twenty years have
produced great changes in both the total annual products and the relative
cost of mining. The estimate of 1877 would now be incorrect for any of the
metals named. A pound of gold now buys 1,540 pounds of aluminum, the
change being due to an invention for reducing aluminum ore. It now takes
about thirty-seven pounds of silver to pay for one pound of gold, a change
in part due to new systems of coinage in which silver plays a subordinate
part, but chiefly due to the greatly increased product of rich mines and
greatly improved methods of reducing ores.

_The cheaper money drives out the good money._—In any system of coinage,
employing both silver and gold as standards, it is found by actual
experience, repeated hundreds of times, that a change in the ratio between
the two metals in open market always leads to hoarding for speculative
purposes of the most costly metal of the two.

Thus, in our country previous to 1873, when silver was worth more than
one-sixteenth of its weight in gold, uncoined silver was necessarily worth
more than coined silver for some purposes, and the coins already struck
were worth more in the manufacture of spoons and plate than to circulate
as coins. Prior to 1853, when the half dollars, quarter dollars and dimes
were coined at the ratio of sixteen to one, such coins could not be kept
in circulation, for the reason that they were worth more than their face
value. The law of 1853 reduced the weight of these coins so that their
market value as silver was sure to remain a trifle less than their face
value. The result was no further melting up of these small coins for use
in the arts or for bullion. This fact is only one illustration of what is
called Gresham’s law, formulated in the time of England’s base coinage
during the sixteenth century, but noticed centuries earlier, that _cheap
money always drives out a more costly money_. The principle is as constant
as human nature, that nobody will give a greater value when a less value
will serve the same purpose. For this reason, no country in recent times
has been able to keep both gold and silver as the actual standards of
value at the same time. Either the ratio must be changed with every
fluctuation of either metal, or one of the metals must be undervalued in
the system of coinage, as has been done in England for the greater part of
this century; or else the total coins of the cheaper metal must be limited
in amount, as has been done by the Latin Union in Europe during the last
twenty-five years. In either case the tendency is toward a single
standard. The commercial world prefers a stable, well understood unit to a
changeable one. And while the fluctuations of gold alone affect somewhat
the stability of prices, these are thought of less importance than the
necessary legal adjustments for new systems of coinage.

_Monometalism and bimetalism._—The discussion has led to two opposing
views, distinguished as monometalism and bimetalism. The monometalist
holds that since one metal only can, under ordinary circumstances, set the
standard of price, it is wise to choose the one subject to the least
fluctuation for the universal standard. The bimetalist holds that a
nation, or at any rate a group of nations, can fix by agreement the price
of gold and silver in terms of each other, when used as money. Since the
use of these metals as money makes the chief demand for them, it is
thought possible to make this legal ratio hold upon the total product of
both gold and silver. If, then, in any country the supply of gold should
be out of due proportion with silver, its overvaluation will at once
attract gold from other countries until it becomes no more profitable
there than elsewhere. The result is assumed to be a somewhat ready
equalization of values for the territory establishing the standard, so
that the actual fluctuations of the standard unit will follow the line of
lowest prices for either of the metals. The monometalist feels certain
that the actual withdrawal from circulation, and so from use as money, of
the higher priced metal causes greater hardship and probably greater
fluctuations in values of other commodities than any fluctuation of a
single standard can produce.

It is very certain that the commercial world recognizes the tendency
toward a single standard, and that the coinage systems of all civilized
countries are practically, if not in definite form, based upon a single
standard. The countries of wide commerce and extensive credit are using
the gold standard. The less developed countries adhere to the silver
standard. Many which nominally sustain both have, by some legal
restriction in the coinage of silver, become practical supporters of the
gold standard. Few, if any, thorough students of the subject believe it
possible by statute in the present conditions of mining and commerce to
bring the commercial world anywhere back to the ratio of sixteen to one,
established in the United States in 1834. Statute law might declare a
sheep to be equal to a horse, but no power on earth could make it pull as
much. So even agreement among nations, by legal enactments, cannot enforce
an unnatural relation between two products.

NATIONAL STANDARDS OF VALUE, 1899

_Gold_            _Gold, with       _Gold or          _Silver_
                  silver limited_   silver_
Great Britain,    United States,    Haiti, Uruguay,   Mexico, Central
Germany,          France,           Argentine         America,
Sweden, Norway,   Belgium, Italy,   Republic,         Columbia,
Denmark,          Switzerland,      Venezuela,        Bolivia, Peru,
Austro-Hungary,   Greece, India.    Spain, Servia,    Equador, China,
Roumania,                           Bulgaria,         Hong Kong and
Turkey,                             Netherlands,      Straits, Cochin
Portugal,                           Algeria, Tunis,   China.
Brazil, Canada,                     Japan, Java,
Newfoundland,                       etc.,
Egypt, Russia,                      Philippine
Chile.                              Islands,
                                    Hawaii.

_Actual bimetalism._—It is necessary to caution against supposing that the
use of both gold and silver as currency in any country implies true
bimetalism, nor is it at all certain that the making of either gold or
silver legal tender at option touches the question of bimetalism. Only the
issue by free coinage at the will of the owner of both metals shows a
distinct attempt to maintain bimetalism. The actual maintenance of both
standards has always been, and always will be, by alternation, when the
ratio of the two metals as to value is established at very nearly the
market value of the two metals in bullion.

Popular demand for a return to the old ratio in the United States is
founded in part upon misconception of commercial principles and largely
upon a misunderstanding of current events during a financial crisis. The
supposed dangers from a single standard of value are largely exaggerated
from confusion of standards with currency in exchange. It is quite
conceivable that gold may still serve as a standard unit of value, while
90 per cent of exchanges have no other use for gold beyond its furnishing
terms of comparison. We must measure value by value, and the unit of value
must be true to its name, just as we measure length by something long. But
the number of yardsticks in actual use in a store may have no constant
ratio to the number of yards of cloth sold by that measure. The folding of
calico in yard folds relieves the yardstick, but does not change the
nature of the yard. So gold, or silver, is relieved of many functions in
exchange through banking systems without materially affecting its use as a
standard unit.

_The multiple standard._—It is proper to mention in connection with units
of value a theoretical device for overcoming the necessary fluctuation in
all articles of value. This is sometimes called the multiple standard. The
plan, in brief, is to appoint a committee of experts, whose record of
current prices, in some general market, for a hundred or more staple
articles of commerce, shall be compared from week to week, or day to day,
in such a way as to indicate how far above or below the average the price
of any article may be. If, then, gold is made a legal tender, a comparison
of its price with the average of all prices will show how much weight of
gold must be given on any day to actually return a value exactly
equivalent to what was borrowed sixty days or a year previous, when the
ratio of gold to average prices was different. In this way it is supposed
that natural fluctuations in gold, silver or any other commodity made
legal tender for debt can be fully provided for without loss to either
debtor or creditor.

The objections to this ideal standard are the practical difficulty of
settling, first, the wide range of commodities to serve as the basis;
second, the importance to be given each in adjusting the standard; and
third, the nature of the commission under which the work should be done.
In the history of the world, custom has preceded law in devising for
welfare; in this, law without experience will have to precede custom. The
difficulty which most men would experience in understanding and trusting
such a system puts off indefinitely the possibility of a general adoption.

_The currency._—The last essential in perfect freedom of exchange is a
satisfactory means of transferring completely and quickly all property
right in any article of trade. Exchange of commodity for commodity or
service for service is possible to a very limited extent, since the man
who wants my horse may have nothing which I want in return, or if he has,
the values may be unequal, and one or the other must remain in debt, which
means that one of the articles belongs in part to both. In some new
countries exchanges are confined to this slow and uncertain method of
barter, where nobody can buy until he finds a neighbor wanting just what
he himself has to sell. Traders in such countries contrive to accumulate a
variety of things needed by all sorts of people, that they may be ready
with some kind of exchange to meet particular wants. No community,
however, begins to reap the clear advantages of exchange until some
universally acceptable medium of exchange is discovered and accepted. The
process of developing this medium is essentially the same as that
described in establishing a standard of value; and so the word money
naturally represents both the standard of value and the common currency of
trade. It is easy, however, to see by further examination that the two
functions of money are quite easily separable, and that, while it is
difficult to substitute for the standard of value, a variety of
substitutes can serve as currency.

In speaking of coinage hitherto, the standard of value has been assumed to
be the most important, but in fact a large proportion of our coin serves
simply as currency without materially affecting the standard of value.
This is true of all the fractional coins, which are purposely over-valued,
and equally true of the silver dollar under existing circumstances. In
fact, the primary use of coin was simply for the purpose of transferring
property. In the words of Aristotle, 350 B. C., “Men invented among
themselves, by way of exchange, something which they should mutually give
and take, and which, being really valuable in itself, might easily be
passed from hand to hand for purposes of daily life.” This coined money
supplies the needed means of exchange most readily because it carries its
value with it. In all civilized communities, and in many only partially
civilized, it is readily exchangeable for any article of commerce. It is
also valued in proportion to its weight, so that any bulk in gold or in
silver may be easily divided by exchange for smaller coins. With a little
painstaking the coins are made identical in value, so that every trader
knows what he gives and receives. They are exceedingly durable, resisting
almost all the forces of nature with little loss. For this reason they are
likely to have an almost universal value, that is to be wanted by
everybody, in any place, at any time, and under any circumstances. These
facts are proved by the tendency to hoard such coins whenever individuals
have a surplus of wealth beyond present wants, or whenever there is risk
in using wealth as capital because of distrust of government, of
individuals or of future enterprise. A buried treasure is almost sure to
be in the form of coins.

Under a system of coinage, inequalities in exchange are easily adjusted,
like “the boot” in a horse trade, or the balance between produce carried
to the store and the articles carried away. Most of all, coin is used
where for any reason there is distrust of the future. Coin, or its
equivalent in bullion, is needed in all transactions where credit is
wanting. This appears prominent in all lawless communities with a
fluctuating population, and may be found in ignorant communities where
methods of credit are not established. It is often essential in the
settlement of claims between hostile countries, and is the final means of
adjusting balances in all foreign trade. Occasionally this need appears in
a universal panic, where each man takes his fellow by the throat, saying,
“Pay me that thou owest.”

_Coin a part of a country’s capital._—The coined money of a country thus
becomes wealth in store for constant use as a machine of exchange. Its
operation is effective when it keeps in constant motion, being itself
consumed very slowly in the wear and tear of motion. It is sometimes
compared to an endless screw, transmitting motion to everything else with
which it comes in contact. Like other machines, it may be either too
abundant or too scarce for the best advantage of the country. In either
case there is waste. When the coin is idle it is unproductive, but suffers
less waste from deterioration than almost any other kind of machine. In
case of scarcity the cost of its use is increased under the general law of
supply and demand, exactly as the cost of other machinery in use is
advanced when many desire to use it. This machine is a prominent part of
the capital of a country, greater in some countries than in others. In
France the value of coin is estimated to be 3 per cent of the value of all
real estate, including buildings. The use of such a machine makes a
material part of the annual cost of exchanges. The coin of England, where
interest is comparatively low, costs for its use in interest, wear and
tear, and re-coinage more than $20,000,000 annually.

An additional cost to individuals is in the extra risk of carrying such
wealth, as shown in express charges and special insurance, and still
greater expense for safe keeping, and a considerable use of time in
counting. These facts have led to many devices for lessening the need of
keeping wealth in this form.

_Credit by accounts._—The most obvious method of avoiding the use of coin
in exchanges is a current account between individuals having many
transactions in trade. A farmer carries his butter, eggs, fruits, grains
and live stock, perhaps, to a single dealer in all these articles, and
takes in return articles of household use or for any necessity as he
requires them, from a spool of thread to a harvester. If both keep
accurate accounts, a settlement once in six months satisfies most
conveniently all the requirements of perfect trade. Indeed the settlement
is needed only that the accounts may be verified. Except for the dangers
of waste in unlimited credit and carelessness in expenditure where future
wealth is drawn upon, this method of exchange is simple and inexpensive.
In the nature of the case, however, it must be limited, for safety, to
trade between people having confidence in each other’s honesty of purpose
and ability to keep correct accounts. It also requires a mutual
expectation of ability on the part of either to meet indebtedness at any
future time of settlement.

_Credit by due-bills._—An extension of this credit in well established
countries, so as to take in other persons than the two involved in book
account, is found in due-bills, notes of hand payable on demand, or more
formal securities, any of which may require a final decision in court.
These pass from hand to hand, often in connection with coin, and under
ordinary circumstances serve their purpose cheaply. In some countries a
note of hand, with endorsement of each user, may make exchanges until it
is covered with endorsements. The danger of waste is considerable from the
impossibility of knowing the financial standing and honesty of the various
endorsers, and the system is limited, of course, to the range of
confidence in such trustworthiness. So easy is it to extend this credit of
individuals beyond the range of safety that most governments have found it
necessary to protect their citizens against its dangers by limiting or
prohibiting its use as currency.

_Credit currency._—So convenient, however, and so economical is the use of
credit, that all well established nations have developed systems for the
issue of a credit currency founded upon the stability of strong
corporations or upon the national credit. Nations themselves have often
issued bills of credit in the form of notes, or promises to pay at the
national treasury. If these are payable on demand in the coin of the
realm, they are said to be redeemable. If the time of payment is
uncertain, or indefinitely postponed, they are said to be irredeemable.
Thus we have the many forms of paper money so familiar to everybody and
the various practices and speculative theories regarding it, which make a
large part of the discussion of financial questions throughout the world.

No one doubts the worthlessness of currency in any form of note, from
individual or firm, which cannot be paid when presented. The notes of the
government, so long as that government is considered stable, may circulate
readily, and even after doubts exist as to the final ability of the
government to redeem, they still circulate, perhaps with greater
readiness, in the feeling that hoarding is utter loss and the stopping of
trade in the ordinary perishable products of industry will be an enormous
disaster. This feeling often leads to the use of a currency without value,
like the token money used for change in the absence of legal coins. Though
nobody is bound to redeem these tokens, everybody takes the risk of loss
as less disastrous than no exchange. Paper money issued by corporations is
universally considered dangerous to the interests of communities, unless
very carefully restricted within distinct and clearly understood limits.
The discussion of such issues will be given in another chapter devoted to
banking. The issue of paper money by governments has been a frequent
device for enforcing contributions of citizens to extraordinary expenses
in war or other disaster. A history of such issues cannot be given within
the limits of this book, but is well worth the study of those who seek an
understanding of the powers and limitations of government under natural
laws, in making a satisfactory currency. A government’s stamp upon the
piece of paper is so far good, and only so far, as it secures to the
receiver of the paper an equivalent value to what he gave for it. If the
government itself is unable to give that value, it can never insure the
ability or the willingness on the part of any individual to give such
value. While millions of dollars in such form may serve as currency
without any deterioration, as at the present time, when government
promises in all the various forms amount to nearly $1,000,000,000, should
any of these, on any day, be refused payment for want of means in
government possession, every individual in the land would feel that the
value of his possessions in the shape of such notes was made just so far
doubtful as the chances of redemption are postponed. All issues of such
notes at once become certificates of debt rather than credit, and lose, to
greater or less extent, their exchangeable value.

In the extraordinary issue of “greenbacks” during the civil war, the
purchasing power of a paper dollar was reduced to less than half, and
gradually appreciated in value as the expectation of early redemption
increased. The effect of such issues upon government revenues will be
treated in its proper connection. As currency, it certainly robs each
creditor and holder while depreciating, and as surely robs each debtor
while appreciating. As wage earners are universally creditors, according
to prevailing customs, they suffer most in a depreciation of money values:
i. e., they work for dollars at one value and a week or a month later
receive them to expend at a less value. Speculative debtors, on the other
hand, always thrive on depreciating currency, paying their debts in what
costs less exertion. Under appreciating currency, the creditors gain, be
they bankers or workmen.

_Banking._—The peculiar convenience for saving found by experience in the
use of each of these methods of settlement in exchange leads to a natural
commingling of all. Coins serve some purposes best, and accounts have a
limited range; notes of hand are often desirable, and paper money, if
s

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