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Science Primers.
POLITICAL
ECONOMY.
BY
W. STANLEY JEVONS, LL.D., M.A., F.R.S.,
PROFESSOR OF POLITICAL ECONOMY IN UNIVERSITY COLLEGE, LONDON;
EXAMINER IN LOGIC AND MORAL PHILOSOPHY IN THE UNIVERSITY OF LONDON.
NEW YORK:
D. APPLETON AND COMPANY,
549 AND 551 BROADWAY.
1880.
CONTENTS.
CHAP. PAGE
I.--INTRODUCTION, 7
II.--UTILITY, 17
III.--PRODUCTION OF WEALTH, 24
IV.--DIVISION OF LABOUR, 32
V.--CAPITAL, 42
VI.--DISTRIBUTION OF WEALTH, 48
VII.--WAGES, 53
VIII.--TRADES-UNIONS, 61
IX.--CO-OPERATION, ETC., 77
X.--THE TENURE OF LAND, 87
XI.--EXCHANGE, 95
XII.--MONEY, 103
XIII.--CREDIT AND BANKING, 110
XIV.--CREDIT CYCLES, 115
XV.--THE FUNCTIONS OF GOVERNMENT, 123
XVI.--TAXATION, 126
PREFACE.
In preparing this little treatise, I have tried to put the truths of
Political Economy into a form suitable for elementary instruction. While
connected with Owens College, it was my duty, as Cobden Lecturer on
Political Economy, to instruct a class of pupil-teachers, in order that
they might afterwards introduce the teaching of this important subject
into elementary schools. There can be no doubt that it is most desirable
to disseminate knowledge of the truths of political economy through all
classes of the population by any means which may be available. From
ignorance of these truths arise many of the worst social
evils--disastrous strikes and lockouts, opposition to improvements,
improvidence, destitution, misguided charity, and discouraging failure
in many well-intended measures. More than forty years ago Miss Martineau
successfully popularised the truths of political economy in her
admirable tales. About the same time, Archbishop Whately was much struck
with the need of inculcating knowledge of these matters at an early age.
With this view he prepared his "Easy Lessons on Money Matters," of which
many editions have been printed. In early boyhood I learned my first
ideas of political economy from a copy of these lessons, from the
preface to which I quote these remarks of Whately: "The rudiments of
sound knowledge concerning these (subjects) may, it has been found by
experience, be communicated at a very early age.... Those, therefore,
who are engaged in conducting, or in patronising or promoting
education, should consider it a matter of no small moment to instil,
betimes, just notions on subjects with which all must in after-life be
practically conversant, and in which no class of men, from the highest
to the lowest, can, in such a country as this at least, be safely left
in ignorance or in error." In later years like opinions have been held
and efforts made by Mr. William Ellis, Professor W.B. Hodgson, Dr. John
Watts, Mr. Templar, and others, and experience seems to confirm both the
need and the practicability of the teaching advocated by Whately. But it
is evident that one condition of success in such efforts is the
possession of a small text-book exactly suited to the purposes in view.
Relying upon my experience of ten years in the instruction of
pupil-teachers at Manchester, I have now put my lessons into the
simplest form which the nature of the subject seems to render advisable.
It is hoped that this little treatise may also serve as a stepping-stone
to a knowledge of the science among general readers of maturer age, who
have hitherto neglected the study of political economy.
Owing to the narrow limits of the space at my disposal, it was
impossible to treat the whole of the science in a satisfactory way. I
have, therefore, omitted some parts of political economy altogether, and
have passed over other parts very briefly. Thus the larger portion of my
space has been reserved for such subjects as Production, Division of
Labour, Capital and Labour, Trades-Unions, and Commercial Crises, which
are most likely to be interesting and useful to readers of this Primer.
UNIVERSITY COLLEGE,
GOWER STREET, LONDON, W.C.
_31st January, 1878_.
SCIENCE PRIMERS.
_POLITICAL ECONOMY_.
CHAPTER I.--INTRODUCTION.
#1. What is Political Economy?# Political Economy treats of #the wealth
of nations#; it inquires into the causes which make one nation more rich
and prosperous than another. It aims at teaching what should be done in
order that poor people may be as few as possible, and that everybody
may, as a general rule, be well paid for his work. Other sciences, no
doubt, assist us in reaching the same end. The science of mechanics
shows how to obtain force, and how to use it in working machines.
Chemistry teaches how useful substances may be produced--how beautiful
dyes and odours and oils, for instance, may be extracted from the
disagreeable refuse of the gasworks. Astronomy is necessary for the
navigation of the oceans. Geology guides in the search for coal and
metals.
Various social sciences, also, are needed to promote the welfare of
mankind. Jurisprudence treats of the legal rights of persons, and how
they may be best defined and secured by just laws. Political Philosophy
inquires into the different forms of government and their relative
advantages. Sanitary Science ascertains the causes of disease. The
science of Statistics collects all manner of facts relating to the state
or community. All these sciences are useful in showing how we may be
made more healthy, wealthy, and wise.
But #Political Economy# is distinct from all these other sciences, and
treats of #wealth# itself; it inquires what wealth is; how we can best
consume it when we have got it; and how we may take advantage of the
other sciences to get it. People are fond of finding fault with
political economy, because #it treats only of wealth#; they say that
there are many better things than wealth, such as virtue, affection,
generosity. They would have us study these good qualities rather than
mere wealth. A man may grow rich by making hard bargains, and saving up
his money like a miser. Now as this is not nearly so good as if he were
to spend his wealth for the benefit of his relatives, friends, and the
public generally, they proceed to condemn the science of wealth.
But these complainers misunderstand the purpose of a science like
political economy. They do not see that in learning we must do one thing
at a time. We cannot learn the social sciences all at the same time. No
one objects to astronomy that it treats only of the stars, or to
mathematics that it treats only of numbers and quantities. It would be a
very curious Science Primer which should treat of astronomy, geology,
chemistry, physics, physiology, &c., all at once. There must be many
physical sciences, and there must be also many social sciences, and each
of these sciences must treat of its own proper subject, and not of
things in general.
#2. Mistakes about Political Economy.# A great many mistakes are made
about the science we are going to consider by people who ought to know
better. These mistakes often arise from people thinking that they
understand all about political economy without studying it. No ordinary
person of sense ventures to contradict a chemist about chemistry, or an
astronomer about eclipses, or even a geologist about rocks and fossils.
But everybody has his opinion one way or another about bad trade, or the
effect of high wages, or the harm of being underbid by cheap labour, or
any one of hundreds of questions of social importance. It does not occur
to such people that these matters are really more difficult to
understand than chemistry, or astronomy, or geology, and that a lifetime
of study is not sufficient to enable us to speak confidently about
them. Yet, they who have never studied political economy at all, are
usually the most confident.
The fact is that, just as physical science was formerly hated, so now
there is a kind of ignorant dislike and impatience of political economy.
People wish to follow their own impulses and prejudices, and are vexed
when told that they are doing just what will have the opposite effect to
that which they intend. Take the case of #so-called charity#. There are
many good-hearted people who think that it is virtuous to give alms to
poor people who ask for them, without considering the effect produced
upon the people. They see the pleasure of the beggar on getting the
alms, but they do not see the after effects, namely, that beggars become
more numerous than before. Much of the poverty and crime which now exist
have been caused by mistaken charity in past times, which has caused a
large part of the population to grow up careless, and improvident, and
idle. Political economy proves that, instead of giving casual
ill-considered alms, we should educate people, teach them to work and
earn their own livings, and save up something to live upon in old age.
If they continue idle and improvident, they must suffer the results of
it. But as this seems hard-hearted treatment, political economists are
condemned by soft-hearted and mistaken people. The science is said to be
a dismal, cold-blooded one, and it is implied that the object of the
science is to make the rich richer, and to leave the poor to perish. All
this is quite mistaken.
The political economist, when he inquires how people may most easily
acquire riches, does not teach that the rich man should keep his wealth
like a miser, nor spend it in luxurious living like a spendthrift. There
is absolutely nothing in the science to dissuade the rich man from
spending his wealth generously and yet wisely. He may prudently help his
relatives and friends; he may establish useful public institutions,
such as free public libraries, museums, public parks, dispensaries, &c.;
he may assist in educating the poor, or promoting institutions for
higher education; he may relieve any who are suffering from misfortunes
which could not have been provided against; cripples, blind people, and
all who are absolutely disabled from helping themselves, are proper
objects of the rich man's charity. All that the political economist
insists upon is that #charity shall be really charity, and shall not
injure those whom it is intended to aid#. It is sad to think that
hitherto much harm has been done by those who wished only to do good.
It is sad, again, to see thousands of persons trying to improve their
positions by means which have just the opposite effect, I mean by
strikes, by refusing to use machinery, and by trying, in various ways,
to resist the production of wealth. Working men have made a political
economy of their own: they want to make themselves rich by taking care
not to produce too much riches. They, again, see an immediate effect of
what they do, but they do not see what happens as the after result. It
is the same with the question of Free Trade. In England we have at
length learned the wisdom of leaving commerce free. In other countries,
and even in the Australian Colonies, laws are yet passed to make people
richer by preventing them from using the abundant products of other
lands. People actually refuse to see that wealth must be increased by
producing it where it can be produced most easily and plentifully. Each
trade, each town, each nation must furnish what it can yield most
cheaply, and other goods must be bought from the places where they also
can be raised most easily.
Political economy teaches us to look beyond the immediate effect of what
we do, and to seek the good of the whole community, and even of the
whole of mankind. The present prosperity of England is greatly due to
the science which Adam Smith gave to the world in his "Wealth of
Nations." He taught us the value of #Free Labour and Free Trade#, and
now, a hundred years after the publication of his great book, there
ought not to be so many mistaken people vainly acting in opposition to
his lessons. It is certain that #if people do not understand a true
political economy, they will make a false one of their own#. Hence the
imperative need that no one, neither man nor woman, should grow up
without acquiring some comprehension of the science which we are going
to study.
#3. Divisions of the Science.# I will begin by stating the order in
which the several branches or divisions of the science of economy are to
be considered in this little treatise. Firstly, we must learn what
wealth, the subject of the science, consists of. Secondly, we proceed to
inquire how wealth is used or consumed; nothing, we shall see, can be
wealth, unless it be put to some use, and before we make wealth we must
know what we want to use. Thirdly, we can go on to consider how wealth
is produced or brought into existence; and how, in the fourth place,
having been produced, it is shared among the different classes of people
who have had a hand in producing it. Briefly, we may say that political
economy treats of (1) #The Nature#, (2) #The Consumption#, (3) #The
Production#, and (4) #The Distribution of Wealth#. It will also be
necessary to say a little about #Taxation#. A part of the wealth of
every country must be taken by the government, in order to pay the
expenses of defending and governing the nation. But taxation may come,
perhaps, under the head of distribution.
#4. Wealth and Natural Riches.# We do not learn anything by reading that
#political economy is the science of wealth#, unless we know what
science is, and what wealth is. When one term is defined by means of
other terms, we must understand these other terms, in order to get any
light upon the subject. In the Primer of Logic I have already attempted
to explain what science is, and I will now attempt to make plain what
wealth is.
Doubtless many people think that there is no difficulty in knowing what
#wealth# is; the real difficulty is to get it. But in this they are
mistaken. There are a great many people in this country who have made
themselves rich, and few or none of them would be able to explain
clearly what wealth is. In fact it is not at all easy to decide the
question. The popular idea is that wealth consists of money, and money
consists of gold and silver; the wealthy man, then, would be one who has
an iron safe full of bags of gold and silver money. But this is far from
being the case; rich men, as a general rule, have very little money in
their possession. Instead of bags of money they keep good balances at
their bankers. But this again does not tell us what wealth is, because
it is difficult to say what a bank balance consists of; the balance is
shown by a few figures in the bankers' books. As a general rule the
banker has not got in his possession the money which he owes to his
customers.
Perhaps some one will say that he is beyond question rich, who owns a
great deal of land. But this depends entirely upon where and what the
land is. A man who owns an English county is very wealthy; a man might
own an equal extent of land in Australia, without being remarkably rich.
The savages of Australia, who held the land before the English took it,
had enormous quantities of land, but they were nevertheless miserably
poor. Thus it is plain that land alone is not wealth.
It may be urged that, in order to form wealth, the land should be
fertile, the soil should be good, the rivers and lakes abounding in
fish, and the forests full of good timber. Under the ground there should
be plenty of coal, iron, copper, reefs of gold, &c. If, in addition to
these, there is a good climate, plenty of sunlight, and enough, but not
too much, water, then the country is certainly rich. It is true that
these things have been called #natural riches#; but I mention them in
order to point out that they are not in themselves wealth. People may
live upon land full of natural riches, as the North American Indians
lived upon the country which now forms the United States; nevertheless
they may be very poor, because they cannot, or they will not labour, in
such a way as #to turn the natural riches into wealth#. On the other
hand, people like the Dutch live upon very poor bits of land, and yet
become wealthy by skill, industry and providence. The fact is that
wealth is more due to labour and ingenuity than to a good soil or
climate; but all these things are needed in order that people shall
become as rich as the inhabitants of England, France, the United States,
or Australia.
#5. What is Wealth?# Nassau Senior, one of the best writers on political
economy, defined #wealth# in these words: #Under that term we comprehend
all those things, and those things only, which are transferable, are
limited in supply, and are directly or indirectly productive of
pleasure, or preventive of pain.# It is necessary to understand, in the
first place, exactly what Senior meant. According to him, whatever is
comprehended under wealth must have three distinct qualities, and
whatever has these three qualities must be a part of wealth. If these
qualities are rightly chosen, we get a correct definition, which, as
explained in the _Logic Primer_ (section 44), is a precise statement of
the qualities which are just sufficient to make out a class, and to tell
us what things belong to it and what do not. Instead, however, of the
long phrase "directly or indirectly productive of pleasure or preventive
of pain," we may substitute the single word #useful#, and we may then
state the definition in this simple way:--
{ (1) #transferable#.
#Wealth = what is# { (2) #limited in supply#.
{ (3) #useful#.
We still need to learn exactly what is meant by the three qualities of
wealth; we must learn what it is to be transferable, limited in supply,
and useful.
#6. Wealth is transferable.# By being #transferable#, we mean that a
thing can be passed over (Latin, _trans_, across, and _fero_, I carry)
from one person to another. Sometimes things can be literally handed
over, like a watch or a book; sometimes they can be transferred by a
written deed, or by legal possession, as in the case of land and houses;
services, also, can be transferred, as when a footman hires himself to a
master. Even a musician or a preacher transfers his services, when his
auditors have the benefit of hearing him. But there are many desirable
things which cannot be transferred from one person to another; a rich
man can hire a footman, but he cannot buy the footman's good health; he
can hire the services of the best physician, but if these services fail
to restore health, there is no help. So, too, it is impossible really to
buy or sell the love of relatives, the esteem of friends, the happiness
of a good conscience. Wealth may do a great deal, but it cannot really
ensure those things which are more precious than pearls and rubies.
Political economy does not pretend to examine all the causes of
happiness, and those moral riches which cannot be bought and sold are no
part of wealth in our present use of the word. The poor man who has a
good conscience, affectionate friends, and good health, may really be
much happier than the rich man, who is deprived of such blessings; but,
on the other hand, a man need not lose his good conscience, and his
other sources of happiness when he becomes rich and enjoys all the
interesting occupations and amusements which wealth can give. #Wealth,
then, is far from being the only good thing: nevertheless it is good#,
because it saves us from too severe labour, from the fear of actual
want, and enables us to buy such pleasant things and services as are
transferable.
#7. Wealth is limited in Supply.# In the second place, things cannot be
called wealth unless they be _limited in supply_; if we have just as
much of any substance as we want, then we shall not esteem a new supply
of it. Thus the air around us is not wealth in ordinary circumstances,
because we have only to open our mouths and we get as much as we can
use. What air we do actually breathe is exceedingly useful, because it
keeps us alive; but we usually pay nothing for it, because there is
plenty for all. In a diving bell, or a deep mine, however, air becomes
limited in supply, and then may be considered a part of wealth. When the
tunnel under the English Channel is completed, it will be a great
question how to get air to breathe in the middle of it. Even in the
Metropolitan Railway tunnel a little more fresh air would be very
valuable.
On the other hand diamonds, though much valued, are used for few
purposes; they make beautiful ornaments and they serve to cut glass or
to bore rocks. Their high value chiefly arises from the fact that they
are scarce. Of course scarcity alone will not create value. There are
many scarce metals, or minerals, of which only a few little bits have
ever yet been seen; but such substances are not valuable, unless some
special use has been found for them. The metal iridium is sold at a very
high price because it is wanted for making the tips of gold pens, and
can be got only in small quantities.
#8. Wealth is useful.# In the third place, we can easily see that
everything which forms a part of wealth must be #useful#, or have
#utility#, that is, it must serve some purpose, or be agreeable and
desirable in some way or other. Senior said correctly that #useful
things are those which directly or indirectly produce pleasure or
prevent pain#. A well tuned and well played musical instrument produces
pleasure; a dose of medicine prevents pain to one who is in need of it
But it is often impossible to decide whether things give more pleasure
or prevent more pain; dinner saves us from the pain of hunger and gives
us the pleasure of eating good things. There is utility so far as
pleasure is increased and pain decreased; nor does it matter, as far as
political economy is concerned, what is the nature of the pleasure.
Then, again, we need not be particular as to whether things #directly
produce pleasure#, like the clothes we wear, or whether they
#indirectly# do so, as in the cases of the machines employed to make the
clothes. Things are indirectly useful when, like tools, machines,
materials, &c., they are only wanted to make other things, which shall
be actually consumed and enjoyed by some person. The carriage in which a
person takes a pleasant drive is directly useful; the baker's cart which
brings him food is indirectly useful. But sometimes we can hardly
distinguish. Shall we say that the meat put into the mouth is directly,
but the fork which puts it in is indirectly, useful?
#9. Commodity.# We now know exactly what is wealth; but instead of
speaking continually of wealth, it will often be convenient to speak of
commodities, or goods. #A commodity is any portion of wealth#--anything,
therefore, which is useful, and transferable, and limited in supply.
Wool, cotton, iron, tea, books, boots, pianos, &c., are all commodities
in certain circumstances, but not in all circumstances. Wool on a stray
sheep lost in the mountains is not a commodity, nor iron in a mine which
cannot be worked. #A commodity, in short, is anything which is really
useful and wanted, so that people will buy or sell it.# But, instead of
the long word commodity, I shall often use the shorter word goods, and
the reader should remember that
#goods = commodities = portion of wealth#.