CHAPTER I.

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PRINCIPLES OF POLITICAL ECONOMY.

* * * * *

PROFESSOR PERRY'S WORKS ON

POLITICAL ECONOMY.

1. INTRODUCTION TO POLITICAL ECONOMY. Fifth

Edition. 12mo. 357 pp. Price, $1.50.

2. PRINCIPLES OF POLITICAL ECONOMY. 8vo. 585

pp. Price, $2.00.

3. POLITICAL ECONOMY. Twenty-First Edition. Crown

8vo. 600 pp. Price, $2.50.

* * * * *

PRINCIPLES OF POLITICAL ECONOMY

by

ARTHUR LATHAM PERRY, LL.D.

Orrin Sage Professor of History and Political Economy in

Williams College

_"No task is ill where Hand and Brain

And Skill and Strength have equal gain,

And each shall each in honor hold,

And simple manhood outweigh gold."_

WHITTIER.

New York

Charles Scribner's Sons

1891

Copyright, 1890,

by Arthur Latham Perry.

Dedication.

TO MY PERSONAL FRIEND OF LONG STANDING

J. STERLING MORTON

OF NEBRASKA

A FRIEND OF THE PEOPLE ALSO

FOUNDER OF ARBOR DAY

PREFACE.

It is now exactly twenty-five years since was published my first book

upon the large topics at present in hand. It was but as a bow drawn at

a venture, and was very properly entitled "Elements of Political

Economy." At that time I had been teaching for about a dozen years in

this Institution the closely cognate subjects of History and Political

Economy; cognate indeed, since Hermann Lotze, a distinguished German

philosopher of our day, makes prominent among its only _five_ most

general phases, the "industrial" element in all human history; and

since Goldwin Smith, an able English scholar, resolves the elements of

human progress, and thus of universal history, into only _three_,

namely, "the moral, the intellectual, and the productive."

During these studious and observant years of teaching, I had slowly

come to a settled conviction that I could say something of my own and

something of consequence about Political Economy, especially at two

points; and these two proved in the sequel to be more radical and

transforming points than was even thought of at the first. For one

thing, I had satisfied myself, that the word "Wealth," as at once a

strangely indefinite and grossly misleading term, was worse than

useless in the nomenclature of the Science, and would have to be

utterly dislodged from it, before a scientific content and defensible

form could by any possibility be given to what had long been called in

all the modern languages the "Science of Wealth." Accordingly, so far

as has appeared in the long interval of time since 1865, these

"Elements" were the very first attempt to undertake an orderly

construction of Economics from beginning to end without once using or

having occasion to use the obnoxious word. A scientific substitute for

it was of course required, which, with the help of Bastiat, himself

however still clinging to the technical term "Richesse," was discerned

and appropriated in the word "Value"; a good word indeed, that can be

simply and perfectly defined in a scientific sense of its own; and,

what is more important still, that precisely covers in that sense all

the three sorts of things which are ever bought and sold, the three

only Valuables in short, namely, material Commodities, personal

Services, commercial Credits. It is of course involved in this

simple-looking but far-reaching change from "Wealth" to "Value," that

Economics become at once and throughout a science of Persons buying

and selling, and no longer as before a science of Things howsoever

manipulated for and in their market.

For another thing, before beginning to write out the first word of

that book, I believed myself to have made sure, by repeated and

multiform inductions, of this deepest truth in the whole Science,

which was a little after embodied (I hope I may even say _embalmed_)

in a phrase taking its proper place in the book itself,--_A market for

Products is products in Market_. The fundamental thus tersely

expressed may be formulated more at length in this way: One cannot

Sell without at the same instant and in the same act Buying, nor Buy

anything without simultaneously Selling something else; because in

Buying one pays for what he buys, which is Selling, and in Selling one

must take pay for what is sold, which is Buying. As these universal

actions among men are always voluntary, there must be also an

universal motive leading up to them; this motive on the part of both

parties to each and every Sale can be no other than the mutual

satisfaction derivable to both; the inference, accordingly, is easy

and invincible, that governmental restrictions on Sales, or

prohibitions of them, must lessen the satisfactions and retard the

progress of mankind.

Organizing strictly all the matter of my book along these two lines of

Personality and Reciprocity, notwithstanding much in it that was

crude and more that was redundant and something that was ill-reasoned

and unsound, the book made on account of this original mode of

treatment an immediate impression upon the public, particularly upon

teachers and pupils; new streaks of light could not but be cast from

these new points of view, upon such topics especially as Land and

Money and Foreign Trade; and nothing is likely ever to rob the author

of the satisfaction, which he is willing to share with the public, of

having contributed something of importance both in substance and in

feature to the permanent up-building of that Science, which comes

closer, it may be, to the homes and happiness and progress of the

People, than any other science. And let it be said in passing, that

there is one consideration well-fitted to stimulate and to reward each

patient and competent scientific inquirer, no matter what that science

may be in which he labors, namely, this: Any just generalization, made

and fortified inductively, is put thereby beyond hazard of essential

change for all time; for this best of reasons, that God has

constructed the World and Men on everlasting lines of Order.

As successive editions of this first book were called for, and as its

many defects were brought out into the light through teaching my own

classes from it year after year, occasion was taken to revise it and

amend it and in large parts to rewrite it again and again; until, in

1883, and for the eighteenth edition, it was recast from bottom up for

wholly new plates, and a riper title was ventured upon,--"Political

Economy,"--instead of the original more tentative "Elements." Since

then have been weeded out the slight typographical and other minute

errors, and the book stands now in its ultimate shape.

My excellent publishers, who have always been keenly and wisely alive

to my interests as an author, suggested several times after the

success of the first book was reasonably assured, that a second and

smaller one should be written out, with an especial eye to the needs

of high schools and academies and colleges for a text-book within

moderate limits, yet soundly based and covering in full outline the

whole subject. This is the origin of the "Introduction to Political

Economy," first published in 1877, twelve years after the other. Its

success as a text-book and as a book of reading for young people has

already justified, and will doubtless continue to justify in the

future, the forethought of its promoters. It has found a place in many

popular libraries, and in courses of prescribed reading. Twice it has

been carefully corrected and somewhat enlarged, and is now in its

final form. In the preface to the later editions of the "Introduction"

may be found the following sentence, which expresses a feeling not

likely to undergo any change in the time to come:--"I have long been,

and am still, ambitious that these books of mine may become the

horn-books of my countrymen in the study of this fascinating Science."

Why, then, should I have undertaken of my own motion a new and third

book on Political Economy, and attempted to mark the completion of the

third cycle of a dozen years each of teaching it, by offering to the

public the present volume? One reason is implied in the title,

"_Principles of Political Economy_." There are three extended

historical chapters in the earlier book, occupying more than

one-quarter of its entire space, which were indeed novel, which cost

me wide research and very great labor, and which have also proven

useful and largely illustrative of almost every phase of Economics;

but I wanted to leave behind me one book of about the same size as

that, devoted exclusively to the Principles of the Science, and using

History only incidentally to illustrate in passing each topic as it

came under review. For a college text-book as this is designed to

become, and for a book of reading and reference for technical

purposes, it seems better that all the space should be taken up by

purely scientific discussion and illustration. This does not mean,

however, that great pains have not been taken in every part to make

this book also easily intelligible, and as readable and interesting as

such careful discussions can be made.

A second reason is, to provide for myself a fresh text-book to teach

from. My mind has become quite too thoroughly familiarized with the

other, even down to the very words, by so long a course of instructing

from it, for the best results in the class-room. Accordingly, a new

plan of construction has been adopted. Instead of the fourteen

chapters there, there are but seven chapters here. Not a page nor a

paragraph as such has been copied from either of the preceding books.

Single sentences, and sometimes several of them together, when they

exactly fitted the purposes of the new context, have been incorporated

here and there, in what is throughout both in form and style a new

book, neither an enlargement nor an abridgment nor a recasting of any

other. I anticipate great pleasure in the years immediately to come

from the handling with my classes, who have always been of much

assistance to me from the first in studying Political Economy, a fresh

book written expressly for them and for others like-circumstanced; in

which every principle is drawn from the facts of every-day life by way

of induction, and also stands in vital touch with such facts (past or

present) by way of illustration.

The third and only other reason needful to be mentioned here is, that

in recent years the legislation of my country in the matter of cheap

Money and of artificial restrictions on Trade has run so directly

counter to sound Economics in their very core, that I felt it a debt

due to my countrymen to use once more the best and ripest results of

my life-long studies, in the most cogent and persuasive way possible

within strictly scientific limits, to help them see and act for

themselves in the way of escape from false counsels and impoverishing

statutes. Wantonly and enormously heavy lies the hand of the national

Government upon the masses of the people at present. But the People

are sovereign, and not their transient agents in the government; and

the signs are now cheering indeed, that they have not forgotten their

native word of command, nor that government is instituted for the

sole benefit of the governed and governing people, nor that the

greatest good of the greatest number is the true aim and guide of

Legislation. I am grateful for the proofs that appear on every hand,

that former labors in these directions and under these motives have

proven themselves to have been both opportune and effective; and I am

sanguine almost to certainty, that this reiterated effort undertaken

for the sake of my fellow-citizens as a whole, will slowly bear

abundant fruit also, as towards their liberty of action as

individuals, and in their harmonious co-operation together as entire

classes to the end of popular comforts and universal progress.

A. L. PERRY.

WILLIAMS COLLEGE,

November 25, 1890.

TABLE OF CONTENTS

PAGE

CHAPTER I.

VALUE 1

CHAPTER II.

MATERIAL COMMODITIES 80

CHAPTER III.

PERSONAL SERVICES 181

CHAPTER IV.

COMMERCIAL CREDITS 271

CHAPTER V.

MONEY 361

CHAPTER VI.

FOREIGN TRADE 451

CHAPTER VII.

TAXATION 540

INDEX 587

PRINCIPLES OF POLITICAL ECONOMY.

CHAPTER I.

VALUE.

The first question that confronts the beginner in this science, and

the one also that controls the whole scope of his inquiries to the

very end, is: What is the precise subject of Political Economy? Within

what exact field do its investigations lie? There is indeed a short

and broad and full answer at hand to this fundamental and

comprehensive question; and yet it is every way better for all

concerned to reach this answer by a route somewhat delayed and

circuitous, just as it is better in ascending a mountain summit for

the sake of a strong and complete view to circle up leisurely on foot

or on horseback, rather than to dash straight up to the top by a

cog-wheel railway and take all of a sudden what might prove to be a

less impressive or a more confusing view.

The preliminary questions are: What sort of facts has Political

Economy to deal with, to inquire into, to classify, to make a science

of? Are these facts easily separable in the mind and in reality from

other kinds of facts perhaps liable to be confounded with them? Are

they facts of vast importance to the welfare of mankind? And are the

activities of men everywhere greatly and increasingly occupied with

just those things, with which this science has exclusively to do? Let

us see if we cannot come little by little by a route of our own to

clear and true answers for all these questions.

If one should take his stand for an hour upon London Bridge, perhaps

the busiest bit of street in the world, and cast his eyes around

intelligently to see what he can see, and begin also to classify the

things coming under his vision, what might he report to himself and to

others? Below the bridge in what is called the "Pool," which was

dredged out for that very purpose by the ancient Romans, there lie at

anchor or move coming and going many merchant-ships of all nations,

carrying out and bringing in to an immense amount in the whole

aggregate tangible articles of all kinds to and from the remote as

well as the near nations of the earth. All this movement of visible

goods, home and foreign, is in the interest and under the impulse of

Buying and Selling. The foreign goods come in simply to buy, that is,

to pay for, the domestic goods taken away; and these latter go out in

effect even if not in appearance to buy, that is, to pay for, the

foreign goods coming in. At the same hour the bridge itself is covered

with land-vehicles of every sort moving in both directions, loaded

with salable articles of every description; artisans of every name are

coming and going; merchants of many nationalities step within the

field of view; and porters and servants and errand-boys are running to

and fro, all in some direct relation to the sale or purchase of those

visible and tangible things called in Political Economy _Commodities_.

Moreover, vast warehouses built in the sole interest of trade on both

sides the river above and below the bridge, built to receive and to

store for a time till their ultimate consumers are found, some of

these thousand things bought and sold among men, lift their roofs

towards heaven in plain sight. Doubtless some few persons, like our

observer himself, may be on the spot for pleasure or instruction, but

for the most part, all that he can see, the persons, the things, the

buildings, even the bridge itself, are where they are in the interest

of _Sales_ of some sort, mostly of Commodities. What is thus true of a

single point in London is true in a degree of every other part of

London, of every part of Paris and of Berlin, and in its measure of

every other city and village and hamlet in the whole world. Wherever

there is a street there is some exchange of commodities upon it, and

wherever there is a market there are buyers and sellers of

commodities.

If the curiosity of our supposed observer be whetted by what he saw on

London Bridge, and if the natural impulse to generalize from

particulars be deepened in his mind, he may perhaps on his return to

America take an opportunity to see what he can see and learn what he

can learn within and around one of the mammoth cotton mills in Lowell

or Fall River or Cohoes. Should he take his stand for this purpose at

one of these points, say Lowell, he will be struck at once by some of

the differences between what he saw on the bridge and what he now sees

in the mill. He will indeed see as before some commodities brought in

and carried out, such as the raw cotton and new machinery and the

finished product ready for sale, but in general no other commodities

than the cotton in its various stages of manufacture, and those like

the machinery and means of transportation directly connected with

transforming the cotton into cloth and taking it to market.

But he sees a host of persons both within and without the mill, all

busy here and there, and all evidently bound to the establishment by a

strong unseen tie of some sort; he sees varying degrees of authority

and subordination in these persons from the Treasurer, the apparent

head of the manufactory, down to the teamsters in the yard and the

common laborers within and without; he will not find the owners of

the property present in any capacity, for they are scattered

capitalists of Boston and elsewhere, who have combined through an act

of incorporation their distinct capitals into a "Company" for

manufacturing cotton; besides their Treasurer present, whose act is

their act and whose contracts their contracts, he will see an Agent

also who acts under the Treasurer and directly upon the Overseers and

their assistants in the spinning and weaving and coloring and

finishing rooms, and under these Operatives of every grade as skilled

and unskilled; and lastly he will observe, that the direct

representatives of the owners and all other persons present from

highest to lowest are conspiring with a will towards the common end of

getting the cotton cloth all made and marketed.

What is it that binds all these persons together? A little tarrying in

the Treasurer's office will answer this question for our observer and

for us. He will find it to be the second kind of Buying and Selling.

At stated times the Treasurer pays the salary of the Agent, and his

own. He pays the wages of the Overseers and the wages of all the

Operatives and Laborers,--men and women and children. Here he finds a

buying and selling on a great scale not of material commodities as

before, but of personal services of all the various kinds. Every man

and woman and child connected with the factory and doing its work

sells an intangible personal service to the "Company" and takes his

pay therefor, which last is a simple buying on the part of the unseen

employers. Here, then, in this mill is a single specimen of this

buying and selling of personal services, which is going on to an

immense extent and in every possible direction in each civilized

country of the world, and everywhere to an immensely increased volume

year by year. Clergymen and lawyers and physicians and teachers and

legislators and judges and musicians and actors and artisans of every

name and laborers of every grade sell their intangible services to

Society, and take their pay back at the market-rate. The aggregate

value of all these services sold in every advanced country is probably

greater than the aggregate value of the tangible commodities sold

there. At any rate, both classes alike, commodities and services, are

bought and sold under substantially the same economic principles.

The inductive appetite in intelligent persons, that is to say, their

desire to classify facts and to generalize from particulars, almost

always grows by what it feeds on; and our supposed observer will

scarcely rest contented until he has taken up at least one more

stand-point, from which to observe men's Buying and Selling. Suppose

now he enter for this purpose on any business-day morning the New York

Clearing-House. He will see about 125 persons present, nearly one half

of these bank clerks sitting behind desks, and the other half standing

before these desks or moving in cue from one to the next. The room is

perfectly still. Not a word is spoken. The Manager of the Clearing

with his assistant sits or stands on a raised platform at one end of

the room, and gives the signal to begin the Exchange. No commodities

of any name or nature are within the field of view. The manager indeed

and his assistant and two clerks of the establishment who sit near him

are in receipt of salaries for their personal services, and all the

other clerks present receive wages for their services from their

respective banks, but the exchange about to commence is no sale of

personal services any more than it is a sale of tangible commodities.

It is however a striking instance of the buying and selling of some

valuables of the third and final class of valuable things.

At a given signal from the manager the (say) 60 bank messengers, each

standing in front of the desk of his own bank and each having in hand

before him 59 small parcels of papers, the parcels arranged in the

same definite order as the desks around the room, step forward to the

next desk and deliver each his parcel to the clerk sitting behind it,

and so on till the circuit of the room is made. It takes but ten

minutes. Each parcel is made up of cheques or credit-claims, the

_property_ of the bank that brings it and the _debts_ of the bank to

which it is delivered. Accordingly each bank of the circle receives

through its sitting clerk its own _debits_ to all the rest of the

banks, and delivers to all through its standing messenger its own

_credits_ as off-set. In other words, each bank buys of the rest what

it owes to each with what each owes to it. It is at bottom a mutual

buying and selling of debts. There is of course a daily balance on one

side or the other between every two of these banks, which must be

settled in money, because it would never happen in practice that each

should owe the other precisely the same sum on any one day; but

substantially and almost exclusively the exchange at the

Clearing-House is a simple trade in credit-claims. Each bank pays its

debts by credits. A merchant is a dealer in commodities, a laborer is

a dealer in services, and a banker is a dealer in credits. Each of the

three is a buyer and seller alike, and the difference is only in the

kind of valuables specially dealt in by each. In all cases alike,

however, there is no buying without selling and no selling without

buying; because, when one buys he must always pay for what he buys and

that is selling, and when one sells he must always take his pay for

what he sells and that is buying. This is just as true when one credit

is bought or sold against a commodity or a service, and when two or

more credits are bought and sold as against each other, as it is when

two commodities or two services are exchanged one for the other.

But the Clearing-House is not by any means the only place where

credits or debts (they are the same thing) are bought and sold. Every

bank is such a place. Every broker's office is such a place. Every

place is an establishment of the same kind where commercial rights,

that is, claims to be realized in future time and for which a

consideration is paid, are offered for sale and sold. The amount of

transactions in Credits in every commercial country undoubtedly

surpasses the amount in Commodities or that in Services.

Now our supposed observer and classifier, having noted on London

Bridge the sale of material commodities, and in the Lowell Mill the

sale of personal services, and within the New York Clearing-House the

sale of credit-claims, has seen in substance everything that ever was

or ever will be exhibited in the world of trade. He may rest. There is

no other class of salable things than these three. Keen eyes and minds

skilled in induction have been busy for two millenniums and a half

more or less to find another class of things bought and sold among

men, and have not yet found it or any trace of it. This work has been

perfectly and scientifically done. The generalization is completed for

all time.

The _genus_, then, with which Political Economy deals from beginning

to end, has been discovered, can be described, and is easily and

completely separable for its own purposes of science from all other

kinds and classes and _genera_ of things, namely, Salable things or

(what means precisely the same) Valuable things or (what is exactly

equivalent) Exchangeable things. In other words, the sole and single

class of things, with which the Science of Political Economy has to

do, is Valuables, whose origin and nature and extent and importance it

is the purpose of the present chapter to unfold. We have fully seen

already that this Genus, Valuables, is sub-divided into three

_species_, and three only, namely, Commodities, Services, Credits. A

little table here may help at once the eye and the mind:--

ECONOMICS.

_The Genus_ _Valuables_

{ _Commodities_

_The Species_ { _Services_

{ _Credits_

If only these three species of things are ever bought and sold, then

it certainly follows that only six kinds of commercial exchanges are

possible to be found in the world, namely these:--

1. _A commodity for a commodity._

2. _A commodity for a personal service._

3. _A commodity for a credit-claim._

4. _A personal service for another service._

5. _A personal service for a credit-claim._

6. _One credit-claim for another._

Though the kinds of possible exchanges are thus very few, the

exchanges themselves in one or other of these six forms and in all of

them are innumerable on every business day in every civilized country

of the globe. And this point is to be particularly noted, that while

buying and selling in these forms has been going on everywhere since

the dawn of authentic History, it has gone on all the while in

ever-increasing volume, it is increasing now more rapidly and

variously than ever, and moreover all signs foretell that it will play

a larger and still larger part in the affairs of men and nations as

this old world gains in age and unity.

Damascus is one of the very oldest cities of the world, and its very

name means a "_seat of trade_." We are told in the Scriptures, that

Abraham about 2000 years before Christ went up out of Egypt "very rich

in cattle, in silver, and in gold," and the only possible way he could

have acquired these possessions was by buying and selling. He

afterwards purchased the cave and the field in Hebron for a family

burial-place, and "weighed unto Ephron the silver which he had named

in the audience of the sons of Heth, four hundred shekels of silver,

current money with the merchant." We may notice here, that there were

then "merchants" as a class, that silver by weight passed as "money"

from hand to hand, and that in the lack of written deeds to land, as

we have them, sales were "made sure" before the faces of living men,

who would tell the truth and pass on the word. Abraham indeed seems to

have given the pitch for the song of trade sung by his descendants,

the Jews, from that day to this; for Jacob, his grandson, was a

skilled trafficker, not to say a secret trickster, in his bargains;

and wherever in the Old World or the New the Jews have been, _there_

have been in fact and in fame busy buyers and sellers.

But the Jews have had no special privileges in the realm of trade; on

the contrary, they have always been under special disabilities both

legal and social. Even in England, the most liberal country in Europe,

they were exiled for long periods, maltreated at all points of contact

with other people, more or less put under the ban of the Common and

the Statute law, often outrageously taxed on their goods and persons,

and studiously kept out of the paths of highest public employment even

down to a time within the memory of living men.[1] Yet so natural is

the impulse to trade, so universally diffused, so imperative also if

progress is in any direction to be attained, that the English and all

other peoples were as glad to borrow money, that is, buy the use of

it, of the persecuted Jews, as the latter were to get money by buying

and selling other things, and then to loan it, that is, sell the use

of it, under the best securities (never very good) for its return with

interest, that they could obtain. Happily, the mutual gains that

always wait on the Exchanges even when their conditions are curtailed,

of course attended the mutilated exchanges between Jews and

Christians: otherwise, they would not continue to take place.

Christianity, however, as the perfected Judaism, gradually brought in

the better conditions, the higher impulses, and the more certain

rewards, of Trade, all which, we may be sure, were designed in the

divine Plan of the world. What is called the Progress of Civilization

has been marked and conditioned at every step by an extension of the

opportunities, a greater facility in the use of the means, a more

eager searching for proper expedients, and a higher certainty in the

securing of the returns, of mutual exchanges among men. There have

been indeed, and there still are, vast obstacles lying across the

pathway of this Progress in the unawakened desires and reluctant

industry and short-sighted selfishness of individuals, as well as in

the ignorant prejudices and mistaken legislation of nations; but all

the while Christianity has been indirectly tugging away at these

obstacles, and Civilization has been able to rejoice over the partial

or complete removal of some of them; while also Christianity directly

works out in human character those chief qualities, on which the

highest success of commercial intercourse among men will always

depend, namely, Foresight, Diligence, Integrity, and mutual Trust; so

that, what we call Civilization is to a large extent only the result

of a better development of these human qualities in domestic and

foreign commerce.

Contrary to a common conception in the premises, the sacred books of

both Jews and Christians display no bias at all against buying and

selling, but rather extol such action as praiseworthy, and also those

qualities of mind and habits of life that lead up to it and tend too

to increase its amount, and they constantly illustrate by means of

language derived from traffic the higher truths and more spiritual

life, which are the main object of these inspired writers. It is

indeed true that the chosen people of God were forbidden to take Usury

of each other, though they were permitted to take it freely of

strangers, and that they were forbidden to buy horses and other

products out of Egypt, for fear they would be religiously corrupted by

such commercial intercourse with idolaters; but there is nothing of

this sort in the law of Moses that cannot be easily explained from the

grand purpose to found an agricultural commonwealth for religious

ends, in which commonwealth no family could permanently alienate its

land, and in which it was a great object to preserve the independence

and equality of the tribes and families. Throughout the Old Testament

there is no word or precept that implies that trade in itself is not

helpful and wholesome; there were sharp and effective provisions for

the recovery of debts; there were any number of exhortations to

diligence in business, such as, "_In the morning sow thy seed, and at

evening withhold not thy hand_"; King Solomon himself made a gigantic

exchange in preparation for the temple with King Hiram of Tyre, by

which the cedars of Lebanon were to be paid for by the grain and oil

of the agricultural kingdom; chapter xxvii of the prophet Ezekiel is a

graphic description of the commerce of the ancient world as it

centered in the market of Tyre, a description carried out into detail

both as to the nations that frequented that market and as to the

products that were exchanged in it,--"_silver, iron, tin, lead,

persons of men, vessels of brass, horses, horsemen, mules, horns of

ivory, ebony-wood, carbuncles, purple work, fine linen, corals,

rubies, wheat, pastry, syrup, oil, balm, wine of Helbon, white wool,

thread, wrought iron, cassia, sweet reed, cloth, lambs, rams, goats,

precious spices, precious stones, splendid apparel, mantles of blue,

embroidered work, chests of damask, and gold_"; and chapter xxxi of

Proverbs describes the model housewife in terms like these,--

"_The heart of her husband trusteth in her,

And he is in no want of gain.

She seeketh wool and flax,

And worketh willingly with her hands.

She is like the merchants' ships;

She bringeth her food from afar.

She riseth while it is yet night,

And giveth food to her family,

And a task to her maidens.

She layeth a plan for a field and buyeth it;

With the fruit of her hands she planteth a vineyard.

She perceiveth how pleasant is her gain,

And her lamp is not extinguished in the night.

She putteth forth her hands to the distaff,

And her hands take hold of the spindle.

She maketh for herself coverlets;

Her clothing is of fine linen and purple.

She maketh linen garments and selleth them,

And delivereth girdles to the merchants._"

Still more explicit and instructive are the words and spirit of the

New Testament. There cannot be the least doubt that the whole

influence of Christianity is favorable to the freest commercial

exchanges at home and abroad, because these depend largely on mutual

confidence between man and man, of which confidence Christianity is

the greatest promoter. It may be conceded at once that our Lord

"_overthrew the tables of the money-changers and the seats of them

that sold doves_" within the sacred precincts of the temple, but

this, not because it is wrong to change money or sell doves, but

because that was not the _place_ for such merchandising; so He himself

explained his own action in the sequel; provincial worshippers coming

up to Jerusalem must needs have their coins changed into the money of

the Capital, and must needs buy somewhere the animal victims for

sacrifice; but the whip of small cords had significance only as to the

_place_, and not at all as to the _propriety_, of such trading.

One of our Lord's parables, the parable of the Talents, sets forth in

several striking lights the privilege and duty and reward of diligent

trading. "_Then he that had received the five talents went and traded

with the same, and made them other five talents._" And when this

servant came to the reckoning, and brought as the result of his free

and busy traffic "_five talents more_," the prompt and hearty approval

of his lord--"well done, thou good and faithful servant"--becomes the

testimony of the New Testament to the merit and the profit and the

benefit of a vigorous buying and selling. For this servant could not

have been authoritatively pronounced good and faithful if the results

of his action commended had been in any way prejudicial to others. The

truth is, as we shall abundantly see by and by with the reasons of it,

that any man who buys and sells under the free and natural conditions

of trade, benefits the man he trades with just as much as he benefits

himself. But the parable has a still stronger word in favor of

exchanges. There was another servant also entrusted with capital by

his lord at the same time, when the latter was about to travel "_into

a far country_." We are expressly told that distribution was made "_to

every man according to his several ability_," and thus this servant

was only entrusted with a single talent, the size of the capital given

to him being in just proportion to the size of the man,--the smallest

share falling of course to the smallest man. But he had the same

opportunity as the two others. The world was open to him. Capital was

in demand, if not in those parts then in some other, to which, like

his lord, he might straightway take his journey. But when his time of

reckoning came, and he had nothing to show for the use of his capital,

he upbraided his lord as a hard man for expecting any increase, and

brought out his bare talent wrapped in a napkin, saying, "_I was

afraid, and I went and hid thy talent in the earth_." His wise lord at

once denounced this servant as "_wicked and slothful_," insisted that

his money ought to have been "_put to the exchangers_," and said

finally in a just anger "_cast ye the unprofitable servant into outer

darkness_."

It is moreover in incidental passages of the Scriptures, in which the

methods of business are commended to the searchers after higher

things, that we see their high estimate of those methods and gains.

"_Buy the truth, and sell it not; buy wisdom and understanding_"

(Prov. xxiii, 23). "_Buying up for yourselves opportunities_" (Col.

iv, 5). "_I counsel thee to buy of me gold refined by fire, that thou

mayest be rich; and white garments, that thou mayest be clothed; and

eye-salve to anoint thine eyes, that thou mayest see_" (Rev. iii, 18).

"_But rather let him labor, working with his hands at that which is

good, that he may have to give to him that is in need_" (Eph. iv, 28).

"_But if any one provideth not for his own, and especially for those

of his own house, he hath denied the faith, and is worse than an

unbeliever_" (1 Tim. v, 8).

Now, the universal test and proof of any truth is its harmony with

some other truths. Does an alleged truth fall in with and fill out

well some other demonstrated and accepted proposition, or a number of

such other propositions? If so, then that truth is _proved_. Human

reason can no further go. The mind rests with relish and content in a

new acquisition. To apply this to the case in hand,--if men were

designed of their Maker to buy and sell to their own mutual benefit

and advancement, if mankind have always been buying and selling as

towards that end and with that obvious result, and if the Future

promises to increase and reduplicate the buying and selling of the

Present in every direction without end, and all in the interest of a

broad civilization and a true and lasting progress; and if, in harmony

with these truths, the written revelation of God in every part of it

assumes that buying and selling in its inmost substance and essential

forms be good and righteous and progressive, and suitable in all its

ends and methods to illustrate and enforce ends and methods in the

higher kingdom of spiritual and eternal Life;--then these coördinate

truths will logically and certainly follow, (1) that Trade is natural

and essential and beneficial to mankind; (2) that it constitutes in an

important sense a realm of human thought and action by itself,

separate from the neighboring realm of Giving, and equally from the

hostile realm of Stealing; and (3) that a careful analysis of what

buying and selling in its own peculiar nature is, a thorough

ascertainment and a consequent clear statement of its fundamental

laws, and a faithful exposure of what in individual selfishness and in

subtle or open Legislation makes against these laws, _must be of large

consequence to the welfare of mankind_.

Accordingly, let us now attempt such Analysis and Ascertainment and

Exposure. This is precisely the task that lies before us in this

book--just this, and nothing more. The term, "Political Economy," has

long been and is still an elastic title over the zealous work of many

men in many lands; but in the hands of the present writer during a

life now no longer short, the term has always had a definite meaning,

the work has covered an easily circumscribed field, and so the present

undertaking concerns only Buying and Selling and what is essentially

involved in that. This gives scope and verge enough for the studies of

a life-time. This has the advantage of a complete sphere of its own.

Terms may thus be made as definite as the nature of language will ever

allow; definitions will thus cover things of one kind only; and

generalizations, although they may be delicate and difficult, will

deal with no incongruous and obstinate material.

1. The grandfather of the writer, an illiterate but long-headed

farmer, was able to give good points to his three college-bred sons,

by insisting that they look "_into the natur on't_." What, then, are

the ultimate elements of Buying and Selling? What are the invariable

conditions that precede, accompany, and follow, any and every act of

Trade? Of course we are investigating now and throughout this treatise

the deliberative acts of reasonably intelligent human beings, in one

great department of their common foresight and rational action. We

have consequently nothing to do here with Fraud or Theft or Mania or

Gift. Acts put forth under the impulse of these are direct opposites

of, or at best antagonistic to, acts of Trade. They tend to kill

trade, and therefore they are no part of trade. These, then, and such

as these, aside, we will now analyze a single Act of Exchange at one

time and place,--which will serve in substance for all acts of

exchange in all times and places, and just find out for ourselves what

are the Fundamentals and Essentials of that matter, with which alone

we have to do in this science of Political Economy.

Incidental reference was had a little way back to an Exchange once

made between King Solomon of Jerusalem and King Hiram of Tyre. Let

that be our typical instance. (a) _There were two persons_, Solomon

and Hiram. Those two, and no more, stood face to face, as it were, to

make a commercial bargain. They made it, and it was afterwards

executed. The execution indeed concerned a great many persons on both

sides, and occupied a long period of time; but the bargain itself, the

trade, the exchange, the covenant, concerned only two persons, and

occupied but a moment of time. It made no difference with the bargain

as such, with the binding nature of it, with the terms of it, with the

mutual gains of it, that each person represented a host of others,

subordinates and subjects, who would have to coöperate in the carrying

of it out, because each king had the right to speak for his subjects

as well as for himself, for commercial purposes each was an agent as

well as a monarch, the word of each concluded the consent and the

action of others as well as his own. Nor did it make any, the least,

difference with this exchange or the advantages of it, that each party

to it belonged to, was even the head of, independent and sometimes

hostile Peoples. Commerce is one thing, and nationality a totally

different thing. The present point is, in the words of the old

proverb,--"It takes two to make a bargain." And it takes _only_ two to

make a bargain. When corporations and even nations speak in trade,

they speak, and speak finally, through one accredited agent. We reach,

then, as the first bit of our analysis of Trade, the fact, that there

are always two parties to it, "the party of the first part and the

party of the second part."

(b) _There were two desires_, Solomon's desire for cedar-timbers to

build the temple with, and Hiram's desire for wheat and oil with which

to support the people of his sterile kingdom. "_So Hiram gave Solomon

cedar-trees and fir-trees according to all his desire: and Solomon

gave Hiram twenty thousand measures of wheat for food to his

household, and twenty measures of pure oil._" The desire of each

party was personal and peculiar, known at first only to himself, but

upon occasion became directed towards something in the possession of

the other, and each at length became aware of the desire of the other,

and also of his own ability to satisfy the want of the other. If

Solomon could have satisfied his desire for timber by his own or his

subjects' efforts directly, this trade would never have taken place;

if Hiram or his subjects could have gotten the wheat and oil directly

out of their narrow and sandy strips of sea-coast, this trade would

not have taken place; and so there must be in every case of trade not

only two desires each springing from a separate person, but also each

person must have in his possession something fitted to gratify the

desire of the other person, and each be willing to yield that

something into the possession of the other for the sake of receiving

from him that which will satisfy his own desire, and so both desires

be satisfied indirectly.

Here is the deep and perennial source of exchanges. Men's desires are

so many and various, and so constantly becoming more numerous and

miscellaneous, and so extremely few of his own wants can ever be met

by any one man directly, that the foundation of exchanges, and of a

perpetually increasing volume of exchanges, is laid in the deep places

of human hearts, namely, in Desires ever welling up to the surface and

demanding their satisfaction through an easy and natural interaction

with the ever swelling Desires of other men. Here too is a firm

foundation (a chief foundation) of human Society. Reciprocal wants,

which can only be met through exchanges, draw men together locally and

bind them together socially, in hamlets and towns and cities and

States and Nations, and also knit ties scarcely less strong and

beneficent between the separate and remotest nationalities of the

earth. It is certain that an inland commercial route connected the

East of Asia with the West of Europe centuries before Christ, and that

a traffic was maintained on the frontier of China between the Sina and

the Scythians, in the manner still followed by the Chinese and the

Russians at _Kiachta_. The Sina had an independent position in Western

China as early as the eighth century before Christ, and five centuries

later established their sway under the dynasty of Tsin (whence our

word "China") over the whole of the empire. The prophet Isaiah

exclaims (xlix, 12), "Behold! these shall come from far; and behold!

these from the North and from the West; _and these from the land of

Sinim_." The second bit of our analysis leads to Desires as an

essential and fundamental element in every commercial transaction.

(c) _There were two efforts_, those of the Tyrians as represented by

King Hiram and those of the Israelites as represented by King Solomon.

It was no holiday task that was implied in the proposition of Solomon

to the party of the other part,--"_Send me now cedar-trees, fir-trees,

and algum-trees out of Lebanon; for I know that thy servants are

skilful to cut timber in Lebanon; even to prepare me timber in

abundance, for the house which I am about to build shall be

wonderfully great._" On the other hand, the efforts insolved on the

part of the people of Israel in paying for these timbers, and for

their transportation by sea from Lebanon to Joppa, were equally

gigantic. Solomon's offer in return for the proposed service of the

Tyrian king was in these words,--"_And behold, I will give to thy

servants, the hewers that cut timber, twenty thousand measures of

beaten wheat, and twenty thousand measures of barley, and twenty

thousand baths of wine, and twenty thousand baths of oil._"

The reason why two efforts are always an element in every act of

traffic, however small or however large the transaction may be, is the

obvious reason, that the things rendered in exchange, whether they be

Commodities, Services, or Credits, invariably cost efforts of some

kind to get them ready to sell and to sell them, and no person can

have a just claim to render them in exchange, who has not either put

forth these efforts himself or become proprietor in some way of the

result of such efforts. Efforts accordingly are central in all trade.

Every trade in its inmost nature is and must be either an exchange of

two Efforts directly, as when one of two farmers personally helps his

neighbor in haying for the sake of securing that neighbor's personal

help in his own harvesting, or an exchange of two things each of which

is the result of previous Efforts of somebody, as when a man gives a

silver dollar for a bushel of wheat. The third bit of the present

analysis brings us to Efforts, perhaps the most important factor in

the whole list.

(d) _There were also two reciprocal estimates_, the estimate of King

Hiram of all the efforts requisite to cut and hew and float the

timber, as compared with the aggregate of efforts needed to obtain the

necessary wheat and barley and wine and oil in any other possible way;

and the estimate of King Solomon of all the labors required to grow

and market these agricultural products, as compared with what would

otherwise be involved in getting the much-wished-for timbers. Such

estimates invariably precede every rational exchange of products. It

is not in human nature to render a greater effort or the result of it,

when a lesser effort or the result of it will as well procure the

satisfaction of a desire. Efforts are naturally irksome. No more of

them will ever be put forth than is necessary to meet the want that

calls them forth. No man in his senses will ever put more labor on

anything, with which to buy something else, than is necessary to get

that something else by direct effort or through some other exchange.

Here we are on ground as solid as the very substance of truth can make

it. The Jews of Solomon's time were too shrewd and sparing of irksome

labor to devote themselves for years to the toils of the field and of

the vat to get by traffic the materials for their temple, if they

could have gotten those materials by a less expenditure of toil in any

other way. Those Phoenicians of Tyre and Sidon, the born merchants of

the East, the founders of commercial Carthage in the West, if they

could have extorted from the reluctant sands of their coast the

cereals and the vines and olives requisite for their own support with

only so much of exertion as was needed to get that to market with

which to buy them, would never have taken the indirect in preference

to the direct method. They took the indirect, because it was the

easier, and therefore the better.

It may, accordingly, be laid down as a maxim, that men never buy and

sell to satisfy their wants but when that is the easiest and best way

to satisfy them. It saves effort. It saves time. It saves trouble. It

divides labor. It induces skill. It propels progress. But in order to

determine which may be the easier way, requires constant _estimates_

on the part of each party to a possible trade. Shall I shave myself or

go to the barber? Before I decide, I estimate the direct effort in the

light of the effort to get that with which to pay the barber for his

service. If I trade with him, it is because I deem it easier, cheaper

in effort, more convenient in time. Trade means comparisons in every

case--comparisons by both parties--and in the more recondite and

complicated cases, elaborate comparisons and often comprehensive

calculations involving future time.

Now these estimates inseparable from exchanges, and these

calculations which are a factor in all the far-reaching exchanges, are

mental activities. They quicken and strengthen the _minds_ of men.

Trade is usually, if not always, the initial step in the mental

development of individuals and nations. Desires stir early in the

minds of all children; efforts more or less earnest are the speedy

outcome of natural desires; direct efforts, however, to satisfy these

soon reach their limits; it is now but a step over to simple

exchanges, by which the desires are met indirectly; exchanges once

commenced tend to multiply in all directions, and the estimates that

must precede and accompany these are mental states,--the more of them,

the greater the mental development, the higher the education;

consequently, commerce domestic and foreign is a grand agency in

civilization, a constant and broadening impulse towards progress in

all its forms; and Christianity, as we have already seen, is friendly

to commerce in its every breath. Those, therefore, who talk and preach

about Trade as tending to _materialism_, do not know what they are

talking about. Because Commodities are material things, and because a

portion of the trade of the world concerns itself with commodities,

these shallow thinkers jump to the conclusion that trade is

materialistic. _It is just the reverse._ Let us hear no more from

Professor Pulpit or Platform that buying and selling is antagonistic

to men's higher intellectual and spiritual culture, because the

present careful analysis has brought us indubitably to mental

Estimates and prolonged comparisons, which are activities of Mind, as

the fourth and a leading factor among the radical elements of Sale.

(e) _There were two renderings_, King Hiram's rendering at Joppa the

desired cedars from the mountains of Lebanon, and King Solomon's

rendering in return at Tyre the food products grown in his fertile

country. These renderings were visible to all men. Unlike the desires

and the estimates, which were subjective and invisible; the actual

exchange of the products, the culmination of the previous efforts, the

stipulated renderings by and to each party, were outward and

objective--"known and read of all men." This is the reason why public

attention is always strongly drawn to this particular link of the

chain of events which we are now unlocking and taking apart, while

other links of the series, that are just as essential, almost wholly

escape observation. The ports and the markets are apt to be noisy and

conspicuous, when the desires and the estimates and the satisfactions,

without which in their place there would be no market-places, work in

silence, and leave no records except the indirect one of the

renderings themselves.

It is of great moment to note here, that each of the two parties to an

exchange always has an advantage over the other, either absolute or

relative, in the rendering his own product, whatever it may be, as

compared with his present ability to get directly or through any other

exchange the product he receives in return. Take the example in hand.

Cedars and sandal-wood were natural to Mount Lebanon; there were no

other workmen in those regions of country that could "_skill to hew

timber like unto the Sidonians_"; the Mediterranean afforded a level

and free and easy highway from its northern coast to the Judean

seaport at Joppa; and all these natural and acquired facilities put

King Hiram into a posture of advantage in the rendering of timber, not

only over the Jews, but also over all the other peoples in the basin

of the midland sea. Still this advantage, great as it was, could only

be made a real and palpable gain to themselves, the proprietors of the

timber, by means of some exchange with somebody else, by which some

wants of their own greater than their present want of timber, could

be supplied by means of the timber. They had more of that commodity,

and more skill to fashion and transport it, than their present and

immediately prospective needs could make use of; and the only way in

which they could practically avail themselves of their advantages,

was, to sell their surplus timber and buy with it something that they

needed more. Otherwise their very advantage perished with them. God

has scattered such a diversity of blessings and capacities and

opportunities over the earth on purpose, that, through traffic, on

which his special benediction rests, the good of each part and people

may become the portion of other parts and peoples.

So, on the other hand, of the southern neighbors of the Tyrians. There

the earth brought forth by handfuls. There was an abundance of corn in

the land, even to the tops of the mountains. Its fruit did indeed

shake like Lebanon. But there were no cedars there, no fir-trees, no

sandal-woods. How short-sighted, then, and futile, would it have been

for the Jews, to try to hang on in their own behoof to all the natural

advantages that God had given to them, and to say, We will not part

with the direct results of any of them, we will build treasure-cities

as they did in Egypt, we will store up all the fruits of these fat

years against the possible coming of some famine years in the time to

come. That is anything in ordinary times but the divine plan. It is

anything but the letter and spirit of the divine injunction: "_Him

that keepeth back corn the people curse; but blessing shall be upon

the head of him that selleth it_" (Prov. xii, 26). Had they talked and

acted thus, no temple could then have been built in Jerusalem, and the

people of that generation would have lost the moral and religious

impulse and uplifting of their service and sacrifice. Their grain

would have become worthless from its very abundance, and would have

decayed on their hands. They would have missed a great gain for

themselves, and would have snatched away from their neighbors to the

northward a providential opportunity for an equal gain.

The general truth must not be lost sight of here, even in passing,

that all trade whatsoever is based upon a Diversity of relative

Advantage as between the parties exchanging products. If, for example,

the Hills of Judah and the Mountains of Israel had been covered with

timber suitable for building the temple, and the coasts of Tyre and

Sidon and the foot-hills of Lebanon had been fertile stretches of

arable land, this particular trade would never have been thought of

and could never have been realized. There would have been no gain in

it for either party, and unless there be a valid gain for both parties

at least in prospect, no trade will ever spring into being, because

there would be no motive, no impulse, no reason, in it. Unless the

Jews could get the timber easier by raising grain to pay for it, and

the Tyrians get the oil and wheat and barley easier by cutting and

floating timber to pay for them,--no trade; but the greater easiness

to each actually came about, because each had an Advantage both

natural and acquired over the other in his own rendering, and the

mutual gain of the trade was wholly owing to that circumstance. So far

as that matter went, the Tyrians had no cause to envy their neighbors

the superior soil of the south, for they reaped indirectly but

effectively a part of those harvests for themselves; and the Jews had

no reason to be jealous of their northern neighbors on account of the

noble forests crowning their mountains, because through trade they

secured easily to themselves a share of that vast natural advantage.

Diversity of Advantage both natural and acquired is the sole ground of

Trade both domestic and foreign; and consequently by means of trade

the peculiar advantages of each are fully shared in by all.

It is perhaps less obvious but surely equally true, that the greater

the relative diversity of advantage as between two exchangers, the

more profitable does the exchange become to each. If the Vale of

Sharon had been twice as fertile as it was, and the cedars of Lebanon

twice as large and lofty as they were, the easier and better would

Israel have gotten its timber, and the more secure and abundant would

have become the food of Tyre and Sidon; and, therefore, the more

unreasonable, or rather the more absurd and wicked, would have been

any envy or jealousy of either of the superior advantages at any point

or points of the other. So universally. By the divine Purpose as

expressed in the constitution of Nature, in the structure of Man, and

in the laws of Society, Trade in good measure and degree imparts to

each the bounties of all, arms each with the power of all, and impels

each by the progress of all.

One other important matter is closely connected with these two

Renderings, which is the fifth bit in succession of our present

analysis, namely this, that traffic renderings always make necessary

new and better routes of travel and transportation. It is mainly for

this reason, that persons and things have to be carried to distances

less or greater in order to consummate these Renderings of home and

foreign commerce, that roads by land and routes by sea have been

sought for and found, made and made shorter, improved as to method and

facilitated as to force, from the dawn of History until the present

hour. It was to get the goods of India, and so find a market for the

goods of Europe, that the earliest land routes between the two were

tried and maintained. The ground-thought of Columbus, meditated on for

years, was to discover a new commercial way to India; Magellan with

the same intent sailed westward through the Straits that wear his

name, and so circumnavigated the globe; repeated searches mainly with

the mercantile view, never long intermitted, have attempted ever since

the North-West or the North-East passage to India; Vasco da Gama in

1497 boldly accomplished the East passage, and thus changed for all

the Continents the channels of trade; the West now trades with all the

East through the Suez Canal, dug for that express purpose; and the

words, "Panama" and "Nicaragua" are upon everybody's lips, simply

because through Central America is the shortest and safest route for

men and goods to and from all the Oceans.

Quite recently Dr. W. Heyd has announced through the Berlin

Geographical Society the discovery of two commercial routes from India

to the West not hitherto described. Trebizond (on the Black Sea) and

Tana (at the mouth of the Don) were the chief distributing points.

Through Tana passed westward the pepper and ginger and nutmeg and

cloves; and the price of spices is said to have doubled in Italy, when

the Italians were for a time shut out of Tana in 1343. The chief

overland route from India to Tana ran through Cabul to Khiva by the

Oxus, and then by land through Astrakhan. The other route to Trebizond

passed through Persia, and came out by Tabriz to the Black Sea. It may

perhaps be pardoned, if a far homelier, more modern, and even local,

illustration be given of the present point, that trade makes roads.

The western wall of Williamstown is the mountain range of the

Taconics, whose general height is about 2000 feet above tide water at

Albany. Within the limits of this town are four natural depressions or

passes over this range, which is also the watershed between the Hoosac

River on the east and the Little Hoosac on the west. About the

beginning of this century, the population was quite sparse in both

these valleys, while the impulse to travel and traffic over the

barrier was sufficient to build (wholly at local expense) wagon roads

over each of the four passes, one of which soon after became a

turnpike between Northampton and Albany; and another was built mainly

to accommodate the medical practice on the west side of the mountain

of Dr. Samuel Porter--a Williamstown surgeon of local eminence. So

soon as railroads were constructed to run down these parallel valleys

(railroads themselves are perhaps the best illustration of the point

in hand), the mountain roads were relatively deserted, and only two of

them are now open to transient travel.[2]

Lastly, (f) _There were two satisfactions_, the satisfaction of the

southern king in actually obtaining the excellent timbers, without

which the cherished national temple could not have gone up; and the

satisfaction by the northern king in the easy receiving of the

abundant food products for the daily maintenance of his court and

kingdom. The simple story of these commercial transactions between Jew

and Tyrian indicates clearly enough, what might have been anticipated

and what always happens in such circumstances, not only a mutual

satisfaction at the completion of each specific exchange, but also a

general relation of contentment and peace in consequence of

advantageous commercial intercourse. "_And Hiram, king of Tyre, sent

his servants unto Solomon; for he had heard, that they had anointed

him king in the room of his father; because Hiram was ever a lover of

David. And it came to pass, when Hiram heard the words of Solomon,

that he rejoiced greatly, and said, Blessed be the Lord this day,

which hath given unto David a wise son over this great people; and

there was peace between Hiram and Solomon; and they two made a league

together._"

It is plain to reason and to all experience, that mutual Satisfactions

are the ultimate thing in exchanges. Our present analysis can go no

further, for the reason, that we have now reached in Satisfactions the

end, for the sake of which all the previous processes have been gone

through with. Persons do not engage in buying and selling for the mere

pleasure of it, but always for the sake of some satisfactions

derivable to both parties from the issue of it. Ordinary

self-inspection and foresight and industry being presupposed, the

issue of exchanges is just what was expected by the two persons, the

satisfaction of each follows as a matter of course, and stimulates to

new exchanges in ever-widening circles.

Since the desires of all men, which the efforts of other men can

satisfy through exchange, are indefinite in number and unlimited in

degree, there is no end of human Satisfactions to be reached along

this road of reciprocal trade; and since the very object of all trade

and the actual result of all trade (the exceptions are infinitesimal)

is to multiply and reduplicate continually mutual Satisfactions among

men; we can see right here what a loss and wrong it is, what a wanton

destruction of possible human happiness it is, what a bar to progress

among men in comforts and powers it is, for nations to impede and to

prohibit commerce by legislation! As we shall see more fully in a

later chapter, Governments can have no moral or constitutional right

to restrict the trade of their people, except in the sole interest of

revenue or health or morals.

Such is the constitution of the universe, that a really good thing is

usually cognate with and inseparable from a good many other good

things. Buying and selling, as we have now clearly seen, springs right

out of the nature of men in the circumstances in which they are

providentially placed on the earth, and ends in the satisfaction of

innumerable wants common to all men. This makes trade a thoroughly

good thing in itself; and consequently it is intimately associated

with many other good things. The scriptural instance, that we have

been examining, gives a neat illustration of this: "_and there was

peace between Hiram and Solomon; and they two made a league

together_." The mutually profitable exchange of commodities led to a

feeling of amity between the two neighboring kings; the feeling of

amity led to a treaty of Peace between the two adjacent nations; and

the "_league_" so ratified not only kept out war from their borders,

but also permitted the unhindered continuance of profitable exchanges

between them.

So it is always. Peace waits on Commerce. Good-will among the nations

is strengthened by the ties of interest and profit among their

citizens. The mercantile classes as such are always averse to war,

because war is the natural enemy of exchanges. Thus traffic leads to

peace and tends to maintain it, and peace preludes increased

prosperity, and commercial prosperity under freedom is wholly friendly

to mental and moral progress, and Christianity walks before and all

along this line of individual and national blessing. The commercial

treaty of 1860 between France and England has tended powerfully,

perhaps more powerfully than any other single cause, to keep those

formerly inter-belligerent nationalities in peace and amity ever

since.

We will now put into a little table the final results of the present

analysis of Buying and Selling. The ultimate elements seem to be

these:

1. _Two Persons._ 4. _Two Estimates._

2. _Two Desires._ 5. _Two Renderings._

3. _Two Efforts._ 6. _Two Satisfactions._

The thoughtful reader will note in this table the fact, that three of

these elements are objective, that is, outward and visible; and the

other three are subjective, that is, inward and invisible. Persons,

Efforts, Renderings, are seen and known of all men; Desires,

Estimates, Satisfactions, can be directly known only to the persons

who feel and make them. This is a peculiarity of Political Economy,

that has been far too little observed even when it has been observed

at all. Objective and subjective elements in it meet and mingle in

each transaction. Indeed, they alternate, as is shown in the table

above: first a Seen, and then an Unseen, Element throughout. It is

this commingling of outward and inward, visible and invisible, that

makes all the difficulty and gives all the fascination in Political

Economy. Whatever carries us into the steady though billowy play of

universal human nature is at once difficult and fascinating.

Quite contrary, however, to a common impression, the _certainty_ both

of action and prediction in all the other Sciences as well as in

Economics lies rather in the unseen elements than in those that are

seen. Take for an example the calculation of an eclipse: it is not so

much from what is visible in the heavens and on the earth that the

astronomer infers and predicts to the instant the shadow of one orb

thrown upon another, as it is from the wholly hidden but ever-enduring

forces of gravitation constantly relating these orbs one to the other.

So it is of the Sciences generally; progress is made in them and

certainties are reached in connection with them, "_while we look not

at the things which are seen, but at the things which are not seen;

for the things which are seen are but for a time; but the things which

are not seen are everlasting_." Invisible Desires and Satisfactions

felt in connection with Exchanges are among the most constant elements

of human nature; they, as it were, give birth to the relatively more

transient (though visible) data of Efforts and Renderings; while

inferences and conclusions and even predictions may be securely drawn

from all of these, giving a solid ground for Political Economy to

stand on,--almost as solid as the ground of the chief Physical

Sciences.

2. We will next examine the inmost nature and the outward

manifestations of _Value_. "Value" is by much the most important word

in the Science of Economics; and we must, therefore, comprehend it

thoroughly, root and branch. Nearly all the writers in English have

used in place of this the word "Wealth" and those in other languages

some equivalent and equally concrete word; but the present writer

fully satisfied himself some twenty-five years ago, that it is

impossible to use that word to any advantage in economical

discussions, owing to its inherent ambiguities and concrete

associations in the minds of men. He utterly discarded the word at

that time, and has found not the least occasion to pick it up again

since, and believes now that his substitution of the word "Value" in

place of it will ultimately be seen to have been his greatest

contribution to that Science, to which he devoted his life.

Even professed and excellent logicians, like John Stuart Mill, found

the word "Wealth" an insoluble element in the science of Economics; he

commenced his great work by writing, that it was not really needful to

_define_ the word which nevertheless he laid at the foundation of his

discussions, that "every one has a notion sufficiently correct for

common purposes of what is meant by Wealth"; he goes on, however, to

give at least a half-dozen definitions of the word, no two of which

are at all consistent with each other, only one of which embodies a

clear and scientific conception, and even to this one he himself does

by no means coherently adhere throughout his treatise. No wonder, that

this great man died thoroughly dissatisfied with his own work in

Economics, and wishing for longer life in which to recast and improve

it! No wonder, too, that the crowd of writers both English and

American, many of them able and thoughtful and otherwise logical, who

have been content to continue to use this irreducible and utterly

unscientific word at the bottom, have made a mess of it!

In dropping the word, "Wealth," accordingly, Political Economy has

dropped a clog, and its movements are now relatively free and certain;

and it is all the more incumbent on the Science for that very reason

to define the good word that it substitutes for a bad one with

absolute clearness, to explain it through and through until it become

quite transparent, and then always to use it in its defined and

economical sense, and none other, even though the same word be

properly enough used in other senses in common speech and in other

than scientific relations. Exactly that is what we are now going to

attempt to do in a simple and consecutive order.

(a) Perhaps it will help us to find out precisely what Value _is_ by

seeing as clearly as possible at the outset what it is _not_. It is

not _easy_, and never can be made so, to teach and to learn distinctly

what Value is in its ultimate nature and constant changes. Here is the

one unavoidable difficulty that lies at the very threshold of

Political Economy; and this difficulty, which is not found as in the

case of "Wealth" in the meaning of the word but in the complex

character of that which the word describes, once overmastered, and one

walks thereafter with ease and pleasure throughout the economic

domain. It would be wrong and cruel to deny that just here is one hard

place in the road for teacher and pupils to get over. It arises wholly

from the nature of the subject, as we shall soon see, and not at all

from the insufficiency of the word, Value. We have already seen fully,

that Buying and Selling in each and every transaction is complex and

relative, involving twelve elements every time; that Desires and

Estimates and Renderings are especially relative,--each party to a

trade desires something in possession of the other, estimates that

something relatively to something in his own possession, and finally

renders to the other his own something for the sake of receiving the

other's something. Now everybody is used to all this and practically

understands it perfectly, but it is complicated and reciprocal

nevertheless, and Value, which is the single birth of the two

Renderings, though perfectly intelligible to him that takes pains, is

not a thing to be seized once for all at a passing trot.

Value, then, is _not_ a quality of single things, belonging to them as

if by nature, as hardness is a quality of a rock or gravity is an

attribute of gold; because all physical qualities in physical things,

all that which makes or helps to make anything such as it is, may

be learned by a study of the things themselves by themselves; a

careful examination and analysis of the mechanical and chemical

properties of any physical thing will discover all its distinguishing

characteristics, all that makes it that particular thing in

distinction from all other things; but it is plain already, that the

_Value_ of anything (if it have value) cannot be found out by studying

that particular thing by itself alone; the questioning of the senses

however minute, the test of the laboratory however delicate, can never

determine how much anything is _worth_, because that always implies a

comparison between _two_ things, or more strictly a comparison between

two Renderings in exchange. Value is not an attribute of single

things: not even if the things be physical and tangible.

Now two other kinds of things are bought and sold besides physical and

tangible things, namely, personal services and commercial credits; and

it is very plain, that Value cannot be a quality of any one personal

service rendered, as looked at by itself, such as the service of a

physician towards a fever patient, because the service in and of

itself might be the same whether rendered to his own child or the

child of one of his patrons, while in the former case there would be

no value, and in the latter there would be; and so too the very name

"commercial credit" implies an exchange of two Renderings, out of

which Value always emerges, and not at all an attribute of one credit

considered by itself. Value is no more a characteristic of single

intangible services and claims than it is of single intangible

commodities rendered.

And what makes all this still more certain is, that Value even in

physical things, and perhaps still more in services and claims, is all

the while changing under demand and supply, now rising and then

falling, while the physical properties of things, that make them what

they are, are fixed and unchangeable. A gold eagle, for example, has

certain primary qualities as gold, without which it would not be gold;

it is hard and heavy and colored: gold is gold the world over and in

all ages: Value is not one of these primary qualities, nor even a

secondary quality, nor any quality at all, of gold as such; because

circumstances are readily conceived and have often occurred, in which

gold has no Value even in exchange; for instance, among a crew

abandoned at sea, a bag of gold belonging to one of the sailors might

not buy even a biscuit belonging to another; all the natural qualities

of the gold are present,--it is still yellow and weighty and

solid,--but its Value has escaped altogether. Gold is always 19 times

heavier than water: specific gravity is a _quality_ and is constant in

all physical things: Value is not a quality in this sense at all,

inasmuch as it is something that is constantly changing, rising or

falling, and not infrequently disappearing altogether, leaving no

sign.

Ignorance of this vastly important truth has pecuniarily ruined

thousands upon thousands of the people of this country during the last

20 years. They have gone into the mining of metals, gold and silver

and copper, sometimes as individuals and more often as companies

gathering in the driblets of investors, under the notion that if they

could only get these metals out of the ground their Value would be

just as secure and fixed as their physical qualities. They found out

their mistake in bitterness of spirit. For example, the Value of an

ounce of silver has gone down and down and down as the quantity of

silver excavated has increased under zealous digging, in accordance

with the universal and pitiless law of Supply and Demand. So of

copper. And both these great monetary interests went to Congress and

secured the passage of laws designed to lift artificially the Values

that were sinking naturally under increased Supply, the silver men by

a law requiring the United States to buy and mint at least $2,000,000

in silver each month whether the silver dollars were needed or not,

and the copper men by a law imposing a tariff-tax on foreign copper

that has actually lifted the price two cents a pound on the average of

the whole 20 years above the average price of copper in the markets of

the world.

Take another illustration of disappearing Values, this time in lands,

long supposed to be the most stable in value of all human possessions.

Whole tiers of farms in the writer's native town in New Hampshire, and

for that matter all over New England as well, that in his boyhood

supported large families, and when sold usually brought a fair price,

are now abandoned of their owners as wholly or comparatively

worthless, and are allowed to grow up into forest again, without a

sign of present human habitation upon them. Value is something that

needs to be studied carefully, if it is to be fully understood.

(b) Perhaps the origin of the word, "Value," will throw some light

upon its nature and changes. Etymology can never be safely despised in

scientific discussions, although words are perpetually changing their

meaning in the mouths of men. No science can afford to build upon the

transient meaning of a word; and yet it is clearly possible so to use

words as to reach and describe ultimate and unchanging facts in

science; and some knowledge of the original meaning of words is always

a help in getting at those definitions and analyses of facts that are

permanent in science. Let us hold fast to the cheering truth

exemplified on all sides of every science, that a just analysis and

exact description of ultimate facts in any department of knowledge are

for all time, in spite of the transient meaning of current words.

The present word is derived from the Latin VALERE, _to pass for, to be

worth_. There is a strong hint of a _comparison_ in the original

meaning of the word, and the current use of it both in Latin and

English develops the hint into a certainty. In common language, when

the Value of anything is asked for, the answer always comes in the

terms of something else. If the question be, How much is it worth? the

answer is, So many dollars or cents. Now the cents or dollars are very

different things from those whose value is thus inquired after; and so

we see again from another point of view that Value is a relative

matter, since it clearly implies a comparison between two distinct

things; and, if so, it is clearly enough not a quality of any one

thing, and of course it would be useless to try to ascertain the Value

of anything by a study of that thing alone. Etymology thus easily

brings us up to our present vital question, and will assist us to

solve it completely.

(c) _What is Value?_ Plainly it is the result of a comparison

instituted between two things, using the word, "things," here in its

broadest sense. But who institutes the comparison? And who is

competent to announce the result of it in Value? A comparison is

required in order to ascertain the length of a stick of timber in feet

and inches, and a carpenter's square is the instrument by which the

comparison is made, and it makes no difference in the result whose the

square is or whose the stick of timber is, since the square and the

stick have in common the physical quality of length, and a simple

comparison of square with stick determines the length of the latter,

and one man in this case may determine the result by himself alone,

and it is not needful that he be the _owner_ of either of the things

compared.

But it is a different kind of comparison from this that issues in

Value. Let us suppose an exchange of a bushel of wheat for a mason's

trowel: there is no common physical quality, as length, between the

wheat and the trowel; and it is evident, that no _one_ man can measure

in any form one of these two commodities by means of the other. It is

a peculiar kind of comparison that is involved in any and every trade;

and the first peculiarity of it is, as we have already seen in another

connection, that it always requires "two persons" to make it; and each

of the two persons must always be the virtual _owner_ of one of the

two things exchanged. A thief may indeed go through the motions of

selling a stolen horse, but as he is not the owner of the horse there

can be no sale, and the actual owner may take his horse wherever he

finds it even in the hands of an innocent third party. In other words,

there must ever be "two efforts" also, two legitimate efforts giving a

valid claim of ownership to each of the two parties in the exchange.

And there is a second distinctive peculiarity in that comparison that

ends in Value, namely, the two things to be exchanged are not compared

directly with each other at all, as square and stick are compared,

but in the light of the "two desires" with which we are already

familiar, and in that of the "two estimates" resulting therefrom. The

owner of the wheat desires a trowel, and the owner of the trowel

desires a bushel of wheat; the former estimates the effort it has

already cost him to procure the wheat in a sort of comparison with the

effort that it would otherwise cost him to procure the trowel, and he

does not trade unless the trowel seem more and better to him than does

the wheat; the latter estimates the effort it has cost him to procure

the trowel in a sort of comparison with the effort it would cost him

to procure otherwise the wheat that he wants, and he does not trade

unless the wheat then and there seem more desirable than the trowel,

which he already has; and these two relative estimates of the two

owners must _coincide_, that is, the owner of the wheat must think

more of the trowel than of the wheat, and the owner of the trowel must

think more of the wheat than of the trowel, before these two parties

can ever trade. So of all traffic whatsoever.

Now the third and last distinctive peculiarity of that kind of

comparison out of which Value emerges is this,--an _action_ is

necessary in order to complete the comparison. Desires and estimates

may have been never so busy, but no Value can ever be born until an

outward action takes place in the "two renderings" of our former

analysis. Then first we come out upon plain and solid ground. We leave

the play of the subjective elements, which yet are essential in the

premises, and touch firmly objective realities. _The trowel-maker

passes over his tool in the sight of men to the wheat-grower in firm

possession and ownership, and takes in return for it from him the

grain, which the latter passes over to the former for the sake of

receiving the trowel._ The two "satisfactions" follow as a matter of

course, and that whole transaction as a commercial exchange and as

the sole subject of Political Economy is ended.