Principles of Political Economy
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Title: Principles of Political Economy
Author: Arthur Latham Perry
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PRINCIPLES OF POLITICAL ECONOMY.
* * * * *
PROFESSOR PERRY'S WORKS ON
POLITICAL ECONOMY.
1. INTRODUCTION TO POLITICAL ECONOMY. Fifth
Edition. 12mo. 357 pp. Price, $1.50.
2. PRINCIPLES OF POLITICAL ECONOMY. 8vo. 585
pp. Price, $2.00.
3. POLITICAL ECONOMY. Twenty-First Edition. Crown
8vo. 600 pp. Price, $2.50.
* * * * *
PRINCIPLES OF POLITICAL ECONOMY
by
ARTHUR LATHAM PERRY, LL.D.
Orrin Sage Professor of History and Political Economy in
Williams College
_"No task is ill where Hand and Brain
And Skill and Strength have equal gain,
And each shall each in honor hold,
And simple manhood outweigh gold."_
WHITTIER.
New York
Charles Scribner's Sons
1891
Copyright, 1890,
by Arthur Latham Perry.
Dedication.
TO MY PERSONAL FRIEND OF LONG STANDING
J. STERLING MORTON
OF NEBRASKA
A FRIEND OF THE PEOPLE ALSO
FOUNDER OF ARBOR DAY
PREFACE.
It is now exactly twenty-five years since was published my first book
upon the large topics at present in hand. It was but as a bow drawn at
a venture, and was very properly entitled "Elements of Political
Economy." At that time I had been teaching for about a dozen years in
this Institution the closely cognate subjects of History and Political
Economy; cognate indeed, since Hermann Lotze, a distinguished German
philosopher of our day, makes prominent among its only _five_ most
general phases, the "industrial" element in all human history; and
since Goldwin Smith, an able English scholar, resolves the elements of
human progress, and thus of universal history, into only _three_,
namely, "the moral, the intellectual, and the productive."
During these studious and observant years of teaching, I had slowly
come to a settled conviction that I could say something of my own and
something of consequence about Political Economy, especially at two
points; and these two proved in the sequel to be more radical and
transforming points than was even thought of at the first. For one
thing, I had satisfied myself, that the word "Wealth," as at once a
strangely indefinite and grossly misleading term, was worse than
useless in the nomenclature of the Science, and would have to be
utterly dislodged from it, before a scientific content and defensible
form could by any possibility be given to what had long been called in
all the modern languages the "Science of Wealth." Accordingly, so far
as has appeared in the long interval of time since 1865, these
"Elements" were the very first attempt to undertake an orderly
construction of Economics from beginning to end without once using or
having occasion to use the obnoxious word. A scientific substitute for
it was of course required, which, with the help of Bastiat, himself
however still clinging to the technical term "Richesse," was discerned
and appropriated in the word "Value"; a good word indeed, that can be
simply and perfectly defined in a scientific sense of its own; and,
what is more important still, that precisely covers in that sense all
the three sorts of things which are ever bought and sold, the three
only Valuables in short, namely, material Commodities, personal
Services, commercial Credits. It is of course involved in this
simple-looking but far-reaching change from "Wealth" to "Value," that
Economics become at once and throughout a science of Persons buying
and selling, and no longer as before a science of Things howsoever
manipulated for and in their market.
For another thing, before beginning to write out the first word of
that book, I believed myself to have made sure, by repeated and
multiform inductions, of this deepest truth in the whole Science,
which was a little after embodied (I hope I may even say _embalmed_)
in a phrase taking its proper place in the book itself,--_A market for
Products is products in Market_. The fundamental thus tersely
expressed may be formulated more at length in this way: One cannot
Sell without at the same instant and in the same act Buying, nor Buy
anything without simultaneously Selling something else; because in
Buying one pays for what he buys, which is Selling, and in Selling one
must take pay for what is sold, which is Buying. As these universal
actions among men are always voluntary, there must be also an
universal motive leading up to them; this motive on the part of both
parties to each and every Sale can be no other than the mutual
satisfaction derivable to both; the inference, accordingly, is easy
and invincible, that governmental restrictions on Sales, or
prohibitions of them, must lessen the satisfactions and retard the
progress of mankind.
Organizing strictly all the matter of my book along these two lines of
Personality and Reciprocity, notwithstanding much in it that was
crude and more that was redundant and something that was ill-reasoned
and unsound, the book made on account of this original mode of
treatment an immediate impression upon the public, particularly upon
teachers and pupils; new streaks of light could not but be cast from
these new points of view, upon such topics especially as Land and
Money and Foreign Trade; and nothing is likely ever to rob the author
of the satisfaction, which he is willing to share with the public, of
having contributed something of importance both in substance and in
feature to the permanent up-building of that Science, which comes
closer, it may be, to the homes and happiness and progress of the
People, than any other science. And let it be said in passing, that
there is one consideration well-fitted to stimulate and to reward each
patient and competent scientific inquirer, no matter what that science
may be in which he labors, namely, this: Any just generalization, made
and fortified inductively, is put thereby beyond hazard of essential
change for all time; for this best of reasons, that God has
constructed the World and Men on everlasting lines of Order.
As successive editions of this first book were called for, and as its
many defects were brought out into the light through teaching my own
classes from it year after year, occasion was taken to revise it and
amend it and in large parts to rewrite it again and again; until, in
1883, and for the eighteenth edition, it was recast from bottom up for
wholly new plates, and a riper title was ventured upon,--"Political
Economy,"--instead of the original more tentative "Elements." Since
then have been weeded out the slight typographical and other minute
errors, and the book stands now in its ultimate shape.
My excellent publishers, who have always been keenly and wisely alive
to my interests as an author, suggested several times after the
success of the first book was reasonably assured, that a second and
smaller one should be written out, with an especial eye to the needs
of high schools and academies and colleges for a text-book within
moderate limits, yet soundly based and covering in full outline the
whole subject. This is the origin of the "Introduction to Political
Economy," first published in 1877, twelve years after the other. Its
success as a text-book and as a book of reading for young people has
already justified, and will doubtless continue to justify in the
future, the forethought of its promoters. It has found a place in many
popular libraries, and in courses of prescribed reading. Twice it has
been carefully corrected and somewhat enlarged, and is now in its
final form. In the preface to the later editions of the "Introduction"
may be found the following sentence, which expresses a feeling not
likely to undergo any change in the time to come:--"I have long been,
and am still, ambitious that these books of mine may become the
horn-books of my countrymen in the study of this fascinating Science."
Why, then, should I have undertaken of my own motion a new and third
book on Political Economy, and attempted to mark the completion of the
third cycle of a dozen years each of teaching it, by offering to the
public the present volume? One reason is implied in the title,
"_Principles of Political Economy_." There are three extended
historical chapters in the earlier book, occupying more than
one-quarter of its entire space, which were indeed novel, which cost
me wide research and very great labor, and which have also proven
useful and largely illustrative of almost every phase of Economics;
but I wanted to leave behind me one book of about the same size as
that, devoted exclusively to the Principles of the Science, and using
History only incidentally to illustrate in passing each topic as it
came under review. For a college text-book as this is designed to
become, and for a book of reading and reference for technical
purposes, it seems better that all the space should be taken up by
purely scientific discussion and illustration. This does not mean,
however, that great pains have not been taken in every part to make
this book also easily intelligible, and as readable and interesting as
such careful discussions can be made.
A second reason is, to provide for myself a fresh text-book to teach
from. My mind has become quite too thoroughly familiarized with the
other, even down to the very words, by so long a course of instructing
from it, for the best results in the class-room. Accordingly, a new
plan of construction has been adopted. Instead of the fourteen
chapters there, there are but seven chapters here. Not a page nor a
paragraph as such has been copied from either of the preceding books.
Single sentences, and sometimes several of them together, when they
exactly fitted the purposes of the new context, have been incorporated
here and there, in what is throughout both in form and style a new
book, neither an enlargement nor an abridgment nor a recasting of any
other. I anticipate great pleasure in the years immediately to come
from the handling with my classes, who have always been of much
assistance to me from the first in studying Political Economy, a fresh
book written expressly for them and for others like-circumstanced; in
which every principle is drawn from the facts of every-day life by way
of induction, and also stands in vital touch with such facts (past or
present) by way of illustration.
The third and only other reason needful to be mentioned here is, that
in recent years the legislation of my country in the matter of cheap
Money and of artificial restrictions on Trade has run so directly
counter to sound Economics in their very core, that I felt it a debt
due to my countrymen to use once more the best and ripest results of
my life-long studies, in the most cogent and persuasive way possible
within strictly scientific limits, to help them see and act for
themselves in the way of escape from false counsels and impoverishing
statutes. Wantonly and enormously heavy lies the hand of the national
Government upon the masses of the people at present. But the People
are sovereign, and not their transient agents in the government; and
the signs are now cheering indeed, that they have not forgotten their
native word of command, nor that government is instituted for the
sole benefit of the governed and governing people, nor that the
greatest good of the greatest number is the true aim and guide of
Legislation. I am grateful for the proofs that appear on every hand,
that former labors in these directions and under these motives have
proven themselves to have been both opportune and effective; and I am
sanguine almost to certainty, that this reiterated effort undertaken
for the sake of my fellow-citizens as a whole, will slowly bear
abundant fruit also, as towards their liberty of action as
individuals, and in their harmonious co-operation together as entire
classes to the end of popular comforts and universal progress.
A. L. PERRY.
WILLIAMS COLLEGE,
November 25, 1890.
TABLE OF CONTENTS
PAGE
CHAPTER I.
VALUE 1
CHAPTER II.
MATERIAL COMMODITIES 80
CHAPTER III.
PERSONAL SERVICES 181
CHAPTER IV.
COMMERCIAL CREDITS 271
CHAPTER V.
MONEY 361
CHAPTER VI.
FOREIGN TRADE 451
CHAPTER VII.
TAXATION 540
INDEX 587
PRINCIPLES OF POLITICAL ECONOMY.
CHAPTER I.
VALUE.
The first question that confronts the beginner in this science, and
the one also that controls the whole scope of his inquiries to the
very end, is: What is the precise subject of Political Economy? Within
what exact field do its investigations lie? There is indeed a short
and broad and full answer at hand to this fundamental and
comprehensive question; and yet it is every way better for all
concerned to reach this answer by a route somewhat delayed and
circuitous, just as it is better in ascending a mountain summit for
the sake of a strong and complete view to circle up leisurely on foot
or on horseback, rather than to dash straight up to the top by a
cog-wheel railway and take all of a sudden what might prove to be a
less impressive or a more confusing view.
The preliminary questions are: What sort of facts has Political
Economy to deal with, to inquire into, to classify, to make a science
of? Are these facts easily separable in the mind and in reality from
other kinds of facts perhaps liable to be confounded with them? Are
they facts of vast importance to the welfare of mankind? And are the
activities of men everywhere greatly and increasingly occupied with
just those things, with which this science has exclusively to do? Let
us see if we cannot come little by little by a route of our own to
clear and true answers for all these questions.
If one should take his stand for an hour upon London Bridge, perhaps
the busiest bit of street in the world, and cast his eyes around
intelligently to see what he can see, and begin also to classify the
things coming under his vision, what might he report to himself and to
others? Below the bridge in what is called the "Pool," which was
dredged out for that very purpose by the ancient Romans, there lie at
anchor or move coming and going many merchant-ships of all nations,
carrying out and bringing in to an immense amount in the whole
aggregate tangible articles of all kinds to and from the remote as
well as the near nations of the earth. All this movement of visible
goods, home and foreign, is in the interest and under the impulse of
Buying and Selling. The foreign goods come in simply to buy, that is,
to pay for, the domestic goods taken away; and these latter go out in
effect even if not in appearance to buy, that is, to pay for, the
foreign goods coming in. At the same hour the bridge itself is covered
with land-vehicles of every sort moving in both directions, loaded
with salable articles of every description; artisans of every name are
coming and going; merchants of many nationalities step within the
field of view; and porters and servants and errand-boys are running to
and fro, all in some direct relation to the sale or purchase of those
visible and tangible things called in Political Economy _Commodities_.
Moreover, vast warehouses built in the sole interest of trade on both
sides the river above and below the bridge, built to receive and to
store for a time till their ultimate consumers are found, some of
these thousand things bought and sold among men, lift their roofs
towards heaven in plain sight. Doubtless some few persons, like our
observer himself, may be on the spot for pleasure or instruction, but
for the most part, all that he can see, the persons, the things, the
buildings, even the bridge itself, are where they are in the interest
of _Sales_ of some sort, mostly of Commodities. What is thus true of a
single point in London is true in a degree of every other part of
London, of every part of Paris and of Berlin, and in its measure of
every other city and village and hamlet in the whole world. Wherever
there is a street there is some exchange of commodities upon it, and
wherever there is a market there are buyers and sellers of
commodities.
If the curiosity of our supposed observer be whetted by what he saw on
London Bridge, and if the natural impulse to generalize from
particulars be deepened in his mind, he may perhaps on his return to
America take an opportunity to see what he can see and learn what he
can learn within and around one of the mammoth cotton mills in Lowell
or Fall River or Cohoes. Should he take his stand for this purpose at
one of these points, say Lowell, he will be struck at once by some of
the differences between what he saw on the bridge and what he now sees
in the mill. He will indeed see as before some commodities brought in
and carried out, such as the raw cotton and new machinery and the
finished product ready for sale, but in general no other commodities
than the cotton in its various stages of manufacture, and those like
the machinery and means of transportation directly connected with
transforming the cotton into cloth and taking it to market.
But he sees a host of persons both within and without the mill, all
busy here and there, and all evidently bound to the establishment by a
strong unseen tie of some sort; he sees varying degrees of authority
and subordination in these persons from the Treasurer, the apparent
head of the manufactory, down to the teamsters in the yard and the
common laborers within and without; he will not find the owners of
the property present in any capacity, for they are scattered
capitalists of Boston and elsewhere, who have combined through an act
of incorporation their distinct capitals into a "Company" for
manufacturing cotton; besides their Treasurer present, whose act is
their act and whose contracts their contracts, he will see an Agent
also who acts under the Treasurer and directly upon the Overseers and
their assistants in the spinning and weaving and coloring and
finishing rooms, and under these Operatives of every grade as skilled
and unskilled; and lastly he will observe, that the direct
representatives of the owners and all other persons present from
highest to lowest are conspiring with a will towards the common end of
getting the cotton cloth all made and marketed.
What is it that binds all these persons together? A little tarrying in
the Treasurer's office will answer this question for our observer and
for us. He will find it to be the second kind of Buying and Selling.
At stated times the Treasurer pays the salary of the Agent, and his
own. He pays the wages of the Overseers and the wages of all the
Operatives and Laborers,--men and women and children. Here he finds a
buying and selling on a great scale not of material commodities as
before, but of personal services of all the various kinds. Every man
and woman and child connected with the factory and doing its work
sells an intangible personal service to the "Company" and takes his
pay therefor, which last is a simple buying on the part of the unseen
employers. Here, then, in this mill is a single specimen of this
buying and selling of personal services, which is going on to an
immense extent and in every possible direction in each civilized
country of the world, and everywhere to an immensely increased volume
year by year. Clergymen and lawyers and physicians and teachers and
legislators and judges and musicians and actors and artisans of every
name and laborers of every grade sell their intangible services to
Society, and take their pay back at the market-rate. The aggregate
value of all these services sold in every advanced country is probably
greater than the aggregate value of the tangible commodities sold
there. At any rate, both classes alike, commodities and services, are
bought and sold under substantially the same economic principles.
The inductive appetite in intelligent persons, that is to say, their
desire to classify facts and to generalize from particulars, almost
always grows by what it feeds on; and our supposed observer will
scarcely rest contented until he has taken up at least one more
stand-point, from which to observe men's Buying and Selling. Suppose
now he enter for this purpose on any business-day morning the New York
Clearing-House. He will see about 125 persons present, nearly one half
of these bank clerks sitting behind desks, and the other half standing
before these desks or moving in cue from one to the next. The room is
perfectly still. Not a word is spoken. The Manager of the Clearing
with his assistant sits or stands on a raised platform at one end of
the room, and gives the signal to begin the Exchange. No commodities
of any name or nature are within the field of view. The manager indeed
and his assistant and two clerks of the establishment who sit near him
are in receipt of salaries for their personal services, and all the
other clerks present receive wages for their services from their
respective banks, but the exchange about to commence is no sale of
personal services any more than it is a sale of tangible commodities.
It is however a striking instance of the buying and selling of some
valuables of the third and final class of valuable things.
At a given signal from the manager the (say) 60 bank messengers, each
standing in front of the desk of his own bank and each having in hand
before him 59 small parcels of papers, the parcels arranged in the
same definite order as the desks around the room, step forward to the
next desk and deliver each his parcel to the clerk sitting behind it,
and so on till the circuit of the room is made. It takes but ten
minutes. Each parcel is made up of cheques or credit-claims, the
_property_ of the bank that brings it and the _debts_ of the bank to
which it is delivered. Accordingly each bank of the circle receives
through its sitting clerk its own _debits_ to all the rest of the
banks, and delivers to all through its standing messenger its own
_credits_ as off-set. In other words, each bank buys of the rest what
it owes to each with what each owes to it. It is at bottom a mutual
buying and selling of debts. There is of course a daily balance on one
side or the other between every two of these banks, which must be
settled in money, because it would never happen in practice that each
should owe the other precisely the same sum on any one day; but
substantially and almost exclusively the exchange at the
Clearing-House is a simple trade in credit-claims. Each bank pays its
debts by credits. A merchant is a dealer in commodities, a laborer is
a dealer in services, and a banker is a dealer in credits. Each of the
three is a buyer and seller alike, and the difference is only in the
kind of valuables specially dealt in by each. In all cases alike,
however, there is no buying without selling and no selling without
buying; because, when one buys he must always pay for what he buys and
that is selling, and when one sells he must always take his pay for
what he sells and that is buying. This is just as true when one credit
is bought or sold against a commodity or a service, and when two or
more credits are bought and sold as against each other, as it is when
two commodities or two services are exchanged one for the other.
But the Clearing-House is not by any means the only place where
credits or debts (they are the same thing) are bought and sold. Every
bank is such a place. Every broker's office is such a place. Every
place is an establishment of the same kind where commercial rights,
that is, claims to be realized in future time and for which a
consideration is paid, are offered for sale and sold. The amount of
transactions in Credits in every commercial country undoubtedly
surpasses the amount in Commodities or that in Services.
Now our supposed observer and classifier, having noted on London
Bridge the sale of material commodities, and in the Lowell Mill the
sale of personal services, and within the New York Clearing-House the
sale of credit-claims, has seen in substance everything that ever was
or ever will be exhibited in the world of trade. He may rest. There is
no other class of salable things than these three. Keen eyes and minds
skilled in induction have been busy for two millenniums and a half
more or less to find another class of things bought and sold among
men, and have not yet found it or any trace of it. This work has been
perfectly and scientifically done. The generalization is completed for
all time.
The _genus_, then, with which Political Economy deals from beginning
to end, has been discovered, can be described, and is easily and
completely separable for its own purposes of science from all other
kinds and classes and _genera_ of things, namely, Salable things or
(what means precisely the same) Valuable things or (what is exactly
equivalent) Exchangeable things. In other words, the sole and single
class of things, with which the Science of Political Economy has to
do, is Valuables, whose origin and nature and extent and importance it
is the purpose of the present chapter to unfold. We have fully seen
already that this Genus, Valuables, is sub-divided into three
_species_, and three only, namely, Commodities, Services, Credits. A
little table here may help at once the eye and the mind:--
ECONOMICS.
_The Genus_ _Valuables_
{ _Commodities_
_The Species_ { _Services_
{ _Credits_
If only these three species of things are ever bought and sold, then
it certainly follows that only six kinds of commercial exchanges are
possible to be found in the world, namely these:--
1. _A commodity for a commodity._
2. _A commodity for a personal service._
3. _A commodity for a credit-claim._
4. _A personal service for another service._
5. _A personal service for a credit-claim._
6. _One credit-claim for another._
Though the kinds of possible exchanges are thus very few, the
exchanges themselves in one or other of these six forms and in all of
them are innumerable on every business day in every civilized country
of the globe. And this point is to be particularly noted, that while
buying and selling in these forms has been going on everywhere since
the dawn of authentic History, it has gone on all the while in
ever-increasing volume, it is increasing now more rapidly and
variously than ever, and moreover all signs foretell that it will play
a larger and still larger part in the affairs of men and nations as
this old world gains in age and unity.
Damascus is one of the very oldest cities of the world, and its very
name means a "_seat of trade_." We are told in the Scriptures, that
Abraham about 2000 years before Christ went up out of Egypt "very rich
in cattle, in silver, and in gold," and the only possible way he could
have acquired these possessions was by buying and selling. He
afterwards purchased the cave and the field in Hebron for a family
burial-place, and "weighed unto Ephron the silver which he had named
in the audience of the sons of Heth, four hundred shekels of silver,
current money with the merchant." We may notice here, that there were
then "merchants" as a class, that silver by weight passed as "money"
from hand to hand, and that in the lack of written deeds to land, as
we have them, sales were "made sure" before the faces of living men,
who would tell the truth and pass on the word. Abraham indeed seems to
have given the pitch for the song of trade sung by his descendants,
the Jews, from that day to this; for Jacob, his grandson, was a
skilled trafficker, not to say a secret trickster, in his bargains;
and wherever in the Old World or the New the Jews have been, _there_
have been in fact and in fame busy buyers and sellers.
But the Jews have had no special privileges in the realm of trade; on
the contrary, they have always been under special disabilities both
legal and social. Even in England, the most liberal country in Europe,
they were exiled for long periods, maltreated at all points of contact
with other people, more or less put under the ban of the Common and
the Statute law, often outrageously taxed on their goods and persons,
and studiously kept out of the paths of highest public employment even
down to a time within the memory of living men.[1] Yet so natural is
the impulse to trade, so universally diffused, so imperative also if
progress is in any direction to be attained, that the English and all
other peoples were as glad to borrow money, that is, buy the use of
it, of the persecuted Jews, as the latter were to get money by buying
and selling other things, and then to loan it, that is, sell the use
of it, under the best securities (never very good) for its return with
interest, that they could obtain. Happily, the mutual gains that
always wait on the Exchanges even when their conditions are curtailed,
of course attended the mutilated exchanges between Jews and
Christians: otherwise, they would not continue to take place.
Christianity, however, as the perfected Judaism, gradually brought in
the better conditions, the higher impulses, and the more certain
rewards, of Trade, all which, we may be sure, were designed in the
divine Plan of the world. What is called the Progress of Civilization
has been marked and conditioned at every step by an extension of the
opportunities, a greater facility in the use of the means, a more
eager searching for proper expedients, and a higher certainty in the
securing of the returns, of mutual exchanges among men. There have
been indeed, and there still are, vast obstacles lying across the
pathway of this Progress in the unawakened desires and reluctant
industry and short-sighted selfishness of individuals, as well as in
the ignorant prejudices and mistaken legislation of nations; but all
the while Christianity has been indirectly tugging away at these
obstacles, and Civilization has been able to rejoice over the partial
or complete removal of some of them; while also Christianity directly
works out in human character those chief qualities, on which the
highest success of commercial intercourse among men will always
depend, namely, Foresight, Diligence, Integrity, and mutual Trust; so
that, what we call Civilization is to a large extent only the result
of a better development of these human qualities in domestic and
foreign commerce.
Contrary to a common conception in the premises, the sacred books of
both Jews and Christians display no bias at all against buying and
selling, but rather extol such action as praiseworthy, and also those
qualities of mind and habits of life that lead up to it and tend too
to increase its amount, and they constantly illustrate by means of
language derived from traffic the higher truths and more spiritual
life, which are the main object of these inspired writers. It is
indeed true that the chosen people of God were forbidden to take Usury
of each other, though they were permitted to take it freely of
strangers, and that they were forbidden to buy horses and other
products out of Egypt, for fear they would be religiously corrupted by
such commercial intercourse with idolaters; but there is nothing of
this sort in the law of Moses that cannot be easily explained from the
grand purpose to found an agricultural commonwealth for religious
ends, in which commonwealth no family could permanently alienate its
land, and in which it was a great object to preserve the independence
and equality of the tribes and families. Throughout the Old Testament
there is no word or precept that implies that trade in itself is not
helpful and wholesome; there were sharp and effective provisions for
the recovery of debts; there were any number of exhortations to
diligence in business, such as, "_In the morning sow thy seed, and at
evening withhold not thy hand_"; King Solomon himself made a gigantic
exchange in preparation for the temple with King Hiram of Tyre, by
which the cedars of Lebanon were to be paid for by the grain and oil
of the agricultural kingdom; chapter xxvii of the prophet Ezekiel is a
graphic description of the commerce of the ancient world as it
centered in the market of Tyre, a description carried out into detail
both as to the nations that frequented that market and as to the
products that were exchanged in it,--"_silver, iron, tin, lead,
persons of men, vessels of brass, horses, horsemen, mules, horns of
ivory, ebony-wood, carbuncles, purple work, fine linen, corals,
rubies, wheat, pastry, syrup, oil, balm, wine of Helbon, white wool,
thread, wrought iron, cassia, sweet reed, cloth, lambs, rams, goats,
precious spices, precious stones, splendid apparel, mantles of blue,
embroidered work, chests of damask, and gold_"; and chapter xxxi of
Proverbs describes the model housewife in terms like these,--
"_The heart of her husband trusteth in her,
And he is in no want of gain.
She seeketh wool and flax,
And worketh willingly with her hands.
She is like the merchants' ships;
She bringeth her food from afar.
She riseth while it is yet night,
And giveth food to her family,
And a task to her maidens.
She layeth a plan for a field and buyeth it;
With the fruit of her hands she planteth a vineyard.
She perceiveth how pleasant is her gain,
And her lamp is not extinguished in the night.
She putteth forth her hands to the distaff,
And her hands take hold of the spindle.
She maketh for herself coverlets;
Her clothing is of fine linen and purple.
She maketh linen garments and selleth them,
And delivereth girdles to the merchants._"
Still more explicit and instructive are the words and spirit of the
New Testament. There cannot be the least doubt that the whole
influence of Christianity is favorable to the freest commercial
exchanges at home and abroad, because these depend largely on mutual
confidence between man and man, of which confidence Christianity is
the greatest promoter. It may be conceded at once that our Lord
"_overthrew the tables of the money-changers and the seats of them
that sold doves_" within the sacred precincts of the temple, but
this, not because it is wrong to change money or sell doves, but
because that was not the _place_ for such merchandising; so He himself
explained his own action in the sequel; provincial worshippers coming
up to Jerusalem must needs have their coins changed into the money of
the Capital, and must needs buy somewhere the animal victims for
sacrifice; but the whip of small cords had significance only as to the
_place_, and not at all as to the _propriety_, of such trading.
One of our Lord's parables, the parable of the Talents, sets forth in
several striking lights the privilege and duty and reward of diligent
trading. "_Then he that had received the five talents went and traded
with the same, and made them other five talents._" And when this
servant came to the reckoning, and brought as the result of his free
and busy traffic "_five talents more_," the prompt and hearty approval
of his lord--"well done, thou good and faithful servant"--becomes the
testimony of the New Testament to the merit and the profit and the
benefit of a vigorous buying and selling. For this servant could not
have been authoritatively pronounced good and faithful if the results
of his action commended had been in any way prejudicial to others. The
truth is, as we shall abundantly see by and by with the reasons of it,
that any man who buys and sells under the free and natural conditions
of trade, benefits the man he trades with just as much as he benefits
himself. But the parable has a still stronger word in favor of
exchanges. There was another servant also entrusted with capital by
his lord at the same time, when the latter was about to travel "_into
a far country_." We are expressly told that distribution was made "_to
every man according to his several ability_," and thus this servant
was only entrusted with a single talent, the size of the capital given
to him being in just proportion to the size of the man,--the smallest
share falling of course to the smallest man. But he had the same
opportunity as the two others. The world was open to him. Capital was
in demand, if not in those parts then in some other, to which, like
his lord, he might straightway take his journey. But when his time of
reckoning came, and he had nothing to show for the use of his capital,
he upbraided his lord as a hard man for expecting any increase, and
brought out his bare talent wrapped in a napkin, saying, "_I was
afraid, and I went and hid thy talent in the earth_." His wise lord at
once denounced this servant as "_wicked and slothful_," insisted that
his money ought to have been "_put to the exchangers_," and said
finally in a just anger "_cast ye the unprofitable servant into outer
darkness_."
It is moreover in incidental passages of the Scriptures, in which the
methods of business are commended to the searchers after higher
things, that we see their high estimate of those methods and gains.
"_Buy the truth, and sell it not; buy wisdom and understanding_"
(Prov. xxiii, 23). "_Buying up for yourselves opportunities_" (Col.
iv, 5). "_I counsel thee to buy of me gold refined by fire, that thou
mayest be rich; and white garments, that thou mayest be clothed; and
eye-salve to anoint thine eyes, that thou mayest see_" (Rev. iii, 18).
"_But rather let him labor, working with his hands at that which is
good, that he may have to give to him that is in need_" (Eph. iv, 28).
"_But if any one provideth not for his own, and especially for those
of his own house, he hath denied the faith, and is worse than an
unbeliever_" (1 Tim. v, 8).
Now, the universal test and proof of any truth is its harmony with
some other truths. Does an alleged truth fall in with and fill out
well some other demonstrated and accepted proposition, or a number of
such other propositions? If so, then that truth is _proved_. Human
reason can no further go. The mind rests with relish and content in a
new acquisition. To apply this to the case in hand,--if men were
designed of their Maker to buy and sell to their own mutual benefit
and advancement, if mankind have always been buying and selling as
towards that end and with that obvious result, and if the Future
promises to increase and reduplicate the buying and selling of the
Present in every direction without end, and all in the interest of a
broad civilization and a true and lasting progress; and if, in harmony
with these truths, the written revelation of God in every part of it
assumes that buying and selling in its inmost substance and essential
forms be good and righteous and progressive, and suitable in all its
ends and methods to illustrate and enforce ends and methods in the
higher kingdom of spiritual and eternal Life;--then these coördinate
truths will logically and certainly follow, (1) that Trade is natural
and essential and beneficial to mankind; (2) that it constitutes in an
important sense a realm of human thought and action by itself,
separate from the neighboring realm of Giving, and equally from the
hostile realm of Stealing; and (3) that a careful analysis of what
buying and selling in its own peculiar nature is, a thorough
ascertainment and a consequent clear statement of its fundamental
laws, and a faithful exposure of what in individual selfishness and in
subtle or open Legislation makes against these laws, _must be of large
consequence to the welfare of mankind_.
Accordingly, let us now attempt such Analysis and Ascertainment and
Exposure. This is precisely the task that lies before us in this
book--just this, and nothing more. The term, "Political Economy," has
long been and is still an elastic title over the zealous work of many
men in many lands; but in the hands of the present writer during a
life now no longer short, the term has always had a definite meaning,
the work has covered an easily circumscribed field, and so the present
undertaking concerns only Buying and Selling and what is essentially
involved in that. This gives scope and verge enough for the studies of
a life-time. This has the advantage of a complete sphere of its own.
Terms may thus be made as definite as the nature of language will ever
allow; definitions will thus cover things of one kind only; and
generalizations, although they may be delicate and difficult, will
deal with no incongruous and obstinate material.
1. The grandfather of the writer, an illiterate but long-headed
farmer, was able to give good points to his three college-bred sons,
by insisting that they look "_into the natur on't_." What, then, are
the ultimate elements of Buying and Selling? What are the invariable
conditions that precede, accompany, and follow, any and every act of
Trade? Of course we are investigating now and throughout this treatise
the deliberative acts of reasonably intelligent human beings, in one
great department of their common foresight and rational action. We
have consequently nothing to do here with Fraud or Theft or Mania or
Gift. Acts put forth under the impulse of these are direct opposites
of, or at best antagonistic to, acts of Trade. They tend to kill
trade, and therefore they are no part of trade. These, then, and such
as these, aside, we will now analyze a single Act of Exchange at one
time and place,--which will serve in substance for all acts of
exchange in all times and places, and just find out for ourselves what
are the Fundamentals and Essentials of that matter, with which alone
we have to do in this science of Political Economy.
Incidental reference was had a little way back to an Exchange once
made between King Solomon of Jerusalem and King Hiram of Tyre. Let
that be our typical instance. (a) _There were two persons_, Solomon
and Hiram. Those two, and no more, stood face to face, as it were, to
make a commercial bargain. They made it, and it was afterwards
executed. The execution indeed concerned a great many persons on both
sides, and occupied a long period of time; but the bargain itself, the
trade, the exchange, the covenant, concerned only two persons, and
occupied but a moment of time. It made no difference with the bargain
as such, with the binding nature of it, with the terms of it, with the
mutual gains of it, that each person represented a host of others,
subordinates and subjects, who would have to coöperate in the carrying
of it out, because each king had the right to speak for his subjects
as well as for himself, for commercial purposes each was an agent as
well as a monarch, the word of each concluded the consent and the
action of others as well as his own. Nor did it make any, the least,
difference with this exchange or the advantages of it, that each party
to it belonged to, was even the head of, independent and sometimes
hostile Peoples. Commerce is one thing, and nationality a totally
different thing. The present point is, in the words of the old
proverb,--"It takes two to make a bargain." And it takes _only_ two to
make a bargain. When corporations and even nations speak in trade,
they speak, and speak finally, through one accredited agent. We reach,
then, as the first bit of our analysis of Trade, the fact, that there
are always two parties to it, "the party of the first part and the
party of the second part."
(b) _There were two desires_, Solomon's desire for cedar-timbers to
build the temple with, and Hiram's desire for wheat and oil with which
to support the people of his sterile kingdom. "_So Hiram gave Solomon
cedar-trees and fir-trees according to all his desire: and Solomon
gave Hiram twenty thousand measures of wheat for food to his
household, and twenty measures of pure oil._" The desire of each
party was personal and peculiar, known at first only to himself, but
upon occasion became directed towards something in the possession of
the other, and each at length became aware of the desire of the other,
and also of his own ability to satisfy the want of the other. If
Solomon could have satisfied his desire for timber by his own or his
subjects' efforts directly, this trade would never have taken place;
if Hiram or his subjects could have gotten the wheat and oil directly
out of their narrow and sandy strips of sea-coast, this trade would
not have taken place; and so there must be in every case of trade not
only two desires each springing from a separate person, but also each
person must have in his possession something fitted to gratify the
desire of the other person, and each be willing to yield that
something into the possession of the other for the sake of receiving
from him that which will satisfy his own desire, and so both desires
be satisfied indirectly.
Here is the deep and perennial source of exchanges. Men's desires are
so many and various, and so constantly becoming more numerous and
miscellaneous, and so extremely few of his own wants can ever be met
by any one man directly, that the foundation of exchanges, and of a
perpetually increasing volume of exchanges, is laid in the deep places
of human hearts, namely, in Desires ever welling up to the surface and
demanding their satisfaction through an easy and natural interaction
with the ever swelling Desires of other men. Here too is a firm
foundation (a chief foundation) of human Society. Reciprocal wants,
which can only be met through exchanges, draw men together locally and
bind them together socially, in hamlets and towns and cities and
States and Nations, and also knit ties scarcely less strong and
beneficent between the separate and remotest nationalities of the
earth. It is certain that an inland commercial route connected the
East of Asia with the West of Europe centuries before Christ, and that
a traffic was maintained on the frontier of China between the Sina and
the Scythians, in the manner still followed by the Chinese and the
Russians at _Kiachta_. The Sina had an independent position in Western
China as early as the eighth century before Christ, and five centuries
later established their sway under the dynasty of Tsin (whence our
word "China") over the whole of the empire. The prophet Isaiah
exclaims (xlix, 12), "Behold! these shall come from far; and behold!
these from the North and from the West; _and these from the land of
Sinim_." The second bit of our analysis leads to Desires as an
essential and fundamental element in every commercial transaction.
(c) _There were two efforts_, those of the Tyrians as represented by
King Hiram and those of the Israelites as represented by King Solomon.
It was no holiday task that was implied in the proposition of Solomon
to the party of the other part,--"_Send me now cedar-trees, fir-trees,
and algum-trees out of Lebanon; for I know that thy servants are
skilful to cut timber in Lebanon; even to prepare me timber in
abundance, for the house which I am about to build shall be
wonderfully great._" On the other hand, the efforts insolved on the
part of the people of Israel in paying for these timbers, and for
their transportation by sea from Lebanon to Joppa, were equally
gigantic. Solomon's offer in return for the proposed service of the
Tyrian king was in these words,--"_And behold, I will give to thy
servants, the hewers that cut timber, twenty thousand measures of
beaten wheat, and twenty thousand measures of barley, and twenty
thousand baths of wine, and twenty thousand baths of oil._"
The reason why two efforts are always an element in every act of
traffic, however small or however large the transaction may be, is the
obvious reason, that the things rendered in exchange, whether they be
Commodities, Services, or Credits, invariably cost efforts of some
kind to get them ready to sell and to sell them, and no person can
have a just claim to render them in exchange, who has not either put
forth these efforts himself or become proprietor in some way of the
result of such efforts. Efforts accordingly are central in all trade.
Every trade in its inmost nature is and must be either an exchange of
two Efforts directly, as when one of two farmers personally helps his
neighbor in haying for the sake of securing that neighbor's personal
help in his own harvesting, or an exchange of two things each of which
is the result of previous Efforts of somebody, as when a man gives a
silver dollar for a bushel of wheat. The third bit of the present
analysis brings us to Efforts, perhaps the most important factor in
the whole list.
(d) _There were also two reciprocal estimates_, the estimate of King
Hiram of all the efforts requisite to cut and hew and float the
timber, as compared with the aggregate of efforts needed to obtain the
necessary wheat and barley and wine and oil in any other possible way;
and the estimate of King Solomon of all the labors required to grow
and market these agricultural products, as compared with what would
otherwise be involved in getting the much-wished-for timbers. Such
estimates invariably precede every rational exchange of products. It
is not in human nature to render a greater effort or the result of it,
when a lesser effort or the result of it will as well procure the
satisfaction of a desire. Efforts are naturally irksome. No more of
them will ever be put forth than is necessary to meet the want that
calls them forth. No man in his senses will ever put more labor on
anything, with which to buy something else, than is necessary to get
that something else by direct effort or through some other exchange.
Here we are on ground as solid as the very substance of truth can make
it. The Jews of Solomon's time were too shrewd and sparing of irksome
labor to devote themselves for years to the toils of the field and of
the vat to get by traffic the materials for their temple, if they
could have gotten those materials by a less expenditure of toil in any
other way. Those Phoenicians of Tyre and Sidon, the born merchants of
the East, the founders of commercial Carthage in the West, if they
could have extorted from the reluctant sands of their coast the
cereals and the vines and olives requisite for their own support with
only so much of exertion as was needed to get that to market with
which to buy them, would never have taken the indirect in preference
to the direct method. They took the indirect, because it was the
easier, and therefore the better.
It may, accordingly, be laid down as a maxim, that men never buy and
sell to satisfy their wants but when that is the easiest and best way
to satisfy them. It saves effort. It saves time. It saves trouble. It
divides labor. It induces skill. It propels progress. But in order to
determine which may be the easier way, requires constant _estimates_
on the part of each party to a possible trade. Shall I shave myself or
go to the barber? Before I decide, I estimate the direct effort in the
light of the effort to get that with which to pay the barber for his
service. If I trade with him, it is because I deem it easier, cheaper
in effort, more convenient in time. Trade means comparisons in every
case--comparisons by both parties--and in the more recondite and
complicated cases, elaborate comparisons and often comprehensive
calculations involving future time.
Now these estimates inseparable from exchanges, and these
calculations which are a factor in all the far-reaching exchanges, are
mental activities. They quicken and strengthen the _minds_ of men.
Trade is usually, if not always, the initial step in the mental
development of individuals and nations. Desires stir early in the
minds of all children; efforts more or less earnest are the speedy
outcome of natural desires; direct efforts, however, to satisfy these
soon reach their limits; it is now but a step over to simple
exchanges, by which the desires are met indirectly; exchanges once
commenced tend to multiply in all directions, and the estimates that
must precede and accompany these are mental states,--the more of them,
the greater the mental development, the higher the education;
consequently, commerce domestic and foreign is a grand agency in
civilization, a constant and broadening impulse towards progress in
all its forms; and Christianity, as we have already seen, is friendly
to commerce in its every breath. Those, therefore, who talk and preach
about Trade as tending to _materialism_, do not know what they are
talking about. Because Commodities are material things, and because a
portion of the trade of the world concerns itself with commodities,
these shallow thinkers jump to the conclusion that trade is
materialistic. _It is just the reverse._ Let us hear no more from
Professor Pulpit or Platform that buying and selling is antagonistic
to men's higher intellectual and spiritual culture, because the
present careful analysis has brought us indubitably to mental
Estimates and prolonged comparisons, which are activities of Mind, as
the fourth and a leading factor among the radical elements of Sale.
(e) _There were two renderings_, King Hiram's rendering at Joppa the
desired cedars from the mountains of Lebanon, and King Solomon's
rendering in return at Tyre the food products grown in his fertile
country. These renderings were visible to all men. Unlike the desires
and the estimates, which were subjective and invisible; the actual
exchange of the products, the culmination of the previous efforts, the
stipulated renderings by and to each party, were outward and
objective--"known and read of all men." This is the reason why public
attention is always strongly drawn to this particular link of the
chain of events which we are now unlocking and taking apart, while
other links of the series, that are just as essential, almost wholly
escape observation. The ports and the markets are apt to be noisy and
conspicuous, when the desires and the estimates and the satisfactions,
without which in their place there would be no market-places, work in
silence, and leave no records except the indirect one of the
renderings themselves.
It is of great moment to note here, that each of the two parties to an
exchange always has an advantage over the other, either absolute or
relative, in the rendering his own product, whatever it may be, as
compared with his present ability to get directly or through any other
exchange the product he receives in return. Take the example in hand.
Cedars and sandal-wood were natural to Mount Lebanon; there were no
other workmen in those regions of country that could "_skill to hew
timber like unto the Sidonians_"; the Mediterranean afforded a level
and free and easy highway from its northern coast to the Judean
seaport at Joppa; and all these natural and acquired facilities put
King Hiram into a posture of advantage in the rendering of timber, not
only over the Jews, but also over all the other peoples in the basin
of the midland sea. Still this advantage, great as it was, could only
be made a real and palpable gain to themselves, the proprietors of the
timber, by means of some exchange with somebody else, by which some
wants of their own greater than their present want of timber, could
be supplied by means of the timber. They had more of that commodity,
and more skill to fashion and transport it, than their present and
immediately prospective needs could make use of; and the only way in
which they could practically avail themselves of their advantages,
was, to sell their surplus timber and buy with it something that they
needed more. Otherwise their very advantage perished with them. God
has scattered such a diversity of blessings and capacities and
opportunities over the earth on purpose, that, through traffic, on
which his special benediction rests, the good of each part and people
may become the portion of other parts and peoples.
So, on the other hand, of the southern neighbors of the Tyrians. There
the earth brought forth by handfuls. There was an abundance of corn in
the land, even to the tops of the mountains. Its fruit did indeed
shake like Lebanon. But there were no cedars there, no fir-trees, no
sandal-woods. How short-sighted, then, and futile, would it have been
for the Jews, to try to hang on in their own behoof to all the natural
advantages that God had given to them, and to say, We will not part
with the direct results of any of them, we will build treasure-cities
as they did in Egypt, we will store up all the fruits of these fat
years against the possible coming of some famine years in the time to
come. That is anything in ordinary times but the divine plan. It is
anything but the letter and spirit of the divine injunction: "_Him
that keepeth back corn the people curse; but blessing shall be upon
the head of him that selleth it_" (Prov. xii, 26). Had they talked and
acted thus, no temple could then have been built in Jerusalem, and the
people of that generation would have lost the moral and religious
impulse and uplifting of their service and sacrifice. Their grain
would have become worthless from its very abundance, and would have
decayed on their hands. They would have missed a great gain for
themselves, and would have snatched away from their neighbors to the
northward a providential opportunity for an equal gain.
The general truth must not be lost sight of here, even in passing,
that all trade whatsoever is based upon a Diversity of relative
Advantage as between the parties exchanging products. If, for example,
the Hills of Judah and the Mountains of Israel had been covered with
timber suitable for building the temple, and the coasts of Tyre and
Sidon and the foot-hills of Lebanon had been fertile stretches of
arable land, this particular trade would never have been thought of
and could never have been realized. There would have been no gain in
it for either party, and unless there be a valid gain for both parties
at least in prospect, no trade will ever spring into being, because
there would be no motive, no impulse, no reason, in it. Unless the
Jews could get the timber easier by raising grain to pay for it, and
the Tyrians get the oil and wheat and barley easier by cutting and
floating timber to pay for them,--no trade; but the greater easiness
to each actually came about, because each had an Advantage both
natural and acquired over the other in his own rendering, and the
mutual gain of the trade was wholly owing to that circumstance. So far
as that matter went, the Tyrians had no cause to envy their neighbors
the superior soil of the south, for they reaped indirectly but
effectively a part of those harvests for themselves; and the Jews had
no reason to be jealous of their northern neighbors on account of the
noble forests crowning their mountains, because through trade they
secured easily to themselves a share of that vast natural advantage.
Diversity of Advantage both natural and acquired is the sole ground of
Trade both domestic and foreign; and consequently by means of trade
the peculiar advantages of each are fully shared in by all.
It is perhaps less obvious but surely equally true, that the greater
the relative diversity of advantage as between two exchangers, the
more profitable does the exchange become to each. If the Vale of
Sharon had been twice as fertile as it was, and the cedars of Lebanon
twice as large and lofty as they were, the easier and better would
Israel have gotten its timber, and the more secure and abundant would
have become the food of Tyre and Sidon; and, therefore, the more
unreasonable, or rather the more absurd and wicked, would have been
any envy or jealousy of either of the superior advantages at any point
or points of the other. So universally. By the divine Purpose as
expressed in the constitution of Nature, in the structure of Man, and
in the laws of Society, Trade in good measure and degree imparts to
each the bounties of all, arms each with the power of all, and impels
each by the progress of all.
One other important matter is closely connected with these two
Renderings, which is the fifth bit in succession of our present
analysis, namely this, that traffic renderings always make necessary
new and better routes of travel and transportation. It is mainly for
this reason, that persons and things have to be carried to distances
less or greater in order to consummate these Renderings of home and
foreign commerce, that roads by land and routes by sea have been
sought for and found, made and made shorter, improved as to method and
facilitated as to force, from the dawn of History until the present
hour. It was to get the goods of India, and so find a market for the
goods of Europe, that the earliest land routes between the two were
tried and maintained. The ground-thought of Columbus, meditated on for
years, was to discover a new commercial way to India; Magellan with
the same intent sailed westward through the Straits that wear his
name, and so circumnavigated the globe; repeated searches mainly with
the mercantile view, never long intermitted, have attempted ever since
the North-West or the North-East passage to India; Vasco da Gama in
1497 boldly accomplished the East passage, and thus changed for all
the Continents the channels of trade; the West now trades with all the
East through the Suez Canal, dug for that express purpose; and the
words, "Panama" and "Nicaragua" are upon everybody's lips, simply
because through Central America is the shortest and safest route for
men and goods to and from all the Oceans.
Quite recently Dr. W. Heyd has announced through the Berlin
Geographical Society the discovery of two commercial routes from India
to the West not hitherto described. Trebizond (on the Black Sea) and
Tana (at the mouth of the Don) were the chief distributing points.
Through Tana passed westward the pepper and ginger and nutmeg and
cloves; and the price of spices is said to have doubled in Italy, when
the Italians were for a time shut out of Tana in 1343. The chief
overland route from India to Tana ran through Cabul to Khiva by the
Oxus, and then by land through Astrakhan. The other route to Trebizond
passed through Persia, and came out by Tabriz to the Black Sea. It may
perhaps be pardoned, if a far homelier, more modern, and even local,
illustration be given of the present point, that trade makes roads.
The western wall of Williamstown is the mountain range of the
Taconics, whose general height is about 2000 feet above tide water at
Albany. Within the limits of this town are four natural depressions or
passes over this range, which is also the watershed between the Hoosac
River on the east and the Little Hoosac on the west. About the
beginning of this century, the population was quite sparse in both
these valleys, while the impulse to travel and traffic over the
barrier was sufficient to build (wholly at local expense) wagon roads
over each of the four passes, one of which soon after became a
turnpike between Northampton and Albany; and another was built mainly
to accommodate the medical practice on the west side of the mountain
of Dr. Samuel Porter--a Williamstown surgeon of local eminence. So
soon as railroads were constructed to run down these parallel valleys
(railroads themselves are perhaps the best illustration of the point
in hand), the mountain roads were relatively deserted, and only two of
them are now open to transient travel.[2]
Lastly, (f) _There were two satisfactions_, the satisfaction of the
southern king in actually obtaining the excellent timbers, without
which the cherished national temple could not have gone up; and the
satisfaction by the northern king in the easy receiving of the
abundant food products for the daily maintenance of his court and
kingdom. The simple story of these commercial transactions between Jew
and Tyrian indicates clearly enough, what might have been anticipated
and what always happens in such circumstances, not only a mutual
satisfaction at the completion of each specific exchange, but also a
general relation of contentment and peace in consequence of
advantageous commercial intercourse. "_And Hiram, king of Tyre, sent
his servants unto Solomon; for he had heard, that they had anointed
him king in the room of his father; because Hiram was ever a lover of
David. And it came to pass, when Hiram heard the words of Solomon,
that he rejoiced greatly, and said, Blessed be the Lord this day,
which hath given unto David a wise son over this great people; and
there was peace between Hiram and Solomon; and they two made a league
together._"
It is plain to reason and to all experience, that mutual Satisfactions
are the ultimate thing in exchanges. Our present analysis can go no
further, for the reason, that we have now reached in Satisfactions the
end, for the sake of which all the previous processes have been gone
through with. Persons do not engage in buying and selling for the mere
pleasure of it, but always for the sake of some satisfactions
derivable to both parties from the issue of it. Ordinary
self-inspection and foresight and industry being presupposed, the
issue of exchanges is just what was expected by the two persons, the
satisfaction of each follows as a matter of course, and stimulates to
new exchanges in ever-widening circles.
Since the desires of all men, which the efforts of other men can
satisfy through exchange, are indefinite in number and unlimited in
degree, there is no end of human Satisfactions to be reached along
this road of reciprocal trade; and since the very object of all trade
and the actual result of all trade (the exceptions are infinitesimal)
is to multiply and reduplicate continually mutual Satisfactions among
men; we can see right here what a loss and wrong it is, what a wanton
destruction of possible human happiness it is, what a bar to progress
among men in comforts and powers it is, for nations to impede and to
prohibit commerce by legislation! As we shall see more fully in a
later chapter, Governments can have no moral or constitutional right
to restrict the trade of their people, except in the sole interest of
revenue or health or morals.
Such is the constitution of the universe, that a really good thing is
usually cognate with and inseparable from a good many other good
things. Buying and selling, as we have now clearly seen, springs right
out of the nature of men in the circumstances in which they are
providentially placed on the earth, and ends in the satisfaction of
innumerable wants common to all men. This makes trade a thoroughly
good thing in itself; and consequently it is intimately associated
with many other good things. The scriptural instance, that we have
been examining, gives a neat illustration of this: "_and there was
peace between Hiram and Solomon; and they two made a league
together_." The mutually profitable exchange of commodities led to a
feeling of amity between the two neighboring kings; the feeling of
amity led to a treaty of Peace between the two adjacent nations; and
the "_league_" so ratified not only kept out war from their borders,
but also permitted the unhindered continuance of profitable exchanges
between them.
So it is always. Peace waits on Commerce. Good-will among the nations
is strengthened by the ties of interest and profit among their
citizens. The mercantile classes as such are always averse to war,
because war is the natural enemy of exchanges. Thus traffic leads to
peace and tends to maintain it, and peace preludes increased
prosperity, and commercial prosperity under freedom is wholly friendly
to mental and moral progress, and Christianity walks before and all
along this line of individual and national blessing. The commercial
treaty of 1860 between France and England has tended powerfully,
perhaps more powerfully than any other single cause, to keep those
formerly inter-belligerent nationalities in peace and amity ever
since.
We will now put into a little table the final results of the present
analysis of Buying and Selling. The ultimate elements seem to be
these:
1. _Two Persons._ 4. _Two Estimates._
2. _Two Desires._ 5. _Two Renderings._
3. _Two Efforts._ 6. _Two Satisfactions._
The thoughtful reader will note in this table the fact, that three of
these elements are objective, that is, outward and visible; and the
other three are subjective, that is, inward and invisible. Persons,
Efforts, Renderings, are seen and known of all men; Desires,
Estimates, Satisfactions, can be directly known only to the persons
who feel and make them. This is a peculiarity of Political Economy,
that has been far too little observed even when it has been observed
at all. Objective and subjective elements in it meet and mingle in
each transaction. Indeed, they alternate, as is shown in the table
above: first a Seen, and then an Unseen, Element throughout. It is
this commingling of outward and inward, visible and invisible, that
makes all the difficulty and gives all the fascination in Political
Economy. Whatever carries us into the steady though billowy play of
universal human nature is at once difficult and fascinating.
Quite contrary, however, to a common impression, the _certainty_ both
of action and prediction in all the other Sciences as well as in
Economics lies rather in the unseen elements than in those that are
seen. Take for an example the calculation of an eclipse: it is not so
much from what is visible in the heavens and on the earth that the
astronomer infers and predicts to the instant the shadow of one orb
thrown upon another, as it is from the wholly hidden but ever-enduring
forces of gravitation constantly relating these orbs one to the other.
So it is of the Sciences generally; progress is made in them and
certainties are reached in connection with them, "_while we look not
at the things which are seen, but at the things which are not seen;
for the things which are seen are but for a time; but the things which
are not seen are everlasting_." Invisible Desires and Satisfactions
felt in connection with Exchanges are among the most constant elements
of human nature; they, as it were, give birth to the relatively more
transient (though visible) data of Efforts and Renderings; while
inferences and conclusions and even predictions may be securely drawn
from all of these, giving a solid ground for Political Economy to
stand on,--almost as solid as the ground of the chief Physical
Sciences.
2. We will next examine the inmost nature and the outward
manifestations of _Value_. "Value" is by much the most important word
in the Science of Economics; and we must, therefore, comprehend it
thoroughly, root and branch. Nearly all the writers in English have
used in place of this the word "Wealth" and those in other languages
some equivalent and equally concrete word; but the present writer
fully satisfied himself some twenty-five years ago, that it is
impossible to use that word to any advantage in economical
discussions, owing to its inherent ambiguities and concrete
associations in the minds of men. He utterly discarded the word at
that time, and has found not the least occasion to pick it up again
since, and believes now that his substitution of the word "Value" in
place of it will ultimately be seen to have been his greatest
contribution to that Science, to which he devoted his life.
Even professed and excellent logicians, like John Stuart Mill, found
the word "Wealth" an insoluble element in the science of Economics; he
commenced his great work by writing, that it was not really needful to
_define_ the word which nevertheless he laid at the foundation of his
discussions, that "every one has a notion sufficiently correct for
common purposes of what is meant by Wealth"; he goes on, however, to
give at least a half-dozen definitions of the word, no two of which
are at all consistent with each other, only one of which embodies a
clear and scientific conception, and even to this one he himself does
by no means coherently adhere throughout his treatise. No wonder, that
this great man died thoroughly dissatisfied with his own work in
Economics, and wishing for longer life in which to recast and improve
it! No wonder, too, that the crowd of writers both English and
American, many of them able and thoughtful and otherwise logical, who
have been content to continue to use this irreducible and utterly
unscientific word at the bottom, have made a mess of it!
In dropping the word, "Wealth," accordingly, Political Economy has
dropped a clog, and its movements are now relatively free and certain;
and it is all the more incumbent on the Science for that very reason
to define the good word that it substitutes for a bad one with
absolute clearness, to explain it through and through until it become
quite transparent, and then always to use it in its defined and
economical sense, and none other, even though the same word be
properly enough used in other senses in common speech and in other
than scientific relations. Exactly that is what we are now going to
attempt to do in a simple and consecutive order.
(a) Perhaps it will help us to find out precisely what Value _is_ by
seeing as clearly as possible at the outset what it is _not_. It is
not _easy_, and never can be made so, to teach and to learn distinctly
what Value is in its ultimate nature and constant changes. Here is the
one unavoidable difficulty that lies at the very threshold of
Political Economy; and this difficulty, which is not found as in the
case of "Wealth" in the meaning of the word but in the complex
character of that which the word describes, once overmastered, and one
walks thereafter with ease and pleasure throughout the economic
domain. It would be wrong and cruel to deny that just here is one hard
place in the road for teacher and pupils to get over. It arises wholly
from the nature of the subject, as we shall soon see, and not at all
from the insufficiency of the word, Value. We have already seen fully,
that Buying and Selling in each and every transaction is complex and
relative, involving twelve elements every time; that Desires and
Estimates and Renderings are especially relative,--each party to a
trade desires something in possession of the other, estimates that
something relatively to something in his own possession, and finally
renders to the other his own something for the sake of receiving the
other's something. Now everybody is used to all this and practically
understands it perfectly, but it is complicated and reciprocal
nevertheless, and Value, which is the single birth of the two
Renderings, though perfectly intelligible to him that takes pains, is
not a thing to be seized once for all at a passing trot.
Value, then, is _not_ a quality of single things, belonging to them as
if by nature, as hardness is a quality of a rock or gravity is an
attribute of gold; because all physical qualities in physical things,
all that which makes or helps to make anything such as it is, may
be learned by a study of the things themselves by themselves; a
careful examination and analysis of the mechanical and chemical
properties of any physical thing will discover all its distinguishing
characteristics, all that makes it that particular thing in
distinction from all other things; but it is plain already, that the
_Value_ of anything (if it have value) cannot be found out by studying
that particular thing by itself alone; the questioning of the senses
however minute, the test of the laboratory however delicate, can never
determine how much anything is _worth_, because that always implies a
comparison between _two_ things, or more strictly a comparison between
two Renderings in exchange. Value is not an attribute of single
things: not even if the things be physical and tangible.
Now two other kinds of things are bought and sold besides physical and
tangible things, namely, personal services and commercial credits; and
it is very plain, that Value cannot be a quality of any one personal
service rendered, as looked at by itself, such as the service of a
physician towards a fever patient, because the service in and of
itself might be the same whether rendered to his own child or the
child of one of his patrons, while in the former case there would be
no value, and in the latter there would be; and so too the very name
"commercial credit" implies an exchange of two Renderings, out of
which Value always emerges, and not at all an attribute of one credit
considered by itself. Value is no more a characteristic of single
intangible services and claims than it is of single intangible
commodities rendered.
And what makes all this still more certain is, that Value even in
physical things, and perhaps still more in services and claims, is all
the while changing under demand and supply, now rising and then
falling, while the physical properties of things, that make them what
they are, are fixed and unchangeable. A gold eagle, for example, has
certain primary qualities as gold, without which it would not be gold;
it is hard and heavy and colored: gold is gold the world over and in
all ages: Value is not one of these primary qualities, nor even a
secondary quality, nor any quality at all, of gold as such; because
circumstances are readily conceived and have often occurred, in which
gold has no Value even in exchange; for instance, among a crew
abandoned at sea, a bag of gold belonging to one of the sailors might
not buy even a biscuit belonging to another; all the natural qualities
of the gold are present,--it is still yellow and weighty and
solid,--but its Value has escaped altogether. Gold is always 19 times
heavier than water: specific gravity is a _quality_ and is constant in
all physical things: Value is not a quality in this sense at all,
inasmuch as it is something that is constantly changing, rising or
falling, and not infrequently disappearing altogether, leaving no
sign.
Ignorance of this vastly important truth has pecuniarily ruined
thousands upon thousands of the people of this country during the last
20 years. They have gone into the mining of metals, gold and silver
and copper, sometimes as individuals and more often as companies
gathering in the driblets of investors, under the notion that if they
could only get these metals out of the ground their Value would be
just as secure and fixed as their physical qualities. They found out
their mistake in bitterness of spirit. For example, the Value of an
ounce of silver has gone down and down and down as the quantity of
silver excavated has increased under zealous digging, in accordance
with the universal and pitiless law of Supply and Demand. So of
copper. And both these great monetary interests went to Congress and
secured the passage of laws designed to lift artificially the Values
that were sinking naturally under increased Supply, the silver men by
a law requiring the United States to buy and mint at least $2,000,000
in silver each month whether the silver dollars were needed or not,
and the copper men by a law imposing a tariff-tax on foreign copper
that has actually lifted the price two cents a pound on the average of
the whole 20 years above the average price of copper in the markets of
the world.
Take another illustration of disappearing Values, this time in lands,
long supposed to be the most stable in value of all human possessions.
Whole tiers of farms in the writer's native town in New Hampshire, and
for that matter all over New England as well, that in his boyhood
supported large families, and when sold usually brought a fair price,
are now abandoned of their owners as wholly or comparatively
worthless, and are allowed to grow up into forest again, without a
sign of present human habitation upon them. Value is something that
needs to be studied carefully, if it is to be fully understood.
(b) Perhaps the origin of the word, "Value," will throw some light
upon its nature and changes. Etymology can never be safely despised in
scientific discussions, although words are perpetually changing their
meaning in the mouths of men. No science can afford to build upon the
transient meaning of a word; and yet it is clearly possible so to use
words as to reach and describe ultimate and unchanging facts in
science; and some knowledge of the original meaning of words is always
a help in getting at those definitions and analyses of facts that are
permanent in science. Let us hold fast to the cheering truth
exemplified on all sides of every science, that a just analysis and
exact description of ultimate facts in any department of knowledge are
for all time, in spite of the transient meaning of current words.
The present word is derived from the Latin VALERE, _to pass for, to be
worth_. There is a strong hint of a _comparison_ in the original
meaning of the word, and the current use of it both in Latin and
English develops the hint into a certainty. In common language, when
the Value of anything is asked for, the answer always comes in the
terms of something else. If the question be, How much is it worth? the
answer is, So many dollars or cents. Now the cents or dollars are very
different things from those whose value is thus inquired after; and so
we see again from another point of view that Value is a relative
matter, since it clearly implies a comparison between two distinct
things; and, if so, it is clearly enough not a quality of any one
thing, and of course it would be useless to try to ascertain the Value
of anything by a study of that thing alone. Etymology thus easily
brings us up to our present vital question, and will assist us to
solve it completely.
(c) _What is Value?_ Plainly it is the result of a comparison
instituted between two things, using the word, "things," here in its
broadest sense. But who institutes the comparison? And who is
competent to announce the result of it in Value? A comparison is
required in order to ascertain the length of a stick of timber in feet
and inches, and a carpenter's square is the instrument by which the
comparison is made, and it makes no difference in the result whose the
square is or whose the stick of timber is, since the square and the
stick have in common the physical quality of length, and a simple
comparison of square with stick determines the length of the latter,
and one man in this case may determine the result by himself alone,
and it is not needful that he be the _owner_ of either of the things
compared.
But it is a different kind of comparison from this that issues in
Value. Let us suppose an exchange of a bushel of wheat for a mason's
trowel: there is no common physical quality, as length, between the
wheat and the trowel; and it is evident, that no _one_ man can measure
in any form one of these two commodities by means of the other. It is
a peculiar kind of comparison that is involved in any and every trade;
and the first peculiarity of it is, as we have already seen in another
connection, that it always requires "two persons" to make it; and each
of the two persons must always be the virtual _owner_ of one of the
two things exchanged. A thief may indeed go through the motions of
selling a stolen horse, but as he is not the owner of the horse there
can be no sale, and the actual owner may take his horse wherever he
finds it even in the hands of an innocent third party. In other words,
there must ever be "two efforts" also, two legitimate efforts giving a
valid claim of ownership to each of the two parties in the exchange.
And there is a second distinctive peculiarity in that comparison that
ends in Value, namely, the two things to be exchanged are not compared
directly with each other at all, as square and stick are compared,
but in the light of the "two desires" with which we are already
familiar, and in that of the "two estimates" resulting therefrom. The
owner of the wheat desires a trowel, and the owner of the trowel
desires a bushel of wheat; the former estimates the effort it has
already cost him to procure the wheat in a sort of comparison with the
effort that it would otherwise cost him to procure the trowel, and he
does not trade unless the trowel seem more and better to him than does
the wheat; the latter estimates the effort it has cost him to procure
the trowel in a sort of comparison with the effort it would cost him
to procure otherwise the wheat that he wants, and he does not trade
unless the wheat then and there seem more desirable than the trowel,
which he already has; and these two relative estimates of the two
owners must _coincide_, that is, the owner of the wheat must think
more of the trowel than of the wheat, and the owner of the trowel must
think more of the wheat than of the trowel, before these two parties
can ever trade. So of all traffic whatsoever.
Now the third and last distinctive peculiarity of that kind of
comparison out of which Value emerges is this,--an _action_ is
necessary in order to complete the comparison. Desires and estimates
may have been never so busy, but no Value can ever be born until an
outward action takes place in the "two renderings" of our former
analysis. Then first we come out upon plain and solid ground. We leave
the play of the subjective elements, which yet are essential in the
premises, and touch firmly objective realities. _The trowel-maker
passes over his tool in the sight of men to the wheat-grower in firm
possession and ownership, and takes in return for it from him the
grain, which the latter passes over to the former for the sake of
receiving the trowel._ The two "satisfactions" follow as a matter of
course, and that whole transaction as a commercial exchange and as
the sole subject of Political Economy is ended.
_But where is the "Value," of which we have been in search?_ The
answer is easy and certain and unevadible. _The Value is in the
Renderings, and nowhere else._ The value of the trowel is the wheat,
that is actually given in exchange for it; and the value of the wheat
is equally the trowel, for the sake of getting which the wheat was
rendered. What was the Value of King Hiram's cedar-timbers? The oil
and wheat actually returned in pay for them. What was the Value of the
oil and wheat sent northward by King Solomon? The timbers rendered in
direct exchange for the same. This is not merely the only possible
answer to the question, _What is Value?_ but it is also a perfectly
complete and satisfactory answer. Common language here corresponds
exactly with scientific language. "How much did the horse cost?" "One
hundred dollars." The dollars have nothing whatever in common with the
horse, except that they express his Value at the time; the horse has
nothing in common with the dollars, except that it expresses the Value
of the dollars at the time. It is just as exact to say, it means
precisely the same thing to say, the dollars are worth the horse, as
to say, the horse is worth the dollars.
In general terms, the Value of anything is something else received in
return for it, when each owner renders the one _for the sake of_
getting the other. This is the whole of it, so far as any specific
valuable thing is concerned. We shall indeed need after a little, and
shall have no trouble in finding, an abstract and universal definition
of "_Value_," as an abstract and scientific term perfectly
circumscribing the field of Economics. Here and now we are dealing
with the simpler concrete question, What is the value of any specific
valuable thing? The unvarying answer is, Some other specific valuable
thing already exchanged for the first! There may be expected value,
estimated value, but actual value there is none, until a real exchange
has settled how much the value is. The value of anything is something
else already exchanged for it. Value is not simply a relation
subsisting between two things, the result of a careful comparison
between them, but rather an actual fact established in connection with
them. The universal formula of Value is _quid pro quo_, in which
formula _quid_ stands for one of the valuables and _quo_ for the
other, and _pro_ unfolds the motive of each owner for the reciprocal
receiving and rendering.
Here a caution is needful. Because nobody can tell what the value of
anything is until something else has been put over against it in order
to get it and actually received therefor, and because the only
possible way to express the value of either is in the terms of the
other,--the trowel is worth the wheat and the wheat is worth the
trowel,--one must not therefore jump to the conclusion that the value
of either is settled for all time or even for any future time. It is
only settled for _this_ time. In Economics as in Christianity, Now is
the accepted time. There is nothing fixed in Values, and never can be
from the nature of the case, because Desires are personal to
individuals, and Efforts fluctuate with times and persons, and
Estimates that wait on these vary from necessity, and the Renderings
of to-day may not be the chosen renderings of other persons in the
same articles to-morrow. Value is not a quality at all, still less is
it a permanent quality, of anything; it is a relation established
between two things when these are in the hands of two given persons;
but now when these are in the hands of two different persons, whose
views are pretty sure to differ from the former, and a new relation is
sought to be established between these in the old way of Estimates,
is it strange that a new balance is struck, and Value is expressed in
quite different terms?
One of the chief charms of Political Economy is the open secret, that
it deals not with rigidities and inflexible qualities and mathematical
quantities and the unchanging laws of matter, but with the billowy
play of desires and estimates and purposes and satisfactions, all of
which are mental states, and all of which are subject in the general
to ascertainable laws, though laws of a quite different kind from
those of Mechanics. Values come and they go. Within certain limits and
under certain conditions they may be anticipated and even predicted,
but never with the precision of an eclipse or the result of a known
chemical combination. There is a useful and fascinating Science of
Value, as we shall see indubitably by and by in the present chapter;
but it is a science that deals primarily with _persons_ and only
secondarily with _things_, with mind and not with matter, with the
general undulations of the sea and not with the crests of the waves.
And all this is so, because Values are relative, because the
announcements in the market-place to-day may stand listed differently
to-morrow and very differently next year, and because old values may
disappear altogether and many new ones come in, all in accordance with
the incessant changes in the wants and labors and fashions and
projects of men.
We are now in a good place to see once for all the sharp distinction
there is between Utility and Value. These two are often confounded to
the deep detriment of our Science; and no clear thinking is possible
in Economics without drawing this line sharp, and then holding it
fast; for the hazard of this confusion is all the greater, because
Utility is always connected with Value, although it is a totally
different thing from Value. We will see. Utility is the simple
capacity of anything to gratify the desire of anybody. This is at
once the etymological as well as the popular signification of the
word. It is derived from the Latin _utor_, to make use of, a word that
is often conjoined in Latin with _fruor_, to enjoy; so much so, that
the two verbs are often put together, _utor et fruor_, and also often
without the conjunctive, _utor fruor_. Utility, then, is a quality of
innumerable things. Anything that is _good for_ anything, anything
_useful_, anything that has the power to still _the desires_ of any
person, has Utility. But multitudes of things that have this capacity
to gratify human desires are never bought and sold, and therefore can
have no Value, since nobody will give anything for them. The air we
breathe, the water we refresh ourselves with from spring or brook, the
light of the sun and moon and stars, the fragrance of the flowers, the
mountain prospect that delights the eye,--all these, and thousands
more, possess the highest utility, but no value whatsoever. They are
free. They are the bounty of God. They are never bought and sold. They
are a vast class of things by themselves, with which Political Economy
as such has nothing to do.
Nevertheless the element of Utility comes into every case of Value,
because the element of Desire comes into every case of Value, and
whatever merely satisfies the Desire of any person is Utility, whether
that capacity be the direct gift of God or whether the Efforts of men
have been employed to bring it about. It is just here that we see the
precise function of our "two efforts" in each case of Value, in
distinction from mere Utility in all cases: much of utility is
absolutely free, no effort of men having been put forth to secure it,
for example, the fragrance of the wild rose; much more of utility is
the commingled bounty of Nature and the gratuitous effort of men, for
example, the fragrance of the domestic rose brought by the householder
himself into his own yard for the gratification of his own family;
while by much the most of utility is commingled free gift of God and
the compensated efforts of men, for example, the fragrance of the bank
of roses cultivated and cared for by the hired gardener. It is
important for our purposes to discriminate carefully the three kinds
of Utility: (1) what is wholly disconnected from the efforts of men,
and comes freely from the hand of God; (2) what is mingled with the
unpaid efforts of men, so that the satisfaction of the desire comes
partly from Nature and partly from unbought effort; and (3) the
compound utility that is partly free gift and partly the result of
compensated labor. The last is the only kind of Utility that stands in
any connection with Value.
And even this is very different from Value. Utility in all three of
its forms--now free, now onerous, now partly bought--is always a
quality of one thing by itself, going straight to the satisfaction of
some desire, and there an end. It is simplicity itself compared with
Value, which is always a resultant of several things, and is
specifically a relation of mutual purchase established between two
"renderings," each of which expresses the value of the other, in each
of which is embodied an "effort" made by each of the two "persons"
rendering, and each of which excites a "desire" and an "estimate"
before being passed over in ownership to another, and a "satisfaction"
afterwards.
The utility in every valuable rendering comes partly from free Nature
and partly from compensated effort, but it is remarkable, that a
principle, with which we are to become very familiar later on, namely,
Competition, eliminates for the most part from all influence upon
Value that portion of the Utility that is the free gift of God. The
great Father never takes pay for anything, and never authorizes
anybody to take pay in his behalf; and, moreover, has arranged things
so, that it is exceedingly difficult for any person to extort anything
from another person on the strength of anything that God has made, and
man has not improved. Take, for example, ten horses of any general
grade, brought into the same market by their ten owners for sale.
These men did not make these horses, but they have cared for and
trained them, or at least have become proprietors by purchase or
otherwise of the results of such care and training. The Utility in
each horse is compound, consisting partly of what God has done for him
and partly of what man has done for him,--the two parts inextricably
interwoven,--and all ten are offered now for sale. Each of the owners
would indeed be glad to get something for his horse on the ground of
what God has done to make him sound and strong and fleet, in addition
to a fair compensation for what he (and his predecessors) has done in
raising and breaking him; but the cupidity of all is likely to be
thwarted by the ultimate willingness of some to sell their horses for
a price covering the element of human "efforts" involved, and the
action of these tends to fix a general rate for the whole ten, and
thus the gratuitous element is eliminated from influence on Value.
Even if the ten owners should combine for a higher price, there are
doubtless a plenty of horses of that general grade elsewhere, some of
whose owners are content to get back an equivalent for their own and
others' "efforts" expended on their horses; and so the action of these
tends to fix the general price for horses of that kind for that time
and place at a point not above a fair estimate of the onerous human
elements involved; thus throwing out by the action of competition all
effect of natural Utility upon the Value of horses then and there. So
of all other products of that kind.
It is true, that in certain unique cases, in which competition has
little or no play, because there is only one or a very few owners of
such unique products, one cannot certainly say that free Utility may
_not_ influence the Value to lift it above the gauge of human efforts
involved; but such cases are rare, and relatively unimportant; and the
tendency is immensely strong, under the natural and beneficial
condition of things, for Values to graduate themselves through the
reciprocal estimates and renderings of commerce, down to the actual
and onerous contribution of _men_ to that Utility that underlies
Value.
Thus we are brought again and again from differing points of view to
the "two renderings" as central and determinative in Value, and also
more specifically to the "two efforts" of persons rather than any free
contribution of Nature as constituting that portion of the compound
Utility, whose function it is to gratify the "two desires" that
precede the realization of Value,--that portion of the utility in any
rendering that must be _compensated for_ by the other rendering. Now
in order to reach in a moment more our final definition of "Value," a
definition, it is believed, that will cover all the cases and take the
life out of endless disputes, we need a scientific term to carry
easily and exactly the meaning of any economic _rendering_. Let that
word be SERVICE. We must have it in its generalized meaning, to cover
the renderings of all the three kinds, in distinction from the term
"personal services," which we have already used and shall continue to
use to designate one class only of things exchanged, in
contradistinction to "commodities" and to "credits," the other two
classes.
VALUE IS THE RELATION OF MUTUAL PURCHASE ESTABLISHED BETWEEN TWO
SERVICES BY THEIR EXCHANGE.
We offer this definition of "Value" to our readers in much confidence,
that they will find it exact and adequate and altogether trustworthy.
No one of them, however, is precluded from attempts to improve it in
breadth and brevity and beauty; and all are invited to pick logical
flaws in it, whether of ambiguity or superfluity or deficiency. Many
minds and many hands in many lands have left their impress on parts of
this definition, for example, Aristotle in Greece and Bastiat in
France and Macleod in Great Britain; the present writer thinks, that
he has bettered the definition of Bastiat, namely, "_Value is the
relation of two services exchanged_," by precisely _defining_ the
relation as one of mutual purchase; and he is sure, that he has
improved the definition of Macleod, namely, "_The value of any
economic quantity is any other economic quantity for which it can be
exchanged_," by making his definition at once more abstract and more
general and more definite, and also by escaping the slight implication
in the word, "quantity," that only material things are exchanged in
economics.
The immense importance of securing _first_ a clear and correct
Definition of "Value," which is the foundation-word and the
circumference-word of Political Economy, and _then_ of using that term
and all other scientific terms in the Science in their defined senses
only, will certainly be appreciated by those who have wandered in the
wide wilderness of the discussions on the undefinable word, "Wealth,"
and especially by those who have reflected most upon the vast and
illimitable significance of economic Exchanges on the welfare of
mankind. Associate Justice Miller of the Supreme Court of the United
States, not an Economist in the technical sense, referred in 1888, in
words that are worth remembering, to "_the philosophical maxim of
modern times, that of all the agencies of civilization and progress of
the human race commerce is the most efficient_." In August of that
year John Sherman of Ohio, a man far enough from being a technical
Economist, said in the Senate of the United States, that "_it is
almost a crime against civilization_" to maintain commercial barriers
between Canada and the United States.
There were tokens a plenty in the year of Grace just referred to, that
the Science of Value in all the lands of the civilized world, and
particularly in the United States, was drawing to itself a new and
more popular esteem. It was seen more clearly and felt more deeply
than ever before, that this science has a weighty word for every man
and woman and child in the world; that there are certain Rights in
every one inherent and inalienable to buy and sell for his own
advantage; that most if not all of the Governments, under the lead of
comparatively few selfish and powerful men, were infringing upon these
Rights, and robbing under the forms of Law the masses of their
citizens to immense amounts for the special benefit of these very men;
that the only sure defences of the people against these abuses of all
kinds were in the maintenance and diffusion of the scientific and
consequently disinterested principles and maxims of a sound Political
Economy; that such a science was only friendly to the broadest rights,
to universal gains, to illimitable increase in human comforts and
powers, to international fellowship, to peace on earth and good-will
among men; that, accordingly, a science of such scope and tendencies
must be encouraged and cultivated and improved; that what had been
crude in it, and narrow, and merely national, must be sloughed off;
that the English and insular and special speculations of a century
ago, which regarded "Wealth" as consisting of material things only,
excepting however considerable portions of Adam Smith's immortal book,
were antiquated and unusable; that the Science had really moved into a
broader and still a well-circumscribed field, new and more permanent
foundations were being laid, and fresh contributions from all
countries should be welcomed; and that the time had fully come, when
the accepted truths of this Science, like those of the other developed
sciences, should be practically and steadily applied to the betterment
of mankind. Under these broadening and inspiriting and uplifting
conditions Political Economy, as never before, thanked God and took
courage.
3. Having now a satisfactory definition of Value, and knowing
accordingly just what Valuables are in clear distinction from all
other things in the world, we must examine with some care two or three
of the most general facts and laws and limits of Value, before we pass
in the next following chapters to study in detail each of the three
kinds of Valuables, namely, material Commodities, personal Services,
commercial Credits.
(a) Since Value in general is the relation of mutual purchase between
two Services, and consequently the specific value of either can only
be expressed by the other,--one Valuable being always measured by the
Valuable exchanged against it,--it follows as a matter of course that
such a thing as a general Rise or Fall of Valuables is an
impossibility. The rise of one valuable involves of necessity a fall
in the other, as the fall of one implies the rise of the other. If the
articles exchanged be bushels of wheat and dollars of silver, and if a
bushel buys a dollar to-day, then wheat is worth a dollar a bushel;
but if wheat rises next week, so that a dollar will not buy a full
bushel, that is precisely the same thing as saying, that the dollar
has fallen in its purchasing-power as compared with the wheat. Such
specific changes in the purchasing-power of one Valuable over another
are incessant throughout the commercial world, and a merchant's
sagacity consists in anticipating these so far as possible and in
availing himself of them alertly and prudently; but each one of us
must needs see clearly and hold firmly in mind, that each fall in the
purchasing-power of a Valuable means a corresponding rise of power in
the other Valuable,--if the first buys more of the second than before,
then the second must buy less than before of the first; and,
consequently, a general rise of Valuables is a contradiction in terms,
and so of course is a general fall of Valuables.
This brings us to _Price_. Price is Value reckoned in money; and this
is the only difference in the meaning of the two terms. When one
valuable is sold against another, even when one of the two is money,
each is the _Value_ of the other: Value is the general and universal
term in Economics. When any other valuable is sold against money, the
amount of money it buys is called its _Price_: Price is a specific and
restricted term in Economics. Since we shall study Money thoroughly in
a later chapter, and there explain the origin and extent of its
functions throughout, it is only in order to remark here, that it is
for convenience' sake, that is, to make easy the comparison of
valuables one with another, that Value in commerce is commonly reduced
to Price. Money becomes a sort of measure, by means of which to
compare all other valuables with each other. In order to ascertain the
Price of a Valuable, it only needs to be sold once against money; but
in order to ascertain the Value of a Valuable, it would need to be
sold once against all other valuables whatsoever. This last is clearly
impracticable; and so Value for practical purposes is reduced to
Price. The General is made Particular for convenience. Hence we have
"Prices current," but never Values current.
Now it will be plain to all, how there may easily be and often is a
general rise or fall of Prices while a rise or fall of Values is
impossible. Price is a relative word as much as Value is, but it does
not relate to so many things. Price is specific, and Value universal.
Both equally involve buying and selling, but one sale of a single
valuable against money leads to Price, while ten thousand sales of the
same valuable against other than money would not conduct to complete
Value. That would require a sale of this valuable against all other
valuables in the world, and a complete statement of the comparative
results.
General, or at least universal, changes of Prices in rise or fall in
any given country are due to general and great changes in the Money
current there. Subordinate changes in other valuables, money being
supposed to remain uniform, will of course vary their Prices; but it
is impossible that such changes should affect equally or even
generally all the various and numberless valuables of a whole country;
while some are coming easier, others are coming harder, while some are
more desired than formerly others are less desired, and this will
bring in of course altered prices, some higher and some lower; but a
general rise of all prices, or a general fall in the same, can only
come about by great changes of some kind in the circulating medium,
that is, the money, of the country. For example, in the United States,
between 1862 and 1878 inclusive, a government paper promise, called
_greenbacks_, was the current money of the country; owing to its
excessive issue, and to some doubt in the minds of the people whether
the paper would ever be redeemed in gold, it soon became depreciated
as compared with gold, the premium on which over the paper money
varied at different times from 1 to 185 _per centum_; as all other
valuables were then sold against greenback money, which had declined,
their prices naturally rose in some sort of proportion as the medium
fell; general _values_ remained much as before, but general _prices_
were much enhanced; and when, after the resumption of specie payments
in January, 1879, gold became again the standard medium, general
prices declined in full accordance with the same universal principle
reversed.
(b) Prices, as we have now seen, are only a subordinate form of
Values: the universal law that regulates all the variations of them
both, within certain fixed limits to be examined shortly, is called
the LAW OF SUPPLY AND DEMAND. This is perhaps the most comprehensive
and beautiful law in Political Economy. We shall look at it now only
in outline: the filling in will be the pastime and profit of all that
is to come.
"Demand" is a technical term in Economics, and accordingly needs to be
defined, and then always used in its defined sense. So is "Supply."
_Demand is the "desire" of a "person" for something in the hands of
another person, coupled with the possession of something else capable
of buying that something._ Mere desire has no function in Political
Economy: hungry and penniless children passing by the stalls of a
great market, have no influence on the prices or values of the viands,
on which they cast their eager glances: only desires accompanied by
"efforts" competent to excite the desires and to pay for the efforts
of another are a Demand. Supply is the same thing as Demand looked at
from the other side. Supply is the correlative of Demand. The Supplyer
is a person, who has in his possession something desired by the
Demander, and who in turn desires something in the hands of the
Demander, when both are willing to exchange their "renderings." There
is no economical difference in the position of the Demander and the
Supplyer. Each is equally a Demand and a Supply with reference to the
other. It is the old and ever-recurring case of Value, the
propositions being here stated in their most universal terms.
For simplicity's sake, however, and for convenience, without altering
the substance of the definitions a particle, the valuables when looked
at as a Demand are practically reduced in all markets to their
equivalent in Money, so that Money offered or ready to be offered
against any other exchangeable thing constitutes what is called in
commercial language a Demand; and this is sufficiently accurate as
well as current, although it must always be remembered that each
valuable in any market in reality constitutes a Demand for another,
and is equally a Supply in reference to that other. _Supply is any
exchangeable thing offered for sale against any other exchangeable
thing._ For example, corn in any market is at bottom a Demand and a
Supply at once for every valuable offered in that market at that time,
say, ploughs for one thing; but in the talk of the market, the
presence of corn there, or its being ready to be immediately brought
there and offered in exchange for money, constitutes what is called a
Supply of corn; money offered, or ready to be offered, in exchange for
corn, constitutes what is called a Demand.
On this account Money seems to play a much more important part in
trade than it actually does play; the corn is sold in the terms of
money, that is, for dollars and cents as denominations of Value;
convenience dictates such a reduction of general Value to this
particular form of it, because this is found to make easier the
ultimate exchange; but there is not one chance in a hundred, as trade
runs nowadays in the larger markets, that this seller of corn will
take his pay for it in actual money whether metallic or paper; money
is never an ultimate product, but only an intermediate one; this
seller of corn wants perhaps a plough or some other farming implement,
and ten to one he will take for his corn a bill or order in some form
on the seller of ploughs, and it will be corn for a plough, each
becoming a Demand and a Supply for the other, though money or rather
its denominations has acted as an agent in bringing about the final
trade; the details of all this in manner and result will be as plain
as day when we come to study "Money" and "Credits" in following
chapters; while the essential point to be noted here is, that all
Valuables are a Demand and Supply as towards one another. In other
words, the world over, A MARKET FOR PRODUCTS IS PRODUCTS IN MARKET.
What, then, is Market-Value returned in the terms of Money? And what
is the universal Law of it?
Market-value is the present rate of exchange between dollars and cents
and any other valuable, that can be fairly graded in a class made up
of valuables similar to itself; and the law of market-value is the
equation of Supply and Demand, that is, the current rate is adjusted
when money enough is offered to take off within the usual times the
valuables on hand and offered for sale. If Demand for any reason
become quickened, and the Supply be not increased, there is
competition among buyers for the stock in market, and the market-rate
rises or tends to rise. If, on the other hand, Demand become sluggish,
the Supply remaining the same, there is a like competition among the
sellers to dispose of their stock, and market-value sinks or tends to
sink. So far it is the simple action on Value of the element of one
"desire" expressing itself through a money-demand, the elements of
"desire" and of "efforts" expressing themselves through Supply being
supposed to remain stable, and the pulsations in the market-rate
follow accordingly.
How far can this simple action go? Demand increasing, Supply remaining
as before, market-rate rises: how far can it rise from this cause?
Here we must remember that Demand not only acts upon Value, but also
Value reacts upon Demand. As Value rises, the number of those whose
means or inclinations enable them to purchase at the new rate is
constantly diminished: there are ten persons who may wish an article
at one dollar, of whom not over four will wish it at two dollars, and
perhaps only one at three dollars. Every rise in market-rate then,
under the impulse of enlarged Demand, tends to cut off a part of that
Demand, that is, to lessen the number of those who will purchase at
the increased price; and the rate consequently can only rise to that
point, whatever it be, where an equalization takes place between the
Supply and Demand, between the quantity of flour, for example, offered
at the enhanced rate, and the quantity of money in the hands of those
willing to exchange it for flour at the higher rate.
Just so in the reverse way, when Demand is slackened, Supply
continuing as before, the market-rate is sure to decline; but
declining rates tend strongly in turn to increase the demand by
bringing the article within the range of a larger number of
purchasers; Society is like a pyramid, each lower stratum is broader
than the one above; and so the decline of rates under a weaker Demand
is arrested by a stronger Demand coming from a wider circle of buyers,
and a new market-rate is determined at the point of equalization
between the new Demand and the old Supply. Thus every rise or fall of
Demand tends to check itself, and will check itself in all the great
classes of valuables, even without any variations in the Supply;
everything oscillates under the variations of Demand; while the point
of stable equilibrium, if we may use the expression of anything so
unstable as Market-value, is always the equation of Supply and Demand.
But all considerable variations of market-rate are commonly checked at
an earlier point than the one just indicated by variations in the
Supply. A sharper Demand carries up the market-rate, and a higher
market-rate commonly acts upon Supply to enlarge it, and an increased
Supply too checks the rise of market-rate. _Per contra_, a slacker
Demand lowers market-rates, and lowered rates often lessen the Supply
by the action of holders and speculators,--holders withdrawing their
stock for a better market, and speculators buying now when the article
is cheap to store away until it shall be dearer. Thus rise of
market-rate from Demand growing stronger is checked doubly; first, by
curtailing the number of would-be buyers, and second, by enlarging the
Supply: the fall of market-rate from Demand growing weaker is checked
doubly; first, by increasing the number of consumers of a now cheaper
article, and second, by a diminution of Supply by the action of
holders and speculators. This double and harmonious working of the law
of the Equalization of Demand and Supply is one of the most
comprehensive and beautiful laws in Political Economy.
Besides this, we must note the effect on Value of conditions in Supply
only, Demand being supposed to continue steady. There are three
classes of valuables in respect to the law of their Supply. (1) When
the Supply is scant, and cannot be increased at all, as is the case
with choice antiques and certain gems and paintings by the old
masters, their value may rise to any point under the action of Demand,
there is and can be in such cases no market-rate, and the individual
value will be struck at the point of equalization of the demand then
existing with the supply there offered. For instance, the French
Government paid, in 1852, 615,300 francs for a painting by Murillo,
which had belonged to Marshal Soult. The genuine Murillos are
comparatively few, and their number cannot be increased, and their
merit causes a strong "desire" to possess them, and their value rises
in connection with the limitation of Supply to a point beyond which no
one purchaser can be found. When this painting was offered in Paris
for sale, many "persons" of course were anxious to buy it, there was
but one painting, there could be but one purchaser, value rose under
the influence of a sharp Demand, the rise could not be checked by any
duplication of the Supply, and the equation was complete and the value
for that sale determined when one party distanced all other
competitors and offered a sum greater than any one else would give.
The same principle controls all sales of this sort, and is practically
the principle of the _Auction_, whose very name indicates its nature
in this regard, that Demand becomes restricted to one party, and that
the highest bidder.
(2) When the Supply, instead of being absolutely limited, can only be
increased with difficulty or after the lapse of time, similar but less
extreme results will be observed. Let us suppose, that pianos are
selling in some rural community at $300 each, that there are twenty
persons in the place who want a piano immediately, that there are but
fifteen pianos on hand, and that the number cannot be increased for
half a year. The market-rate will certainly rise above $300. How much
above? To that point, at which only fifteen of the twenty will be
willing to purchase at the new rate. The equation of Supply and Demand
will be reached by a rising rate which cuts off five competitors. This
is the principle, working only roughly in practice through the
estimates and good judgment of dealers and purchasers. A better
illustration of this second class of cases is, perhaps, the Grains and
other agricultural products. When these have been gathered, there is
no more home supply for a year; and any deficiency in the crops will
raise their market-rate, not at all in the ratio of the deficiency,
but according to the relations of the diminished Supply to a new
Demand. Since the abolition of the Corn-Laws in England in 1846, and
the resulting ease of grain-imports from abroad, a deficiency of home
crops has no such effect on the price of cereals as it had before that
time; when, according to Tooke's History of Prices, an expected
falling-off of one third in the crops often doubled and sometimes
quadrupled the usual prices; which shows that the world ought to
become one country in respect to all food supplies, as indeed happily
it is now for the most part, each country allowing them to be
distributed freely everywhere in accordance with this law of Demand
and Supply. Speculation is more busy in grain, in cotton, and in such
things generally, because a new Supply can only be had once a year;
early information is eagerly sought at the trade centres in regard to
the prospects of the growing crops, and has its influence one way or
the other on current prices; but the world is so wide and all the
parts of it now so closely connected together by steamship and
telegraph, that the prices of the great food staples are remarkably
uniform over the earth, and Speculation has not the chance it once had
to count and "corner."
(3) In the only remaining and by far most comprehensive class of
cases, in which the Supply of Commodities and Services and Credits can
be readily and indefinitely increased to meet enhanced Demand, and
easily withdrawn from market and stored when Demand declines, each
rise and fall of market-rate tends to be speedily checked through the
mere action of Supply; and the doubly and harmoniously working Law but
just now referred to keeps Value in this class of cases comparatively
steady all over the world.
(c) It only remains in this branch of the general discussion on Value,
to indicate the Limits, within which all oscillations of Value are
contained. These extreme limits are specially to be found in the
element of Value which we have called "Efforts." We have clearly seen
already, that "efforts" (or Labor) are not, as has been often
asserted, the cause of Value, but only one of several constituent
causes; if Labor be asserted to be the sole cause of Value, the
inquiry becomes instantly pertinent, what is the cause of the value of
Labor; yet we know, that "efforts" always stand in preconnection with
value, and, the mutual "desires" being presupposed, there must always
be Limitations of Value lying partly in the efforts made by the person
serving and partly in the efforts saved to the person served. In every
valuable transaction, each of the parties is reciprocally serving and
served, and it is clear, that the two would not exchange "renderings"
unless the service which each renders to the other is less onerous
than the "efforts" which each would have to make if each served
himself directly. For example, it takes a certain effort for me to
bring water from the spring for the use of my family; I am willing to
pay a neighbor for bringing it for me, but I should not be willing to
make a greater effort for him in return than the effort is to bring it
myself; neither should I be willing to make an effort for him in
return which I regarded just as onerous as the bringing the water
myself; and unless there is some service which he will accept less
onerous to me than that, I shall continue to bring the water. On the
other hand, he will surely not render the service to me of bringing
the water, unless it be less onerous to him to do so than the doing
that for himself which I am ready to do for him.
This principle, applicable to all exchanges whatsoever, draws on the
one side the outermost line, beyond which Value never can pass. It may
be asserted with confidence, that no person will ever knowingly make a
greater effort to satisfy a desire through exchange, than the effort
needful to satisfy it without an exchange. Therefore, it follows,
that all exchanges lessen onerous efforts among men relatively to the
satisfaction of their desires, and tend to lessen these more and more
as exchanges multiply in number and variety, otherwise the exchanges
would not take place.
Moreover, within this outermost Limit of Value, which is made by the
comparative onerousness of the respective "efforts," there is a second
limitation of a similar kind to be found specially in the element
which we have called "estimates." The estimate of each exchanger is
based at once on his own effort about to be rendered and on his desire
for the return service offered: the element of effort in the case of
both being considered for the time as fixed, Value will vary according
to the varying desire of each for the return service of the other,
affecting of course the "estimate" of each, and furnishing also a
secondary Limit of Value. To pursue the same illustration, suppose I
regard the effort required to bring the water myself as 10; that there
are several persons, who would be glad to do that service for me at a
return service which I consider as 8; that there are two persons, who
are willing to do it for something which I estimate at 6; and that
there is only one person, who will do it for a return service which I
regard as 5. It is evident, that the extreme limits of that service to
me are 10 and 5. Higher than 10 it cannot go, lower than 5 it cannot
sink. But why have I before me three possible classes of renderers?
Because the persons in each class, while estimating their own efforts
alike in the proposed rendering to me, have varying "desires" as
towards a possible rendering from me to them, and consequently put
differing "estimates" upon the possible transactions. The man who will
bring the water for 5 has for some reason (no matter what) a stronger
desire for the return than anybody else, and I should of course
employ him so long as he would serve me on those terms; if he decline
the exchange, I fall back on one of the two persons in the class above
him, and Value rises now from 5 to 6, and will be steadier there than
it was before; if each of these in turn should give out, I should fall
back upon the larger class ready to serve me at 8, and Value would be
very steady at that rate, because there are numerous competitors; and
by no possibility could it rise above 10. Between 10 and 5 the value
may fluctuate, but it cannot overpass these Limits in either direction
under existing circumstances.
Therefore we may conclude, that the _maximum_ Value of any Service in
exchange will be struck at the point where the recipient will prefer
to serve himself, or go without the satisfaction, rather than make the
exchange; and the _minimum_ Value of any Service in exchange is struck
at the point below which the recipient cannot get himself served even
by him who most highly estimates the return service offered.
(4) We come now to the last and most important Inquiry in this initial
chapter, namely this, _Can there be, and is there, a strict Science of
Buying and Selling? Is there a Science by itself, clear and certain,
that covers and controls Valuables?_
Here we must go slowly, if we would go surely. We must first find out
exactly what a Science is in general, and then ascertain in particular
whether Political Economy bears all the marks and stands all the tests
of the other genuine Sciences. What is a Science?
_A Science is the body of exact definitions and sound principles
educed from and applied to a single class of facts or phenomena._
The very first condition, accordingly, of any science is, that there
be a single class of facts, objective or subjective, that can be
separated from all other classes of facts, in the mind by a
generalization and in words by a definition, and that such
generalization and definition be clearly made and held; the second
condition is, that the class of facts so circumscribed and defined be
open to some or all of the logical processes of construction, of which
the most important are Induction and Deduction; the third condition
is, that the subordinate definitions and working principles within the
inchoate Science be all educed from and applied to these circumscribed
facts in strict accordance with these well-known logical processes;
and the last condition is, that these definitions and principles have
gradually become "_a body_," in which there is an organic arrangement
of parts, all being placed in a just order and mutual interdependence.
There is no old Science, and there can be no new Science, in which
these four conditions do not meet and become blended; and the beauty
of it is, that this Definition applies to any Science in all stages of
its growth. No one of all the Sciences is as yet completed; but just
so soon as any correct definitions and principles are drawn from and
applied to any _class_ of things clearly circumscribed as such, and
these definitions and principles are orderly arranged in a _body_,
there is an incipient Science; and its progress towards perfection
will proceed in precisely the same manner in which its foundations
have been laid; new facts and principles and definitions will
gradually be discovered, and these when reapplied to the class of
things out of which they have sprung, will lead to corrections and
adjustments and enlargements of the Science; and no matter how far
these logical processes may be carried, the general Definition with
which we start will also be found ample at the end of the journey.
All of the Sciences without exception have been developed into their
present position in just this manner; and they fall easily into three
great classes, namely, the Exact, the Physical, and the Moral
Sciences. The ground of this triple classification is partly the
distinct subject-matter in the three classes of Sciences, and partly
the distinctive prominence of one or more of the logical processes of
construction in each.
Thus, the class of the Exact Sciences consists only of the formal
Logic, and pure Mathematics. These two are distinct from all other
sciences, because their logical method of procedure is wholly
Deductive. Deduction is the process of the mind, by which we pass from
a _general_ truth to a _particular_ case under it, that is to say,
from _more_ to _less_ inclusive propositions. Stuart Mill argues at
much length in his book on Logic, that even the axioms of pure
Mathematics are originally gained by Induction, while others claim
that the truth of these axioms is perceived _intuitively_, but no
matter how this point is decided, the construction process of the Pure
Mathematics is from the General to the Particular. So it is also with
the Aristotelian logic, whose Major Premise, whether only _supposed_
to be true or intuitively _perceived_ or inductively _proved_ is
always General in its terms. This is the form of Aristotle's
Syllogism:--All sinners deserve to be punished; John is a sinner; and
therefore, John deserves punishment.
Physical Sciences are those concerned with the classifications and
laws of action belonging to material substances. There are a great
circle of these, of which Astronomy, Botany, and Chemistry, may serve
as examples. They have been mostly developed since the time, and in
accordance with the methods, of Lord Bacon; who, in strong reaction
against the Deductive logic of Aristotle, exalted Induction or the
mode of generalizing from _particulars_, as the true way of building
up Sciences; and, as the subject-matter of each of the physical
sciences is well open to observation and experiment, to Induction and
Deduction, and to corrective verifications, both inductive and
deductive, the new method proved remarkably pregnant and successful.
Each of these sciences has a distinct _Class_ of objects or phenomena
to which its attention is directed; the class is circumscribed by the
scientific Conception and Definition; its devotees as a rule are
skilled in using the Baconian tools; and consequently, its conclusions
receive the confidence and control the action of men. All of the
Physical Sciences are constantly enlarging "the body of exact
definitions and sound principles" connected with their several classes
"of facts or phenomena."
Moral Sciences are those concerned with the classifications and laws
of action belonging to beings having Thoughts and Desires and Will.
The most developed of these sciences at present are Metaphysics,
Ethics, and Economics. Each of these is concerned with a single class
of phenomena, which may be exactly conceived of and defined, and is
open to the logical processes by which alone Sciences can be built up.
But Induction cannot march up with quite so sure a stride, nor
Deduction descend with so large degrees of certainty, in relation to
_persons_ endowed with free-will, as in relation to physical
substances held firm in the grip of unvaried law. Still, the doubt
always attaches far more to the actions of an _individual_ than to the
actions of the _masses_ of men. It is much easier to know human nature
in general, than one man in particular, because many Inductions guided
by observation and History make it almost certain how masses of men
will act under a given set of conditions, while any one _may_ act in a
contrary way. Deduction, accordingly, cannot hold quite the same place
in the Moral Sciences so far as individuals are concerned, as it holds
in the Physical and Exact Sciences; but this lack is perhaps more
than made up by other advantages. _Experience_ in the moral sciences
corresponds to _Experiments_ in the physical sciences. Then there is
the great advantage of _Introspection_; since each man has within
himself the means of interpreting and testing the inductions of
Metaphysics, Ethics, and Economics. Then also there is the great
resource of _Feigned Cases_, which, provided only they be cases
possible to occur, open up to Reasoning a new means of proving and
correcting. Besides these, which it enjoys in common with them,
Economics, as we shall soon see, possesses one other great advantage
over and above the rest of the Moral Sciences.
Since, then, Political Economy deals primarily with Persons, and only
quite secondarily with Things, it is, under the definition and on
every ground, a "moral science"; yet it must not be confounded in the
least with what is sometimes called the science of Morals, or Ethics.
There is one word that marks and circumscribes the field of Ethics,
and that word is _Ought_; there is one word also that marks and
circumscribes the field of Economics, and that word is _Value_. Now,
the idea of _obligation_, on which ethical science is founded, and the
idea of _gainful exchange_, on which economical science is founded,
are totally distinct ideas. The imperatives of ethical obligation rest
upon the consciences of men, and Duty is to be done at all hazards;
guilt is incurred if it be neglected; while pecuniary gains and
losses, however large, do not, or at least ought not, weigh a feather
against an intuition of Right and Wrong. Economics, on the other hand,
does not aspire to place its feet upon this lofty ethical ground; no
man is ever under any moral obligation to make a trade; he properly
makes it or not, according to his present sense of its gainfulness to
himself; and so economic science finds a solid and adequate footing
upon the expedient and the useful. Ethics appeals only to an
enlightened conscience, and certain conduct is approved because it is
Right, and for no other reason; Economics appeals only to an
enlightened self-interest, and exchanges are made because they are
mutually Advantageous, and for no other reason; each of the two
Sciences, therefore, has a basis and sphere of its own, and the
grounds of the two are not only independent, but also incommensurable.
We will now apply _seriatim_ to Political Economy the four fundamental
conditions belonging to all recognized Sciences, and so determine for
ourselves whether it be not a strict science, and thus worthy in its
leading propositions of all acceptation.
(a) Every science must have to begin with a definite Class of facts,
which lie in an easily circumscribable field, and which are not likely
to be confounded with other facts of a differing nature. Economy has
such a class of facts, that lie in such a field, and that cut
themselves off by sharp lines from all other things. _Valuables_ is
its class of things. It has nothing to do with any other class of
things. Its field is Value, or Sales, or Exchanges. This field is
perfectly definite. Sales are never confounded with gifts, and are
never confounded with thefts. They have a distinctive character of
their own. They have always been in the world, will always be in the
world in ever-multiplying volume, and no one ever mistakes their main
features for anything else. Anything whatsoever that is salable, or is
about to be made so, comes within the view of Economics, and
scientifically it cares for nothing else. While it finds its field
definite, it also finds it broad. It has no wish to encroach on other
sciences, nor will it tolerate any encroachments on its own. Before
anything is sold, or is being made ready to sell, it cares nothing
what other science employs itself upon that thing; after the thing is
sold, Economy loses its interest in it, and other sciences may take it
up if they choose. Valuableness is the one quality that constitutes
the Class of things with which the Science is conversant, and it
claims complete jurisdiction over all things just so far forth as they
have this one quality, and no farther. Now there _is_ in the actual
world such a Class of things; its exterior boundaries have been
exactly ascertained by a long series of Inductions and Deductions,
tentative, corrective, and confirmatory; and accordingly, Political
Economy has now in full possession the first grand condition of a
Science.
(b) This great class of facts, thus reached by logical Generalization
and grasped and held by a mental Conception and fixed by an adequate
verbal Definition, is remarkably open to all the logical processes of
reasoning, by which alone sciences are constructed, and thus possesses
in full measure the second grand condition of the Sciences. Not one
logical resource is denied to the economists: all the tools of the
scientific workshop are at their hands. Let us now catalogue these in
their order.
(1) _Induction._ This is the logical and universal process, by which
the mind naturally passes up from a certain number of observed cases,
in which a certain quality appears, to a Generalization, which is a
conception of the mind followed by a statement in words to the effect,
that _all possible cases_ of that kind will exhibit the quality
already observed in _the few cases_. It has as its basis a confidence
in the resemblances and uniformities of Nature; it proceeds upon the
axiom that Nature throughout is consistent with herself; and this
confidence has been ten thousand times justified in the issue, when it
is found that Nature preordained the Sciences by causing grand
analogies to run through each department of her works, including man
and his works. The structure of the human mind corresponds with these
objective resemblances; it seizes upon them, and delights in them, and
naturally and joyfully infers and concludes that what has been
observed of _a part_ may be safely affirmed of _the whole_ of that
kind; accordingly, the world over, when certain things are found to be
true in a considerable number of cases, the mind leaps over space and
time to a whole class, and frames for itself a general rule or
principle, which binds all the cases into one bundle, and thereafter
confidently affirms what is known to be true of some to be probably
true of all. This is inductive Generalization; and the strength and
the joy of it is well expressed by Descartes: "_I have thought that I
could take as a just generalization that which I very clearly and
vividly conceived to be true._"
Experience in Economics corresponds to Experiment in the Physical
Sciences, and furnishes to Induction all the fuel it can ask for to
feed its logical furnace and to forge the chains that bind the Cases
to the Classes. Personal experience in buying and selling, local
experience in buying and selling, and national experience in buying
and selling, with all that belongs to these, the records of which are
full to overflowing, afford to the inductive inquirer in Economics an
inexhaustible supply of material. Instances abound. Particulars may be
gathered up one by one on every hand and linked into the inductive
chain. If any doubt be felt about the strength of any one of these
chains, another one may at once be linked in terms drawn from another
field of Experience with a view to test the strength of the first.
Most fortunate from this point of view is the United States, because
here there are States with substantive powers of control over most
matters of trade within their borders, as well as a Nation with
sovereign powers of control over some points of trade within the
country as a whole. This feature has given birth to commercial
experiments as well as commercial experience of all kinds; and
Induction rejoices in all these abundant materials for generalization
thus furnished free of cost to Science, though unfortunately not free
of cost to the People.
(2) _Deduction._ This is a logical process exactly the reverse of the
first, in that it descends from a generalized statement reached by the
inductive process to some particular, or subordinate class of
particulars, ostensibly covered by the general maxim. Induction
examines a number of particulars, and then makes a leap, it may be a
long leap, over all intervening particulars, to its Generalization
clamping them. The main use of Deduction is to make sure of any one of
these overleaped particulars, which may come into importance, and thus
confirm the generalization, or correct it. It is not strictly true,
what is often alleged against deductive reasoning, that there is
nothing _new_ in its result, that the Induction had already passed
through that particular in rising to its Generalization, and therefore
to descend to any particular link to examine that, is something
useless. The exact truth is, that it _is_ useless to examine again
deductively the very particulars that were carefully studied
inductively, but on the other hand there is always much actually
untraversed territory between these already examined particulars and
the inductive generalization, and Deduction is often very useful in
carrying us down to questionable points in this territory. Even Lord
Bacon, who scorned the syllogism, admits this: "_Axioms duly and
orderly formed from particulars easily discover the way to new
particulars, and thus render sciences active._"
We will illustrate this by a reference to Franklin's famous induction
to prove the identity of lightning with electricity. Only one
experiment, and that a very rude one, was needful in this case;
although usually many experiments, or the careful observation of many
particulars, are necessary in inductions; but the generalization
having been gained, Deduction had a chance to try its hand; it had
long been observed that electricity could be conducted from point to
point, and if electricity and lightning be identical, then lightning
can be so conducted; therefore, deduced Franklin, a pointed iron rod
elevated above buildings will harmlessly conduct lightning from the
clouds into the ground. Deduction gave mankind the lightning-rod, and
so made one point of science "_active_," as Bacon phrased it; and it
is noticeable, that Turgot's felicitous epigram turns on the deductive
rather than the inductive side of Franklin's experiment: _Eripuit
coelo fulmen sceptrumque tyrannis._
Let us catch up another illustration from the science of Botany, to
show how Deduction may strengthen and sharpen an inductive result. The
botanists say, that apple-tree blossoms are always five-petaled,
because blossoms from a large number of apple-trees in various
localities have been observed to have just five petals to the blossom;
so far, they affirm inductively, and indeed securely; but they have
also reached by means of another induction a much broader law of
plant-life, namely, that outside-growers, when they have petaled
flowers at all, always have them five-fold; now apple-trees are
outside-growers; and therefore, deductively also, and conclusively
beyond shadow of question, apple-tree blossoms are five-petaled.
Political Economy is just as open to Deduction as it is to Induction,
and the two continually are reaching each other the hands of
economical reasoning, not always indeed pursuing each a separate and
distinct path to the end, as in the botanical instance just adduced;
because in practice the two processes mingle constantly, and neither
is carried out in full and due form, since premises used by the mind
are often dropped in the statement, and shortened forms of expression
take the place of long-drawn-out formulas. But all good reasoning in
Economics, as in all other sciences, is analyzable into one or other
of these two processes, both based alike on the uniformities of Nature
and the structure of the human mind.
Deduction has not quite the same scope and certainty in Economics as
in the Physical Sciences, because any one _may_ act contrary to the
vastly probable action of many individuals; still, it is a safe and
potent process in economics, since it may descend securely from the
larger masses to the smaller, even though perchance the individual
escape, because of the simplicity and universality and certainty of
the impulses that lead men to exchange. John Bascom gives the reason
well, why both Induction and Deduction have so firm a grasp upon this
science: "_Between one dollar and two dollars a man has no choice, he
must take the greater; between one day and two days of labor he must
take the less; between the present and the future he must take the
present. This is not a sphere of caprice, nor scarcely even of
liberty; the actions themselves present no alternative, and, if an
alternative giving an opportunity for choice does arise, it arises
from some partial or individual impulse, from some one of those
transitory and foreign influences, which, while rippling the surface,
neither belong to nor affect the current of the stream._"
(3) _Introspection._ Everybody buys and sells, and almost everybody
watches the action of his own mind enough to see what are his
_motives_ in buying and selling, and soon comes to know also that the
other party has corresponding motives. Even the child knows perfectly,
that it takes two to make a bargain, that each party renders
something to the other, that each is glad to part with something for
the sake of receiving something from the other, and that this higher
esteem put by each on what is taken from the other makes for each the
gain of the trade. A very little introspection tells anybody, that
were this higher esteem wanting in the minds of either of the two, the
trade would not take place at all. Everybody within the pale of
_compos mentis_ knows, that, were his own desire for the rendering of
another to increase, he himself would offer more of his own rendering
rather than forego the trade; and he rightly infers, that what is true
of himself is true of all other men; and so, every seller rightly
tries to display his wares in such a way as to increase the desire of
buyers for them; knowing full well from his own experience in buying
that, other things being equal, they will be willing to render him
more for them in consequence.
The phrase above, "rightly infers," is based upon the truth, that all
men are remarkably alike in certain great departments of action; and
that, in no department are they so nearly alike as in this of buying
and selling. Introspection, therefore, an easy self-knowledge open to
all persons alike, and a personal experience in these matters that
everybody gains, give most trustworthy answers to Inductive inquiry
along these lines. Trade is natural and gainful, as any person can
see, who stops to ask himself why he has made, or is about to make, a
given trade; and if natural and gainful to _him_, equally so for
precisely the same reasons to the party of the other part; hence no
law or encouragement is needed to induce any persons to enter upon
traffic; and any law, or artificial obstacle, that hinders any two
persons from trading, who would otherwise trade, not only interferes
with an inalienable right that belongs to both, but also destroys an
inevitable gain that would otherwise accrue to both. Political
economy is very fortunate, accordingly, in being able to make its
appeal to the common sense of all men, giving sound starting-points
through self-knowledge possessed by all men, guiding to safe steps by
means of Induction all who like to generalize and prove, and
especially breaking up current fallacies by asking the potent
question, "How would you like it yourself?"
(4) _Feigned Cases._ There are two kinds of these, namely, those which
might be realized in actual fact, and those which never can be so
realized. The acute mind of the Greeks marked in their flexible
language a decided difference between the class of suppositions that
might possibly become facts, and another class of suppositions
impossible to become facts, by developing a distinct form of expression
for each. This distinction must always be borne in mind by those who
use or note in economical discussions the expedient of Feigned Cases.
Reasoning is always legitimate and often pregnant from suppositions,
whenever these are such as might readily become facts of experience,
because in that case the argument proceeds upon recognized and
inductive resemblances; but otherwise, no inference at all can be drawn
from them, because it is an universal truth in Nature and in Logic, _ex
nihilo nihil fit_, out of nothing nothing can come. In plausible
suppositions impossible to become facts is a nest of logical fallacies,
that need to be watched. A good illustration may be found in the
Monetary Conference at Paris in 1881. Delegates were there from all the
nations of Europe, from the United States, and even the distant India.
Some of these in their eagerness for a factitious ratio of value
between gold and silver forgot the important distinction now in hand,
and argued of the good results to flow from the realization of a
supposition, _which in fact never could be realized_. Mr. Evarts voiced
the French and American delegates in this declaration: "_Any ratio now
or of late in use by any commercial nation, if adopted by an important
group of states, could be maintained; but the adoption of a ratio of
15-1/2 silver to 1 of gold would accomplish the principal object with
less disturbance in the monetary systems to be affected by it than any
other ratio._" The fallacy in this passage is in the words, "could be
maintained," which are a supposition, and what is much worse, a
supposition contrary to fact, from which all arguing is nugatory. Why
it is contrary to fact will be seen at length in the following chapter
on Money.
On the other hand, a supposition that may clearly become a fact is a
substantive thing, and logical inferences may be drawn from it, just
as geometrical inferences may be drawn from a _supposed_ circle: the
circle on the page is not a _perfect_ circle--no such circle was ever
drawn--but _suppose_ it perfect, as it might possibly be, and argument
becomes at once valid. Let us take another Monetary Conference at
Paris in 1867 as an illustration: its judgment as voiced by Mr.
Ruggles of New York was taken with logical propriety, when the great
benefits of an international coinage of gold alone were argued and
announced, because, while that was then a mere conjectural project, it
was possible any day by mutual agreement among the nations to become a
reality. An international coinage of gold is a simple question of
equivalence of _weights_ in the coins of different countries: an
equivalence of _values_ as between gold and silver coins for any great
length of time is neither simple nor possible.
(5) _Results measurable in numbers._ The four preceding logical
processes of proof and construction Political Economy is glad to share
with the other Moral Sciences, but this fifth and last one it has to
itself alone, and this is its chief scientific advantage over them,
and is consequently the main reason why it is already more advanced
and more symmetrically developed than any of them. In common with them
it has important subjective elements, such as Desires, Estimates, and
Satisfactions; in marked advantage over them it has also objective
elements, that can be weighed and measured and even hardened into
statistics. Economics has an ever ready objective test, which mere
mental and ethical and other moral processes never can have from their
very nature. The _result_ of each and of all economic transactions may
be measured by money, and put down in a ledger, and published to the
world in the form of statistics. An economic blunder, whether in
legislation or in private action, pretty soon proves itself to be such
by the lessened gains of somebody, and these losses can be stated
arithmetically; and similarly, an economic improvement evidences
itself at once by increased gains coming to somebody; while it may
take years and years to work out the results of an ethical mistake,
and even then their amount can only be guessed at.
Theories in metaphysics can only be tested by the _Reason_ of men, and
reasonable men without apparent bias of motive take opposite views of
Sensations and Intuitions and Volitions; while theories in economics,
which can be even better tested by the _Reason_, have an additional
and almost immediate and constantly recurring test through men's
pockets and the tables of the Census. The people indeed sometimes
deceive themselves, and are also too often deceived by others, in
these matters of buying and selling; but it is none the less of the
utmost consequence to this Science, that all the results of good and
bad practice in Economics work themselves at last into a definite
shape, into facts and figures that cannot lie. It is not, as in Ethics
and Metaphysics, that tendencies and potencies only are ascertained,
but everything speedily drifts into results measurable in numbers,
which stand out like landmarks against the sky. It is just for this
reason, as both the schools of the Roman lawyers admitted, namely,
that we have in all cases the Return-Service as the outward expression
and measure of the Desire and Effort of him who renders the service,
and because it makes no difference which of two services exchanged be
regarded as the return-service, that our Science is reared on the firm
ground of objective realities, notwithstanding the strong subjective
elements that have a constant part in it.
(c) The third condition of a recognized Science is, that the logical
processes appropriate to its class of facts have been already
carefully applied to them and a certain number of "exact definitions
and sound principles" have been already "educed from and applied to"
them. We do not hesitate a moment to claim, that this condition also
is fairly and fully met by Political Economy, and that this is a
"Science" under the definition from every point of view, and
particularly from this third point of view; and a few examples will
now be given as a specimen merely of the logical work already achieved
in Economics. First, Induction more or less busy for two thousand
years has given at last an exact and acceptable definition of the
Science, and impliedly an exact description of the class of facts with
which it is conversant, namely, the Science of Sales, or what is
exactly equivalent, the Science of Value; and Deduction at all points
along this slow road has helped to correct and to broaden successive
imperfect inductions, which an inquisitive and tentative and cautious
spirit--the mainspring of Constructive Science--has instituted from
time to time.
Second, precisely the same processes often repeated have ascertained
beyond question, that there are only three classes of Valuables and
the exact differences between them, and that, consequently, only six
cases of Value are possible to happen.
Third, so many nations at different times in all ages have lowered the
standard of their Money under a misapprehension of its nature and in a
vain hope of profit, and a general scale of rising prices following
each attempt of this kind having been several times observed and no
instance to the contrary, Economists came by Induction to assert the
proposition, that falling Moneys cause rising Prices; the proposition
stood secure on inductive grounds alone; but so soon as a perfect
definition of Money, namely, a Measure of Services, had at last been
reached both inductively and deductively, it became at once a safe
Deduction from the definition, that rising Prices must succeed a
falling Measure. Thus assurance became doubly sure.
Fourth, Introspection gives each buyer and seller such firm possession
of _his own motive_ in buying and selling, that he naturally and
inductively concludes on the ground that men are substantially alike,
that the _motive is similar_ in the party of the other part; each
further step of experience in traffic assures him of this beyond a
doubt,--each wants to get and does get something from the other of
more consequence to him than what he gives; every attempted deviation
from rectitude in trade so far forth throws the trader out from
opportunity to trade; opportunity to trade is nothing in the world but
_a market_; a market is nothing in the world but men with products in
their hands, desiring to buy other products with these; the more men
anywhere with the more products in their hands of all sorts to buy
with, the better market everywhere for other men (the more the better)
with other products of all kinds to buy with; all the appropriate
logical processes in action and reaction, all the commercial
experience of all men everywhere, and all the true statistics of
traffic ever gathered, do but assure the inductive assent to one of
the best and broadest of all the Generalizations in Economics, namely
this: _A market for products is products in market._
(d) Are the definitions and principles already logically educed from
and applied to the great class of Valuables orderly arranged in "_a
body_"? This is the only inquiry that remains, in order to determine
whether Political Economy is already a "Science" in the strictest
sense of that term. It is admitted, that a jumble of even just
definitions and principles do not constitute a science, but only these
when placed in a just order and interdependence. A "body" implies an
organic arrangement of parts. It has been well said of the human body,
that all its parts are reciprocally means and ends; the same may be
said of every living organic body, whether vegetable or animal; and
the same may be said in the way of analogy of every developed and
recognized Science. All the definitions and propositions and
illustrations in any science should be so arranged, as to show the
mutual relations and reciprocal dependence of all the parts, and as to
display the whole in harmony and symmetry.
It is as certain as anything in the future can be in science, that new
principles will be discovered in Economics as Time and Inquiry go on,
and that these will find their place little by little in a fuller and
more rounded "body" than is at present possible; while it is also as
certain as anything in the future of science can be, that the Outline
of economics is already perfectly drawn, that the great class of
Valuables will never be enlarged nor be better described, that the
category of Commodities, Services, Credits, is completed for all time,
and that the analysis of each act of trade into two Desires and two
Efforts and two Estimates and two Renderings and two Satisfactions
will never yield additional elements. Political Economy is already a
body of exact definitions and sound principles educed from and
applied to a single class of facts. This body will indeed be enlarged
by a future and finer scientific construction, the arrangement and
interdependence of its parts will be better exhibited, the form and
filling up of the Science within the outline already determined is
sure to become more compact, more robust, and more beautiful, as the
decades and centuries go by; while, as in the human body throughout
all the changes of its growth and mature life, that future body of
economic science in all its stages towards perfection will be but the
continuation and fuller development of the present "body" of Political
Economy.
FOOTNOTES:
[1] Green's Short History of the English People, p. 591.
[2] See on this general topic, Mommsen's Provinces of the Roman
Empire, _passim._
CHAPTER II.
MATERIAL COMMODITIES.
Valuables fall naturally and exactly into three classes, Commodities,
Services, and Credits. The reasons are obvious at first glance, why
articles falling in the first class occupied the thoughts and the
efforts of men almost exclusively for the first thousand years of
recorded history. Commodities appealed to the senses of men: they are
visible, tangible, weighable. Some form of personal slavery existed
everywhere, and largely withdrew attention from personal services
bought and sold; and there was not apparently sufficient personal
confidence between man and man in the earlier ages to allow much
development of credits, whose ground is personal trust and whose
sphere is future time. Commodities, on the other hand, fitted by the
efforts of some men to satisfy the immediate wants of other men, all
ready for delivery, to be exchanged against other commodities
similarly fitted and at hand, took the field apparently in the
earliest ages of recorded Time, gradually became very large in volume,
opened new routes of travel and transportation, and served to connect
in a rough and ready way neighboring tribes and even neighboring
nations.
_Commodities are the class of Valuables comprising material things,
organic and inorganic, fitted by human efforts to satisfy human
desires._ Cattle were probably among the first things to become
valuable, that is, salable; and it is certain, that they became very
early in many quarters of the world a sort of Money or standard of
comparison among other things exchangeable, and indeed they continue
to be such in some quarters to this day. Near the middle of the sixth
book of the Iliad occur these lines:--
"Then did the son of Saturn take away
The judging mind of Glaucus, when he gave
His arms of gold away for arms of brass
Worn by Tydides Diomed,--_the worth
Of fivescore oxen for the worth of nine_."
Gold and silver also became valuable in the ordinary way in very early
times, and later became Money or a medium in exchanging other things;
and much later other metals came into use as commodities and then too
as money; for the Latin word for money, _pecunia_, derived from
_pecus_, cattle, seems to imply some original equivalence in value
between the bronze stamped with the image of cattle and the cattle
themselves. Parcels of land subdued and improved by human hands were
probably bought and sold in some portions of the world as early as
anything was,--at any rate very early. Land-parcels are a commodity
under the definition. Another passage from Homer, towards the end of
the seventh book of the Iliad, displays some of the commodities in
common use during the heroic age in Greece:--
"But the long-haired Greeks
Bought for themselves their wines; some gave their brass,
And others shining steel; some bought with hides,
And some with steers, and some with slaves, and thus
Prepared an ample banquet."
The earliest detailed record of a commercial transaction in
commodities, is the purchase by Abraham of the field and cave in
Hebron, more than 2000 years before Christ. It is narrated at length
in Genesis xxiii. Long before this purchase, however, it is said of
Abraham that he "went up out of Egypt very rich in cattle, in silver,
and in gold." This formal sale to him in Hebron of the field and cave
of Machpelah is in all its parts instructive to us, and full of signs
of the drift of those times. It was "_in the audience of the sons of
Heth, before all that went in at the gate of his city, that the field
and the cave were made sure unto him for a possession. And Abraham
weighed unto Ephron the silver which he had named in the audience of
the sons of Heth, four hundred shekels of silver, current money with
the merchant._" In the lack of written and recorded deeds to
land-parcels, as we have them now, the sale of them was "_made sure_"
before the faces of living men, who would tell the truth and pass on
the word. The market-place in those days was "_at the gate of the
city_," where the judges also used to hold their courts, the place
most frequented of all, and sales were made "_before all that went
in_" thither; "_in the audience of the sons of Heth_" was the silver
weighed out, and the field made sure in exchange. Then there were
"merchants" as a class; silver passed by weight rather than by tale,
although it had already passed beyond a mere commodity and had become
money, "_current money with the merchant_"; and even at this day the
Bank of England takes in and pays out gold and silver by balance
rather than by count, though they be in coined money: it is the more
accurate method.
The author of the book of Job, believed to be of great antiquity, and
certainly true to nature and to fact in its essential parts, knew very
well the modes in which the ancient mines were wrought, and the worth
of the commodities extracted:--
"Truly there is a vein for silver,
And a place for gold, which men refine.
Iron is obtained from earth,
And stone is melted into copper.
Man putteth an end to darkness;
He searcheth to the lowest depths
For the stone of darkness and the shadow of death.
From the place where they dwell they open a shaft;
Forgotten by the feet,
They hang down, they swing away from men.
The earth, out of which cometh bread,
Is torn up underneath, as it were by fire.
Her stones are the place of sapphires,
And she hath clods of gold for man.
The path thereto no bird knoweth,
And the vulture's eye hath not seen it;
The fierce wild beast hath not trodden it;
The lion hath not passed over it.
Man layeth his hand upon the rock;
He upturneth mountains from their roots;
He cleaveth out streams in the rocks,
And his eye seeth every precious thing;
He bindeth up the streams, that they trickle not,
And bringeth hidden things to light."
The prophet Ezekiel, who wrote in the sixth century before Christ,
incidentally described in his chapter xxvii the commerce in
commodities, that then centered in the city of Tyre on the eastern
Mediterranean. "_All the ships of the sea with their mariners were in
thee to traffic in thy merchandise: many islands were at hand to thee
for trade: with silver, iron, tin, and lead, they traded in thy fairs:
they brought thee for payment horns of ivory and ebony-wood._" Among
the commodities besides these exchanged in that market, are mentioned
by the prophet horses and mules and lambs and rams and goats, wine of
Helbon and white wool, fine linen and embroidered work, and riding
cloths and mantles of blue and chests of damask and thread, wheat and
pastry and syrup and oil and balm, precious spices and cassia and
sweet reed, and gold and carbuncles and corals and rubies. These old
Phoenicians of Tyre colonized Carthage, and thus bore a vast trade in
commodities to the West, going overland into the heart of Africa for
dates and salt and gold-dust and slaves, and by sea through the
Pillars of Hercules northward to the British Isles for the sake of the
trade in tin.
The amount of transactions in commodities, the first class of
Valuables, has been constantly increasing, under natural impulses
which we shall have shortly to describe, from the dawn of authentic
History down to the present moment; and figures are baffled in
expressing to our minds the sum of these transactions even in a single
country, still more their aggregate in the commercial world. The
foreign trade of every country is almost exclusively in commodities,
and is only a small fraction of its domestic trade in the same; and
so, when we remember that the foreign trade of the United States, for
example, under a commercial system designed and adapted to curtail
such trade, amounted in 1889 to about $1,600,000,000, and the foreign
trade by Great Britain the same year to about 4,000,000,000, we gain a
glimpse, we touch as it were the hem of the garment, of the gigantic
traffic of the world in commodities alone.
_The Production of Commodities is the getting them ready to sell and
the selling them._
1. We must look first at the REQUISITES of such production. They are
three, _Natural Agents_, _Human Efforts_, _Reserved Capital_. The
following lines of Whittier touch incidentally on these three
requisites, and may serve us as a general introduction to them:--
"Speed on the ship!--But let her bear
No merchandise of sin,
No groaning cargo of despair
Her roomy hold within.
"No Lethean drug for Eastern lands,
No poison-draught for ours:
But honest fruits of toiling hands,
And Nature's sun and showers!"
Natural Agents include not only "Nature's sun and showers," but also
all the forces and fertilities and materials of free Nature, that men
may and do avail themselves of in preparing commodities to exchange
with the commodities of other men. Of higher rank in Production than
these natural agencies are the Efforts of men in molding them so as to
answer other men's Desires, of which efforts the "toiling hands" of
the poet are a symbol. They include also the inventive brains and
eloquent tongues and the skilful manipulations of every name. The
poet's "ship" is an instance of capital, which is always a result of
previous toil reserved to help on some future sales. These three
elements, Nature, Labor, Capital, conspire in all production of
commodities. Nature comes first with her free forces and materials;
and then present toil aided by the results of past toil in the form of
capital does all the rest in getting commodities ready to sell and
selling them. Let us now note each of these three a little more
closely.
(a) Natural Agents. The most important point about these is, that they
are the free gifts of God, and continue so throughout the
complications and transformations wrought on them and through them by
Labor and Capital, until the material commodity of whatever kind is
finally sold, and so passes out of the purview of our Science. Many of
the gifts of God, like the air we breathe and the light in which we
recreate ourselves and the water of refreshment drunk from spring or
brook, do not connect themselves in any way with commodities bought
and sold, and nobody ever thinks of them as salable at all; but it has
seemed and still seems to many, as if the natural fertility in a
land-parcel, the water-fall along the course of river or stream, the
timber-growth which the hand of man planted not, the deposit of gold
or coal in the bowels of the earth, and other such-like cases in which
natural gifts _do_ connect themselves with human services and then are
sold, lifted the Value of the things sold above the point to which the
mere human efforts, whether past or present, would raise it. In point
of fact, this seeming is not a reality, as will fully appear in the
sequel. God is a Giver, and never a Seller; and he has arranged it so
in his great world of gifts, that, however much shrewd men may try to
monopolize these gifts and then dole them out to other men for pay,
they are always practically thwarted in the attempt. God himself never
takes pay for anything, and has never authorized anybody to take pay
in his behalf; and when this role of Seller of free gifts, which have
cost him nothing and which he has not improved, is taken up by any
one, he is shortly crowded off the stage in shame by other actors true
to Nature.
This is the place for a grand induction. When we study in detail the
free gifts of God to this world and its inhabitants, we find they come
and keep coming _in great classes_. This is one of the uniformities of
Nature, on whose solid ground men tread and stride in safe inductive
reasoning. Can a farmer get pay in the price of his grain for the
original fertility of his field, which neither he nor his fathers nor
his neighbors have bettered or made more available? Doubtless he would
be _glad_ to do so, doubtless he _would_ do so, were it not for the
primary fact, that such fertilities as his are in a _class_ of fields,
that other men in more or less proximity to him raise grain on other
fields, whose original fertility is equal to that in his field; and
some of these other men in common competition with the rest as sellers
will be willing to part with _their_ grain for a price which will be a
fair equivalent for the onerous human services rendered in getting
their grain ready to sell and selling it; and the free action of
_these_ men as sellers will tend to fix a general market-rate for
grain then and there, at which rate _all_ must sell whether they will
or nill; and where now is the effect on price of God's free gift? It
is still free.
Here is a fine water-fall on the bounding river, the banks are low at
this point, just the place for mill and factory, the weight of God's
free water will turn the wheels, a hamlet will grow up around
them--perhaps a city,--can the riparian owner charge a fancy price for
site of dam and mill? He might under some circumstances; but the same
river doubtless, above, below, rolling over similar geological strata,
leaps and falls at other points also; there are other owners of
mill-privileges within hail; besides, there are other streams and
tributaries in the region round about; and water has a knack of
dropping to the lower levels. God's gifts are broad in classes;
competition naturally has free play; natural agents are an essential
factor in commodities; so and more so are human efforts; but Values
tend perpetually and powerfully under natural competition between men
as sellers to proportion themselves to the onerous human efforts
involved, and to eliminate completely from all influence on themselves
the broad and bountiful gifts of Providence.
What has been observed to be true in respect to two or three or more
of the classes of God's free gifts _to_ men, or _in_ men, may almost
certainly be inferred to be true of all such classes. Therefore,
inductively, _such free gifts have no effect on Values to lift them,
their influence being eliminated by human competition_. Of course, if
there be unique cases of remarkable gifts, falling in no class,
subject consequently to no competition, one cannot say confidently
that the free element in conjunction with the onerous element may not
make the return-service greater than it would be otherwise. It may,
or it may not, make it greater. There is no living principle at work
in such cases, that makes it certain, that the return-service will
_not_ be greater. Still, unique cases, if they exist, are of little or
no consequence in Economics. They are most remarkably few, at all
events. Where come in the solitary gifts, that may later be connected
with Valuables, on the round earth as God fashioned it? Gold, silver,
diamonds, copper, coal, tin, amber, spice-shrubs, chinchona-trees, and
all such things, have been scattered too widely and liberally for
individuals to monopolize them, or even combinations of men unless
they be assisted by law. Where even are the unique cases of God-given
talent or genius in men themselves, such as may become connected with
Valuables of the second class? Daniel Webster had his competitors in
the Court-room and in the Senate, Ben Jonson did not let Shakspeare
have it all his own way on the stage, and even "Milton's starry
splendor" did not make Paradise Lost sell well.
We must just note here in passing the supreme importance in an
economical point of view of untrammelled competition in the sale of
commodities. It is the divinely-appointed means, and the only possible
means, of preventing wide-spread injustice through Monopoly. Nothing
else in the world can be made effective to estop men from robbing
their fellow-men through exchanges artificially restricted; from
charging more in the market for their wares than a just compensation
for their own efforts; from enriching themselves by impoverishing
their neighbors; from worsening the quality of their wares offered for
sale; and from relying upon the artificial restrictions put on their
competitors, rather than on their own skill and enterprise and the
goodness of their goods, for a market. The Common Law of England holds
monopolies to be illegal, and the reasons given (11 Coke, 84) are,
first, because the price of the commodity will be raised; second,
because the quality of the commodity will not be so good and
merchantable as it was before; and third, because they are apt to
throw many working people out of employment. It is nothing less than a
crime against Civilization, than a sin against the clear ordinance of
God, than an artificial obstruction to individual and national
Progress, to put up bars and barriers by law for the purpose of
cutting off competition, whether domestic or foreign, either by
putting disabilities in the path of any or through monopoly
tariff-taxes, in the buying and selling of useful commodities
anywhere.
(b) Human Efforts. Every way unlike the free forces and materials of
Nature, indispensable as these are in the production of commodities,
is the second requisite in such productions, namely, the onerous
efforts of men. Persons are very different from things, from powers,
from lifeless materials. Persons act from motives only. Minds lie back
of bodily exertions, impelling and guiding them. Such efforts as are
needful to mold materials into commodities are only put forth in view
of, and for the sake of, a remunerative return; and only rational
beings, acting under motives whose goal is in the future, capable of
foresight and of adapting means to ends, can put forth such efforts.
No degree of training can make even the most intelligent animals
capable in any degree of that kind of exertion, which we call _Labor_;
and there is no improvement whatever in the methods of animals in
reaching their instinctive ends,--the beaver builds his dam and the
bee gathers and deposits the honey exactly as bees and beavers did
ages ago.
In the strictest sense, accordingly, there is no such thing as
physical labor, because the mental must coöperate with the physical
even in the lowest forms of human exertion; and in the same sense
there can be no such thing as exclusively mental labor, for the bodily
powers conspire more or less in the highest intellectual efforts that
are ever sold. Nevertheless, both the phrases, physical labor and
mental labor, are convenient and not harmful, whenever on the one side
the bodily powers seem to be predominant in the effort, and on the
other the intellectual.
It is now to be noticed, that all that men can do, when they labor
physically, is _to move something_. When a man works with his hands or
his feet or his whole body, all that he does or can do, is to begin a
series of motions or resistances to motion, for this good reason,
human muscles in their very structure are capable only of starting
motion and stopping motion. All the marvellous results of physical
effort in all the world have flowed from so simple a matter as the
contraction and expansion of muscle; and the world of materials is so
cunningly constructed, that, when these are moved into right position
by human hands, or by some form of capital itself the result of
previous human handling, the free powers of Nature do all the rest,
and valuable commodities are the good outcome. For one example, when
the woodman fells a tree for sale, he brings a series of motions
(_labor_) to bear upon the trunk, by means of his sharp axe
(_capital_), and then the power of gravitation (_nature_) seizes the
tree and brings it crashing to the earth. For a second illustration,
wool and cotton have by nature a certain tenacity of fibre, and what
is more to the point, a certain _kinkiness_ of fibre easily
interlinking one with another indefinitely in length; men move these
separate fibres in certain relations to each other by an instrument
(_capital_) called a spindle, and the result is thread; then other men
move these threads into relations with each other by means of an
implement (_capital_) called a shuttle, and the outcome is a web of
cloth; lastly, the tailor moves his shears through the cloth, and then
his needles, and the issue is a coat, a commodity, the valuable for
which all these processes were gone through with, and by the sale of
which all the onerous factors therein are compensated.
Now, since human muscles are soon wearied in action, and since motion
is the only thing required of men in the production of commodities,
they naturally look around for outside help in this matter; and the
first help they lighted on for moving things was the domestic animals,
the ox and ass and horse, doubtless domesticated in the very
beginnings of society; and as these can be used in so many different
places, and for such a variety of purposes, and are so cheaply reared,
they are exceedingly useful as a motive power, and will probably never
be superseded as such. Inanimate auxiliaries in moving things into
right position for the production of commodities, such as the
water-wheel and wind-mill, were undoubtedly brought into use much
later; and much later still, steam and electricity and other more
subtle and recondite natural agents. All of these helps, whether
animate or inanimate, do but cause simple motions of the same kind as
those caused by the human hand. The most ponderous engine merely
reduplicates that which the arm of a child is capable of; while in
point of delicacy and firmness of touch, perhaps no machinery can
subdivide and apply this motion so skilfully as the human fingers can.
It is said that some of the lace made wholly by hand is finer and more
delicate than any yet woven by machinery, although the introduction of
machinery into lace-making has cheapened lace products in general to a
small fraction of their former cost.
What we commonly call "_Power_," then, by whatever instrumentality
furnished, is simple auxiliary motion, additional to that of physical
human Labor. Commodities are produced in unlimited quantity and
variety by such labor, assisted by the free forces of nature applied
by means of animals and implements, which are capital. But such labor
is irksome as well as wearisome, and is never expended except in view
of a reward, which is secured only from the sale of the finished
commodity.
(c) Reserved Capital. We must examine the nature of Capital with care,
and follow its varied forms without confusion, because it is the only
other factor besides labor in the production of commodities, that has
to be paid for out of their sale.
Simplest cases are always the best in economical discussions. Let us
take for illustration a recently observed case from the gold hills of
North Carolina. All the methods are strongly primitive, but all the
elements of production are present. A negro woman is the laborer, the
bits of gold scattered in the soil are the free gift of nature, a
bored log to divert the water from the mountain stream, and a tin pan
in which to gather and wash the sand and gravel, are two crude forms
of capital; free gravitation also brings the water through the log,
and free gravity carries down the particles of gold to the bottom of
the washing-pan, and many other agencies of free nature coöperate in
this very simple case of production; and besides the log and the pan,
there are doubtless some other forms of capital, at least the whittled
plug to stop at need the flow of water through the log. The chief
factor in these processes of production is still the laborer, the
motions of her hands in stirring the sand and picking out the precious
bits at the bottom of the pan are the chief motions, the labor is both
physical and mental,--no animal could be trained to adopt means to
ends like this negro woman.
It is her capital that now engages our attention. _Any Valuable
outside of man himself reserved to assist in the production of further
valuables is Capital._ The idea of growth and increase inheres in the
very word, which is derived from the Latin noun, _caput_, a head, a
source, and gives intimation in its etymology of its scientific
meaning. The word, _caput_, is often used in classical Latin for a sum
of money put out at interest, and its derivative, _capitale_, is also
used in the same sense, at least in mediæval Latin; and from this form
of the word have come into English not only _Capital_, but also by
corruption _Cattle_ and _Chattels_. Flocks and herds were at one time
the principal riches of our Saxon ancestors, and also the principal
means of _increasing_ their riches, and in process of time the same
root-word came to be spelled differently as applied to animate or
inanimate things of value; while the notion implied in the Latin
_caput_, and in the English _source_, came along in all three of these
words; and hence the careful definition of Capital above given.
It makes no difference whether the colored woman bored her own log by
means of an item of capital already existing, namely, an auger, or
hired another person to bore it for her, or bought the log already
perforated, it is an article of Capital, a valuable kept to increase
future valuables; she might doubtless sell it for something to a
new-comer wishing to operate other sand in the neighborhood, but she
keeps it to help herself gather more gold for ultimate sale, she
practises what we call in Economics _abstinence_ and must have her
reward for this in the form of _profits_ from the ultimate sale of her
commodity, gold, as well as a reward for her labor in the form of
_wages_ from the same source. As one person furnishes both the labor
and capital in this case, there is no actual division of the gross
return into wages and profits, as there always must be when separate
parties furnish the two essential factors, both of which must be
remunerated by the sale of the commodity. What is thus true of the
log, is equally true of the tin-pan, and even of the plug also, if it
be capable of repeated use and cost something of labor and the help of
a previous item of capital, namely, the jack-knife. Our negro woman of
the South is a small capitalist as well as a rude laborer, and
practises _abstinence_ as well as puts forth _exertion_, and
consequently is entitled to receive _profits_ as well as _wages_ in
the return she gets for her gold-dust when she sells it.
We are now beginning to see what the nature of Capital is, and what
the motives are for employing it. In the production of commodities
Capital is always something that makes easier to the producers the
getting ready to sell and the selling of future commodities. The
capital always spares more or less of onerous and irksome human
exertion. It always mediates between some free force of Nature and
some otherwise more onerous effort of men. The sole motive to employ
capital in any one or in all of its multitudinous forms from the
simplest to the most complex is to throw off upon the ever-willing
shoulders of Nature some part of the irksome effort that would
otherwise come to the easily-wearied muscles of men. Nature is "good,"
to use a commercial term, for all she can be made to carry of men's
work, through implements devised and machinery contrived to apply, to
commodities in every stage of their transformation and transportation
till the last, the ever-present potencies of this physical world.
These potencies cost nothing. The implements and machinery cost much
in present labor and previously created capital. The ultimate sale of
commodities must make return for all the forms of capital employed in
their production, in the shape of Profits, the reward of
_abstinence_; and for all the forms of direct labor employed in their
production, in the shape of Wages, the reward of personal _effort_.
The beaver gnaws down the tree with his teeth from generation to
generation in precisely the same manner; but man is a being more nobly
endowed than the beaver, and no sooner had he occasion to fell trees,
than something of the nature of an axe suggested itself to his
ingenuity. It is true, that his earliest attempts at axe-making were
probably of the rudest sort, but just as soon as anything was devised,
whether of flint or shell or metal, that rendered easier the felling
of a tree, Capital made a beginning along that line of obstacles. Our
chief interest in studying the implements of the successive so-called
Ages of Stone and Bronze and Iron, is to witness the increasing
degrees of ingenuity displayed by those pre-historic men. Among the
more gifted races, progress in this direction was perhaps more rapid
than we are wont to think it was, since Tubal-Cain, the first
artificer of record, is said to have "_hammered all kinds of
implements out of copper and iron_" (Gen. iv, 22). Lucretius, writing
in the century before the Christian era, put down the following lines
in vigorous Latin, as translated by Mason Good:--
"Man's earliest arms were fingers, teeth, and nails,
And stones, and fragments from the branching woods;
Then copper next; and last, as later traced,
The tyrant iron."
We are at no loss, then, to explain the origin of Capital and its
motives. Tools are invented and employed for no other reason than
this, that, by means of their help, the human efforts are lessened
relatively to the given satisfactions. Since it requires tools to make
tools, the progress of this branch of capital must have been
relatively slow at first; but, since every advance in mechanical
contrivance makes still further advances easier, there is a natural
tendency, which facts abundantly exemplify, to a more and more rapid
progression in the number and perfection of all implements of
production. The same motive that impelled to the first invention, has
impelled to the whole series of inventions since, and will constantly
impel to further inventions till the end of time. Every step of this
progress gives birth to a larger and still larger proportion of
satisfactions relatively to efforts; marks an increasing control on
the part of man over the powers of Nature; and gives promise for the
time to come of greater advantages still in both of these directions.
The powers of Nature, such as those which make the grain grow, bring
the tree down, turn the water-wheel, impel the locomotive, and send
the message round the world, all stand ready to slave in the service
of man; but in order to make their aid available for human purposes,
there must be a plough, an axe, a wheel, an engine, an electric
machine; and it is because capital brings gratuitous natural forces
into service, and the more so as capital progresses, that the Value of
those commodities produced by the aid of capital tends constantly to
decline as compared with those commodities, in the production of which
capital conspires less.
It is already plain, that the class, Capital, is a smaller and a
peculiar sub-class under the great class, Valuables; nothing can
become Capital until it first become a Valuable, and then be
_capitalized_ by a distinct act or intention on the part of the owner
to reserve it in his own hands as an aid in further production, or
transfer it to other hands to be so used, he meanwhile receiving
profits as the reward of his abstinence; only a _transferable_
valuable, accordingly, can become Capital in any case, that is to say,
it must be either a Commodity or a Credit, since personal services,
though they may be sold, cannot be put over into the hands of another
to be used in production, and therefore cannot become Capital in any
case; and the chief peculiarity of this sub-class, Capital, is, unlike
the three great classes of Valuables, each of which is utterly
distinct from the other two, so that a Commodity can never become a
Credit or a personal Service either of the others, that Capital as a
class has extremely flexible limits, and consequently certain
Commodities and Credits may easily enough be Capital to-day, and fall
back to-morrow into their respective classes of mere Valuables and the
next day come out from the class Non-Capital into the class Capital
again. The same commodities and credits may be capital at one time,
and non-capital at another, though they must be valuable all the time,
or cease to be commodities and credits. When it is said that a young
man's talents and skill are his "capital," the word of course is used
in a metaphorical sense, and the meaning is, that skill and talents
are _like_ capital in some respects. Popular language is not
scientific.
Cicero wrote long ago: "Optimum et in privatis familiis et in
republica vectigal est parsimonia." _Abstinence is the best means of
revenue as well in private families as in the State._ The source of
Capital in a distinct act of will saving or sparing from present use
(_parsimonia_) a valuable commodity or credit, and the quick nature of
Capital as adding to itself (_vectigal_) in profits, are both brought
out in this Latin maxim, which is rather an expression of an old and
ingrained Roman sentiment than anything original with Cicero. It is
the very nature as well as the very name of "Capital" to increase
itself by rapid increments. It is as well the Stream as the Source.
For example, any sum of money soon doubles itself when put out at
compound interest, because the original sum increases day and night
until it be repaid. It is of the essence of every form of Capital _to
make growth_, because its sole purpose as such is to become an aid to
future and further production. A trowel in the hands of a mason, which
is capital, pays for itself every day he works with it, and perhaps
every hour of the day, in the increased production wrought by means of
it. The wheel, which free water turns, though a costly implement,
repays that cost a hundred fold in the additional bushels of wheat
turned into flour through its aid as capital. So of all implements. So
of all machinery. So of all means of transportation: ships, canals,
railroads.
There was a strange prejudice in ancient and mediæval times against
this natural increase of capital out of its own bowels, as it were,
owing probably to this dictum of Aristotle: "_For usury is most
reasonably detested, as the increase of our fortune arises from the
money itself, and not by employing it for the purpose for which it was
intended._" In 1360, a French bishop, Nicole Oresme, repeats the error
of Aristotle under the same rhetorical image: "_It is monstrous and
contrary to Nature that a barren stock should give birth, that a thing
sterile in its whole being should fructify and be multiplied from
itself, and such a thing is money._" Even Shakspeare catches up the
old figure: "_Is your gold and silver ewes and rams?_" Shylock
answers: "_I cannot tell; I make it breed as fast._" In the light of
the three requisites of Production, in the light of the purpose and
wisdom of God in arranging the active forces of this world, the
prejudice in question disappears, and intelligence rejoices in the
ever-increasing use of Capital as the handmaid of Labor, in the quick
and sure reward of him who practises abstinence, in the production of
commodities constantly made easier and cheaper in all directions, in a
scale of comforts for the masses of men assuredly rising, in a
divinely appointed force lifting like Christianity itself upon the
otherwise sagging condition of mankind.
Capital assumes but two economical forms, namely, Circulating Capital
and Fixed Capital. _Circulating Capital is all those capitalized
products, whether commodities or credits, the returns for the sale or
use of which are derived at once and once for all._ All circulating
capital will be found in one or other of the following sub-forms: (1)
raw materials; (2) wages paid out in view of an ultimate profit; (3)
completed products on hand for sale; and (4) products bought and held
for the sake of resale. The crucial test of circulating capital is the
question, Are the returns to be secured by the single use or single
transfer of that particular product? Tools, for example, in the hands
of him who has manufactured them for sale is circulating capital.
_Fixed Capital is all those capitalized products, which are purchased
or held with a view of deriving an income from their delayed and
repeated use._ All fixed capital will probably be found in one or
other of the sub-forms following: (1) tools and machinery in use; (2)
buildings used for productive purposes; (3) permanent improvements in
land parcels; (4) investments in aid of locomotion and transportation;
(5) products rented or retained for that purpose; and (6) the national
money considered as a whole.
2. We will next look at the essential CONDITIONS of the production of
Commodities. These are also three, as are the Requisites, namely,
_Association_, _Invention_, _Freedom_. More or less will men make and
sell to one another commodities in any state of society, in which
there is permitted any considerable degree of association of men with
men locally or commercially, in which is encouraged in any way the
universal spirit of invention or the desire to get hard things done
easier, and in which some degree of liberty of action and security of
property and equality of privileges is guaranteed; but it is very
plain, that the production of commodities will increase in all
directions and become the greatest in that age and country when and
where are allowed the closest ties of human association both in place
and in commerce, the freest scope and largest rewards of inventive
genius, and the highest possible degree of liberty and security and
equality of rights. Let us illustrate from a state of things in the
southern half of the United States during the first half of the
nineteenth century. For the most part the land owners lived on
isolated plantations widely separate from one another, these
plantations were cultivated by gangs of slaves, a system that tends to
bring all manual labor into contempt, the poor
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