LIBRARY OF CONGRESS. %p iStip^^ f xt ShelfJibjILS ^ rQ\lB^ UNITED STATES OF AMERICA. A NEW POLITICAL ECONOMY JOHN M.i>^GREGORY, LL.D. Ex-president of Illinois Industrial University. Ex-superintendent of Public Instruction for Michigan. VAN ANTWERP, BRAGG & CO. CINCINNATI. NEW YORK. ECLECTIC EDUCATIONAL SERIES. 6 ^p i1 (^ 'f^ High School and College Course of Study. Gregory^s Political Economy. Andreivs^s Constitution of United States. Andrews's Elementary Geology. Norton's Elements of Physics. Norton's Natural Philosophy. Norton's Elements of Chemistry. Broivn's Physiology and Hygiene. Buffet's [Hennequin's'] French Method. Duffet's French Literature. Bartholomew's Latin Series. Holbrook's First Latin Lessons. Hepburn's English Rhetoric. Smith's Studies in English Literature. Thalheimer's Historical Series. White's Complete Arithmetic. Ray's New Higher Arithmetic. Ray's New Algebras. Ray's Test Problems in Algebra. Ray's Plane and, Solid Geometry. Ray's Geometry and Trigonometry. Ray's Analytic Geometry. Ray's Elements of Astronomy. Ray's Surveying and Navigation. Schuyler's Complete Algebra. Schuyler's Elementary Geometry. Schuyler's Principles of Logic. Schuyler's Psychology. Kidd's New Elocution. Descriptive Circulars and Price-List on Application. Copyright, 1882, By Van Antwerp, Bragg & Co. DEDICATION. y^ This volume is affectionately dedicated to the several hundreds of former students for whom its studies were undertaken, and to whom, in the author's annual courses of lectures, its chief parts were first presented. The heart of the author has followed his pupils out into their various careers of honored usefulness, and now sends after them, this publica- tion, so often requested by many of them, as a token of his continued regard for their welfare, and his continued faith in the great doctrines of public well-being which he attempted to inculcateN^ Reminding them of a pleasant past, may it also afford them fresh pleasure in the midst of present work, and renew within them the generous feelings, thoughts, and purposes of the elder time. (3) PREFACE. The Author presents his work to the fair thinking among his countrymen, and especially to the teachers of Economic Science. This volume is the product of years of combined thinking and teaching, and is offered as a modest contribution to the growth of that science which seeks to explain and promote the industrial progress of the world. It is an essentially new statement of the facts and principles of Political Economy. It may seem absurd to expect any new discov- eries in a field whose earliest surveys are recorded in the theogonies of India, Egypt, and Greece, and some of whose grandest features were evidently seen by Moses, Plato, and Aristotle. But, though this field has repeatedly and perpetually been under survey by statesmen, publicists, and philosophers, whose attention has been attracted to the causes of human progress and well-being, it is presenting ever fresh phenomena, with the progress of mankind in arts and civilization, and demands, therefore, ever fresh study and statement. Even if the grander features of the great landscape do not change, one who sur- veys them from some new hill-top, to which his business or his tastes have led him, may be able to present them in new relations and with a fresh perspective. It is in these new relations and this new per- spective that the author believes his book will be found essentially new.yThe fresh views presented are chiefly the following: 1. The clear recognition of the three great economic facts of Wants, Work, and Wealth, as the principal and constant factors of the indus- tries, and as constituting, therefore, the field of Economic Science. 2. The recognition of man, and of the two great crystallizations of man into society and into states, as presenting three distinct fields of (V) vi PREFACE. Economic Science, each having its own set of problems, and each its own species of quantities or factors, to be taken into account in the solution of those problems. • 3. A new definition and description of Value, as made up of its three essential and ever-present factors, forming the triangle of Value, and evidenced by the clear explanation they afford of the various fluctuations of prices. 4. The new division and distribution of the discussion arising out of these new fundamental facts and definitions. 5. The aid rendered to the reader and student by the diagrams and synoptical views. These, though somewhat artificial, will, it is hoped, be found to serve as a map to the territory to be traversed, and helpful to a better understanding of the true relations of its parts and divisions. It was the primary purpose of the Author to present to his country- men his views upon the subjects discussed. He hoped thus to con- tribute to the better public understanding of a branch of knowledge of great importance to intelligent citizenship. He has given his book a form adapting it also to the use of the schools and colleges, partly from the force of habit, and partly because he recognizes the truth that, through the schools, ideas flow, by wide and natural channels, into the currents of the nation's life. Without further explanation of his work, the Author cheerfully sub- mits it to the inevitable and, he hopes, candid judgment of his contemporaries. CONTENTS. CHAPTER. L Wants, Work, Wealth PAGE 9 II. The Three Economic Sciences 17 III. The Triangle of Value 30 IV. How Values Vary . . 46 V. Measure of Value . 60 VI. Wants and Utilities . 67 VII. Demand and Supply 77- VIII. Work . 89 IX. The Gifts of Nature . 97 X. Labor — Strength 112 XL Labor— Skill . 122 XII. Intellectual Labor 134 XIII. Services . 145 XIV. Organization of Labor . 152 XV. Organization of Labor- —Continued . 169 XVI. Conditions Favoring Labor 178 XVII. Capital . 187 (Vll) Vlll CONTENTS. CHAPTER. XVIII. Relations of Capital and Labor XIX. Agricultural or Rural Economy XX. Exchange — Trade and Transportation XXL Trade XXII. Money ........ XXIII. Money — Continued . . . . . XXIV. Property ....... XXV. The Distribution of Wealth . . . . XXVI. Secondary Distributions of Wealth . 197 208 228 240 250 266 284 301 319 NATIONAL ECONOMY. I. The Natio Q and its Economics IL Taxation . . III. Protection and Free Trade . . . . To the ' reachers of PoHtical Economy Index 333 341 362 387 POLITICAL ECONOMY CHAPTER I. "" WANTS, WORK, WEALTH. 1. Definition. — Political economy is the science of the industries. Its aim is to investigate and explain the nature, relations, and laws of these three constant factors and elements of the industries — human wants, work, and wealth. Man is a being of many wants. Out of his wants springs his work to gratify them. Out of his work come the goods which he calls wealth. This is the simplest history of human industry\ In this industry, wants, wealth, and work are ever present factors. They are its essential and significant terms, and, with any one of them lacking, industry, in its full meaning, could not exist. Without wants, man would not work. Without work, no wealth' could come. If wealth — that is, goods — did not result, no one would work. Thus the three terms are involved in every full idea of industry. . 2. Sphere and science of industry.-^The industries fill the world. They occupy the daily life of mankind. They feed and support the populations of the globe. They are the primary and principal element in civifization, and they fill the chief chapter in modern history — in all true history. Constitut- (9) lO POLITICAL ECONOMY. ing the largest and most conspicuous part of the personal life and social connections of mankind, they, more and more, as civilization advances, engage the attention and absorb the energies of communities and of statesA The study of these industries necessarily interests all who care for mankind, and it grows in importance with every ad- vance in their character, and with every enlargement of their sphere and power. It is the study of man and of society, in the largest field of their activities, and in the line of their most potential movements. The name, Political Economy, given to this science, implies the economy of states or nations, and has been properly ob- jected to as too restricted and inapplicable. Several other titles have been suggested and employed, but this has become familiar by long, popular use, and is now generally accepted as covering the whole field of economic science. It is better to follow the common usage without debate, than to discard a name which, however poorly chosen, a century's use has made significant. To gain a clear and complete view of this science, we must enter thoughtfully the wide domains filled with the incessant stir of daily working life. We must observe and question care- fully all the facts presented by the busy millions of men who are covering continents and oceans with their work, and who are conquering into use and service every form of matter and all the potencies of nature. We must watch the development of labor, from its rudest beginning in the savage, to its highest achievements in the arts of civilized fife. We must follow its triumphs, from the simp- lest fruit plucked by the child, to its mighty outcome in the commerce of cities, empires, and peoples. All the phenomena found in this great field, innumerable and varied as they are, will be seen to spring from a few simple forces, and to be controlled by a few principles, which it is the business of political economy to trace and describe; WANTS, WORK, WEALTH. II 3. The factors described. — The first step in any science is to discover, if possible, the simple, elementary facts. If we look steadily into any part of the field before us, we shall see, gradually emerging from the wide confusion, the three primary facts named at the head of this chapter. The entire mass of phenomena ultimately resolves itself into these three./ Throughout the whole field, and at each point, how- ever simple, or however complex, the economic appearances, there will be : 1. Man's wants. — These are the impelling forces which push forward the entire movement, and give direction and meaning to it all. They include the endless range and the ceaseless repetitions of human needs, desires, tastes, and appetites, physical or intellectual. They are the basis of all market demand — the compelling reason and final purpose of all indus- trial effort. 2. Man's work. — This includes the actual movements in all arts, trades, and business. It comprises all the efforts which men make to create, procure, preserve, transport, or exchange the objects which satisfy their needs or gratify their desires — to secure pleasure or avoid pain. It covers the whole procession of industrial acts and efforts, of body and mind. 3. Man's wealth. — This embraces all the products of work. It includes the great mass and countless forms of goods and possessions which come from the labor and tempt the cupidity of mankind, and which are the purposed aim and objects of all industrial efforts.X The word wealth is used, in pofitical economy, to denote goods or valuable things, without reference to their quantity. In common speech, it usually implies an abundance of such goods. It is sometimes employed for natural resources, as the wealth of the soil or of the sea. Some economists have ob- jected to its use because of this variety of meanings: but we must reject all common words if their loose colloquial or poetic use is allowed to spoil them for scientific purposes. 12 POLITICAL ECONOMY. / 4. Field of economic science. — These three world-wide facts — want, work, wealth — thus understood and considered, fill the entire field of political economy. They are the funda- mental facts with which the science is concerned.* To impress this field more clearly at the outset upon the mind, let it be represented to the eye by the following diagram : FIELD OF POLITICAL ECONOMY OR ECONOMIC SCIENCE. MAN Human Society. Nationality. WANTS. WORK. ' Needs. Desires. Appetites. Tastes. Demand. V « ' Efforts. Industries. Arts. Trade. Business. WEALTH. In each of the primary facts, man must be understood as a constant and potential presence. It is not simply abstract wants, work, and wealth that economic science has to do with, but the humanity connected with them. It is the wanter and his wants ; the worker and his work ; the owner and his wealth. Man stands at the beginning of pohtical economy. Man, in * Years after the author had made and presented this grand division of the subject to his classes, he met, in the "Harmonies Economiques," by Fred. Bastiat, Paris, 1850, the sentence, "Wants, efforts, satisfac- tions — this is the circle of political economy." WANTS, WORK, WEALTH. 13 his great social and national organizations, stands at the end of it. It rises with his wants; it ends with his satisfactions. It sustains and penetrates his civilization, and is penetrated by every department of that civilization. 5. Relations of the factors. — It is also important, and will prove useful, to note some of the more striking features and differences of these facts. 1. Wants are motive forces. Work is productive movement. Wealth is material result. 2. Wants determine the work to be done, by determining the products wanted. 3. Wants exist in the mind alone, and can not be definitely measured. Work is force in action, and can only be measured by its results. Wealth is the material product of work and the object of desire, and takes its measure from both. 4. Wants are original. The others are derivative. Work is want in struggle and conflict. Wealth is want in victory, in satisfaction, and repose. 5. Wants look beyond work to its results. They intend wealth as their object; they accept work as a means.X 6. The economic circle. — Some of the more important relations and reactions of these several classes of facts may be usefully represented to the eye by arranging them as sectors of a common circle — the great circle of man's industrial life. Each sector limits and is limited by the other two. In the natural or historic order of movement of our circle, indi- cated by the arrows in the diagram, wants impel work; work produces wealth; wealth satisfies and stimulates afresh the wants. But there is also a line of reactions moving in the opposite direction. Wealth once in existence aids and stimulates work; 14 POLITICAL ECONOMY. work, by its threatened hardships, often represses desires; wants, by their presence, give to weahh its values. These ac- tions and reactions are constantly at work in the business world, and account for much of the phenomena it presents. As they will be more properly discussed in a coming chapter, they are not followed further here. 7. Sectors of the circle. — Each sector in this economic circle both separates and unites the other two. I. Between wants and wealth lies the work necessary to their meeting. What a man wants he must work for, or give in exchange the products of work already done by himself or another. Work is the efficient mean between wants and their gratifications. 2, /Between wealth as a good to be coveted, and work as an effort to be dreaded, come in wants, lending new attrac- tion to the object they crave, and new stimulation to the efforts they inspire. Wants constitute the reconciling means_ between a feared evil and a desired good. Men overcome their native indolence and go cheerfully to their toil so soon as their desire for the goods to be gained becomes strong enough.N 3. Between wants as conditions of disquiet, and work as a condition of drudgery, the goods of wealth come in, giving force and activity to desire, and lessening the dread of toil. The impulsion of wants is thus helped to overcome the repul- sion of work, and the antagonism between them is for the time destroyed. All these statements are only so many different aspects of the same fact — the close interdependence of the three facts of want, work, and wealth. But each one of these aspects has its place in the history of industry. Sometimes the wants to be satisfied will seem to be the prominent and controhing phe- nomena; at other times work will fill the foreground; and, in other cases, the vision of the wealth concerned will throw both the others into the shadow. A failure to hold their WANTS, WORK, WEALTH. 15 Strictly reciprocal character in mind has produced much confu- sion of thought. S/The three names of economic science. XrFrom the mutual relations and union of these three great factors of politi- cal economy, it is evident that the science might take its name from either one of the three. Thus, we might call it the science of man's economic desires or wants; or the science of work or of the industries; or, finally, the science of wealth. Under either title we should be led into the same field, though entering it on different sidesX Thus, in discussing the eco- nomic wants — that is, the wants whose gratification demands effort — we must necessarily consider the wealth which satisfies these wants, and the work which produces it. So, also, if we undertake the study of the industries, we must take into our view the desires which give aim and impulse to these indus- tries, and the wealth which it is their object to create. The title, ''Science of Wealth,^' has already been employed by J. B. Say, and by Count Pelegrino Rossi, his successor in the chair of political economy in the College of France; and it has been taken as a title for their books, by Prof. A. Walker, and Prest. Sturtevant, in America. From another point of view, J. Stuart Mill, De Quincey, Prof. Bowen, and others, have defined political economy as a mental and moral science, because built on the action of human desires, and taking its laws from them. These econo- mists would name the science from its causes or forces, as the others would from its effects or results. We might, with the same propriety, name it from work, the series of activities which lie between the cause and effect. The title. Science of Work, or Science of Industries,^ would *The Dictionary of Political Economy (Dictionnaire de L'Economie Politique, Coquelin & Guillaumin, Paris, 1873), under the question, "Is wealth the object of economic science, or is it industry, the source of wealth?" says: "C'est en realite le travail humain, I'industrie humaine, 1 6 POLITICAL ECONOMY. need no more explanation to show its application to the field of Political Economy than does that of Science of Wealth. It is an obscure survival of the old feudal sentiment which worshiped wealth, but despised the labor which produced it, that prefers the title "Science of Wealth" to the "Science of Work." Certainly, to the unprejudiced eye of the statesman or philanthropist, wealth is neither so conspicuous nor so significant a fact as the marching armies of labor — the great fighting columns of industry. The man is greater than his possessions. The worker is a more important fact than the products of his work. The real business of economic science is to comprehend and guide human industry. It is the gospel of work, not merely of wealth. Since no single word can be found which will express at once, and in their true relations, the three chief elements and fields of our science, we must content ourselves with the old name, pofitical economy, putting into it, as we find them, all the truths and meanings which the science embraces. V source des ri chesses, qui fait I'objet des investigations economiques." It is, in reality, human labor, human industry, the source of wealth, which forms the object of economic investigations. Vol. I, p. 651. On the following page, the writer calls political economy: "La science des lois du monde industriel " — the science of the laws of the industrial world. And he adds that this title seems to him "nobler, more comprehensive, and more exact." CHAPTER II. THE THREE ECONOMIC SCIENCES. g. Man in economic science.— We advance now to a nearer view. The three world-wide, fundamental facts—human wants, work, and wealth — have been shown to constitute the broad field of economic science. We are now to see how this science divides into three. /We have affirmed that man must be understood as a constant and potential presence in political economy. The sciencejbe- gins^ ajid_emisjivith^ma,n — the wealth-seeker, the wealth-winner, and the wealth-owner. Hence, whatever great natural laws of development, organization, or change affect humanity will also affect the laws of man's wants and industriesN 10, Mankind, society, nations. — Man appears to us under three great natural aspects: i. As mankind, or the ag- gregated humanity; 2. As human society, organized under the power of certain natural affinities and needs; 3. As nations organized for political ends and under political laws. Under the first we have simply the human herd — the great mass of individual beings, each with the simple wants, capaci- ties, and powers of a human being. Under the second, the herd appears organized with all the wants and conditions of or- ganized society added. In the third, we find the compact body politic — a sort of political person called the state, including in it individuals, and including also all phenomena of society. Each of these three aspects, or conditions of humanity, has its own economic phenomena and laws. Political economy, p. E.-2. (17) 1 8 POLITICAL ECONOMY. therefore, will be marked by the same broad aspects and divisions, and will give us three sciences instead of a single one. Adopting for these sciences names already in use, though with a modified signification, we may style them : 1. The Science of Value, or pure economics; 2. Social Economy; and, 3. National Economy. 11. Pure Economics. — If we study the industrial life of mankind, separate from all consideration of social or national conditions and divisions, we shall obtain a science of pure eco- nomics, which we shall call the Science of Value, The name is not without objection, but the term value, more nearly than any other of those sanctioned by use, covers the whole phenomena of economic Hfe. The real meaning of this term — value — will be shown in another chapter. The scope of this science has already been partly shown in the preceding chapter. It is the natural history, as it were, of work and wealth. It embraces all the phenomena which natu- rally arise out of the relation of the three great economic factors, want, v^lth, and work. Like all pure sciences, it deals with general principles and laws rather than with particular applica- tions and phenomena. It is that science of political economy which so many modern writers, like Smith and Quesnay, Say and Mill, Rossi and Senior, Wayland and Carey, Walker and Bowen, have attempted to develop, and which seeks to know all the laws that center in the notion of value, and go out from it to influence human affairs. 12. Social Economy. — If now among the facts and princi- ples of this science of value we bring in human society, with its social forces and necessities, its various social ranks, classes, and conditions, its poverty and riches, its learning and igno- rance, its masters and servants, its capitalists and laborers, its dependent childhood and its sustaining parenthood, its crim~es and charities, its homes, churches, and schools, it is clear that THE THREE ECONOMIC SCIENCES. 19 a new set of economic phenomena must arise, and new condi- tions and problems appear, unknown to the pure science of values. New wants will emerge, new conditions of work will arise, and wealth will be found reacting powerfully among the social forces, and taking on new functions as a social factor. We find ourselves studying a new science, or, rather, an ap- plication of the old. This applied science we call vSocial Economy. The name is not new. Several writers have seen this large social side of political economy, and have chosen the name social economy as expressing best their view of the general science. 13. National Economy. — Now let mankind be separated into different nations. Let the differences of race, of language, of territorial position, of climate, industries, and civilization come into the field of our pure science of values, and, behold, another change has occurred in its limits and phenomena. An- other set of facts, forces, and conditions appear, and new ques- tions and problems arise. Our great primary factors of wants, work, and wealth take new and strange aspects. To personal wants of individuals are added wider national wants; the indus- tries assume a national character and import; and private wealth becomes tributary to national power and purposes. We con- front another field of economic science, which we may not un- fitly call National Economy. The name is not new, though it has not been employed in the Hmited and precise sense here given to it. 14 The three sciences contrasted. — These three eco- nomic sciences, though they have many principles in common, yet differ in much. As already stated, the first may be called the pure science, dealing with fundamental and universal facts, and remaining true in all times and places. The other two are mixed, or appfied sciences, and vary with each new condition of the society or nationality involved. The Science of Value concerns itself only with the factors of 20 POLITICAL ECONOMY. want, work, and wealth. It seeks to determine the nature, ori- gin, changes, and laws of distribution of values. It wishes to know general principles and universal laws. Social Economy studies the industries as social phenomena, and wealth as a social force. It takes into its account the re- lations of work and wealth to the growth and well-being of so- ciety and its various classes. It admits to its view a large number of social wants. Social Economy is properly a chapter of social science. Its problems have two sets of factors : the one social, the other economic; and the solution of these problems necessarily in- volves the principles of both social and economic science. The answer of the pure political economist to the questions of socialism, are rarely or never satisfactory to the true socialist. Among the problems of Social Economy are those of wages, of the relations of labor to capital, of population, of pauperism and public charities, of education, of the economic aspects of intemperance and crime, and of many of the questions of so- cialism and communism. Some of these problems belong, also, in part, to national economy or to general politics. National Economy discusses wealth as a national resource, and as an essential condition of national life, power, and well- being. It studies the industries as matters of national concern- ment, and as connected with national character and progress. Its aim is the good of the nation, and it is, therefore, a seg- ment of political science. Its problems have a political as well as an economic side. It accepts the science of value as one of its bases, but it insists on the laws of national growth and power as the other. The mere economist is often an unwise statesman. His economic theories too often neglect or discard the facts and needs of nationality. The problems of national economy include such as those of tariff and foreign trade, of taxation, of bounties and protection to industries, of international commerce, currency, of banking THE THREE ECONOMIC SCIENCES. 21 and money, of public education and public improvements, highways and water-courses, and of public revenues and public lands. Other economic questions sometimes assume a national aspect and become questions of national economy. These problems are often counted as belonging to the statesman rather than to the economist, but statesmanship must look to economic science to aid in the solution, if not to give the com- plete answer. The statesman has no other means of solving them than has the economist. 15. Importance of the division. — This threefold division of economic science is important; and, if made earlier, might have saved political economy from much of the confusion seen among its writers, and not a little of the reproach thrown upon its teachings. It is obvious that questions of social economy, or of national economy, can not be properly answered by the abstract principles of the science of value alone. As well seek to settle a question in mechanics, or in accounts, by the simple rules of arithmetic. It is true that the aid of arithmetic must be called in before the final answer to the mechanician's prob- lem can be had; but there are questions of force, velocity, and direction, or of materials and of proper mechanical devices, which must be determined before the computations of numbers can begin. The most difficult part of the problem must often be answered before the aid of arithmetic is invoked. No accu- racy in numbers can give a true solution if an error has crept into the first part of the work. So the problems of social and national economy involve, in their solution, the principles of pure economic science; but they involve also principles of social and national life, and no correct answer can be obtained without taking these into account. As a familiar and conspic- uous example, take the question of a protective tariff. Prop- erly it is a problem of national economy, and can only be solved as such. The various attempts to settle it as a question of political economy have filled the world with endless if not useless debates. 2 2 POLITICAL ECONOMY. i6. The three sciences mingle. — It may not be neces- sary, nor indeed always possible, to treat these three great branches of economic science separately ; but it is important to recognize distinctly the fields which they occupy, and the special conditions and problems belonging to each. The com- mon facts of humanity, society, and nationality are interwoven in so many threads and figures that it may seem impossible to trace their separate influence; but the different visions which these names summon before the ^mind prove that each has features not common to the others. In each, the facts of want, work, and wealth fill a large part of the field. Neither society nor nations could exist without the support of labor and its products. To promote labor and to protect its products are, indeed, among the chief aims and duties of society and the state. There are few great social or national questions which have not an economic aspect or factor. Social and national economy constitute the largest chapters in social and political science. That they are also the most ab- struse and difficult parts of those sciences does not lessen, but rather increases their importance to the patriot statesman. 17. The division authorized — This classification of po- litical economy, though new in the form and importance here claimed for it, is not without support in the writings of eminent economists. In the wide landscape of industrial fact and move- ment, some observers have caught sight of one of these fields, and some of another; but the common disposition has been to show that the field seen is the entire territory instead of a single section of it. As in the case of the three great primary elements — want, work, and wealth — some economists have taken one, and others another, of these fields as the all embracing territory of the science. Thus we have had political economy presented by some as national economy, by others as social economy, and by others still as the science of wealth. And each of these has been counted as including the whole science of political THE THREE ECONOMIC SCIENCES. 23 economy. Or, as has, perhaps, more frequently happened, the common name of poHtical economy has been retained, while some have defined and treated it as the science of wealth, others as national, and others still as social economy. 18. National Economy first. — Among the earUer writers, political economy was almost exclusively national economy. They were usually statesmen or publicists, and they were led to the study by national exigencies, such as the decrease of the public revenues, the increase of national expenses, the preva- lence of pauperism, or by some national crisis in finance or in- dustry. It was the struggle of nations loaded with debt, and envious of the prosperity of their richer neighbors, which gave impulse to the study of political economy. Labor itself was too much despised as the degrading drudgery of the brutish and en- slaved mass to excite the attention of great thinkers. Only the glittering wealth which came as the sweet fruit of this menial toil, and was plucked and enjoyed by nobles and monarchs, was considered as worthy the study of statesmen. Colbert, the great minister of Louis XIV., studied, it is true, to promote the industries of France, because he saw clearly that to increase the taxes he must increase the tax-paying power of the people. But his master showed how little he comprehended the wise policy of his minister by driving out, without scruple, by the revoca- tion of the Edict of Nantes, hundreds of thousands of his most industrious subjects. Adam Smith, who has been accounted by many to be the founder of the science, entitled his work, ''Inquiries into the Causes of the Wealth of Nations." The German and Italian economists have usually preferred the title national economy to that of political economy. Professor Wm. Roscher, one of the latest and ablest of the German writers, returns to the name po- litical economy, but defines it as treating "chiefly of the mate- rial interests of nations." In another statement he gives the science the broad field here claimed for it. ' ' Like all the po- litical sciences or sciences of national life, it is concerned, on 24 POLITICAL ECONOMY. the one hand, with the consideration of the individual man, and, on the other, it extends its investigations to the whole of human kind." The most conspicuous aim of political economy is, doubtless, the general wealth and well being; and as these have their most conspicuous feature in the national prosperity, it is not strange that this aspect of the science should be most noted. And thus political economy is thought of as a study for statesmen and pubHcists, rather than one for business men and for students of social science. ig. The science came next. — The desire to find a sci- entific basis and form for the study, led to more careful observa- tion of the nature and laws of values, and of the forces by which values are produced. The discussions shifted from the field of national economy to that of the science of values, or of wealth, preferred as a more general term for the aggregations of values. The name, political economy, still retained by most writers, was now defined as the science of wealth, but it was still made to cover the questions of national economy, as chap- ters of the more general science. Adam Smith, of England, Jean Baptiste Say, and his suc- cessor Count Pellegrino Rossi, of France, followed by the eminent English economists, Ricardo, J. Stuart Mill, N. W. Senior, and by a long line of eminent names of European and American writers, have given their strength to the development of this science of values, though they differ much both as to the exact limits of the field it should cover, and as to the meaning and import of such words as value and wealth. With this recognition of the scientific character of political economy came a host of controversies which have injured the credit of the study and retarded its progress. These contro- versies, though seemingly endless, reduce readily to three main questions. 20. The questions and answers. — i. As to its field: Shall political economy embrace simply the laws of values or THE THREE ECO NO All C SCIENCES. 25 wealth, or shall it include also the phenomena and laws of social and political life? 2. As to its nature: Shall it rank among the material and his- torical sciences, or among the mental and moral? 3. As to fact: Is it properly a science at all, or is it merely the art of good management, personal, social, and political? To quote the opinions of the great authors upon these ques- tions would occupy a volume. Let us rather present the simple and easy answers afforded by the analysis offered in these two chapters. 1. Political economy, as the pure science of values, studies the laws of value as they are presented under the three catego- ries of want, work, and wealth.' In its two applied branches of national economy and social economy, it covers the laws of national and social well-being as far as these depend upon the element of wealth. Count Rossi recognized this difference between pure and ap- phed science in political economy, and relied upon it to recon- cile the dispute that had arisen as to the proper scope of the science. But he did not sufficiently insist upon it, nor give to the two their proper limits. 2. Pure political economy, or the science of values, is clearly a mixed science, taking into its survey the purely mental facts of want and desire, and the material facts of work and goods. If we must resort to the mental phenomena to explain the mate- rial, we must equally resort to the material to explain the mental. If the dollar without the desire for it is worthless, and therefore not economic, the desire without the dollar, real or possible, is powerless and also uneconomic. Both orders of facts are essential to the full science. 3. The question whether political economy is a science, de- pends upon the definition given to the word science. As com- monly used, the word science may mean: i. The facts in some one field of knowledge referred to their proper laws, and ac- counted for by those laws; or it may mean: 2. A branch of P. E.-3. 26 POLITICAL ECONOMY. knowledge so thoroughly worked out and systematized, the sequences of facts so determined, that it is possible to predict the result of any given set of facts observed. It is obvious that these two meanings differ only in the degree of advancement ob- tained by the knowledge in question. Few, if any sciences, have attained the standing required by the last definition. All knowledge is scientific if it refers its phenomena to the great natural laws from which they spring. Political Economy traces its facts to the mental and social laws and forces from which they spring. Its phenomena are the effects of causes, more or less perfectly understood, and are controlled by natural laws as fixed and uniform as the laws of physics. They may be more difficult to trace and comprehend, but this does not destroy their scientific character;, it only shows the science to be harder to learn and apply. If the question of character lies between considering it as a science or an art, the answer is still easier. All arts reach back into some science from which they draw their principles; all sciences have their arts in which their principles find application. All good management, whether personal or national, is based upon some theory, more or less distinctly understood; and every theory assumes the existence of fixed underlying principles or laws. "All political rulers," said Prof. G. K. Richards, of Ox- ford, "whether they recognize the fact or not, are, of necessity, political economists. On some principles of economy, true or false, they must needs act." The difficulty of the science and of its applications, is ad- mitted without debate; but this difficulty has been vastly in- creased by the failure to recognize the distinctions between the three great branches of the science insisted on in this chapter. 21. Rise of Social Economy. — As modern revolutions in government and society brought the working people gradually into power and honor, the students of economic science began to pay more attention to the problems of social science. Pro- found questionings arose among the people themselves, as to the THE THREE ECONOMIC SCIENCES. 27 nature of property and the rights of labor and capital. A wide- spread unrest manifested itself. Strikes and labor insurrections appeared- and organizations spread throughout the working world, aiming to introduce great economic and social revolu- tions. Political economists felt themselves called upon to exam- ine the new problems proposed, and a new science appeared — that of Social Economy. The present tendency of economic science may be said to be in the direction of social economy. It is, however, linked closely with national economy. Thus, in our country, the late Henry C. Carey and his followers of the Philadelphia School of Economists are chiefly social economists, though Prof. R. E. Thompson, one of the most recent expounders of its doctrines, calls his book "Social Science and National Economy." In France, where the questions of social organization have engaged most attention, the title. Social Economy {Economic Socialc), proposed by Say, has been employed by E. About and others. Prof. J. E. Thorold Rogers, of Oxford, has also used this title, though both About and Rogers properly limit the term to real social economy, and do not extend it to the entire field of economic science, as the term national economy has been extended. 22. Other divisions possible. — Thus all the three grand divisions of political economy have been recognized by eminent economists, though not, perhaps, in the exact limit and relations claimed for them in this chapter. It is further evident that if this division exists in nature, its recognition is essential in our studies. To put together those things which nature puts asunder, can produce nothing but confusion and errors. It matters litde that our three sciences mingle with each other on their borders, and that they have many principles in com- mon. This is true through the entire realms of human knowl- edge, because it holds through the entire domains of being. "All are but parts of one stupendous whole." 2 8 POLITICAL ECONOMY. Physics includes half a dozen sciences, each of which has some- thing in common with all the others. Physics, chemistry, biol- ogy, and geology, though separate sciences, have large areas of common ground. Each borrows principles and truths from the others. The progress of all true science has resulted in subdivisions of its territory. The ground originally assigned to one science has been found to include two, or ten even. Economic science is certainly no exception, and a full discussion of it may require us to still further subdivide its territory. Indeed, a sort of cross- sectioning of it has already commenced, and we are furnished separate treatises on some of its chief sections, such as Banks and Banking, Money and Currency, Labor, Wages, and Land. A different subdivision will give us the economy of agriculture, of commerce, of manufacture, and of other great departments of industry. 23. Certainty not necessary to usefulness. — Economic science shares the uncertainty that attaches to all those in which the human will enters as a factor. This factor takes it out of the rank of the mathematical and exact sciences, but by no means discredits its utility or its claim to be treated as a science. As in the case of meteorology, geology, and many other sciences of cosmic or cosmopolitan forces, its field of observation is too wide, and its phenomena are too comphcated for the pres- ent powers of man; but this is a confession of its difficulties rather than a proper charge against its scientific character. The popular objection to political economy, that it fails to furnish infallible rules for the guidance of business men and statesmen, is no more just than would be the same objection urged against the boasted common sense which serves mankind so much, but which can furnish no infallible rules for the direc- tion of its possessor or of others. The common sense is noth- ing but unwritten science, and science is only the common sense of truth and fact reduced to writing. The master of common THE THREE ECONOMIC SCIENCES. 29 sense may, sometimes, understand the facts more clearly and profoundly than the scientific writer, and in this case the com- mon sense view, so called, will be better and truer than the written science, because more truly scientific. If common sense is useful, it is useful through its clear per- ceptions of the facts and truths in question, and the more clear and complete this perception, the better and more useful the common sense. But it is folly to contend that the unwritten perceptions and judgments of the common sense are useful for the guidance of statesmen and business men, while the same judgments and perceptions, carefully classified and plainly written, are useless. If economic science and the plain common sense of experienced practical men do not agree, as far as they cover common ground, it is because one of them is false. And the false one is not science, for all true science is true. We affirm that economic science, like meteorology or any of the incomplete sciences — hke common sense — is useful as far as it is known and established. It has already modified and improved theories of government, and has changed the features of the social and industrial life of the world. To no other science can mankind look for future guidance in the great struggles for economic progress and amelioration. CHAPTER III. THE TRIANGLE OF VALUE. 24. The natural history of value. — We approach now the science of value, or of the industries which produce value. It is the science of human want, work, and wealth. But these three every-where group themselves around a central fact, which may be symbolized by a triangle — the triangle of value. The world is full of work. Every-where appear the toil and struggle of millions — toil of hands, of brains, and of helping machinery. This is the perpetual and most conspicuous fact in the daily life of humanity. Now for what is all this toil? Plainly to produce the objects which may satisfy human wants — objects which can support life, gratify desire, and give pleasure, or prevent or lessen pain. This toil has been abundantly successful. It has produced more of these objects than are needed to satisfy the present wants of mankind. Gradually have accumulated great stores of such objects — of foods, cloths, tools, machinery, houses, culti- vated fields, domestic animals, and innumerable things of use or beauty. But these great accumulations do not exist as a common stock. They belong to owners — to those who made, or bought, or inherited them. Why they so belong is a question for an- other chapter. The belonging is a fact; and only the owners have the right to use and enjoy them. But now the toil and struggle still go on. Notwithstanding the accumulations, the toilers still labor to produce useful ob- (30) THE TRIANGLE OF VALUE. 31 jects, though it is with a partly changed purpose. They toil to produce something which they may exchange for some part of the accumulated goods. This is the simplest history of those objects which men call goods^ because they benefit or do us good ; conwiodities , because commodious, or helpful to man's needs; products, because brought forth from antecedent wealth, or work; property, be- cause they belong to owners; merchandise, because men sell them. Thus, toil which started with the purpose of gratifying a de- sire, comes finally to seek, as one of its chief aims, the means of buying the goods already existing. Accumulation is a stronger motive than present gratification, for accumulation has the promise of all future gratifications in it. 25. Three requisites of value. — But what kinds of ob- jects must men offer for the purchase of goods? First, some- thing useful; for surely no sane man will give a good and useful thing for one that is neither good nor useful. Second, it must be something which can not be produced or procured without labor or difficulty; for men will not give that which has cost labor for something which they can get without toil or trouble. Thirdly, it must be something that can be owned or pos- sessed; for one will not give that which he owns for a thing which he can neither own nor sell. If any one of these qualities be lacking, the object will not sell. If all are present, the object is said to have value. Men desire it, and will give other goods for it. Such is the plainest and simplest account of value. Every child that runs an errand for a penny unconsciously recognizes value. It is in the thought of every day-laborer. It makes a part of every bargain, whether for a mouse-trap or a gold mine. But value which is thus central in all trade and business, is also central in all that science which attempts to explain trade and business. 32 POLITICAL ECONOMY. We seek first this central fact or entity — this triangle of value — whose three sides confront and unite the three great facts and factors of the industrial, business world. The key to our science must be found in that. / 26. The sides of the triangle,— Value is made up of three essential notions or elements: 1. Utility, or the power to gratify desire — to give pleasure or avoid pain. 2. Effort, or labor required in pro- curing or producing the article valued. 3. Ownership or appropriation. These three constitute the sides of a triangle, in which each side is es- sential, and neither can be removed without destroying the triangle. All value is thus threefold or three-sided, "^-x The discussion of this triangle will prove not only the essen- tial character of the three elements of value, but also their central relation to the great facts of the industrial world. The question whether value is a quaHty of objects, or a simple conception of the mind — a question so learnedly and so laboriously discussed by eminent economists — is of Httle prac- tical importance. The simple truth, as the business world con- ceives and acts upon it, is this : Value is a complex fact made up of three elements, one of which, utility, is conceived as residing in objects, and the other two, effort and ownership, are thought of as material or external relations. These latter do not appeal to the senses as facts of form, color, or weight, and they are, therefore, necessarily mental concepts; but they are always conceived as attaching to matter. The complex nature of value, once fairly recognized, will end much of the debate which has arisen from the attempt to define it as a simple notion or fact. 27. Utility described. — Utihty, the first side of our tri- THE TRIANGLE OF VALUE. 33 angle, is the first quality thought of in the production of values. It is generally, also, the first considered in trade. Of what use is it? What is it good for? How much of good is there in it? These are the first questions asked or thought of in ascertaining both the fact of value and its amount. If the object lacks all power to satisfy, directly or indirectly, any human want, desire, or taste, its value is at once, and with certainty, denied. It may have cost immense labors, like the deserted fortifications of some old battle-field, but if it is now without -use, if no one desires it for any purpose whatever, it is without value. Utility must here be taken in its broadest sense. It includes not only the power to satisfy want, to give pleasure, to procure a good or ward off an evil, but to serve any purpose of man, society, or the state, in the present or coming time. Utility must often pass through several steps before it reaches a human desire. A fertilizer is useful to enric.h a meadow; the meadow is useful to produce hay; hay is useful to feed horses; and horses are useful to do service, or to afford power for further production. From the fertilizer to the man are several steps; but it is the final step which makes all the others count. It is the human want or desire which lends value to them all. Some economists have chosen to employ the word service as a broader term than that of use, and as including both the use- fulness of goods and of persons. But this breaks down an im- portant distinction, and twists the word service out of its plain- est meaning. Utility makes up so large a part of value that the two words are used in common speech as synonymous. Men talk of the value of fresh air, meaning simply its usefulness. But they are themselves conscious of the different sense in which they use the word when they speak of the value of a gold watch. Let them be asked what is the value of pure air, and they will tell what it is good for; but ask them the value of the watch, and they will reply, a hundred dollars. In the one case, value is used for utility, and in the other it means the real cost or 34 POLITICAL ECONOMY, price. In business and in political economy it always means the worth, including utility and cost. Adam Smith and other economists have tried to rid their dis- cussions of the ambiguity growing out of this double use of the word value, by discriminating between "value in use" and "value in exchange." Chapters have been written to show that the former is simple utility, and is not the same as the other. The device of substituting a phrase for the word is awkward in form, if not also incorrect in fact. "Value in use" can only mean useful in use, a tautology which comes near be- ing an absurdity. It is better to reclaim the word at once to the only meaning it can have in economic science, as covering the complex idea presented in our triangle. If the student, . after a simple ex- planation, can not thereafter distinguish between utility and value, he should be sent back to begin his education. But while value differs from utility, let it be carefully noted that it does not exclude it. There is no value without utility. Value is utility and something more. Water has high utility, but not, commonly, any value. Let it become scarce, and so require labor to obtain it, and the owners of water find it valuable, and get a price for it. 28. Effort defined. — Effort, the second side in our triangle, and the second element in value, includes all labor of mind or body — all exertion of strength or skill needed to procure or produce the object of value. How effort enters into value is easily shown. What can be had for the taking, and without effort, men will not buy. Such objects cost nothing and carry no price. Sunlight is vastly better than gas light, but no man offers sunlight for sale, or thinks of it as a commodity. It comes without effort, and is enjoyed without cost. Whatever has cost effort to procure, or would cost effort to replace, the owner will not part with, ex- cept for an equivalent. All effort is more or less painful or exhausting, and men will THE TRIANGLE OF VALUE. 35 not undertake efforts without compensation. The pain or trouble of the effort is weighed against the gratification to be gained by it. All value represents effort or labor. In general, all value is produced by labor. In some cases the utility is the result of the labor, and in others it is the product of nature, and col- lected by labor. The utility of a watch is given it by the labor bestowed upon it; the utihty of an apple is its natural quality. In each case the value is due to the labor, or, in other words, the labor must be added to the utility in making up the value. If the first question to be asked concerns the utility of an ob- ject, the second as certainly concerns the effort necessary to obtain it. In the place of effort, J. Stuart Mill and others have chosen to consider the "difficulty of attainment" as the true element in value. Properly, neither of them reside in the object, but both stand related to it. The difficulty of attainment represents the obstacles to be overcome; the effort represents the pain or trouble of overcoming them. The one involves the other. The efforts must equal the difficulties. Each in turn will naturally be in mind, in thinking of value. In estimating the value of a fish, or of a rare work of art, the difficulty of attainment may be first thought of; but in valuing manufactured goods, or ordinary commodities, the effort required in their production is uppermost in mind. It seems clear that most commonly, if not also most naturally, the efforts are counted as the element of value. N. W. Senior, an eminent English economist, regarded scarcity as an element of value. But scarcity is only one of the forms of difficulty of attainment. Gold in the mine is difficult to obtain, because of the rocks to be removed; but diamonds, in the sands of Golconda, are difficult of attainment because of their scarcity. Whatever increases the effort necessary to gain any useful or desirable object will add to its value, whether it be obstacles or scarcity. It is obvious that the efforts to be taken into account in 36 POLITICAL ECONOMY. estimating value, are not those which were actually expended in producing the object, but those which would now be nec- essary to produce or replace it. In the oft-used and well-worn illustration of the man who found a diamond in his path, the jewel was priced not according to the effort which it cost him to pick it up, but according to the effort which it would, on the average, cost him or others to find another like it. This aver- age effort required is supposed to be indicated by the price put upon diamonds by those who work the diamond mines as a business. The effort expended by the producer saves effort to the pur- chaser. The producer may still think of his own effort in count- ing value; but the purchaser will naturally think only of effort saved. Both parties will, in fact, compare his own efforts saved and expended. The producer or seller compares the effort it cost him to produce or procure the goods, or that which it will cost to reproduce or replace them, with the effort it would cost to produce or procure the goods or money offered in exchange. The purchaser compares, likewise, the efforts required on his side to produce the goods, and those which the means of purchase have cost or will cost. 29. Ownership defined. — The two elements, utility and effort, may seem at first to be the only essential ones. They have been treated as such by De Quincey, Mill, and others. But a little observation, or a fresh appeal to the business world, will reveal another. In actual life, ownership is always thought of as a part of value, or, at least, as one of its essential adjuncts. No one will purchase what he can not own. The word property, in the sense of something owned or appropriated, is used as a common name — the commonest, perhaps — for all objects of value. The very notion of all purchase is that of gaining rightful possession or ownership. Honest men will not, knowingly, buy stolen goods, because a thief can not give good and lawful ownership. THE TRIANGLE OF VALUE. 37 Nearly all economists have recognized and affirmed that value can not attach to that which can not be appropriated. They account for the absence of value in air and sunshine by the pal- pable fact that these things can not be appropriated or made property. No ownership in them can be established or con- veyed. President Sturtevant makes ownership not only an ele- ment of value, but the fundamental law of economic science. Roscher says (''Principles of Political Economy," Vol. i, page 62), "Goods, to obtain value in exchange, must, in addition to their value in use, have the capacity of becoming the exclusive property of some one individual." The clear-thinking President Wayland said, many years ago, "Another element which enters into the notion of wealth is the idea of possession." The notion of ownership is the basis of all transferability in values. Utility and effort can not be conveyed as property without this. They may be abandoned, but they can not be transferred either as a purchase or gift without recognizing own- ership. Only he who owns them can rightfully sell or give them. This third element of value, though so long almost unrecog- nized by leading economists, has come to hold the chief place in the world of trade and in the esteem of men. The severer pressure of present want having been relieved, utiHty is now thought of chiefly as a means of appeal to the cupidity of others. Large masses of values, or property, being in existence, the efforts which they cost are partly forgotten. But ownership re- mains a present fact, full of power and rich significance — full, also, of all promises of future good. To gain this ownership becomes naturally the leading aim of industry and enterprise. Men work to increase their possessions. They struggle for a larger share of what is called the world's wealth. After meet- ing and providing for the day's needs, all efforts and products go to purchase permanent possessions. The ownership of wealth gives so much of power and dig- nity — so many advantages in the struggle for honor and influ- 38 POLITICAL ECONOMY. ence — that ownership is sought for its own sake, even when the wealth itself is unneeded if not a burden. 30. The three elements essential. — These three ele- ments, though different in their nature, are all equally essential to the full notion of value as it exists in the industrial world, and as it enters into political economy. Strike out either side of the triangle and the triangle is destroyed. In any object of value, obliterate either its utility, its demand for effort in its produc- tion, or its property relation to some owner, and in either case the value will disappear. It will no longer have a price, nor be salable. Men may still desire it for its usefulness as they de- sire fresh air ; they may appreciate the labor it has cost, as they appreciate the well-worked highway ; they may even recognize the right of property as that of a man to a letter he has written or to some short-hand notes he has made for his own advantage, and which are wholly illegible and useless to any one else ; but till these three qualities unite in one object, there is no mer- chantable value. These three are the only essential elements in value, since, if these are all present, value is present in all its power and func- tion. In general trade, values are based not upon the desires or efforts of the actual owner or purchaser, but upon the presump- tion of general desires which are assumed to exist, and upon an average effort which it is assumed will be required to obtain the article. Thus the price of flour depends upon the assumption of the general hunger which it will feed, and upon the effort which in general will be required to obtain it in the given time and place. It thus happens that goods often bear a fictitious or exaggerated value. But false values presuppose the true, just as counterfeit bank notes presuppose true ones. 31. The three elements compared. — Utility, efforts, and ownership, here called elements, are not elements in the strict sense of the term; they are rather parts of a complex whole, not elements of a compound. A comparison of them THE TRIANGLE OF VALUE. 39 in some prominent aspects will best show their true character and relation. 1. Looking at the object valued: Utility inheres in it as some form, quality, or other fitness to meet desire. Effort represents the force necessary to produce this form, quaHty, or fitness. Ownership represents the right to use or enjoy the object — its restriction to some one owner. 2. Looking at its relations to other objects : Utility is the relation of the object to the powers and needs of man. Effort shows the resistance offered by other things to the enjoyment of the object desired. Ownership tells the ex- clusion of the object from the common stock of nature's gifts. 3. Looking at man and nature: Utility in an object measures nature's power in it over man — man's dependence upon nature. Effort measures man's power over nature — the extent of his power to subdue nature to his use. Ownership bespeaks man's power over man — his enforcement of his right to enjoy his own efforts. 4. Utility has been described as affirmative or positive value; effort, or the difficulty of attainment, as negative value. The first represents the positive power of gratification residing in the article ; the second, not something in the article, but the re- sistance to be overcome before its utility can be reached. 5. Utility is a good sought. Effort is the rugged path which leads to it. Ownership is a right to hold and use it. 6. Utility appeals to desire ; effort, to fear or dread of effort ; ownership, to the sense of power. 7. Utility resides in the object; ownership, in the man; effort, in both. /32. The triangle inscribed. — Looking at the entire field of economic science as included in the three great facts of want, work, and wealth, each element in value is found to front one of these fundamental facts. Our triangle may, there- fore, be inscribed in the economic circle as follows : Every object of value exhibits- this threefold response to the 40 POLITICAL ECONOMY. great facts of the business world. Its utility faces human wants. Its required effort faces the working world. Its principle of ownership ties it to the world of wealth. Whatever the object, whether a material thing or some power of service, these truths hold good. Value is forever, and in all cases, thus three-sided and central, in the economic world, and in the science which exi^lains this world. And since every business trans- action — every act of labor or of trade — involves some value, every such transaction must exhibit these three sides and this threefold relationship.\ J. Stuart Mill denies this central relationship of value to the entire science of political economy, and offers in proof of his view that he has proceeded through two main divisions of his work — books I and II — without discussing value. But his proof is spoilt by the admission which follows : " It is true that in the preceding books we have not escaped the necessity of anticipating some small portion of the theory of value." (''Po- litical Economy," book III, chapter I.) We may add that Mill's treatise throughout recognizes the idea of value as pres- ent to the mind of writer and reader, and its meaning is assumed as understood without discussion. His poHtical econ- omy, if stripped of this ever-present idea, and the propositions involving it, would show remaining only some disconnected, if not incoherent, thoughts on political and social science. De Quincey, with more acuteness and correctness, affirms the notion of value to be "not a regulative but a constitutive idea of political economy." ("Logic of Political Economy," sec. i.) Frederick Bastiat says: "The theory of value is to politi- cal economy what numeration is to arithmetic." ("Harmonic d'Economie Politique.") Scores of writers might be quoted in THE TRIANGLE OF VALUE. 41 proof of our position ; but an easy appeal to the common sense of the business world would show that all the activities of in- dustrial life circle around this idea of value. Let it disappear, and all the industries would cease, and economic science would no longer exist. 33. Erroneous notions of value. — It is necessary to no- tice some of the common errors in the definition of value in order that economic science may be freed from the charges of speculation and obscurity which have been urged against it. A brief exhibit of these errors will also be of use to the student as showing the difficulties to be met, and the mistakes to be avoided in his progress. Value is complex. The common source of error has been the disposition to regard it as simple, and to define it as such. Being expressed by a single word, the tendency is to believe it a simple idea. The definitions given, though numerous and discordant, may be reduced to the three following classes : 1. Value is defined as some power or property, inherent or acquired, residing in the object valued. 2. Value is a relation between the objects valued. 3. Value is a mere feeling or judgment of the mind, directed toward the object valued. 34. Exchangeability mistaken for value. — To the first class belongs the definition given by several economists : that value is purchasing power or exchangeability; in other words, the power to induce exchange and thus to procure another val- uable object in place of the one given. But common sense tells us that it is because value is discerned in each of the ob- jects offered in exchange that the exchange is made. One might as well define music as the power to induce listening. Purchasing power is the incident or result of value; not value itself. Every value is desirable, and therefore exchangeable. To define value as purchasing power, is only to give it a new and imperfect name, which needs definition as much as the first. p. E.— 4. 42 POLITICAL ECONOMY. Value has, indeed, the power to purchase or procure another value in exchange, simply because it is value — something which men want and will give value for. And as exchange occupies so large a place in the business of life, the purchasing power of value is its most conspicuous and most frequently used function. 35. Value not a relation. — Under the second class of erroneous definitions comes the famous definition of Bastiat, pronounced, by " McLeod's Dictionary of Political Economy," to have effected " the greatest revolution that has been effected in any science since the days of Galileo." This definition declares that "value is the relation of two services exchanged." In another statement of it, Bastiat says: "Value consists in the comparative appreciation of reciprocal services." Several American authors have followed Bastiat in defining value as a relation between things exchanged, or offered in exchange. Since a relation can only exist, or at least be known, when both terms related are present in thought, it follows that value, if merely a relation, can not attach to a single object; nor, in- deed, to any number of objects except when compared. But it is evident that value is thought of by all as belonging to each of the objects or services offered for exchange. The very de- sire for exchange springs from the belief in the existence of two values, and the only question in exchange is as to the equality of these values. The error seems to lie in mistaking the measurement of value for value itself. Ask any man if his hat or coat has any value, and he will reply, promptly, yes. Ask him how much value, and he will, perhaps, say, " I do not know; I have not fixed a price;" or, in other words, measured the value. But measur- ing value does not produce value any more than measuring wheat produces wheat. A relation of quantity exists, doubdess, between two values, as it exists between any other two objects or forces open to the same measurement. 36. Value not merely a feeling or judgment. — In the THE TRIANGLE OF VALUE. 43 third class come such definitions as that given by the Russian economist, H. Storch: "Value is not a quality inherent in things ; it depends upon our judgment. We judge that an arti- cle is more or less fitted for the purpose for which we desire to use it, and this estimation of it constitutes its value." Nearly equivalent to this is the description recently given by Bonamy Price, of England, who affirms that value is an affection of the mind. Plain men will say that the judgment or feeling of value imphes the existence of value \ just as the perception or feeling of weight or color implies the existence of weight and color. It is true that a great variety of considerations and feelings often enter into our estimation of a value gotten or given in ex- change; and a still greater variety induces the exchange itself. The pressure of an immediate want; the pride, pleasure, or passion of the hour; motives of benevolence, of honor, of piety, of love, or hate, may cloud or color the view, and cause a temporary misapprehension, or disregard even, of the real ele- ments of value. But so may passion or prejudice cause a mis- apprehension or disregard of any other fact or truth. In many cases the parties concerned are conscious of their disregard of the true value; and they affirm that the transaction was not purely "business" — it was moral or social, not economic in character. H. C. Carey's definition of value, as "the measure of resist- ance to be overcome in obtaining the commodities required for our purposes;" N. W. Senior's notion of it as consisting in or measured by scarcity; and Prof. Jevons's view, that it is "the ratio between two numbers," — all are definitions of the measure of value rather than of value itself. 37. The three elements acknowledged. — Besides the three classes of definitions described as arising from the effort to define value as a simple notion, there are many others in which the presence of two elements or factors is recognized or affirmed. President Wayland enumerated "the capacity to gratify de- 44 POLITICAL ECONOMY. sire" and "possession" as elements of value. J. Stuart Mill wrote "that a thing may have any value in exchange, two con- ditions are necessary. . . . The thing must not only have some utility, there must also be some difficulty of attainment." Professor Bowen and President Bascom, both following Mill, affirm value to consist of the two elements, ' ' utihty and diffi- culty of attainment." De Quincey says: "Almost all writers have agreed substanti- ally, and have rightly agreed, in founding exchange value upon two elements — power in the article valued to meet some natural desire, or some casual purpose of man, in the first place, and, in the second place, upon difficulty of attainment. These two elements must meet, must come into combination, before any value in exchange can be estabUshed." Roscher writes ("Principle of Political Economy," 1878): "Goods, to obtain value in exchange, must, in addition to their value in use, have the capacity of becoming the exclu- sive property of some one individualj and therefore of being ahenated or transferred." In this enumeration of elements, he agrees with Dr. Wayland, but disagrees with Mills and the others. Roscher elsewhere (sec. v) says: "The value in ex- change of goods is based on a combination of their value in use with their cost-value." He thus, though not in immediate connection, recognizes all three of the elements represented in our triangle. The affirmation of De Quincey, that "almost all writers have agreed substiantially in founding" value upon utility and diffi- culty of attainment, has this much of truth in it, that in many of the definitions or discussions, both of these elements are in- volved or implied; but there are many definitions which can not be so construed. The many disagreements shown between the writers quoted would be increased by a wider quotation. These disagreements are easily accounted for by the evident preoccupation of the mind with false conceptions of the nature and field of the THE TRIANGLE OF VALUE. 45 science, and of its central and constructive idea, value. Their errors in these respects would be of less consequence, but for the fact that they affect, with their own viciousness, all the discussions based upon them. This enumeration of errors will not be useless if it warns the reader to be constantly on guard to prevent his mind from slid- ing back insensibly into the error of confounding value with utility. Pages of useless debate might have been spared us in the writings of economists if this unconscious relapse into a false view had been avoided. 38. Synonyms of value. — There are several terms in con- stant use in connection with value, and often supposed to be synonymous with it. Their definition may properly come here. Wealth, as used by economists, means any or all articles hav- ing value. In common speech it usually implies an abundance of such articles, or of property. The word is sometimes ap- plied to the abundance of utility even where no true value exists. This has already been noticed. Cost means, properly, the amount of labor and value ex- pended in the production of any object of value at the time and place of valuation. In this sense, the value produced should equal the cost. Frequently, however, the word is ap- plied to designate the money or other property paid for the' object — the purchase money. Price is value measured in money — the money equivalent. Commonly, the price means the amount demanded for any arti- cle. The term price has been so loosely used that it has been found necessary to define its different applications as so many kinds or forms of price. Thus we have cost price, by which is meant cost simply as defined above ; market price, or the price asked in market; selling price, or the amount the article is actually sold for, and which, in cases of fraud or ignorance, may be greatly above or below its real value. CHAPTER IV HOW VALUES VARY. 39. A true theory of value explains variations. — The incessant variations of value are the perpetual problem of trade and industry. They bring riches or ruin to thousands. They constitute, in political economy, that element of uncertainty which robs the science of half its credit and usefulness. If the economist could give rules to forecast the market for any com- modity, he might have the ear of the world. No theory or definition of value is true or complete which does not explain its variations. This explanation, though sci- entifically correct, may not, it is true, give the desired power of forecast; but it will show the basis on which any true fore- cast must be made. A rule may be right in principle, but it may fail in application for lack of the facts required. The rule for finding the area of a triangle — ''multiply the base by one-half the altitude" — is correct beyond question; but if either the base or altitude is unknown, the rule can not be applied. 40. Variations of value not al^vays variations of price. — The variations of value must not be confounded with the variations of price. As price is, in general, value meas- ured in money or some other commodity — or value expressed in the terms of money — the variation in price may be usually taken as indicating a variation in value. But prices are often speculative in character, anticipatory of future values, or im- posed by monopoly with little regard to values, (46) HOW VALUES VARY. 47 No fact is more open and common in the business world than tKfe fanciful fluctuations of prices, seemingly independent of real value. The same article may bear one price to-day and another to-morrow, influenced only by the whims of buyers or sellers, or by statements wholly false and illusory, of probable demands or supplies in market. But in all cases there is a pre- tense of value, and a virtual recognition of the fact that real values do exist and that price should conform to these values. The variations of prices may be taken as proofs that there are real variations in value; since if value was known to be always fixed and invariable, prices themselves must cease to vary. 41. Variations in utility. — Every true variation in value must arise from a variation in some one of the elements of value. In determining the changes or variations to which these elements are separately liable, we shall determine the true causes of all genuine changes in values themselves. Utility, which has been already defined as the power to grat- ify desire, is subject to two classes of variations. First, the de- sire remaining constant, the power of the object to yield grati- fication may be increased or diminished, as by growth or waste. Old wines gain in value, but old clothes lose. Second, the ob- ject remaining unchanged, the desire to be gratified by it may change. A bonnet made last year may retain its covering and adorning power, but the fashion has changed, and, the desire for the bonnet in question being lessened, its value is dimin- ished. The changes of fashion occasion some of the most fre- quent fluctuations in market values, and these changes are purely changes in desires or tastes. The discovery of a new use for any article or material, gives it a new value by relating it to a new set of desires. So, too, the discovery of some new and better means of gratifying a common desire, lessens the value of the old means of gratifica- tion by removing the desire for it. Thus, linen rags were almost without value till it was found they could be manufact- ured into paper; and the discovery of petroleum, and the illu- 48 POLITICAL ECONOMY. minating oils distilled from it, greatly diminished the demand for whale-oil, and cheapened its price. 42. Conflict of desires. — But the fluctuations in value, oc- casioned by changes in desires, are increased by the opposi- tion of the several desires which enter into the common esti- mates of value. In exchange, each article offered for exchange appeals to a separate desire, and the strength of one desire may lessen the force of the opposing desire. The strong desire or need for money often leads men to sacrifice, or sell at a cheaper rate, the articles they have to exchange for money. The strength of a man's desire for a watch may lessen his feel- ing of need for a new coat when he can have but one of the two. But, further, each party in an exchange has two desires — the desire for his own property and the desire for that of the other. Hence, in every estimation of value, four desires, two of each party, come into competition and help to determine the final judgment; In general trade, the desires of the individual buyers and sellers have little to do in determining values. These individ- ual desires may favor or hinder the sale of a single article; but both parties look to the larger public or general demand and supply to fix the real value. The individual buyer is only one of many hundreds whose wants are to be supplied; and if he demurs to the price fixed, the goods may be kept for other purchasers, whose desires are stronger or whose means are greater. 43. Variations of efforts. — Effort is also a variable ele- ment. The efforts required for the production of any commod- ity change, and this change will cause a variation in the value of that commodity. Books, when formerly made by hand, cost sometimes as much as a farm ; but the invention of the printing- press reduced the value to less than that of a day's labor. Three classes of change may affect the efforts of production: change in the processes; change in the material used; and HOW VALUES VA/^V. 49 change in the machinery. Processes of production are often simplified and improved, so that much larger products come from the same amount of labor. In mining, agriculture, and the chemic manufactures, many cases abound, in which a change in processes both increases and improves the goods produced. The cheapening of materials by the opening of new sources of supply, near market, or the discovery of other and cheaper materials, diminishes the effort required in this direction, and lessens the market value of the goods produced. The more fruitful seasons often produce the same effect, by giving larger harvests from the same cultivation. The improvement of machinery has wrought the chief changes in the amount and kind of efforts required for the production of goods. Modern arts are full of examples of lessened labor and lowered values. The cloth manufacture, and, more re- cently, the watch manufacture, are familiar and fine examples. Cloth and watches are now produced by machinery which even children, in many cases, can tend; and the value of these prod- ucts has cheapened, while their utility and excellence have greatly increased. Thousands of men now wear broadcloths and carry watches, where only single individuals enjoyed them in the old days of hand labor. Aided by his machinery, one man can now do the work of ten, and, not unfrequently, of a hundred hand laborers. 44. Variations of value illustrated. — By recurring again to our triangle, we may find an illustration which will make clearer the relative influence of utility and efforts in producing variations of values. Let the base, representing ownership, be an unvarying line representing a fixed quantity. Then: Case I. — It is evident that any increase of either, or both, of the lines representing effort and utility or desire, will increase the area representing value. This may be seen in the case of commodides, such as personal ornaments or other goods not P. E.-5. so POLITICAL ECONOMY. indispensable, in which the effort of production, and the utility or the desire on which the utility depends, are limited quantities. Let both the work required and the desire for the commodity increase, and the value will enhance rapidly. Case 2. — But the effort remaining constant, there is a point which may be reached where any increase of utiHty will not increase the value area. This will be the case when efforts have reached the highest point attainable — that is, when the purchasing power has reached its highest limit, shown by the effort line reaching the perpendicular (Fig. 2). The illustration will remain true whether the effort line rep- resents the highest possible effort or means of purchaser, or only the highest actual limit of nec- essary labor in production. If an article can be produced by a day's labor, it can not, ordinarily, be made to bear a higher value by finding a new use for it; nor can its selling price be effectively raised above the purchaser's means of purchase. Case 3. — So on the other hand, the desire and consequent utility remaining constant, there is a point (represented by the perpendicular utiHty Hne, Fig. 3) beyond which no increase of the line of effort can increase the value area. It must be remem- bered, in this and the other illus- trations, that the Hrait of desire is also the limit of utiHty. There can be no utility where there is HOW VALUES VARY. 51 no desire to be gratified. If a man's desire for any article is measured by one dollar, doubling the effort necessary to its production will not increase his desire nor the price which measures his estimate of the value, and which he is willing to pay. But there are cases in which either desire or effort are unlim- ited, in which the desire or need is vital, and therefore practi- cally infinite; or in which the difficulty of attainment and the effort required approaches the infinite — that is, the impossible. Case 4. — Let the utiHty be un- limited. In this case the value area will seem to vary solely with the effort required. Doub- ling the effort doubles the value. In a famine, the price of food goes up till at last a man will give all he has for a loaf of bread. So, too, the value of gold sinks to nothing when weighed against the plank needed to escape from a burning ship. Case 5. — Let the effort required be unlimited. Now the value area will vary with the utility line. Doubling the desire will double the value. This case will explain De Quincey's story of the musical snuff-box. The trader, exaggerating the charms of the toy, stimulated the emigrant's desire for it, and, as long as the power to purchase was not overpassed, he continued to increase the estimate of value. In common life, an expert sales- man often thus plays upon the desires of his customer. In the case of a master-piece of Raphael or Rubens, the pro- Fig. 4. 52 POLITICAL ECONOMY. duction has ceased, and the difficulty of attainment approaches the impossible; hence, the price or estimate of value mounts with the taste or desire of the buyer. 45. Monopoly. — Ownership is a right, and can not, there- fore, be thought of as varying in quantity. Hence, it can not be counted as a variable element in value. But it is, neverthe- less, the source of the most frequent and largest fluctuations in prices, if not in values, known in the markets. Monopoly means, properly, an exclusive power of sale. When the ownership or control of all the goods or services of a given kind, in any locality or market, belongs to one man, he is said to have the monopoly, or exclusive sale, of such goods or services. Monopolies are very old in history. They were frequently reserved by monarchs for their own profit, or were given by them to enrich a favorite, or reward a chief. Not unfrequently they were sold as a means of raising supplies. The monopolist holds almost absolute control over the prices of his commodity or services. ControlHng the supply, he can at will create an artificial scarcity, or, in other words, increase the difficulty of attainment, or effort demanded, as far as he chooses; and may thus raise the price to any point, up to the limit of men's needs for the goods in question, or at least up to the limit of their power to purchase. Monopohes are often useful, and sometimes necessary. They offer the hope of enormous reward for enterprises whose risks would otherwise prevent their being undertaken at all. Many of the discoveries and settlements on the American continent were stimulated by patents giving the monopoly of trade with the lands to be discovered or settled. 46. Classes of monopolies. — Monopolies have been di- vided into four classes ('' Dictionnaire De L'Economie Politi- que."): I. Personal monopolies, or those which result from~the pos- session of superior faculties : as the genius of a great painter or HOW VALUES VARY. 53 physician, or others, whose unequaled skill allows them to charge what they will for their services. 2. Landed monopolies, or those resulting from the possession of lands, mines, and privileges connected with lands. 3. Legal monopolies, or such as are retained by the govern- ment for itself, or given by charters to individuals or corpora- tions. The French and German governments hold the mo- nopoly of tobacco, which is raised, or imported, and sold by government agents, and yields a large government revenue. Our own government, as well as others, holds a monopoly of the post-office service, and of the coining of money. We grant to certain bank corporations the monopoly of supplying the country with paper money, beyond the treasury notes; and to railroad corporations the right to build railroads between certain given points. 4. Monopolies of concentration, by which are meant those produced by' the concentration of capital, or by any business combinations. These last may be useful or injurious, according to the spirit of their use and control. 47. Advantages and dangers of monopolies. — If their influence on production be alone considered, monopolies are doubtless beneficial. They stimulate production by lessening the risks and giving assurance of larger rewards than can ordi- narily be obtained where markets are free. But they are liable to such abuses that their existence should be carefully governed by restraining laws. It is evident that the values created by monopoly are often artificial and false, if not excessive. They are produced by in- terposing an artificial obstacle in the way of the attainment of the goods monopolized, and thus imposing an unnecessary pressure on the needs of mankind. The monopoly principle has penetrated and influenced every department of modern business. So powerful and enticing is this exclusive ownership as a means of controlling prices and se- 54 POLITICAL ECONOMY. curing profits, that there is a constant temptation in the manage- ment of business to obtain, if possible, a monopoly of some kind and to some extent. The manufacturer who gains a mo- nopoly by producing fabrics of a novel pattern, or by securing for them a reputation for their style or excellence; and the merchant who gets the temporary monopoly of goods by the earhest importations, or by keeping Hues of goods not found at any of his competitors, gain their advantages by the uSe of legitimate and intelligent enterprise; and generally they are sufficiently guarded from the abuse of their power over prices by the felt need to keep on good terms with their customers, and to avoid the bad and ruinous reputation of extortion. The gigantic trade, transportation, mercantile and manufac- turing companies and corporations sometimes gain monopolies by overthrowing, or buying out all rivals, to keep the field clear for themselves. It is then in their power to tax, at will, and often with more audacity than the government itself, those who require their services or commodities. In general, the re- straining power of an intelligent public sentiment, and the eager desire to induce a larger patronage, are found sufficient to hold back these great corporations from a too serious abuse of their advantages. The value of their enormous constructive and productive energies to the country are well known. 48. "Corners" and other monopolies. — The ''corners" contrived by speculators, in stocks and grain, are bad applica- tions of the monopoly principle. The parties creating the cor- ner get possession, as nearly as possible, of all the shares of some railroad, or other stock, or of the supply of some com- modity, and thus put themselves in a position to control the market price. They next make contracts with brokers, or others, to deliver to them, the corner makers, at the common or current rates, large amounts of the cornered stock or com- modity. Having thus created an artificial and imperative de- mand for this stock or commodity, they put on their exorbitant HOW VALUES VARY. 55 monopoly price, and the duped brokers, or other victims, must purchase at these prices or forfeit the difference. Artisans, through their trade unions, sometimes attempt to gain a monopoly of labor by restricting the number of appren- tices who may be allowed to learn their trade, or by forbidding their members to work for less than some prescribed rate of wages. A sort of natural monopoly exists in the case of articles of rare occurrence, or of very limited production. The number of large diamonds, like the celebrated Kohinoor, is so limited that the possessor has a monopoly, and may set his own price. So, also, in the case of the great master-pieces of painting and sculpture, already noticed. The owners, knowing that they have the whole supply, are limited in their prices only by the height of the desire and the length of the purse of the pur- chasers. 49. Abuses of monopoly. — The too common and often enormous abuses of the monopoly power must be held responsi- ble for those disturbances in the economic world which seem to contradict and discredit economic science. Monopoly is the intrusion of an external force into the realm of values. It adds no new element to value, but imposes upon the elements of de- sire and difficulty of attainment an artificial pressure. It is the usurped domination of the social and artificial element of own- ership over the two natural elements of utility and desire. 50. Individual values and their variations. — The va- riations of value have another source in the fact that each of its elements is subject to two distinct and opposing estimations — that of the owner and that of the proposed buyer. It has already been shown that two sets of desires are brought into competition in every act of exchange. We may add that every article has two values, or, indeed, as many as there are individ- uals who desire it. And each value is real, though different from every other. TJie utility to the owner is often widely different from the utility to the buyer. So the efforts contem- 56 POLITICAL ECONOMY. plated are never the same to both parties. The article may be easy of attainment to the one, and difficult to the other. The possession, also, may be of great importance to the one, and of none at all to the other. Hence, no value is the same to any two minds, for no two minds are alike in desires, power, or circumstances. No value remains constant to the same man, even; for no man remains constant in desires, needs, or environment. We often count as almost worthless to-day the things which, yester- day, we thought of high value. All this does not disprove the reality or certainty of value, but shows simply its variable character. 51. Market values. — Values in general, as they are known in the markets, are, as before stated, not estimated by the de- sires or needs of individual buyers or sellers, but by the known or supposed wants of communities or classes of people. This general value we may call market value, to distinguish it from the special values described in the last section. The ordinary trader buys and sells the market values. He counts upon the existence and strength of certain common needs and tastes among his customers, and his success depends on the correctness of his perception and forecast, both of the kind and quantity of goods desired. So, also, the manufacturer manufactures for the market, and counts upon the market values. He shapes his products to meet the common wants. In general trade, the comparison of desires and efforts between individuals seems to disappear. It is, in reality, only replaced by another comparison — that of the individual value with the market value. When the would-be buyer estimates the value to himself as less than the market value, as stated by the seller, he refuses to purchase. The market value thus comes to rest, at last, upon the indi- vidual values; for, if it were higher than these, the demand for it would cease. By a great law of market gravitation, the value in market finds the level of the total individual demands. The HOW VALUES VARY. 57 general variations of values with which the business world is concerned, are made up of the special variations of individual utihties and efforts. And so all changes of value, whether true or false, must rest finally upon a variation, real or supposed, in some one of the three elements of value. 52. Gifts and keepsakes. — Men, from motives of poHcy or friendship, often donate goods, or sell them less than cost; but in such cases there is no new estimate of value. They do not lose their conviction that there is a real value, much higher than the price they charge. So, also, from the pressure of a present want, or from weariness with some long-used article, the owner sacrifices his property for a price below the real value; but in these cases there is a sense of sacrifice, and the true value is still judged to be that which its utifity and cost give. In the case of heir-looms and keepsakes, the owner often counts, as beyond price, things of little or no value ; but he will freely confess that it is not the value for which he keeps them, but from tender and sacred associations. 53. Profit: — A final and, as it may seem, wholly arbitrary source of fluctuations in market values, or prices, is to be found in what men call profit. Profit, in its strict sense, means the advantage or value gained by the production or exchange of goods. In every successful effort in production, there is an excess of new value created over and above that consumed or used up. This excess of new value is profit. In the manufacture of cloth, the cloth pro- duced, by virtue of its new utility, is of more value than the wool, labor, and machinery used up in the manufacture. In the mercantile industry, the goods collected, transported, and properly stored and arranged for sale, are worth more than the original cost. These increments of value are the proper profits of the cloth-maker and the merchant. Profit furnishes the chief motive for ordinary production and trade. If no new values were created by their efforts, men 58 POLITICAL ECONOMY, would have little or no motive for business. Their wants might compel them to change one valuable product into another, even at a loss ; but the great wealth-creating industries, if robbed of profit, would dwindle to the mere production of the necessaries of daily life. Profit is, therefore, a legitimate and needful de- mand of business. It is the very condition on which it exists, and by which it grows. True profit, which represents a real increase in values, is the rightful property of him who creates it. But there is an exag- gerated and false profit, charged by cupidity and extorted from ignorance, which represents nothing but the greed of its gainer. 54. The elements of profit. — It is conceded that the re- turns and profits of a business ought to cover the entire expense for labor, materials, and machinery used up, interest on the capital invested, compensation for the risks run, and the proper pay for the time and managing ability of the proprietor or conductor of the business. These ought all to be represented in the new values created. Economic science recognizes these as proper elements of value, and as justly included in the prices charged. The thoroughly honest manufacturer and trader will limit themselves to these as their own. But, as few purchasers have the ability or leisure to learn the real cost of the goods they purchase, the manufacturer and merchant are left to fix their own estimate of the cost of their commodities, and to de- termine their own demands for profits, except as they are held in check by their sense of prudence and right, and by the com- petition of their rivals. Little wonder that the temptation to take excessive prices is sometimes too strong to be resisted, and that dishonest dealers take, as legitimate profits, all that the ignorance or needs of their customers will give them. But it is no remedy for the wrongs wrought by bad men, to denounce or deny the principles which they abuse. Frauds may justly quicken our vigilance, but need not fill us with universal suspicion, both of men and of truth. It seems needless to repeat that Political Economy, as a HOW VALUES VARY. 59 science, has nothing to do with fictitious vahies or false prices, except to show the principles by the abuse of which they are im- posed upon men. Beyond that, the question must be sent to social science, or, further than that, to the cognizance of morals and the jurisdiction of law. The ceaseless gravitations which rule in the economic as they do in the material world, the steady pull and pressure between buyers and sellers, and between sellers themselves, are certain, in the long run, to bring prices to the level of values, and to bring values to the level determined by the relations of their several elements. And if this level is never reached except for a passing moment, it still remains the necessary ideal Hne from which all upward and downward movement must be measured. It is the constant "sea level" of the economic world. CHAPTER V. MEASURE OF VALUE. 55. Its measure presupposes value. — The measure- ment of value constitutes so important a problem in economic science, that a brief chapter may well be given to its discussion. As an estimation of values must necessarily precede every ex- change or sale, and as value is most commonly thought of in connection with some proposition of exchange, and thought of, therefore, in an effort to measure it, it is not surprising that many economists should have confounded the fact of value with the act of estimation. Such is the origin of Bastiat's definition, "Value consists in the comparative appreciation of reciprocal services;" and of that of Prof. Perry, "Value is the relation of mutual purchase established by exchange between two services." It is true that the perception of value is clearest in the act of measuring it. All its elements are then necessarily passed in review; but, as already answered in a previous chapter, meas- urement necessarily presupposes the existence of the thing measured. 56. Two kinds of measurement. — In trade, men seek to get as much as they give. Each party, therefore, to a trade, or exchange, necessarily measures the value of what he gives and of what he gets. This measurement is wholly private and par- ticular. It determines only the value to himself, and of the arti- cles actually compared. But there is a public and general measurement of the values of classes of goods, which determines (60) MEASURE OF VALUE. 6i their market value or price, and decides what each article of any class is entitled to exchange for in general. There are thus two measurements of value. The first is rela- tive, and consists in comparing one value with another, to deter- mine their equality or difference. The second is absolute, and is the comparison of any value with some standard of measure- ment, to determine its positive quantity as expressed in terms of the standard used. 57. Relative measurement. — Barter. — Relative meas- urement, or comparison, is used in barter, or in the exchange of goods for goods, or for services, and it ascertains only equal- ity or difference. In case of difference, it ascertains also the ratio of difference, or the number of times one value is greater or less than the other. Thus, the value of some hat may be found equal to, or greater, or less, than that of a given coat; and, further, it may be determined that the one value is twice as large as the other. This estimation is personal and private, and fixes the amount of values only for the parties concerned in it. We have already seen that, ultimately, all values are individ- ual, each object having a separate and different value for each person desiring it. In the end, therefore, all values must re- duce to personal or private values ; hence the necessity of deter- mining the laws of measurement in this ultimate and relative estimation. In every exchange of commodities between two owners, each will estimate for himself both articles offered in exchange. There will be, therefore, four values put in competition. To illustrate this, take the following figure: Let A represent the owner of the horse, and B the owner of the carriage, which they wish to exchange. The lines a and a! represent A's val- uations of the Carriage^ Horse . 62 POLITICAL ECONOMY. horse and carriage, and b' and b represent B's valuations of the same. In order to an exchange, a! must be greater than a, and b' must exceed b\ for the motive for the exchange is found in the gain that each party thinks he is making. The double gain is possible because of the double valuation. Each party to a fair trade may receive what to him is of more value than the thing he gives. No exchange can usually take place if either <2 is greater than a' , or b is greater than b' ; for in either case one of the parties will, in his own estimation, suffer loss. It is not necessary, in this case of pure barter, that a shall equal b' , or that a' shall equal b; for, as the barterers have no common standard of value, they can not compare their several estimates of either the horse or the carriage alone. 58. Relative measurement in sale. — In the case that each first puts a money price upon his property, the conditions of trade are changed, as the following figure may illustrate. Let each value his property at one hundred dollars. The money, we may assume, represents the same amount of value to both. As before, let A be the owner of the horse, and B A-^:; ~ "v Horse. the owner of the carriage, and one hundred dollars be the price fixed upon each. Let Carriage r — — -b^ "^^Ov .iT r j ^- — — ^::^-r. the Imes a and a! represent A's estimates respectively of the two articles, and the lines b and b' represent B's estimates of the same. Let c and/' represent the equal estimates which each puts upon the one hundred dollars. Now the exchange will not depend alone upon the excess of a! over a, and of b' over b, but upon the relations of a and b\ and of b and a! . The lines a and b being each equal to c {c = c'), the exchange may take place if either a' or b' are greater than c; that is, if either A or B counts that he shall gain by the bargain, the other not losing, the trade may be effected. In general, both a' and b' must exceed c; MEASURE OF VALUE. 63 that is, both parties must be tempted by a hoped for profit or gain. In this case it must be noted that a and b represent market values, while c^ and b' represent personal values, or the personal desires for the property sought. It is obvious that in cases like the .above, in which each party sets a price upon his property, there is a double sale; A sells his horse for one hundred dollars, and buys B's carriage for the same sum. But each immediately reduces the market value, in his own mind, to the personal, and feels sure that he has gained* as much by the bargain as the personal exceeds the market estimate. This difference between personal and market values is of the utmost importance in trade, as it furnishes the motive for all exchanges. 59. Absolute measurement. — Absolute measurement is measurement by a standard. The common standard of meas- urement of values is money, and the measurement is the fixing of the price. This is rarely done by one or two persons, ex- cept as they take into account the general wants of those who are expected to purchase. It is, as we have seen, the general estimate of the buyers and sellers concerned that establishes market prices. We leave out of sight, in this statement, those fictitious prices imposed by speculators and monopolists, which are usually temporary, and confined mostly to a few classes of goods. Competition, and the various influences which deter- mine the course of trade, are constantly at work to rectify the. estimates of value and to make prices correspond to values. In sales of goods or services for money, the measurement of value is of the absolute kind. The money price is taken as the value; but, as has been shown, both buyer and seller take into account the personal value of both money and goods to them- selves, and count upon a gain of satisfactions, if not of values. 60. A standard of value, — It is conceded that money is not a fixed and perfect standard of value. Like all other com- modities, it varies in utility and in purchasing power. Its 64 POLITICAL ECONOMY. variability, through a long series of years, is shown both by the changes in its power to buy labor, food, and other com- modities, and by the differences in the rates of interest paid for its use. To find a fixed and constant standard of value, or "measure of prices," is one of the unsolved problems of economic science. It has long engaged the attention of economists, but has baffled all their attempts. The requirement is to find some commodity which remains, in all times and places,^ constant in value, or varies uniformly and by some known law. Several different standards have been proposed by as many different writers. Adam Smith proposed an ordinary day's labor as such a standard, and judged that the goods which, in different parts of the world, will purchase a common day's labor, will equal each other in value or price. A simple ap- peal to facts disproves this. The wages of labor vary con- stantly in the same country, and rarely, if ever, agree in differ- ent lands. Benjamin Franklin sought to improve on Smith's standard by limiting the labor to be taken as a standard to some one kind, and thought that labor employed in the pro- duction of wheat would serve best as a measure of values. But common labor in one department will evidently follow any fluctuation of common labor in all other departments. John Locke, Condillac, and others, proposed wheat or other princi- pal bread-stuff of any people, as the standard. Say recom- ' mended wheat for distant times, but not for distant places. But it was easily shown, by statistics, that wheat varied in price with the shortness of crops, with the prosperity of other industries, and with wars. Nor is the average price of wheat taken for a long series of years, constant with its average for the next like series. Slaves, land, and other kinds of property have also been offered as the desired standard; but to all nearly the same objections apply. 6i. The compound or tabular standard. — Despairing of finding any single standard, later economists have attempted MEASURE OF VALUE. 65 to construct a compound, or tabular standard, by taking a large number of leading commodities of nearly universal use, such as labor, land, wheat, sheep, beef, wool, flax, cotton, tea, coffee, sugar, salt, etc., and finding the mean of their average varia- tions. It is assumed that the rise in the values of some of these articles will be compensated by the fall in others, and that the mean will prove to be nearly constant. Prof. Jevons, who made a computation based upon forty different articles, has recommended the tabular standard, based upon at least one hundred articles. Gen. Francis A. Walker, in his "Money, Trade, and Industry," says: "So far as I am able to judge, the scheme has not a single weak point." The proposition of Mr. Joseph Lowe, of England, the inventor of this scheme, was that a commission of competent persons should be em- ployed to collect and tabulate the prices of the articles chosen. Jevons and Walker propose that the commission shall publish, periodically, their decisions, as well as a tabular statement of the prices on which it is based. This standard of value is not designed to supersede money as the ordinary measure of prices and values, but it is proposed that the fluctuations of money shall be corrected by the tabular standard. For this purpose the value of money by the tabular standard, would be noted on every long-time contract at the time of making it, and cor- rected by the same standard at the time of payment. The Hon. H. C. Burchard, director of the United States mints, in his report for 1881, made an important contribution toward the establishment of a tabular standard, by collecting the average prices, through a period of fifty-six years, of nearly a hundred different commodities. 62. Utility of a true standard.— The need of a constant standard is to be found in those contracts which allow long times of payment, and also in the measurement of legacies and permanent investments for the benefit of heirs, or of public eleemosynary, educational, or other institutions. It would also find place in maintaining at an equal level fixed salaries, taxes, p. E.— 6. 66 POLITICAL ECONOMY. and other annual payments, made to run through a long series of years. The need of such a standard was forcibly illustrated during and after our late civil war. Debts contracted when the dollar was at par, or worth one hundred cents in gold, were often due and paid when the dollar had dechned to be worth no more than thirty-five or forty cents in gold. In these cases the cred- itors lost the largest part of their dues. On the contrary, debts made during the war, when the dollar was worth only one-half of its face, were required to be paid years later, in dollars worth nearly or quite one hundred cents in gold. So salaries, established before the war, at two thousand dollars, were worth during the war, and for years afterwards, one thousand or less. Endowment funds, invested for the support of public institu- tions, have been found strangely inadequate in subsequent times, because of the changed value of their incomes. The real difficulty in finding a constant standard of value lies in the variable nature of value itself. And as the sources of these variations are planted in the mental and social conditions of the race, it may be questioned whether such a standard would not prove illusive if not injurious. Value is a matter of the moment, and responds to an existent state of want and rela- tionship. The toy represents to the child what the splendid mansion does to the man. The paint and the eagle's feathers are to the savage what the crown of jewels and the royal robe are to the white monarch. The wealth of distant ages, and of alien peoples, can only be compared in connection with their civihzations. Practically, a fixed standard of value is of conse- quence in such cases as those mentioned, and then only for a single generation or less. CHAPTER VI WANTS AND UTILITIES. 63. The circle enlarged. — We bring forward, once more, for a further illustration, our triangle and circle. The triangle of value has been sufficiently discussed to show its central character and importance. The discussion must now pass be- yond its lines into the ever-wid- ening circuits of wants, work, and* wealth. The notion of value, with its threefold character, is not to be left behind, nor lost sight of. It is every-where the central idea, and the key to all the rest. It responds to all mate- rial wants ; it energizes all work ; it is the significant fact in all wealth. Central in every act of exchange between children or men, in every purchase or sale, in every contract and business en- gagement, in the gigantic transactions of great corporations and in the widest calculations of a world-embracing, world-enriching commerce, from the want and work of an hour to the mighty industries which employ and feed the world's uncounted mill- ions, the notion of value mingles with it all, and gives the business character to it all. 64. Wants and utilities reciprocal. — To the idea of (67) 68 POLITICAL ECONOMY. want, value always answers as the gratifying utility. When merchant and manufacturer look out upon the wide world of human wants which constitute their market, they unconsciously turn to the utility of their goods as the natural correlate and response to these wants; and so, too, the thought of the utilities they are producing, summons into sight, as the other side and counterpart, the wants which these utilities presuppose. The full discussion of the one must necessarily involve the survey of the other. Just as in the world of work, values are thought of as the products of such and such efforts; and as in the world of wealth, they are thought of as possessions having purchasing power ; so in the world of wants, they are uniformly and always, of necessity, thought of as utilities having power to gratify. Those economists are wrong who assume that value is always thought of as a relation of goods offered or given in exchange. 65. Want and utility defined.— The word want, in strict use, means something lacking. It is the felt lack of something required to gratify a human need, desire, taste, or appetite of mind or body. In Political Economy, want is any need or de- sire which seeks its gratification through labor or the products of labor. The word utility must be given an equally wide meaning. It embraces not merely the useful, in the narrow sense, but all things which have the power to gratify any desire, or to aid in getting such gratification. Want and utihty mutually imply each other. Want is a craving which utility satisfies. Want is an inward feeling; utihty its external object. Want precedes; utility follows. Want is original ; utility is its derivative. Want is positive and necessary; utility is conditioned upon it. Utihty is limited by the want it gratifies ; when the want ceases, the utility ends. It is in the nexus of want and utility that Political Economy unites its mental and material sides or aspects. Looking in^ WANTS AND UTILITIES. 69 ward, it is a mental science; looking outward, it is a material science. 66. Vast extent and influence of man's wants. — The wants of man are practically endless. Human life is a recur- ring series of needs and desires. They return afresh after each gratification. They multiply with the growth, they change with the character, and vary with every varying condition of man and society. They constitute the motives of all voluntary action, and measure the fullness and force of all sentient life. Civilization is to be known and estimated chiefly by the num- ber and character of its wants. Every advance in civilization is accompanied, if not produced, by the elevation and increase of human wants. The savage has few wants, and these are simple and mostly sensual, yielding but low and brutal pleas- ures, and lending to its employments only a feeble and fitful force. The needs of the civilized man are as endless as his resources. They sweep through the entire range of his sensi- bilities and his intelligence, filling his life with pleasures both elevated and intense, and giving to his enterprises an impulsive force as powerful as persistent. It is an error as grotesque as it is false to conclude, as Rousseau did, that civifization is an evil because it adds to man's wants. The increase of wants is the increase of motives and of opportunities. It is the widening of the field of life that widens the scope of desires. If the civilized man is inferior in condition to the savage, because of his greater needs, then is the savage inferior to his dog for the same reason, and the dog is inferior to the oyster. The argument of Rousseau shows its falsity by the absurdity of its conclusions. But it is also false in its facts; for the savage, or man in the state of nature, is not content. And the discontent of the savage is real, for he lacks the necessaries of life; the discontent of the civiHzed man is often imaginary, arising from the indisposition or neglect to enjoy the abundance which surrounds him. 70 POLITICAL ECONOMY. .67. Non-economic wants. — Not all wants demand labor for their gratification. Many of the bodily needs, and still more of the spiritual, are met by gifts of nature, by material or spiritual conditions and environments which come without effort. Nature gives light for the eyes, air for the lungs, water for the thirst, and sunshine and its warmth for man and soil, without labor and without price. She also gives, freely, beauty to gratify the aesthetic taste, truths for the intelligence, and facts for the understanding. In many cases also nature furnishes, without human labor, food and shelter. Wants thus met by the free utilities of nature cost no efforts, and give rise to no values. Such wants do not count among the economic forces, though these free utilities, helping to swell the aggregate of the resources of life, have sometimes errone- ously been counted among the world's wealth. They belong to wealth only in that figurative sense in which we speak of rich mines and of a rich soil, and in which use is put for value. Only labor can create value; and nature's gifts, however high their utility, and however vital or many the wants they gratify, are never counted as goods, in the world's market, till touched by the hand of toil. Many wants are also suppressed by men as beyond their means of gratification. The poor habitually suppress many desires, and few men have wealth enough to , gratify all their wants. These suppressed desires are not actual, but only possible economic forces. They become active when easier production and cheaper products allow them to be gratified. 68. Economic or demand wants. — The wants which count in economic science are those which can be gratified only by labor or its products, and which men are either unable or unwilling to suppress. These wants constitute the market demand for goods or service, and may be called demand wants, or simply demand. There is a class of wants which can be met only by personal WANTS AND UTILITIES. 71 service, which may be rendered by hired servants and profes- sional aid, or by the gratuitous help of friends. Such are the care and nursing required by those in either extreme of life, or by the sick and the unfortunate. It includes, also, the wants and desires met by professional service, such as that of the teacher, the lawyer, and the physician. The power to render service is also an economic value, but limited in the character of its ownership, which can not be transferred except in use and temporarily. 6g. Estimation of wants. — Wants are estimated both by those who feel them, and by those who propose to provide for them. In the actual business world, they are mostly estimated by manufacturers, merchants, and others, who hope to make their profits by meeting them. But this public estimate must necessarily rest first, if not finally, upon the private estimate which every man makes of his own desires. Personal desires all relate to pleasures which we wish to enjoy, or to pain which we wish to avoid. Jeremy Bentham said, "To a person considered by himself, the value of a pleasure or pain, considered by itself, will be greater or less, according to the four following circumstances : I. Its intensity; 2. Its duration; 3. Its certainty or uncertainty; 4. Its propinquity or remoteness." He also adds, as circum- stances giving power or value to a pleasure or pain, ' ' Fecun- dity, "ox the chance of being followed by others of the same kind; purity, or chance of not being followed by others of the opposite kind; and extent or the number of persons to whom the pleasure or pain extends." All of these, doubtless, have to do with the personal estimate which each one makes of his own desires and aversions. But the public estimate of human wants made by those who seek to learn the market demand for goods which may gratify desire, or save men from pain and trouble, must rest upon other and larger, if also less scientific, classifications. 70. Classes of demand wants. — Several classifications 72 POLITICAL ECONOMY, of economic or demand wants, though lacking in scientific precision, will be found useful in studying their economic rela- tions. We notice some of the principal ones : 1. Vital and non-vital. — Vital wants are those whose gratifica- tion is necessary to the continuance of life. The goods which satisfy them are called necessaries. These are chiefly food, and the means of procuring or conserving warmth, such as clothing, shelter, and fuel. The non-vital are those whose gratification yields pleasure, but is not necessary to life. The goods which gratify these wants are called luxuries. The line of division between these two classes of wants is not fixed and immovable. Luxuries may not only become necessaries by use, but the pleasures they afford are often the means of increasing or conserving vital energy. The vital wants are universal, and can not be suppressed or held in abeyance. The market demand for necessaries is, therefore, large and nearly constant. The supply must also be abundant and constant. But, as these wants are nearly fixed in their limits, the conditions of scarcity and glut of the market will be more frequent than in the case of other goods. The non-vital wants or desires for luxuries have a wider range, but are less constant. They vary with tastes and fash- ions, and have a large choice of gratifications; hence, produc- tion of any one kind of goods is less abundant, and scarcity and glut will be less frequent, though the market will be more fickle and more difficult of calculation. Necessaries mark ex- istence; luxuries mark pleasure. 2. Physical and mental wants.— VhysicdiX wants include all bodily appetites and needs, which are met either by material goods or by personal services. They embrace the vital wants and most of the desires for physical pleasures. The mental wants include all gratifications of the intelligence, and of the aesthetic, mora], and religious nature of man. These WANTS AND UTILITIES. 73 gratifications come sometimes through physical agencies, as works of art, books, and instruments of music, and sometimes through personal services of professional men, artists, or other laborers. The goods which answer to the physical or animal wants are chiefly nature's products or commodities, in which the gifts of nature enter as a chief factor. The utility of these goods are found in the natural properties they possess. Our foods, cloth- ing, houses, machinery, and vehicles are valued according to the sterHng material quaUties they possess. The goods which serve the spiritual or mental needs of men are those in which the efforts of high skill and special genius are involved. The natural material properties count for little, but the ideas in- volved, or represented in them, count for much. It is obvious that the distinction between physical and mental wants is not wide nor always clear. The one mingles with, and shades up into, the other. We choose our clothes partly for comfort and partly for good looks, and we build our houses as much for our minds as for our bodies. We look for warmth, for durability of texture, and for substantial structures ; but we seek, also, beauty of form, for gracefulness of style, and pleasing proportions. As men emerge from savagery, and march upward in civil- ization, the mental wants advance beyond the physical, and the markets for these higher forms of value open and grow stronger. It is here that education, civilization, and morahty become eco- nomic factors. They multiply and elevate desires, and diversify and improve products. 3. Immediate and future wants. — All wants are present as feelings, but some ask an immediate gratification, while others look to a future. The real want, in the latter case, is anticipated as likely to exist in coming time. Immediate wants demand immediate gratification. They give motives for the purchase of goods already in market and ready for use. They are strong because immediate, and often P. E.-7. 74 POLITICAL ECONOMY. act with a much greater force than that of greater wants lying in the future. They are the actual market demand of the hour. Future wants are the motives of prudence and economy, of business forecast and enterprise. It is this care for coming needs and gratifications which furnishes the motive power for the immense machinery and the grand movements of the in- dustrial world. The accumulated wealth of mankind owes its existence to this regard for future wants, and its value is main- tained by the faith men have in those wants. The difference between savage and civilize'd men, as also between the idle and improvident, and between the industrious and enterprising, lies largely in the different force which the future exercises over them. In the estimation of the value of any article offered for sale, the present want is weighed against the future, and many ex- changes of a less present value for a value greater but future, can be explained only in this way. A sad but forcible illustra- tion of this improvidence is found in the inebriate who sacri- fices all provision for his family and himself to the present gratification of his appetite. Present gratifications are temporary; future ones are thought of as continuous or enduring, and they gain in power by this promise of permanency. 4. Special and general wants. — Special wants belong to par- ticular occasions, or to individual men or classes. General wants are such as are common to the whole community. Special wants may be more or less limited, and the values an- swering to them will have a like limitation. When limited to a single person, as in case of an artificial tooth, the value, though real, lacks exchangeability — another proof that purchasing power is not identical with value. Utility can never be wider than the desires it gratifies; but the value may be more widely recognized, and bought and sold by those who have no use for the goods. Special values will WANTS AND UTILITIES. 75 obviously be more liable to fluctuations than those of more gen- eral character, because desires common to all are less likely to change or cease. Certain special desires become so strong by habit as to be- come a sort of physical madness ; as, for example, the appetite for opium, for tobacco, and for strong drinks. These seek their gratification at all hazards and at whatever cost. The enor- mous profits of the liquor traffic are due mainly to this cause. As in the case of monopoly, the seller plays upon the element of desire, almost without reference to the effort involved in the manufacture. 5. Primary and secondary wants. — Some goods give immediate gratification of themselves; others simply aid to obtain desirable things. Our desire for the former is a primary want; the de- sire for the latter may be called secondary. Man's desire for bread is primary ; he wants it for the gratification it gives. But the desire for a plow is secondary; it is wanted as a means of getting bread. Secondary wants come from the primary. The need for the plow is derived from the need for bread. The value of secondary gratifications depends therefore upon that of the primary. In the business world, secondary wants are most numerous. Lands, store-houses, money, merchandise, ships, carts, manu- facturing machinery, and tools are wanted not to gratify the primary desire for enjoyment, but as a means of winning wealth and getting other enjoyments. As the business wants are chiefly secondary, so the values engaged are mostly secondary. Men trade on the desires of other men. They manufacture and buy and sell to gain wealth, though their ultimate aim is, of course, personal gratification. Hence, as we have seen elsewhere, in the common estimation of primary values, or goods for use, the trader weighs the desires of consumers, and not his own. The love of wealth is, properly, a secondary desire, but it 76 POLITICAL ECONOMY. may become primary. Men often seek wealth beyond all pos- sible needs, from the simple love of gaining and having. They enjoy wealth as wealth. Its mere possession brings to them a certain power and influence which are a gratification. This constitutes an immense force in the business world. In its intenser form it makes the miser. CHAPTER VII DEMAND AND SUPPLY. 71. Demand defined. — In pursuing the study of human wants, we come in sight of the oft-quoted, though not well- understood, law of supply and demand. We have already shown that demand-wants are such as men have the power and the will to gratify. The demand for any commodity is made up of all such desires for it as come to market to purchase. The demand for wheat, for example, will be made up of the wants of all who wish wheat for any purpose, and who are able and disposed to buy it. Market, as commonly understood, means any customary public place of sale of one, or several, classes of commodities. In this chapter, and generally in political economy, the word is used to denote the aggregate need and disposition to purchase any given commodity, existing at any given place or time. Thus, the market for wheat is the demand for wheat by actual purchasers and consumers. In this sense of the term, there is no direct reference to any special place of sale. The demand will never exceed the real or supposed wants of mankind; but it may, and often will, fall short of these wants; for those who can not produce or purchase the goods in ques- tion, must suppress their desire or find a substitute. There is always a volume of wants of this latter class which may, at any moment, when circumstances favor, be added to the actual de- mand. The demand of one day may be doubled the next if in any way the price is made, suddenly and largely, to decline, (77) 78 POLITICAL ECONOMY. 72. Supply defined. — Supply, in its simplest definition, includes the goods, at any moment, held for sale. It is the amount of any given commodity available to meet the demand for that commodity. Goods not open to purchase, do not properly constitute any part of the supply. There are always large masses of wealth in the world which are not for sale. Men of wealth hold large estates of land, and numerous herds of domestic animals, to gratify their own love of grandeur and display. These lands and herds can not be counted as a part of the market supply of these goods. So, also, wheat may be held in reserve, for future use or for speculation; and in this case it is, for the time, withdrawn from market, and is counted as no part of the actual supply, though it remains a potential or possible supply. In a general sense, it may be said that all the wealth of the world constitutes the supply of the world's wants; and in this sense all wants are demand, and all wealth is supply. But in the strict sense of the terms, as employed in the market laws of supply and demand, they must be understood as including only wants in market, and the goods offered for sale. The French economists call these, Voffre et la demande — the offer and the asking. The demand and supply are not always those of the hour, but often necessarily include all that are to be met during a period of time. The harvest of the summer is the natural bread supply of the year. So the merchant imports his supply of goods for the season, and the demands in these cases include all the desires which will appear for gratification during the period. It is obvious, from these statements, that demand and supply are not fixed quantities. Beyond the actual demand there is always a large possible demand, reaching out to the last limit of human wants. So beyond the actual supply, there is a large possible supply stretching to the entire mass of the production, actual or possible. DEMAND AND SUPPLY. 79 73. Demand and supply reciprocal. — These two, de- mand and supply, stand over against each other, the two gigantic factors or forces of the world's markets. Knit together by reciprocal relations, as the asking and offer, the desire and its gratification, they have long been recognized as giving law to market values and prices. Each supposes the existence of the other. True demand is not a vague or indefinite desire for some gratification, but the specific desire for a known commodity. All men may like to ride and to enjoy the shelter of a roof, but the demand for actual horses known to be in market, and for mansions or houses known to be for sale, comes only from those who feel themselves able to purchase and possess these things. On the other hand, supply looks to existing desires and askings. It is the offer of goods to those thought to be purchasers. The laws of supply and demand only exhibit, on a larger scale, the relations which exist between the two parties to a simple exchange or purchase. Demand is the aggregate de- sires of many purchasers, and supply the cumulate offer of many sellers. The difference between these aggregates and the simple cases which they involve, lies chiefly in the uncertainty as to the amounts of the aggregate demand and supply. In the simple exchange, the quantities are supposed to be in sight, and no question necessarily arises as to other desires or other offers. But in the grander market movements, the buyers and sellers are two uncounted multitudes partly hidden from sight. The number and extent of the wants, as also the sources and amount of the supplies, are always partially unknown. The utility and necessity of the general law come from this uncertainty. A single instance requires no law. Its conditions are visible. It is only when we need to grasp a large class of cases, stretching beyond our power of vision, that we call in the aid of a general law or principle. The law itself is discovered by the study of single cases. We mount from the particular to the general, only that we may 8o * POLITICAL ECONOMY. have the means to judge and determine all coming particulars. The law, once discovered, remains forever true, though we may find still some uncertainty in our application of it. 74. Laws of supply and demand. — The market laws of supply and demand may be stated as follows: 1. When demand and supply are equal, values and prices remain at their natural level, as determined by cost. 2. The supply remaining constant, the value will vary di- rectly as the demand — that is, if the demand for an article in- creases, the value will increase; if the demand diminishes, the value will diminish, as shown by the prices, which are to be counted in general as the measure of value. 3. The demand remaining constant, values will vary inversely as the supply. Increase of supply will lower values, and de-" crease of supply will enhance them. These laws may be more concisely stated in one as follows : Values vary directly with the demand, and inversely with the supply. It might seem wiser to state these laws as concerning prices, since it is the price that appears always to be affected by the variations in supply and demand; but the changes in price are supposed to represent changes in value (not in utihty), and have no significance except as they do represent such changes. Economic science has nothing to do with false and fraudulent prices which represent only the fraud of the seller and the ig- norance of the buyer. It is evident that a seller may ask more than the market or current price, and that an ignorant or_ care- less customer may give what is asked, and that this may be done without any relation to the actual demand and supply, but such a case, however many times repeated, does not properly bring into question or doubt the laws already stated. Thornton (on Labor) contradicts Mill and other economists, and affirms that selling prices never depend on supply and de- mand, basing his argument on the fact that sellers often fix their prices without reference to the supply of goods on hand. He loses sight of the fact that the merchant lays in his supply DEMAND AND SUPPLY. 8i to meet the demand of the season, and not the demand of the hour. He takes no account of the monopoly prices based on an artificial scarcity, caused by the seller's withholding his goods till his own price is offered. As the real supply and demand can only be approximately known, each buyer and seller is left to make his own estimate of them, and hence there may be several prices asked and paid in the same market, the same day; but this does not disprove the law. It only proves that the law is operative as far as the facts are known, and no further. The positive proof of the truth of the laws of supply and de- mand is to be found in the constant appeal made to them in actual life, and the constant efforts of traders to ascertain the real supply of their commodities. 75. The laws explicated. — The philosophy of these laws may easily be seen from the principles already stated in previ- ous chapters. The increase of demand beyond supply is the excess of desire beyond the means of gratification. The conse- quent scarcity increases the difficulty of attainment, or the efforts required, and this in turn increases the value. But an- other, if not the chief reason of increase of price, is found in the partial monopoly which nearly always attends a sudden in- crease of demand. As only a part of the existing desires can be gratified, there are two or more buyers for each article to be sold, and the element of effort is pushed higher by the anxiety of each party not to go unsupplied. In the case of diminished demand, another principle prevails. The diminution of demand leaves an excess of goods or gratify- ing power over the existing desires, or those of the period for which the supply is designed. Such excess having no desires to gratify, has, of course, no immediate value ; but as this ex- cess can not be separated from the part of the goods in" demand, the loss of value tends to distribute itself over the entire quantity of goods of that kind. Suppose a community to have a full supply of peaches to 82 POLITICAL ECONOMY. meet all demands. Now let some sickness, or other cause, suddenly destroy half the demand for this fruit. It is evident that only half of the supply will be wanted ; the other half, if there is no foreign demand, will be worthless, as there will be no buyers for it. Each seller, fearing to have the worthless surplus left in his hands, reduces his price in the hope of thus securing the sale of all his stock. Other dealers doing the same, the loss tends to spread itself over the entire stock on hand. If all had combined to destroy the excess, the price would have remained unaffected. Cases are not wanting in which owners have recognized the valueless character of the surplus, and have deliberately destroyed it rather than cheapen the price of their commodities, knowing, as they did, the difficulty of restoring prices to the old standard. A varying supply presents, evidently, only the same cases conversely stated. The increase of supply works the same re- sult as the decrease of demand; and the diminution of supply gives the effect of an increase of demand. There is, however, an important difference in the effects of the cases, as will be seen further on. It is evident that the general law might be stated simply as the law of excess and deficiency of demand alone, or of supply alone. Thus it might read : An excess of dema7id raises the value, and the deficiency of demand lowers it. Or, leaving demand out of mention, we might read: The excess of supply lowers values, and the deficiency of supply raises them. 76. Limitations of these laws — upward. — These fa- mous market laws, though involving important truths, are by no means" so comprehensive and potential as they seem. There are other relations and reactions between supply and demand which essentially modify the force of these laws. An examina- tion of the several cases in detail will show some noteworthy results. Case I. — Let the supply of any commodity become excessive. The immediate effect is to cheapen the price ; but this cheapen- DEMAND AND SUPPLY. 83 ing brings the commodity within the purchasing power of a larger number of consumers, and thus increases the demand. This restores the equiHbrium between the supply and demand, though at a lower level of value, and checks the fall of prices below that level. The introduction of the several inventions in cotton manufacturing machinery, greatly decreased the price of common caHcos. The retail prices fell successively from fifty cents a yard to twenty-five, fifteen, and ten cents a yard. But at each reduction the demand increased and held the price firm till another improvement in manufacture multipHed again the supply and occasioned another fall. Thus, in nearly all cases the fall in price is followed immediately by an enlargement in the demand. But another reaction may set in if the fall in prices lessens too much the profits of production. In this case, the production will be abandoned by some of the manufacturers, or will be less urged, and so the equihbrium may be reached by lessening the supply. Case 2. — Let demand be in excess, and an opposite train of consequences may follow. At first, the price rises in proportion to the scarcity. This increase of price drives from market the poorer class of consumers, and thus lessens demand. The equilibrium established again between the offer and the asking, the prices remain stationary, though at a higher level, till a further increase of demand repeats the process. But the increase of price stimulates production, and thus in- creases again the supply, and the upward movement of prices is checked before they reach their highest possible limit. Thus it will be seen that in both of these cases two sets of forces are at once set in motion to restore the balance between supply and demand so soon as it is disturbed in either direction. The normal condition is that of equilibrium between these two market factors, and they can not long be kept out of balance. Should the supply of any commodity be permanently shortened, the consumption would fall to the nev/ point of supply, and re- main there. Or, should any demand be permanently lessened. 84 POLITICAL ECONOMY. as is often the case with goods out of fashion, the supply would be speedily reduced to the same level. 77. Limitations — do^?vnward. — In the two cases consid- ered, the excess of supply or demand was supposed to result from an upward movement of desire or of production. Let us now consider the effect if the equilibrium is destroyed by the downward movement of either. Case 3. — A diminution in demand would leave supply in ex- cess, as certainly as an increase in production. And this ex- cess, like the other, would reduce the price. But in this case the excess marks, not an increase of goods and of the general wealth, but a decrease either of desire or of purchasing power, since demand would fall with each. The new demand, spring- ing from diminished price, will less often appear under these circumstances, and the balance between supply and demand must usually be reached by the path of diminished production. The changes of fashion afford many illustrations of this case. Goods out of fashion may, sometimes, find a limited increase of market among the poor, but not sufficient to maintain the manufacture. The hoop-skirt factories were soon out of work when these skirts went out of fashion. Case 4. — Finally, a diminution in production may leave de- mand in excess, as surely as an increase in desires. But in this case, the diminished supply means, usually, diminished wealth, and not unfrequently, general distress and hard times. Short crops and the desolations of war afford us instances of such diminution of supply below the demand. The increasing prices may still lessen the number of purchasers, as in Case 2, but they rarely stimulate, to any great extent, the new produc tion. The equilibrium is reached by the dying out of all demand which can not afford the gratification at the higher prices. 78. Artificial limitations. — Several other causes also in- terfere with the action of these laws of supply and de- mand : DEMAND AND SUPPLY. . ■ 85 1. The hope of a better market in future often leads to the withdrawal of goods from market, and to this extent relieves the glut by lessening the offer. This is feasible with goods which do not perish by storing, and with such, also, as have only a limited market. In the case of agricultural products, such as grain, fruits, and cattle, this withdrawal from sale is often dangerous and expensive. The fruits may decay, and the cattle must be fed. 2. When goods are sufficiently cheapened by an oversupply, they may sometimes find an outlet in foreign markets. The wonderful facilities of modern commerce have vastly diminished the dangers of both scarcity and glut, and have done much to maintain the equilibrium of markets and the steadiness of prices. 3. On the other side, the necessity of giving employment to labor, and to capital already invested, often compels continued production after supply is in excess. English manufacturers have lately been obliged to run their mills, sometimes at a loss upon the goods manufactured, in order to avoid a greater loss in the departure of their skilled operatives and the deterioration of their machinery. It is said that cargoes of English goods have sometimes been shipped to foreign markets to be sold under cost, in order to relieve the home market and give em- ployment to men and machinery, 4. Monopolists sometimes interfere with the laws of supply and demand in order to maintain high prices. The monopolist restrains supply and creates an artificial scarcity. He does not subvert the law, but employs its force to his own advantage. This, it should be remembered, is an abuse of monopoly, not its necessary action. 5. Speculators create a false demand by exciting hopes of a large increase in values, without regard to the supply. They induce a feverish present demand for lands, grain, or stocks by skillfully parading the prospects of a larger future demand. While it continues, this fictitious demand is as powerful as a S6 POLITICAL ECONOMY. real one to enhance values. It may be claimed, therefore, as a proof of the laws rather than as an exception to them. 79. Limitation by prospective and new utilities. — I. As all business looks, partly at least, to future profits, and hence also to future production, present prices must necessarily feel the influence of prospective supplies or demands. The promise of a large harvest in the coming season, will often act like a present increase of supply, and lower the price of the grain on hand. The prospect of a large importation of goods from abroad, will diminish the value of the same kinds of goods at home. On the other hand, the fear of a poor harvest will increase the demand for the present supply of breadstuffs, and will give it additional value. The interruption of trade with the tar and turpentine producers of North Carohna, at the opening of the war, more than doubled the price of all the turpentine then in market. 2. The discovery of a cheaper or better substitute for any commodity in market, will have the same effect as a large in- crease of the supply of that commodity. The invention of paper speedily drove parchment out of the book market by re^ ducing its value below its cost. So also the art of printing ruined the business of the manuscript writers, by multiplying the supply of books. The products of the power-looms have in the same way displaced the expensive coarser fabrics made upon the hand-looms of earlier times. 3. The finding of a new use for any commodity gives a new demand for it, which is equivalent to increasing the old de- mand. The invention of straw wrapping-paper gave a new de- mand for, and an increased value to, straw in the neighborhood of the mills. The many new uses found for iron in modern machinery, railroads, and iron ships multipHed many times over the demand for this useful metal, and must have raised enormously its value had not the stimulated production kept near pace with the need. Nickel was discovered in 1751, and DEMAND AND SUPPLY. 87 had some value for such alloys as German silver; but it was not till after the discovery of its use in nickel-plating, a few years ago (1869), that the demand became important, 80. The laws vary with goods. — The action of the laws of supply and demand varies somewhat with different classes of goods. Goods which are necessaries, because demanded by the vital wants, can never go wholly out of quest, though the consumption of them may be largely reduced in a time of scarcity. Luxuries, on the other hand, may be driven out of use, or nearly so, if the diminished supply shall raise the price too far. Articles, whose use may easily be dispensed with without much loss of pleasure, will disappear from the market on a sHght increase of price; but indispensable goods, such as the breadstuffs, will bear any increase of price up to the full purchasing ability of the consumers. During the civil war, the sale of books was said to have largely diminished; but the sale of newspapers increased, as tidings from kindred in the army were felt to be a necessity. During the siege of Paris, by Henry IV., the price of wheat rose to fifty times its ordinary value. In the case of excess of supply, the prices of luxuries will fall, other things being equal, faster and farther than those of necessaries. The cost of production, including all expenses of manufact- ure, preservation, and transportation, may be regarded as the lowest Hmit of natural value. Necessaries will easily be forced down in price, below this limit, by overproduction ; but many of the so-called luxuries frequently fall below it by changes in fashion. Auctions and other forced sales of such commodities are common. The durability of goods, and the probabilities of future demands or supplies, will, of course, modify the result in each class of goods. Articles of secondary or indirect utility, such as tools, ma- chines, seed, and laboring animals, used in the production of goods of primary and direct utility, must usually be reckoned 88 POLITICAL ECONOMY. as necessaries, in the case of diminishing supply; but as luxu- ries in case of excess. A soldier or hunter will sacrifice his clothing, and often his food, rather' than part with his gun ; but the extra gun is easily thrown away, or sold for a trifle, when he is on march. Governments, very properly, guard the implements of labor from being seized for ordinary debts. 8i. The laws defended. — The formulas of supply and de- mand have sometimes been ridiculed by a certain class of econ- omists; while they have been denounced, by socaHsts and com- munists, as unnatural, iniquitous, and fit only to be abolished. But, as we have seen, these laws are nothing but the enlarge- ment of the facts found in every act of exchange of values. Properly understood, the laws of supply and demand are as valid and as uniform as any of the laws of nature. They are not to be discredited by seeming exceptions, nor by the modi- fications in results produced by other forces or environments. These laws must forever remain the chief guides for practical men in the prosecution of wealth-creating or wealth-distributing business. But here, as elsewhere, such men must learn to judge between the real and the false, and, amid the complex, to discriminate the essential from the accidental. In the appli- cations of all sciences, such sound judgment and practical skill must be employed, and this is accepted, by all fair reasoners, as an essential condition of the problems under these sciences. Science is light ; but it requires good eye-sight to use it for the best. The discussion of this subject might properly enough have been deferred to another branch of the science — that of ex- change — with which it has a close connection; but it seemed better to keep it in its place as a part of the field and phe- nomena of wants. CHAPTER VIII. WORK. 82. The work segment. — We pass now to another seg. ment of our economic circle. The good Saxon word Work will serve us better than the Latin labor to cover that great middle ground of economic science which lies between Wants and Wealth. Even in common speech the word work is wider in meaning than the word labor. Men apply it to all voluntary efforts of mind or body — of individuals or soci- ety — to promote useful or ben- eficient ends; and it covers all production, from the humblest work of man to the mightiest, divinest work of God. The term labor has a more restricted meaning. It is the effort put forth to effect some given change or to produce some given result. Men employ labor to accomplish their work. 83. The segment defined. — As shown in Chapter I, work takes its motives and its direction from the wants of man. These set in motion the giant wheels of all our industries, and choose for them the rich and coveted objects of their efforts. So, also, as shown in the same chapter, work finds its des- tined end and completion in the wealth it creates. The mag- nificent industrial movement ripens and rounds up into the p. E.— 8. (89) 90 POLITICAL ECONOMY, equally magnificent result. In Chapter IV, we have seen that work furnishes the second essential element in value. The effort side of the triangle of value marks the presence of work. No article, however useful, can have true and full value till the hand of toil has touched it, or till the shadow of past or coming work has fallen upon it. 84. Work explicated. — Work in its largest sense, the sense in which we use it in this chapter, includes the entire volume and variety of activities which fill the business world. Each man's trade, profession, or vocation is his work. Be it with brain or hand, on land or sea, in shop or field or store, with pen or plow, as master or as man, inventing, construct- ing, managing, serving, laboring, trading, or conserving, — all activity which aims to create, increase, or exchange values, to gratify desires or prevent pains, — all come under the great name work. As work is the wealth-producer, its discussion will necessarily cover that field in economic science known in most of the books as production. The following synoptic view will exhibit something of the extent and distribution of this field : WORK. ■ Its field. Its factors. [ts forms. Material changes. Exchanges. Mental effects. Services. Nature Labor. r In sul \ In for *- In pis In substance, form, lace. crude, products. J Vital — human, animal. *- Non-vital — physical, chemic. soil — site. See full synopsis in Chapter X. ,. • 1 f Nature.) ^ . ^, ,^,t,t Capital, i _ ( See synopsis, Chapter XV 11. L *■ Forms. ) Agricultural. Mining, etc. Manufacturing. Trade and transportation. Intellectual professions and pursuits. See synopsis in Chapter XVIII. wo/^Jir. 91 85. The field of work. — Man's work lies with the world. In his business of wealth-making, or in that broader business of maintaining life, increasing happiness, and elevating his con- dition, he finds before him nothing but the naked planet on which he lives, and his own physical and intellectual powers. The entire field and problem of his work must be found in these. He can not go outside of these ; he can import nothing from other realms. If, now, the question be put. What can his work do ? the re- sponse comes, simple and plain, it can do four things, no more : I. It can change material things, change them in substance or mixture, in form and in place. 2. It can exchange its prod- ucts with other workers. 3. It can produce mental effects, — ideas, arts, sciences, civilization. 4. It can render services di- rectly to mankind. These four include all trades, professions, and employments; all the innumerable forms of man's work; all the ceaseless activities of the business world. 86. Substance-changing work. — The changes in mate- rial things, effected by work, constitute the field of the proper productive industries. The change in substance, or, more properly, in the mixture or composition of substances, gives us : I. Agriculture, which, by the aid of natural forces, changes soil and its adjuncts to vegetables, and these again to animal substance. In economics, agriculture is understood to include all those industries which simply collect nature's growths, with- out first cultivating them. Thus, lumbering, hunting, and fish- ing may be counted as branches of agriculture, though the lumberman simply takes the trees from the wild forests; the hunter collects the meats, skins, feathers, furs, and ivories of animals which grew without his care, in their native haunts; and the fishermen fetch from the lakes, rivers, and seas, the fish which cost them only the labor of catching. At its outset all agriculture gathered nature's spontaneous products. Agriculture, it is evident, deals with the life-forces of nature and their products. It takes nature at its highest and best, and 92 POLITICAL ECONOMY. finds for man the nearly ready supply of his first and simplest wants. 2. The substance-changing industries include mining and the metallurgic arts which dig the ores and extract the metals, or bring us the coal from its native beds. 3. They include, also, the chemical manufactures, as those of oils, paints, drugs, artificial condiments, perfumes, and all the various preparations of animal and vegetable substances for the arts or appetites of men. Many of these approach, in their economic characters and conditions, the ordinary manufactures. 87. Form-changing work. — The changes in material forms occupy what may be called the mechanic manufactures. Their aim is not like that of agriculture, to collect utiHties already produced by nature, but, out of crude and otherwise useless materials, to shape new utilities, devised by the thought of man, so that the iron becomes a ship, the tree a table, and the stone a' house. They include the great staple industries of all nations and all times, — the house-building, the cloth-making, and the tool-making arts, in all their wide variety of products, from the hut to the palace, from the sackcloth to the finest lace, and from the simplest lever to the watch-making machin- ery, the eighty-ton steam hammer, and the dividing machine which graduates the meridian circle to a fineness that demands the microscope to discern its marks. They comprise, also, the almost innumerable fabrications in which the brute matter and dumb forces of nature are trans- formed into a great army of silent and obedient slaves and helpers to mankind, to draw his vehicles, carry his messages, do his drudgery, fight his battles, increase his powers, multiply his wealth, and give him wider dominion over the land and over the sea. In these arts, nature is taken at its lowest — its unorganized matter — and man at his best, putting his thought and will into crude matter, and making it to assume shapes and to yield utilities which nature never dreamt of WORK. 93' 88. Place-changing work. — The change in place is the work of transportation. Its necessity comes from the desire of men to collect and enjoy, at their homes, the varied products of distant lands and of differing climes. Sitting under his own vine and fig-tree, man would eat the fruits of the tropics, clothe himself with the furs of the arctics, the Hnen of Ireland, the silks of France, and the soft wools of Saxony or Cashmere. On his breakfast table, he wishes the coffee of Arabia, the tea from China, the sugar of the West Indies, and the spices of the East— fruits, fish, flesh, and bread, each from a different and perhaps distant locality. To get these, the long lines of trans- portation must be worked — ships must sail, caravans must travel, rail-cars run; and great store-houses must receive, pre- serve, and distribute the surplus products of each and every land. Transportation, as an industry, is usually united with that of trade or exchange, but it has its own arts, laws, and condi- tions, which the economist must study. It creates values as truly as the other arts, though it adds not a single bushel to the wheat it carries, nor works a single change in the form of the goods it distributes. It does not deal with nature directly, low or high, as do the great industries of the field and the shop, except as it employs her forces to waft its ships and drag its trains. It might appropriately be called the service-industry, since its mission is to run our errands, carry our packages to our neighbors, and bring back theirs to us. 8g. Exchange. — We have considered the first of the four great fields open to man's work- — the field in which man meets nature, and exerts his powers to effect useful changes in her materials and products. In the second field, that of exchange, to which we now come, man meets man. He comes as the owner of wealth, which he does not need for his personal grat- ification, to exchange it for the surplus goods of another. Ex- change, seemingly so simple and unimportant, forms one of the widest and most difficult fields of Political Economy. Constitut- 94 POLITICAL ECONOMY. ing one of the most striking differences which distinguish men from brutes, it lies at the basis of human civihzation, if not of man's power to stay permanently upon the earth. The right to exchange hangs upon the right to possess, and gives to that right its chief importance. Wealth is possible, and worth hav- ing, only through this power to exchange it for all objects of desire. The wider discussion of tTiis field must be left for coming chapters. go. Intellectual work. — The third field of work takes us out of the domain of material goods into the sphere of man's in- tellectual life and powers. Human efforts do not expend them- selves wholly upon the outer world; there is a world within, a world of ideas, in which man is also a worker. There are in- dustries of the intellect just as onerous and as important as those of the physical powers. Indeed, all proper industry be- gins with a mental movement; and the physical effort only gives form and effect to what the mind had already shaped in idea. Some knowledge of nature's laws must precede the mastery of her forces and the proper use of her materials. There has been a question whether intellectual forces are economic factors, and whether intellectual products are eco- nomic goods; but there can be no question as to the part that these intellectual powers and products play in the world of the industries. The scientific investigator and explorer sometimes discovers facts which revolutionize industry and lend to it a productiveness manifold greater than that which it had previ- ously possessed. The discoverer of the magnet made modern commerce possible. The studies of Galvani and his successors have given to us the telegraph and telephone, electro-plating, electrotype, and the powerful and fast-prevailing electric light. They bid fair to give us, ere long, a motor force which shall surpass all others, and lift us to achievements heretofore impossible. The inventor who is also an intellectual worker, turns the work of the investigator to account, and harnesses the new WORK. 95 found fact or force to its task in the arts. The great patent offices of Europe and America are full of their work; and gov- ernments, by their letters-patent, recognize the property value of their ideas. Authors, scholars, orators, teachers, lawyers, poets, preach- ers, artists, and statesmen, all belong to the guilds of intellect- ual workers, and all have their place in the world of work. All are counted worthy of wages by their fellow-men, and their wages are relatively large. -The number of intellectual workers always increases as civil- ization advances; and one of the plainest results of our modern improvements in the arts, is the release of men, more and more, from merely physical toil and drudgery, and their eleva- tion to the position of brain-workers. Arms of iron and fingers of steel now do the hardest of the work, while the human laborer furnishes the eyes to watch the processes, and the hand to arrange the task and summon the power. 91. Service work. — In the fourth and final field of work, we find the worker ministering directly to the gratification of his employer. This ministration we call service. The worker in this field fabricates no goods, offers no exchanges, aims at no mere intellectual effects. He simply meets, by some act, an- other's wants. He who brushes our clothes, or brings our din- ner, drives our carriage, or watches by our bedside when we are sick, does us a valuable service, and we recognize its value by giving value in exchange. For there are intellectual as well as physical services. The lawyer, the teacher, the singer^ and many other professional and artist classes, render services, either personal or public. The chief criterion of service is that it yields gratification without producing valuable goods. It does for us directly what the goods are designed to do — meets our wants or desires. But this test is not of universal appfication. Many services are a part of the necessary labor of production. Thus, the cook who prepares our dinner adds to the value of the food as much as g6 POLITICAL ECONOMY. the miller who grinds the wheat into flour. Service employs no small part of the working forces of the world. Myriads of services are rendered gratuitously, by friend to friend, by kin- dred and neighbors, and even by strangers. They may all be counted as contributions to the common good, if not to wealth, in so far as they save goods, conserve force, and advance well- being. We have thus glanced at the great subdivisions of that field in which the working power of the world finds its daily employ- ment. This survey will help us to study, with more clearness, the factors, or agencies, and instruments by which man effects his purposes. It is not needful to anticipate here the discussion of these factors, each of which will demand its separate chapter or chapters. In the examination of the chief forms of industry, each of which will also ask its own chapter, we shall revisit, from a new line of approach, and see under a different light the fields here explained. CHAPTER IX. THE GIFTS OF NATURE. 92. General view. — We come now to the factors which necessarily enter into all of man's work. They are these three: I. The gifts of nature; 2. Labor; 3. Capital. Before acquiring any thing of his own, man must take from existing things around him. His work presupposes matter and its laws. Nature, or the world of matter and force, presents to man. kind and their industries, an endless variety of substance, forms, and forces. To measure properly the economic charac- ter and influence of these, they must be divided into their proper classes. The following diagram will bring these classes under the eye at once : Matter. Forces. Crude materials. Vital, Land ...{ Animal. Organic products. \ Vegetable. Mineral. Metals I Useful : iron, tin, copper, etc. I Precious : gold, silver. Other minerals— stone, earths, clay, lime. Organic matter — wood, cotton, wool, bone, silk, etc. l. Air and water. Human strength. Animal strength. Forces of growth. r Gravitation and cohesion. Sunlight and heat. Wind-power. Water-power. Electricity and galvanism. Magnetism. Chemical aifinities. Heat and combustion. . Non-vital. Molar. - Molecular. As soil. As site. P. E.— 9. (97) 98 POLITICAL ECONOMY. * This classification is economic, not scientific. In a scientific classification, water-power is a form of gravitation, and wind and steam are results of heat. The division lines in science are never fixed and impassible. Class melts into class by insensible gradations. 93. Nature's gifts control industry. — These so-called gifts of nature, though without any proper value, have often the highest utility, and are among the most important economic facts and forces. They furnish the solid basis of all values, and their abundance or scarcity in any region, potentially affects and controls the industries of that region. In tropical climates, the gifts of nature so nearly meet the common wants of man as to seriously discourage industry. The spontaneous growths of edible fruits and vegetables pro- vide the indolent natives with food ; the warm air renders cloth- ing nearly useless except for decency, and the shade of the trees shelters from the sunshine. Except to guard against the attacks of wild beasts, and to protect from the occasional storms, houses would be needless, and the simplest inclosure, with roof of boughs or bark, serves as domicile and home. Store-houses and barns are unknown. When commerce tempts them with its offers of useful exchanges, the labor is often lim- ited to a more abundant gathering of the spontaneous products of their prolific soil and clime. In the arctic regions, on the contrary, nature is so chary of its higher gifts, that the laboring power of the inhabitants is mostly exhausted in the ' toil of procuring the merest necessaries of life. If the desire is ever awakened to engage in higher and more productive arts, the rigors of the cHmate, and the absence of favoring conditions, would make them powerless against the rivalries of more temperate and propitious climes. The fields of ice and snow offer poor soil for seed-sowing, and the scant sunshine of the brief summer could ripen only the hardiest plants. The darkness and cold of the arctic winter would compel a suspension of most manufactures, and commerce THE GIFTS OF NATURE. 99 would find In the dog-sleds but a poor substitute for the rail- roads and canals, snow-bound and ice-bound through so many months. The temperate regions are the natural homes of the industrial arts. Here the impulse to work is strongest, and the oppor- tunities are most favoring. Earth and sky conspire to stimulate and aid the work-spirit in mankind. Nature refuses him food without labor; but she responds so liberally to his efforts that the surplus invites him to traffic, or affords him support and leisure for all his arts. It is obvious that the practical problems of economics will vary in the different zones almost as much as the zones them- selves differ. Both man and his work change as they cross the lines of latitude. 94. How nature helps arts. — The presence or absence of minerals and other materials, of food supplies, of coal for the generation of steam- and of water-power, also give direction, and put limitations, to human industry. Enghsh statesmen and economists have already begun to express fears for the future of their island, in view of the rapid consumption of their coal supplies. But the influence of these circumstances has largely diminished since the railroad, the steamship, and the telegraph have so far overcome the barriers of time and distance; and electricity or other new motors may relieve their fears long ere the coal-beds have been exhausted. A careful study of the history of human industries and arts, would doubtless show that the forms and the processes of nat- ure have frequently, if not usually, furnished man the hints for his inventions. The mechanism of his own body has taught him the devices for a hundred machines, and his agriculture is but a late imitation of nature's planting and sowing. The com-, ing arts and industries of mankind will doubtless be still more indebted to nature's gifts. Since modern science began in earnest, the closer and more comprehensive study of nature, the arts have made strides hitherto unprecedented in their lOO POLITICAL ECONOMY. history; and the new victories have been won just where the facts of nature have come most to be understood. 95. Unappropriated gifts. — There is a class of nature's gifts which are too abundant to be appropriated, and which can never, under ordinary circumstances, have any value in the markets. Such are the atrnosphere, the light and heat of the sun, gravitation, climate, the rain and snow, the rivers and seas, and, in most cases, potable water. All these have high utility, and are indispensable to mankind. Yet they are no man's property, and are bought and sold in no market; except in the case of water in time of drought, and in the great cities. But, like all other gifts of nature, these can not be utilized in the arts, except under conditions which cost effort and have value. The wind is free, but we must have sails if we will have it waft our ships. We have already noted how climates, including the elements of the light and heat of the sun, influence the industrial pur- suits of whole populations. But there are other important eco- nomic influences and relations of these great natural agencies which can not be omitted in the broadest view of Political Economy. From the moment that man places himself over against the world of matter, to subdue and use it, from that moment every aspect and agency of nature comes to have an economic bearing. The Gulf Stream has played, and still plays, as important a part in the Political Economy of England as do the coal-beds hidden under her soil. The coast lines of Europe have determined the commerce of Europe, and this in turn has influenced European production and wealth. Climate, soil, food, and water influence the health of a popu- lation, and health reacts on their industries. Dr. Roscher has collected many interesting facts which illus- trate the influence of external nature, the sea and the climate, on the courses and success of the industries of different peo- ples. Owing to the great oceanic currents, "England is nearer to almost all the important mercantile coasts of the world, by THE GIFTS OF NATURE. joi three hundred geographical miles, than the eastern states of the American union." "The more remote a country is from the equator, the more is its fertility confined to its lowest parts. Greater heat will, as a rule, ripen the same product sooner, and thus permit the same land to be used several times in a year." "In central Germany, even a second crop can be produced after the corn harvest. In Arabia, the same seed produces three harvests, be- cause the grain which falls at the time of harvesting germinates immediately, and suffices for new seed." g6. Natural products. — In this class of nature's gifts are included all those which are ready, without change, or with such slight changes as do not destroy their character, to satisfy human wants. Thus, the edible plants, fruits, grains, and roots, with or without cooking, give man food. The forests and coal-beds give him fuel with no change but that of cutting or digging. The animals to carry him, or give him their flesh, milk, and eggs to feed him. The mineral world gives him salt for his viands, water for his thirst, and air for his breath. In all these cases, the utihty is given by nature ; man's art does nothing but collect and appropriate the products of nature's own labor; or if, as in agriculture, man also labors, it is with nature, and as her assistant. The lower animals, without art or labor, share with man in many of these gifts. If all of nature's gifts had been of this class, or if she had in this manner provided for all the wants of man, then human in- dustry might never have existed, and economic science would have had no field. Arts would have been as needless to man as they are to the animal tribes. As we have seen, even the abundance of these products, in the tropical regions, leaves mankind with little occasion, and with still less disposition, to labor. It is obvious that as these products of nature's organic forces require less of man's labor to fit them for his use, so also they afford less scope for man's arts than do the crude forms of I02 POLITICAL ECONOMY. matter. We shall find this an important economic fact in judging the value of the different forms of labor. These products appeal to the vital wants of man, incessant, pressing, immediate, but chiefly animal and sensuous. They are thus the more useful, but the less valuable, portion of man's wealth. In time of great need, all other wealth will be readily given for these food products; but in times of ordinary abun- dance men give dollars for manufactured goods where they give only a few cents for bread and meat. 97. Crude materials. — Most of the substances met in nature have no immediate use for man. They feed no appe- tite, gratify no desire ; they simply help to make up the world. But to human art they are the materials for its work, and it gives to this crude matter shapes which make it highly useful. Many animal and vegetable substances, such as wool, silk, hides, bones, shell, wood, cotton, flax, are included in this class of substances, because they are employed as materials and not as products useful in themselves. They are substances out of which art may manufacture its useful goods. The utility is chiefly in the form of construction of such goods, and not in their materials. To the worthless, man gives the highest values known in the markets. Out of the metals, in themselves useless and inconvenient, work brings the myriad articles of use and beauty which fill our houses with convenience and comfort, our mills with pow- erful machinery, our roads with vehicles, our shops and fields with tools, and cover our rivers and seas with ships and swift- sailing steamers. Out of the wood, fit, as nature gives it, only for fuel, art constructs our houses, our furniture, and a host of utihties to help human Hfe in its conflicts for existence, happi- ness, and progress. And so through the entire range of crude matter, nature gives things in themselves worthless; but work changes them into goods of highest use, and into treasures of countless wealth. Here in this field of brute matter, art wins its greatest tri- THE GIFTS OF NATURE. 103 umphs and gains its richest rewards. Out of this comes the largest part of the world's riches, and here economic science finds some of its most difficult problems. 98. Products of nature and art contrasted. — A look through the great marts of trade will tell us that nature's prod- ucts fill but a small space there, and that manufactured goods — goods for which nature furnished material only, and labor gave valuable forms — fill the great ware-houses. Most of the per- manent wealth of the world belongs to this class. The houses dotting the farms and walling in the streets of the great cities; the cultivated lands, won from weeds and wildness by years of skillful tillage; the roads, railroads, and paved streets; the great mills and their costly machinery; the innumerable wares, woven, forged, cast, wrought, pressed, printed, or shaped by hands of men or hands of iron ; the beautiful works of higher art, — these fill the endless pages of the inventories of wealth." The products of nature are fitted mostly to gratify the lower, animal wants of mankind. Manufactured . goods are, in gen- eral, intended for higher gratifications. Nature satisfies the brute and the savage; but art labors to afford joy and satisfac- tion to the children of civilization. The forms and properties of nature's products are nearly fixed. They may be enlarged, improved, and multiplied by the skill of man, but the natural type remains visible through all changes. The goods wrought by art, from nature's crude materials, have an endless variety, and fresh novelties are added almost daily to the list. Hence, the production may go on endlessly since it may perpetually choose new forms and objects — new desires to gratify and new gratifications for the old. 99. Natural forces. — The forces of nature stand next in the catalogue of her gifts. All work — all changes in matter — imply force as their efficient agent. Physical changes presup- pose physical forces, and these must come from nature. Of nature's forces we know htde. They are the unknown causes I04 POLITICAL ECONOMY, of known and visible effects. Whether they are all distinct and different, or are merely the differing forms of a common en- ergy, it is of little use to inquire. As economic facts, these forces differ in rank and worth. Force is never an absolutely free gift of nature. Human strength must be nourished and educated before it is useful; animals must be tamed, trained, fed, and cared for; and the non-vital forces must be fitted with the proper machinery before they can be made to do useful work. First in the rank of forces stand the vital, and first among the vital stand the human, and first among the human stand the mental or brain forces, if we may separate the brain power from the bodily forces. lOO. Human strength. — The mental, or rather the brain and nerve force, stands most nearly connected with the mind which controls all by its intelligence. It is not necessary to discuss here the real relations of mind and matter. Taking the mind or intelligence as a palpable and admitted fact, we may confine our view to the physical side of being. On this side, man's power, or strength, rather, is a gift of nature as much as is that of the animals which serve him. Man, it is true, is reared for his manhood, not simply for his labor. The wants of childhood are as much the ultimate end and use of wealth as those of manhood. But, as an economic force, we must take account of the cost and productiveness of human strength as we would of any other agent used in our work. The proper and full showing of this cost belongs to another chapter — that on labor. Whatever the aids man may summon by his arts, from nat- ural forces and mechanical devices, human strength can never be dispensed with in the field of the industries. Above the machine always stands the man. Even the business of super- vision — the work of eyes and brain — demands a certain outlay of physical energy. The hand of the machinist comes before the machine which he constructs; and the hand of the engi- THE GIFTS OF NATURE. 1 05 neer, or other attendant, must remain upon the machine till its work is done. As to fact, the wide introduction of so-called labor-saving machinery, in modern times, has greatly increased the demand for human labor, in place of diminishing it. It has simply transferred the man to another, and generally to a higher, sphere of work. loi. Animal strength. — The strength of the domesticated animals — the first force which man learned to employ next his own — has also been crowded out of its old places in the indus- tries. Water, wind, and steam have shown themselver cheaper, mightier, and more manageable servants than the ox and the horse. But, like their masters and drivers, these animals have found themselves not dismissed from labor, but only transferred to new fields. It was thought that the railroads, which dis- placed the old stage coaches, would also render thousands of horses useless; but the result shows that the demand for horses was increased. New routes were found for many of the coaches, and a multitude of cars and carts came into demand to transport people and packages to and from the railway sta- tions. Agriculture and other industries also took on immense growths, making new requisitions for the draft animals; and hence the animal forces, instead of disappearing from our in- dustries, hold now, among these industries, a larger place than ever. 102. Forces of growth. — The silent, vital forces employed by nature to build up her forests and to clothe her fields with vegetation, as also those which work out the tissues and organs of animal life, are implied and embraced in the organic gifts which they create. In the great agricultural industries, the forces of plant-growth have for ages been the chief reliance of the grain-raisers and the forest and fruit-growers. To stimulate these forces by cul- tivation, to nourish them by fertilizers, to direct them by selec- tions of seed and soil, by grafting and pruning, — these make up much of agricultural art. Io6 POLITICAL ECONOMY. But with the advance of biological science, and in the farm- er's and stock-breeder's art, these forces are coming to be counted on and employed as the mechanician counts on and employs, the energies of steam and electricity. Thus they are now to be reckoned among the costly and controllable eco- nomic forces, to be taken into account in the computations of values. 103. Economic production a problem of force. — In the final analysis, all economic questions, in the production and consumption of wealth, reduce to the question of the economy and Conservation of energies — the silent energies of nature above all others. The productive power of the soil, the work- ing power of the domestic animals, and the steam or electric power generated by the consumption of costly fuels, all alike belong to these silent molecular energies. The foods or other gratifications which they produce, are only stored-up energy, ready to be transformed, in turn, to the finer energies of human life and happiness. 104. Non-vital forces. — The non-vital or inanimate forces of nature can only be employed through machinery costing great skill in its invention, construction, and management. But, when thus harnessed and controlled, these forces work with a tireless power and steadiness which defy the competition of human energies. The most conspicuous feature of the indus- trial progress of this century, is the rapid multiplication and perfection of power-machinery of all sorts. Its triumphs are still extending: i. In the variety of purposes to which it is ap- plied, leaving no field of industry uninvaded; 2. In the perfec- tion and abundance of its work, surpassing skilled labor in some of its very strongholds, such as watch-making and bank- note engraving, and so abundantly that a watch may now be had for five dollars, and even less; and, 3. In man's increas- ing mastery over these forces, enabling him to cheapen the use of the older forces of wind and water, and to introduce new forces, as in the heat engine and the electric motors. THE GIFTS OF NATURE, 107 It was estimated, in 1876, that the steam-power then in use throughout the world, amounted to fifteen million horse-power; and that, if worked continuously, it would do the work of sixty million horses. Stephenson's first railroad locomotive, built in 1 8 14, could run six miles an hour. Locomotives have lately drawn trains ninety miles the hour. The Rocket, the first locomotive of the first regular railroad, the Liverpool and Man- chester Railway, weighed four and one-fourth tons. Loco- motives are now made which weigh nearly one hundred tons. The non-vital forces which nature offers for the service of man are usually divided into the molar forces, or those which affect masses of matter and produce sensible movements, and the molecular, or those which act upon the molecules of matter and produce motions inappreciable by the senses. In their origin all known forces are molecular, the largest motions growing out of the minute and insensible. The molar forces, embracing the power of moving winds, of falling waters, the down-pulling weight, and the coiled spring, early attracted attention, and were utilized in the arts. Their sensible character made it easy to invent the sails, the water- wheel, and the pulley, which served to harness them to their work. But their utility was limited to times and conditions which prevented their general employment. The molecular forces of electricity, magnetism, chemical affinities, and, above all, the steam-generating heat, have come forth only at the bidding of science, but their omnipotence and their independence of favoring times and localities have given them a sudden acceptance and a universal employment. 105. The land gift. — Land, as a gift of nature and a factor in the world's work, might seem properly to belong partly to the class of crude matter and partly to the non-vital forces which alone make the soil productive. But the land problems hold so important a place in PoHtical Economy as to ask separ- ate treatment. Land, as an economic fact, is both important and peculiar. Io8 POLITICAL ECONOMY. As constituting the habitable part of the globe, all human life must have a part in its occupation. As the theater of all estab- lished industrial operations, it is a prime necessity to such op- erations. As the source of nearly all the food supplies, and thus of man's continued stay in life, its cultivation fills the first place among human employments. As a form of permanent investment of wealth, its security and other advantages are so unique and superior as to claim for it a still higher considera- tion. And, finally, its connections as territory, with social and national life and power, force it perpetually to the front in all great political interests and questions. The piecuharity and im- portance of its economic character are attested by the space given to its discussion among the economists, and by the diversity of views presented in their discussions. io6. Land as soil. — Land as soil is useful in proportion to its productiveness, and its nearness to markets. Its productiveness depends: (i.) Upon its composition and that of the subsoil; (2.) Upon the climate in which it lies; (3.) Upon its elevation, slope, and exposure; (4.) Upon the irrigation and drainage required and possible to it; (5.) Upon the fertilization needed or applicable to it; (6.) Upon the crops to which it is adapted; (7.) Upon the kind and amount of cul- tivation to be employed. The character, amount, and value of the crops will depend, in part, upon all of these. The dis- cussion of the extent of the influence of these several circum- stances would occupy more space than can be given in this chapter. The nearness to markets affects the value of land because of the time and labor required to get its crops to the place of sale. Many of the coarser products are so great in bulk in proportion to their value, that they will not pay for long transportation. There is a distance at which the cost of carrying a ton of hay will equal the value of the hay itself. In this case, the farmer will simply be paid for his labor of transportation, and not at all for his hay. All less distances will evidently consume THE GIFTS OF NATURE. 109 some part of the price of the hay in the cost of carrying. Pota- toes can usually be carried farther than hay without using up the value in transportation; Indian corn farther than potatoes; wheat farther than corn; animals farther than grain; and dairy products farther than animals. Tea, coffee, and spices will bear longer transportation than ordinary food products. Thus, all transportation may be regarded as a direct charge or tax upon the land, and must be deducted from its value. The adaptation of the products to the market, and the com- petition to be met in such market, must also be taken into the economic account. So, also, must we take account of the re- turn supplies to be obtained from the market, since these too cost something for transportation. In this discussion of the nature of land values, no mention has been made of mineral products found in the earth. If the land covers a gold mine, or mines of iron or other metals, it has an independent value, and high in proportion to the rich- ness and accessibility of its ores. So, also, coal-beds beneath the surface, or forests standing upon it, give each a distinct in- crement of value. But the value of mines must be considered as something distinct from the value of soil. If the land is taken into consideration at all in mining, it is simply as includ- ing the right to the mines, or as a site for the above-ground works connected with the mine. 107. Land as site. — Land as a site is useful for the space and support it affords for the property or works to be placed upon it. For this purpose it matters little whether it consists of richest mold, of rocks, or of barren sand ; what is wanted is space and situation. For these purposes the values are some- times enormous. In great cities, plots of ground, fronting upon business streets, have been sold for four thousand dollars for each foot of frontage. Residence lots on fashionable streets also bring incredible prices. Land as a site varies in value with the presence or absence of adjacent population; with the proximity to roads, rivers, no POLITICAL ECONOMY. harbors, cities, markets, and other civic or economic institu- tions ; and, finally, with its adaptations to the uses for which it is desired, as a place of abode or of business. 1 08. Land values also include effort. — In this discus- sion of the value of lands, it is to be understood that the value meant is a possible rather than an actual value. Land and mines offer no real exception to the doctrine of value, hereto- fore given, as requiring effort as one of its essential elements. Neither lands nor mines, as they lie in nature, have any true value. The value is given to them by the work which affects their situation or surroundings. Just as surplus and therefore worthless products of one country become valuable by the work of transporting them to another — to the vicinity of those who need them — so land becomes valuable, not by transporting it to the people who will use it, but by transporting these people to or towards it. When we open new roads, or railroads, into unoccupied territory, we say we . are bringing its lands into market. We mean that we are bringing the market to the lands. Speculators buy the lands in anticipation .of their com- ing value. Let it be certain that no immigration will ever reach them, and the shadowy value reflected upon them, in anticipation of their coming value, will fade out at once. When the immigrants come, and begin their work of im- provement, every road they make and every house they build, reflects something of possible value upon the wild lands near them ; for, as we have seen, soil has two elements of value — its productiveness and its nearness to markets. So, also, mines are counted valuable in anticipation of the values to be given to them by the workers to come. These prospective values are not uncommon in other spheres. The surplus wheat of this year has a value in view of the probable wants of the year to come. But neither in lands or mines is the value so large as specu- lation represents it. In strict truth, it is found, in the long run, that metals are worth what it costs to mine and smelt them 3 THE GIFTS OF NATURE. Ill and lands, after they are fully improved, can nearly always be bought for what the improvements cost, often for less. The illusion which exists in regard to land, mines, and other gifts of nature (for it is an illusion to count them as valuable in their natural state*), comes from the failure to discriminate be- tween utility and value. Where there is evident utility, men readily conclude there must be value. The Scotch farmer, who found some garnets and other precious stones among the rocks on his land, thought himself wealthy, and might have sold a part of his new-found riches to his neighbors, if he could have persuaded them to beheve in the value of his findings ; but when he had gathered and carried a quantity of the gar- nets to the London lapidary, he was disgusted to learn that till the lapidary had expended his labor upon them, they would not pay him for the trouble of getting them to market. His belief that they were valuable in their native state did not make them so. Men must learn that there is no wealth without labor. What nature gives can be made valuable only by labor upon or around it. It must be changed by human toil, in substance, in form, or in relative position. *"Bastiat asserted, strongly and clearly, that no mere product of nat- ure (land, of course, included) possesses value. Roscher partly contra- dicts this, and instances mineral veins and coal-fields which immediately, on discovery, he says, "acquire great exchangeable value." But suppose the coal-field to be discovered in an uninhabited land, remote and difti- cult of access. Its supposed value would diminish with the distance, till it finally disappeared. It evidently owes much, if not all, of its value to location and surroundings; just as in the case of a city lot. The sup- posed value is of that speculative and unreal character which is almost daily given to worthless stocks used in the gambling operations of stock exchanges. CHAPTER X. LABOR — STRENGTH. 109. Synoptic view. — The following tabular presentation of topics will enable the reader and student to follow more easily the discussion : Factors. r Its nature and kinds. Strength \ Its source and cost. I Its substitutes. Its nature. Kinds — mental, sense, Cost — varieties. Substitutes. Skill manual. Tools and machines. Physical ] Classes Organization. - Productive. Services. Discovery and invention. Superintendence and management. I Professional services. Undistributed or solitary. Its nature. Its advantages. Its nature. Its advantages. Its disadvantages. Its limits. Health and bodily vigor. Liberty and public esteem. Intelligence. Good morals. Fair wages. Piece wages and time wages. I Self-employed labor. Distribution of labor to the employments. Intellectual. Division of trades. Division of labor. Conditions 110. General aspects of labor. — We come now from the gratuitous to the costly factors in work. (112) LAB OR—S TRENG TH. 113 In the great economic field of Work, labor stands central and conspicuous. To many careless eyes it seems the only real or needful presence there. Labor, all-conquering, wealth-produc- ing, appears to them the sole source of value — the true wealth creator. Its presence is so active and imposing that it seems to fill the whole field, and labor and work are taken as inter- changeable terms. As here used, labor includes all voluntary human efforts of strength or skill, to do service, or to produce valuable changes in matter. Economically, labor represents the difficulty in the way of the attainment of man's wishes. He sees a ripe fruit upon a high tree; it will cost a painful effort to obtain it. He weighs the pain of the effort against the pleasure to be derived from the fruit. He is offered a gold watch for one hundred dollars; it will cost the wages of a month or two of labor to earn the price. He measures the pain of this toil against the gratifica- tion to be gotten from the watch. He has reared a good horse for which one offers him two hundred dollars; he meas- ures the toil and care which his horse has already cost him against the labor it would require to get the money some other way. This is a simple, elementary view. It tells a part of the truth, but not all. There are other aspects of the subject. Labor is a productive effort. It is the application of energy to effect some change of place, form, or substance, which will not take place without such labor. Thus it is creative, giving existence to forms and qualities — utilities — which would else remain non-existent. The power to labor is the power to produce objects of de- sire, and therefore of value. He who labors is entitled to the fruits of his labor. They are his to enjoy or to sell. If he chooses to sell his laboring power to another, then the price of the labor is his, but the products belong to him who purchased the labor. p. E.-io. 114 POLITICAL ECONOMY. 111. Labor an economic battle-field. — Labor furnishes one of the great battle-fields of Political Economy. Its ques- tions are often distorted by animosities, or clouded by party spirit. Communism and socialism oftenest wage their warfare in the name and behalf of labor; and economists are summoned to use their sharpest insight to determine the exact rights of labor, and the conditions of its greatest efficiency and well- being. The reason of all this lies in the pregnant fact that laborers constitute the great mass of human society ; and they stand doubly related to others, as laborers confronted with capitahsts, and as the many poor contrasted with the few rich. These questions of the rights and well-being of laborers belong to social economy rather than to the science of wealth, and to that branch of our work we relegate them. In this chapter, labor will be considered in its purely economic as- pects, as an agent in the production of values. It is not, however, forgotten that the laborer's education, personal com- fort, and self-respect add to his working power and efficiency. 112. The three factors of labor. — Every act of labor performed by man involves three factors : - 1. The strength or force by which the motion is made; 2. The skill or intelligence by which this motion is directed; 3. The tool, implement, or machine by the aid of which the force is applied. In some cases the hand itself is the only tool employed. The strength and skill reside in the laborer. The tools employed may be regarded as supplements to his hands and fingers, which are his natural tools of labor. Tools and ma- chines are also to be considered as capital; but here they are studied as means of accomplishing labor. 113. Economic rank of the factors. — These three factors are of different origin and costhness, and the values produced by labor will vary as one or another of them enters chiefly into the labor required. Products of labor requiring chiefly strength LAB OR—STRENG TH. 115 will be cheaper than those of labor requiring skill as the prin- cipal factor. The consideration of the relative amount and kind of strength and skill required enters into all true estimates of values produced. The labor of children is low in price because of slight strength and skill. The laborer who can work with fine tools is worth more than one who uses only coarse and common tools. He whose tools are most costly and efficient is preferred to others. Some tools are simply aids to strength, as the lever, the wedge, and the pulley. Others are aids to skill, as are the cutting tools in general. 114. The strength factor. — Strength is first in necessity, but lowest in rank, of the three factors of labor. It is animal rather than human. Man has it in common with the brutes. It is the cheapest because most nearly a gift of nature. It is true it costs years of growth, care, and feeding, but these are looked upon as the natural incidents of life, as a part of the natural expenditures of parents, and not as economic facts. In computing the strength and laboring power of a whole peo- ple, the cost of growth and nurture must be taken into ac- count. If we accept, with Dr. Edward Jarvis, the period from twenty to seventy as ' ' the period of maturity and efficiency " in human life, and call these fifty years — twenty to seventy — the sustaining period, and the periods below and above these ages the dependent periods, then, as he says, "the effective power of a nation is in the number of its people in the sustain- ing period, and in the proportion these bear to the dependent classes." The following statistics, taken from a table given by Dr. Jarvis, in the "Massachusetts Health Report," 1874, will show the efficient strength of several peoples, as determined by the per centage of their sustaining and dependent classes. By sustaining classes are meant those who, for the time, are of the proper age, soundness, and strength to transact the busi- ness and produce the support of the population. All others belong to the supported or dependent classes. ii6 POLITICAL ECONOMY. The figures in the first four columns show percentages of the entire population. SUSTAINING DEPENDENT. ' DEPENDENT NATION. FOR EACH 1,000 20 TO 70. UNDER 20. OVER 70. SUSTAINING. France, 60.32 36.09 3-64 39.68 657 Switzerland, 56.20 41,22 2.58 43.80 779 Sweden, 54-51 42.67 2.82 45-49 834 Prussia, 52.62 45-34 2.03 47-37 880 England, 52.21 45.04 2-74 47.78 915 Scotland. 51-30 45.60 2.95 48.55 946 Ireland, 46.50 52-03 1.48 53-51 1,201 United States, white, 49.04 49.18 1.80 50.98 1,039 United States, colored 44.80 53-60 1.50 55-10 1.229 Massachusetts, 56.80 40.30 2.80 43.10 759 Georgia, 44.40 53-90 1-50 55.40 1,248 The sustaining class, in France, is ten and one third per cent more than one half of the population. In England it is two and two thirds per cent. In Ireland it is three and one half per cent less than one-half of the population. Among the white people of the United States, the sustaining part of the population lacks nearly one per cent of being one-half. Among the colored people it is nearly five per cent less than a half. The sustaining classes represent, loosely, the laboring power of the nation. It is to be increased in practice, by the laboring power of those under twenty years of age, and diminished by the idlers between twenty and seventy. It must also be modi- fied by the average strength of each nation and the period of effectiveness in each. The average period of efficiency falls much short of the fifty years — between twenty and seventy. Dr. Jarvis gives the average duration of effectiveness of several countries as follows (" Massachussetts Health Report," 1874, page 342): LABOR— STRENG TH. 117 Working Years. Norway, _ . . - 39.61 years. Sweden, .... 38.10 years. United States, males, 37.46 years. Hanover, . - - - 35.81 years. England, . . - - 35.35 years. France, 32.84 years. Ireland, 28.88 years. 115. Cost of human strength. — The cost of rearing a child to manhood must, evidently, come into the estimated cost of the laboring strength of any nation. * ' The cost, at contract prices, of raising an orphan child to the age of eleven years, in England, is computed, by Mr. Chad wick, at 130 pounds ster- ling (S632.65)." Dr. Jarvis computes the cost of rearing a child of the laboring classes, in this country, at fifty dollars a year. The child, at eleven, would be worth five hundred and fifty dollars. At maturity (twenty years) it would be worth, or would have cost, one thousand dollars. But, "in estimating the cost of rearing children to manhood, it is necessary to include the number of years that have been lived by those that fell by the way," says Dr. Jarvis; and he gives the following statistics of the loss in raising children in the different countries named : Number of Years Lived by Those under Twenty for Every One Thousand that Reached Maturity. COUNTRY. years lived UNDER twenty. PER CENT OF LOSS. Norway, 2,142 7.10 Sweden, 2,182 9.10 England, 2,192 9.60 America. 2,233 II. 16 United States, 2,251 12.55 France, 2,327 16.35 Ireland, 2,514 25.70 ii8 POLITICAL ECONOMY. Counting in these lost years as costing fifty dollars each, it raises the average cost of raising a child to maturity, in the United States, to $1,112.55. This does but follow the com- mercial custom of charging the cost of all goods, lost or spoiled by the risks of manufacture or transportation, to those which come through safe. 116. Variations of labor power. — The average laboring power of the men of different nations also differs. Dr. Roscher states that "the experiments made with the dynamometer, in 1800^, show that the average /. The purchaser for use usually accepts market value as actual value. 236. Hiring and rent. — Hiring differs from trade and barter in the fact that the two latter transfer ownership, while the former transfers only temporary use. Hiring includes both property and persons. Property is hired for its uses. Persons are hired for their labor and serv- ices. The former is usually called renting, letting, or leasing; the latter is called hiring or employing. The hiring of houses and lands is a temporary purchase of all property rights, excepting the right of sale, and of altera- tion. All the utilities of the property belong, for the time, to the lessee or person renting, and all the profits he can make out of the houses or lands, while holding them, are accounted as his own. The owner forgoes the use and profit, and re- ceives the rent in lieu thereof. The renter is saved the labor and expense of building, or from buying a house and land for himself, and pays his rent in place of the year's saving. TRADE. 243 In the rent of houses, whether for dwelHng or for business, the renter pays his money in exchange for a vahiable use, a use which satisfies a want and saves a labor ; and which also, in general, contributes to a new value, in the labor force re- newed, or in the goods produced. The owner parts with a value in exchange, since he loses the use and also the value used up in the wear and deterioration of the house. The money paid for the rent of farm lands is exchanged for the use of these lands as an instrument of production. The owner receives the money rent in place of the products which the land would have brought him, less the expense of work- ing it. . The renting of land differs from that of houses in the fact that the land yields its use only on condition of a large ex- penditure of labor and capital. The profits are in part from the land; but in still larger part they are usually from the labor and capital expended in the cultivation. The rent is counted as coming out of the production, and in the so-called metayer system in France, and frequently in this country, is a stipulated share of the products. 237, Domestic and foreign trade. — Trade has been com- monly divided into domestic and foreign. Domestic trade is between the citizens of the same country ; foreign trade takes place between citizens of different countries. The economic differences between the two are chiefly the following : I. In the goods exchanged. — Commonly, the goods imported from foreign lands differ in kind or quality from those pro- duced at home. Such goods do not come into direct competi- tion with home products. This remains true in such produc- tions as are peculiar to the foreign climate; but the progress of modern manufactures has brought a large list of common prod- ucts into direct competition between the great manufacturing nations. In this competition, the questions of differences in civilization, in governments, and in the cost of labor and capi- tal among the* two peoples are involved. The people which 244 POLITICAL ECONOMY. can, at any given place, furnish the best and cheapest goods of a given variety, will gain the market for such goods. 2. In the cost of transportation. — Domestic products are usu- ally exchanged with less transportation and risks than foreign goods, and, therefore, with less addition to the original cost of production. This difference is also disappearing with the improvement in steam, land and ocean carriage, and with the aid of the telegraph. 3. In taxes and tariffs imposed. — Domestic goods pay the ordinary taxes of the country on capital, income, or products. Imported goods pay, if taxed at all,, the tariff or import duties imposed for revenue or for protection of home manufactures. 4. In the means of exchange. — Domestic goods are exchanged chiefly by the aid of money, or its representatives; but there is no international money. Foreign trade is, therefore, a sort of barter. All goods imported must finally be paid for in goods exported. Even gold and silver, when paid to foreign countries, is sent as bullion, or merchandise, and not as money. Bills of exchange — drafts drawn on foreign debtors — serve, to some extent, as an international currency, and aid to effect exchanges; but these bills represent goods already sent. All of these differences are in themselves hinderances to foreign trade. Their weight may fall upon either nation, as circumstances determine, or may be divided between them. The advantages of foreign trade are many, and are both economic and social. It opens markets, stimulates production, diffuses improvements in the arts, enlarges the stores of knowl- edge, advances civilization, and promotes the harmony of peoples and the peace of the world. 238. Wholesale and retail trade. — Trade is classified also as wholesale and retail; and each of these are, in prac- tice, subdivided according to the goods dealt in. Wholesale trade deals with goods in bulk, or in the original packages of the producers. It represents the principal or c*entral markets, TRADE. 245 and collects goods from the producers, to distribute them to the retail dealers who represent the final markets. Its customers are the retail traders. Wholesale trade requires skill and intelligence of a high character. There is needed not only a knowledge of the widely scattered sources of production, and of the means and cost of such production, but also an equally wide knowledge of markets, and of the means of distribution. It requires, too, wide and difficult calculations of the probable suppHes and demands in near or remote markets. There are also needed, to successfully meet the many emergencies of trade, prompt- ness, decision, courage, and energy of the highest character. Many enter into this trade without all these qualifications, and sometimes succeed, for a time, by happy chances, but their final failures are as disastrous to the public as to themselves. A large command of capital is also required in the whole- sale trade. To purchase and hold goods in large quantities, to own or control means of transportation, and to provide the necessary store-houses, imply immense outlays. Retail trade sells goods in small quantities, and to the in- dividual consumers. Its mission is to bring goods of all kinds to the vicinity where they are wanted for consumption, and to hold them there to await the needs of customers. The source of its true profits has already been shown to be in the labor and capital necessarily expended by the trader and saved to the consumer. The skill required in retail trade is less than that demanded by the wholesale trader, but is still large as compared with miany employments. The skill needed to manage a small re- tail shop, confined to the sale of a few common articles, may, indeed, be speedily acquired by any one of the requisite edu- cation ; but it is evident that as the range and amount of goods to be kept increases, the problem rapidly grows difficult; and the frequent failures are sufficient proof of the ability and intelligence needed for success. 246 POLITICAL ECONOMY. 239. Is trade a tax?— It is held by many that the profit of the trader, or middle-man, is a tax, necessary, perhaps, but still a tax, upon the productive industries of the world. "His profit is a tax upon both (producer and consumer), which should be reduced to a minimum, for he adds nothing to the real wealth of society." — Thompson. An excess of traders or middlemen is, doubtless, an evil, as an excess of laborers in any other department would also be. The increase of traders does not increase trade unless buyers choose to increase their purchases. Nor does the in- crease of traders necessarily increase the profits charged upon goods. It tends, rather, by competition, to diminish profits. It is true that traders sometimes take advantage of their opportunities and charge larger profits than they are entitled to, but the absence of rival traders would not necessarily make them more honest or more just. The cure of this, as of so many other evils, must be sought in an increase of popular intelligence. It is one of the many cases in which people pay more for their ignorance than it would have cost to gain knowledge. The real utility of the trader's services, and their wealth-producing power have already been suffi- ciently proved. No community would long consent to do with- out such service; nor could the service be. done by any one without a costly expenditure of capital and labor. 240. Balance of trade defined. — Connected with the subject of foreign trade, one meets the question of the "bal- ance of trade." By this phrase is meant the difference in amount or value, between the goods imported and those ex- ported. The balance of trade is said to be in our favor when we sell more than we buy ; and against us when we buy more than we sell. For some years our exports from this country have been much larger than our imports, and this has been thought so plain a proof of national prosperity that even the Presidents' messages have mentioned it with public congratu- lations. TRADE. ' 247 The popular feeling in regard to the balance of trade is based upon two distinct notions: i. That selling is a source of income, and that buying marks expenditures; and, hence, that we are growing richer as a people when we sell more than we buy. 2. That when we send to foreign peoples more goods than they send to us, the balance in our favor must be paid in gold and silver, and thus increase our money and capital. President Hayes, in his message of 1879, said: "The increasing foreign demand for our manufactures and agricult- ural products has caused a large balance of trade in our favor, which has been paid in gold, from the ist of July last to November 15, to the amount of about $59,000,000." This statement is made in the midst of his congratulations on the national prosperity, of which he, in common with many others, thought this one of the proofs. This popular opinion is, per- haps, a survival of the old belief that w^ealth consists in money, a belief which led the English Parliament, in the times of the Tudors, to prohibit the exportation of gold from the country on pain of death. 241. Is the balance of trade an advantage? — To judge rightly of this question, let it be reduced to a case of the balance of trade between individuals. All trade, foreign or domestic, is individual; for nations do not make exchanges. In fair exchanges, as we have seen, both parties are benefited ; and this is as true in trade across the seas as across the street. When foreign trade ceases to be profitable to our merchants, they will, doubtless, abandon it; and if it is profitable to them, it is difficult to see why it is not also profitable to the country But let us take the simplest case, of a single cargo. If an American trader sends to England a cargo of wheat, worth, in New York, $5,000, and sells it in Liverpool for cloth worth $6,000, which he brings home, the balance of trade is said to be against him, since he seems to have sold less than he has bought. But the cloth bought in Liverpool for $6,000 may be w^orth, in New York, $7,000. So the balance of 248 POLITICAL ECONOMY. trade, which seemed $1,000 against him, was in his favor to the amount of $2,000, less the cost of freight and insurance. Let us suppose that in place of taking cloth in full payment, he takes only $2,000 in cloth and the $4,000 is paid him in gold. The balance of trade is now pronounced to be in his favor, because he sells more than he buys; but it is evident that he makes less than before; and if the profit on the wheat and cloth is less than the expenses of the shipment, he really suffers loss. The gold itself is nothing but merchandise, as between different countries; and it is merchandise on which there is usually no profit. 242. Profit and loss lie in use. — If, through failure in markets, the shipments turn out to be losses in either direction, the parties making the shipments are losers, whether the bal- ance of trade is in their favor or against them. If goods sent abroad are sold for less than cost, the more we export the worse for us; and if goods imported are sold or employed at a profit, the greater the importations the better. Even if the goods imported are merely luxuries, which are consumed with- out profit, the difficulty is not with the balance of trade, but with the useless consumption of luxuries. Had these luxuries been home productions, their consumption would have been equally the destruction of so much value; though in this case it is true the money or goods given in exchange would have remained in the country. It may be urged that the goods imported gave employment to foreign labor in place of home labor. This is true ; but it must be remembered that the goods exported gave to home labor employment which it would have lacked without the foreign market; for the exported goods, it is to be presumed, were in excess of the demands of the home market. And the objection Hes not alone against a balance of imports, but against all imports which might have been produced at home. By consequence, it lies also against all exports; for since in foreign trade all goods must be paid in goods or gold, TRADE. 249 without imports there can be no exports. It may be pleasant to take our pay in gold, but it is certainly more economical to import goods on which there is a profit. The cloth which was $6,000 in Liverpool, but changed to $7,000 in New York, was a better bargain than the gold which remained worth only $6,000 after its costly transportation across the Atlantic. If it still be urged that a man who buys more than he sells is getting poorer, the reply must be, it depends upon the use he makes of his purchases. If he sells them to his neighbors at a profit, or uses them to improve his property, then it is not true that his purchases are making him poorer. The case supposed is this, that it is only his foreign purchases and sales that are in question, his sales to his neighbors not belonging to foreign trade. CHAPTER XXII. MONEY. 243. Synoptical view: Natural functions. {•: Nature, origin, and history of money. As a commodity. As a measure of values. Functions J ' C 3. As a medium of exchange, of money. Legal — its power to pay debts — legal tender. It facilitates hoarding. It facilitates transportation. {Amount required. Effects of deficiency. Effects of redundancy. - Incidental. 244. Peculiar character and power of money. — Money is the puzzle both of people and of economists. Economic science has no topic more difficult or important than this. Whether as a species of property, or as an instru- ment of trade, or as a potential factor in modern life, the roles played by money are as dazzling and bewildering as the splendid and coveted metals of which it is commonly made. Many volumes have been written, in almost every language, to give its history and to explain its functions, and still both- statesmanship and pubUc opinion seem alike divided and un- able to solve its practical problems. For a second time, this past summer (1881), an international congress of eminent pub- licitsts was convened to setde one of its questions, and ad- journed without reaching any conclusion. Kings and cabinets have juggled with it for their own profit, and demagogues (250) MONEY. 251 have used it as a battle cry for electoral campaigns. It is the jumping-jack of values; the trick card of speculation; the king of the market ; and the most watched and feared of all the factors of trade and business. Its power is enormous be- yond calculation; its great holders, the "money kings," con- trol trade as monarchs rule kingdoms; and its great fluctuations shake the whole fabric of industry. Modern governments jeal- ously reserve to themselves the right to coin money, and the most difficult and most anxious legislation is that which is devoted to the guarding and controlling its issues and uses. 245. Origin of money. — In its simplest notion, money is an instrument of exchange or trade. It is something to buy and sell with. As such, its invention was easy and natural. The first man who failed to find some one to give him the thing he wanted for the thing he wished to give in exchange, and who thereupon bethought himself to sell his commodity for some third thing with which he might buy the article he needed, invented money. The third something, which he used simply as a means of effecting his desired exchange, was to him money. Any commodity may be used to effect an exchange, and to that extent may become money. If I can not barter my corn for a coat, I may sell it for butter, and with the butter buy the coat. The butter, in this case, serves me as money. The more general the desire for any commodity, the better it will serve as a medium. Butter is better than corn, in this respect, because more people want butter than want corn. 246. History of money. — In earlier ages, many different articles were used as money. Cattle, slaves, skins, shells, pieces of leather, feathers, strings of beads, grain, sugar, oil, nuts, tobacco, gold-dust, nails, postage stamps, and many other things, have all been used and counted as money. Gradually, as civilization advanced, and as exchanges in- creased in number and variety, the commodities most con- venient for the purpose were naturally selected and retained 252 POLITICAL ECONOMY. for this use. These commodities were such as were found to fulfill most perfectly all the conditions required, to serve all the uses, and perform all the functions, of true money. Gold and silver won their place as money, in ancient times, from their brilliancy, their scarcity, their consequent high value, and their adaptability to coinage, and to general use as a portable medium of exchange. Money having been invented, and having speedily shown its immense power as the one commodity of universal desira- bility, its coinage was assumed among the prerogatives of sov- ereignty, and the legal quality became attached. To trace its whole history would be to review much of the economic his- tory of the world. The invention of coinage has been cred- ited to the Corinthians, the Lydians, and to the people of India. It is certain that coins were in use in the sixth cen- tury before Christ. The use of paper money dates from the fourteenth century in Europe, but it was employed in Asia, it is claimed, much earHer. 247. The natural functions of money. — What is money? What does it do? To find the true nature and functions of money, let us examine «. single act of exchange. Since money, when used^ always takes the place of one of- the commodities in the act of exchange, it must, evidently, fill all the essential conditions filled by the commodity whose place it takes. 1. In every act of barter or exchange, each of the articles offered in exchange must have value, must be an object of desire — a. real commodity. No one will, knowingly, give a valuable for a worthless thing. To fulfill this condition, money must also be a commodity, and have a recognized value. 2. In barter, the values exchanged are counted as equal. Each one is measured against the other. Each measures the other. Money must also fulfill this condition — must equal in value the article for which it is given, and must, therefore, measure it. And as money is so commonly exchanged for MONEY. 253 all kinds of goods, it comes naturally to serve as a common measure of values. Thus, the values of all articles are ex- pressed by the money for which these values would exchange. This incidental use of money has come to be one of its most important functions. It is the universal measure of values. In millions of daily exchanges and bargains in which no money is actually used, the prices of goods to be bought or sold are fixed at so many dollars, or marks, or francs, or pounds sterHng. The money value named, at once gives defi- niteness, in all minds, to the estimate of the values traded. Daily traffic would be paralyzed if this function of money should be destroyed or suspended. 3. In exchanges it is also commonly required that each article shall have further exchangeability — that it may, if de- sired, be traded for other goods. This is the especial condi- tion required in any commodity to fit it to become a medium of exchange. The wider the exchangeability, the better it will serve as such a medium. Money, by reason of its universal exchangeability, is the universal medium of exchanges. This condition of exchangeabiUty is simply the extension of the first two conditions to successive acts of barter or trade. It is yalue and mensurability carried forward to successive exchanges. These three seem to be all the essential conditions of com- modities in exchange, and hence the essential natural func- tions of money may be stated as including these three : 1. It is a commodity, — having a value of its own, 2. It is a common measure of values. 3. It has general exchangeability, and is, hence, a general medium of exchange. 248. The legal function. — Legal tender. — To the three natural functions of money must be added the function given it by law, which authorizes the debtor to tender it in payment of Jiis debt, and compells the creditor to accept it. This is its so-called legal-tender quality. Without this legal quafity, 254 POLITICAL ECONOMY. money might be accepted or refused like any other commod- ity. Its sole power as a medium of exchange would lie in its almost universal acceptability. But with this legal power behind it, it becomes something more than a commodity; it has the stamp and authority of the supreme government upon it, affirming its value, and commanding its use. It is evident that the act of coinage has a value in itself, and means, in practical life, something more than the mere ascertainment and certification of the market value of the metal contained in the coin. A conspicuous instance and proof of this is found in the subsidiary coins, whose money value is always higher than their metal or bullion value.. It is, however, a gross exaggeration of this legal power to suppose that nothing but the government fiat is necessary to give to any commodity the money power. Despotic govern- ments, have sometimes attempted to enforce the use of their depreciated money, under the penalty of death for its refusal, but their decrees have been found idle and vain. The neces- sity that money shall sometimes pass back into its primary condition as a simple commodity, limits the power of the gov- ernment stamp to give if perpetual currency, at more than its commodity value. 249. Incidental functions. — Hoarding and transpor- tation. — Besides its natural and legal functions, money has two other common and valuable uses, derived from its form and monetary qualities, and which help to give it further desirability and currency: 1. It serves to store up values, in a compact and nearly imperishable form, and thus facihtates hoarding or hiding such stores of value. So far as hoarding promotes prudence in expenditure and care in saving, it is an economic good ; but where the savings are placed in a savings bank, the same end is secured, and the money is not withdrawn from use. 2. It allows and makes easy the transfer of property or MONEY, 255 values to distant places. The owner of a farm on the Merri- mac, or Hudson, can not transport it to the banks of the Sacramento or Mississippi; but, by the aid of money, he can carry its full value with him, and possess himself of a farm in the locality desired. Much of property is of the immov- able sort; and if men could enjoy it only by remaining with it, the desire to save would be much restricted; but the aid of money permits the transfer with slight expense, not, indeed, of the identical articles, yet of their full value, to the most distant points. 250. Money as a commodity. — Money as a commodity has two distinct values : the value of the metal of which it is made, and the value it has as an instrument of trade. The second depends, primarily, upon the first. Gold and silver, the common materials of money, are valuable as metals. In bulk, or bullion, they are supposed to have nearly the same worth as when manufactured into coin. It was their high values as precious metals which primarily gave them their currency as money. But money, as a manufactured commodity, has a value aris- ing from its special uses as money. ■ As such a commodity it must also obey the market laws of supply and demand. If in excess of the demand, its value will decline; .if deficient, its value will rise in the market. Bankers and brokers trade in the commodity of money, as merchants trade in other goods. They borrow or import it from places where it is cheap, and lend it in places where it is dearer; and this bor- rowing and lending is a species of purchase and sale. 251, Variations in the value of money. — From its double value as metal and as coin, money* has two classes of variations in value, — the variations in the cost of the metal, and the variations in it as a manufactured instrument of ex- change. Paper money, representing as it does metallic money, will have the same variations. There is a popular feeling that we can not have too much 256 POLITICAL ECONOMY. money; that the more money a man or a nation has, the greater the weakh of that man or nation. But no fact is more certain, in the commercial history of the world, than the depreciation of money in value, whenever it has been issued in excess of the public need. The history of the assignats issued in France during the French Revolution; of the continental currency of the times of our own revolution; the depreciated paper money of Austria, Italy, Turkey, Russia, and China, as well as in Mexico and the South American re- publics, all prove, beyond dispute, the certain depreciation of that kind of money when in excess; and this depreciation is not because it is paper, but because it is an excess of money. When the paper money is not made redeemable in coin, the depreciation is still more rapid, because the paper itself has no commodity value lying behind its money value. Metallic money must depreciate just as certainly when in ex- cess; but the depreciation of coin values can not fall below the value of the metals themselves; because, if not needed as money, coins are readily sold as bulhon, or exported as such. The immense increase of the precious metals during the sixteenth century, after the discovery of the American mines, diminished the purchasing power of metallic money by nearly four fifths. The fluctuations in the value of money are not confined to these extreme cases of excessive issue. They occur in money as** a commodity, and, because a commodity, as frequently, perhaps, as in other commodities, and from the same causes. The special use for which money is made is that of an instrument of trade. When there is more of this instrument than the trade requires, it is a surplus beyond demand, and must cheapen. When it is less than the trade demands, it is in deficiency, and its value rises. As trade itself is constantly varying in its amounts and demands, the require- ments for money must also change, and the daily money reports from the great money centers show this to be the case, MONEY. 257 while the corresponding changes in the rates of interest show the rise or fall in the value of money. The fluctuations in the value of money are concealed from the popular view by the facts that the names and forms of the coins remain unchanged, and that the prices of all other commodities are given in money. The rise or fall in the worth of money is easily mistaken, therefore, for a rise or fall in the prices of goods. Thus, soon after the opening of the civil war, goods and labor were said to have risen in price; and after the close of the war, prices were said to be falHng; whereas, the rise in prices was a real fall in the value, or purchasing power, of money; and the subsequent fall in prices was a rise in the worth of money. This popular illusion must be kept in mind when we would estimate rightly the economic effects and phenomena of money. The fluctuations are inseparable from the function of money as a commodity; and, being concealed, the influence of these fluctuations is carried, almost without notice, into all the estimations of property, and all the transactions of trade. The variations of the value of money, arising from the in- crease or deficiency of the precious metals, are much slower in their progress and more permanent in their character. 252. Money as a measure of values. — The measuring function of money rises naturally, as we have seen, from its use, or place, as one of the commodities in exchange. In strict truth, the measurement of the two commodities is mutual. The article purchased measures the money paid, as really as the money measures the article. The measurement is merely the determination of their equivalency. It is by finding how much a dollar will buy that we form our estimate of the worth of the. dollar. By common and general use, this value of the dollar becomes known to all traders, and henceforward it is used commonly as the most convenient means of expressing all values. Money is a conventional, not an absolute standard of p. E.— 22. 258 POLITICAL ECONOMY. measurement. Its variations forbid its use as an absolute standard of value. In the measurements in daily traffic, its variations are of little consequence; but in the payment of fixed salaries and annuities, and in the liquidation of debts of long standing, it is often of great consequence, entailing serious losses upon some and giving undue advantages to others. This has led to the effort, described in a previous chapter, to find or create a permanent standard of values. The usefulness of money as a common measure of values is greatly increased by its divisibility. It would be exceed- ingly difficult to express the value of a coat in baskets or boots, or the worth of a hat in houses and lands ; but it is easy to give the price of the most trifling, and of the most valuable, commodities, in dollars and cents. It is this capacity of measuremicnt against the widest extremes of value which gives to money its greatest utility. By this, it serves the child to buy his penny toy, and the capitalist to purchase a railroad worth milhons. The day laborer counts in it his wages, and the government employs it to compute enormous national debts and incomes. This makes money the most useful labor- saving machine ever invented by human genius. Money, in this use as an instrument of measurement, is called, frequently, "Money of account." It is the measuring function of money which renders its concealed fluctuations of value so harmful and sometimes dis- astrous. It is as if some one should secretly, in a night, shorten or lengthen by an inch all the carpenters' rules and other measures of length in the country. The next day every one would find his property changed in its apparent dimen- sions, and every unfulfilled contract would be changed in its requirements. 253. The medium of exchange. — The function of money most known and regarded among men, and often among economists, is that of a medium of exchange. Popu- larly, this is believed to be its only essential function; and MONEY. 259 hence the conclusion that any thing which can be made to fulfill, for a" time, this function, is good enough money. Its function as a medium of exchange is fulfilled whenever it is offered and received in payment for goods or labor. The exchange is completed when the money is exchanged again for other goods. Men sell their products for money in order that with the money they may buy in turn the products of other men. The full act of exchange is thus divided, as an- other expresses it, into halves, a purchase and a sale; and the exchange is made easier, because that only one of the com- modities is to be considered and passed upon at a time. If the farmer wishes to trade his wheat for cloth, he is obfiged to consider carefully the value of each; but if he sells his wheat for money, and afterwards purchases the cloth with money, he feels that each transaction is simplified, for, know- ing in general the value of the money^^ he is forced to con- sider first only the price of the wheat, and afterwards the price of the cloth. The great utility and convenience of money as an instru- ment of exchange are too obvious and too well known to need demonstration. A single illustration is sufficient. To trade his load of wheat for all the various articles he wishes to get in market, would cost the farmer the labor of days, in finding the persons wishing to make such exchanges as he desires, and in dividing out his wheat to each in due measure; but selling the whole load for money, and buying at once the articles he needs, his task is reduced to the minimum of time and labor. 254. The measure more important than the me- dium. — In general, no use is popularly known for money except that of buying and selling, and as any money which will pass currently for the time fulfills this use, it is no wonder that little care is felt for the character of money in use so long as it passes. Brass is as good money as silver, and paper is equal to gold, as long as people will take the one as 26o POLITICAL ECONOMY. readily as the other. So says the crowd. But, as we have shown, to serve as a means of exchange is not the only function of money. Its very power to effect exchanges de- pends upon its character as a commodity and its capacity for measurement. These never leave it, and it is through these that it enters into the commercial system as blood in the body. But a small part of the actual exchanges of goods and property is made with money. MilHons are bought and sold on credit. It is said that ninety-five per cent of the daily exchanges of New York City are effected by other means than money. But not one is effected without the measuring power of money. Every yard of cloth in store, every day's labor, every house and acre of land, every ship that sails the seas, every cargo that comes or goes, the great aggregations of wealth, the gigantic shadow^s of debt, all are measured by and in the units of money. And as these change with the commodity value of money, the entire accumulations of the property of the world feel the effects. It is not the few milHons of money that pass from hand to hand in the course of daily traffic, but the mightier millions which He in banks and in government treasuries, which are to be watched and taken into account by the economist and statesman. It is these gigantic reserves which react upon the money market, and through this upon all the markets of the world. What the dollar in the market will buy is determined by the millions of dollars which do not appear in market, but lie in the strong vaults ready to meet the final settlements of trade. The most essential step in making an exchange is the fixing the price, and this must be done by the aid of the measuring power of money — not money actually present, but "money of account" — the established unit and value of money. The price fixed and agreed to, the remainder of the transaction is very simple, and is as easily done without money as with it, in most cases. It is but to transfer the goods to the purchaser, and to take a note, draft, or promise, or a paper dollar, MONEY. 261 which is also only a promise, that some time, when desired, or as agreed, the seller shall have value in return. 255. Amount of money required. — The quantity of money required by any country will depend upon three chief conditions : 1. The advancement in civilization. — Savage peoples are poor and . have few exchanges. They require, consequently, little or no money. As civilization advances, the differentiation of employments goes on, and exchanges become steadily more necessary and more numerous. Up to a certain point, the demand for money constantly increases. After this point is reached, the money begins to become burdensome by its amount, and the increased intelligence finds substitutes for it in the larger transactions, while the increase of public moral- ity favors credit exchanges which are made without the use of money, except on final settlement. 2. General wealth. — The larger the wealth of any people, and the more widely this wealth is diffused among the people, the greater the demand for money to effect the daily ex- changes. But if the wealth is confined to the higher classes, and the peasantry are poor and ignorant, the demand for money will be less. The largest actual use of money in daily life is found in the payment of wages, and in the purchase, at retail, of daily supplies. Both of these increase with the diffusion of wealth, and diminish with the poverty of the masses. 3. Intelligence and morals affect the money demand for another reason. Ignorance and low morals create common distrust, which not only compels cash payments, but also leads to hoarding. Intelligence and good morals increase credit, and favor institutions of credit. Hoarded money goes out of circulation and use; but money deposited in a savings bank still remains in circulation, the bank loaning it on interest. An ignorant population must commonly work for small wages; a vicious population will usually prefer idleness to toil. 262 POLITICAL ECONOMY. 256. Money circulation of principal countries. — The following tabular statement is taken from the report of the Director of the Mint, for 1881 : COUNTRIES. United States Great Britain Canada Australia India Germany France , Belgium Switzerland Greece Italy Austria Sweden. Norway Denmark. Netherlands Russia. Spain Portugal Turkey Mexico Colombia Peru Brazil Venezuela Central America Argentine Republic Cuba Japan Algiers Hayti Cape of Good Hope Total ; POFULATION. 876 LATEST CENStTS OR ESTIMATE. 50,155,783 35,246,833 "•'4,075,000 2,749'852 191,096,633 45,194,172 36,905,788 5,476,668 2,846,102 1,679,775 ''27,769,47s 37,741,413 4,568,901 1,806,900 1,980,675 3,866,456 86,952,347 16,625,869 4,160,000 ■'2 1 ,000,000 9,343,470 2,951,3" 2,703,070 10,108,291 2,080,000 =■=2,600,000 =•'■2,000,000 1,394,516 33,623,319 2,867,626 "■■=572,000 720,984 $780,506,128 207,001,444 41,562,711 23,606,739 55,874,880 276,897,658 511,328,021 63,434,827 i6,594,coo 12,890,000 323,975,402 295,611,587 21,657,372 10,375,265 19,028,000 83,836,901 126,237,000 53,867,288 5,023,360 21,871,289 1,500,000 1,895,343 13,098,820 91,000,000 250,900 163,347 373,470,000 48,943,457 147,288,681 11,194,000 4,129,230 3,644,113,650 TOTAL GOLD AND SILVER. $749,042,484 694,595,544 10,646,000 60,440,708 1,015,000,000 607,792,577 1,478,062,000 107,000,000 34,700,000 7,500,000 57,900,000 90,400,000 11,681,616 10,913,324 14,179,000 85,793,273 119,209,784 200,000,000 60,000,000 15,589,828 50,00^,000 4,500,000 1,882,018 11,000,000 2,692,300 6,000,000 50,000,000 [50,514,016 16,306,748 5,000,000 32,440,726 5,760,181,946 TOTAL PAPEl AND SPECIE. 1,529,548,612 901,596,988 51,608,711 84,047,447 1,070,874,880 884,690,235 1,989,390,021 170,434,827 51,294,000 20,390,000 381,875,402 386,011,587 33,338,988 21,288,589 33,207,000 169,630,174 245,446,784 253,867,288 65,023,360 37,461,117 51,500,000 6,395,343 14,980,838 ^1,000,000 11,250,900 2,855,647 379,470,000 98,943,457 297,802,697 27,500,748 5,000,000 36,569,956 9,404,295,596 * Estimated. rv MONEY. 263 Most of these figures will be sufficiently explained by the three conditions described as affecting the amount of money required. The countries with a small amount of money per capita will usually be found to have large masses of the population in an ignorant or barbarous state, England claims larger wealth and more business than France, but has only a little more than half the per capita of money. M. Chevalier attrib- utes the difference to the advantage which England derives from its institutions of credit, its banks and clearing houses, which enable it to accomplish the same amount of exchanges with a less quantity of money. It is, doubtless, due also to the disposition so common among the French people to hoard money, derived, perhaps, from circumstances in their former history, and continuing by force of habit. 257. Redundancy and deficiency. — The effects of a redundance and a deficiency of money demand careful con- sideration. As we have seen, money, like any other com- modity, is liable to the operation of the laws of supply and demand. Having specific functions and uses, whenever it ex- ceeds the amount required for those uses, it is in excess; and whenever the amount falls short of supplying those uses, it is in deficiency. The amount of money needed varies with the course of trade and business. It is larger at some seasons of the year than at others. For example, there is a large demand for money when the crops are being .marketed; also when the taxes of the year are being collected. Great public move- ments and enterprises, in which large amounts of materials are to be purchased and great numbers of laborers are to be employed, also create large demands for currency. The excess or deficiency of money can only be known by its effects. An excess lowers interest and raises the prices of commodities; a deficiency increases interest and lowers prices. The bank reserves, as they are called, the amounts of money 264 POLITICAL ECONOMY. held by the banks at the great commercial centers, are now watched, as indicating the dearth or plethora of money. Bank interest rises and falls with the diminution and increase of the reserves. These fluctuations are usually temporary, de- pending on the movements of business; but there are cases in which the whole volume of the money of the country rises, for a protracted period, above the general need, or falls below the demand. In such cases, a readjustment of general prices and values will occur, and so the excess or deficiency will disappear. 258. Effects of too much money. — A general and pro- tracted redundancy of money tends : 1. To stimulate business. Increasing the prices of commod- ities and of labor, and raising the apparent value of property, it produces a spirit of speculation, and thousands rush into, or enlarge, their business. The increasing prices are mistaken for an increasing demand, and men count upon a career of prosperity. In the end, if continued, the effect would be simply the employment of more money to do the same amount of business. Each man would get more and give more in trade. 2. It places the country at a disadvantage in relation to other countries; for the high cost of its commodities would discourage or forbid their export, and the redundancy of money, even if it is in gold, can not be exported except at a loss, since it must go as bullion and not as coin. 259. Too little moneyc — A protracted deficiency of money tends : 1. To hinder exchanges and diminish, to some extent, the circulation of goods. 2. To increase the rate of interest and to discourage busi- ness. The fall of prices and of wages are commonly taken as evidences of general prostration and poverty, and men hesitate to go into business or to increase their risks. The final result must be to fix all prices on a lower scale. Men MONEY. . 265 get less and give less money in trade, and business accommo- dates itself to the new values of money. 3. The country gains in its relations to foreign countries where a similar result has not been reached. Its exports are at a larger profit, and gold, if not goods, may be imported at an advantage. Another and serious effect of a deficiency of money, is the hardship imposed upon the debtor class. This class is always a large one, and especially in times of financial pros- perity, when public confidence enlarges the amount of private credit. As a deficiency of money raises its relative value, the debtor finds his debt increased, while the property for which he incurred the debt shrinks in price. The opposite line of effects follows a redundancy of money, which entails a hard- ship upon the creditor class. During the war, mortgages upon western farms, to an immense amount, were paid off with paper money worth no more than one third to one half the money loaned. On the other hand, debts contracted and mortgages given during the later years of the war, or in the years which immediately followed the peace, while the great volume of paper money was still afloat, had to be paid at a later date in money worth two or three times that which was borrowed. p. E. —23. CHAPTER XXIII MONEY — CONTINUED. 260. Kinds of money. — Metallic. — Modern money is of two chief classes: i. Metallic money, called specie; 2. Paper money, sometimes called credit money. Each of these classes has several varieties. All the civilized peoples now concur in the choice of the two precious metals, gold and silver, as the fittest materials for money. Inferior coins and tokens are made of copper, nickel, and alloys. Gold and silver, which have been in use as money from very early times, are peculiarly suited to be the money of the world: I. They are beautiful and easily distinguished in color. 2. They are sufficiently hard and durable to receive and re- tain the impress of the mint in coinage. 3. They are so val- uable that small and portable quantities contain the requisite amount of value. 4. They are nearly sufficient in amount to supply the money needs of the world. 5. They have an in- dependent value for other important uses in the arts to sus- tain and regulate their use as money. 6. They are suscepti- ble of being divided into equal parts sufficiently minute to measure nearly all the current values of the market. 7. They are so nearly indestructible that they may be hoarded without danger of loss. 8. Though liable to fluctuations of value, from the rates of production, they fluctuate so Httle and so slowly that, within periods of considerable length, they may be considered as fixed in value. 9. It is another advantage {266) MONEY. 267 possessed by these metals, that they are so related to each other in value, that the one furnishes convenient coins of small value, and the other, coins of large value. Few of these advantages are found in other metals; and no other metal possesses them all. Platinum has been proposed and coined by Russia, but the supply is not sufficient for a gen- eral use; and if new discoveries should overcome this objec- tion, it has such a limited use in the arts that its value could not be kept at a high figure when greatly increased in amount. With the addition of copper and nickel for the coins of small value, the metallic money system may be regarded as complete. So far as a specie currency is concerned, these four metals leave little to be desired. The history of the precious metals, and of their use as money, — of their fluctuations of value, and of their relative changes, — is full of interest and instruction, and recent inves- tigations afford abundant material for such history; but it would unnecessarily swell our volume. The articles on gold, silver, money, mint, coin, and coinage, in the cyclopaedias, or any of the numerous books upon money which have recently appeared, will give the student or reader a fuller statement than would be possible here. 261. Problems of coinage. — The question of the standard of coinage has assumed, of late, a new interest and impor- tance. The demonetization of silver by the German Empire, the remonetization of this metal in the United States, the vast discoveries of silver and gold in Western America, Australia, and Russia, and, finally, the two unsuccessful international conferences, held in 1878 and 1881, to secure the adoption of a common standard by the leading commercial countries of the world, — all these have given to the subject an interest which is scarcely exceeded, at the present time, by any other in the range of Political Economy. The practical problems of coinage are the following : I. The choice of the metal or metals for the legal money, — 268 POLITICAL ECONOMY. money to be coined by the government and made legal tender, for the payment of all debts. 2. The determination of the money unit; as the dollar, the franc, or the pound sterling; and also the multiples and frac- tions of this money unit to be represented by different coins. 3. The fixing of the amount of pure metal and alloy which shall make the unit coin and the other pieces. 4. The choice of the form, design, and inscriptions for each piece. 5. Whenever two or more metals are to be used as money, the determination and establishment of the ratio of value between them. 262. Single and double standard, — The chief question now in debate between states and among statesmen is whether gold or silver, or both, shall be made legal tender. Countries using both gold and silver as legal currency are said to have a double standard. Those using only a single metal, either silver or gold, for their legal currency, have a single standard. The single silver standard prevails in Australia, in India, China, and other countries in Asia. The gold standard is in use in Great Britain, Germany, the Scandinavian Kingdoms, and Portugal. The double standard, gold and silver, prevails in the states of the so-called Latin union, including France, Belgium, Italy, and Switzerland. It is also in use in the United States, in Spain, Greece, Netherlands, Mexico, Japan, and Russia. The countries having the gold standard still use silver for subsidiary coins, — or biUon, as the French call all coins which are employed to make change, but are not a legal tender, except for very small amounts. In 1873, the United States demonetized silver, taking away from silver coins their legal tender quahty. Not long after- wards the agitation began for its remonetization, and after a long and somewhat heated conl!roversy, in Congress and by the press of the country, silver was again made legal tender, and its extensive coinage was commanded by law. Since this MONEY. 269 remonetization, the opinion has been growing stronger in this country, that, the double standard is founded in reason, and ought to prevail throughout the world. 263. Battle of the standards. — "The battle of the stand- ards," as Prof. Jevons calls it, began in earnest only after that the gold discoveries in California, in 1849, ^i^d in Australia, in 1 85 1, threatened, by their extraordinary richness, to create a monetary revolution. Apprehending that gold would sink enormously in value, Germany, in 185 1, hastened to demon- etize gold and establish the silver standard. Belgium and Holland also joined the silver states. The annual production of gold, according to Gen. Walker, rose from $30,000,000, in 1846, to $150,000,000 in 1852, while the annual yield of silver increased, in the same time, from $32,500,000 to $42,500,000. But the panic proved needless. The fall in gold was lightened by the larger coinage of it in the double standard states, and by the fact of the two metals being tied together in these states. According to Prof. Jevons, the price of silver was raised only from 59}^d. to 62 ^d. in London, and the permanent depreciation of gold was not more than one and a half per cent. In 1859, the rich Comstock lode was discovered in the Sierras, and in 1861 the silver mines of Nevada began to pour their treasure upon the markets of the world. Slowly the tables began to turn; gold began to rise from its depressed condition, and silver to fall. By 1867, the two metals stood at par again; but silver continued to fall, and now came a silver panic. Germany, in 187 1, demonetized silver and es- tablished the gold standard, offering a large amount of silver for sale, and entering the market for gold. Her example was followed by the Scandinavian states, Denmark, Sweden, and Norway. And India, the hitherto insatiable market for En- gland's silver, having fallen off in its demand, the price of silver went down to 47d., or less. In 1879, it had risen again to 52^^^. According to General Walker, the mean 270 POLITICAL ECONOMY. annual rate of exchange, by weight, of silver to gold, was, in 1867, 15.57 for i; in 1871 it was 15.58: i; in. 1873 it was 15.92:1; in 1874' it was 16.17:1; in 1875 it was 16.58:1; and in July, 1876, it fell to 20.17 '• i- The silver product of the United States rose from $2,000,000, in 1861, to $38,000,000, in 1878. In 1854, the annual silver product of the world was estimated at $47,442,000. In 1878, it was reported at $87,351,491. The total production of the precious metals throughout the world, in 1880, as given in the annual report of Hon. Horatio C. ^urchard, director of United States Mint, was as follows : Gold, weight, 160,984 kilograms; value, ^106,989,846. Silver, M^eight, 2,105,966 kilograms; value, 87,543,072. England established the gold standard in t8i6, and has adhered to it steadily since. Her statesmen and economists, with some distinguished exceptions, are monometallists. The United States had the double standard till 1873, ^^. Destructive. Savings. f Safety. Investment. Laws. f. Profit. Territorial. International. Natural. Human. Constructive ; mental, moral, and social advancement. Destructive. 2 86 POLITICAL ECONOMY. 273. The right of property. — Ancient view. — The earlier economists accepted the right of property as a fact, and left its discussion to the philosophers and lawyers. Mod- ern economics, more searching and more profound, must meet this question also; must explain and defend property, not simply as a production, but also as a possession. It will seem strange to many to be told that the true notion of property, as now accepted among men, was not fully un- derstood nor received till near the close of the last century. Some of the opinions held will show how the minds of men groped in the dark, in their efforts to discover the truth. Montesquieu said : ' ' Men renounced their natural independ- ence that they might live under political laws; they renounced community of goods in order to live under civil laws. The first laws gained for them liberty; the second, property." Jeremy Bentham, agreeing with Montesquieu, affirmed that: ' ' Property does not exist in nature ; it is consequently the product of the laws." ''I can not count," said he, "upon the enjoyment of that which I regard as mine, only on the promise of the law which guarantees it to me." Mirabeau said : ' ' Private property is goods acquired by virtue of the laws. The law alone constitutes property." Robespierre affirmed : ' ' Property is the right which each citizen has to enjoy the goods guaranteed to him by the laws." Grotius (15 83-1 645), nearly two hundred years earlier, taught that God had conferred upon the human race a general or com- mon right to all things; that each took for his own use what he wished, and consumed what he chose ; that matters re- mained in this state till the multiplication of men and of ani- mals upon the earth caused the lands which had been divided among the nations to be parted among families, and each ap- propriated that which he was able to seize. All these writers, it will be observed, leave out of sight the labor which creates property, and confound the right of property with the security which the law gives to that right. PROPERTY. 287 These views will seem less strange if we consider the loose and uncertain tenure under which property was held in olden times. In the beginning, men take what they require, from the common stock of nature, and abandon what they can not use. The idea of property scarcely enters the mind. The occupa- tion of the soil was at first for a night; then, for a single harvest season; finally, for life. Land belonged to the tribe before it belonged to the family; to the family before it be- longed to the individual. When movable property began to accumulate, it was held by force, and taken by violence. In the middle ages, fortunes were obtained by craft or force. The labor which produced property was the labor of serfs or of slaves, who were seized and sold with the goods they produced. Land, labor, and harvests were seized and held by the strongest. The only notion of property Hkely to exist in such a state of society, was that it belonged of right to him that had the power to take it and keep it. When at length law came to restrain violence and to protect men in their rights, property was naturally thought of as the gift of law. The feudal chieftain owned, in some sense, the labor and the chattels of his feud- atories; and the rights of the laborer to the products of his industry were only partial rights, liable at any moment to be resumed by his lord. When the law took the place of the chieftain, it became, hke him, the source of rights and privi- leges. Only careful scholars can appreciate how slowly the ideas of property, liberty, and personal independence have made their way in the world. Sir Henry Maine and Emile de Laveleye have proved that the village community system of land-holding was once com- mon in England, Germany, and, indeed, throughout Europe, as also at the foot of the Himalayas, among the Hindoos; and as the idea of property, or of rightful possession, first de- veloped itself in connection with land and the products of 288 POLITICAL ECONOMY. land, community of property must have been, and was, as naturally held as community of land. All investigations of the German and other European scholars show that this was the case. Individual property had little or no place or sacred- ness in the system. 274. The right of property. — Modern view. — The emergence of the rights of man brought with it, as its neces- sary corollary, the emergence of the right of private prop- erty. The right of man to himself obviously includes the right to what he produces. This right embraces possession, enjoyment, and the power of alienation by gift or exchange. Such is the modern view. The right of property, like that of liberty, is a personal right. It rests upon nature, and not upon law. Law, or rather society acting under law, may be summoned to defend these rights; but law does not create them. Property comes from labor, and labor is the free effort of the laborer. As a free man he may labor or not, as he chooses. If he does not labor, nothing is produced; if he labors successfully, some value results, and this value belongs to him that created it. The laborer may sell his labor to another, taking in place of the product the wages which his employer gives. His sale of his labor is a virtual sale of the product, and this product belongs to him who bought it from its rightful owner. It is admitted that there is a kind of property which seems to be held by no right save the right of prior occupancy. Such is the right of the man who first takes a piece of land, or who appropriates any of nature's gifts which he may find unappropriated. It is against this kind of property that most complaint is made, and the complaint is sometimes extended to all property by the skillful confounding all other property with this. It must be admitted that simple occupancy can not give a permanent right to the thing occupied. So long as the occu- pancy continues, the man has a claim to remain undisturbed, PROPERTY. 289 unless his occupancy is injurious to others who have an equal right; but when his occupancy ceases by his voluntary aban- donment of it, the land or other material thing occupied re- turns to the free state of nature, to be taken by the next comer. The occupant may, indeed, transfer his occupancy to another for a price; in other words, he may be hired to va- cate in favor of another waiting to take possession. This oc- cupancy must be a real one. Robinson Crusoe did not oc- cupy his whole island by simply living on or inclosing a part of it. His right extended only to so much as he used or held inclosed for use. As soon as the occupant has bestowed labor upon the land, or material, and fitted it in the least for human use, he has added value to it, and the case is changed. His right of occupancy is then changed to a right of property. Government, standing in the place of the body of society which it represents, holds the right of eminent domain over all unoccupied territory, and sells or grants it to private indi- viduals. In this case the right of property may be thought to come from the law, but if we carefully reconsider the nat- ure and origin of values, as explained in a previous chapter, it will be found that whatever value is involved, is the prod- uct, not of law, but of labor. The toil and expenditure of the American people, in estabhshing good government over our territories, and in creating manufactures and markets, has reflected a certain amount of value upon all the lands within these territories. The government sells this inchoate and re- flected value, and thus guards against the strifes also of rival occupants. 275. The property of society. — The doctrine of Dugald Stewart, that property, or the right of property, derives its origin from two distinct sources, the one labor and the other the municipal institutions of the country, has this of truth in it : that some property, or value, is created by the common efforts of society, and that this property so created may be p. E.— 2S. 290 POLITICAL ECONOMY. conferred by government, as the agent of society, upon some private individual. We may add here that on these values, created by the efforts of society, rests the right of government to tax private property. In taking taxes for the public use, society does but take its own. Society may be said to be a silent partner in every man's business. It acts as a watchman or guardian of the accumu- lating wealth. As this wealth increases in volume, the services of society grow larger; and there may come a point where the work and expenditure of society in guarding, is greater than that of the owner in creating, the property. But society does not act as guardian alone; it produces, by its mere pres- ence, and still more by its manifold interests and industries, the conditions which make large values possible. It is the presence of the multitudes of citizens which gives to city-lots their enormous values. Every man that erects a costly and ele- gant mansion adds to the price of the adjoining lots. A great manufactory or a railroad raises the price of land all around it. The values created thus by the public furnish the legiti- mate basis both for taxation and for that control which, in the last resort, or in cases of public need, government rightfully assumes to exercise. The valuable privileges and franchises granted by govern- ment to private parties or corporations, are to be explained in the same manner. The value of these franchises is the product of the general and common efforts of society. A wise and just government will only confer them for the good of society, and will carefully guard the rights of society in the terms of the grant. Thus all rights of property are seen to merge at last in the rights of man, since all property comes from labor. 276. The right to land and materials.— A question of much delicacy and difficulty remains to be noticed in con- nection with the rights of property — a question which has already attracted serious attention, and which may hereafter PROPERTY. 291 become a source of serious disturbances. Tliis question relates to the gifts of nature. It has been agreed that these gifts, including land, air, water, and all the materials which nature provides, are not themselves property till they are in some way touched by the hand of labor ; yet it must be remembered that they are the necessary conditions of productive labor. Without materials, labor is powerless to produce any thing valuable. Nature's gifts, though free, are limited in amount. There is a definite quantity of land, which can not be increased; and every acre of it that is taken by any one, leaves so much the less for the occupation of others. It is a supposable case that all the land, in some one country at least, may fall into the hands of a few wealthy men. In England, with a popu- lation of 35,000,000, less than 1,000,000 of men own all the land; and deducting those who possess merely city or village lots of less than one acre each, 269,547 land owners, or a little more than a quarter of a million, hold the farming lands ; while 5,000 owners possess fully one half of these lands; and the tendency is to steadily lessen the number of land holders, since the wealth made in other employments seeks the safe and honorable investment of lands. In Ireland, with a pop- ulation of nearly five and a half millions, 32,572 owners hold the farming lands. Is there a necessary limit beyond which men can not be permitted to monopolize the soil . and raw materials of the globe? This question begins to force itself upon the attention of mankind. To us, in this country, with its hundreds of millions of un- occupied acres, and its inexhaustable forests and mines, the question seems far away; but in England and Ireland it is near at hand, and the Enghsh government has, by its action in Ireland, determined that society, by its recognized agents, may step in between the land holder and his tenant, and put a limit to the property right of the land-owner in the land. The Parliamentary Commissioners fix the rents which the 292 POLITICAL ECONOMY. landlords may demand, and which the tenants must pay, for the use of the soil. The doctrine advocated by such economists as Henry George (in "Progress and Poverty") and by Proudhon (in " Qu 'est — ce que la propriete"), who deny the right of prop- erty in land, and would have the soil held by the government as a common possession, involves a serious fallacy in its dis- crimination between land and other material gifts of nature. Land, it may be granted, is the most important of all mate- rials, not only from its amount and its necessity to food pro- duction, but also because the occupancy of some part of it is a need of every being that lives upon the earth's surface. Every man must live and walk upon the land, for at least some part of his life. But all production of material wealth involves the appropriation of some of nature's gifts. In every article of value there is a basis of material substance which belonged, originally, equally to the whole human family, or at least as much to all as to any. It is the primary condition of productive labor that.it shall be permitted to take from the common stock, and appropriate to private use, the materials it needs for its fabrics; but it is to be remembered that it takes that which has commonly no utility to change it into something useful. To refuse materials is to forbid labor; and to deny to labor its right of property in its products on the ground of the common right to the materials used, is to sub- ject a higher and useful right, that of the laborer to himself and his own activities, to a lower and doubtful one, that of mankind to the crude materials. The remedy for the inequality of property is not to forbid all property. "Suicide is not a remedy." The safeguard against the final catastrophe which such economists seem to fear, is to be found in that final paramount claim which soci- ety has to life and to its conditions, and which it will not be slow to exert when the occasion demands, as in the case of the English Parliament in its treatment of the Irish land ques- PROPERTY. 293 tion. One may not be able to say beforehand what society wil] or should do, but it is certain that, in the last resort, men will, by reformation or revolution, rectify the wrongs which creep into human policies, and which become at last dangerous to the common safety. The right of self-preserva- tion in man and society overrides all other rights. 277. The nature of property. — In the discussion of value, it was shown that ownership was one of its constant and necessary elements. The very exchangeability or purchas- ing power which some economists so much insist on, and claim to be the essence of value, presupposes and depends upon ownership. Without ownership there can be no rightful trans- fer or exchange of goods; and exchange, if made without ownership, confers no right. In our inscribed triangle of value (see page 40), we have shown that value — and we include in this statement every form and object of value from a pin to a palace — presents three aspects; its utility looks forth towards the human wants it is fitted to satisfy; the effort required in its production relates it to the world of work, by whose agencies it can alone be pro- duced or replaced; and, finally, its ownership puts it in the world of wealth, — constitutes it property, and counts it among the things possessed by mankind. In values looked at as property, this fact of ownership is the most conspicuous of all. The whole discussion thus far made in this chapter, shows the question of ownership princi- pally in sight. The right of property is the right of owner- ship and all that ownership implies. We may, therefore, properly define property as goods possessed by an owner. It was a strange mistake of an American economist of some reputation, who affirmed that Robinson Crusoe, on his island, had no property, because there was no one there with whom he might exchange his goods. By the same rule he might have affirmed that the products of a great mill are not prop- erty while they lie in the mill, remote from market, or are on 294 POLITICAL ECONOMY. their way across the ocean, because that then and there, where they happen to be, there is no market, and no owner to exchange them. If the owner chances to come on board with a customer, they immediately become property. A won- derful transformation ! He apparently does not see that ex- changeability presupposes all the real elements of property — usefulness, difficulty of production, and ownership. 278. Forms of property. — Material. — Property has as many forms as there are classes of valuable goods. The chief economic division is into material and immaterial prop- erty, the former including all goods that have a material sub- stance as their basis, and the other consisting in valuable rights, franchises, and privileges. The law divides all material goods into realty or fixed prop- erty — property fixed in place as houses and lands; and per- sonal or movable property, including all not fixed. This division, taken in a large sense, has some economic advan- tages as helping to show some of the economic differences between the two classes. Fixed property, including land and all its ameliorations, and the structures erected upon it, can only be used or sold with- out removal. It knows no distant market, and suffers no charges for transportation. It fears no robbery, and com- monly changes but slowly in its values. It is made up, chiefly, of nature's gifts, and derives its chief utility from the control it gives over the producing energies of nature. It ministers mainly to the vital wants of mankind — the demand for food and shelter, and, except in cities and their vicinity, it is hable to little fluctuation and to slight decay or danger of destruction. It becomes thus a favorite form of invest- ment for the surplus wealth gained in the more remunerative pursuits. Movable property is much more varied in character. It includes the innumerable classes of manufactured goods, and the gathered and transformed products and fruits of nature. PROPERTY. 295 These goods usually require transportation to distant markets, are exposed to the risks and charges of transportation, and require for their storage and distribution the skill, labor, and capital of a host of mediaries or middle-men, whose labors and profits add immensely to the original cost. They appeal largely to the less constant desires of mankind, and take their values from the artificial and perishable forms given by human art and labor. Short-lived, they demand large profits to in- duce their perpetual reproduction, but are commonly unsuited to permanent investment. All material property is subject to loss and decay. Even land, left without care, becomes infested with weeds and nox- ious or cumbering growths, which lessen its value and require new labor to restore it to its productive condition. The less perjnanent forms of property decay or lose value still more rapidly. The wealth of the world is maintained by being constantly reproduced; poured into the Segment of Wants, it reappears from the Segment of Work. The grand aggregate of the wealth of the world can not be even approximately known. Estimates of the wealth of some of the more civilized peoples have been made, and we borrow from a recent work the following statements of the wealth of a few of the leading nations in 1880: The wealth of Great Britain . $44,800,000,000. The wealth of the United States 39,400,000,000. The wealth of France .... 37,085,000,000. The wealth of Germany . . 30)3 7 5 jooo, 000. The wealth of Russia . . . 17,700,000,000. The wealth of Austria . 15,250,000,000 The wealth of Italy .... 9,300,000,000. The wealth of Spain . . . 6,865,000,000 The wealth of Holland . , 5,650,000,000. The wealth of Belgium . . 4,700,000,000. The wealth of Turkey . . . 3,800,000,000 The wealth of Sweden and Norwa y 3,690,000,000 The wealth of Canada . . . . 3,180,000,000. 296 POLITICAL ECONOMY. In the great aggregates of material wealth, the fixed prop- erty tends to increase, relatively, faster than the movable, both because more durable and because attracting investments. In 1880, the value of farms in the United States was over $10,000,000,000. If we add to this the real estate of cities and villages, and the capital invested in manufactories, we shall find that it largely exceeds the entire amount of personal or movable property. In 1874, the entire taxable property of Massachusetts was $2,164,398,548, of which $1,289,308,763, more than one half, was real estate. In 1880, the total valuation of property of all sorts, in the state of Ohio, was $1,545,746,600; of this the real estate amounted to $1,102,677,704, the personal property to only $443,068,896. 279. Immaterial property. — The older economists were disinclined to allow the existence of any property except that which was found in material forms. They could not conceive of values which had no visible substance or local habitation. They were familiar with valuable rights and privileges, but did not count them as property. A more careful analysis of the nature of property has led men to see that intellectual labor is also productive of values, and that these values ac- knowledge the natural law of ownership as well as those found in material products. Of the several classes of immaterial or intellectual property, the most common are copyrights and patent-rights. A copyright is a legal recognition of the property interest which an author has in the book he has written, or the pict- ure, chart, map, or other literary or artistic product of his labor. The manuscript in which he has recorded his thought-prod- ucts, is a material thing, and the author has the same right to it that a hatter has to the hat he has made. He may keep it or sell it; lend it for a price, or destroy it altogether. No one will question his perfect property-right over the man- uscript he has written. Copyright is simply the right to make PROPERTY. 297 copies of his book or to allow others to make copies. As these copies can be made cheaply and in great numbers by the art of printing, and the printed copies are more desirable, in general, than the original manuscript, this right of copying becomes very important to the author. His work may have cost him years of hard and difficult labor; but from the mo- ment that printed copies of his book appear, his own manu- script becomes almost worthless. It is to his right to make copies that the author must look for any adequate reward for his labor. Modern governments have justly recognized this right of the author, and have made laws to secure to him the copyright. From considerations of public good, as it is claimed, most governments limit this right to a fixed number of years. These laws seem based upon the idea that copyright is of the nature of a monopoly, and should, therefore, be limited in duration. Considering copyright as property, this legal limita- tion of its enjoyment is as unjust as it would be to limit the time during which the builder of a house may claim it as his own. The first copyright law in England was enacted in the reign of Queen Anne. In the United States, the constitution au- thorizes Congress to make laws securing copyrights and patent- rights as a means of encouraging art and learning. Under the present law, passed in 1870, the United States allows to authors the privilege of copyright for a period of twenty-eight years, and gives to the author himself, his widow or children, the right to renew it for fourteen years in addition. In England, the copyright endures for forty-two years, or for the life-time of its author and seven years beyond, or more, if a longer time is necessary to make up the forty-two years. 280. Patent-rights, — ^A patent-right is the right of the inventor, guarantied by letters-patent issued by the govern- ment, to the exclusive manufacture, sale, or use, of his inven- tion. Patents in the United States run for seventeen years 298 POLITICAL ECONOMY. without privilege of renewal, and may be obtained by the inventor for any new and useful "art, machine, manufact- ure, or composition of matter, or any new and useful im- provement thereof." Thus it applies to processes, machines or parts of machines, designs, chemical compounds, and medicines. Patent-rights are looked upon by most nations with much less favor than copyrights, and some countries refuse to grant patents at all. But it is evident that the inventor has a prop- erty-right in his invention, and that the securing of this right tends to promote the activity of invention. The inventor usually secures the benefit of his invention by a sum called a royalty, paid him by the manufacturers on each machine or article manufactured under his patent. To the manufacturer it serves as a monopoly-right, shielding him from competition. Many inventions owe their final success and use more to this privilege guarantied to the manufacturer than to the merit of the invention itself. Few out of the thousands of patents issued annually prove remunerative to the inventor; but, in extraordinary cases, as in that of the Howe's sewing-machine, and in the vulcanized rubber goods, the fortunes made by the inventors are enormous. No census can be taken of the property existing in copy- rights and patents, because, being in the nature of rights, their value depends entirely upon the use of them. As eco- nomic facts they are of much importance, absorbing large amounts of skill and labor, controlling production and manu- facture, and giving new turns to industry. 281. Franchises. — There is another species of immaterial property, consisting in the franchises or privileges granted by governments to individuals, or to corporations. In ancient times these franchises were very numerous and were frequently given by monarchs to favorites, or sold as a means of raising revenue. In modern times they are conferred with more care, and usually to secure the construction of some public PROPERTY, 299 work, or the performance of some public function which it is supposed will not be undertaken without such franchise. Thus, the privilege is granted to the national banks to issue bills to be circulated as money; or to a railroad company to construct and operate a given hne of railroad, free from immediate competition. The value of the franchise, in these cases, is evidently a product of the presence and work of society; and government, acting in the place of society, sells the privilege for the benefit which it is supposed will result to society from the work done. That these franchises are to be considered as a species of property is evident from the fact that they are often sold by the original corporators before a stroke of work is done under them. Railroad charters have frequently been thus sold in this country. The good-will of an established business is of the nature of a private franchise, the value of which has been created by the long services of the tradesman to a given circle of customers. This good-will is often of great value, and, in the case of an old and well established newspaper, is sometimes the most valuable part of the property. The seller of good- will agrees to leave the business, and thus, as far as possi- ble, turns his clients, customers, or subscribers over to the purchaser. Debts, or the notes, bonds, or other evidences of debt, are usually counted as property; but it is clear that debts are but claims of ownership on property supposed to be in the hands of the debtor. If A buys a farm from B, paying $5,000 in cash, and giving a bond and mortgage for the $10,000 yet due, the bond does not increase the amount of property in exist- ence; it only shows that the real ownership of so much of the value of the farm still remains in B, the original holder. The total interest-bearing debt of the United States outstanding July I, 1 88 1, and represented b)^ government bonds, was $1,639,567,750. These bonds were held as property by those who had purchased them ; and to them they stand as so 300 POLITICAL ECONOMY. much wealth, which they may keep or sell. But these bonds represent only an ownership of so much of the taxes or taxable property of the country, which the government engages to take and turn over to the bond-holders according to the terms of the bonds. These bonds neither increase nor diminish the volume of the nation's wealth; they simply show ownership. This ambiguity of ownership has its chief disadvantage in the double taxation it induces. The holder of a mortgaged farm, for example, is taxed for the entire assessed value of the farm, though he may be the owner of only half its value. Then the holder of the mortgage is taxed for his interest in the farm, or, as it is generally put, for the mortgage he holds ; and so the farm is taxed double on that part of its value covered by the mortgage. CHAPTER XXV. THE DISTRIBUTION OF WEALTH. 282. Forces of distribution. — Wealth tends not only to constant fluctuations, but also to incessant movement. Like the tides and currents of the ocean, it obeys great attractions from above and from beneath, and yields to its surroundings as the waves yield to the resistless pressure of winds and coast-lines. The forces which cause the grander movements of wealth are to be found : 1. In the personal desires and business needs of men; 2. In the general conditions and movements of communities and nations; 3. In the agencies and accidents of nature and history. The intense desires of men to amass property, to employ it profitably in business, and to secure it in safe and profitable investments, act as a complex and incessant force to draw wealth from hand to hand; to carry it to this place and that, and to gather it at the promising points of investment. Under the action of this set of forces, property is constantly changing hands and flowing to remote localities. Communities and peoples influence the flow of wealth by their civilization, by their legislation, and by all the influences and characteristics which aflect the safety and determine the enjoyment of wealth, or give honor and dignity to industry. Good morals, liberty, high intelligence, and respect for labor draw wealth as magnets draw iron. 302 POLITICAL ECONOMY. Natural accidents — like the potatoe-rot in Ireland, the phil- loxera in the wine-growing regions of France, the presence of a sweeping epidemic like the yellow fever in the South, a season of drought as in India, floods and earthquakes, or wars and riots — often change for a time, if not permanently, the movements of wealth. 283. Classes of distribution. — We may properly distin- guish between four great classes of distributive movement; as follows : 1. The primary distribution to the several producers, and especially the division of products between labor, capital, and the pay or profits of management. 2. The secondary movement or distribution made by the owners to consumption or to investment. 3. The territorial movement from place to place, as from city to country, or from country to city. 4. An international movement of wealth between nations or countries. All the forces enumerated in the preceding section will be found at certain times affecting each of these four dis- tributions. 284. Primary distribution, — Values are produced by the application of capital and labor to nature's gifts. If the capi- tal and labor are furnished by the same owner, the product evidendy belongs to him. But in most cases, in the modern industries, the capital is furnished by one party, and the labor is performed by others; and frequently the work is planned and directed by a third party. In these cases, the resulting products belong to the several parties contributing to the production; and to each in proportion to the cost, or value, of his contribution. Labor, capital, and management, each claims its share of the new values produced by their joint efforts. But this is on the supposition that they are all partners in the work, that they all share in the risk of the enterprise, and that they have THE DISTRIBUTION OF WEALTH. 303 not, in any other way, received the price or value of their contribution out of the aggregate product. Commonly, the laborer is unprepared to share any risks, or even to await the completion of the final products; and often the capitalist declines to run any risks, and prefers a surer, if also a smaller, return in some fixed sum paid for the use of capital. Hence, in the modern industries, capital is fre- quently borrowed, and labor is commonly hired. The laborer accepts wages in place of his share of the products, and capi- tal takes its share in interest money. If the manager is also a hired and salaried agent, he, too, takes his legitimate share of the values he has helped to produce, in his wages or salary. In most great industrial enterprises, the use of lands and buildings is involved. These, too, enter usefully into the pro- duction; their values are in part consumed, and should reap- pear in the new values produced. The share which thus goes to land and buildings is taken in the form of rent. It is true that, in general, the land and buildings may be considered a part of the capital invested in the plant; but in agriculture, the land holds so prominent a place, that men have chosen to recognize its rent as differing in its methods of computation, if not in its principles of right, from other forms of capital. Should the new products chance to exceed the several sums thus set apart or paid for wages, interest, and rent, this sur- plus, whether little or much, evidently belongs as profit to the party, whether manager, or laborer, or capitalist, or stock- holder, who assumed the risk. If all shared the risk, it be- longs to all; but if only one party out of all assumed this risk,^ after paying the others their full and rightful shares, he may take as legitimate profit all that remains. If there had been a deficiency, he would have been held to make it good. . The primary distribution of wealth, therefore — the distribu- tion to the original producers and owpers, — is into wages, in- cluding all salaries and sums paid for services; interest on cap- 304 POLITICAL ECONOMY. ital used or invested; re7it on lands and buildings; and, finally, profits which may be regarded as the pay for risks. All of these enter into every new article of value which is produced, whether they come all from one hand or from many. 285. Wages. — Two theories. — Wages may be regarded either as a share of products, or as the price of labor. Both views are common; and both represent a truth. This double aspect of wages grows out of the double char- acter of labor or working power. First, looked at as a pro- ducing effort, it is seen to enter into its product, a-nd to re- main there incarnate and crystallized, as it were, in its result. It claims the result as its own offspring and possession. But, in the second aspect, labor is simply laboring-force without aim or object, offered in the market, and sold for its market price to any one who desires to employ it upon his own ac- count. The employer looks upon and uses the hands and strength of the laborer as he uses his own— to accomplish any piece of laber he has planned. The laborer counts himself to have sold this use of his laboring power, for a stipulated price which is entirely independent of the product to be obtained. In that product he takes no risk, and claims no part; he works for the wages and not for the product, and he rightly regards that product as belonging to the man who planned it, and furnished the material and labor for it. Both theories of wages are in common use. It is not un- common to find men working ''upon shares," as it is called — that is, agreeing to receive as their wages a certain share of the products. In some of the simpler forms of mining, in fishing, in chopping, and in gathering the fruits of the or- chards, the laborers frequently work for a specified part of the products. In these cases, the laborer does not ordinarily look upon himself as selling his labor. He simply takes his rightful share of products, leaving to the owner of the mine, the forest, or the orchard the share which rightfully belongs to him. But the more common usage is for the laborer to THE DISTRIBUTION OF WEALTH. 305 seek an employer who has work to be done, and offering his labor, for a fixed wage, to do what the other directs. 286. Piece wages and time wages. — Labor may be sold to accomplish a given work, or for a given time. In the first case, the laborer agrees to do a certain thing for a given price; in the other, he agrees to work a certain time for a stipulated sum. The first includes what is known as ''working by the piece;" the second is work by the hour, the day, the month, or the year, according to the time sold. Wages paid for the former are called piece-wages, and those for the latter, time- wages. In piece-work, the efficiency of labor is more fully recog- nized and kept in view, and, economically, it is found more valuable and productive. The laborer surrenders himself less fully to the direction of another, and assumes less of the atti- tude of the mere machine. He looks upon his labor as his own, and consciously puts it into his products; and in the end he seems to offer his work, and not himself, as the ex- change for the wages paid him. If he has superior skill and quickness, he profits by them to produce more and better products, and to gain better wages thereby. In time-work, the laborer surrenders himself fully to the will of his employer, for the time agreed upon, to do what-^ ever he is directed, under such hmitations as may have been established by custom or by the contract. He agrees to use, within the prescribed hours, whatever force or skill he may have, upon whatever work is placed before him, and is not at all responsible for the choice of the work nor for its eco- nomic result. If he takes any personal interest in his work and its products, it is either because the artist spirit in him will not allow him to be indifferent, or because he recognizes that a certain measure of effectiveness in work will enable him to sell his labor more readily, and, perhaps, command higher wages. In time-work, as the labor is more absolutely sold, so the control and use of it is more absolutely held by the p. E.— 26. 3o6 POLITICAL ECONOMY. purchaser. In many employments this is more important than the superior efficiency of piece-work, and the employer vol- untarily assumes something more of risk for the sake of the more complete control. He wants his man, like his machine, to obey strictly his will ; and he relies upon the perfection of his system to make both man and machine do their best. Time-wages and piece-wages, though thus differing in the theory of their earning, are both, in the last analysis, to be regarded as the share which labor produces, and takes for its own, in the new values created. The right to take wages is the right of labor to its own products. 287. The share of wages. — To determine the share of production which should go to the payment of wages, is one of the most difficult problems of practical economy. And the difficulty is increased by the fact that wages have mostly ceased to be considered as a share of the product, and are now looked upon as the price of labor. Most of the econo- mists are disposed to count labor as a commodity, offered in the market, and obeying the ordinary market laws of supply and demand. When work is scare and laborers are abundant, wages will be low ; but when work is abundant and laborers are in deficient numbers, wages will be high. Such is the common accouiU of the matter, and, within a §mall range of very common labors, the account is near the truth; but, taken on the largest scale, there are other factors which enter into the problem, and which modify largely the results. As a commodity, labor has two features which distinguish it radi- cally from all other commodities, i. The labor of to-day, if not sold to-day, can not be kept till to-morrow. To-day's labor-power, if not sold and used to-day, is lost. To-morrow can only sell and use its own labor-power. 2. Labor is, in general, the laborer's only commodity; its sale and employ- ment are his only means of sustaining life. He must labor in order to live. If his work is to be wanted next month, or next year, he must be sustained till that time, and must THE DISTRIBUTION OF WEAITH. 307 be employed in order to be sustained. From these features of labor, it results that the laborer is, in general, under a strong necessity to sell his labor, and to sell it for enough to meet his wants; and, on the other hand, there is an almost equally strong necessity upon the employing class to provide work for laborers. For example, the great iron and cotton industries can not afford to lose from the country the large supply of iron-workers and cottourspinners. Many other circumstances and conditions interfere with the distribution of that part of wealth which goes to labor as wages, and with the rate of wages. The competition of mas- ters and of men; the state of the markets; the supply of cap- ital; the opening or closing of contemporary industries; the variation in prices of the goods produced by the labor in question; the fluctuations of foreign demand for goods or for men; the fruitfulness or scarcity of the agricultural season; the presence of war or peace; great social or industrial dis- turbances, such as labor-strikes or lock-outs; the discovery of some new and important source of wealth and field of labor, like the discovery of the gold mines of California, in 1848; and especially the great financial and industrial crises, which come Hke periodic storms, and sweep over the com- mercial and industrial world, and which usually break up the labor market, turn thousands of laborers partly or wholly out of employment, and push wages down to the lowest living point.. It is not difficult, in any given case, to trace the fluctuation of wages to its proper source; but it is rarely pos- sible to apply any remedy to save labor, for the time, from the consequences of the causes then operating. The competition between labor, capital, and management, for the lion's share of the wealth produced, involves princi- ples of Political and Social Economy which take it mainly out of the domain of the pure economic science. The remedies proposed to secure a fairer and more equitable distribution belong to two great classes — those of combinations and those 3o8 POLITICAL ECONOMY. of cooperation. The former work through trades-unions and other labor associations which combine labor against capital; the latter, through cooperative organizations which seek to combine labor, capital, and management in the same hands, and thus prevent their competition in the distribution of prod- ucts. The discussion of these remedies belongs to another branch of the subject. 288. What share labor gets. — The proportion that labor now takes of the new production can be seen by a few ex- amples. The following statements are collected from the census bulletins of the census of 1880: PER INDUSTRY. CAPITAL VALUE OF VALUE OF TOTAL CENT OF INVESTED. MATERIALS. PRODUCTS. WAGES. NET PRODUCT Iron and steel $230,971,884 8,225,760 $191,271,150 22,005,576 $296,557,685 4,817,636 $35,476,785 1,256,113 33-6 44.6 Salt manufactures Glass manufactures i9>4i5,599 7,991,303 21,013,464 9,112,301 69.9 Coal-mining, anthracite 150,161,196 6,439,437 40,331,981 21,680,120 61. Coal-mining,bituminous 101,996,037 4,851,093 52,316,968 32,535,460 68.5 If from the total annual products, in each case, we take the cost of materials used up in the work of the year, we may easily ascertain the percentage of the net products which went to labor in the shape of wages. Thus, in the iron and steel industries, in which the capital and material largely ex- ceeded the gross products, 33.6 per cent went into wages; the remainder went, of course, into interest, rent, royalty, taxes, incidental expenses, and profits. In the salt manufact- ures, labor took 44.8 per cent of the net products; in the glass manufactures, in which capital and materials hold a less proportion to gross products, labor took 69.9 per cent. In the anthracite coal-mining, labor took 61 per cent; in the bituminous coal-mining, it took 68.5 per cent of the net production. The wages per man will be found to depend on the skill required in the work. THE DISTRIBUTION OF WEALTH. 309 The following table, giving wages per week of several classes of laborers, in different countries, is borrowed from the report of the state department on the state of labor in Europe, 1878: Occupation. w 2 < (I. >• z < s K W > < z < z Q Z < h 8 > w z < s Brick-layers... $6.00 $4.00 $3-6o $3-45 $8.12 $9.63 $12. CO to $15.00 $ 6.00 to $10.50 Carpenters 5-4° 5-42 4.00 4.18 8 25 8.12 9.00 to 12.00 7.50 to 12.00 Gas-fitters 5-40 3.65 3-95 7 25 8.40 10.00 to 14.00 10.00 to 12.00 Masons 6.00 5.00 4-30 4.00 8 16 8.28 12.00 to 18.00 12.00 to 15.00 Painters 4.20 4.90 3-92 4.60 7 25 8.16 10.00 to 16.00 6.00 to 12.00 Plasterers. 5.40 3.80 4-35 8 10 10.13 10.00 to 15.00 9.00 to 15.00 Plumbers 6.00 5-50 3.60 3-9° 7 75 7-13 12.00 to 18.00 12.00 to 20.00 Bakers 4.40 4.40 5-55 5-45 3-50 3-55 3-90 3-94 6 50 12 6.60 8.00 to 12 00 8 00 to 12 00 Blacksmiths... 8 7.04 10.00 to 14.00 9.00 to 12. CO Book-binders. 4.85 3-82 3-9° 7 83 6.50 12.00 to 18.00 9.00 to 20.00 Brass-found's 3.20 5-49 7 40 6.90 10.00 to 14.00 8.00 to 15.00 Butchers 4-50 5.42 3-85 4.20 7 23 4-75 8.00 to 12.00 12.00 to 18.00 Cabinet-mak's 4.80 6.00 3.97 4-95 7 70 8.48 9.00 to 13.00 7.00 to 15.00 Coopers 7.00 3-30 4-35 7 30 6.10 12.00 to 16.00 6.00 to 15.00 Coppersmiths 3-30 390 7 40 7.10 12.00 to 16.00 15.00 to 20.00 Cutlers 4.63 4.00 390 8 00 6.25 10.00 to 13.00 15.00 to 20.00 Engravers 4.C0 4.00 9 72 8.75 15.00 to 25.00 9.00 to 30.00 Horseshoers... 5-40 3-25 3-50 7 20 7.00 12.00 to 18.00 15.00 to 25.00 Mill-wrights... 330 4-95 7 50 7-50 10.00 to 15-00 12.00 JO 20.00 Printers 4.70 5-00 4.80 3.60 3-9° 3-90 7 6 75 80 7.52 8.00 to 18.00 12.00 to 18.00 Harness-mak. 4.80 6.15 12.00 to 15.00 6.00 to 12.00 Sail- makers... 3-3° 3-90 7 30 6.33 12.00 to 18.00 12.00 to 15.00 Shoe-makers.. 4-75 3.12 4'32 7 35 7-35 12.00 to 18.00 9.00 to 18.00 Tailors S-io 3-58 4-30 7 30 7.00 10.00 to 18.00 6.00 to 18.00 Tinsmiths 4.80 4.40 3.65 3.60 7 30 6.00 10.00 to 14.00 Q.OO to 12.00 Laborers 3.00 2.92 2.00 5 00 4-50 6.00 to 9.00 5-5° to 9.00 As real wages, or wages measured in the goods which the laborer would get for his work, differ from nominal or money wages in proportion as the prices of necessaries which wages must purchase vary, we collect, from the same reports, the following statement of prices of the necessaries of life in several of the countries named : 3IO POLITICAL ECONOMY. ARTICLES. D I III u u < >■ z <; S K [I] < Q Z < 2 > z z < y K CTS. CTS. CTS. CTS. CTS. CTS. CTS. Bread, per pound 4 to 5 3 3 to 7 6 3>^ to 4K 4 to 4^ 4 to 4^ Flour, per pound 4 s% 10 3^ to 4^ 3 to 4 ^% to 4^ Beef,roast,per pound 20 22 22 20 22 I2>^ to 16 8 to 12)^ Bacon, per pound 18 20 20 22 12 to 16 8 to 10 7 to 12 Lard, per pound 20 20 21 22 15 to 18 ID to 12 6 to 10 Butter, per pound 20 to 50 25 22 28 29 to 38 25 to 32 16 to 40 Potatoes, per bush. 56 50 50 I-I5 1.12^ to 2.00 1.40 to .60 60 to 80 Milk, per quart 4 7 6 to 9 8 to 10 3 to 6 Sugar, per pound 15 to 20 II 8^ 53^ to 9 8 to 10 7 to ID Coffee, per pound 30 to 40 30 35 32 28 to 42 2D to 30 16 to 40 Soap, per pound ...... 10 4 5^ to 9 6 to 7 3 to 8 289. Wage-fund and wage-rate. — Almost interminable discussions have been made to show the causes which affect the rate of wages, and the reasons of differences between wages in different employments and in different countries. It has been a favorite doctrine among one school of English economists, and some Americans, that there is a certain nearly fixed sum out of which all wages are paid, and which consti- tutes, therefore, what may properly be called the Wage-fund. Even J. Stuart Mill seems to believe in the existence of such a fund, which he describes as "that part of circulating capi- tal which is expended in the direct purchase of labor;" to which must be added, also, ' ' all funds which, without form- ing a part of capital, are paid in exchange for labor, such as the wages of soldiers, domestic servants, and all other unpro- ductive laborers." "There is supposed to be," says Mill, elsewhere, "at any given instant, a sum of wealth which is unconditionally de- voted to the payment of wages of labor. This sum is not regarded as unalterable, for it is augmented by saving, and increases with the progress of wealth; but it is reasoned upon THE DISTRIBUTION OF WEALTH. 311 as at any given moment a predetermined amount. More than that amount, it is assumed, the wages-receiving class can not divide among them; that amount, and no less, they can not but obtain." As the wage-fund is claimed to be, at any given time, a fixed amount, these economists assume that the wages, at such time, will depend upon the number of laborers among whom this wage-fund is to be divided. General Walker has sufficiently answered the wage-fund theory by showing that wages are paid from production and not wholly from capital ; and that wages will vary with changes in the facilities of production, even if capital varies in the other direction. But the wage- fund theory fails from a disagreement among its advocates as to what the fund is made up of, and from the obvious fact that if such a fund can be conceived as theoretically existing, it can not, at any given moment, be determined, and can not, therefore, influence the demands of laborers and employers, who act without any possible knowledge of its amount. 290. The wage limits. — Wages evidently fluctuate be- tween two extreme limits, beyond which they can not per- manently pass, though they may overstep these limits, in particular cases, for short periods of time. The lowest limit, the limit of least wages, is that below which the laboring population can not continue to exist and keep its numbers good. This limit will evidently differ with different races and in different climates. This limit might, evidently, be overpassed for a time, but the perishing of a part of the laboring population would diminish the labor sup- ply and raise the wages again to a living rate. Ricardo held that wages are always tending towards this minimum; and Turgot held that, in the long run, wages would always settle at the living point. The highest limit, the limit of greatest wages, is that beyond which goods can not be produced without loss. Evidently, 312 POLITICAL ECONOMY. no one will continue long to employ labor when the products will not pay the cost of production. The excitement of com- petition and speculation may, for a time, crowd wages above this point, but they can not remain there. Between these limits there will be incessant fluctuations, and the free movement of labor, especially among intelligent populations, will tend to prevent either extreme from being exceeded or even reached. 291. The share of capital. — Two theories. — Capital has already been shown to be an instrument of production. As materials, or tools, or supplies, it enters into all produc- tion, and hence, justly, claims a share of the products. Capital may be used by its owner; or its use may be sold to another. In this it precisely resembles labor; and the same two theories of distribution which apply to the wages of labor, will be found to apply to the interest of capital. The owner of capital may use it himself, with his own or with hired labor, and take as his own whatever his capital shall pro- duce; or he may offer his capital in market, to be loaned for the current rate of interest, and receive this interest in place of his share of the products. The purchaser or hirer of the capital assumes all risk of its employment, pays the price agreed on, and takes the net proceeds as his own profits. Capital differs, however, from labor in several important particulars : 1. It may increase much more rapidly than population, and consequendy more rapidly than is possible for labor to increase. 2. Its demands have no life limit below which it can not continue to exist. The rate of interest may fall to mere cost of safe keeping without impairing the integrity of capital. 3. Capital, though ceasing to be capital, remains wealth, and may still serve to support its owner till it is wholly spent or consumed. The life standing behind labor must be nour- ished by something else than the mere laboring power, while this remains idle. The Hfe standing behind capital may feed THE DISTRIBUTION OF WEALTH. 313 upon the capital itself while the capital endures, and this may be for years. In any contest of endurance between capital and labor, capital has this advantage. 4. Labor has this advantage that it can do something with- out capital; it can, at least, collect the free fruits of nature. Capital, without labor to use it^ can do nothing. Hence, in the long run, labor increases in power, while capital dimin- ishes relatively. Labor represents man; but capital represents only things. In the struggle for existence, man rises and things fall. The rate of interest has steadily dechned, in the best cases of modern civilization — among the leading industrial peoples; and the wages of labor have as steadily risen. These facts are full of significance; and they are all the more sig- nificant because directly opposed to the theories of the old economists, Hke Ricardo and Turgot. 292. The rent share. — As has been shown, lands and buildings aid in the production of values, and must, therefore, share in the primary distribution of the products. This share is usually called rent. In manufacturing and commercial industries, lands are com- monly useful only as sites, or spaces where the operations can be carried on. They are to be counted as a part of the plant, and as one of the forms of capital; and, as such, the law of distribution is the same as that shown for other capital, mod- ified, indeed, by the durabihty of the lands. The same two theories prevail, by one of which the rent is a share of products, while by the other it is the price of the use of lands. In agricultural industries, the soil is an important agent of production, and must be counted partly as nature's gift and partly as a machine prepared and put in operation by the skill and labor of man. No important difference in principle can be found between this and any other machine constructed by man, though it differs largely from other machines in mag- nitude and fixity. A good farm, like a loom, is made from P. E.--27. 314 POLITICAL ECONOMY, nature's materials, by the application of labor aided by tools; it can only be used by labor and skill; it wears out in use, and needs constant renewal and repairs. It is only a machine of more varied production than the loom. The law of rent would seem, therefore, to be not necessarily different from that of the interest or rent paid for the use of the loom. In many parts of the United States, farms are rented for a fixed share of the crops, commonly one third. Under the *' metayer" system, prevalent in Italy and France, a share of the products, amounting commonly to one half, is paid as rent for the land and stock. All of these systems presuppose a laboring and a land-holding class; or, in other terms, the land is furnished by one party and the labor by another. Under the cottier system, in Ireland, a money rent is paid, only indirectly based upon the products of the land. The cottiers bid for the use of the land, and the rent they can pay is limited only by the surplus they can produce beyond the meager support of their own families. The farming sys- tem of England also is that of a money rent, fixed for a number of years by the lease given by the land-holder. Money rents are also common in the United States, and are always regarded as given for the use of the land. Rent, like wages, has two extreme limits, beyond which it can not pass permanently. The highest limit is that beyond which the surplus of products, after paying the rent, will not support the labor. This is upon the supposition that the land is cultivated for its products, and that the laborer has no other means of support. Land used for a home, for pleasure, or for other purposes, may bear any rent whatever which the means of the occupant will allow. But land cultivated for profit must, evidently, pay its cultivator to the extent that he may keep working, or it will be abandoned. The lowest limit of rent is that below which the land can not be kept in a productive condition. This is upon the sup- position that the improvements and betterments — the fencing, THE DISTRIBUTION OF WEALTH. 315 the fertility, and the necessary buildings or other structures — are paid for out of the rent. These constitute, as we have seen, the real capital in farming lands, and when these disap- pear the land relapses to a state of nature. The occupant of the land may agree to keep the land in good condition. In this case his care of the land is part of the rent he pays. If he receives the use of the land on the simple terms that he keep it in condition, then the whole rent may be counted as absorbed in the preservation of the owner's capital. When the occupant is no longer willing to take the needful care of the property for its use, the land lapses into the valueless natural state, and no longer yields returns sufficient to support the labor. 293. The Ricardo Rent Theory. — The celebrated Ricardo theory of rent, propounded first by a Dr. Anderson, at the end of the last century, and advocated, in this century, by Mr. Ricardo, Mr. Malthus, and Sir E. West, has been ac- cepted by J. S. Mill and many other English and some American economists. It is expressed by Mill in these terms : "The rent which any land will yield is the excess of its pro- duce, beyond what would be returned to the same capital if employed on the worst land in cultivation. This is not, and never was, pretended to be the limit of metayer rents, or of cottier rents; but it is the limit of farmers' rents. No land rented to a capitalist farmer will permanently yield more than this; and when it yields less, it is because the landlord fore- goes a part of what, if he choose, he might obtain." It is elsewhere stated, by the advocates of this theory, that when, the best land alone needs to be occupied, it will pay no rent. When the next grade of land comes into use, the best will pay rent equal to the excess of its products over those of the second grade; and so on, as third and fourth grade lands come into necessary use. The theory may be illustrated by the following diagram, in which each line represents a suc- cessive grade of land, and the lengths of the lines represent 3i6 POLITICAL ECONOMY. the degree of fertility, or producing power under a common cultivation. As A, the secant line of cultivation, moves from right to left, it successively reaches the lower grades of land; and the amount of products it cuts off on the left, on each Hne, represents the rents to be paid by the land next above. D B 1st grade. 2d grade. 3d grade. 4th grade. 5th grade. At A, the first grade land bears no rent; at B, it bears the rent AB; at C, it bears the rent AC; and at D, it bears the rent AD. At B, the second grade bears no rent*; at C, it bears the rent BC; at D, it bears the rent BD. At C, the third grade bears no rent; at D, it bears the rent CD. As soon, in any case, as the line of cultivation reaches a lower grade of land, the grade of land above it begins to bear rent, for the reason given by J. S. Mill in the passage quoted. He assumes that what the poorest land in cultivation will yield is only ^'the ordinary profit of capital," and that all income above this ordinary profit of capital will be de- manded by the landlord and freely paid by the tenant for the rent of the land. It will be seen that this is really a law for the estimation of rent, rather than the reason for rent itself, though it has sometimes been put forth as such. The real reason for all sharing in the primary distribution of products, as already sufficiently shown, is in the producing power of the sharer. THE DISTRIBUTION OF WEALTH, 317 Evidently, if the products could be secured without the use of the land, no one would consent that the land should take a share of the products under the name of rent or under any other name. As a rule for the estimating of rent, the Ricardo theory may have some value, and especially in a land like England, in which the land is almost wholly held by one class and cultivated by another. But it ignores the almost wholly arti- ficial character of fertility and the new and higher agencies of cultivation, which become available as soon as the demand for intense cultivation arises. It does not seem to add any thing to the evident principles stated in the preceding section. 294. The profit share. — An industry may be counted successful in which the products pay fully all wages and sal- aries, the interest on all capital emjoloyed, and the rents, in- cluding all wear and tear, of property used. But it is ex- pected that a prosperous business will do more than this; that it will produce a surplus or profit. But as all contributors to the work of production have received their respective shares of the products resulting from their common efforts, to whom does this surplus of profit belong? We have supposed, in this case, that all labor, including that of management, has been paid for at the stipulated price; that the capital has been replaced with its agreed interest, and that whatever was rented has been returned with the proper rent, as stipulated. It is evident that the profit belongs to the parties, whoever they may be, who undertook the enterprise and accepted the risks of it. These may be stockholders, or the capitalists, or the whole body of persons engaged in the work. It is this pos- sible surplus, or profit, which induces the planning and carry- ing forward of business enterprises, and compensates for the risks undertaken. Profits have been defined, by J. S. Mill and others, as in- cluding the interest on capital, the pay for superintendence and management, and the compensation for risk; but it is evident 3i8 POLITICAL ECONOMY, that, strictly used, the term profit should include only the last of these. The four elements, labor, capital, management, and risk, may, evidently, each be furnished by separate parties, as in the case of the great corporations which borrow much of their capital, employ salaried superintendents, hire the labor, and themselves assume the risk. In the case of the business man or the partners of a firm, who plan and manage their business, furnish the capital, and hire the labor, doubtless the management and capital share the risk and take the profit, which then may be considered as covering interest, manage- ment, and risk. If the laborers should also unite in the enter- prise as partners in its risks, putting their wages at risk along with the capital invested, then all parties would share the profits, which, in this case, might be said to include wages, interest, management, and risk. Large risks demand large profits. No wise man would assume great risks without the chance of making such profits as would cover large losses, in the long run, and still leave a profit. Profit shares in the products of any business in propor- tion to the risks run. It was shown, in a preceding chapter, that risks imply possible losses, or a certain proportion of act- ual losses in a long series of similar enterprises. As the suc- cessful ventures must be counted on to cover the losses, each successful venture should produce, in its profits, its share of the coming loss. These four, then — wages, interest, rent, and profit — com- plete the primary distribution of products, and share between them the whole of each new value added to the world's wealth. CHAPTER XXVI. SECONDARY DISTRIBUTIONS OF WEALTH. 295. For consumption and saving. — Wealth having reached the hands that created it — having undergone the pri- mary distribution to laborers, capitalists, and business man- agers — does not rest there; it begins imrpediately another movement of secondary distributions. By an innumerable series of exchanges, the values created are converted into the various articles desired by the several parties. The laws of the secondary distributions are found partly in the natural desires of men, and partly in their surroundings. The chief division which takes place in the secondary distri- bution, is into the part to be consumed and the part to be saved. Only among the thoughtful and provident is this division made at the outset, and intelligently; in most cases it is governed by accident, and seems to depend upon chance. Still, it occurs with a certain regularity, and in a definite pro- portion, when large populations are taken into view. It has been computed that ninety-five per cent of the annual produc- tion of wealth in the United States, is consumed within the year in the current support of the population. 296. Classes of consumption. — The wealth consumed may be counted as chiefly carried forward into new produc- tion. It may be coarsely subdivided into the following classes of expenditures : I. The satisfaction of the vital wants, including food, cloth- ing, housing, and care. These expenditures support life, (319) 320 POLITICAL ECONOMY. renew strength, and go to make up the labor-power for the year. It keeps good that great vohime of uncounted capital which lies in the muscular and mental force of the active, laboring population; and, in the case of a growing people, it adds to that capital. Only when expended in the support of the dependent classes, including the idle and the unfortunate, may it be counted as lost. 2. Expenditures for personal pleasures, such as are inno- cent, if not also elevating, in character, including fine dress and equipage, ornament of the person or house, social enter- tainments and feasts, pleasure excursions, sight-seeing, and shows. These, though often wasteful and excessive, if wisely used, may improve health, stimulate higher tastes and activity, and open new fields of industry for large classes of laborers. They increase the desire and power to labor, and only entail loss when carried to excess. Luxuries, doubtless, consume > and destroy large masses of goods; but all luxury is not loss. It often stimulates the production which it consumes, and in- duces industry which would not otherwise be exerted. Even savages are sometimes made industrious to obtain the luxuries offered them by their civilized neighbors. Take, for example, a single article of luxury. The silk manufactures imported into this country, in the year ending June 30, 1881, amounted to $32,377,226.48. The duties paid on these goods raised the cost to more than $50,000,000. The home production probably nearly doubled this amount. In 1874, the 180 silk mianufactories of the United States em- ployed 141,479 operatives of both sexes, and produced over $20,000,000 worth of silk goods. Were these silks, satins, and velvets, worn by American women, a mere waste of lux- ury; or did the industries stimulated by it make up for the expenditure of these millions, and leave the country as rich as it would have been had all this silk never existed? The equal steps, by which the refinements of life and the wealth producing industries have gone forward together, amount SECONDARY DISTRIBUTIONS OF WEAITH. 321 almost to proof that these luxuries have in some way increased rather than diminished the world's wealth. Cases of extrava- gance and loss may easily be found, without doubt, but the economist is concerned only with the grand totality of outcome. 3. Expenditures for personal and public improvement. These include the sums paid for good government, for educa- tion and books, for churches, libraries, museums, galleries, lectures, and the whole round of esthetic, literary, and scien- tific work. These expenditures entail no loss, but, on the contrary, they enter into the mass of existing goods as a new element of value. They enlarge the value of wealth by en- larging its uses, by increasing the demand for it, and by giving to it greater safety and higher powers. 297. The economic maelstrom. — Expenditures for harm- ful and vicious pleasures are almost wholly a loss of property, being both a destruction of the values consumed, and a dete- rioration of the powers of production. Among the most public and conspicuous of these expenditures are to be noted those for intoxicating drinks, for opium, and for tobacco. No more serious drain upon the world's wealth exists than is to be found in the use of these substances. Taking the total consumption of spirituous liquors, wines, beer, etc., as given in the quarterly report (No. i, 1881-1882) of the bureau of statistics, and deducting spirits used in the arts, the remainder, at the common retail prices, would show an expenditure, in the United States, for the year closing June 30, 1 88 1, of over $500,000,000 for intoxicating drinks. Some estimate it much higher than this, and count that it can not fall short of $1,000,000,000. As an absolute destruction, this would be an enormous loss to the land: but it carries with it loss of time, of health, of morals, and of life itself, that make it of frightful consequence. The consumption of tobacco, though less enormous in amount, and less injurious to morals and health, must still 32 2 POLITICAL ECONOMY. • be classed among the harmful and useless expenditures. Over 147,000,000 pounds of tobacco, mcludmg more than 3,250,000,000 cigars and cigarettes, were taxed for consump- tion in the United States in the year ending June 30, 1881; and to this amount must be added over $10,000,000 worth, including cost and duties, of imported tobacco. The cost to consumers probably exceeded $250,000,000. Thus, into the smoky air and into the spittoons went a sum more than three times as large as the entire annual expenditure for the pay- ment of the 272,000 teachers, and the education of the 15,000,000 school children, in the pubHc schools of the United States. Add to these items of spirits and tobacco, the millions con- sumed in opium and in the nameless vices, with the millions lost utterly in fires and floods, and we have before us that economic maelstrom into which goes as into utter perdition, more than one tenth of the entire annual production of wealth, leaving behind only the weakness, the stain, and the brood- ing discontents which threaten both society and the industries with riots and overthrow. 298. The savings. — The other great stream of secondary distributions of wealth goes into the channels of savings and investments. These savings will seem, at first but the frag- ments gathered up after humanity's feasts; but out of these grow that mighty mass of accumulated values which greets the eyes and fills the balance sheets of the world's gathered wealth. The enormous cumulations of riches which deck the great globe in myriad forms of magnificence and splendor, — of comforts, luxuries, and solid values, — all these, it should be remembered, represent the results of savings. Traced from its beginnings, in the far away springs and rivulets of past industries, all capital is, at the outset, a saving. It is the part of his product which the first laborer saves from his con- sumption, which becomes capital in his hand. The savings of the first day unite with the savings of subsequent days, SECONDARY DISTRIBUTIONS OF WE AIT H. 323 and, multiplying the power of production, increase the oppor- tunity of saying till the accumulated savings of the generations stand before us in the gigantic masses of wealth which excite the cupidity and, too frequently, also, the discontents of the beholders. 299. Laws of investment. — Savings naturally seek invest- ment. Only in the earHer and less settled states of society are men disposed to hoard and hide their savings in order to keep them safe from the prevalent robbery and outrage. When industry feels safe in the possession of its earnings or products, it naturally seeks to gain a profit from its little wealth. Men wish to secure the advantages which may come from the employment or investment of their savings. Two laws govern all investments, whether put into trade or into property. The first is the law of safety; the second is the law of profit. These two control all investment as gravi- tation controls the flow of rivers. They determine whether the spare dollar shall go to the hidden hoard, in which safe keeping alone is sought; or to the savings bank, where it is hoped to find equal safety and some profit beside; or to active trade, where more of risk is met, it is true, but where, also, more tempting profits offer themselves. Safety and profit may be counted as counter-balancing forces in their influence upon investments. They stand always to each other in an inverse ratio. When an investment prom- ises high safety, it promises but small profits; when the profits are high, the safety is small. The reason is sufficiently obvi- ous. Where safety and profit are both small, no one cares to invest. The small returns would not repay the great risks, which mean, also, great possible losses. Where safety and profits are both high, the rush of investments will soon bring down the profits. Agricultural property is known to have great security. Land can not be easily lost or destroyed ; but landed property yields only low profits. Were agricultural investments as profitable 324 POLITICAL ECONOMY. as they are safe, the movement of capital in that direction would soon raise the price of lands to a point which would again make their profits to stand in the inverse ratio of their safety. Manufacturing capital ordinarily yields greater profits than agricultural, but with less security; and commercial capital, in general, the highest in profits, is also the highest in risks. Investments are influenced by the business experience of the investor, and also by the social and other advantages promised by the investment ; but the laws of safety and profit will, in the long run, be found to be the chief controHing forces in directing the flow of investments in one direction or another. In times of business depression, investments consult safety; capital is then said to be timid. But in times of great pros- perity, and especially when the spirit of speculation is aroused, profit becomes the ruling motive, and capital becomes venture- some and bold. In the days of ''Law's Mississippi Scheme," and of "The South Sea Bubble," all classes rushed eagerly to invest their accumulations in the most hazardous enterprises, tempted by the enormous profits promised. Similar periods have occurred in our own country — in the time of the wild land speculations of 1836, and in the railroad speculations between the close of the war and the panic of 1873. 300. Territorial distribution of wealth. — Besides the movements of savings to the various forms of investment, there is a territorial movement, slower in its action, but not less certain in its results, which carries the larger masses of wealth, in one direction or another, across larger spaces of territory, and usually towards given centers of accumulation. Thus, in the United States, there has been a constant flow of wealth carried with the immigration into the West. A care- ful estimate would, probably, show that the wealth of the West, for the years before its products became in excess of its consumption, was imported wealth. Even the value which SECONDARY DISTRIBUTIONS OF WE A IT H. 325 was thought to exist in its lands was but the reflected shining of the imported capital. But from the moment that its surplus of products began to flow eastward to pay interest, and to purchase goods, western wealth moved, by a strong but certain under-current, to the eastern manufacturing centers and to the seaboard cities. 301. Flow of wealth to cities. — A second form of terri- torial movement is that which steadily carries the wealth of the country into the cities. This movement is accompHshed partly by the removal of population from the country places into the towns, but chiefly by the movements of trade, the products of the rural districts going to the cities for distribution, and leav- ing there large amounts of values in the form of profits on trade. At the present moment, another and more powerful cause is at work to carry the wealth of the country into the cities. The cities have become the great seats of manufacture. The cheapening of steam-power has caused the banks of the streams to be deserted, and has left the water-falls to pour their floods in solitude and idleness. Manufacture finds the city a more convenient and more profitable home. At these great centers of traffic and population, the materials can be more easily gath- ered, the laboring forces can be more readily summoned and supported, and the sale and distribution of products can be effected with more ease and speed. 302. City growths. — Thus, the cities have become wealth- producing, and the enlargement of population, by the new manufacturing hosts, increases at the same time the trade, power, and profits of these great hiving places of civiHzed life. No feature of modern life and economic movement is more characteristic or important than this of city growth. If we assume, as we may, that this strong tendency of populations to the cities has developed itself chiefly within the last four decades, the figures given us in the last census will be found instructive. In 1840, the number of cities in the United States with a population of 8,000 and upwards, was 44; in 326 POLITICAL ECONOMY, 1880, there were 286. Of the larger cities, in which the manufacturing movement is more characteristic, in 1840, there were six having over 40,000 population; in 1880. there were 45 such cities in the union. In 1840, 8.5 per cent of the entire population was found in the cities; in 1880, the pro- portion was 22.5 per cent, showing that the city popula- tions increased two and a half times as fast as the entire population. It will be also found that the wealth and man- ufacture of the cities has increased in nearly the same ratio. There is a counter current of wealth flowing from the city to the rural districts, seeking safe investment for the surplus of wealth. This movement has been especially conspicuous in England, where the overflow of city wealth has been stead- ily buying up the lands of England till these lands have largely passed into the hands of wealthy land-holders. So, also, around all the great American cities, there is an ever- widening belt of suburban setdements made up of the country homes of the wealthy classes of the cities. 303. International distribution of wealth. — The final flow of wealth is from the less favored countries to those more favored. The internadonal movement of wealth is by two channels: i. By migration, and 2. By trade. The immigration from Europe to America has brought with it large, though unseen, sums of wealth in goods and money. But the chief importation has been the labor power brought by these immigrants. It is uncounted wealth, but it is none the less real or valuable, because not enumerated in the census as property. The rapid development of the resources of this country would have been impossible but for the im- ported labor-power which has come to us in the voluntary immigration from the old world. The large and increasing stream of American travel to Europe doubtless carries large amounts of wealth in the other direction. Ten thousand tourists, spending an average of $i,ooo each, will leave in Europe $10,000,000 of American SECONDARY DISTRIBUTIONS OF WEALTH. 327 capital; and it is claimed that as many as this have sometimes visited Europe in a single season. But the chief agency of the international movement of wealth is to be found in the international commerce. As all trade between the people of different countries is an exchange of values, it may appear, at first sight, that the outflow of wealth from any country, by the channels of trade, must equal the inflow; but a more careful estimate will show that some countries, by necessities of character and position, are tributary to others, just as the rural districts are tributary to the cities. Peoples using chiefly unskilled labor, and produc- ing coarse goods, pay tribute to more skillful populations. The grand aggregate of the foreign trade of the United States, in the fiscal year 1881, was $1,545,041,974, made up as follows: Exports of merchandise, . . $902,377,346 Imports of foreign merchandise, 642,664,628 Excess of exports over imports, $259,712,718 This excess must be paid to us sooner or later in gold, silver, or bonds. The balance of trade and its meaning have already been discussed in a preceding chapter. The ques- tion now is to determine in which direction the real flow of wealth is taking place. All foreign trade may be divided, in general, into two great classes : i . That with nations from whom we receive more goods than we send; 2. That with nations to whom we send more goods than we receive from them. To the first class belong the South American coun- tries, and, in general, the peoples of lower industrial con- dition and civilization than our own ; to the second belong Great Britain, France, Belgium, and most of the European peoples. During the fiscal year 1881, our trade with the South American states was as follows: 328 POLITICAL ECONOMY. Imports of merchandise and specie $81,501,718 Exports of merchandise and specie 25,871,953 Excess of merchandise and specie received by us, $55,629,765 During the same year, our trade with Great Britain was as follows : Exports, including merchandise and specie, $491,260,473 Imports, including merchandise and specie, 217,838,629 Excess of exports to Great Britain . , . $273,421,844 The excess due from us to the South American states was paid chiefly by drafts on England, drawn against the balance due us on our trade with the latter country; so that our purchases from South America were paid partly by our direct sales to the South American states and partly out of our sales to England. The goods purchased from South America were chiefly raw materials for our manufactures, and partly agricultural prod- ucts, such as coffee, quinine, etc. These raw materials were, to us, a source of further wealth, and were imported, there- fore," at a profit. Our sales to the South Americans were chiefly manufactured goods, on which we also made a large profit. Thus, while we apparently fell in debt to those states, we probably found a larger profit from the trade than they did. To us it was a source of further wealth; to them it was a means of supply of necessaries for consumption. Our importations from England were largely of manufact- ured goods, which were a source of larger profit to England than to us. Our exports were also in large part manufactured goods, on which the profit was ours, though we also sent large quantities of cotton, grain, and meats. In general, whatever may be the apparent course of trade, the flow of wealth will be found to be from the poorer and less civiHzed peoples to the richer and more civilized — from those of rude and simple arts to those of higher and more SECONDARY DISTRIBUTIONS OF WEALTH. 329 complicated industries. This movement may be slow and small in amount, but the laws of commerce and of civiUzation alike determine its direction. Among nations, as among men, the ignorant and improvident serve the intelligent. Wealth flows to the most advanced and most progressive populations. 304. Transformations of wealth. — There remains still another set of phenomena to be studied in the history and final destiny of wealth. All material things undergo changes. They are in a pro- cess of perpetual decay and dissolution on the one hand, and of perpetual growths or renewals on the other. The materi- als of which wealth is made can not be saved from the forces of decay. From the moment our fabrics are finished, they begin to yield to the destroying powers of nature. From the hour of its creation, wealth begins then to un- dergo changes or transformations. Some of these transforma- tions are destructive, and others are constructive or productive. We have already seen that, in the creation of new values, something of old values must ordinarily be destroyed. We have also seen that under many of the forms of consumption, we have only a transmutation of one form of value into an- other. The values used up in the feeding of laborers are turned into new labor j^wer. The wearing machinery is constantly projecting its values into the fabrics it is helping to produce. The forms of wealth are changed, in these cases, but its energies and values are conserved. All of these may be styled constructive transformations. They add to, rather than take from, the sum total of man's wealth. The destructive transformations are of two classes: those which occur by the unintentional action of natural agents; and those which come from the action of mankind. The destructive agencies of nature include the chemical forces which are found in the air, the water, the heat and cold, and the various chemic laws and agencies which rust, rot, desiccate, and destroy the structure and integrity of the p. E-— 28. 330 POLITICAL ECONOMY. substances which they attack. They include, also, those vital agencies of infusorial and microscopic life which seem to per- vade all things with their spores or germs, and are ever ready to set actively to work on all substantive or material things. To these we may add the predaceous animals and noxious plants, and even the destructive agency of evil men. All of these are embraced in that warning against the short-lived treasurers of earth, ' ' where moth and rust doth corrupt, and where thieves break through and steal." The silent destructive agencies of nature are perpetually working against the prod- ucts of human labor; and, if not stayed by the hand of con- stant care and repair, would, in a score of years, destroy nearly the whole accumulation of the world's wealth, and turn the fairest fabrics of human skill into melancholy ruins. It is by the unseen hand of this silent wasting force that a large part of wealth comes to its end. 305. How progress destroys. — There is a rapid destruc- tion of wealth, brought on by man himself, not in the ordinary course of consumption, but by the changes made without intention to destroy. The changes of fashion annually strike from the world's balance-sheet enormous masses of value. The improvements made in machinery consign thousands of dollars worth of old machines to the heaps of old iron. The changes in the styles of building, or of furniture and equipage, send down the values of the older houses and furniture. A change in the route of a railroad, the position of a market, or of the business from a street, works destruction to values once recognized as valid and great. The invention of the steamship sunk, as if in the depths of the sea, the values of the old packet-ships which carried the passengers on their ocean voyage. There is still another mode of destroying property which is sometimes met. It is in the destruction of the moral or social character of a neighborhood. The presence of a liquor saloon, a gambling hell, a house of infamy, or of any brutal SECONDARY DISTRIBUTIONS OF WEALTH. 331 and degrading establishment, will strike from the value of property around it, half its worth. The change in the char- acter of the government from a higher to a lower plane, the incoming of a rabble of ignorant and vicious people, the growth of public vice and lawlessness, are as destructive to values as is fire or flood. 306. From matter to mind. — The last thought in prac- tical economics, touches that possible transformation of wealth, which transmutes it from material and destructible forms into spiritual and indestructible riches. Through the laboratories of science and the mindcraft of great scholars, aided by the appliances which wealth alone can gain, humanity has stored up a treasury of knowledge and a mastery of forces which could replace in a few months the wealth of the world, should it all be swept away in one mighty conflagration. And the advance of economic science and economic power has not yet reached its end. In the great store-house of nat- ure, lie facts as grand and truths as fruitful as any already discovered. The world of matter is as yet only half subdued to the service of man. On the pathway which leads from savagery to the highest civilization, it is probable that we are advanced less than half the way. The understanding of eco- nomic truths and the mastery of economic organization must go on with accelerated steps, and with accumulating power, in the future as in the past, till the ministry of nature to the wants and progress of mankind shall be more rational, more abundant, and more sure. The transmutations of wealth into mind-power, into intel- ligence, into truths discovered and into arts perfected, can not cease. The great economic circle of the industries which began with the impelling wants of mankind, must end where it began, and by all its accumulated power of work, and its accumulated mass of wealth, must push the- human wants steadily into higher ground of more intellectual, more moral, more perfectly human and divine, needs and aspirations. As 332 POLITICAL ECONOMY. man appears forever rising above the summit of his highest achievements, so the last and noblest transformations of wealth must be into a healthier, stronger, and purer manhood, a happier humanity — into nobler forms of society, and a diviner life for man. Economic Science will justify its claim to our study, when it shall thus demonstrate its tendency and power to lift society and humanity to higher levels. NATIONAL ECONOMY. CHAPTER I. THE NATION AND ITS ECONOMICS. I. A nation is not simply a crowd — a mere mass of human beings assembled upon the same territory. A nation is a body corporate — an organic whole, composed of mutually de- pendent and closely related parts. Herbert Spencer assumes society to be a Hving organism, and traces the analogies between it and the highly organized animal forms. The nation low in rank, like the animal of low structure, has but few organs. The lowest type of animal is ' ' all stomach, all re- spiratory surface, all limb." So the nation, in its rudimentay state, is "all warrior, all hut-builder, all hunter." In the more perfect animal, there is a division of labor among the parts; each need of the body has its own organ, which serves alone that purpose of the body. It has a special organ for each sense — a stomach for digestion, a nervous system for sen- sation, limbs for locomotion, a heart for circulation, and lungs for respiration. So, in a highly organized nation or society, a complete division of labor and function takes place. Fourier, the great French social philosopher, also counted society a living organism, and compared its growth to the growth of the Hving man. He went further, and presented (333) 334 POLITICAL ECONOMY. an analysis of the passional forces that produce this growth, and proposed a scheme of social organization which should give full force and effect to all the passional attractions that control the several functions of society as an organized whole. Without accepting, in full, either the idea of Spencer or of Fourier, we must recognize a large measure of truth in both. The nation is in a certain large sense a unit. It is united by many common ties, external and internal. A common territory, a common climate, common rivers, highways, cities, and markets, act as incessant though silent forces to produce community of characteristics, interests, and ideas. A com- mon government, common laws, common systems of educa- cation, common institutions of religion, charity, learning, and art, a common literature, and finally, a common name, his- tory, and flag, give to the nation a community of feeling, functions, and powers akin to that which binds the several members and organs of the human body into organic unity. 2. The family of nations. — The individual nation is only one in a great family of nations; or rather, as a living organ- ism it stands confronting other similar organisms, sometimes with common, and sometimes opposing interests. These na- tions differ in size, situation, resources, interests, ideas, and civilization. They differ also in political, social, and indus- trial character and power. History is chiefly made up of the record of the rivalries of nations, and of their perpetual strug- gles for their selfish interests and supremacy. In the presence of this powerful and august assembly of national units, each nation is called upon to play its separate part, defend its individual integrity and rights, and achieve, as best it may, its individual destiny. In the mighty strug- gle for existence, each nation is to be treated as a whole. The individual citizen is not recognized except as a member of the organism. His interests are but a- part of the general interest; his life but a portion of the common life, in which each must be ready to suffer for all, and all for each. THE NATION. 335 3. National economics. — In this high and true view of the nation,' and of its relationship to other nations, all indus- tries are seen to possess a national aspect and importance, and all wealth is in the last resort a national resource. In the nation's life, work-power and wealth are prominent factors. There is, then, a national side to economic science; or, as it may be stated with equal truth, there is an economic seg- ment in national politics. As shown in chapter second of our first part, national economy is an application of economic science, rather than a distinct chapter of that science. Its problems involve all the principles of pure economic science, but they also involve principles and factors of the national fife which must be taken into account in their solution. It is as idle and foolish to deny this special and distinct character to national economy as it would be to deny the economic feature in national polity. It may not be possible, always and in all cases, to distinguish between pure economics and national economy, since each juts into the other, as we shall see in the next sections; but the broad distinction between the two is easily discernible. Pure economics knows nothing of national lines or interests. National economy holds these as its foremost facts and aims. 4. National work not economic. — Nations, as such, netther labor nor trade, in the common economic sense of these terms. Governments do indeed employ large numbers of people — officials, agents, clerks, laborers, soldiers, and sail- ors. They also construct roads, canals, harbors, and public buildings; they manufacture arms, munitions, and ships; print documents, bonds, bills, and blanks ; and conduct post-offices, telegraphs, and, in some cases, government railroads. They license, and thus control, certain forms of manufacture and traffic ; and sometimes, as in France, hold the monopoly of tobacco or of other special products and industries. Prisons and alms-houses are also under government control, and the 336 POLITICAL ECONOMY, government either employs or hires to others the labor of the convicts and paupers. But with all this immense army of employees, the nation pursues no industry for the profits of it, or for the purpose of increasing wealth. The labor of its workmen, like that of its sailors and soldiers, is employed for general governmental uses and ends, but it is scarcely to be counted as a part of the world's wealth-producing industries, or as belonging to those phenomena which it is the business of the economist to study and explain. The subtraction of so large a mass of labor-power from the population, and the imposition of their support on the indus- trial efforts of the remainder, works, no doubt, a large if not violent disturbance of the economic conditions; but this disturbance is to be considered as a question of national economy rather than as a matter of pure economics. 5. National property not economic. — Governments necessarily hold and use large amounts of property. The lands that serve as sites and reservations for civil or military purposes; the large and costly edifices employed as capitols, court-houses, palaces, prisons, asylums, hospitals, school-houses, public galleries and hbraries, arsenals, offices, stores, and shops, all these cost millions of treasure to erect and main- tain. The arms, munitions, and machinery, the costly furni- ture, books, pictures and scientific collections held by the nation are of enormous values; but they constitute no part of the supplies in the world's markets, and serve none of the purposes of common capital. They are part of the needful or desirable machinery of government, but they are not property in the ordinary economic sense. They have no place in those great aggregates of wealth which stimulate, sustain, and re- Avard the industrial efforts of mankind. It is true that the production of this mass of government property, and the abstraction of materials and products from the markets, must necessarily affect, for the time at least, the THE NATION. 337 ruling prices for such goods and services, and the paying out of large sums from the public treasury must deflect more or less widely the currents of trade ; but these are only incidental ef- fects, and are not to be counted as among the ordinary forces of economic science. Thus, neither in the segment of work, nor in the segment of wealth, does the nation intrude as a proper competing fac-" tor; but the industrial Hfe and the political life of a people interlace in so many ways that a study of national progress and civiHzation can not be made complete without the study of national economy, or the wealth-side of the nation's Hfe. 6. The nation a trustee. — The very existence of the na- tion, the gathering together into settled habitations of large populations, creates certain franchises and reflected values which belong to the people as a whole, and not to any one man more than to others. Of this character are the water- courses, the public lands, the forests, mines, and fisheries, which the presence of markets has, as explained in the former part of this work, made to become valuable. Among the valuable franchises created by the presence of society, may be enumerated the coining of money, the issuing of paper money, the transportation of mails, the opening of mar- kets, the provision of public highways, the supply of public light, and the importation of foreign goods. Over all these species of property and franchises, the government claims ownership in the name of the people which it represents. To this property, must be added all possessions to which private ownership has ceased by failure of heirs, and by for- feiture and confiscation. All waifs, treasure trove, lapsed es- tates, and franchises, go to swell this volume of common property of the whole people for whom the government stands as trustee. In its character as trustee, the government makes sales of public lands, forests, and mines, issues charters of franchises for the construction of railroads, for banks, and for the public p. E.— 29. 338 POLITICAL ECONOMY. sale of commodities; provides post-offices and post-roads, and coins and issues money. The. exercise of the powers of this trust necessarily sways a powerful influence over the industrial interests and movements- of the people. They may often, in great commercial crises, work the well-being or wide-spread ruin of vast business interests. History has many such inter- ferences for good or evil to record. The timely redemption of bonds by the Secretary of the United States Treasury has often saved the money market of the country from disastrous press- ure and panics. The English and French governments have frequendy interposed their control over the money franchise, and, by a suspension of specie payments, saved the monetary system and credit of their respective countries from collapse. 7. The nation the guardian of property. — There re- mains one other relation which unites the nation to the eco- nomic concerns of its people. All property rights rest for their enjoyment and security upon, the protection of the na- tion and its laws. Whatever natural right a man may claim over the products of his own skill and labor, it is evident that no man, unaided, can maintain his rights against the will of his fellow-men. The nation must, by law, consent to his rights, and protect him in their enjoyment, or his right of property would be an empty, if not a dangerous, claim. It is evident that this protection, as it costs the expenditure of valuable materials and forces, in the enactment and ad- ministration of laws, adds largely to the values of property; and these added values belong, not to the individual, but to the public, or nation, which created them. Society is thus, we repeat, a silent partner in every man's business. What he produces, society protects. 8. The nation the paramount owner of all prop- erty. — There is a certain high and sacred sense in which the nation, as the all-comprehending organism, including and sus- taining all its many members, is the true and final owner of all property within its borders. Just as it may, in the hour THE NATION. 339 of peril, summon any of its citizens to stand up in its defense at the peril and sacrifice of his life; so it may also, in similar need, claim the use or sacrifice of property. As we have seen, it was anciently held that all right of property was cre- ated by law; that the nation granted property rights to private citizens. Though not all true, yet this view involved a cer- tain amount of indisputable truth. For all great national uses and defense, all property is national. In the failure of other heirs, the nation is the heir of all its people. It is in the exercise of this paramount ownership that the nation asserts the right of eminent domain, confiscates the property of criminals, and imposes its taxes upon the wealth or incomes of all its citizens. g. Synoptic view. — Wants, Work, and Wealth, the three great factors of economic science, if taken in their national meaning, will give us likewise the grand divisions of national economy. With their subdivisions, they afford the following synoptic view of the field of this science : National wants. National work. r Domestic. Foreign. r Public security. Public education and science. 1 Public chanties, j Paupers. I *. Unfortunates. \ Public well-being. Commercial intercourse. Commercial protection. National honor and independence. Public defense. Public administration. Public improvements. Public enlightenment. International defense. National wealth. Property. Franchises Public lands and buildings. Public highways and waters. Public funds. Taxes and revenues. of coinage and banking. of trade and transportation. of patent-rights and copyrights It will be evident, on light examination, that all of the 340 POLITICAL ECONOMY. topics here shown have an economic side — a property as well as a political element; and it is by reason of this economic feature alone they claim a place in national economy. As simple, social, or national concernments they could not prop- erly demand the attention of the economist. They are not all of equal interest and importance in their economic rela- tions, and some of them may seem to have only an indirect and remote relation to economic science. A full discussion of the entire field would demand a vol- ume. It is the purpose here to treat only of those topics that have been most commonly included in Political Economy, and which will therefore be asked after by readers as neces- sary to their view of the subject. We limit ourselves to some brief chapters on taxadon, and on protection or protective tariff. CHAPTER II TAXATION. lo. Taxes. — A tax is an enforced contribution of private property for a public use. As governments must exist, they must be supported; and as they produce nothing directly, they must be sustained out of the productions of the private citizenship. Government may be counted as one of the wants of mankind, and taxes as the price paid for it. The cost of good government varies with the extent of territory to be guarded, with the character and proximity of neighboring nations, with the numbers of people to be gov- erned and protected, with the character and civilization of the people, with the variety and extent of the industrial and com- mercial interests to be conserved, and with tl\e form and spirit of the government itself. The cost of government in a savage tribe is apparently nothing — no taxes are levied or col- lected — but the possessions are meager, and these are not unfrequently swept away entirely by an adverse war. In a great and rich nation, the cost of government is necessarily large, but the property is immense, and the tax taken from each citizen is usually insignificant in amount. iio The objects of taxation. — The general purposes for which taxes may be legitimately taken are the following: 1. Public administ7'ation, including the, legislation, the judicial functions, and the general administration by the executive officers of the government. 2. Public safety, to be secured by police or military power against foreign or domestic foes. (341) 342 POLITICAL ECONOMY. 3. Public improvements for the general well-being, by public works. 4. Public intelligence, to be promoted by public schools, public libraries, scientific investigations, and scientific and art collections. 5. Public charities, or the care of the poor and the unfortu- nate or afflicted classes, — the insane, the imbecile, the deaf mutes, and the blind. These are the recognized ends of good government, and are, therefore, the proper objects of taxation. 12. The right of taxation. — The right of governments to levy taxes is commonly supposed to rest upon the duty of each citizen to contribute for the common safety and for the promo- tion of public order and well-being. Others claim that the government earns its support by the protection it gives; in other words, the citizens hire the government to defend them and their property, and pay the hire in taxes. But, as has been shown, there is a deeper basis of right than this, in the fact stated, that society is a silent partner in every man's business, and does by its presence create much of the wealth which it pr^erves. Government stands as the representative and agent of society, and in collecting taxes does but take the property of society for the use of society. The amount which it may properly take is limited by the needs of society, as taxes can not be rightfully taken for any other than public uses. 13. Basis of taxation. — Taxes may be considered as im- posed upon persons, or upon property. The former, or the personal tax, takes no account of the man's possessions, but claims from him the tax as his payment for the support of government, or for public good. The personal tax may be a simple charge per capita, or poll tax, imposed upon all citi- zens alike; or may be a license tax paid upon the professional or business calling. The fees charged for official service are sometimes a tax upon the person, as the fee for a teacher's TAXATION. 343 certificate or a marriage license; but more frequently they are a tax upon property, as are the fees for the inspection of goods, and for the verification of deeds and mortgages. The second, or the property tax, takes no account of ownership, but asks for a share of the property for the public use. The payment is of course exacted from the owner when he can be found; but in his absence or failure to pay, the property is taken and sold for the tax. Taxes upon property are of two kinds — the Direct and the Indirect tax. The direct tax is charged upon the person who is expected to pay it, and may be a personal or a property tax. The indirect tax is levied on the manufacturer or im- porter of the taxed goods, and is usually added by such manufacturer or importer to the prices, to be paid finally by those who purchase and use the goods. There are large economic as well as political differences between these differ- ent classes of taxation. Another important classification of property taxes rests upon the question whether such tax is assessed upon capital or upon income. The common tax upon property is assumed to be a tax upon capital, and to be paid out of the accumulated wealth. The tax levied upon a man's ascertained annual in- come is assumed to be paid out of the year's production. In fact, however, all taxes may be counted as paid out of pro- duction whenever they and the necessary expenditures of the tax-payer do not exceed his annual product. 14. Systems of taxation. Among barbarous peoples no regular system of taxation is known. Each man is called upon at need to fight for the public defense, and, if necessary, to render public service. The chieftain or ruler, if not sat- isfied with the income from his own lands, or flocks, or ef- forts, supphes the lack by the confiscation of goods of his subjects accused or convicted of crime. In other cases, he sells privileges, or monopolies, or extorts gifts, or takes by force of arms from neighboring tribes. Such was most of the 344 POLITICAL ECONOMY. taxation by the feudal chieftains and monarchs in the Middle Ages. One of the earliest systems of taxation on record is that of the Jews under the Mosaic laws. Under this system, a tithe, or tenth part, of the annual production was paid for the support of the Levites, who included the teachers, magis- trates, and priests of the commonwealth. As the state was theocratic, religion shared with the government in the taxes. Beside the tithe, there were certain personal taxes, as a half shekel — about thirty cents — assessed upon every male, and a system of religious offerings made by the individual or family annually or on special occasions. Among the Greeks, nearly every form of taxation known to modern times was in use, but with much irregularity and many abuses. The Romans also were fertile in expedients to extort taxes, both from their provinces, and finally from the subjects or citizens of the empire. Their custom of farming out the taxes — that is, selling the taxes to some tax-gatherer for a gross sum, and allowing him to extort from the tax- payers as much as possible — was perhaps one of the most ef- fective, but at the same time the most ruinous, methods of taxation ever devised. The first approaches to the modern systems of taxation were made by Venice and the other Italian republics, which im- posed taxes upon lands, and upon manufactures and imports. But taxation remained unequal and tyrannical In its methods on the continent till after the upheaval of the French revolu- tion. Before that revolution, the property of the nobles and of the church was exempted from impost, and less than one third of the property of France paid the entire taxes for the support of government. Few chapters of history are fuller of tyranny and meanness than those which record the devices of the governing classes to possess themselves of the hard earn- ings of the common people. 15. Ideas of the modern system. — The first clear state- TAX A TION. 345 ment of the principles of a true system of taxation was made by Adam Smith, in the four maxims which John Stuart Mill says "have become classic." These maxims are as follows: 1. "The subjects of every state ought to contribute to the support of the government, as nearly as possible, in propor- tion to their respective abilities; that is, in proportion to the revenue they enjoy under the protection of the state." 2. "The taxation which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought to be clear and plain to the contributor, and every other person." 3. "Every tax should be levied at the time, and in the manner, which is most likely to be convenient to the contrib- utor to pay it." 4. "Every tax ought to be so contrived as to take out, and keep out, of the pockets of the people as little as possible, over and above what it brings into the treasury of the state." These principles, in conciser terms, affirm that taxation should be equal and proportionate; that it should be certain, clear, and public; that the collection should be convenient in the time and manner of payment; and that the collection should be inexpensive. It is probable that every law-maker would assent to these general propositions ; but a wide difference of view will prevail as to the means of carrying them into effect. Amasa Walker proposed to add to these rules the following : "The heaviest taxes should be imposed on those commodi- ties, the consumption of which is especially prejudicial to the interests of the people." This maxim is the basis of our national tax upon alcoholic liquors — a tax, the policy of which is now violently opposed by large numbers of temperance people. They affirm that the tax meant to be repressive, gives currency and credit to the practice to be repressed, and thus supports it against more direct moral and legal efforts for its entire suppression. 346 . POLITICAL ECONOMY. Most of the systems of taxation now in vogue recognize these rules of Adam Smith; but they vary widely in the tax- ables chosen, in the kinds of taxes imposed, and in the methods of assessment and collection. In the United States we have: 1. Taxes imposed by the general government — embracing import duties, excise taxes on spirits, tobacco, and medicines, and certain direct taxes on persons and property. 2. State taxes — including direct taxes upon lands and other property, license taxes upon several kinds of business, and fees for certain official services. 3. Municipal taxes, imposed by county, township, district, or city authorities, including taxes upon property, poll taxes upon persons, license taxes upon business, and fees of officers. 16. The two difficulties.— The two chief practical diffi- culties in taxation are to secure (i) equity and certainty of assessment or levy, and (2) ease and certainty of collection. The interests of the government and the rights of the people alike demand that all taxables shall be assessed, and assessed at their true value; and they also alike demand that the tax shall be collected with the least effort and hardship, and in full amount. No system of taxation is wise or even tolerable which does not fairly meet and master these two difficulties. 17. Obstacles to assessment. — The difficulty of fair and certain assessment is twofold: i. The true measure of values can only be positively determined in open market, where the competing estimates of buyers and sellers may help to correct each other. The assessor who views alone the property to be taxed must often mistake its real values, es- pecially when large estates, houses full of furniture, or store- houses full of goods, are to be assessed. The difficulty is multiplied by the fact that the several districts fall to differ- ent assessors, who not only vary in their estimates, but are liable to be influenced by personal or local preferences, or by the desire to favor their friends and their neighborhood by a low assessment of taxables. TAXATION. 347 2. The other obstacle to full and fair assessment lies in the strong temptation to tax-payers to lighten their tax by the con- cealment of their wealth. Money and many other forms of property are easily hidden from sight, and thus readily escape assessment. When mortgages or other securities are to be taxed the difficulty is greatly increased. The requirement of the oath of the owner is only a partial remedy, and is open to high moral objections. The usage, said to prevail in some coun- tries, of holding the assessor responsible to the -government for any loss which may accrue to it from failure or deficiency of assessment, might be more effective if it were less expen- sive in application. In most sections of the United States the assessment is made systematically below the real valuation, lands being as- sessed at one half, or even one third, of their cash value, and other property in proportion. The object of this is to guard against the deficient assessment of other sections of the same county or state, over which a common tax is to be levied. The practice serves only to confuse still further the entire system of taxation, and to render it more certainly unequal and unjust. 18. Obstacles to collection. — The chief obstacles to the easy and sure collection of a tax lie in the inability of the tax-payers, or in their absence or indisposition. The first is partly met by the exemption from taxation of the household goods and common tools, which constitute often the only possessions of the poorer laboring classes. But the payment of the annual tax is sometimes beyond the ready means of even the small householder, impoverished, it may be, by fail- ure of health or of work. In the densely populated countries this must frequently occur. In the second case, that of absent or unwilling tax-payers, the time for collection still more frequently goes by, leaving the taxes unpaid. In all these cases, of both classes, no re- mission of the tax is usually possible, or even thought of. 34S POLITICAL ECONOMY. The tax not voluntarily paid must be collected by law, which means, in modern times, by the distraining and sale of the goods taxed, or a sufficient part thereof to pay tax and costs. And here lies the difficulty. The sale of property for taxes is always expensive, and generally odious to the popular feelmg. No kindly man Hkes to buy his neighbor's goods from the tax- collector; and the sale of lands for the taxes, with the rights of redemption always and justly reserved to the defaulting owner, is so full of hazard and uncertainty that few honora- ble men care to purchase. The buyer of "tax titles" is, in jnost American communities, a man of evil repute. He is counted as speculating on the misfortunes of his neighbors, if not as taking selfish part with the government against the people. Even the default of the tax-payer, if poor, is forgot- ten in the hardship of the enforced tax. The government gets its revenue, but it is only after long delay, and at the sacrifice of some part of its popularity. This last may indeed be little, where the form of government is popular in charac- ter, as in this country ; but it is still so great that wise and patriotic statesmen seek to avoid or lessen it by merciful and conciliatory tax legislation. 19. Direct taxes. — Of the great forms of taxation, the direct and the indirect, the former is often approved for its apparent equity. It is levied directly upon the person who is expected to pay it, and is either a personal tax upon him as a citizen, or a property tax upon his possessions according to their value. The claim of the government is seen to fall just where it belongs, upon each citizen according to his ob- ligation and ability, and the exact amount and justice of the claim are seen and known of all his fellow-citizens. Its pay- ment is also public, ap^d it thus meets three of Adam Smith's maxims. It is an additional advantage of the direct tax that its amount can be accurately fixed, and can thus be proportioned to the exact needs of the government. The assessed valuation of TAXATION. 349 all taxables being known, and the amount of the required tax being determined, it is but a simple problem of arithmetic to apportion this amount fairly among the tax-payers, according to their wealth or business. This particular advantage of the direct tax will always commend it to the states and smaller districts in which the public needs can be nearly ascertained beforehand, and in which it is desired to collect only the ex- act amount required. But direct taxes upon wealth have also their disadvantages. They involve all the difficulties of a universal assessment of property, which, as has been seen, are neither few nor small. The apparent equitableness of the tax is almost constantly vitiated by the obvious inequalities of the assessment. So also the pubHcity of collection is offset by the hardship of that collection. In this respect the direct tax is the most bur- densome of all taxes in proportion to its amount. Coming usually once a year, with its inexorable demand for the en- tire tax of the year to be paid at once, few find themselves able to pay it without a consciousness of the burden, and fewer still suffer the sacrifice of their property to public good without reluctance. Half the satisfaction felt in seeing the tax fall equally on the property of others, comes from the consciousness of its burdensome weight upon ourselves. 20. Income taxes. — The income tax is a direct tax upon the annual revenue or income of the person taxed. It takes no account of capital or wealth, but looks solely to the an- nual product accruing to the man from whatever source. Amasa Walker has praised this as the most equitable of all taxes, because, as he assumes, each man's ability to pay is proportioned to the amount he actually receives. He affirms that every man can know, and ought toSyiow, almost exactly what his income is for each year, and that he may, without hardship or injustice, be made to reveal that income to the public. Different opinions will be entertained upon these claimed 350 POLITICAL ECONOMY. advantages, but income taxes have always been unpopular, and have rarely been resorted to by modern governments except under the pressure of some extraordinary need, and then always as a supplementary tax to eke out an insufficient revenue. Were the entire tax for the support of government levied upon incomes, its inequalities would be speedily mani- fest. Not only would the sight of vast masses of untaxed wealth disturb the public mind, but it would be found that the power to pay taxes is by no means proportioned to the annual income. The poor laborer, whose scant and uncertain wages scarcely meet the most common wants of himself and his family, could not, without distress, pay even one per cent of his income as a tax, while a millionaire might pay ninety per cent without the sacrifice of a single comfort or luxury even. The governments employing this tax have been obliged to recognize this disparity of power to pay, and they have gen- erally exempted from taxation all incomes under a given amount. They have, moreover, fixed a higher rate of taxa- tion upon the larger incomes. This itself is a public admission that the income is an uncertain basis of taxation and needs to be limited by other considerations than its amount — a seri- ous if not a fatal objection to it. The chief of these limiting considerations is found in the fact that income must be correlated to expenditures. Equal incomes do not imply equal necessary expenditures. One in- come may be drawn upon to sustain a single life; another, of like or even less amount, may be required to sustain ten lives. One man way, from choice or necessity of position, be called upon to contribute largely for great social, scientific, educational, or religious interests, and these taxes may be enforced by personal or public motives that scarcely leave him any choice in the payment; his neighbor, with equal or perhaps larger income, may selfishly ignore all these claims, and leave to others the burden of sustaining the civilization TAXATION, 351 and public well-being from which he, as well as they, draws advantage and profit. This objection lies also^ it is true, against the tax upon wealth; but that does not diminish its validity or force against the tax upon incomes where its stress is comparatively greater, since, in general, all taxes must be paid out of annual production. A final and more serious objection to taxes upon incomes is found in the indefiniteness and uncertainty of the revenue produced. In a year of great prosperity the aggregate in- comes of the country may rise to nearly double their ordinary amount, and, in a year of disaster, they may fall to a half. The public revenue would follow the fluctuations of incomes, and the government would accordingly get the double or only the half of tax required for its wants. 21. Indirect taxes. — Indirect taxes, collected by govern- ments upon goods in the hands of the manufacturers, import- ers, or traders, are paid finally by the consumers of those goods, the tax being concealed in the price charged them. The history of indirect taxes is nearly as old as that of gov- ernment itself. They were imposed both by Greeks and Romans, and were common through the Middle Ages. They furnish a large part of the revenues of modern European -na- tions, and they are almost the sole support of our own na- tional government. Against many and serious objections, their simpHcity of assessment and ease of collection have con- tinued to make them the favorites of statesmen and of the people. 22. Evils of indirect taxes. — The indirect tax is wholly unequal as far as wealth is concerned. It takes no account of capital or of income. The man who drinks his cup of coffee, smokes a cigar, drinks a glass of beer or brandy, or uses any foreign fabric on which duties are charged, pays for each one his tax to the government, whether he lives in a hut or a mansion, and whether he cuts clods or coupons. And in the aggregate, the poor man often pays nearly as much as the 352 POLITICAL ECONOMY. rich, since with his large family he may consume nearly as much of taxed goods as the other. This is especially true if the tax is laid upon the necessaries of life. A tax upon lux- uries may be avoided by those who prefer to forego the enjoyment of these luxuries rather than pay the tax. The indirect tax is also grossly uncertain in the revenue yielded by it. As the consumption of the taxed goods must constantly vary with the abiHty and tastes of the consumers, the tax may yield one year a deficiency and the next an enormous surplus. Such has been the history of the indirect taxes collected by our general government. It is another objection to indirect taxes that, being paid by the manufacturer or importer, he must, in order to re-imburse himself for both tax and risk, increase the charge upon the consumer beyond the amount of the tax, and thus multiply the burden upon the real tax-payers beyond the amount col- lected by the government. This adds a private tax to the public impost. This tax, moreover, is imposed neither upon production nor upon capital as such, but upon consumption, and therefore directly intermeddles with and influences the industries whose products it taxes. It is not, therefore, a purely fiscal machine for collecting revenue, but is also a governmental agency which may be, and often is, used to repress an undesirable business or to protect a useful one. Its necessary interference with trade may therefore be harmful or beneficial, according to its use. 23. Advantages of indirect taxes.— But while the in- direct tax thus violates two of the maxims — that of equaHty of burden and that of definite yield — it meets more fully than any other the two difficulties of assessment and collection. It levies its tax in the workshop or warehouse of the manu- facturer or at the port of entry, before the goods are scattered among many owners. It deals with articles whose amount and value can be nearly ascertained and which have known TAXATION. 353 market prices, and it holds these goods under official care and control till the tax is paid. While thus collected by the government without difficulty, it is paid by the people without hardship and almost without knowledge of it. Hidden in the price, and distributed over a great number of purchases, it is paid in small amounts taken day by day, and is thus unnoticed from its smallness as well as its commonness. This very ease of payment has been sometimes urged as an objection, as rendering the people indifferent to the amount of taxation and the government extravagant in its takings and expenditures. It is assumed that the hardship and irritation of the direct tax will keep the tax-payer's vigilant and alert to guard their interests and hold their rulers to strict account. 24. Taxables. — In the practice of different governments, taxes have been imposed upon nearly every class of objects used by mankind. Not only lands, houses, and commodities in general have been counted as taxables, but the house and the ground on which it stands have been taxed separately, and additional taxes, as in France, have been imposed upon the doors and windows. Taxes upon dogs, horses, and other animals; upon carriages and harness; upon watches, musical in- struments, and household furniture; on all forms of incomes and of expenditures; upon newspapers and law papers; upon all forms of business and of amusements, have been resorted to in order to secure the required revenue. In earlier times, when possessions were small and taxes were shunned, the ingenuity of rulers was exerted to discover new taxables and new meth- ods of taxation. In modern times many of these are retained, partly with the purpose of distributing the burden of taxation over a wider surface, as it were, and thus lightening its ap- parent weight; and partly from the desire of equalizing its demands and allowing no one to escape his due share of con- tribution to the support of government. The question of the best selection of taxables still remains p. E.-30. 354 POLITICAL ECONOMY. one of the most difficult problems of the law-maker. An in- discriminate ad valorem tax upon all existing property, without regard to its character, would be a tax upon capital alone, and would leave the great volume of annual production out of sight, except as it is drawn upon by the tax-payers them- selves to pay their taxes. What might be paid easily by highly productive property would be ruin to property of low pro- ductive power, such as farm lands are, generally, as compared with commercial and manufacturing property. So, also, a tax laid indiscriminately upon all commodities, whether luxuries or necessaries, would fall with undue force upon the poor, who must consume necessaries almost as freely as the rich, while the latter may forego, the luxuries and escape their tax if they will. A man with an income of $500 must expend nearly all of it for necessaries for himself and family. The man who has an income of $5,000 or $50,000, having no* larger family, will spend litde more for necessaries, and after all expenditures for luxuries, may still have a large un- taxed surplus. A tax upon necessaries yields the largest and most certain revenue. A tax limited to luxuries might prove so heavy as to prevent their use, and thus cut off revenue and stop pro- duction. A large list of taxables may make the tax system cumbrous and confusing, but it tends to distribute the burden and to equahze the pressure. He who unjustly avoids one tax may be caught by another, and thus be compelled to bear his part in the common burden. 25. The unattainable in taxation. — Evidently just, as is Smith's first maxim, and desirable as it seems to tax every citi- zen in proportion to his ability to pay, the experience of ages proves that this is unattainable. Nearly every inexperienced legislator who is sent to represent the people, comes with the desire to so amend the tax-laws as to force all to pay their proper share of the taxes. He does not see that he desires the impossible. In his determinadon to allow nothing and no one to TAXATION. 355 escape, he. imposes taxes upon debts as well as upon property, and doubles the burden upon the one he is attempting to re- lieve. He is attempting to use the tax system as an instru- ment to punish the money-lender for his extortion, and he frequently only doubles the burden of the extortion; for as capitaHsts will only lend for the current rate of interest, they secure their end by charging sufficient interest or bonus to cover the taxation, or by stipulating that the borrower shall pay all taxes. The insuperable obstacles to the exact equality of taxation are these two: 1. The impossibility of a perfect valuation of property ac- cording to its tax-paying power; or, of a perfect adjustment of a levy on commodities or incomes which shall bear with exact equality upon all. 2. The readiness with which the tax-payer may, in so many cases, transfer to others the burden of the taxes meant for himself. This latter fact is true, not only of the indirect taxes upon commodities manufactured or imported, and which are expected to be charged over upon the consumers; but it is true also of all those cases in which the conditions of trade will allow the owner of property to fix his own price upon its use or sale. Thus, the tax upon a rented house or farm will be added, when possible, to the rent. The merchant adds the taxes on his store and stock to the prices of his goods, and the licensed dealer collects his license tax from those who patronize his business. In general, it may be as- sumed that every tax-payer will shift to others as much as possible of his taxes, and no legislation can prevent this without it can change the course of trade and the ever-vary- ing relations of values. All those who live upon salaries or wages, and those whose products, like the farmers', must be sold at prices fixed in the world's open market, must be content to pay their taxes with slight chance of collecting them back from others. 356 POLITICAL ECONOMY. In the long run, the strong tendency of things is to throw the burden of taxes upon consumption. The consumer must pay for his goods all the price they come loaded with, from whatever source that price may spring, and whatever charges it may include. 26. The equilibrium of taxes. — As all things that obey gravitation tend towards a level, so all burdens imposed upon any of the industries of mankind, either directly or through their products, seek to distribute themselves over all. There is thus a law of equilibrium of taxes which tends constantly to equalize, as far as possible, the burden wherever it may have been first imposed. To illustrate this law, let us suppose a tax, which would be thought most of all unjust, and perhaps least hkely to be distributed — a tax upon common labor. Let us suppose that each laborer was required to pay one tenth of each day's wages to the government. The result would be an increase of wages to that extent. The general law of wages, as an- nounced by Turgot, is that wages tend always to the level of the cost of living; and as the tax proposed would act as so much addition to the laborer's cost of living, it must be added to his wages. This, in turn, would increase the cost and price of all things produced by labor, and so the tax would ultimately be paid by all who purchase or consume these products. Instead of labor, let the entire tax of the country be laid upon land; the effect, would be to raise the price of every product of the land, and so again an equalization would follow. Let us pass to the other extreme, and suppose the entire tax of the nation to be imposed upon luxuries — upon silks and jewelry, for example — the probable effect would be to so increase the price and diminish the sale as to defeat the tax and compel its transfer to articles of greater necessity. But if we may suppose the enhanced price to be paid, it must be paid at the expense of a nearly equal retrenchment in other purchases; since it can not be supposed that many of TAXATION. 357 the rich will be found wilUng, if able, to increase so largely their expenditures in one direction without a corresponding retrenchment in others. Even with the wealthy there is a nearly fixed relation of expenditure to income. The retrench- ment would throw the burden of the tax upon the manufact- urers and dealers in the retrenched goods, and thence, by various and obvious channels, it would reach out to others till the equihbrium was found. It is not claimed that this law or tendency is so quick and perfect in its operation as to reduce all inequalities in taxation ; but in any settled system of taxes, where the properties taxed are sufficiently wide and various, it may be relied upon to distribute the burden more equally than any legislation is likely to do it. Uniformity, simplicity, and certainty of tax- ation are more important than any attainable legal equality. 27. Economic principles. — Viewed economically, every tax is an impost upon property and production. It is a price paid for police and protection; or, at best, the payment exacted for certain public convenience's; a charge faUing upon the industry and business of the people. All that economy re- quires is that the charge shall be as light as possible, and shall be collected with the minimum of disturbance of the course of trade. These demands may be stated as follows : 1. The amount of tax should only equal the real wants of the government. A lavish and ostentatious government, that gathers and expends unnecessary millions, disturbs industry both by its exactions and by its large expenditures, thus making a double disturbance of the common course of trade, repress- ive and stimulating by turns. 2. The collection should be as much distributed as possible in times and amounts. A heavy tax collected at once, if such a thing were possible, would fatally derange business, stopping the payment of private debts, and abstracting so large a por- tion of the common currency as to block the wheels of trade. The annual taxes collected by the States would work annual 3S8 POLITICAL ECONOMY. ruin, if, by a stretch of the laws, the collections were not distributed through several months, thus allowing time for the money to be paid out and get again into circulation. As it is, a severe stringency in the local money market is often produced, and much hardship is frequently wrought. A large number of Hght taxes, payable at different times in the year, would be much more philosophical in principle and easier in practice than the wholesale annual taxation now in use. The indirect tax, paid little by little, as the daily purchases are made, is on that account the lightest of all taxes. The tax system of France is superior to ours by its subdivision of taxes among so many taxables, and its frequent payments. 3. Under strict economic principles the tax should not favor or oppress one industry at the expense of others. Such par- tiality may sometimes be. allowed for a time for national ben- efit, but it is always in violation of economic principles. 28. National principles. — Viewing the nation as an or- ganism — a body whose parts are knit together by vital rela- tions and mutual dependence, in which the health of each is the health of all, a tax is a process for the transmutation of a certain amount of private property into pubhc safety, public intelligence, public convenience, and pubHc good. It- is the contribution which the stomach and working organs pay to the brain and nervous system. It is what the nation costs and consumes in maintaining and working the organism. Its amount, its modes of collection, and its expenditure, must be controlled by the conditions of national life, and yet with a strict regard also to the individual rights and interests of the citizens, since the life of the nation is no other than the grand aggregate of individual lives. The tax taken for the nation is taken from the individual. It is not alone the tariff, or tax upon imports, which affects the domestic manufacturer competing with the foreign. The home tax, which falls heav- ily upon its labor, materials, or machinery, must diminish the power of any industry to compete with its foreign rival. TAXATION. 359 The highest problems of taxation are evidently national in character. The tax is taken, as the nation's right, to be used for the nation's good. Its collection is an act of national sovereignty, and it distinctly enounces the national well-being as paramount to all personal and private interests; or, if this statement is preferred, as inclusive of them all. Taken in this light, the national demands are : 1. Taxes, in amount, in time and modes of collection, and in expenditure, should take into account the character and cir- cumstances of the state or nation, its needs, its powers, and its true progress. A monarchy demands a certain stateliness and splendor, which may lend dignity to power and excite the admiration of its people. A republican government should be on a level with the people — simple, serviceable, and without pomp or parade. A people of few industries, such as an agricultural people, can not pay, and do not need large taxes. A commercial nation requires, and can pay more. A people of wide territories and great diversity of employments, can and must necessarily pay larger assessments. Thus a hundred cir- cumstances of national hfe go in to hx the amount of national expenses. 2. A tax that is needlessly large both oppresses the nation, taking for its governing brain the substance of its working hands, and also injures the government, pushing it into false and feverish overaction or ruinous, lavishness. The extrava- gance of one year becomes the rule for the next; and, having once overpassed the limits of safe and economic expenditures, few governments have the virtue or the courage to return to a lower rate. They are launched on a current ever swifter, and with more fatal and resistless flow. The luxurious gov- ernment corrupts and then impoverishes the people. It lives an intoxicated, and hence a dangerous and perilous, hfe. 3. Taxes react on the national character, and ought, there- fore, to be adjusted to promote public virtue and well-being. If the tax can be so levied as to repress harmful luxuries or 360 POLITICAL ECONOMY. vices, or to promote helpful industries and public virtues, such ought to be the rule. The certainty of the result ought to be ascertained beyond reasonable doubt, and the limits of personal liberty ought not to be transgressed except to secure a greater public good. No wisdom can make the burdens and benefits of taxation fall with exact equahty upon all and to all; but a steady regard for the good of the whole nation will, in the end, compensate for minor inequalities. A true pubHc good is, in the end, universal private good. 4. Taxes are taken to nourish the nation in its whole hfe — not simply to arm it against its possible enemies, or to provide it with prisons for criminals; but to feed its brain, its heart, and its laboring hands. The most palpable and conspicuous function of government is to govern — to make and administer laws to secure rights and to guard the life and property of citizens. In this chief function the highest officers of the government and a vast army of officials are engaged; and the very splendor of state which surrounds it, gives to it undue predominence in its demands on the public purse. The expenses of government are almost the only unquestioned objects of appropriation. All other ob- jects are considered by many as beggars sitting at the govern- ment gate. Half the immense sums habitually wasted in the luxurious idling, or the party squabblings, of legislative bodies, or extravagantly spent on overpaid and underworked officers and agents of administration, if appUed to works of pubhc improvement and enHghtenment, would both enrich and ele- vate the nation. The government is not the master of the people, but their servant and agent; and, as such, it must be held to effect for the people those great public works which, from their magni- tude and pubhc character, private enterprise will not undertake and could not accomphsh. All public works, required for the business or the safety and health of the people, may claim their share in the public expenditures as much as the mere TAXATION, 361 making and administration of laws. In a healthful body, brain, heart, hands, feet, and every organ are equally and impartially fed and nourished. 29. The limits of taxation, — It is evident that there must be a limit beyond which the people could not, or would not, continue to pay taxes. It is obvious also that this limit must be far within the annual net production of wealth, or even the annual savings; for the people will not continue to produce if not permitted to enjoy the larger part of their products; and if savings be made impossible, the spirit of in- dustry will be destroyed. It has been computed that the average annual savings out of the annual production of the United States are not more than 5 per cent. A tax that would average 5 per cent of the production would therefore forbid any increase of wealth, unless it be by enhanced valuation. No tax should be allowed to diminish or prevent production ; but taxation will diminish production long before it absorbs the entire savings. It may be assumed that a thrifty people will make up for a moderate tax by extra industry or econ- omy; but when the impost is greater than they can meet in this way, and they find their savings lessened below their sense of security and need, they will seek to change their employment or their location. The instances are not rare where the incoming of capital has been forbidden, and the more difficult outgoing of labor and capital has been produced, by excessive taxation. Taxes on future production by the issue of bonds to be paid in subsequent years, are the most frequent means of overtaxation. Public improvements of large extent, or the pressure of war, may compel the incurring of public debt; but such a debt is always an addition to the current taxation of the future, and may easily carry it beyond the limit which the people can endure, without suffering and loss. p. E. CHAPTER III. PROTECTION AND FREE TRADE. 30. The tariff battle. — The fiercest economic debate of modern times is that between the advocates of a protective tariff and the champions of free trade. After a hundred years of conflict, the battle still rages with all its old violence. Volumes have been written, interminable masses of statistics have been arrayed, and speeches and reports without end have been made on both sides : on the one hand, to prove that a protective tariff is a wise and useful measure of na- tional policy; and, on the other, to demonstrate its public folly and its personal hardships. On the one side, in this controversy, stand most of the economists; on the other, are found the apparent majority of peoples and statesmen. But the economists are not unani- mous; nor indeed are statesmen and peoples. The tariff battle has been rendered fiercer by the vast amount of capital, invested in great industries, and the armies of laborers held to be concerned in the result. National prosperity, independence, and power are claimed to be at stake, and the work and wages of labor are affirmed to be involved in the issue. The impossibility, thus far, of reaching a conclusion to which all can assent, proves the difficulties of the problem, and rebukes the assumptions on both sides, of its simpHcity and its easy solution. After allowing for all partisanship of politicians, and all mercenariness of manufacturers who par- (362) PROTECTION AND FREE TRADE. 363 ticipate in the debate with selfish motives, there remains a wide and honest divergence of opinions among thousands who wish for Hght and anxiously seek the truth. It must be pat- ent to all fair minds that there are difficulties in the questions involved, beyond those ordinarily stated by the economists. It would not take the civilized world a century to settle a question so simple and easy as they assume this one to be. 31. Definitions. — Let it be explained, for the benefit of new students of this question, that : 1. A tariff is a tax, or system of taxes, laid on goods im- ported from foreign countries, and collected commonly at the port of entry, where such goods are landed. The word tariff is derived from the name of the Spanish town Tarifa, on the Straits of Gibraltar, where a tax was formerly levied by the Moors upon every vessel passing the Straits. The tariff taxes, commonly called duties, or customs, belong to the class of indirect taxes. They are made up of specific duties, charged upon the quantities of goods, without regard to their values, at so much per yard, gallon, pound, ton, or other measure of amount; and ad valorem duties, levied upon goods according to their values, as shown in the bills or in- voices of the importers. 2. Protection. — This word is used to express some public aid or favor to home manufactures to defend them from losses which might arise from the competition of foreign man- ufactures of the same sort. 3. A revenue tariff \s one laid for the sole purpose of collect- ing revenue for the uses of government, and is properly made up of duties on goods not produced at home, as the tax on these will be paid without interfering in any way with the prices of domestic goods. 4. A protective tariff lays its charges on foreign goods com- peting with home manufactures, and, by adding to the prices of such foreign goods, prevents their underselling and crowd- ing out the domestic manufactures. 364 POLITICAL ECONOMY. 5. Free trade means, literally, trade with foreign countries untrammeled by taxes or restrictions. But most advocates of free trade favor a tariff for revenue as a convenient mode of national taxation. They only demand that the duties shall not be laid on competing goods. 32. The double question. — The question in debate, in this old controversy, has a double form of statement, as it is seen from one or the other of the two points of view; or rather there is a double issue confounded in the discussion. The protectionist regards the tariff as a national question. At the bottom of every argument made by him, lies the as- sumption that there is a national interest, broader and deeper than the individual interest, and that the promotion of this na- tional interest is of importance to all the members of society. He perceives, more or less clearly, the unity of the national organism, and feels in his own life and business the pulse- beat of the national life. If he seems to be pleading the cause of some limited group of manufactures, it is because he wishes to preserve that industry to the nation. His error, if he is in error, comes from his point of view, and it must be answered from the same point of view. The free trader, on the other hand, looks at the tariff as it affects individuals, either as producers or consumers. He claims that whatever is good for individual citizens will be good for the nation ; that the private interests of the people are identical with their public interests. He considers the tariff as a simple tax affecting the tax-payers and their business. If any manufacture can not live without protection against its foreign competitor, he questions whether it ought to live at all. To him the tariff is a tax laid upon the many for the benefit of the few„ It may easily be seen that the issue is not fairly joined in this debate. The answer of each party to the other is, in a large measure, irrelevant. Hence, the arguments of neither convince the other. The economists, as students of Economic PROTECTION AND FREE TRADE. 365 Science, affirm the validity of the great natural laws of trade, and deny that special manufactures can be wisely, if even successfully, built up in opposition to these laws. The pro- tectionists, having in mind social laws and needs, beHeve the natural laws of trade are insufficient, and claim the importance of public interference to secure results which natural laws would never bring about, or Avould not effect in time for the national needs. The two doctrines, of protection of industries by tariffs, and of freedom of exchange or trade, are not exact contradictories, since they are not answers to the same ques- tion, hence the truth of the one does not prove the falsity of the other, and the falsity of either does not affirm the truth of its opposite. The subordinate questions, of the effects of the tariff upon prices, present and future, and of the distribution of the burden of the taxation, on which so much of the debate is ordinarily expended, can evidently never be properly discussed or wisely settled till the great main questions are definitely determined. 33. The protection doctrine. — The doctrine of the pro- tection of home industries by means of a tariff on foreign goods rests upon three principal assumptions, or postulates, as follows : 1. The interests of the nation, as a united body of people — a living organism — require something more than, and different from, what is required by its individual citizens. 2. These national interests demand a wider and earlier di- versification of industries than the natural laws of life and trade would, of themselves, bring about. 3. A tariff or tax upon imported goods is a wise and effect- ive means of securing and preserving the home industries de- sired. If any one of these postulates fails, the doctrine of protection must fail with it. Their united force is required to support the conclusion. If they can all be sustained, in their full in- 366 POLITICAL ECONOMY. tegrity, the doctrine will stand unassailable. The importance of the consequences involved, as well as the economic in- terest of these postulates themselves, demands their careful scrutiny. 34. First postulate, national interests. — It may be admitted that the common sense of mankind, as shown by the history of all peoples, recognizes such a thing as national in- terests distinct from, and overtopping, individual interests. Everywhere and in all communities, men have felt that there is a common safety, which includes indeed the individual safety, and for which they may rightfully be called to fight and die if necessaryo They have also recognized a common well-being of society, higher than any personal well-being, to which all may justly be required to contribute of their per- sonal wealth and service. This common well-being is made up of the common security, the public order, morals, and in- telligence ; the general supply of products and of work, the public improvements and conveniences, and the national power, reputation, and independence. All this is something more than the sum total of private and personal qualities, posses- sions, and condition. It is true that public interests are made up of private inter- ests, but not of merely personal interests. To the interests and rights belonging to the man as a living being, must be added those which belong to him as a social being and as a member of society. These latter often he outside of his per- sonal possessions and immediate surroundings, but are nearly as necessary as those to his development and happiness. In trade and industry all things may seem personal, but the in- terests of industry and trade can not be separated wholly from other personal or public interests. The whole man enters into society, and must be protected and considered in his entirety. What we call public interests belong to separate groups, or rather, to different concentric circles of different diameters. PROTECTION AND FREE TRADE. 367 The man has certain interests in common with his village; other interests in common with his township; others still in common with his county and his state; and, finally, others which belong to the nation. Wise men recognize all these, and seek to promote them in some proper way. The villager often strives to increase the prosperity of his village by seek- ing to secure immigrants, or by offering a bounty to manu- facturers. He promises himself both personal and puWic advantage from the increase of population and wealth. It is true that the smaller community sometimes needs protection from the other communities united with it in the large com- munity of which they form part. A tariff between states, or even between counties, would sometimes defend one against the overmastering competition of the other; but this rather increases than invalidates the force of the argument for na- tional protection. The clear recognition of the narrower pub- lic interest which every man can see and appreciate, opens the way for the admission of the wider national interests which only a few are intelligent enough to see in all their breadth. It is not needful here to enumerate all the interests which belong to a civilized people; but we may name, as involved in the present discussion: i. An abundance of work for all workers, and wages for their work. 2. A sufficient diversity of industries to utilize all natural resources and give employ- ment to all talents. 3. An abundance of wealth to meet, without hardship, all necessary taxes for the public good and safety. 4. A sufficient common intelligence and civilization to properly enjoy and maintain the form of government chosen by the state. 5. An equahty of condition with confronting nations, that may protect from their hostility, and prevent them from imposing undue burdens, or winning undue advantages from age or position. The rival nation is a factor that can never be left out in any complete estimate of our national interests and concerns. And as nations, like corporations, are soulless, and are generally actuated by selfish motives, it is 368 POLITICAL ECONOMY. all the more necessary to take their conduct and condition into account in studying our own. If we have national inter- ests, they have national interests also, and it is not impossible that the one shall conflict with the other. The conquest of arms is not the only form of national aggression. There is a conquest of commerce more frequent and nearly as fatal to the subjugated nation. 35. Second postulate, — diversification of indus- tries. — The national importance of a variety of industries among the people does not need argument. In a general sense, all parties admit it, however they may differ as to its desirable extent, or as to the means of securing it. To give the largest amount and variety of employments to the people; to properly utilize all the resources of the country, and to furnish at home the markets for the several productions of labor, are objects so palpable that no one will deny them. The higher influences of diversity of employment on national civilization, and on national power and wealth, may not be so obvious, but they are equally true and important. In a savage state, and in the first stages of colonial hfe, the industries must be few and simple. The savage contents himself with few gratifications; the colonist imports most of his from older countries. Manufactures require both capital and skill, and there is usually a dearth of both of these in a new settlement. Increase of population usually brings increase of wealth and of intelligence, and so industries naturally advance in quality, multiply in amount, and divide into separate branches. But history shows that new populations are slow in introducing new industries widely different from their own. It shows, also, that the migrations of manufactures have more frequently been due to some fortunate accident, than to nat- ural causes or the laws of trade. England owes her silk and woolen manufactures more to the immigration of Flemish and Huguenot fugitives than to any natural growth in her in- dustries. PROTECTION AND FREE TRADE. 369 It is possible that all the forms of industry to which any country is naturally adapted, might, in time, come in by the laws of trade ; but generations and centuries must often elapse before the result would be reached. The assumption of the protectionist is in keeping with the facts of history; the na- tional interest demands a wider and earher diversification of the industries than the natural laws of trade would produce. 36. Third postulate, — the tariff power. — The third as- sumption is by no means so clear, and so nearly self-evident as the two former. A tax upon imported goods is, at best, only an indirect way of producing or promoting new indus- tries. As shown, many years ago, by President Wayland, a tariff does not directly and necessarily increase the capital or the labor-power and skill of a country, and these are the im- mediate and only indispensable conditions of founding a new manufacture. Such a tax may stimulate and sustain a man- ufacture already started, by securing it a better price for its goods; but it will not certainly lead to the establishment of new manufactories. Indirectly, by raising the prices of goods of the sort taxed, it may induce capitalists to import or em- ploy capital in their production ; and such is the way in which the tariff is expected to accomplish its results. It is claimed that the silk manufactures, and some others, were introduced into this country by this means. Whenever unemployed capital is sufficiently abundant in the country, it may be as- sumed that it will seek investment in new industries as fast as they become profitable and safe. So far as the tariff secures to them this safety and profitableness it promotes this invest- ment. 37. Is the protective tariff wise? — To judge of the wisdom of the tariff as a means to the desired end, it must be compared with other means available for the same end. Three other methods have, in different cases, been employed to secure the establishment of new industries : i. A direct donation to the capitalist to induce or aid him in the founding 370 POLITICAL ECONOMY. of his manufactory. 2. A bounty paid by government for each given amount of goods manufactured. 3. A release from all taxes upon the capital or labor employed in the new industry. Each of these three methods has an advantage over the protective tariff in the certainty of result, for nothing is paid till the result is assured. Under the tariff, the tax must be paid upon all goods imported, whether it induces home man- ufactures or not; but no one is pledged by it to introduce or maintain any new industry. It is a second advantage that all the money paid under either of these three is given directly for the purpose in view. Under the tariff, all the money collected by the tax goes to the government, and the manufacturer gets his aid by impos- ing a similar tax upon his customers in the higher price of his goods. A third advantage of these methods lies in the definite amount of the taxation imposed by them. As we have just seen, the tariff imposes a tax upon all the imported goods for the benefit of the government, and allows the imposition of an equal or greater tax by the manufacturer upon all the goods produced by him. This may greatly exceed the amounts actually required to secure the establishment and support of the home industry. On the other side, the protective tariff has some advantages over the other methods proposed : i . As an indirect tax for the support of the national government, the tariff has strong claims; and to make it protective, needs only to distribute it upon the goods competing with home manufactures. 2. The machinery for the assessment and collection is a common and necessary part of the machinery of government. Custom- houses, and custom-house officers belong to the ordinary ar- rangements for the management of the commercial intercourse with foreign nations. The use of this common machinery in the way of a protective system for the promotion of domestic manufactures, does not compel the establishment and maintenance PROTECTION AND FREE TRADE. 371 of any new system. 3. The operation of the protective tariff, though uncertain in its results, is simple and easy in its work- ing. The other systems, though more direct and definite, would involve great practical difficulties in their operation, and be liable to great abuses. It is doubtful whether more serious complaints would not be raised against the direct donation to capitahsts from the public funds than have ever been made against protective tariffs. The advantages and disadvantages of the protective system being so nearly balanced, the decision as to its wisdom must rest finally upon its efficiency. If facts prove that it is effect- ive, it must be approved; but, if it can not be shown to be efficient to the end proposed, it must be condemned. At the last, therefore, it becomes a question of fact, to be settled by statistics. 38. The postulates of free trade. — To complete our fundamental view of the principles involved in this discussion, it is necessary to inquire what are the postulates on which the arguments of the free traders rest. These postulates are as follows : 1. Freedom of trade or of exchange is freedom of labor and of industry. 2. If exchanges are left free, men will do those things that they can do best; they will devote themselves to the indus- tries for which they and their circumstances are best adapted. 3. Each land and nation has special industries for which the people by nature, or by their circumstances, are pecuHarly fitted, and which they ought to pursue till, at least, the nat- ural laws of trade shall lead to the introduction of others for which they are equally fitted. Free trade also makes several assumptions which are rather to be counted as objections to protection, and which mast therefore, be answered as such. But, first, let us examine the postulates already stated. On the truth of these, the doctrine of free trade must mainly rest; though, if they fail, their 372 POLITICAL ECONOMY. failure does not establish the doctrine of protection by tariffs, because, as we have seen, the two doctrines are not perfect contradictories. 39. First postulate — Free trade is free industry. — This postulate implies that human industries have no other barriers than those imposed by the restrictions on trade, and that if men are left free to buy and sell when and where they please, they will be free to change their employments as they may choose. To this it must be replied that the great hindrances to the changes of employments are found in the immobility of labor and capital. It is well known that laborers, in general, move reluctantly and with difficulty from one locality to another, and that the passage from one employment to another is still more difficult. So, also, capital is not easily shifted from one investment or industry to another. It fears loss in untried channels, and prefers safety to uncertain profits. No freedom of trade can increase the mobility of labor or the confidence of capital. The industries love beaten and familiar paths. Men follow easily the employments of their fathers and prede- cessors. Restrictions upon trade may force them into new labors to secure the goods they are not allowed to buy; but the removal of the restrictions will only leave them free to go on in the old ruts. 40. Second postulate — What men do best. — The sec- ond postulate affirms that there are things which each man can do best, and that he ought to be left free to do those things instead of others which he can do poorly, if at all. It assumes that if men are permitted to exchange their products freely, they will drift naturally to these best and most profita- ble employments. Thus, a hatter can make hats well, but he can make boots only poorly, if at all. If left free to follow his own good sense, he will spend his time in making hats and exchange them for the boots and other products which he may need. But it is not always true that men's old and PROTECTION AND FREE TRADE. 373 wonted employments are the most profitable in the long run, even if it is true that they can, for the time, do that best which they have best learned to do. The wild Indian can doubt- less hunt and fish better* than he can raise wheat or rear cattle; but who will say that it is best and most profitable for him to follow his old savage ways, and continue forever to hunt and fish? Every advance made by any nation in its arts has been achieved by leaving the things it could do best, and learning to do something it could not formerly do at all. Certainly, there is a sacrifice which always accompanies a change of employment; but the question is, whether the final gain does not compensate for the immediate loss? If there are in any country more hatters than there is market for hats, the change of employment may be a necessity for some of them, however well they may know their trade. 41. Third postulate — The best national industries. — The third postulate is only an extension of the. second; but it seems to have an additional force from the known diversities of climates and productions of different countries. It affirms that natural causes, found in environment or character, determine the industries of peoples, and that these causes, or the natural laws of trade, will introduce new industries as required. China raises tea, and Brazil coffee. Why not leave tea and coffee raising to these nations, and we follow our natural in- dustry, if we have one, and exchange its products for tea and coffee ? Our rich prairie lands mark us for agriculture ; is not England equally marked out for manufactures? Ought we not, then, to sell the English people our corn and buy their cloths and crockery? The answer has already been given in part. What has been said of the individual is true also of the nation. But a further answer is required to the new features of the inquiry. It is true that climate and soil determine the territorial limits of some of the agricultural industries. It is useless to plant cotton in New England, or maize in Great Britain. The 374 POLITICAL ECONOMY. character and habits of peoples, also seem to adapt them to certain special classes of industry. The makers of the Persian carpets, of the Indian shawls, of the Flemish laces, and of the Chinese porcelain seemed for centiuries to have no successful rivals. France still claims a supremacy in certain cloths, silks, and gloves ; Russia in its peculiar iron ; Japan in lacquer ware, and England in a score of articles. The truth seems to be that agricultural industries depend largely upon soil and climate, and a few hand arts are special to certain countries and peoples, either by natural characteris- tics, or by long use and the skill resulting therefrom. But the great part of manufacturing industries are cosmopolitan in character, and may be prosecuted successfully by any people whose situation allows the necessary accumulation of capital, and whose civilization favors the acquisition of the needful skill. Nearly all of the arts are now spreading themselves throughout the world, and scores of peoples are now contend- ing for markets formerly possessed exclusively by one. The introduction of new industries, it is claimed, will be brought about by natural causes and the laws of trade. New manufactures, it must be admitted, do gain foot-hold in all civiHzed lands, whatever be the commercial or governmental poUcy of those lands. In some cases, bold and adventurous artisans or capitalists undertake the introduction, and, after more or less of disastrous failures, succeed in naturalizing the new art. Little by little, the art is improved; new processes and machinery are invented; new capital and skill are gath- ered around it, and the small beginning becomes, in time, a great national industry. As the wealth and population of any country increase, the industries of that country necessarily divide into branches and multiply in number and extent. The natural desires and cultivated tastes of men demand higher gratifications with every increase of means; and the imitative spirit of mankind impels to the borrowing of the arts of neigh- bors near or remote. PROTECTION AND FREE TRADE. 375 But it is obvious, from history and from contemporary obser- vation, that the adopted poHcy of some nations favors the in- troduction of new forms of industry, while that of others repels it. In earher days, new manufactures were often looked upon as innovations to be feared and watched; in modern times, they are sought for as new sources of wealth and power, and are welcomed as advantages to citizens and to state. Protective tariffs grew out of this modern spirit, and are attempts to give government aid to the introduction of new arts. Looked at closely, the conditions of the establishment of any manufacture will be seen to include: i. Capital 2. Skilled labor, and 3. Market. Capital sufficient to provide machinery, buy materials, pay labor, and meet all expenditures till a market can be reached, is a first requisite; and this capital must be created by other industries, or it must be tempted from concealment, from other investments, or from foreign lands. Skilled laborers to build and run the necessary ma- chinery, and to perform all the processes of the art with suffi- cient expertness, must be imported from abroad or trained up at home. But goods will not be made without a market; and where the competition is large and serious, it is some- times very difficult for a new manufacturer to secure a market against the rivalry of old and well-known competitors. A market also implies an adequate demand, and remunerative prices; for no one can continue to manufacture if only half of the product of his mills can be sold, or if they must be sold without profit. All of these conditions are costly at the outset, and the bur- den of this cost must fall upon the manufacturer, or upon the pubhc. The progress of trade and wealth doubtless tends to lighten them all, and might, in time, overcome them. The protective tariff proposes to throw their weight upon the peo- ple at large, and thus secure a much earlier victory. Such are the answers that science is bound to give to the 376 POLITICAL ECONOMY. postulates of free trade. As in the case of the postulates of protection, they leave some questions of fact to be settled by statistics, and, therefore, fail to end the debate by a final and conclusive answer, 42. Objections to protection. — Free trade interposes other serious objections to protective tariifs, and as these objections make up no small part of the common arguments, it becomes the more important to consider them. Even if the assump- tions of protection are, for the main part, true, and if those of free trade are chiefly inadequate or unsound, it still re- mains that protection is nothing but a device to accomplish a given desirable result, and if the objections to it overbalance its advantages, it ought to be abandoned. \st Objection. The protective tariff imposes a tax upon the many for the benefit of the few; that is, upon all consumers for the benefit of the few manufacturers. This objection is evidently irrelevant, since the avowed purpose of the tariff is to aid the manufacturer by laying the burden of introducing and maintaining the new manufacture upon the people at large. But the objection is also false in form. It is a complaint against the inequality of the burdens and benefits of taxation, and, as such, will lie in some sort against every tax imposed by government; for no tax ever was, and none ever will be, equal in its bearing upon all. A defensive war may be absolutely necessary to the safety and life of the nation, but its burdens will fall with terrible and destructive force upon some, while it will enrich others. The proper question to be raised is not as to the taxation, but as to its object; and this is equally true whether a tax is laid to defend the nation or to promote the industries of the country. 2d Objection. A part only of the money paid by the people comes into the public treasury, the greater share going to the manufacturers; that is, all the advanced price paid on the imported goods taxed goes to the government; but all paid PROTECTION AND FREE TRADE. 377 for the goods manufactured at home goes to the manufacturers. This objection is also irrelevant. The very object of the tax is to raise the prices of the goods produced at home in order to induce their production. The aim and efficiency of the tax, and not simply the tax itself, must be the ground of objection. If the protective tariff does really introduce and support do- mestic manufactures, it accomphshes that for which it is levied and in the way proposed. It might be proper to object that the tax is inordinate; or that it does not accompHsh its pur- pose, which would imply that it is too small. But to object to any protective' tariff at all must properly be based upon a denial of the object of such taxation. 3d? Objection. The protective tariff interferes with trade, and, hence, with the natural course of industry, forcing men out of employments which are profitable, and into those which are unprofitable. It is sometimes added, that the people, by doing what they can do best, will get the foreign goods which they desire, cheaper than by attempting to make these goods for themselves. This objection again is irrelevant. The pur- pose of the protective tariff is to interfere with the natural course of industry in order to introduce new industries. It seeks to compensate some men for turning away from indus- tries in which they may be expert, to others which are strange to them. And it seeks to do this for a greater good which it hopes to attain for the people and the country in coming times. The interference with a natural course of events, that is, with the blind action of natural causes, is not necessarily wrong or evil. All human civilization has come from such interfer- ence, in putting men upon doing things which the savage does not do by nature, or in restraining them from courses which savage nature allows. ' There are many forms given by different writers to the above objections; but they may all be readily reduced to these forms, when the same answers will apply. p. E.— 32. 378 POLITICAL ECONOMY. /\^th Objedmi. It is impossible for any statesmanship to so adjust the terms of a protective tariff that its advantages shall always fall where they are most needed, and that its burdens shall not equal or overpass its benefits. This objection is di- rect and serious. It discredits the claims of protectionists on their own grounds, and, if fully sustained, must go far to over- turn their theories. A remedy which exceeds the skill of hu- man beings to apply successfully and safely is no remedy at all. It must be admitted by all candid men that the difficulty with our tariffs has been their cumbersomeness and their in- equaUty; and it has thus far been beyond the power of our National Congress to enact a tariff law free from these objec- tions. But it will be answered that the same imperfection at- taches to all human legislation, and that any other method of effecting the same public purpose would necessarily lie open to the same difficulty and objection. Most of human action proceeds upon probabilities, and must, therefore, be uncertain in its results. Thus again we are brought to a question of fact to be answered by statistics. 43. The true questions. — If the foregoing discussion is sound, then the real questions to be answered are these two : I.. Is it proper and wise for a nation, through its govern- ment, to attempt to promote the diversification and growth of its industries? 2. Does experience prove that a protective tariff does effi- ciently promote the diversification and growth of national in- dustries? All arguments and objections that do not touch one or both of these two questions are irrelevant, and out of place in the discussion. All objections to the inequalities of taxation; all complaints as to the benefits or burdens of the taxes imposed; all affirmations as to how individual men can buy cheap or sell dear; all these, and many others with which economists have filled their volumes of debate, belong to other questions, and have no proper place in this debate. PROTECTION AND FREE TRADE, 379 It is the perception, by people and statesmen, of this ir- relevancy of the arguments and objections of the economist which has robbed those arguments and objections of their ex- pected force, and led to the condemnation of their authors as mere theorizers and doctrinaires. 44. The national question. — The first, or national, ques- tion has already been partly answered in a previous chapter on the organization of the nation. Different views are held by statesmen as to the functions and powers of government, and different opinions will prevail as to the wisdom of gov- ernment interference in matters of trade and industry. Ad- mitting, as we must, that all taxation involves incidental in- terference with industry, it will still be asked whether the aim of the true legislator ought not to be to render this interfer- ence as light as possible, rather than to attempt to employ it as an agent of restriction or impulse. The industries of the people fill the chief chapters in the national life. They occupy and sustain the population, and furnish to the government its chief objects of legislation and oversight. It must burden these industries with taxes for na- tional good; may it also foster them for national good? The extension and prosperity of the industries concern almost equally all classes of citizens; for they include not only the questions of production and wealth, of ease and comfort, but also of work for workers and of wages for work. The industries underhe and support pubHc order and well- being, education, good and cheap government, civilization, and the very existence of society. No question can be more national in character, more universal in application and influ- ence, than that of their prosperity. If government may at all undertake this work of promoting the industries, then it may surely lay taxes and impose re- strictions needful for the purpose. This is no further inter- ference with private liberty than the nature of the case re- quires. 380 POLITICAL ECONOMY. It is plain that the protection, to be wise and just, must take into account the present industrial condition of the nation. A protective tariff among savages would be an absurdity. They have no manufactures, worthy the name, to protect, and they have neither the wish nor ability to engage in new ones. Nor, at the other extreme, is protection necessary to a people who overtop all rivals in their manufactures. As the savage seeks a free foreign market in which to buy his powder and shot, and his meager supplies so the great manufacturing na- tion, outrivaling all others, seeks free foreign markets to sell its surplus. The savage's home market does not yet exist; the home market of the great manufacturing power is fully preoccupied. A German writer has suggested that there are different stages of national progress that need to be taken into account in setthng the policy of a protective tariff. We may easily discriminate three such stages in which the question will wear a different aspect, and demand a different answer: i. The barbarous or nomadic stage, in which the nation or tribe has no manufactures to protect, and does not care to introduce any. 2. A middle stage, in which the nation has begun to manufacture, and in the presence, as it were, of the older and more advanced nations to which it has served hitherto as a market. Its young and feeble manufactures, feeble in capital and skill, without foreign market and insecure in their own, must evidently languish through a long and uncertain infancy unless helped by the public or protected by the gov- ernment. 3. A final stage, in which the nation, after years or centuries of experience, has grown rich in capital, is full of inventors and machinery, and has armies of skilled labor- ers at command, and, besides all this, has the run of the mar- kets ©f the world. To such a nation the term protection is without meaning, since they have no rivals to fear, unless it be in foreign markets where their protective tariffs could not apply. PROTECTION AND FREE TRADE. 381 These stages of national industries may, in some sense, be found also in each one of those industries. Any manufacture, in its infancy, may need protection against its foreign rivals; but when it has grown strong, and, fining its own home markets, it goes forth to the conquest of other markets, pro- tection is to it an insult, if not an absurdity. The doctrine of protection loses all its significance and reasonableness when it is applied to industries hke this. If by any means the nation, or any one of its industries, has relapsed into the feeble stage, or if openly hostile measures have been taken against such industry by its foreign rivals, the case is changed, and protection may be invoked to ward off the threatened evil. 45. The question of fact. — As has been shown, the whole tariff question resolves itself at last into a question of fact. ''Does protection protect?" Does the protective tariff do what it is designed to do? Does it increase and promote the national industries? To this question a vast amount of statis- tical answer has been given. The history of the civilized nations for centuries has been ransacked, and the example of each has been put in evidence on both sides. But, unfortu- nately, there are so many other causes that enter into the production of each claimed result, that the full influence of the presence or absence of a protective tariff can not be fully ascertained. There lies before me, as I write, three separate accounts of the industrial policy and condition of the modern German Empire. The first states that it has only a low tariff and is virtually without protection, but is, nevertheless, in a very prosperous condition. The second affirms, on the au- thority of a German writer, that "Germany is perishing," and gives as the cause of her condition, her adherence to the protective policy. The third, in a popular work on Political Economy, asserts that Germany presents a splendid example of the prosperity which follows from free trade. With such careless discrepancy of statements meeting us on all sides, and 382 POLITICAL ECONOMY. in nearly every case, it will not be wondered at that the question of the influence of a protective tariff is still the bat- tle-field of economists and statesmen. In the United States the difficulties of the tariff question have been greatly increased, and the controversy has been embit- tered by the division of the nation into separate States, each claiming a modified sovereignty, and each having such an extent of territory and such a diversity of soil, position, and chmate as to render it almost a separate people. The tariff that has protected one has oppressed another of these States. The manufacturing States have asked for protection; the agri- cultural States for free trade. Sectional and partisan strifes have distorted facts and obscured the vision, and the question has been one of sections rather than of science. Private greed has purposely added to the confusion, to get gain; and the real arguments and issues have often been lost from sight. The progress of new manufactures in the Southern and West- ern States is now turning them into tariff advocates, while New England, having reached the third state of manufacturing life, is becoming free trade in its views. TO THE TEACHERS OF POLITICAL ECONOMY. Political Economy is not a science for children. As you know, its study requires more knowledge of human affairs and a wider observation of business than are possible to the very young. It is not necessary, there- fore, that its text-books shall be written in the familiar style or with the extreme simplicity of statement demanded in books for primary or inter- mediate instruction. The study finds its proper place in the higher classes of the high- schools and colleges. It asks and repays the thoughtful study of grown men and women. It belongs chiefly to the class of Subjective Sciences, and as such it demands a large use of the student's reflective powers. This is best se- cured by frequent, if not daily, requirement of original answers in writing, to specific questions on the principles and applications of the science. Without abundant writing, such studies are rarely well done. Every chapter, and nearly every paragraph of this volume, furnishes topics which may well be filled out with further study. But Political Economy has a large practical side allying it to the Sciences of Observation, and hence the student should be required to ob- serve carefully and report intelligently the economic facts of his own neighborhood. He ought to be able to interpret the fluctuations of values, the money phenomena, and the economy of the industries of the vicinity. It is also a Statistical Science, and demands a training in the proper study and use of statistics. The statistical tables in this volume are not to be memorized, but they will afford practice in analyzing, com- paring, and interpreting statistics — one of the most difficult arts of states- manship. Statistics represent facts in masses. Their accuracy should be beyond question ; their relations should be fully considered, and they should be so arranged and classified that their real significance is seen. He who wields well statistics, wields arguments of unanswerable power. (383) 384 POLITICAL ECONOMY. Questions and Questioning. In more elementary books and branches of study, it is common to pro- vide questions in the book; but in advanced studies, in which the stu- dents are expected to make their own analysis, prepared questions are of little use, and may be injurious. They may tempt the pupil to forego that very effort at analysis which is the most useful and important part of his work. Better to require of the student to make out for himself a list of questions or topics which shall touch the very heart of each section and paragraph. The art of teaching is, in large part, the art of asking questions. No one can teach well who can not question promptly and wisely. The aim of questions is threefold: i. To awaken thought and attention; 2. To ascertain what the pupil knows; and 3. To correct and instruct. If the teacher is a master of his subject and book, he will easily make his ques- tions as the work goes on; but, if a pressure of other work, as is too often the case in high schools, prevents such mastery of the lesson of the day, questions should be prepared beforehand. Let the teacher read through the chapter, pencil in hand, and, at each paragraph jot down on the mar- gin, OT on a separate sheet, the question or topic which will bring out the truth or principle involved. Such questions will serve him better than any that any author can prepare. The Card System. This system is one of the most convenient for ordinary questioning, or for reviews. Let the teacher procure a good quantity of blank cards, a little smaller than common playing cards; on each of these cards let him write one or more of the questions on topics above described, numbering the cards for his own convenience. The questions and topics should be such as will fairly cover the ground of the instruction. At the opening of the recitation, a card may be handed to a student in place of an oral question, and a full answer required thereon; and so on till the lesson is completed. Or each student may be required to draw a card in turn, at random, and answer at once the questions drawn. In this latter case, the cards may first be shuffled, and the questions, coming out of order, will more fully test the student's mastery of the lesson. • Reviev^s. No teaching can be successful that neglects constant, daily, persist- ent reviews. The unalterable laws of mind refuse accurate and perma- nent knowledge of any book or subject, on any other conditions than this. INSTRUCTIONS TO TEACHERS. 385 He who reviews best, teaches best ; and commonly the teacher who re- views most, teaches most. The first review should be made the next day after the lesson is re- cited. It need occupy but a few minutes, if the lesson was well learned, but it should show that the subject is understood and remembered, A partial, miscellaneous review may be made at any time when the hour of recitation is not fully occupied, by distributing a few of the cards, and requiring the students to answer promptly the questions they chance to draw. A little care in the use of the cards will enable the teacher to pass the whole subject again and again in review in the course of the term. As often as once a week, at the outset of the term, the whole hour should be given to the review, and the cards will afford the means of making this review thorough and searching. These frequent and thorough reviews the first half of the term will make' the progress of the latter half rapid and safe. No harm can come if the students copy the cards as they frequently are inclined to do. If the questions are wide and general, covering fully the ground, the special study of the answers will give a good body of the subject thorough lodgment in the mind ; and a few oral questions will prevent mere memoriter learning. One of the most useful reviews may be given by requiring the pupils to reproduce on the blackboard, from memory, the tabular or synoptical views given in this volume. It will tend to systematize and keep in order the student's knowledge of the subject. These synoptical statements on the blackboard afford also a good method of recitation by requiring the students to explain the topics in their order. The Book. ■ This volume, designed to afford a somewhat full discussion of the subject, for the general reader as well as for the student, presents, in some cases, a wider discussion than is needed for the class-room. The author, therefore, advises the omission, at least in the first study, of such parts as the teacher may choose to omit. This may sometimes be whole chap- ters, and, in other cases, paragraphs or parts of chapters. The coat must be cut according to the cloth. If only a single term can be given to the work, only a portion of the book can be mastered. P. E.-33. INDEX. Numbers refer to pages. About, Edmond, title of work, 27. Accumulation, a motive for labor stronger tinaii gratification, 31. Agricultural Capital, four classes of, 219; amount per acre, 220; in live stock, 222. Agricultural Economy,synoptic view of, 208 ; its peculiarities, 212. Agricultural Education, need of, 217; value of, 218. Agricultural Population in different countries, 215. Agricultural Wealth in U. S., 215. Agriculture belongs to substance- changing work, 91; its scope in , economics, 91 ; employs forces of growth, 105; forms of capital in, 194; as an industry described, 209; tvvo grand divisions ^of, 210 ; mixed hus- bandry, 211 ; classes of soil culture, 211 ; the wants met by, 212 ; nature of its products, 213 ; the materials in, 213 ; extent of, 214; nature's gifts in, 216; extensive and intensive, 221 ; ma- chinery and supplies in, 223; profits of, in economy of force, 223; eco- nomic mistakes : 1, waste of land, 224 ; 2, waste of animal force, 224 ; 8, waste of capital, 225 ; 4, waste by poor stock, 225 ; 5, improper rotation of crops, 226 ; the farm a machine, 313 ; Metayer system of renting, 314. Animals, rearing of in early times, 210 ; necessity of, to fertilize soil, 211 ; cost of, 218 ; uses of draught and stock animals, 222 ; serve on farm as mate- rials, machinery, 223. Animal strength, its uses changed by machinery, 105 ; cost of, 218 ; waste of, 224. Antagonism of Capital and Labor must be between laborer and capi- talist, 205. Arkwright, Sir Richard, invention of spinning-jenny, 264. Arts, all reach back to some science, 25 ; devices suggested by nature, 99 ; natural development of, 154. Balance of Trade, definition and com- mon opinion of, 216 ; is it an advan- tage, 247 ; profit depends on use, 248 ; influence on labor, 248. Bank Checks, use in exchanges, 279 ; tabular statement of use, 280. Banks described, 278 ; two kinds of, 279, Banks of Deposit, functions of, 279. Banks of Issue, description of, 281, Barter, measure of values relative, 61 ; definition of, 240. Bastiat, Frederick, his circle of Pol. Ec. (note), 12; value to Pol. Ec, what enumeration is to arithmetic, 40; definition of value, 42 ; denies value to mere products of nature, 111, Bentham, Jeremy, theory of estima- tion of desires, 71 ; on right of prop- erty, 286. Bowen, Prof., counts Pol, Ec. a men- tal and moral science, 15. Burchard, H. C, notice of report, 65. Business Establishments, large, pro- duced by division of labor, 167 ; why the large absorb the small, 168 ; dan- gers of large, 170. Business Managers, labor of de- scribed, 137; Say's description, 138 ; qualifications required, 139. Capital, general view of, 187 ; its nat- ure explained, 188 ; its origin and four forms, 189 ; two classes of, 190 ; forms of in different business, 193; productive and non-productive, 194 ; fixed and circulating, 195; relations to labor, 197 ; 1, their union neces- sary, 198 ; 2, gives time to labor, 199 ; 3, gives power over nature, 200 ; 4, commands natural forces, 201 ; 5, rel- ative increase, 202; not antagonistic to labor, 205 ; two classes in trade, 232 ; share of in products, 312 ; compared with labor, 312. Carey, H. C. , treats Pol. Ec, as national and social, 26 ; def. of value, 43 ; ex- plains increase of wages, 204. Cha INDEX. Eco Chambers, Dr. T. K., on expenditure of force in living, 119, 120. Cities, flow of wealth to, 325. City Growths in modern times, 325. Civilization estimated by its wants, 69 ; mental wants predominate, 73 ; division of employments a step in, 155 ; depends on soil yield, 211 ; money, 261. Clearing House, description of, 281. Clerks and Accountants, industry of productive, 137. Climates, tropical, discourage indus- try, 98; frigid, overburden industry, 98 ; temperate, natural home of in- dustry, 98 ; influences health, 100. Coinage, problems of, 267. Colbert, promoted industries to in- crease taxes, 23. Commodities, defined, 31; new use of increases demand illustrated, 86. See Goods. Comparison of Values, cases of, 61, 62. Comparison of Values made in trade, 241. Competition between manufactur- ers, 133. Consumption of Wealth a secondary distribution, 319; classes of, 319, 320. Co-operation as remedy for competi- tion, 308. Copyright considered as property, 144, 296 ; law of in Eng. and U. S., 297. Cost, meaning of term, 45. Cost of Production, lowest limit of natural value, 87; diminished by machinery, 129. Cotton Manufacture, illustration of power of machinery to cheapen products, 129 ; its extent illustrated, 130; invention of spinning-jenny, 164 ; growth of in England and U. S., 166. Credit, its nature described, 191 ; is not wealth, 192. Credit Money described, 274. Debts increased or lessened by changes in money, 265; falsely counted property, 299; taxes on, 300. Demand, economic, defined, 77 ; never exceeds wants, 77 ; reciprocal with supply, 79; laws of, 80; effects of in- creased and diminished, 81 ; effects of excess explained, 83 ; effect of diminution, 84; fictitious created by speculation, 85. Dependent Class, proportion of to population, 116. DeQuincey, Thomas, calls Pol. Ec. a mental science, 15 ; value the consti- tutive idea, 40 ; affirms two elements in value, 44. Desires, confiict of in values, 48 ; il- lustrated in 5 caseSj 49-51 ; becomes strong by habit, 75; compared in trade, 241. Distribution of Labor, reasons which control, 185; personal and social considerations in, 186. Distribution of Wealth, forces caus- ing it, 301 ; classes of, 302 ; primary described, 302 ; into wages, interest, rents, and profits, 303 ; the share of wages, 306 ; tabular statement of, 308 ; share of capital, 312 ; rent share in, 312 ; the profit of, 317 ; secondary forms of, 319 ; territorial movement, 324 ; by international trade, 327. Division of Employments, its origin, 154 ; its progress and causes, 155 ; ad- vantages enumerated, 157 ; disad- vantage of mutual dependence an- swered, 157. Division of Labor described, 158; Adam Smith's view of, 159; advan- tages of, 159 ; 1, economy of time, 160 ; 2, economy of strength, 161 ; 3, econ- omy of skill, 161 ; 4, economy of tools, 162; 5, economy of materials, 163; 6, improvement of tools, 162 ; 7, im- proves products, 165; 8, multiplies and cheapens products, 165 ; 9, masses labor and capital, 167 ; disadvantages of, 169; three limits of, 172; in intel- lectual labor, 172; in the graded schools, 173; natural division, 173; between establishments, 174; laws of value in, 175 ; little used in agri- culture, 218. Double Standard defined, 268; objec- tion of monometalists to, 273. Economic Circle, represented, 13; re- lations of its sections, wants, wealth, and work, 14; with the ti'iangle of value inscribed, 40; the work seg- ment, 89. Economic Science, field of repre- sented, 12; three names of, 15; is wealth or industry its object (note) ? 15; begins and ends with man, 17; statesmen must look to, 21 ; three- fold division, 17 ; importance of this division, 21; the three not always separable, 22; these divisions authorized, 22; present tendency of is towards Social Economy, 27 ; other subdivisions possible, 28 ; shares un- certainty of human will, 28 ; its un- certainty does not destroy its utility, 29 ; not concerned with false and fraudvilent prices, 80: laws of exist for the intellectual life, 135; not yet complete, 331. Economics, Pure, defined as the sci- ence of value, 18; the natural his- tory of work and wealth, 18; na- tional, 335. Economy, National, 333; synoptic view of, 339. (388) Edu INDEX. Int Education, its aid in acquiring skill of American mechanics, 125 ; counted as productive labor, 142 ; how It pro- motes labor, 181. Effort, second side Of triangle and element in value defined, 34 ; shown to be essential to value, 35; in- volves "difficulty of attainment" and " scarcity," 35; effort of repro- duction counted in estimation of value, 35 ; of producer and purchaser compared in a bargain, 36; called "negative value," 39; variable ele- ment, 48 ; five cases of variation, 49- 51; degree of in diff"erent values 176. Exchange, implies estimation of value, 60 ; exchange of commodities, four values compared, 61 ; its eco- nomic character as an industry, 93 ; tabular view of subject, 228 ; needs and benefits of, 228; two elements in, 230; forms of, 240; both parties benefited, 241 ; its eflect on values, 241. Extensive and Intensive Farming, description of, 221. Farm Labor, character of, 217; not largely divisible, 218. Fertility of Land chiefly artificial, 220. Food, need of in labor, 119 ; amount of required by laborer, 120 ; impor- tance of s apply, 212, 227; table of prices, 310. Fourier, on the nation, 333. Franchises, nature and classes of, 298. Franklin, Benjamin, proposed labor as standard of value, 64. Free Labor superior to slave, 179. Free Trade, as opposed to protection, 362; the double question, 364; postu- lates of, 371; first postulate dis- cussed, 372; second ditto, 372; third ditto, 373; the true questions, 378; the natural question, 379; the ques- tion of fact, 381. Garfield, President, on use of bank checks, 280. Geographical Position, influence on industries, 174. George, Henry, on advantages of trade, 230 ; theory of land answered, 292. Gifts, keepsakes, etc., value of, 57. Gifts of Nature, diagram of subject, 97 ; eflects of abundance or scarcity, 98; control industry, illustrated, 99; unappropriated are valueless, 100; natural products a class of, 101 ; crude materials a class of, 102 ; nat- ural forces a class of, 103 ; illusion in regard to value, 111 ; Bastiat's and Roscher's views of. 111 (note) ; prop- erty in, 291. Gold and Silver, their advantages as money, 264 ; annual production of, 269 ; exchange values, 270 ; compen- satory action, 272; consumption of in arts, 273. Goldsmiths' Notes, used as money in London, 275. Goods, defined, 31 ; necessai'ies and luxuries, 72 ; answering physical and mental wants, 73; eflfect of different kinds on laws of supply and de- mand, 87 ; necessaries always in de- mand, 87 ; of secondary utility nec- essaries or luxuries, 87 ; conti*asted with natural products, 103; cheap- ened by machinery, 129 ; valued by the ideas incorporated, 134; com- pared with services, 148; improved by division of labor, 165 ; new forms and cheapening from division of labor, 167 ; for sale and for use, 242. Good Will, a kind of property, 299. Gresham's Law of money circulation, 272. Grotius on right of property, 286. Growth as an economic force, 106. Gulf Stream, influence on England, 100. Health, its influence on labor, 178. Hire, a form of exchange, 240; how differs from trade, 242. Hoarding, its advantage, 254. Human Strength a gift of nature, 104 ; period of efficiency, 115 ; of different nations compared, 116 ; cost of rear- ing, 117 ; labor power in different countries, 118 ; loss of by sickness, 119 ; cost of sustaining, 119 ; depends upon digestion, 120 ; the substitutes for, 121. Immaterial Property, nature and classes, 296. Industry, simplest history of, 9; its three factors— sphere of, 9; true ob- ject of Ec. Sc. (note). 15; real busi- ness of Pol. Ec. to guide, 16. Insurance, trades on risks, 235 ; dis- tributes losses, 236. Intellectual Industries, three classes of, 137. Intellectual Labor, its importance shown, 134; counted as productive, 135; its two fields, 136; second-class authors, teachers, etc., 142; products of counted as property, 143 ; division of, 172. Intellectual Work, classes of, 94; in- creases with civilization, 95. Intelligence increases products and values, 134 ; how it influences labor, Int INDEX. Mon 180 ; influence on quantity of money, 261 ; the final form of wealth, 331. Interest falls as wages rise, 203 ; de- crease of in Eng,, 204. Intoxicating Drinks, consumption of, 321. Inventions counted as valuable goods, 141 ; favored by division of labor, 164. Inventors as intellectual workers, 94 ; labor of defined, 136. Investigator, his work described, 136. Investment of Wealth, two laws of, 323 ; varies with prosperity, 324. Jarvis, Dr. Edward, on sustaining and dependent classes, 115; on cost of rearing children, 117. Jevons, Prof. Stanley, def. of value, 43 ; tabular standard of value, 65. Labor, meaning of word, 89 ; diagram of topics, 112; represents difficulty of attainment, 113; the economic battle-field, 114 ; three factors of, 114 ; changes caused by machinery, 131 ; organization of, 152 ; efficiency of— manhood, 178 ; conditions favoring : 1, health, 178 ; 2, liberty, 179 ; 3, intel- ligence, 180 ; 4, morality, 182 ; 5, re- ward, 183; self-employed, 184; distri- bution of, 185 ; fourth form of cap- i ital, 190 ; relations to capital, 197 ; j union with capital necessary, amount required in trade, 231 ; con- trasted with capital, 312. Land a gift of nature, 107 ; its uses as soil, 108 ; value afl"ected by nearness to market, 108; mineral lands, 109; its values as site, 109; value of in- cludes effort, 110; fertility of artifi- cial, 220; right of property in, 288; property in, 290; Henry George's view answered, 292. Land Owners in England and U. S., 219; proportion of in England and Ireland, 291. Laws, utility of general law, 79; of supply and demand, 80; objections to, answered, 81; objections to laws of supply and demand answered, 81 ; these laws explicated, 81; limita- tions of laws of supply and demand, 82; artificial limitations of laws of supply and demand, 84; laws of supply and demand limited by pro- spective goods, 86; laws of supply and demand vary with goods, 87; laws of supply and demand de- fended, 88. Lawyers, services of useful, 148. Legal Tender, description of, 253. Liberty essential to labor power, 179. Lowe, Joseph, invents tabular stand- ard of value, 65. Luxuries stimulate production, 320. (390) Machinery, improvement of lessens efforts, 49; substitute for common skill, 126; cheapens products, 128; cotton machinery opposed by mobs, 129; has not diminished labor or wages, 129; industrial revolution produced by, 131; economic results enumerated, 132. Machines, how differ from tools, 127 : divided into hand machines and power machines, 127; skill trans- ferred to, 164 ; second form of capital, 189; included in the plant, 193. Man, understood as constantly pres- ent in Ec, 12, 17; three aspects in Pol. Ec, 17. Management a necessary class of la- bor, 138 ; bad m. a tax upon labor, 139. Manager (see Business manager). Market, different meanings of term, 77 ; glut of relieved by withdrawal, 85; glut of relieved by foreign mar- kets, 85; description of, 236; three classes of, 237; prices, how ruled, 237, Material Property, nature and divis- ion, 294; subject to loss and decay, 295. Materials, economy of in division of labor, 163 ; first form of capital, 189 ; diflferent classes of, 193. Mercantile Industries, forms of capi- tal in, 194. Metallic Money, description of, 264; disadvantage of, 275. I Mill, J. Stuart, counts Pol. Ec. a men- tal science, 15; difficulty of attain- ment an element of value, 35; de- nial of value as central, 40; gives two elements of val., 44; on the wage fund, 310; on Ricardo theory, 315,316. Mining, a substance-changing indus- try, 92. Mirabeau on right of property, 286. Money, not always capital, 191 ; syn- optical view of discussion, 250; pe- culiar character of, 250; origin and history of, 251; three functions of, 252 ; the legal function, 253 ; inciden- tal functions, 254; as a commodity, 255; variations in value, 255; fiuctu- ations explained, 256 ; effect of fluctu- ations, 257; as a measure of value, 257; as a mediuin of exchange, 258; use and utility as medium, 259; im- portance of measuring power, 260; quantity required, 261; redundancy and deficiency, 263; effects of too much, 264; effects of too little, 264; kinds of modern, 266; circulation of in the world, 271. Money Circulation, tabular state- ment, 262; causes afffecting, 263. Money of Account, meaning of, 258; its use in exchange, 260. Monopoly, def history, classes, 52; advantages and dangers, 53; "Cor- Mon INDEX. Pro ners," 54; other abuses of, 55; in- terferes with supply and demand, 85; frequent in trade and transpor- tation, 234. Montesquieu on tlie right of property, 286. Morality promotes labor, 182. Mutual dependence of laborers the basis of mutual aid, 157. IsTation, definition of, 333; relation of one to another, 334; a trustee, 337; guardian of property, 338; owner of all property, 338. National Banks, circulation of, 277; system described, 282. National Economy described, 19,338; scope and aim of, 20; its problems have two sides, 20; problems enu- merated, 20 ; first form of Pol. Ec. and reasons, 23; most conspicuous part of Pol. Ec, 24; synoptic view of, 339 Natural forces as gifts of nature, 103 ; classes of, 104 ; include forces of growth, 105; the economy of, 106; non- vital used only by machinery, 106 ; molar and molecular, 107. Natural Products, a class of nature's gifts, 101; supply vital wants, 102; contrasted with products of art, 103. Organization of Labor, three stages named, 152 ; . first stage— undistribu- ted, 152 ; second stage described, 155 ; the two stages contrasted, 156; third stage, 158 ; the three stages compared, 175 ; the future of, 177. Ownership, the third element of value, 36; recognized by Presidents Wayland and Sturtevant, 37; the basis of transferability of values, 37; a chief aim in modern industry, 37; not a variable element, but basis of monopoly, 52. Paper Money, amount in circulation, 271 ; description of, 278 ; two kinds of, 274; history and advantages, 275; compared with metallic, 276; dan- gers of, 277. Patents granted by modern govern- ments, 142; law of in U. S., 297. Perry, definition of value, 60. Physicians, services of have eco- nomic value, 148. Piece Wages, stimulating power of, 184. Piece-work, the efficiency of, 305. Playfair, Dr. Lyon, on food needed for labor, 120. Political Economy, science of indus- tries, 9; what name implies, 10; its elementary facts, 11; its field ex- plained, 12 ; Mill counts it mental sci- ence, 15; divided into three sciences : - Science of Value, Social Ec, and Nat. Ec, 18; importance of this division, 21 ; Pol. Ec. confounded with one or other of these divisions, 22; contro- versies and questions, 24; its field covers the pure science and applica- tions, 25; a mixed science, mental and material, 25 ; Pol. Ec. a science, 25; difliculty of the science admitted, 25; other subdivisions possible, 28; popular objection that it fails to fur- nish rules, 28 ; its problems changed by machinery, 182. Power Machinery, its triumphs in three directions, 106 ; extent of steam machinery, 107 ; enormous strength of, illustrated, 128. Price, several uses of term, 45; fluctu- ations in, 47; monopoly prices, 52; excessive and false, 59; of cotton yarn, 129; of services, 150; market prices, 287; retail prices, 238; eflects of money on, 264. Price, Bonamy, definition of value, 48. Production a problem of force, 106 ; affected by machinery, 131, 132; in- crease by division of employments, 155; cheapened by division of labor, 159, 167; influence of liberty, 179; in- fluence of intelligence on, 180-182; effect of good morals on, 182; effect of good wages on, 188 ; effect of piece wages on, 184; how capital aids, 200, 201 ; agricultural, nature of, 209. Productive Labor contrasted with service, 146. Productive Services, several kinds described, 147. Products defined, 31; utility of nat- ural, 101 ; cheapened by machinery, 128; of intellectual labor, 136, 141; improved by division of labor, 165 ; of agriculture, 213; amount of crops in 1880, 216. Profit, described, 57 ; elements of, 58 ; in trade and transportation, 233; de- pends on use of goods, 248; its share in products, 317; proportion to risks, 318 ; law of investment, 323. Property defined, 81 ; right of, ancient view, 286; society's rights in, 289; the nature of, 298 ; forms of, 294 ; agricult- ural, safety, and low profits of, 323. national property not economic, 326 ; taxable, 353. Protection, as opposed to free trade, 362; defined, 363; the double ques- tion, 864; the doctrine of, 365; first postulate discussed, 366 ; second ditto, 868; third ditto, 869; wisdom of, 369; objections to, 376; true questions of, 878; the national question, 879; the question of fact, 881. (391). Ren INDEX. Sup Rent of houses a species of sale, 242. Rent of Land, paid for use of, 243; share of products, 313; "Metayer" system of, 314 ; Cottier system of, 314 ; two limits of, 314 ; Ricardo theory of, 314-316. Representative Money described, 274. Retail Trade, the skill required, 245. Ricardo on tendency of wages, 311; theory of rent, 315. Richards, Prof. G. K., says " all rulers are of necessity Pol. Economists," 25. Right of Property, views of Montes- quieu, Benetham, Mirabeau, Robes- pierre, and Grotius, 286; modern view, 288. Risk, must be paid for in business, 234; covered by insurance, 235; pro- portion to profits, 318. Rogers, Prof. J. E. T., title and scope of work, 27; remark on skill, 127. Roscher, Prof. Wm., defines Pol. Ec. as national and as general, 23; gives three elements to value, 44; state- ments of climatic influence, 100; af- firms value in nature's gifts (note), 111; statements of labor-power of different people, 118; view of pro- ductive labor answered, 135; descrip- tion of fixed capita] criticised, 195. Rossi, Count, 15; recognized differ- ence between pure and applied Pol. Ec, 25. Rotation of Crops, disadvantages of improper rotation, 226. Rousseau, J. J., objection to civiliza- tion answered, 69. Sale, a form of exchange, 240. Savages, labor and tools of, 153 ; work of s. and civilized man compared, 156; capital not separate, 197; labor for immediate wants, 199. Savings a secondary distribution of wealth, 322; investment of, 323. Say, J. Baptiste, proposed standard of values, 64; description of manager, 138. Scholars, work of productive, 140; contributions of to industry, 140. Schools, division of labor in graded, 173. Science, two definitions of, 25; comp. with common sense, 29 ; its division lines never fixed, 98. Science of Value, defined as pure eco- nomics, 18; its scope, 19; can not an- swer questions of Soc. Ec. or of Nat. Ec. 21 ; rise of this science, 24 ; con- troversies, three main questions in, 24; these questions answered, 25. Science of Wealth, the title, by whom used, 15; preferred by feudal sentiment, 16. Self-employed Labor superior in ef- fectiveness, 184. Senior, N. W., counted scarcity an element of value, 35; def. of value, 43. Service, the fourth field of work, 95; extent of, 96; defined— classes of, 145; the power of valuable, 146; con- trasted with productive labor, 146; compared with goods, 148 ; different wages of, 150 ; gratuitous, 151. Service Workers, their numbers sta- ted, 149; include theaters, etc., 150. Sickness, losses by, 119. Silk Manufacture, illustration of lux- ury, 320. Silver demonetized in U. S., 268; de- monetized by Germany, 269 ; price of in London, 269 ; its necessary use in coins, 270. Simon, Jules, effects of deferred wages, 184. Single and Double Standard, discus- sion of, 268 ; battle of the standards, 269. Skill, second factor in labor defined, 122; three classes : naental, sense, and manual, 123; special and general, 124 ; improved by education, 125 ; cost of— three causes, 125; machinery a substitute, 126; value of, compared with strength, 126; power of to aid strength, 126; remark of Prof. Rog- ers, 127; economy of, 161. Smith, Adam, title of book, 23: his phrase " value in use," criticised, 34; proposed standard of valvie, 64; on division of labor, 159; opinion on in- fiuence of good wages, 183 ; objection to piece M^ages, 184; counts skill as capital, 190; on taxation, 345. Social Economy, defined, 18; prop- erly a chap, of soc. sci., 20; problems of, 20; rise of, 25. Society, its right of property, 289 ; a silent partner, 290. Spencer, Herbert, on the nation, 333. Standard of value, 63; several stand- ards proposed, 64; compovmd or tab- ular, 64; utility of true standard, 65; difficulty of finding a constant standard, 66. Stewart, Dugald, on right of prop- erty, 289. Storeh, Henri, defines value as a judg- ment, 43. Sturtevant, Prest.,15; counts capac- ity to be possessed as element of value, 37. Superintendents, labor of described, 138. Supplies, third form of capital, 190; what they include, 193. Supply, definition of, 78; reciprocal with demand, 79 ; laws of supply and demand, 80; effects of increased and diminished, 82; effect* of excessive Sus INDEX. Wan explained, 82; effect of diminution, 84; Influence of prospective, 86. i Sustaining Class, proportion of toj? population in different countries,''^ 116. Tariff, battle of, 362; definition of , 363; revenue, 363; protective, 363; power of, 369; wisdom of, 369. Taxables, 353. Taxation, of mortgages, double taxa- tion, 300; objects of, 341; right of, 342; basis of, 342; systems of, 343; different views or modern system, 344; difficulties in, 346; the unat- tainable in, 354 ; economic principles of, 357; national principles of, 358; limits of, 361. Taxes, definition of, 341 ; in the United States, 346; obstacles to assessment of, 346; to collection of, 347; direct, 348; income, 349; indirect, their evils and advantages, 351, 352 ; equilibrium of, 356. Teachers, classed with intellectual laborers, 143 ; services of productive, 147. Technical Schools, their influence on Industries, 141; substitutes for ap- prenticeship, 142; their uses shown, 142. Territorial Distribution of Wealth, movement of, 324; second form of, 324; Thompson, Prof. R. E., title of work, 27. Thornton, denial of supply and de- mand, 80. Time-work, estimate of, 305. Tobacco, cost and consumption, 322. Tools, described as third factor in labor, 127 ; origin of tools, 127 ; com- pared with machines, 127 ; aid labor and skill, 128 ; economy of in divis- ion of labor, 162; improvements from division of labor, 163. Trade, domestic and foreign — eco- nomic differences, 247; advantages of foreign, 244; wholesale and retail, 244; is it a tax? 246. Trade and Transportation, tabular view of, 228 ; needs and beneflts of, 229; numbers engaged in, 231; skill required in, 231 ; capital required in, 232. Transformations of Wealth, destruc- tive and productive, 329 ; agencies of, 329 ; destruction by progress, 330 ; de- struction by bad morals, 330; from matter to mind, 331. Transportation, its necessity ex- plained, its character as an indus- try, 93 ; what products will pay, 108 ; usually implied in trade, 230 ; capi- tal invested in, 232 ; who pays it ? 238. Triangle of Value, its sides described, 32 ; inscribed in the economic circle, 40. Turgot, Baron, on tendency of wages. Utility, first element of value, 32; full sense of, 33; not to be con- founded with service, not vsynony- mous with value, 33 ; compared with effort and ownership under several aspects, 39; called positive value, 39; variations, two classes, 47; recipro- cal to want, 68; defined by relation to want, 68; free utilities not wealth, 70 ; degree of in different values, 176. Value, natural history of, 30; several names for, 31; three requisites of, 31; triangle of, 32 ; complex nature of, 32; the three elements all essential, 38; value in trade depends on gen- eral desire and effort, 38; elements compared, 39; central in Pol. Ec, 40; three erroneous views of, 41; not mere exchangeability, 41 ; not a re- lation, 42; not a mere feeling, 42; sy- nonyms of value, 45 ; variations of, not variations in price, 46; varia- tions, cases, 49-52 ; individual value, 55; market values, 56; measurement of two kinds, 60; relative measure- ment illustrated, 62 ; absolute meas- urement of, 63 ; standards of, 64 ; of land involves the notion of effort, 110; of land often overestimated, 110; in division of labor, 175; differ- ence of in three stages of labor, 176 ; produced by trade and transporta- tion, 233; comparison of in trade, 241. Wage-fund, theory of, 310. "Wages of different peoples, 118; re- duced by competition of manufac- turers, 133; advanced by machinery, 130; paid for various services, 150; influence of on work, 183; piece and time wages, 184 ; rise as interest falls, 203; increase of in England, 204; in- crease of in France, 205 ; two theories of, 304; piece and time wages, 305; share of products, 306 ; causes affect- ing rate of, 307; table of in Europe, 309 ; the two limits of, 311. "Walker, Amasa, definition of fixed capital, 195; on taxation, 345, 349. "Walker, Francis A,, on tabular standard of value, 65 ; facts given by on labor power and wages, 118 ; view of business managers, 139; report on inci-ease of wealth, 203; answer to wage-fund, 311. "Wants, man's the impelling forces in industry, 11 ; relations to work and •wealth, 13; place in economic circle, (393) Way INDEX. Wor 18; reciprocal to utilities, 67; de- scribed in its relation to utility, 68; vast extent of, 69 ; relation to civiliza- tion, 69; non-economic wants, 70; economic gratified only by labor, 70; estimation of, 71 ; classes of demand, wants, vital and non-vital, 72; phys- ical and mental, 72 ; immediate and future, 73; special and general, 74; primary and secondary, 75. Wayland, Prest. Francis, counted idea of possession as an element of value, 37; gives two elements of value, 44. "Wealth, the third elementary fact in Pol. Ec, 11; use of word in Pol. Ec, 12, 45; relations to wants and work, 13 ; relations illustrated by circle, 14 ; three aspects of, 188; undergoes con- stant changes, 195; increase of in America, 203 ; increases faster than population, 203; influence on de- mand for money, 261 ; general state- ment, 284 ; synopsis of topics, 285 ; of several nations, 295; forces of distri- bution, 301' consumption and sav- ing of, 319-323 ; of cities, 325 ; transfor- mations of, 329. ^ATheat, average yield in U. S., 221. Wholesale Trade, the skill required. 245. Women, their range of work and wages, 151. Woolen Manufactures, increase of in England, 166. Work, defined as a primary fact in Pol. Ec, 11 ; place in field of Pol. 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