The Project Gutenberg eBook, Principles of Political Economy, by Arthur Latham Perry

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.
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3. POLITICAL ECONOMY. Twenty-First Edition.
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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

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.

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 Phœnicians 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:

The thoughtful reader will note in this table the fact, that three of these elements are objective, that is, outward and visible; and the other three are subjective, that is, inward and invisible. Persons, Efforts, Renderings, are seen and known of all men; Desires, Estimates, Satisfactions, can be directly known only to the persons who feel and make them. This is a peculiarity of Political Economy, that has been far too little observed even when it has been observed at all. Objective and subjective elements in it meet and mingle in each transaction. Indeed, they alternate, as is shown in the table above: first a Seen, and then an Unseen, Element throughout. It is this commingling of outward and inward, visible and invisible, that makes all the difficulty and gives all the fascination in Political Economy. Whatever carries us into the steady though billowy play of universal human nature is at once difficult and fascinating.

Quite contrary, however, to a common impression, the certainty both of action and prediction in all the other Sciences as well as in Economics lies rather in the unseen elements than in those that are seen. Take for an example the calculation of an eclipse: it is not so much from what is visible in the heavens and on the earth that the astronomer infers and predicts to the instant the shadow of one orb thrown upon another, as it is from the wholly hidden but ever-enduring forces of gravitation constantly relating these orbs one to the other. So it is of the Sciences generally; progress is made in them and certainties are reached in connection with them, "while we look not at the things which are seen, but at the things which are not seen; for the things which are seen are but for a time; but the things which are not seen are everlasting." Invisible Desires and Satisfactions felt in connection with Exchanges are among the most constant elements of human nature; they, as it were, give birth to the relatively more transient (though visible) data of Efforts and Renderings; while inferences and conclusions and even predictions may be securely drawn from all of these, giving a solid ground for Political Economy to stand on,—almost as solid as the ground of the chief Physical Sciences.

2. We will next examine the inmost nature and the outward manifestations of Value. "Value" is by much the most important word in the Science of Economics; and we must, therefore, comprehend it thoroughly, root and branch. Nearly all the writers in English have used in place of this the word "Wealth" and those in other languages some equivalent and equally concrete word; but the present writer fully satisfied himself some twenty-five years ago, that it is impossible to use that word to any advantage in economical discussions, owing to its inherent ambiguities and concrete associations in the minds of men. He utterly discarded the word at that time, and has found not the least occasion to pick it up again since, and believes now that his substitution of the word "Value" in place of it will ultimately be seen to have been his greatest contribution to that Science, to which he devoted his life.

Even professed and excellent logicians, like John Stuart Mill, found the word "Wealth" an insoluble element in the science of Economics; he commenced his great work by writing, that it was not really needful to define the word which nevertheless he laid at the foundation of his discussions, that "every one has a notion sufficiently correct for common purposes of what is meant by Wealth"; he goes on, however, to give at least a half-dozen definitions of the word, no two of which are at all consistent with each other, only one of which embodies a clear and scientific conception, and even to this one he himself does by no means coherently adhere throughout his treatise. No wonder, that this great man died thoroughly dissatisfied with his own work in Economics, and wishing for longer life in which to recast and improve it! No wonder, too, that the crowd of writers both English and American, many of them able and thoughtful and otherwise logical, who have been content to continue to use this irreducible and utterly unscientific word at the bottom, have made a mess of it!

In dropping the word, "Wealth," accordingly, Political Economy has dropped a clog, and its movements are now relatively free and certain; and it is all the more incumbent on the Science for that very reason to define the good word that it substitutes for a bad one with absolute clearness, to explain it through and through until it become quite transparent, and then always to use it in its defined and economical sense, and none other, even though the same word be properly enough used in other senses in common speech and in other than scientific relations. Exactly that is what we are now going to attempt to do in a simple and consecutive order.

(a) Perhaps it will help us to find out precisely what Value is by seeing as clearly as possible at the outset what it is not. It is not easy, and never can be made so, to teach and to learn distinctly what Value is in its ultimate nature and constant changes. Here is the one unavoidable difficulty that lies at the very threshold of Political Economy; and this difficulty, which is not found as in the case of "Wealth" in the meaning of the word but in the complex character of that which the word describes, once overmastered, and one walks thereafter with ease and pleasure throughout the economic domain. It would be wrong and cruel to deny that just here is one hard place in the road for teacher and pupils to get over. It arises wholly from the nature of the subject, as we shall soon see, and not at all from the insufficiency of the word, Value. We have already seen fully, that Buying and Selling in each and every transaction is complex and relative, involving twelve elements every time; that Desires and Estimates and Renderings are especially relative,—each party to a trade desires something in possession of the other, estimates that something relatively to something in his own possession, and finally renders to the other his own something for the sake of receiving the other's something. Now everybody is used to all this and practically understands it perfectly, but it is complicated and reciprocal nevertheless, and Value, which is the single birth of the two Renderings, though perfectly intelligible to him that takes pains, is not a thing to be seized once for all at a passing trot.

Value, then, is not a quality of single things, belonging to them as if by nature, as hardness is a quality of a rock or gravity is an attribute of gold; because all physical qualities in physical things, all that which makes or helps to make anything such as it is, may be learned by a study of the things themselves by themselves; a careful examination and analysis of the mechanical and chemical properties of any physical thing will discover all its distinguishing characteristics, all that makes it that particular thing in distinction from all other things; but it is plain already, that the Value of anything (if it have value) cannot be found out by studying that particular thing by itself alone; the questioning of the senses however minute, the test of the laboratory however delicate, can never determine how much anything is worth, because that always implies a comparison between two things, or more strictly a comparison between two Renderings in exchange. Value is not an attribute of single things: not even if the things be physical and tangible.

Now two other kinds of things are bought and sold besides physical and tangible things, namely, personal services and commercial credits; and it is very plain, that Value cannot be a quality of any one personal service rendered, as looked at by itself, such as the service of a physician towards a fever patient, because the service in and of itself might be the same whether rendered to his own child or the child of one of his patrons, while in the former case there would be no value, and in the latter there would be; and so too the very name "commercial credit" implies an exchange of two Renderings, out of which Value always emerges, and not at all an attribute of one credit considered by itself. Value is no more a characteristic of single intangible services and claims than it is of single intangible commodities rendered.

And what makes all this still more certain is, that Value even in physical things, and perhaps still more in services and claims, is all the while changing under demand and supply, now rising and then falling, while the physical properties of things, that make them what they are, are fixed and unchangeable. A gold eagle, for example, has certain primary qualities as gold, without which it would not be gold; it is hard and heavy and colored: gold is gold the world over and in all ages: Value is not one of these primary qualities, nor even a secondary quality, nor any quality at all, of gold as such; because circumstances are readily conceived and have often occurred, in which gold has no Value even in exchange; for instance, among a crew abandoned at sea, a bag of gold belonging to one of the sailors might not buy even a biscuit belonging to another; all the natural qualities of the gold are present,—it is still yellow and weighty and solid,—but its Value has escaped altogether. Gold is always 19 times heavier than water: specific gravity is a quality and is constant in all physical things: Value is not a quality in this sense at all, inasmuch as it is something that is constantly changing, rising or falling, and not infrequently disappearing altogether, leaving no sign.

Ignorance of this vastly important truth has pecuniarily ruined thousands upon thousands of the people of this country during the last 20 years. They have gone into the mining of metals, gold and silver and copper, sometimes as individuals and more often as companies gathering in the driblets of investors, under the notion that if they could only get these metals out of the ground their Value would be just as secure and fixed as their physical qualities. They found out their mistake in bitterness of spirit. For example, the Value of an ounce of silver has gone down and down and down as the quantity of silver excavated has increased under zealous digging, in accordance with the universal and pitiless law of Supply and Demand. So of copper. And both these great monetary interests went to Congress and secured the passage of laws designed to lift artificially the Values that were sinking naturally under increased Supply, the silver men by a law requiring the United States to buy and mint at least $2,000,000 in silver each month whether the silver dollars were needed or not, and the copper men by a law imposing a tariff-tax on foreign copper that has actually lifted the price two cents a pound on the average of the whole 20 years above the average price of copper in the markets of the world.

Take another illustration of disappearing Values, this time in lands, long supposed to be the most stable in value of all human possessions. Whole tiers of farms in the writer's native town in New Hampshire, and for that matter all over New England as well, that in his boyhood supported large families, and when sold usually brought a fair price, are now abandoned of their owners as wholly or comparatively worthless, and are allowed to grow up into forest again, without a sign of present human habitation upon them. Value is something that needs to be studied carefully, if it is to be fully understood.

(b) Perhaps the origin of the word, "Value," will throw some light upon its nature and changes. Etymology can never be safely despised in scientific discussions, although words are perpetually changing their meaning in the mouths of men. No science can afford to build upon the transient meaning of a word; and yet it is clearly possible so to use words as to reach and describe ultimate and unchanging facts in science; and some knowledge of the original meaning of words is always a help in getting at those definitions and analyses of facts that are permanent in science. Let us hold fast to the cheering truth exemplified on all sides of every science, that a just analysis and exact description of ultimate facts in any department of knowledge are for all time, in spite of the transient meaning of current words.

The present word is derived from the Latin Valere, to pass for, to be worth. There is a strong hint of a comparison in the original meaning of the word, and the current use of it both in Latin and English develops the hint into a certainty. In common language, when the Value of anything is asked for, the answer always comes in the terms of something else. If the question be, How much is it worth? the answer is, So many dollars or cents. Now the cents or dollars are very different things from those whose value is thus inquired after; and so we see again from another point of view that Value is a relative matter, since it clearly implies a comparison between two distinct things; and, if so, it is clearly enough not a quality of any one thing, and of course it would be useless to try to ascertain the Value of anything by a study of that thing alone. Etymology thus easily brings us up to our present vital question, and will assist us to solve it completely.

(c) What is Value? Plainly it is the result of a comparison instituted between two things, using the word, "things," here in its broadest sense. But who institutes the comparison? And who is competent to announce the result of it in Value? A comparison is required in order to ascertain the length of a stick of timber in feet and inches, and a carpenter's square is the instrument by which the comparison is made, and it makes no difference in the result whose the square is or whose the stick of timber is, since the square and the stick have in common the physical quality of length, and a simple comparison of square with stick determines the length of the latter, and one man in this case may determine the result by himself alone, and it is not needful that he be the owner of either of the things compared.

But it is a different kind of comparison from this that issues in Value. Let us suppose an exchange of a bushel of wheat for a mason's trowel: there is no common physical quality, as length, between the wheat and the trowel; and it is evident, that no one man can measure in any form one of these two commodities by means of the other. It is a peculiar kind of comparison that is involved in any and every trade; and the first peculiarity of it is, as we have already seen in another connection, that it always requires "two persons" to make it; and each of the two persons must always be the virtual owner of one of the two things exchanged. A thief may indeed go through the motions of selling a stolen horse, but as he is not the owner of the horse there can be no sale, and the actual owner may take his horse wherever he finds it even in the hands of an innocent third party. In other words, there must ever be "two efforts" also, two legitimate efforts giving a valid claim of ownership to each of the two parties in the exchange.

And there is a second distinctive peculiarity in that comparison that ends in Value, namely, the two things to be exchanged are not compared directly with each other at all, as square and stick are compared, but in the light of the "two desires" with which we are already familiar, and in that of the "two estimates" resulting therefrom. The owner of the wheat desires a trowel, and the owner of the trowel desires a bushel of wheat; the former estimates the effort it has already cost him to procure the wheat in a sort of comparison with the effort that it would otherwise cost him to procure the trowel, and he does not trade unless the trowel seem more and better to him than does the wheat; the latter estimates the effort it has cost him to procure the trowel in a sort of comparison with the effort it would cost him to procure otherwise the wheat that he wants, and he does not trade unless the wheat then and there seem more desirable than the trowel, which he already has; and these two relative estimates of the two owners must coincide, that is, the owner of the wheat must think more of the trowel than of the wheat, and the owner of the trowel must think more of the wheat than of the trowel, before these two parties can ever trade. So of all traffic whatsoever.

Now the third and last distinctive peculiarity of that kind of comparison out of which Value emerges is this,—an action is necessary in order to complete the comparison. Desires and estimates may have been never so busy, but no Value can ever be born until an outward action takes place in the "two renderings" of our former analysis. Then first we come out upon plain and solid ground. We leave the play of the subjective elements, which yet are essential in the premises, and touch firmly objective realities. The trowel-maker passes over his tool in the sight of men to the wheat-grower in firm possession and ownership, and takes in return for it from him the grain, which the latter passes over to the former for the sake of receiving the trowel. The two "satisfactions" follow as a matter of course, and that whole transaction as a commercial exchange and as the sole subject of Political Economy is ended.

But where is the "Value," of which we have been in search? The answer is easy and certain and unevadible. The Value is in the Renderings, and nowhere else. The value of the trowel is the wheat, that is actually given in exchange for it; and the value of the wheat is equally the trowel, for the sake of getting which the wheat was rendered. What was the Value of King Hiram's cedar-timbers? The oil and wheat actually returned in pay for them. What was the Value of the oil and wheat sent northward by King Solomon? The timbers rendered in direct exchange for the same. This is not merely the only possible answer to the question, What is Value? but it is also a perfectly complete and satisfactory answer. Common language here corresponds exactly with scientific language. "How much did the horse cost?" "One hundred dollars." The dollars have nothing whatever in common with the horse, except that they express his Value at the time; the horse has nothing in common with the dollars, except that it expresses the Value of the dollars at the time. It is just as exact to say, it means precisely the same thing to say, the dollars are worth the horse, as to say, the horse is worth the dollars.

In general terms, the Value of anything is something else received in return for it, when each owner renders the one for the sake of getting the other. This is the whole of it, so far as any specific valuable thing is concerned. We shall indeed need after a little, and shall have no trouble in finding, an abstract and universal definition of "Value," as an abstract and scientific term perfectly circumscribing the field of Economics. Here and now we are dealing with the simpler concrete question, What is the value of any specific valuable thing? The unvarying answer is, Some other specific valuable thing already exchanged for the first! There may be expected value, estimated value, but actual value there is none, until a real exchange has settled how much the value is. The value of anything is something else already exchanged for it. Value is not simply a relation subsisting between two things, the result of a careful comparison between them, but rather an actual fact established in connection with them. The universal formula of Value is quid pro quo, in which formula quid stands for one of the valuables and quo for the other, and pro unfolds the motive of each owner for the reciprocal receiving and rendering.

Here a caution is needful. Because nobody can tell what the value of anything is until something else has been put over against it in order to get it and actually received therefor, and because the only possible way to express the value of either is in the terms of the other,—the trowel is worth the wheat and the wheat is worth the trowel,—one must not therefore jump to the conclusion that the value of either is settled for all time or even for any future time. It is only settled for this time. In Economics as in Christianity, Now is the accepted time. There is nothing fixed in Values, and never can be from the nature of the case, because Desires are personal to individuals, and Efforts fluctuate with times and persons, and Estimates that wait on these vary from necessity, and the Renderings of to-day may not be the chosen renderings of other persons in the same articles to-morrow. Value is not a quality at all, still less is it a permanent quality, of anything; it is a relation established between two things when these are in the hands of two given persons; but now when these are in the hands of two different persons, whose views are pretty sure to differ from the former, and a new relation is sought to be established between these in the old way of Estimates, is it strange that a new balance is struck, and Value is expressed in quite different terms?

One of the chief charms of Political Economy is the open secret, that it deals not with rigidities and inflexible qualities and mathematical quantities and the unchanging laws of matter, but with the billowy play of desires and estimates and purposes and satisfactions, all of which are mental states, and all of which are subject in the general to ascertainable laws, though laws of a quite different kind from those of Mechanics. Values come and they go. Within certain limits and under certain conditions they may be anticipated and even predicted, but never with the precision of an eclipse or the result of a known chemical combination. There is a useful and fascinating Science of Value, as we shall see indubitably by and by in the present chapter; but it is a science that deals primarily with persons and only secondarily with things, with mind and not with matter, with the general undulations of the sea and not with the crests of the waves. And all this is so, because Values are relative, because the announcements in the market-place to-day may stand listed differently to-morrow and very differently next year, and because old values may disappear altogether and many new ones come in, all in accordance with the incessant changes in the wants and labors and fashions and projects of men.

We are now in a good place to see once for all the sharp distinction there is between Utility and Value. These two are often confounded to the deep detriment of our Science; and no clear thinking is possible in Economics without drawing this line sharp, and then holding it fast; for the hazard of this confusion is all the greater, because Utility is always connected with Value, although it is a totally different thing from Value. We will see. Utility is the simple capacity of anything to gratify the desire of anybody. This is at once the etymological as well as the popular signification of the word. It is derived from the Latin utor, to make use of, a word that is often conjoined in Latin with fruor, to enjoy; so much so, that the two verbs are often put together, utor et fruor, and also often without the conjunctive, utor fruor. Utility, then, is a quality of innumerable things. Anything that is good for anything, anything useful, anything that has the power to still the desires of any person, has Utility. But multitudes of things that have this capacity to gratify human desires are never bought and sold, and therefore can have no Value, since nobody will give anything for them. The air we breathe, the water we refresh ourselves with from spring or brook, the light of the sun and moon and stars, the fragrance of the flowers, the mountain prospect that delights the eye,—all these, and thousands more, possess the highest utility, but no value whatsoever. They are free. They are the bounty of God. They are never bought and sold. They are a vast class of things by themselves, with which Political Economy as such has nothing to do.

Nevertheless the element of Utility comes into every case of Value, because the element of Desire comes into every case of Value, and whatever merely satisfies the Desire of any person is Utility, whether that capacity be the direct gift of God or whether the Efforts of men have been employed to bring it about. It is just here that we see the precise function of our "two efforts" in each case of Value, in distinction from mere Utility in all cases: much of utility is absolutely free, no effort of men having been put forth to secure it, for example, the fragrance of the wild rose; much more of utility is the commingled bounty of Nature and the gratuitous effort of men, for example, the fragrance of the domestic rose brought by the householder himself into his own yard for the gratification of his own family; while by much the most of utility is commingled free gift of God and the compensated efforts of men, for example, the fragrance of the bank of roses cultivated and cared for by the hired gardener. It is important for our purposes to discriminate carefully the three kinds of Utility: (1) what is wholly disconnected from the efforts of men, and comes freely from the hand of God; (2) what is mingled with the unpaid efforts of men, so that the satisfaction of the desire comes partly from Nature and partly from unbought effort; and (3) the compound utility that is partly free gift and partly the result of compensated labor. The last is the only kind of Utility that stands in any connection with Value.

And even this is very different from Value. Utility in all three of its forms—now free, now onerous, now partly bought—is always a quality of one thing by itself, going straight to the satisfaction of some desire, and there an end. It is simplicity itself compared with Value, which is always a resultant of several things, and is specifically a relation of mutual purchase established between two "renderings," each of which expresses the value of the other, in each of which is embodied an "effort" made by each of the two "persons" rendering, and each of which excites a "desire" and an "estimate" before being passed over in ownership to another, and a "satisfaction" afterwards.

The utility in every valuable rendering comes partly from free Nature and partly from compensated effort, but it is remarkable, that a principle, with which we are to become very familiar later on, namely, Competition, eliminates for the most part from all influence upon Value that portion of the Utility that is the free gift of God. The great Father never takes pay for anything, and never authorizes anybody to take pay in his behalf; and, moreover, has arranged things so, that it is exceedingly difficult for any person to extort anything from another person on the strength of anything that God has made, and man has not improved. Take, for example, ten horses of any general grade, brought into the same market by their ten owners for sale. These men did not make these horses, but they have cared for and trained them, or at least have become proprietors by purchase or otherwise of the results of such care and training. The Utility in each horse is compound, consisting partly of what God has done for him and partly of what man has done for him,—the two parts inextricably interwoven,—and all ten are offered now for sale. Each of the owners would indeed be glad to get something for his horse on the ground of what God has done to make him sound and strong and fleet, in addition to a fair compensation for what he (and his predecessors) has done in raising and breaking him; but the cupidity of all is likely to be thwarted by the ultimate willingness of some to sell their horses for a price covering the element of human "efforts" involved, and the action of these tends to fix a general rate for the whole ten, and thus the gratuitous element is eliminated from influence on Value. Even if the ten owners should combine for a higher price, there are doubtless a plenty of horses of that general grade elsewhere, some of whose owners are content to get back an equivalent for their own and others' "efforts" expended on their horses; and so the action of these tends to fix the general price for horses of that kind for that time and place at a point not above a fair estimate of the onerous human elements involved; thus throwing out by the action of competition all effect of natural Utility upon the Value of horses then and there. So of all other products of that kind.

It is true, that in certain unique cases, in which competition has little or no play, because there is only one or a very few owners of such unique products, one cannot certainly say that free Utility may not influence the Value to lift it above the gauge of human efforts involved; but such cases are rare, and relatively unimportant; and the tendency is immensely strong, under the natural and beneficial condition of things, for Values to graduate themselves through the reciprocal estimates and renderings of commerce, down to the actual and onerous contribution of men to that Utility that underlies Value.

Thus we are brought again and again from differing points of view to the "two renderings" as central and determinative in Value, and also more specifically to the "two efforts" of persons rather than any free contribution of Nature as constituting that portion of the compound Utility, whose function it is to gratify the "two desires" that precede the realization of Value,—that portion of the utility in any rendering that must be compensated for by the other rendering. Now in order to reach in a moment more our final definition of "Value," a definition, it is believed, that will cover all the cases and take the life out of endless disputes, we need a scientific term to carry easily and exactly the meaning of any economic rendering. Let that word be Service. We must have it in its generalized meaning, to cover the renderings of all the three kinds, in distinction from the term "personal services," which we have already used and shall continue to use to designate one class only of things exchanged, in contradistinction to "commodities" and to "credits," the other two classes.

Value is the relation of mutual purchase established between two services by their exchange.

We offer this definition of "Value" to our readers in much confidence, that they will find it exact and adequate and altogether trustworthy. No one of them, however, is precluded from attempts to improve it in breadth and brevity and beauty; and all are invited to pick logical flaws in it, whether of ambiguity or superfluity or deficiency. Many minds and many hands in many lands have left their impress on parts of this definition, for example, Aristotle in Greece and Bastiat in France and Macleod in Great Britain; the present writer thinks, that he has bettered the definition of Bastiat, namely, "Value is the relation of two services exchanged," by precisely defining the relation as one of mutual purchase; and he is sure, that he has improved the definition of Macleod, namely, "The value of any economic quantity is any other economic quantity for which it can be exchanged," by making his definition at once more abstract and more general and more definite, and also by escaping the slight implication in the word, "quantity," that only material things are exchanged in economics.

The immense importance of securing first a clear and correct Definition of "Value," which is the foundation-word and the circumference-word of Political Economy, and then of using that term and all other scientific terms in the Science in their defined senses only, will certainly be appreciated by those who have wandered in the wide wilderness of the discussions on the undefinable word, "Wealth," and especially by those who have reflected most upon the vast and illimitable significance of economic Exchanges on the welfare of mankind. Associate Justice Miller of the Supreme Court of the United States, not an Economist in the technical sense, referred in 1888, in words that are worth remembering, to "the philosophical maxim of modern times, that of all the agencies of civilization and progress of the human race commerce is the most efficient." In August of that year John Sherman of Ohio, a man far enough from being a technical Economist, said in the Senate of the United States, that "it is almost a crime against civilization" to maintain commercial barriers between Canada and the United States.

There were tokens a plenty in the year of Grace just referred to, that the Science of Value in all the lands of the civilized world, and particularly in the United States, was drawing to itself a new and more popular esteem. It was seen more clearly and felt more deeply than ever before, that this science has a weighty word for every man and woman and child in the world; that there are certain Rights in every one inherent and inalienable to buy and sell for his own advantage; that most if not all of the Governments, under the lead of comparatively few selfish and powerful men, were infringing upon these Rights, and robbing under the forms of Law the masses of their citizens to immense amounts for the special benefit of these very men; that the only sure defences of the people against these abuses of all kinds were in the maintenance and diffusion of the scientific and consequently disinterested principles and maxims of a sound Political Economy; that such a science was only friendly to the broadest rights, to universal gains, to illimitable increase in human comforts and powers, to international fellowship, to peace on earth and good-will among men; that, accordingly, a science of such scope and tendencies must be encouraged and cultivated and improved; that what had been crude in it, and narrow, and merely national, must be sloughed off; that the English and insular and special speculations of a century ago, which regarded "Wealth" as consisting of material things only, excepting however considerable portions of Adam Smith's immortal book, were antiquated and unusable; that the Science had really moved into a broader and still a well-circumscribed field, new and more permanent foundations were being laid, and fresh contributions from all countries should be welcomed; and that the time had fully come, when the accepted truths of this Science, like those of the other developed sciences, should be practically and steadily applied to the betterment of mankind. Under these broadening and inspiriting and uplifting conditions Political Economy, as never before, thanked God and took courage.

3. Having now a satisfactory definition of Value, and knowing accordingly just what Valuables are in clear distinction from all other things in the world, we must examine with some care two or three of the most general facts and laws and limits of Value, before we pass in the next following chapters to study in detail each of the three kinds of Valuables, namely, material Commodities, personal Services, commercial Credits.

(a) Since Value in general is the relation of mutual purchase between two Services, and consequently the specific value of either can only be expressed by the other,—one Valuable being always measured by the Valuable exchanged against it,—it follows as a matter of course that such a thing as a general Rise or Fall of Valuables is an impossibility. The rise of one valuable involves of necessity a fall in the other, as the fall of one implies the rise of the other. If the articles exchanged be bushels of wheat and dollars of silver, and if a bushel buys a dollar to-day, then wheat is worth a dollar a bushel; but if wheat rises next week, so that a dollar will not buy a full bushel, that is precisely the same thing as saying, that the dollar has fallen in its purchasing-power as compared with the wheat. Such specific changes in the purchasing-power of one Valuable over another are incessant throughout the commercial world, and a merchant's sagacity consists in anticipating these so far as possible and in availing himself of them alertly and prudently; but each one of us must needs see clearly and hold firmly in mind, that each fall in the purchasing-power of a Valuable means a corresponding rise of power in the other Valuable,—if the first buys more of the second than before, then the second must buy less than before of the first; and, consequently, a general rise of Valuables is a contradiction in terms, and so of course is a general fall of Valuables.

This brings us to Price. Price is Value reckoned in money; and this is the only difference in the meaning of the two terms. When one valuable is sold against another, even when one of the two is money, each is the Value of the other: Value is the general and universal term in Economics. When any other valuable is sold against money, the amount of money it buys is called its Price: Price is a specific and restricted term in Economics. Since we shall study Money thoroughly in a later chapter, and there explain the origin and extent of its functions throughout, it is only in order to remark here, that it is for convenience' sake, that is, to make easy the comparison of valuables one with another, that Value in commerce is commonly reduced to Price. Money becomes a sort of measure, by means of which to compare all other valuables with each other. In order to ascertain the Price of a Valuable, it only needs to be sold once against money; but in order to ascertain the Value of a Valuable, it would need to be sold once against all other valuables whatsoever. This last is clearly impracticable; and so Value for practical purposes is reduced to Price. The General is made Particular for convenience. Hence we have "Prices current," but never Values current.

Now it will be plain to all, how there may easily be and often is a general rise or fall of Prices while a rise or fall of Values is impossible. Price is a relative word as much as Value is, but it does not relate to so many things. Price is specific, and Value universal. Both equally involve buying and selling, but one sale of a single valuable against money leads to Price, while ten thousand sales of the same valuable against other than money would not conduct to complete Value. That would require a sale of this valuable against all other valuables in the world, and a complete statement of the comparative results.

General, or at least universal, changes of Prices in rise or fall in any given country are due to general and great changes in the Money current there. Subordinate changes in other valuables, money being supposed to remain uniform, will of course vary their Prices; but it is impossible that such changes should affect equally or even generally all the various and numberless valuables of a whole country; while some are coming easier, others are coming harder, while some are more desired than formerly others are less desired, and this will bring in of course altered prices, some higher and some lower; but a general rise of all prices, or a general fall in the same, can only come about by great changes of some kind in the circulating medium, that is, the money, of the country. For example, in the United States, between 1862 and 1878 inclusive, a government paper promise, called greenbacks, was the current money of the country; owing to its excessive issue, and to some doubt in the minds of the people whether the paper would ever be redeemed in gold, it soon became depreciated as compared with gold, the premium on which over the paper money varied at different times from 1 to 185 per centum; as all other valuables were then sold against greenback money, which had declined, their prices naturally rose in some sort of proportion as the medium fell; general values remained much as before, but general prices were much enhanced; and when, after the resumption of specie payments in January, 1879, gold became again the standard medium, general prices declined in full accordance with the same universal principle reversed.

(b) Prices, as we have now seen, are only a subordinate form of Values: the universal law that regulates all the variations of them both, within certain fixed limits to be examined shortly, is called the Law of Supply and Demand. This is perhaps the most comprehensive and beautiful law in Political Economy. We shall look at it now only in outline: the filling in will be the pastime and profit of all that is to come.

"Demand" is a technical term in Economics, and accordingly needs to be defined, and then always used in its defined sense. So is "Supply." Demand is the "desire" of a "person" for something in the hands of another person, coupled with the possession of something else capable of buying that something. Mere desire has no function in Political Economy: hungry and penniless children passing by the stalls of a great market, have no influence on the prices or values of the viands, on which they cast their eager glances: only desires accompanied by "efforts" competent to excite the desires and to pay for the efforts of another are a Demand. Supply is the same thing as Demand looked at from the other side. Supply is the correlative of Demand. The Supplyer is a person, who has in his possession something desired by the Demander, and who in turn desires something in the hands of the Demander, when both are willing to exchange their "renderings." There is no economical difference in the position of the Demander and the Supplyer. Each is equally a Demand and a Supply with reference to the other. It is the old and ever-recurring case of Value, the propositions being here stated in their most universal terms.

For simplicity's sake, however, and for convenience, without altering the substance of the definitions a particle, the valuables when looked at as a Demand are practically reduced in all markets to their equivalent in Money, so that Money offered or ready to be offered against any other exchangeable thing constitutes what is called in commercial language a Demand; and this is sufficiently accurate as well as current, although it must always be remembered that each valuable in any market in reality constitutes a Demand for another, and is equally a Supply in reference to that other. Supply is any exchangeable thing offered for sale against any other exchangeable thing. For example, corn in any market is at bottom a Demand and a Supply at once for every valuable offered in that market at that time, say, ploughs for one thing; but in the talk of the market, the presence of corn there, or its being ready to be immediately brought there and offered in exchange for money, constitutes what is called a Supply of corn; money offered, or ready to be offered, in exchange for corn, constitutes what is called a Demand.

On this account Money seems to play a much more important part in trade than it actually does play; the corn is sold in the terms of money, that is, for dollars and cents as denominations of Value; convenience dictates such a reduction of general Value to this particular form of it, because this is found to make easier the ultimate exchange; but there is not one chance in a hundred, as trade runs nowadays in the larger markets, that this seller of corn will take his pay for it in actual money whether metallic or paper; money is never an ultimate product, but only an intermediate one; this seller of corn wants perhaps a plough or some other farming implement, and ten to one he will take for his corn a bill or order in some form on the seller of ploughs, and it will be corn for a plough, each becoming a Demand and a Supply for the other, though money or rather its denominations has acted as an agent in bringing about the final trade; the details of all this in manner and result will be as plain as day when we come to study "Money" and "Credits" in following chapters; while the essential point to be noted here is, that all Valuables are a Demand and Supply as towards one another. In other words, the world over, A market for products is products in market.

What, then, is Market-Value returned in the terms of Money? And what is the universal Law of it?

Market-value is the present rate of exchange between dollars and cents and any other valuable, that can be fairly graded in a class made up of valuables similar to itself; and the law of market-value is the equation of Supply and Demand, that is, the current rate is adjusted when money enough is offered to take off within the usual times the valuables on hand and offered for sale. If Demand for any reason become quickened, and the Supply be not increased, there is competition among buyers for the stock in market, and the market-rate rises or tends to rise. If, on the other hand, Demand become sluggish, the Supply remaining the same, there is a like competition among the sellers to dispose of their stock, and market-value sinks or tends to sink. So far it is the simple action on Value of the element of one "desire" expressing itself through a money-demand, the elements of "desire" and of "efforts" expressing themselves through Supply being supposed to remain stable, and the pulsations in the market-rate follow accordingly.

How far can this simple action go? Demand increasing, Supply remaining as before, market-rate rises: how far can it rise from this cause? Here we must remember that Demand not only acts upon Value, but also Value reacts upon Demand. As Value rises, the number of those whose means or inclinations enable them to purchase at the new rate is constantly diminished: there are ten persons who may wish an article at one dollar, of whom not over four will wish it at two dollars, and perhaps only one at three dollars. Every rise in market-rate then, under the impulse of enlarged Demand, tends to cut off a part of that Demand, that is, to lessen the number of those who will purchase at the increased price; and the rate consequently can only rise to that point, whatever it be, where an equalization takes place between the Supply and Demand, between the quantity of flour, for example, offered at the enhanced rate, and the quantity of money in the hands of those willing to exchange it for flour at the higher rate.

Just so in the reverse way, when Demand is slackened, Supply continuing as before, the market-rate is sure to decline; but declining rates tend strongly in turn to increase the demand by bringing the article within the range of a larger number of purchasers; Society is like a pyramid, each lower stratum is broader than the one above; and so the decline of rates under a weaker Demand is arrested by a stronger Demand coming from a wider circle of buyers, and a new market-rate is determined at the point of equalization between the new Demand and the old Supply. Thus every rise or fall of Demand tends to check itself, and will check itself in all the great classes of valuables, even without any variations in the Supply; everything oscillates under the variations of Demand; while the point of stable equilibrium, if we may use the expression of anything so unstable as Market-value, is always the equation of Supply and Demand.

But all considerable variations of market-rate are commonly checked at an earlier point than the one just indicated by variations in the Supply. A sharper Demand carries up the market-rate, and a higher market-rate commonly acts upon Supply to enlarge it, and an increased Supply too checks the rise of market-rate. Per contra, a slacker Demand lowers market-rates, and lowered rates often lessen the Supply by the action of holders and speculators,—holders withdrawing their stock for a better market, and speculators buying now when the article is cheap to store away until it shall be dearer. Thus rise of market-rate from Demand growing stronger is checked doubly; first, by curtailing the number of would-be buyers, and second, by enlarging the Supply: the fall of market-rate from Demand growing weaker is checked doubly; first, by increasing the number of consumers of a now cheaper article, and second, by a diminution of Supply by the action of holders and speculators. This double and harmonious working of the law of the Equalization of Demand and Supply is one of the most comprehensive and beautiful laws in Political Economy.

Besides this, we must note the effect on Value of conditions in Supply only, Demand being supposed to continue steady. There are three classes of valuables in respect to the law of their Supply. (1) When the Supply is scant, and cannot be increased at all, as is the case with choice antiques and certain gems and paintings by the old masters, their value may rise to any point under the action of Demand, there is and can be in such cases no market-rate, and the individual value will be struck at the point of equalization of the demand then existing with the supply there offered. For instance, the French Government paid, in 1852, 615,300 francs for a painting by Murillo, which had belonged to Marshal Soult. The genuine Murillos are comparatively few, and their number cannot be increased, and their merit causes a strong "desire" to possess them, and their value rises in connection with the limitation of Supply to a point beyond which no one purchaser can be found. When this painting was offered in Paris for sale, many "persons" of course were anxious to buy it, there was but one painting, there could be but one purchaser, value rose under the influence of a sharp Demand, the rise could not be checked by any duplication of the Supply, and the equation was complete and the value for that sale determined when one party distanced all other competitors and offered a sum greater than any one else would give. The same principle controls all sales of this sort, and is practically the principle of the Auction, whose very name indicates its nature in this regard, that Demand becomes restricted to one party, and that the highest bidder.

(2) When the Supply, instead of being absolutely limited, can only be increased with difficulty or after the lapse of time, similar but less extreme results will be observed. Let us suppose, that pianos are selling in some rural community at $300 each, that there are twenty persons in the place who want a piano immediately, that there are but fifteen pianos on hand, and that the number cannot be increased for half a year. The market-rate will certainly rise above $300. How much above? To that point, at which only fifteen of the twenty will be willing to purchase at the new rate. The equation of Supply and Demand will be reached by a rising rate which cuts off five competitors. This is the principle, working only roughly in practice through the estimates and good judgment of dealers and purchasers. A better illustration of this second class of cases is, perhaps, the Grains and other agricultural products. When these have been gathered, there is no more home supply for a year; and any deficiency in the crops will raise their market-rate, not at all in the ratio of the deficiency, but according to the relations of the diminished Supply to a new Demand. Since the abolition of the Corn-Laws in England in 1846, and the resulting ease of grain-imports from abroad, a deficiency of home crops has no such effect on the price of cereals as it had before that time; when, according to Tooke's History of Prices, an expected falling-off of one third in the crops often doubled and sometimes quadrupled the usual prices; which shows that the world ought to become one country in respect to all food supplies, as indeed happily it is now for the most part, each country allowing them to be distributed freely everywhere in accordance with this law of Demand and Supply. Speculation is more busy in grain, in cotton, and in such things generally, because a new Supply can only be had once a year; early information is eagerly sought at the trade centres in regard to the prospects of the growing crops, and has its influence one way or the other on current prices; but the world is so wide and all the parts of it now so closely connected together by steamship and telegraph, that the prices of the great food staples are remarkably uniform over the earth, and Speculation has not the chance it once had to count and "corner."

(3) In the only remaining and by far most comprehensive class of cases, in which the Supply of Commodities and Services and Credits can be readily and indefinitely increased to meet enhanced Demand, and easily withdrawn from market and stored when Demand declines, each rise and fall of market-rate tends to be speedily checked through the mere action of Supply; and the doubly and harmoniously working Law but just now referred to keeps Value in this class of cases comparatively steady all over the world.

(c) It only remains in this branch of the general discussion on Value, to indicate the Limits, within which all oscillations of Value are contained. These extreme limits are specially to be found in the element of Value which we have called "Efforts." We have clearly seen already, that "efforts" (or Labor) are not, as has been often asserted, the cause of Value, but only one of several constituent causes; if Labor be asserted to be the sole cause of Value, the inquiry becomes instantly pertinent, what is the cause of the value of Labor; yet we know, that "efforts" always stand in preconnection with value, and, the mutual "desires" being presupposed, there must always be Limitations of Value lying partly in the efforts made by the person serving and partly in the efforts saved to the person served. In every valuable transaction, each of the parties is reciprocally serving and served, and it is clear, that the two would not exchange "renderings" unless the service which each renders to the other is less onerous than the "efforts" which each would have to make if each served himself directly. For example, it takes a certain effort for me to bring water from the spring for the use of my family; I am willing to pay a neighbor for bringing it for me, but I should not be willing to make a greater effort for him in return than the effort is to bring it myself; neither should I be willing to make an effort for him in return which I regarded just as onerous as the bringing the water myself; and unless there is some service which he will accept less onerous to me than that, I shall continue to bring the water. On the other hand, he will surely not render the service to me of bringing the water, unless it be less onerous to him to do so than the doing that for himself which I am ready to do for him.

This principle, applicable to all exchanges whatsoever, draws on the one side the outermost line, beyond which Value never can pass. It may be asserted with confidence, that no person will ever knowingly make a greater effort to satisfy a desire through exchange, than the effort needful to satisfy it without an exchange. Therefore, it follows, that all exchanges lessen onerous efforts among men relatively to the satisfaction of their desires, and tend to lessen these more and more as exchanges multiply in number and variety, otherwise the exchanges would not take place.

Moreover, within this outermost Limit of Value, which is made by the comparative onerousness of the respective "efforts," there is a second limitation of a similar kind to be found specially in the element which we have called "estimates." The estimate of each exchanger is based at once on his own effort about to be rendered and on his desire for the return service offered: the element of effort in the case of both being considered for the time as fixed, Value will vary according to the varying desire of each for the return service of the other, affecting of course the "estimate" of each, and furnishing also a secondary Limit of Value. To pursue the same illustration, suppose I regard the effort required to bring the water myself as 10; that there are several persons, who would be glad to do that service for me at a return service which I consider as 8; that there are two persons, who are willing to do it for something which I estimate at 6; and that there is only one person, who will do it for a return service which I regard as 5. It is evident, that the extreme limits of that service to me are 10 and 5. Higher than 10 it cannot go, lower than 5 it cannot sink. But why have I before me three possible classes of renderers? Because the persons in each class, while estimating their own efforts alike in the proposed rendering to me, have varying "desires" as towards a possible rendering from me to them, and consequently put differing "estimates" upon the possible transactions. The man who will bring the water for 5 has for some reason (no matter what) a stronger desire for the return than anybody else, and I should of course employ him so long as he would serve me on those terms; if he decline the exchange, I fall back on one of the two persons in the class above him, and Value rises now from 5 to 6, and will be steadier there than it was before; if each of these in turn should give out, I should fall back upon the larger class ready to serve me at 8, and Value would be very steady at that rate, because there are numerous competitors; and by no possibility could it rise above 10. Between 10 and 5 the value may fluctuate, but it cannot overpass these Limits in either direction under existing circumstances.

Therefore we may conclude, that the maximum Value of any Service in exchange will be struck at the point where the recipient will prefer to serve himself, or go without the satisfaction, rather than make the exchange; and the minimum Value of any Service in exchange is struck at the point below which the recipient cannot get himself served even by him who most highly estimates the return service offered.

(4) We come now to the last and most important Inquiry in this initial chapter, namely this, Can there be, and is there, a strict Science of Buying and Selling? Is there a Science by itself, clear and certain, that covers and controls Valuables?

Here we must go slowly, if we would go surely. We must first find out exactly what a Science is in general, and then ascertain in particular whether Political Economy bears all the marks and stands all the tests of the other genuine Sciences. What is a Science?

A Science is the body of exact definitions and sound principles educed from and applied to a single class of facts or phenomena.

The very first condition, accordingly, of any science is, that there be a single class of facts, objective or subjective, that can be separated from all other classes of facts, in the mind by a generalization and in words by a definition, and that such generalization and definition be clearly made and held; the second condition is, that the class of facts so circumscribed and defined be open to some or all of the logical processes of construction, of which the most important are Induction and Deduction; the third condition is, that the subordinate definitions and working principles within the inchoate Science be all educed from and applied to these circumscribed facts in strict accordance with these well-known logical processes; and the last condition is, that these definitions and principles have gradually become "a body," in which there is an organic arrangement of parts, all being placed in a just order and mutual interdependence. There is no old Science, and there can be no new Science, in which these four conditions do not meet and become blended; and the beauty of it is, that this Definition applies to any Science in all stages of its growth. No one of all the Sciences is as yet completed; but just so soon as any correct definitions and principles are drawn from and applied to any class of things clearly circumscribed as such, and these definitions and principles are orderly arranged in a body, there is an incipient Science; and its progress towards perfection will proceed in precisely the same manner in which its foundations have been laid; new facts and principles and definitions will gradually be discovered, and these when reapplied to the class of things out of which they have sprung, will lead to corrections and adjustments and enlargements of the Science; and no matter how far these logical processes may be carried, the general Definition with which we start will also be found ample at the end of the journey.

All of the Sciences without exception have been developed into their present position in just this manner; and they fall easily into three great classes, namely, the Exact, the Physical, and the Moral Sciences. The ground of this triple classification is partly the distinct subject-matter in the three classes of Sciences, and partly the distinctive prominence of one or more of the logical processes of construction in each.

Thus, the class of the Exact Sciences consists only of the formal Logic, and pure Mathematics. These two are distinct from all other sciences, because their logical method of procedure is wholly Deductive. Deduction is the process of the mind, by which we pass from a general truth to a particular case under it, that is to say, from more to less inclusive propositions. Stuart Mill argues at much length in his book on Logic, that even the axioms of pure Mathematics are originally gained by Induction, while others claim that the truth of these axioms is perceived intuitively, but no matter how this point is decided, the construction process of the Pure Mathematics is from the General to the Particular. So it is also with the Aristotelian logic, whose Major Premise, whether only supposed to be true or intuitively perceived or inductively proved is always General in its terms. This is the form of Aristotle's Syllogism:—All sinners deserve to be punished; John is a sinner; and therefore, John deserves punishment.

Physical Sciences are those concerned with the classifications and laws of action belonging to material substances. There are a great circle of these, of which Astronomy, Botany, and Chemistry, may serve as examples. They have been mostly developed since the time, and in accordance with the methods, of Lord Bacon; who, in strong reaction against the Deductive logic of Aristotle, exalted Induction or the mode of generalizing from particulars, as the true way of building up Sciences; and, as the subject-matter of each of the physical sciences is well open to observation and experiment, to Induction and Deduction, and to corrective verifications, both inductive and deductive, the new method proved remarkably pregnant and successful. Each of these sciences has a distinct Class of objects or phenomena to which its attention is directed; the class is circumscribed by the scientific Conception and Definition; its devotees as a rule are skilled in using the Baconian tools; and consequently, its conclusions receive the confidence and control the action of men. All of the Physical Sciences are constantly enlarging "the body of exact definitions and sound principles" connected with their several classes "of facts or phenomena."

Moral Sciences are those concerned with the classifications and laws of action belonging to beings having Thoughts and Desires and Will. The most developed of these sciences at present are Metaphysics, Ethics, and Economics. Each of these is concerned with a single class of phenomena, which may be exactly conceived of and defined, and is open to the logical processes by which alone Sciences can be built up. But Induction cannot march up with quite so sure a stride, nor Deduction descend with so large degrees of certainty, in relation to persons endowed with free-will, as in relation to physical substances held firm in the grip of unvaried law. Still, the doubt always attaches far more to the actions of an individual than to the actions of the masses of men. It is much easier to know human nature in general, than one man in particular, because many Inductions guided by observation and History make it almost certain how masses of men will act under a given set of conditions, while any one may act in a contrary way. Deduction, accordingly, cannot hold quite the same place in the Moral Sciences so far as individuals are concerned, as it holds in the Physical and Exact Sciences; but this lack is perhaps more than made up by other advantages. Experience in the moral sciences corresponds to Experiments in the physical sciences. Then there is the great advantage of Introspection; since each man has within himself the means of interpreting and testing the inductions of Metaphysics, Ethics, and Economics. Then also there is the great resource of Feigned Cases, which, provided only they be cases possible to occur, open up to Reasoning a new means of proving and correcting. Besides these, which it enjoys in common with them, Economics, as we shall soon see, possesses one other great advantage over and above the rest of the Moral Sciences.

Since, then, Political Economy deals primarily with Persons, and only quite secondarily with Things, it is, under the definition and on every ground, a "moral science"; yet it must not be confounded in the least with what is sometimes called the science of Morals, or Ethics. There is one word that marks and circumscribes the field of Ethics, and that word is Ought; there is one word also that marks and circumscribes the field of Economics, and that word is Value. Now, the idea of obligation, on which ethical science is founded, and the idea of gainful exchange, on which economical science is founded, are totally distinct ideas. The imperatives of ethical obligation rest upon the consciences of men, and Duty is to be done at all hazards; guilt is incurred if it be neglected; while pecuniary gains and losses, however large, do not, or at least ought not, weigh a feather against an intuition of Right and Wrong. Economics, on the other hand, does not aspire to place its feet upon this lofty ethical ground; no man is ever under any moral obligation to make a trade; he properly makes it or not, according to his present sense of its gainfulness to himself; and so economic science finds a solid and adequate footing upon the expedient and the useful. Ethics appeals only to an enlightened conscience, and certain conduct is approved because it is Right, and for no other reason; Economics appeals only to an enlightened self-interest, and exchanges are made because they are mutually Advantageous, and for no other reason; each of the two Sciences, therefore, has a basis and sphere of its own, and the grounds of the two are not only independent, but also incommensurable.

We will now apply seriatim to Political Economy the four fundamental conditions belonging to all recognized Sciences, and so determine for ourselves whether it be not a strict science, and thus worthy in its leading propositions of all acceptation.

(a) Every science must have to begin with a definite Class of facts, which lie in an easily circumscribable field, and which are not likely to be confounded with other facts of a differing nature. Economy has such a class of facts, that lie in such a field, and that cut themselves off by sharp lines from all other things. Valuables is its class of things. It has nothing to do with any other class of things. Its field is Value, or Sales, or Exchanges. This field is perfectly definite. Sales are never confounded with gifts, and are never confounded with thefts. They have a distinctive character of their own. They have always been in the world, will always be in the world in ever-multiplying volume, and no one ever mistakes their main features for anything else. Anything whatsoever that is salable, or is about to be made so, comes within the view of Economics, and scientifically it cares for nothing else. While it finds its field definite, it also finds it broad. It has no wish to encroach on other sciences, nor will it tolerate any encroachments on its own. Before anything is sold, or is being made ready to sell, it cares nothing what other science employs itself upon that thing; after the thing is sold, Economy loses its interest in it, and other sciences may take it up if they choose. Valuableness is the one quality that constitutes the Class of things with which the Science is conversant, and it claims complete jurisdiction over all things just so far forth as they have this one quality, and no farther. Now there is in the actual world such a Class of things; its exterior boundaries have been exactly ascertained by a long series of Inductions and Deductions, tentative, corrective, and confirmatory; and accordingly, Political Economy has now in full possession the first grand condition of a Science.

(b) This great class of facts, thus reached by logical Generalization and grasped and held by a mental Conception and fixed by an adequate verbal Definition, is remarkably open to all the logical processes of reasoning, by which alone sciences are constructed, and thus possesses in full measure the second grand condition of the Sciences. Not one logical resource is denied to the economists: all the tools of the scientific workshop are at their hands. Let us now catalogue these in their order.

(1) Induction. This is the logical and universal process, by which the mind naturally passes up from a certain number of observed cases, in which a certain quality appears, to a Generalization, which is a conception of the mind followed by a statement in words to the effect, that all possible cases of that kind will exhibit the quality already observed in the few cases. It has as its basis a confidence in the resemblances and uniformities of Nature; it proceeds upon the axiom that Nature throughout is consistent with herself; and this confidence has been ten thousand times justified in the issue, when it is found that Nature preordained the Sciences by causing grand analogies to run through each department of her works, including man and his works. The structure of the human mind corresponds with these objective resemblances; it seizes upon them, and delights in them, and naturally and joyfully infers and concludes that what has been observed of a part may be safely affirmed of the whole of that kind; accordingly, the world over, when certain things are found to be true in a considerable number of cases, the mind leaps over space and time to a whole class, and frames for itself a general rule or principle, which binds all the cases into one bundle, and thereafter confidently affirms what is known to be true of some to be probably true of all. This is inductive Generalization; and the strength and the joy of it is well expressed by Descartes: "I have thought that I could take as a just generalization that which I very clearly and vividly conceived to be true."

Experience in Economics corresponds to Experiment in the Physical Sciences, and furnishes to Induction all the fuel it can ask for to feed its logical furnace and to forge the chains that bind the Cases to the Classes. Personal experience in buying and selling, local experience in buying and selling, and national experience in buying and selling, with all that belongs to these, the records of which are full to overflowing, afford to the inductive inquirer in Economics an inexhaustible supply of material. Instances abound. Particulars may be gathered up one by one on every hand and linked into the inductive chain. If any doubt be felt about the strength of any one of these chains, another one may at once be linked in terms drawn from another field of Experience with a view to test the strength of the first. Most fortunate from this point of view is the United States, because here there are States with substantive powers of control over most matters of trade within their borders, as well as a Nation with sovereign powers of control over some points of trade within the country as a whole. This feature has given birth to commercial experiments as well as commercial experience of all kinds; and Induction rejoices in all these abundant materials for generalization thus furnished free of cost to Science, though unfortunately not free of cost to the People.

(2) Deduction. This is a logical process exactly the reverse of the first, in that it descends from a generalized statement reached by the inductive process to some particular, or subordinate class of particulars, ostensibly covered by the general maxim. Induction examines a number of particulars, and then makes a leap, it may be a long leap, over all intervening particulars, to its Generalization clamping them. The main use of Deduction is to make sure of any one of these overleaped particulars, which may come into importance, and thus confirm the generalization, or correct it. It is not strictly true, what is often alleged against deductive reasoning, that there is nothing new in its result, that the Induction had already passed through that particular in rising to its Generalization, and therefore to descend to any particular link to examine that, is something useless. The exact truth is, that it is useless to examine again deductively the very particulars that were carefully studied inductively, but on the other hand there is always much actually untraversed territory between these already examined particulars and the inductive generalization, and Deduction is often very useful in carrying us down to questionable points in this territory. Even Lord Bacon, who scorned the syllogism, admits this: "Axioms duly and orderly formed from particulars easily discover the way to new particulars, and thus render sciences active."

We will illustrate this by a reference to Franklin's famous induction to prove the identity of lightning with electricity. Only one experiment, and that a very rude one, was needful in this case; although usually many experiments, or the careful observation of many particulars, are necessary in inductions; but the generalization having been gained, Deduction had a chance to try its hand; it had long been observed that electricity could be conducted from point to point, and if electricity and lightning be identical, then lightning can be so conducted; therefore, deduced Franklin, a pointed iron rod elevated above buildings will harmlessly conduct lightning from the clouds into the ground. Deduction gave mankind the lightning-rod, and so made one point of science "active," as Bacon phrased it; and it is noticeable, that Turgot's felicitous epigram turns on the deductive rather than the inductive side of Franklin's experiment: Eripuit cœlo fulmen sceptrumque tyrannis.

Let us catch up another illustration from the science of Botany, to show how Deduction may strengthen and sharpen an inductive result. The botanists say, that apple-tree blossoms are always five-petaled, because blossoms from a large number of apple-trees in various localities have been observed to have just five petals to the blossom; so far, they affirm inductively, and indeed securely; but they have also reached by means of another induction a much broader law of plant-life, namely, that outside-growers, when they have petaled flowers at all, always have them five-fold; now apple-trees are outside-growers; and therefore, deductively also, and conclusively beyond shadow of question, apple-tree blossoms are five-petaled.

Political Economy is just as open to Deduction as it is to Induction, and the two continually are reaching each other the hands of economical reasoning, not always indeed pursuing each a separate and distinct path to the end, as in the botanical instance just adduced; because in practice the two processes mingle constantly, and neither is carried out in full and due form, since premises used by the mind are often dropped in the statement, and shortened forms of expression take the place of long-drawn-out formulas. But all good reasoning in Economics, as in all other sciences, is analyzable into one or other of these two processes, both based alike on the uniformities of Nature and the structure of the human mind.

Deduction has not quite the same scope and certainty in Economics as in the Physical Sciences, because any one may act contrary to the vastly probable action of many individuals; still, it is a safe and potent process in economics, since it may descend securely from the larger masses to the smaller, even though perchance the individual escape, because of the simplicity and universality and certainty of the impulses that lead men to exchange. John Bascom gives the reason well, why both Induction and Deduction have so firm a grasp upon this science: "Between one dollar and two dollars a man has no choice, he must take the greater; between one day and two days of labor he must take the less; between the present and the future he must take the present. This is not a sphere of caprice, nor scarcely even of liberty; the actions themselves present no alternative, and, if an alternative giving an opportunity for choice does arise, it arises from some partial or individual impulse, from some one of those transitory and foreign influences, which, while rippling the surface, neither belong to nor affect the current of the stream."

(3) Introspection. Everybody buys and sells, and almost everybody watches the action of his own mind enough to see what are his motives in buying and selling, and soon comes to know also that the other party has corresponding motives. Even the child knows perfectly, that it takes two to make a bargain, that each party renders something to the other, that each is glad to part with something for the sake of receiving something from the other, and that this higher esteem put by each on what is taken from the other makes for each the gain of the trade. A very little introspection tells anybody, that were this higher esteem wanting in the minds of either of the two, the trade would not take place at all. Everybody within the pale of compos mentis knows, that, were his own desire for the rendering of another to increase, he himself would offer more of his own rendering rather than forego the trade; and he rightly infers, that what is true of himself is true of all other men; and so, every seller rightly tries to display his wares in such a way as to increase the desire of buyers for them; knowing full well from his own experience in buying that, other things being equal, they will be willing to render him more for them in consequence.

The phrase above, "rightly infers," is based upon the truth, that all men are remarkably alike in certain great departments of action; and that, in no department are they so nearly alike as in this of buying and selling. Introspection, therefore, an easy self-knowledge open to all persons alike, and a personal experience in these matters that everybody gains, give most trustworthy answers to Inductive inquiry along these lines. Trade is natural and gainful, as any person can see, who stops to ask himself why he has made, or is about to make, a given trade; and if natural and gainful to him, equally so for precisely the same reasons to the party of the other part; hence no law or encouragement is needed to induce any persons to enter upon traffic; and any law, or artificial obstacle, that hinders any two persons from trading, who would otherwise trade, not only interferes with an inalienable right that belongs to both, but also destroys an inevitable gain that would otherwise accrue to both. Political economy is very fortunate, accordingly, in being able to make its appeal to the common sense of all men, giving sound starting-points through self-knowledge possessed by all men, guiding to safe steps by means of Induction all who like to generalize and prove, and especially breaking up current fallacies by asking the potent question, "How would you like it yourself?"

(4) Feigned Cases. There are two kinds of these, namely, those which might be realized in actual fact, and those which never can be so realized. The acute mind of the Greeks marked in their flexible language a decided difference between the class of suppositions that might possibly become facts, and another class of suppositions impossible to become facts, by developing a distinct form of expression for each. This distinction must always be borne in mind by those who use or note in economical discussions the expedient of Feigned Cases. Reasoning is always legitimate and often pregnant from suppositions, whenever these are such as might readily become facts of experience, because in that case the argument proceeds upon recognized and inductive resemblances; but otherwise, no inference at all can be drawn from them, because it is an universal truth in Nature and in Logic, ex nihilo nihil fit, out of nothing nothing can come. In plausible suppositions impossible to become facts is a nest of logical fallacies, that need to be watched. A good illustration may be found in the Monetary Conference at Paris in 1881. Delegates were there from all the nations of Europe, from the United States, and even the distant India. Some of these in their eagerness for a factitious ratio of value between gold and silver forgot the important distinction now in hand, and argued of the good results to flow from the realization of a supposition, which in fact never could be realized. Mr. Evarts voiced the French and American delegates in this declaration: "Any ratio now or of late in use by any commercial nation, if adopted by an important group of states, could be maintained; but the adoption of a ratio of 15½ silver to 1 of gold would accomplish the principal object with less disturbance in the monetary systems to be affected by it than any other ratio." The fallacy in this passage is in the words, "could be maintained," which are a supposition, and what is much worse, a supposition contrary to fact, from which all arguing is nugatory. Why it is contrary to fact will be seen at length in the following chapter on Money.

On the other hand, a supposition that may clearly become a fact is a substantive thing, and logical inferences may be drawn from it, just as geometrical inferences may be drawn from a supposed circle: the circle on the page is not a perfect circle—no such circle was ever drawn—but suppose it perfect, as it might possibly be, and argument becomes at once valid. Let us take another Monetary Conference at Paris in 1867 as an illustration: its judgment as voiced by Mr. Ruggles of New York was taken with logical propriety, when the great benefits of an international coinage of gold alone were argued and announced, because, while that was then a mere conjectural project, it was possible any day by mutual agreement among the nations to become a reality. An international coinage of gold is a simple question of equivalence of weights in the coins of different countries: an equivalence of values as between gold and silver coins for any great length of time is neither simple nor possible.

(5) Results measurable in numbers. The four preceding logical processes of proof and construction Political Economy is glad to share with the other Moral Sciences, but this fifth and last one it has to itself alone, and this is its chief scientific advantage over them, and is consequently the main reason why it is already more advanced and more symmetrically developed than any of them. In common with them it has important subjective elements, such as Desires, Estimates, and Satisfactions; in marked advantage over them it has also objective elements, that can be weighed and measured and even hardened into statistics. Economics has an ever ready objective test, which mere mental and ethical and other moral processes never can have from their very nature. The result of each and of all economic transactions may be measured by money, and put down in a ledger, and published to the world in the form of statistics. An economic blunder, whether in legislation or in private action, pretty soon proves itself to be such by the lessened gains of somebody, and these losses can be stated arithmetically; and similarly, an economic improvement evidences itself at once by increased gains coming to somebody; while it may take years and years to work out the results of an ethical mistake, and even then their amount can only be guessed at.

Theories in metaphysics can only be tested by the Reason of men, and reasonable men without apparent bias of motive take opposite views of Sensations and Intuitions and Volitions; while theories in economics, which can be even better tested by the Reason, have an additional and almost immediate and constantly recurring test through men's pockets and the tables of the Census. The people indeed sometimes deceive themselves, and are also too often deceived by others, in these matters of buying and selling; but it is none the less of the utmost consequence to this Science, that all the results of good and bad practice in Economics work themselves at last into a definite shape, into facts and figures that cannot lie. It is not, as in Ethics and Metaphysics, that tendencies and potencies only are ascertained, but everything speedily drifts into results measurable in numbers, which stand out like landmarks against the sky. It is just for this reason, as both the schools of the Roman lawyers admitted, namely, that we have in all cases the Return-Service as the outward expression and measure of the Desire and Effort of him who renders the service, and because it makes no difference which of two services exchanged be regarded as the return-service, that our Science is reared on the firm ground of objective realities, notwithstanding the strong subjective elements that have a constant part in it.

(c) The third condition of a recognized Science is, that the logical processes appropriate to its class of facts have been already carefully applied to them and a certain number of "exact definitions and sound principles" have been already "educed from and applied to" them. We do not hesitate a moment to claim, that this condition also is fairly and fully met by Political Economy, and that this is a "Science" under the definition from every point of view, and particularly from this third point of view; and a few examples will now be given as a specimen merely of the logical work already achieved in Economics. First, Induction more or less busy for two thousand years has given at last an exact and acceptable definition of the Science, and impliedly an exact description of the class of facts with which it is conversant, namely, the Science of Sales, or what is exactly equivalent, the Science of Value; and Deduction at all points along this slow road has helped to correct and to broaden successive imperfect inductions, which an inquisitive and tentative and cautious spirit—the mainspring of Constructive Science—has instituted from time to time.

Second, precisely the same processes often repeated have ascertained beyond question, that there are only three classes of Valuables and the exact differences between them, and that, consequently, only six cases of Value are possible to happen.

Third, so many nations at different times in all ages have lowered the standard of their Money under a misapprehension of its nature and in a vain hope of profit, and a general scale of rising prices following each attempt of this kind having been several times observed and no instance to the contrary, Economists came by Induction to assert the proposition, that falling Moneys cause rising Prices; the proposition stood secure on inductive grounds alone; but so soon as a perfect definition of Money, namely, a Measure of Services, had at last been reached both inductively and deductively, it became at once a safe Deduction from the definition, that rising Prices must succeed a falling Measure. Thus assurance became doubly sure.

Fourth, Introspection gives each buyer and seller such firm possession of his own motive in buying and selling, that he naturally and inductively concludes on the ground that men are substantially alike, that the motive is similar in the party of the other part; each further step of experience in traffic assures him of this beyond a doubt,—each wants to get and does get something from the other of more consequence to him than what he gives; every attempted deviation from rectitude in trade so far forth throws the trader out from opportunity to trade; opportunity to trade is nothing in the world but a market; a market is nothing in the world but men with products in their hands, desiring to buy other products with these; the more men anywhere with the more products in their hands of all sorts to buy with, the better market everywhere for other men (the more the better) with other products of all kinds to buy with; all the appropriate logical processes in action and reaction, all the commercial experience of all men everywhere, and all the true statistics of traffic ever gathered, do but assure the inductive assent to one of the best and broadest of all the Generalizations in Economics, namely this: A market for products is products in market.

(d) Are the definitions and principles already logically educed from and applied to the great class of Valuables orderly arranged in "a body"? This is the only inquiry that remains, in order to determine whether Political Economy is already a "Science" in the strictest sense of that term. It is admitted, that a jumble of even just definitions and principles do not constitute a science, but only these when placed in a just order and interdependence. A "body" implies an organic arrangement of parts. It has been well said of the human body, that all its parts are reciprocally means and ends; the same may be said of every living organic body, whether vegetable or animal; and the same may be said in the way of analogy of every developed and recognized Science. All the definitions and propositions and illustrations in any science should be so arranged, as to show the mutual relations and reciprocal dependence of all the parts, and as to display the whole in harmony and symmetry.

It is as certain as anything in the future can be in science, that new principles will be discovered in Economics as Time and Inquiry go on, and that these will find their place little by little in a fuller and more rounded "body" than is at present possible; while it is also as certain as anything in the future of science can be, that the Outline of economics is already perfectly drawn, that the great class of Valuables will never be enlarged nor be better described, that the category of Commodities, Services, Credits, is completed for all time, and that the analysis of each act of trade into two Desires and two Efforts and two Estimates and two Renderings and two Satisfactions will never yield additional elements. Political Economy is already a body of exact definitions and sound principles educed from and applied to a single class of facts. This body will indeed be enlarged by a future and finer scientific construction, the arrangement and interdependence of its parts will be better exhibited, the form and filling up of the Science within the outline already determined is sure to become more compact, more robust, and more beautiful, as the decades and centuries go by; while, as in the human body throughout all the changes of its growth and mature life, that future body of economic science in all its stages towards perfection will be but the continuation and fuller development of the present "body" of Political Economy.

CHAPTER II.
MATERIAL COMMODITIES.

Valuables fall naturally and exactly into three classes, Commodities, Services, and Credits. The reasons are obvious at first glance, why articles falling in the first class occupied the thoughts and the efforts of men almost exclusively for the first thousand years of recorded history. Commodities appealed to the senses of men: they are visible, tangible, weighable. Some form of personal slavery existed everywhere, and largely withdrew attention from personal services bought and sold; and there was not apparently sufficient personal confidence between man and man in the earlier ages to allow much development of credits, whose ground is personal trust and whose sphere is future time. Commodities, on the other hand, fitted by the efforts of some men to satisfy the immediate wants of other men, all ready for delivery, to be exchanged against other commodities similarly fitted and at hand, took the field apparently in the earliest ages of recorded Time, gradually became very large in volume, opened new routes of travel and transportation, and served to connect in a rough and ready way neighboring tribes and even neighboring nations.

Commodities are the class of Valuables comprising material things, organic and inorganic, fitted by human efforts to satisfy human desires. Cattle were probably among the first things to become valuable, that is, salable; and it is certain, that they became very early in many quarters of the world a sort of Money or standard of comparison among other things exchangeable, and indeed they continue to be such in some quarters to this day. Near the middle of the sixth book of the Iliad occur these lines:—

"Then did the son of Saturn take away
The judging mind of Glaucus, when he gave
His arms of gold away for arms of brass
Worn by Tydides Diomed,—the worth
Of fivescore oxen for the worth of nine."

Gold and silver also became valuable in the ordinary way in very early times, and later became Money or a medium in exchanging other things; and much later other metals came into use as commodities and then too as money; for the Latin word for money, pecunia, derived from pecus, cattle, seems to imply some original equivalence in value between the bronze stamped with the image of cattle and the cattle themselves. Parcels of land subdued and improved by human hands were probably bought and sold in some portions of the world as early as anything was,—at any rate very early. Land-parcels are a commodity under the definition. Another passage from Homer, towards the end of the seventh book of the Iliad, displays some of the commodities in common use during the heroic age in Greece:—

"But the long-haired Greeks
Bought for themselves their wines; some gave their brass,
And others shining steel; some bought with hides,
And some with steers, and some with slaves, and thus
Prepared an ample banquet."

The earliest detailed record of a commercial transaction in commodities, is the purchase by Abraham of the field and cave in Hebron, more than 2000 years before Christ. It is narrated at length in Genesis xxiii. Long before this purchase, however, it is said of Abraham that he "went up out of Egypt very rich in cattle, in silver, and in gold." This formal sale to him in Hebron of the field and cave of Machpelah is in all its parts instructive to us, and full of signs of the drift of those times. It was "in the audience of the sons of Heth, before all that went in at the gate of his city, that the field and the cave were made sure unto him for a possession. And Abraham weighed unto Ephron the silver which he had named in the audience of the sons of Heth, four hundred shekels of silver, current money with the merchant." In the lack of written and recorded deeds to land-parcels, as we have them now, the sale of them was "made sure" before the faces of living men, who would tell the truth and pass on the word. The market-place in those days was "at the gate of the city," where the judges also used to hold their courts, the place most frequented of all, and sales were made "before all that went in" thither; "in the audience of the sons of Heth" was the silver weighed out, and the field made sure in exchange. Then there were "merchants" as a class; silver passed by weight rather than by tale, although it had already passed beyond a mere commodity and had become money, "current money with the merchant"; and even at this day the Bank of England takes in and pays out gold and silver by balance rather than by count, though they be in coined money: it is the more accurate method.

The author of the book of Job, believed to be of great antiquity, and certainly true to nature and to fact in its essential parts, knew very well the modes in which the ancient mines were wrought, and the worth of the commodities extracted:—

"Truly there is a vein for silver,
And a place for gold, which men refine.
Iron is obtained from earth,
And stone is melted into copper.
Man putteth an end to darkness;
He searcheth to the lowest depths
For the stone of darkness and the shadow of death.
From the place where they dwell they open a shaft;
Forgotten by the feet,
They hang down, they swing away from men.
The earth, out of which cometh bread,
Is torn up underneath, as it were by fire.
Her stones are the place of sapphires,
And she hath clods of gold for man.
The path thereto no bird knoweth,
And the vulture's eye hath not seen it;
The fierce wild beast hath not trodden it;
The lion hath not passed over it.
Man layeth his hand upon the rock;
He upturneth mountains from their roots;
He cleaveth out streams in the rocks,
And his eye seeth every precious thing;
He bindeth up the streams, that they trickle not,
And bringeth hidden things to light."

The prophet Ezekiel, who wrote in the sixth century before Christ, incidentally described in his chapter xxvii the commerce in commodities, that then centered in the city of Tyre on the eastern Mediterranean. "All the ships of the sea with their mariners were in thee to traffic in thy merchandise: many islands were at hand to thee for trade: with silver, iron, tin, and lead, they traded in thy fairs: they brought thee for payment horns of ivory and ebony-wood." Among the commodities besides these exchanged in that market, are mentioned by the prophet horses and mules and lambs and rams and goats, wine of Helbon and white wool, fine linen and embroidered work, and riding cloths and mantles of blue and chests of damask and thread, wheat and pastry and syrup and oil and balm, precious spices and cassia and sweet reed, and gold and carbuncles and corals and rubies. These old Phœnicians of Tyre colonized Carthage, and thus bore a vast trade in commodities to the West, going overland into the heart of Africa for dates and salt and gold-dust and slaves, and by sea through the Pillars of Hercules northward to the British Isles for the sake of the trade in tin.

The amount of transactions in commodities, the first class of Valuables, has been constantly increasing, under natural impulses which we shall have shortly to describe, from the dawn of authentic History down to the present moment; and figures are baffled in expressing to our minds the sum of these transactions even in a single country, still more their aggregate in the commercial world. The foreign trade of every country is almost exclusively in commodities, and is only a small fraction of its domestic trade in the same; and so, when we remember that the foreign trade of the United States, for example, under a commercial system designed and adapted to curtail such trade, amounted in 1889 to about $1,600,000,000, and the foreign trade by Great Britain the same year to about 4,000,000,000, we gain a glimpse, we touch as it were the hem of the garment, of the gigantic traffic of the world in commodities alone.

The Production of Commodities is the getting them ready to sell and the selling them.

1. We must look first at the Requisites of such production. They are three, Natural Agents, Human Efforts, Reserved Capital. The following lines of Whittier touch incidentally on these three requisites, and may serve us as a general introduction to them:—

"Speed on the ship!—But let her bear
No merchandise of sin,
No groaning cargo of despair
Her roomy hold within.

"No Lethean drug for Eastern lands,
No poison-draught for ours:
But honest fruits of toiling hands,
And Nature's sun and showers!"

Natural Agents include not only "Nature's sun and showers," but also all the forces and fertilities and materials of free Nature, that men may and do avail themselves of in preparing commodities to exchange with the commodities of other men. Of higher rank in Production than these natural agencies are the Efforts of men in molding them so as to answer other men's Desires, of which efforts the "toiling hands" of the poet are a symbol. They include also the inventive brains and eloquent tongues and the skilful manipulations of every name. The poet's "ship" is an instance of capital, which is always a result of previous toil reserved to help on some future sales. These three elements, Nature, Labor, Capital, conspire in all production of commodities. Nature comes first with her free forces and materials; and then present toil aided by the results of past toil in the form of capital does all the rest in getting commodities ready to sell and selling them. Let us now note each of these three a little more closely.

(a) Natural Agents. The most important point about these is, that they are the free gifts of God, and continue so throughout the complications and transformations wrought on them and through them by Labor and Capital, until the material commodity of whatever kind is finally sold, and so passes out of the purview of our Science. Many of the gifts of God, like the air we breathe and the light in which we recreate ourselves and the water of refreshment drunk from spring or brook, do not connect themselves in any way with commodities bought and sold, and nobody ever thinks of them as salable at all; but it has seemed and still seems to many, as if the natural fertility in a land-parcel, the water-fall along the course of river or stream, the timber-growth which the hand of man planted not, the deposit of gold or coal in the bowels of the earth, and other such-like cases in which natural gifts do connect themselves with human services and then are sold, lifted the Value of the things sold above the point to which the mere human efforts, whether past or present, would raise it. In point of fact, this seeming is not a reality, as will fully appear in the sequel. God is a Giver, and never a Seller; and he has arranged it so in his great world of gifts, that, however much shrewd men may try to monopolize these gifts and then dole them out to other men for pay, they are always practically thwarted in the attempt. God himself never takes pay for anything, and has never authorized anybody to take pay in his behalf; and when this role of Seller of free gifts, which have cost him nothing and which he has not improved, is taken up by any one, he is shortly crowded off the stage in shame by other actors true to Nature.

This is the place for a grand induction. When we study in detail the free gifts of God to this world and its inhabitants, we find they come and keep coming in great classes. This is one of the uniformities of Nature, on whose solid ground men tread and stride in safe inductive reasoning. Can a farmer get pay in the price of his grain for the original fertility of his field, which neither he nor his fathers nor his neighbors have bettered or made more available? Doubtless he would be glad to do so, doubtless he would do so, were it not for the primary fact, that such fertilities as his are in a class of fields, that other men in more or less proximity to him raise grain on other fields, whose original fertility is equal to that in his field; and some of these other men in common competition with the rest as sellers will be willing to part with their grain for a price which will be a fair equivalent for the onerous human services rendered in getting their grain ready to sell and selling it; and the free action of these men as sellers will tend to fix a general market-rate for grain then and there, at which rate all must sell whether they will or nill; and where now is the effect on price of God's free gift? It is still free.

Here is a fine water-fall on the bounding river, the banks are low at this point, just the place for mill and factory, the weight of God's free water will turn the wheels, a hamlet will grow up around them—perhaps a city,—can the riparian owner charge a fancy price for site of dam and mill? He might under some circumstances; but the same river doubtless, above, below, rolling over similar geological strata, leaps and falls at other points also; there are other owners of mill-privileges within hail; besides, there are other streams and tributaries in the region round about; and water has a knack of dropping to the lower levels. God's gifts are broad in classes; competition naturally has free play; natural agents are an essential factor in commodities; so and more so are human efforts; but Values tend perpetually and powerfully under natural competition between men as sellers to proportion themselves to the onerous human efforts involved, and to eliminate completely from all influence on themselves the broad and bountiful gifts of Providence.

What has been observed to be true in respect to two or three or more of the classes of God's free gifts to men, or in men, may almost certainly be inferred to be true of all such classes. Therefore, inductively, such free gifts have no effect on Values to lift them, their influence being eliminated by human competition. Of course, if there be unique cases of remarkable gifts, falling in no class, subject consequently to no competition, one cannot say confidently that the free element in conjunction with the onerous element may not make the return-service greater than it would be otherwise. It may, or it may not, make it greater. There is no living principle at work in such cases, that makes it certain, that the return-service will not be greater. Still, unique cases, if they exist, are of little or no consequence in Economics. They are most remarkably few, at all events. Where come in the solitary gifts, that may later be connected with Valuables, on the round earth as God fashioned it? Gold, silver, diamonds, copper, coal, tin, amber, spice-shrubs, chinchona-trees, and all such things, have been scattered too widely and liberally for individuals to monopolize them, or even combinations of men unless they be assisted by law. Where even are the unique cases of God-given talent or genius in men themselves, such as may become connected with Valuables of the second class? Daniel Webster had his competitors in the Court-room and in the Senate, Ben Jonson did not let Shakspeare have it all his own way on the stage, and even "Milton's starry splendor" did not make Paradise Lost sell well.

We must just note here in passing the supreme importance in an economical point of view of untrammelled competition in the sale of commodities. It is the divinely-appointed means, and the only possible means, of preventing wide-spread injustice through Monopoly. Nothing else in the world can be made effective to estop men from robbing their fellow-men through exchanges artificially restricted; from charging more in the market for their wares than a just compensation for their own efforts; from enriching themselves by impoverishing their neighbors; from worsening the quality of their wares offered for sale; and from relying upon the artificial restrictions put on their competitors, rather than on their own skill and enterprise and the goodness of their goods, for a market. The Common Law of England holds monopolies to be illegal, and the reasons given (11 Coke, 84) are, first, because the price of the commodity will be raised; second, because the quality of the commodity will not be so good and merchantable as it was before; and third, because they are apt to throw many working people out of employment. It is nothing less than a crime against Civilization, than a sin against the clear ordinance of God, than an artificial obstruction to individual and national Progress, to put up bars and barriers by law for the purpose of cutting off competition, whether domestic or foreign, either by putting disabilities in the path of any or through monopoly tariff-taxes, in the buying and selling of useful commodities anywhere.

(b) Human Efforts. Every way unlike the free forces and materials of Nature, indispensable as these are in the production of commodities, is the second requisite in such productions, namely, the onerous efforts of men. Persons are very different from things, from powers, from lifeless materials. Persons act from motives only. Minds lie back of bodily exertions, impelling and guiding them. Such efforts as are needful to mold materials into commodities are only put forth in view of, and for the sake of, a remunerative return; and only rational beings, acting under motives whose goal is in the future, capable of foresight and of adapting means to ends, can put forth such efforts. No degree of training can make even the most intelligent animals capable in any degree of that kind of exertion, which we call Labor; and there is no improvement whatever in the methods of animals in reaching their instinctive ends,—the beaver builds his dam and the bee gathers and deposits the honey exactly as bees and beavers did ages ago.

In the strictest sense, accordingly, there is no such thing as physical labor, because the mental must coöperate with the physical even in the lowest forms of human exertion; and in the same sense there can be no such thing as exclusively mental labor, for the bodily powers conspire more or less in the highest intellectual efforts that are ever sold. Nevertheless, both the phrases, physical labor and mental labor, are convenient and not harmful, whenever on the one side the bodily powers seem to be predominant in the effort, and on the other the intellectual.

It is now to be noticed, that all that men can do, when they labor physically, is to move something. When a man works with his hands or his feet or his whole body, all that he does or can do, is to begin a series of motions or resistances to motion, for this good reason, human muscles in their very structure are capable only of starting motion and stopping motion. All the marvellous results of physical effort in all the world have flowed from so simple a matter as the contraction and expansion of muscle; and the world of materials is so cunningly constructed, that, when these are moved into right position by human hands, or by some form of capital itself the result of previous human handling, the free powers of Nature do all the rest, and valuable commodities are the good outcome. For one example, when the woodman fells a tree for sale, he brings a series of motions (labor) to bear upon the trunk, by means of his sharp axe (capital), and then the power of gravitation (nature) seizes the tree and brings it crashing to the earth. For a second illustration, wool and cotton have by nature a certain tenacity of fibre, and what is more to the point, a certain kinkiness of fibre easily interlinking one with another indefinitely in length; men move these separate fibres in certain relations to each other by an instrument (capital) called a spindle, and the result is thread; then other men move these threads into relations with each other by means of an implement (capital) called a shuttle, and the outcome is a web of cloth; lastly, the tailor moves his shears through the cloth, and then his needles, and the issue is a coat, a commodity, the valuable for which all these processes were gone through with, and by the sale of which all the onerous factors therein are compensated.

Now, since human muscles are soon wearied in action, and since motion is the only thing required of men in the production of commodities, they naturally look around for outside help in this matter; and the first help they lighted on for moving things was the domestic animals, the ox and ass and horse, doubtless domesticated in the very beginnings of society; and as these can be used in so many different places, and for such a variety of purposes, and are so cheaply reared, they are exceedingly useful as a motive power, and will probably never be superseded as such. Inanimate auxiliaries in moving things into right position for the production of commodities, such as the water-wheel and wind-mill, were undoubtedly brought into use much later; and much later still, steam and electricity and other more subtle and recondite natural agents. All of these helps, whether animate or inanimate, do but cause simple motions of the same kind as those caused by the human hand. The most ponderous engine merely reduplicates that which the arm of a child is capable of; while in point of delicacy and firmness of touch, perhaps no machinery can subdivide and apply this motion so skilfully as the human fingers can. It is said that some of the lace made wholly by hand is finer and more delicate than any yet woven by machinery, although the introduction of machinery into lace-making has cheapened lace products in general to a small fraction of their former cost.

What we commonly call "Power," then, by whatever instrumentality furnished, is simple auxiliary motion, additional to that of physical human Labor. Commodities are produced in unlimited quantity and variety by such labor, assisted by the free forces of nature applied by means of animals and implements, which are capital. But such labor is irksome as well as wearisome, and is never expended except in view of a reward, which is secured only from the sale of the finished commodity.

(c) Reserved Capital. We must examine the nature of Capital with care, and follow its varied forms without confusion, because it is the only other factor besides labor in the production of commodities, that has to be paid for out of their sale.

Simplest cases are always the best in economical discussions. Let us take for illustration a recently observed case from the gold hills of North Carolina. All the methods are strongly primitive, but all the elements of production are present. A negro woman is the laborer, the bits of gold scattered in the soil are the free gift of nature, a bored log to divert the water from the mountain stream, and a tin pan in which to gather and wash the sand and gravel, are two crude forms of capital; free gravitation also brings the water through the log, and free gravity carries down the particles of gold to the bottom of the washing-pan, and many other agencies of free nature coöperate in this very simple case of production; and besides the log and the pan, there are doubtless some other forms of capital, at least the whittled plug to stop at need the flow of water through the log. The chief factor in these processes of production is still the laborer, the motions of her hands in stirring the sand and picking out the precious bits at the bottom of the pan are the chief motions, the labor is both physical and mental,—no animal could be trained to adopt means to ends like this negro woman.

It is her capital that now engages our attention. Any Valuable outside of man himself reserved to assist in the production of further valuables is Capital. The idea of growth and increase inheres in the very word, which is derived from the Latin noun, caput, a head, a source, and gives intimation in its etymology of its scientific meaning. The word, caput, is often used in classical Latin for a sum of money put out at interest, and its derivative, capitale, is also used in the same sense, at least in mediæval Latin; and from this form of the word have come into English not only Capital, but also by corruption Cattle and Chattels. Flocks and herds were at one time the principal riches of our Saxon ancestors, and also the principal means of increasing their riches, and in process of time the same root-word came to be spelled differently as applied to animate or inanimate things of value; while the notion implied in the Latin caput, and in the English source, came along in all three of these words; and hence the careful definition of Capital above given.

It makes no difference whether the colored woman bored her own log by means of an item of capital already existing, namely, an auger, or hired another person to bore it for her, or bought the log already perforated, it is an article of Capital, a valuable kept to increase future valuables; she might doubtless sell it for something to a new-comer wishing to operate other sand in the neighborhood, but she keeps it to help herself gather more gold for ultimate sale, she practises what we call in Economics abstinence and must have her reward for this in the form of profits from the ultimate sale of her commodity, gold, as well as a reward for her labor in the form of wages from the same source. As one person furnishes both the labor and capital in this case, there is no actual division of the gross return into wages and profits, as there always must be when separate parties furnish the two essential factors, both of which must be remunerated by the sale of the commodity. What is thus true of the log, is equally true of the tin-pan, and even of the plug also, if it be capable of repeated use and cost something of labor and the help of a previous item of capital, namely, the jack-knife. Our negro woman of the South is a small capitalist as well as a rude laborer, and practises abstinence as well as puts forth exertion, and consequently is entitled to receive profits as well as wages in the return she gets for her gold-dust when she sells it.

We are now beginning to see what the nature of Capital is, and what the motives are for employing it. In the production of commodities Capital is always something that makes easier to the producers the getting ready to sell and the selling of future commodities. The capital always spares more or less of onerous and irksome human exertion. It always mediates between some free force of Nature and some otherwise more onerous effort of men. The sole motive to employ capital in any one or in all of its multitudinous forms from the simplest to the most complex is to throw off upon the ever-willing shoulders of Nature some part of the irksome effort that would otherwise come to the easily-wearied muscles of men. Nature is "good," to use a commercial term, for all she can be made to carry of men's work, through implements devised and machinery contrived to apply, to commodities in every stage of their transformation and transportation till the last, the ever-present potencies of this physical world. These potencies cost nothing. The implements and machinery cost much in present labor and previously created capital. The ultimate sale of commodities must make return for all the forms of capital employed in their production, in the shape of Profits, the reward of abstinence; and for all the forms of direct labor employed in their production, in the shape of Wages, the reward of personal effort.

The beaver gnaws down the tree with his teeth from generation to generation in precisely the same manner; but man is a being more nobly endowed than the beaver, and no sooner had he occasion to fell trees, than something of the nature of an axe suggested itself to his ingenuity. It is true, that his earliest attempts at axe-making were probably of the rudest sort, but just as soon as anything was devised, whether of flint or shell or metal, that rendered easier the felling of a tree, Capital made a beginning along that line of obstacles. Our chief interest in studying the implements of the successive so-called Ages of Stone and Bronze and Iron, is to witness the increasing degrees of ingenuity displayed by those pre-historic men. Among the more gifted races, progress in this direction was perhaps more rapid than we are wont to think it was, since Tubal-Cain, the first artificer of record, is said to have "hammered all kinds of implements out of copper and iron" (Gen. iv, 22). Lucretius, writing in the century before the Christian era, put down the following lines in vigorous Latin, as translated by Mason Good:—

"Man's earliest arms were fingers, teeth, and nails,
And stones, and fragments from the branching woods;
Then copper next; and last, as later traced,
The tyrant iron."

We are at no loss, then, to explain the origin of Capital and its motives. Tools are invented and employed for no other reason than this, that, by means of their help, the human efforts are lessened relatively to the given satisfactions. Since it requires tools to make tools, the progress of this branch of capital must have been relatively slow at first; but, since every advance in mechanical contrivance makes still further advances easier, there is a natural tendency, which facts abundantly exemplify, to a more and more rapid progression in the number and perfection of all implements of production. The same motive that impelled to the first invention, has impelled to the whole series of inventions since, and will constantly impel to further inventions till the end of time. Every step of this progress gives birth to a larger and still larger proportion of satisfactions relatively to efforts; marks an increasing control on the part of man over the powers of Nature; and gives promise for the time to come of greater advantages still in both of these directions. The powers of Nature, such as those which make the grain grow, bring the tree down, turn the water-wheel, impel the locomotive, and send the message round the world, all stand ready to slave in the service of man; but in order to make their aid available for human purposes, there must be a plough, an axe, a wheel, an engine, an electric machine; and it is because capital brings gratuitous natural forces into service, and the more so as capital progresses, that the Value of those commodities produced by the aid of capital tends constantly to decline as compared with those commodities, in the production of which capital conspires less.

It is already plain, that the class, Capital, is a smaller and a peculiar sub-class under the great class, Valuables; nothing can become Capital until it first become a Valuable, and then be capitalized by a distinct act or intention on the part of the owner to reserve it in his own hands as an aid in further production, or transfer it to other hands to be so used, he meanwhile receiving profits as the reward of his abstinence; only a transferable valuable, accordingly, can become Capital in any case, that is to say, it must be either a Commodity or a Credit, since personal services, though they may be sold, cannot be put over into the hands of another to be used in production, and therefore cannot become Capital in any case; and the chief peculiarity of this sub-class, Capital, is, unlike the three great classes of Valuables, each of which is utterly distinct from the other two, so that a Commodity can never become a Credit or a personal Service either of the others, that Capital as a class has extremely flexible limits, and consequently certain Commodities and Credits may easily enough be Capital to-day, and fall back to-morrow into their respective classes of mere Valuables and the next day come out from the class Non-Capital into the class Capital again. The same commodities and credits may be capital at one time, and non-capital at another, though they must be valuable all the time, or cease to be commodities and credits. When it is said that a young man's talents and skill are his "capital," the word of course is used in a metaphorical sense, and the meaning is, that skill and talents are like capital in some respects. Popular language is not scientific.

Cicero wrote long ago: "Optimum et in privatis familiis et in republica vectigal est parsimonia." Abstinence is the best means of revenue as well in private families as in the State. The source of Capital in a distinct act of will saving or sparing from present use (parsimonia) a valuable commodity or credit, and the quick nature of Capital as adding to itself (vectigal) in profits, are both brought out in this Latin maxim, which is rather an expression of an old and ingrained Roman sentiment than anything original with Cicero. It is the very nature as well as the very name of "Capital" to increase itself by rapid increments. It is as well the Stream as the Source. For example, any sum of money soon doubles itself when put out at compound interest, because the original sum increases day and night until it be repaid. It is of the essence of every form of Capital to make growth, because its sole purpose as such is to become an aid to future and further production. A trowel in the hands of a mason, which is capital, pays for itself every day he works with it, and perhaps every hour of the day, in the increased production wrought by means of it. The wheel, which free water turns, though a costly implement, repays that cost a hundred fold in the additional bushels of wheat turned into flour through its aid as capital. So of all implements. So of all machinery. So of all means of transportation: ships, canals, railroads.

There was a strange prejudice in ancient and mediæval times against this natural increase of capital out of its own bowels, as it were, owing probably to this dictum of Aristotle: "For usury is most reasonably detested, as the increase of our fortune arises from the money itself, and not by employing it for the purpose for which it was intended." In 1360, a French bishop, Nicole Oresme, repeats the error of Aristotle under the same rhetorical image: "It is monstrous and contrary to Nature that a barren stock should give birth, that a thing sterile in its whole being should fructify and be multiplied from itself, and such a thing is money." Even Shakspeare catches up the old figure: "Is your gold and silver ewes and rams?" Shylock answers: "I cannot tell; I make it breed as fast." In the light of the three requisites of Production, in the light of the purpose and wisdom of God in arranging the active forces of this world, the prejudice in question disappears, and intelligence rejoices in the ever-increasing use of Capital as the handmaid of Labor, in the quick and sure reward of him who practises abstinence, in the production of commodities constantly made easier and cheaper in all directions, in a scale of comforts for the masses of men assuredly rising, in a divinely appointed force lifting like Christianity itself upon the otherwise sagging condition of mankind.

Capital assumes but two economical forms, namely, Circulating Capital and Fixed Capital. Circulating Capital is all those capitalized products, whether commodities or credits, the returns for the sale or use of which are derived at once and once for all. All circulating capital will be found in one or other of the following sub-forms: (1) raw materials; (2) wages paid out in view of an ultimate profit; (3) completed products on hand for sale; and (4) products bought and held for the sake of resale. The crucial test of circulating capital is the question, Are the returns to be secured by the single use or single transfer of that particular product? Tools, for example, in the hands of him who has manufactured them for sale is circulating capital. Fixed Capital is all those capitalized products, which are purchased or held with a view of deriving an income from their delayed and repeated use. All fixed capital will probably be found in one or other of the sub-forms following: (1) tools and machinery in use; (2) buildings used for productive purposes; (3) permanent improvements in land parcels; (4) investments in aid of locomotion and transportation; (5) products rented or retained for that purpose; and (6) the national money considered as a whole.

2. We will next look at the essential Conditions of the production of Commodities. These are also three, as are the Requisites, namely, Association, Invention, Freedom. More or less will men make and sell to one another commodities in any state of society, in which there is permitted any considerable degree of association of men with men locally or commercially, in which is encouraged in any way the universal spirit of invention or the desire to get hard things done easier, and in which some degree of liberty of action and security of property and equality of privileges is guaranteed; but it is very plain, that the production of commodities will increase in all directions and become the greatest in that age and country when and where are allowed the closest ties of human association both in place and in commerce, the freest scope and largest rewards of inventive genius, and the highest possible degree of liberty and security and equality of rights. Let us illustrate from a state of things in the southern half of the United States during the first half of the nineteenth century. For the most part the land owners lived on isolated plantations widely separate from one another, these plantations were cultivated by gangs of slaves, a system that tends to bring all manual labor into contempt, the poor whites scattered in hamlets felt themselves above the slaves and beneath the masters, intercourse between the three classes was little, opportunity to better essentially their condition was denied to all three alike, there were but few cities sprinkled over the vast territory and these relatively small, the only commodity produced on a large scale was raw cotton, the simple device for ginning this had been invented in the decade preceding by a college boy from Connecticut, the agricultural implements were of the rudest kind, even the coarse shoes for the slaves were bought at the North;—in short, the degree of association and invention and freedom was each so low, that the production of commodities was exceedingly small, even as compared with what that production became in one quarter of a century after the abolition of slavery.

(a) Association. If we may continue for purpose of illustration our childhood trust in the story of De Foe, Robinson Crusoe came to lead a very tolerable life upon his desolate island by means of his own industry directed so as to satisfy his own wants by his own efforts. He did everything for himself, and had no opportunity to buy anything or sell anything. The whole course of such an isolated life could never develop the idea of Value, would require no such word as Commodities or suggest their production, and such a man while solitary upon his island could not possess Property in the true sense of that word. Association is the first main condition of Production, because of the natural obstacles interposed between the isolated man and the supply of his various wants. If any one man try to surmount a considerable number of these natural obstacles, he must miserably fail, because his powers are not adequate to the task; and hence it follows, that, in a state of isolation, men's wants exceed their powers; but now let the same man devote himself to overcome a single class of obstacles, for instance, those in the way of procuring suitable clothing, and his powers are adequate to this, he soon acquires skill in it, he learns to avail himself of the free help of Nature and the facilitating processes of art, he is able to realize large products along his line, and is now ready to offer his surplus in exchange with other men, who meanwhile have been giving themselves each to another class of obstacles, have concentrated efforts and skill upon them, have succeeded by the help of Nature and art in surmounting them, and are now ready to offer their surplus commodities in exchange for others; and, the exchanges beginning to be made in all directions, men find that they thus obtain vastly greater satisfactions for their various desires than they could possibly get by direct efforts: so that we may even say, that, in a state of society through association, men's powers tend to overtake their wants.

Without association with his fellow-men, there is no creature so helpless, so unable to reach his true end, as is man; and therefore it is, that the impulse to association is one of the strongest of our natural impulses. Men come together, as it were by instinct, into society; and, thus associating themselves together, it is soon discovered, not only that there are various desires in the different members of the community, which are now readily met by coöperation and mutual exchange, but also that there are very different powers in the different individuals in relation to those obstacles which are to be surmounted. The tastes and aptitudes of different men are very diverse. There is a great diversity in natural gifts. One man has physical strength, another mechanical ingenuity, a third a philosophical turn, and a fourth a bent and genius for traffic. Now, then, Nature speaks in as loud a voice as she can utter, in favor of such a degree of association and exchange as shall allow a free development of these varying capacities, while they work upon the obstacles to the gratification of men's wants, which lie appropriately opposite to them.

Men must come together either locally or commercially, must learn each other's wants, must compare with each other powers and tastes and opportunities, must come to have some confidence in each other, and then they will begin by rendering mutual services back and forth to experience the better satisfactions and the new strength that exchanges bring. Whatever improves the character of men, and thus leads to greater confidence among them, will enlarge their commerce, and knit closer and wider ties of association and production. Neighborhood associations and productions soon create a surplus to be exchanged for something else with other neighborhoods; parts of single nations however remote from each other find a relative diversity of advantage and an increasing profit in connecting themselves by the ties of trade; and the separate nations learn, though late, that they are only one great family for the grand ends of production and progress. Even within the single nation, there is a strong tendency for particular trades to localize themselves in one spot, as for instance, the manufacture of skin gloves has centered itself for the United States in Gloversville, N. Y.; and so in the great cities that are centres of distribution, for example, the wholesale grocers of St. Paul are on one street, the dry goods houses of Boston are in close proximity, and the booksellers of New York are tending towards each other in place.

Now, this broad association as between persons and nations, instead of detracting at all from the individuality and power of each, is the very thing that brings out the individuality and intensifies the power of each; because it is only thus that full scope is given to the exercise and development of each peculiar power whether of the individual or the nation. Hence the strong tendency everywhere visible in the world of commerce towards Specialties: the old single trades and vocations and professions are constantly breaking themselves up into parts, and each man is taking up that for which he is naturally best fitted and has specially trained himself, and all to the great advantage of individuality and personal power and progress. Mr. Carey is certainly right in his principle (much insisted on in all his books), that the degree of individuality depends on the degree of association, each advancing hand in hand with the other; and he is as certainly wrong in lacking confidence in the natural forces at work tending to the highest degree of association and consequently to the highest degree of individuality. These forces are immensely strong. Men come together as it were by instinct, being conscious of individual feebleness; personal interest is soon seen to follow the bent of social attraction; a just sense of personal dignity and importance in being a substantive part in the ongoings of society enormously strengthens the impulse to association and individuality; the progress of each and all in achievement and elevation still further knits the ties of union; and lastly, a strong feeling of social justice, of what is due to others as well as to one's self,—that every man has an inalienable right to his full opportunity and all that that implies, to buy and sell and get gain, to life and liberty and the pursuit of happiness. When motives and powers and potencies such as these, proven to be universal by broad and constant inductions, fail as economical forces to secure association and individuality, then it will be time to look around with Mr. Carey for some inferior and factitious force.

(b) Invention. This is the second main condition in the production of commodities; because production is processes, getting something ready to sell and selling it; and Nature stands ever ready with her free agencies to facilitate these processes, just so far as the inventive brain of man can contrive to unite the two. Invention is the marriage of a gratuitous force to an onerous process, and the fruit of that union is an easier way and multiplied utilities. There are some in every considerable community, and more in every community enlarged by the natural association but just now described, who have the knack of contrivance, who find their joy in finding a new power in Nature or some new application of an old power; were it not for unhindered association and free exchange, the individuality of these would be effectually repressed, and they would have to drudge for their daily bread; but the importance of inventors is well understood in every progressive community, and under advanced exchanges their livelihood is guaranteed by those who hope to profit by its results while their work is maturing; and Production rejoices and grows strong and throws out unnumbered hands to make instant use of the new power and the easier processes, in order to multiply commodities in number and variety.

As an illustration of all this, the reader will be interested in a brief account of the series of Inventions made in Great Britain during the last third of the eighteenth century, in consequence of which the Cotton Industry was established in that country in such preëminence as has to this day baffled the attempts of all other countries even to approximate it.

We catch our first glimpse of Cotton in the pages of Herodotus, who wrote more than 400 years B.C. in relation to India as follows: "There are trees, which grow wild there, the fruit whereof is a wool exceeding in beauty and goodness that of sheep. The natives make their clothes of this tree-wool." This passage is interesting, as showing that the first comparison of cotton with wool exhibited their resemblance in whiteness and in kinkiness, which latter quality enables them both to be spun into yarn; as showing also, that the Hindoos very early both spun and wove cotton, and then made it into clothes; and as showing lastly, the appropriateness of the original name given to cotton in Europe, namely, "tree-wool," a name by which the Germans still designate it (Baumwolle). If the extreme East furnishes the first notice of cotton, the extreme West follows it next in order. When the Spaniards discovered Central and Southern America in the first quarter of the sixteenth century, they reported that they found the Mexicans clothed in cotton cloth.

But wool was the staple of England. Parliament and people were jealous of cotton, lest it might prove a rival to wool, and actually prohibited the introduction of printed calicoes (so called from Calicut in India whence they were exported). The taste, however, for calicoes increased in spite of the prohibition, which was afterwards intermitted for a revenue duty on plain cotton, which was then rudely printed on blocks in London, Manchester, and elsewhere; but the prohibition of Parliament against wearing printed calicoes was first repealed in 1736. Fifteen years later the United Kingdom imported only 2,976,610 lbs. of raw cotton, and exported only £45,986 of cotton goods; in one century the import of cotton became 500 times larger than that, and the export of cottons 1300 times larger than that; and this prodigious result was due mainly to three or four inventions occurring within short times of each other, by means of which the free forces of nature took the place of the onerous efforts of men.

John Hargreaves, a poor weaver in the neighborhood of Blackburn in Lancashire, was returning home from a long walk, in which he had been purchasing a further supply of yarn for his own loom. Spinning at that time only admitted of one thread spun at a time by one pair of hands, one of which turned the wheel and thus made the single spindle rapidly revolve, and the other hand pulled gently upon the "roving" attached to the spindle and thus drew it out to the requisite tenuity twisted into yarn. The "carding," then effected by rude instruments called hand-cards, by means of which the fibres of the cotton were disentangled and straightened and laid parallel with each other; and the "roving," a process by which the short fleecy rolls stripped off the hand-cards were applied to the spindle and made into thick threads only slightly twisted, were the two preparatory operations for the spinning. All these operations were slow and clumsy, and the consequent expensiveness of the yarn formed a great obstacle to the establishment of the cotton manufacture in England. The improvements made in the loom of that period by Kay, father and son, had shortly before doubled the power of each weaver, and the spinners could not keep up in furnishing material to the weavers.

As Hargreaves entered his cottage from this excursion to get yarn to keep his loom agoing, his wife, Jenny, accidentally upset the spindle, which, as was her wont, she was diligently using. Her husband noticed that the spindle, which was now thrown into an upright position, continued to revolve just as when horizontal, and that the thread was still spinning in his wife's hands. The idea immediately occurred to him, that it might be possible to connect a considerable number of upright spindles with the revolutions of one wheel, and thus multiply the power of each spinster. "He contrived a frame in one part of which he placed eight rovings in a row, and in another part a row of eight spindles. The rovings, when extended to the spindles, passed between two horizontal bars of wood, forming a clasp which opened and shut somewhat like a parallel ruler. When pressed together this clasp held the threads fast; a certain portion of roving being extended from the spindles to the wooden clasp, the clasp was closed, and was then drawn along the horizontal frame to a considerable distance from the spindles, by which the threads were lengthened out and reduced to the proper tenuity; this was done with the spinner's left hand, and his right hand at the same time turned a wheel which caused the spindles to revolve rapidly, and thus the roving was spun into yarn. By returning the clasp to its first situation and letting down a piercer wire the yarn was wound upon the spindle."

The powers of Hargreaves' machine soon became known among his ignorant neighbors, notwithstanding his strenuous efforts to keep his admirable invention a secret, and these neighbors naturally enough concluded that a contrivance, which enabled one spinster to do the work of eight, would throw many people out of employment. A mob broke into his house and destroyed his machine. Hargreaves retired in disgust to Nottingham, where by means of the friendly assistance of one other person he was enabled to take out a patent for his invention, which he called in compliment to his industrious wife the "Spinning-Jenny." This invention gave a new impulse to the cotton manufacture, but had it been unaccompanied by other improvements, no purely cotton goods could have been made in England; because the yarn spun by the new jenny, like that previously spun by hand, was not fine enough nor hard enough to be used as warp, and linen or woollen threads had consequently to be employed for that purpose.

In the very year, however, in which John Hargreaves, the poor weaver, migrated to Nottingham, Richard Arkwright, a poor barber's assistant, took out a patent for his still more celebrated machine for spinning by rollers. In one respect Arkwright was much worse off than Hargreaves: the latter had a helpmate meet for him, the former had a wife who is said to have destroyed the models her husband had made and to have opposed him in every step of his career. But Arkwright was not deterred from his life pursuit by the poverty of his circumstances or the scandalous conduct of his wife. After many years of intense and opposed devotion to the possible application of a simple principle he had conceived in his mind, namely, that of spinning by means of rollers revolving at varying rates of rapidity, he succeeded in contriving and patenting his memorable machine, which, more than any other one invention, localized and concentrated in England the gigantic cotton-industry of the world. Arkwright's idea and achievement was to pass the coarse thread drawn out from the rovings over two pairs of rollers in succession, the first of which revolving slowly fined the thread down evenly and gradually, and then this thread was passed over a second pair of rollers turning with a high velocity and drawing out the line into any requisite tenuity. Thus a cotton thread was spun capable of being used as warp. Cotton cloth as such could now be manufactured in England.

From the circumstance that the mill, at which Arkwright's machinery was first erected, was driven by water power, the machine received the inappropriate name of the "water-frame"; and the thread spun on these rollers was commonly called the "water-twist." The old mode of carding the cotton by hand now furnished the "rovings" too slowly to meet the wants of the new spinning-jenny and the new water-frame; and these great inventions would consequently have proven comparatively useless, had not a more efficient and rapid process of carding the cotton superseded just at the right time the old system of hand-carding. Lewis Paul introduced revolving cylinders for carding the raw cotton into rovings preparatory to spinning, in partial imitation perhaps of Arkwright's principle of spinning the rovings by the rotatory motion of rollers. Paul's machine consisted "of a horizontal cylinder, covered in its whole circumference with parallel rows of cards with intervening spaces, and turned by a handle. Under the cylinder was a concave frame, lined internally with cards exactly fitting the lower half of the cylinder, so that when the handle was turned, the cards of the cylinder and of the concave frame worked against each other and carded the wool. The cardings were of course only of the length of the cylinder, but an ingenious apparatus was attached for making them into a perpetual carding. Each length was placed on a flat broad riband, which was extended between two short cylinders, and which wound upon one cylinder as it unwound from the other."

While the foregoing series of inventions placed an almost unlimited supply of cotton yarn at the disposal of the weaver, the machinery as yet introduced was still incapable of providing yarn fit for the finest grades of cotton cloth. The "water-frame" indeed spun abundant twist for warps, but it could not furnish the finest qualities of yarn, because these were too tenuous to bear safely the pull of the rollers while they wound themselves on the bobbin. Samuel Crompton, a young weaver living near Bolton, possessed the ingenuity needful to remove this difficulty. He succeeded in combining in one machine, which from its nature is happily called the "mule," the several excellences of Hargreaves' spinning-jenny and Arkwright's water-frame. Copying after the latter, the mule has a system of rollers to reduce the roving; copying after the former it has spindles without bobbins to give the twist; and the thread is stretched and spun at the same time by the spindles after the rollers have ceased to give out the rove. "The distinguishing feature of the mule is that the spindles, instead of being stationary, as in both the other machines, are placed on a movable carriage which is wheeled out to the distance of fifty-four or fifty-six inches from the roller beam, in order to stretch and twist the thread, and wheeled in again to wind it on the spindles. In the jenny, the clasp which held the rovings was drawn back by the hand from the spindles; in the mule, on the contrary, the spindles recede from the clasp, or from the roller-beam which acts as a clasp. The rollers of the mule draw out the roving much less than those of the water-frame, and they act like the clasp of the jenny by stopping and holding fast the rove, after a certain quantity has been given out, whilst the spindles continue to recede for a short distance farther, so that the draught of the thread is in part made by the receding of the spindles. By this arrangement, comprising the advantages both of the roller and the spindles, the thread is stretched now gently and equably, and a much finer quality of yarn can therefore be produced."

The ingenuity of Hargreaves, Arkwright, and Crompton had been exercised to provide the weaver with yarn, and had now indeed provided him with more yarn than he could use; the spinster had beaten the weaver, just as the weaver had previously beaten the spinster; and the making of cotton cloth seemed likely to continue sluggish, because the yarn could not be woven any faster than a skilled workman could weave it with Kay's improved fly-shuttle. In the summer of 1784, a Kentish clergyman named Edmund Cartwright, being in conversation with some Manchester gentlemen, one of whom observed that, "as soon as Arkwright's patent expired so many mills would be erected and so much cotton spun that hands would never be found to weave it," replied, "Arkwright must then set his wits to work to invent a weaving-mill." Notwithstanding the unanimous opinion expressed by the Manchester gentlemen, that such a weaving-machine was wholly impracticable, the clergyman himself within three years had invented and brought into successful operation the "power-loom." Subsequent inventors improved the idea which Cartwright originated, and before 1834 there were not less than 100,000 power-looms at work in Great Britain alone.[3]

Substantially the same machinery invented for carding and spinning and weaving cotton was very shortly and successfully applied to the carding and spinning and weaving of wool, because the wisdom of Nature imparted to them both the same sort of tenacity of fibre, the same capacity in that fibre to be spun into a thread of indefinite length by means of the little loops or kinks easily interlocking contiguous fibres into a single thread, which two obvious resemblances gave an identical name to the animal and vegetable products otherwise so different from each other.

The spirit of Invention, one of the chief conditions in the production of material commodities, thus simply illustrated along the line of a single manufacture, may serve us for a sample of similar improvements taken and taking place in scores upon scores of other lines of effort and production. The principle is the same in all cases past and present and still to come, namely this, to throw the strain from the mind and muscles of men upon the forces and agencies of free Nature, with which the world around us is crowded in our behalf, and which are waiting to slave in the service of mankind without rest and without fatigue,—without money and without price.

(c) Freedom. By far the most important of all the conditions, under which the production of material commodities goes broadly forward, is liberty of action on the part of the individual; because, wherever such liberty is conceded, association and invention and all other needful conditions follow right along by laws of natural sequence. By liberty of individual action is meant the practical right of every man to employ his own efforts for the satisfaction of his own wants in his own way, whether directly or through exchange. Each man's right of individual freedom is limited of course by every other man's right to equal freedom, which the first man is not at liberty to infringe; and also, in certain few and limited respects, by what is sometimes called the "general good," the judge of the application of which must be the government under which the man lives. With these limitations, which are few in number and never serious in degree when rightly applied, and which limit in common all other rights whatsoever, the right of every man to buy and sell and get gain is just as fully a right as the right of breathing. It stands on the same impregnable ground. It is a natural and self-evident and inalienable right, with which each man has been endowed by his Creator, to put forth efforts for his own well-being and for those dependent upon him, either directly or by means of efforts exchanged with other men equally free; and he is a slave in spirit and position, who tamely submits to have his own rights of buying and selling curtailed, or to stand by and see the rights of his fellow-citizens similarly curtailed, unless such act of interference and curtailment on the part of his Government be justified by a solid proof that some other public or private rights, which are at least as well based as his own, would be endangered by the exercise of his own.

In what cases may a Government properly step in to regulate or prohibit the buying and selling of its citizens? Hundreds of inductions extending through hundreds of years have been carefully and logically conducted in order to reach a just and comprehensive answer to this question; and in all probability the cases have been inductively ascertained for all time, and they are these: such buying and selling may be controlled and prohibited, as are proven to be contrary (1) to the public Morals, (2) to the public Health, (3) to the public Revenue. All other buying and selling may be safely assumed to be both profitable to the parties to it, and also useful to the Commonwealth in general; and any interference with it by public authority is a high-handed infringement of natural rights, a blow aimed at the life and source of property. These wrongful strokes at private rights, this restriction on the freedom of individuals to exchange products for their own welfare, is now mostly confined in civilized countries to the region of Taxation. Within this region the wrongs are still frightful. Judge Cooley, in his "Principles of Constitutional Law," states the matter as follows: "Constitutionally a tax can have no other basis than the raising of revenue for public purposes; and whatever governmental action has not this basis is tyrannical and unlawful. A tax on imports, therefore, the purpose of which is not to raise a revenue, but to discourage and indirectly prohibit some particular import for the sake of some home manufacturer, may well be questioned as being merely colorable, and therefore not warranted by constitutional principle."

Formerly, governments interfered almost beyond belief with the freedom of their people in all industrial and commercial action; dictating what should and what should not be grown and manufactured, what should and what should not be exported and imported; decreeing by proclamation or enacting by statute, the number of apprentices each artisan might employ, and the years during which these must serve as such, and the conditions under which they might then work as journeymen; the materials to be used in woven fabrics, and even the widths and other minor features of such fabrics, were prescribed in the foremost of the European nations; in the reign of St. Louis of France, a "Book of Trades" was issued under royal authority and is still extant, which organizes minutely and subjects to cumbersome rules more than one hundred separate industries as then practised; England was the country of the great trading "Companies," and of all of these the same may be said as Adam Smith said of the Turkey Company formed in 1579, namely, it was "a strict and oppressive monopoly"; among others there were the African Company established in 1530, the Russia Company beginning its operations in 1553, the East India Company chartered on the very last day of the seventeenth century and going out of existence in our own time, and the Hudson's Bay Company, chartered in 1670 and so having the sole control in trade of a region forty times larger than all England; while the colonial system prevailing for two centuries in all the countries of Western Europe regulated the commerce and controlled the manufactures in the colonies with a single eye to the benefits of the mother country, as those were conceived of under the wretched Mercantile system.

Happily, since governments have become more enlightened than formerly, they are perceiving for the most part that they have not the least right to interfere in those ways or in any ways with the natural right of their people to make and grow freely all material commodities, and to buy and sell these freely in the best markets wherever these markets are to be found; and they are also perceiving, that by such interference incalculable losses of property and indefinite retardations of progress are caused to their people, as well as weakness to themselves as governments through a more difficult gathering of taxes and a harder maintenance of prestige and power.

The only motive to a mutual exchange of services, whether in one or in all of their three kinds, that is to say, to a free production of commodities and services and credits, is always and everywhere the mutual benefit of the two parties exchanging. After all the processes have been gone through with and the exchanges are consummated, all the parties are richer than before, that is, they have more satisfactions, otherwise the processes and exchanges would instantly cease. Therefore, a universally free production benefits everybody, and harms nobody. Moreover, under a system of free production, every man is allowed under the stimulus of self-interest to work away at those obstacles to the gratification of human desires which he feels himself best able to overcome, to follow the bent of his own mind, and to avail himself of all those free helps in his peculiar work which Nature offers to him. Under these circumstances, obstacles give way in all directions; the amount of material products produced is vastly augmented, the number and variety and excellence of personal services proffered are indefinitely increased, and credits compelling the Future to pay tribute to production are multiplied; the diversified and rapidly increasing desires of all persons in such a community are readily met through profitable exchanges; while all peculiar facilities natural and acquired are taken immediate advantage of, the diversities of relative advantage in production become marked in all directions, and a new day of industrial and commercial prosperity is ushered in. Because under freedom all men are sure to dispose of their industrial efforts to the best advantage, they have the strongest possible motives to put them forth; since they can purchase with them what they will and when they will, and where they will. Thus freedom leads to extended association, and also to the invention of machinery and all labor-saving appliances.

3. We are now in position to understand thoroughly the ultimate Grounds of the production of material commodities. We have seen, that these commodities have been multiplying in number and variety and excellence ever since the beginnings of history, that they are everywhere multiplying now at a rate hitherto unprecedented and undreamed of, and that improved and improving methods of transportation by land and sea are now carrying these back and forth to the ends of the earth. What is the principle, under which these things have been done, are now being done, and are certain to be done in the time to come?

The physical and moral obstacles, that Nature has interposed to the gratification of the multitudinous and constantly increasing desires of men, are so great in all directions, that the powers of the individual man are utterly unable to surmount any considerable number of them; while at the same time, the physical and moral powers, adapted under sufficient motives to overcome these obstacles, are very diverse in the different individuals of mankind. Not only is there a surprising diversity in original gifts, but also the powers acquired by gradual concentration of personal effort upon one set of obstacles become exceedingly diverse, as does moreover familiarity in the use of the gratuitous forces of nature which lend their aid towards overcoming these particular obstacles. As the result of one or two or all of these, one man naturally comes to have a vast advantage over others in his particular branch of business, whatever that may be; each of these others by precisely the same means comes to have a legitimate advantage over the first in his own branch of effort, whatever that may be; and if, as always happens practically, the first has desires which the varied efforts of the others can satisfy, and they too desires which his efforts can satisfy, nothing more is necessary to profitable exchanges between them than this diversity of relative advantage at different points.

It is solely because a given effort irksome in itself put forth for another person, in view of and for the sake of a return-service from him, realizes more of satisfaction to both parties than when put forth for one's self directly, that commercial exchanges ever take place among men. The sole ground of these, the principle underlying them everywhere, is Diversity of Advantage between different Men and between different Nations in different respects. All exchanges whatsoever depend on diversity of relative advantage in the production of commodities or services or credits as between the persons exchanging; and this diversity of relative advantage exists by God's appointment primarily among individual men as such, and only secondarily on the ground of the varied soil and climate and position and natural gifts of different parts of the earth. Reserving these secondary considerations, which are quite secondary in importance also, to a later detailed discussion, it is very clear and of central consequence in our science that a diversity of relative advantage in different things displays itself as between the individuals of every community and country large and small. There is no hamlet in any land in which one man has not an advantage over his neighbors in the making of clothes, another in the making and setting of horse-shoes, a third in the building of houses, a fourth in the curing of diseases, and another in the keeping a school; while each of those neighbors has undoubtedly some advantage or other over each of these in some trade or means of livelihood. As a natural result of this diversity any two of these villagers may profitably exchange their respective efforts with each other, provided of course each has a desire for the product of the other, to the manifest lessening of the effort of each relatively to the satisfaction of each, and the more so as the relative superiority of each to the other in his own trade is the greater.

This point will repay some pains in minute illustration. If the blacksmith can make and set horse-shoes only a trifle better than the tailor could do this if he tried, and the tailor can make coats only a little better than the blacksmith could make one if he chose, there will be but a slight benefit to each in their changing works with one another. For the sake of definiteness, let us say, that the tailor's capacity for making coats is 6, and his capacity in making and setting horse-shoes is 5; and also that the blacksmith's capacity for shoeing horses is 6, and his ability in making coats is 5. Each has a relative superiority to the other of 1 in his own trade; and if they exchange efforts, as they probably would under these circumstances, there is only an advantage of 2 to be divided between them.

Now let us suppose (what might easily become a fact), that the tailor by exclusive and augmented attention to the conditions of his own craft carries up his capacity for making coats to 15, the blacksmith's efficiency in both the trades remaining the same as before. There will now be an increased motive to both the artisans for exchanging products with one another, and a larger gain to each than before as the result of such exchange. The diversity of relative advantage as between the two has now gone up from 2 to 11. The tailor can now make a coat much better and quicker than before; and though the blacksmith owing to his inertness can neither make nor set horse-shoes any better than before, still less make coats any better, he will after all by still trading with the tailor reap a part of the benefit of the latter's increased efficiency in making coats; the new coat is at once better and costs less than the previous one; the tailor is still less inclined than before to leave his new and greater advantage over the blacksmith to set himself to shoeing his own horse; even on the old terms the blacksmith can do that 1 better than he himself can, and rather than forego the trade he will naturally offer the blacksmith somewhat better terms than before, or in other words will feel impelled to share with the blacksmith a part of the proceeds and rewards of his own now superior skill and diligence. The trade began on the sole basis of a relative diversity of advantage as between the two mechanics, each in his own craft; this relative diversity, without which no exchange ever takes place between any two persons, has now gone up as between these two from 2 units of advantage to 11 units of advantage; how will these 11 units be divided in this case? Nobody can tell exactly how they will be divided. Two things about it, however, are certain at least in their tendencies and potencies. The blacksmith is sure to get some part of the extra fruit of his neighbor's new push and spirit, while the tailor is sure to get as his own reward by much the larger part of the whole blessed 11.

We must by no means omit to notice the logical inference from this instance, nor fail to make the proper inductive generalization from a sufficient number of similar instances. It is this: no man can make any essential improvement in any of the methods of producing material commodities, without at the same time benefiting other people as well as himself. Under natural law, which is no respecter of persons, he can by no possibility selfishly take to himself the entire fruits of his own growing skill and vigor. The only way in which he can gather in at all the fruits of these is to sell their proceeds in the open market. To broaden his own market for now better and more abundant goods he must offer them to everybody on somewhat better terms than formerly—and the better the terms the broader the market—and he can well afford to do this, because the goods now cost him less of irksome human effort. Every improvement in the production of commodities is precisely of that complexion. The issue of every invention, of every improved process of every kind, is, so far forth, a cheaper product. And this public gain follows, must follow, individual enterprise at single points, even when the great mass of exchangers remain at the old stage of sluggishness. Whatever increases at one point even, and a fortiori at two points, the diversity of relative advantage as between any two exchangers, is of benefit to them both, and the greater this relative diversity becomes the greater the benefit to both.

Now let us see how the matter stands, when tailor and blacksmith at the same time feel and obey the impulses to a more skilled and vigorous artisan life. Suppose the blacksmith too carries up his efficiency in his own trade to 15, just as the tailor has done, the potency of each in the trick of the other remaining as before at 5; under these circumstances when the two come to trade with each other, each has a relative superiority over the other of 10, and there is an advantage of 20 points to be divided between the two; the trade is now ten times more profitable to each than it was at the outset, when there was only an aggregate of 2 units for the division between two parties; and accordingly the motive to an exchange and the gain of an exchange as between tailor and blacksmith are ten times greater than they were before. Therefore we lay down the principle, as inductively ascertained and as universally applicable to all exchanges, that the greater the relative superiority at different points as between the parties exchanging, the more beneficial and profitable do the exchanges become to all the participators in them. If this principle be just, and we may well flatter ourselves that it will be found to be just, it follows, that every man who has anything to buy or sell, is directly interested in the highest success of his fellow-exchangers, that every trade finds its own advantage in the success of all other trades, and that all discoveries and inventions by which Nature is made to pay tribute to art is, restrictions apart, so much clear gain to the world at large. In the light of sound and broad principles, what David Hume called the "Jealousy of Trade" is simply silly.

The mainspring that impels all buyers and sellers to quicken their movements and to improve their methods and thus and otherwise to cheapen their costs of production, is the natural press of competition. Somebody else is offering this product, or will offer it, for less than we are now selling it for, and we must contrive some way by shortened times or cheaper processes or a quicker zeal not to be beaten in this market-race, is the silent argument ever making itself felt on the mind and hand of the producer. Such natural action always increases the general diversity of relative advantage as among buyers and sellers.

But, on the other hand, whatever lessens or threatens to lessen this natural and most beneficial stress of competition among producers of similar commodities at home or abroad, necessarily lessens the motive on the part of these producers to excellence of quality in their goods and to cheapness of their cost, because it makes less the diversity of relative advantage as between these producers and those producers of other commodities against which the first exchange. The units of advantage that would otherwise be divided between the exchangers are diminished; the motives to trade and the rewards of trade are thus lessened to each pair of parties subject to such diminution of competition, and consequently to the community, or nation, or family of nations, as a whole; and accordingly this is the precise place for us to look into the nature and effects of Monopoly, so called, and to perceive once for all, that Monopoly is the enemy of mankind.

Monopoly is a word derived from two Greek words, which mean when combined selling alone, that is, the privilege of selling one's commodity free from the competition to which it is naturally subject by other sellers than the privileged one. Monopoly is thus artificial restraint imposed on some buyers and sellers for the supposed benefit of other buyers and sellers. It is wholly unnatural. It is usually enjoyed under the forms of law. Its beneficiaries commonly cajole or extort from Government by hook or by crook the exclusive privilege of selling certain commodities in a designated market. Their motive is purely selfish: it is simply and solely to get for themselves a return-service artificially enhanced by selling commodities in a legally restricted market. The effect in the first instance usually corresponds to their expectations. The public are at their mercy so far as the designated commodities are concerned.

The general story of monopolies is a dreary stretch of record of human greed and wrong on the one hand, and of wide-spread poverty and suffering and slowly-gathering resistance on the other. We will look at only two instances at present in the long account, premising that, the motives of greed and grab are the same in all instances, and the results of wrong and hate on the part of those oppressed by them are the same also in all instances. Let Macaulay (I, 40) tell us something of the first instance selected for illustration. "But at length the Queen took upon herself to grant patents of monopoly by scores. There was scarcely a family in the realm which did not feel itself aggrieved by the oppression and extortion which this abuse naturally caused. Iron, oil, vinegar, coal, saltpetre, lead, starch, yarn, skins, leather, glass, could be bought only at exorbitant prices. The House of Commons met in an angry mood. It was in vain that a courtly minority blamed the Speaker for suffering the acts of the Queen's Highness to be called in question. The language of the discontented party was high and menacing, and was echoed by the voice of the whole nation. The coach of the chief Minister of the Crown was surrounded by an indignant populace, who cursed the monopolies, and exclaimed that the prerogative should not be suffered to touch the old liberties of England. There seemed for a moment to be some danger that the long and glorious reign of Elisabeth would have a shameful and disastrous end. She, however, with admirable judgment and temper, declined the contest, put herself at the head of the reforming party, redressed the grievance, thanked the Commons in touching and dignified language for their tender care of the general weal, brought back to herself the hearts of the people, and left to her successors a memorable example of the way in which it behooves a ruler to deal with public movements which he has not the means of resisting."

Perhaps some one of my readers may suggest, that these are the words of a Whig-Liberal, and may thus exaggerate the cause of the people as against the monopolists. Well, then, let us hear the words of a high Tory-Loyalist, the historian Hume (IV, 335, 350), in relation to the same monopolies. "The active reign of Elizabeth had enabled many persons to distinguish themselves in civil and military employments; and the Queen, who was not able from her revenue to give them any rewards proportioned to their services, had made use of an expedient which had been employed by her predecessors, but which had never been carried to such an extreme as under her administration. She granted her servants and courtiers patents for monopolies; and those patents they sold to others, who were thereby enabled to raise commodities to what price they pleased, and who put invincible restraints upon all commerce, industry, and emulation in the arts. It is astonishing to consider the number and the importance of those commodities which were thus assigned over to patentees. Currants, salt, iron, powder, cards, calf-skins, felts, pouldavies, ox-skin-bones, train oil, lists of cloth, potashes, anise-seeds, vinegar, seacoals, steel, aquavitæ, brushes, pots, bottles, saltpetre, lead, accidences, oil, calamine stone, oil of blubber, glasses, paper, starch, tin, sulphur, new drapery, dried pilchards, transportation of iron ordnance, of beer, of horn, of leather, importation of Spanish wool, of Irish yarn; these are but a part of the commodities which had been appropriated to monopolists. These monopolists were so exorbitant in their demands, that in some places they raised the price of salt from sixteen pence a bushel to fourteen or fifteen shillings. Such high profits naturally begat intruders upon their commerce; and in order to secure themselves against encroachments, the patentees were armed with high and arbitrary powers from the Council, by which they were enabled to oppress the people at pleasure, and to exact money from such as they thought proper to accuse of interfering with their patent. The patentees of saltpetre, having the power of entering into every house, and of committing what havoc they pleased in stables, cellars, or wherever they expected saltpetre might be gathered, commonly extorted money from those who desired to free themselves from this damage or trouble. And while all domestic intercourse was restrained, lest any scope should remain for industry, almost every species of foreign commerce was confined to exclusive Companies, who bought and sold at any price that they themselves thought proper to offer or exact."

"The Government of England during that age, however different in other particulars, bore in this respect some resemblance to that of Turkey at present: the Sovereign possessed every power, except that of imposing taxes; and in both countries, this limitation, unsupported by other privileges, appears rather prejudicial to the people. In Turkey, it obliges the Sultan to permit the extortion of the pashas and governors of provinces, from whom he afterwards squeezes presents and takes forfeitures: in England, it engaged the Queen to erect monopolies, and grant patents for exclusive trade; an invention so pernicious, that had she gone on during a tract of years at her own rate, England, the seat of riches, and arts, and commerce, would have contained at present as little industry as Morocco or the coast of Barbary."

But, some one will say, Hume and Macaulay are historians, writing long after these events took place, and may likely have been too favorable in their judgment to freedom of trade domestic and foreign. It is indeed true, that both of them were firmly convinced that freedom of trade is an inalienable right as well as an unspeakable blessing to all men everywhere. So, then, let us go back to contemporaries. Let us hear the eye and ear witnesses of the grievances complained of in 1601. Robert Cecil was then prime minister of Queen Elizabeth. He and his father had had more to do in granting the monopolies than any other persons in the realm except the Queen. Said he from his place in the Commons on the 25th of November: "I say, therefore, there shall be a proclamation general throughout the realm, to notify Her Majesty's resolution in this behalf. And because you may eat your meat more savory than you have done, every man shall have salt as good and cheap as he can buy it or make, freely without danger of that patent which shall be presently revoked. The same benefit shall they have which have cold stomachs, both for aqua vitæ and aqua composita and the like. And they that have weak stomachs, for their satisfaction, shall have vinegar and alegar, and the like, set at liberty. Train oil shall go the same way; oil of blubber shall march in equal rank; brushes and bottles endure the like judgment. Those that desire to go sprucely in their ruffs, may at less charge than accustomed obtain their wish; for the patent for starch, which hath so much been prosecuted, shall now be repealed. The patents for calf-skins and felts, for leather, for cards, for glass, shall also be suspended, and left to the law."

Five days later one hundred and forty members of the House were formally received by Elizabeth in person, the Speaker having been instructed to convey their thanks to her majesty; and, after the Speaker's address, he with the rest knelt down, and the Queen gave her answer as follows: "Mr. Speaker, you give me thanks, but I doubt me, I have more cause to thank you all, than you me: for had I not received a knowledge from you, I might have fallen into the lap of an error, only for lack of true information. Since I was queen, yet never did I put my pen to any grant, but that upon pretext and semblance made unto me that it was both good and beneficial to the subjects in general, though a private profit to some of my ancient servants who had deserved well; but the contrary being found by experience, I am exceeding beholding to such subjects as would move the same at first. I have ever used to set the last judgment-day before mine eyes, and so to rule as I shall be judged to answer before a higher judge. To whose judgment-seat I do appeal, that never thought was cherished in my heart that tended not to my people's good. And now if my kingly bounty hath been abused, and my grants turned to the hurt of my people, contrary to my will and meaning; or if any in authority under me have neglected or prevented what I have committed to them, I hope God will not lay their culps and offences to my charge. Though you have had, and may have, many princes more mighty and wise, sitting in this seat, yet you never had, or shall have, any that will be more careful and loving."[4]

These were the last words of Elizabeth to the Commons of England. She died in a little more than a year. In a little less than a year before the death of her successor, the famous Act of Parliament of 1624 declares, that all monopolies, grants, letters patent for the sole buying, selling, and making of goods and manufactures, shall be thereafter wholly null and void. Though this Act, and many others, was violated more or less in the next reign, it effectually secured in the long run the freedom of industry in England; and in the opinion of excellent authorities, has done more to excite the spirit of invention and industry, and to accelerate the progress of commerce in that country, than any other law on the statute book.

Our second instance of Monopolies shall be drawn from the state of things in the United States in this year of Grace, 1890. The monopolies of to-day are secured by means of an instrument called a Tariff, which, later on in these pages, will be fully discussed in its history, inmost nature, and invariable effects. Here it will suffice to say, that a tariff is nothing in the world but a combination of Taxes, which taxes the people of the country, on which the tariff is imposed, are obliged to pay in one form or another. The only word ever uttered by a tariff, the only word a tariff from its own nature can utter, is, Thou shalt pay! The ostensible reason for levying these taxes is the constitutional one of getting money into the national Treasury,—"to pay the debts and provide for the common defence and general welfare of the United States"; but the real purpose of laying these tariff-taxes at present is only secondarily and remotely the ostensible and constitutional one; because, on the authority of Professor Taussig of Harvard University, there is not a single one of over 4000 items of taxes in this tariff, that is designed primarily to get money into the treasury from the pockets of the people, but every one of them is designed more or less and more rather than less to raise the price of domestic goods to our own people artificially by keeping out of the country by means of these taxes on them the foreign goods, which would otherwise come into a profit. In other words, there is no purely revenue-tax in our immense tariff at present, but every item in the enormous list is a so-called and mis-called "protective"-tax.

By this shutting off from domestic goods the natural competition of corresponding foreign goods by means of such tariff-taxes, a monopoly is created at the instance and for the sole benefit of certain classes of privileged home-producers. They can sell alone (monopoly) just so far as other sellers are kept out by these heavy taxes. The goal of all their striving is to get an artificially-enhanced price for their own products at the cost of their countrymen by means of a market restricted to themselves through obstacles excluding foreign sellers. The end proposed by these shrewd manipulators is realized in fact. Domestic prices are lifted on so-called "protected" goods. This is the first effect of the monopoly. It has often been alleged, and with great vehemence by the late Horace Greely, that competition among the domestic producers of such wares will lower their price again to the natural point; but if this is so, what motive have the individual producers to work so assiduously in elections and lobbyings to get on and keep on these tariff-taxes? Again, Mr. Greely, and all others of like association, forgets the admirable generalization of Robert Stephenson,—"Where combination is possible, competition is impossible." Combination among producers to keep up prices is always possible in a market restricted by law. This has been proven on a large scale in the United States during each of the past thirty years: combinations among coal operators to keep up the prices of "protected" coal by restricting the annual output of their collieries; combinations among carpet and other woollen manufacturers to maintain high prices of their fabrics by restricting their workmen to certain hours per day or to certain months per year; have been among the commonest of industrial events in all this interval. Within a very few years past there has come into almost universal vogue among these monopolists a new kind of combination called "Trusts,"—again abusing a good word by making it cover an abominable purpose,—which are probably illegal at Common Law, which only become possible under monstrously unjust tariff laws, and which work wide-spread wrong among the masses of the people.

A second effect of this monopoly (as of all monopolies) is to worsen the quality of the goods sold in an artificially restricted market. The historian Gibbon noticed this fact more than a century ago, and said: "The spirit of monopolists is narrow, lazy and oppressive. Their work is more costly and less productive than that of independent artists; and the new improvements so eagerly grasped by the competition of freedom, are admitted by them with slow and sullen reluctance." Alfred Lapoint, United States consul in Peru, warned the State Department at Washington in 1883 of this poor quality of our manufactures, which were then trying to find a South American market. He wrote: "It is my duty to indicate that great carelessness prevails with our manufacturers; for instance, I was called upon to purchase in the United States a steam pump and boiler, which I ordered from one of the most famed manufacturers, and when it arrived, not alone was the boiler inadequate for the pump, but actually after two months' work the upper tube sheet split in three parts, a proof of its bad quality and construction." As men are, a natural competition among buyers and sellers is just as needful to keep up the quality of goods as to keep down their price. Good quality always costs more of effort and skill and capital than bad quality: why should producers continue to furnish good quality to a market from which a free competition in good qualities is excluded by law? Every tendency of human nature, as well as every relevant fact in history, attests, that poor wares at high rates invariably attends upon tariff-monopolies. Shoddy takes the place of wool. Cheaper crowds out better material. Skilled workmanship is displaced by unskilled. Processes of manufacture are hastened in time, and left incomplete to the damage of the goods in order to save capital. Monopoly is always and everywhere the foe of excellence.

A third effect of tariff-monopoly is to prevent the sale abroad of domestic goods to the same extent and amount as foreign wares are kept out by these monopoly-taxes. This vital and fundamental result is almost always overlooked. If a man or a nation refuse to buy of a proffered customer, they cannot by any possibility sell to him; because buying and selling are reciprocal and synchronous; because it takes two to make a bargain; because material commodities, for the most part, ultimately, exchange against each other; and because the only motive a foreigner ever has to bring his goods hither, is to take in exchange for them our domestic goods at a profit, and carry these hence. To forbid entrance to foreign goods is to forbid exit to domestic goods. Monopoly-tariff-taxes, therefore, so far forth, destroy the market for home products, without creating or tending to create, any other market for them. Such taxes, accordingly, cause a dead loss all around,—to the foreign producer who wants to buy our products with his own, to the home producer who wants to sell his own products against those, and even to the government also as a tax-collector, which can get no revenue on foreign goods excluded by monopoly-taxes.

There is a final and deeper point of view, from which all such monopolies are wholly condemnable. They lessen of necessity,—from their own nature and inexorable operation,—the diversity of relative advantage as between exchangers, on which diversity, as we have now seen, the whole fact and gain of exchanges depend. Taxes on raw materials, for example, whether actually paid on them or used to enhance the price of other corresponding materials as in the tariff-taxes, increase the costs of all products into which such taxed materials enter, and so restrict the market of the home-producer by lessening his relative advantage as compared with the relative advantage of the foreigner over him. He cannot sell so well, perhaps cannot sell at all, his cost-enhanced products. Monopoly-taxes on industrial processes of any kind, on the means of transportation, have similar effects on the cost of products; and of course, similar effects in lessening Diversity, in restricting markets, and in destroying the life of Trade.

Before quitting this subject, it may be well for us briefly to classify Monopolies.

(a) Patent Rights. In the great parliamentary Statute of 21 James I, which declared the exclusive privileges to use any and to sell any merchandise to be contrary to the ancient and fundamental laws of the realm, and all grants and dispensations for such monopolies to be of none effect, two exceptions had been made; the first, in favor of Patents for fourteen years to the true and first inventors of new manufactures within the realm; and the second, in favor of the grants by Act of Parliament to any Company for the enlargement of foreign Trade, of which the East India Company chartered on the last day of the last year of the sixteenth century became the most famous and the longest-lived. Open letters or letters patent, as they were called, giving to inventors exclusive authority to vend for a limited time any chattel or article of commerce, of which a model could be made showing the point and application of what was claimed to be new; and Copyrights, which grant an exclusive property also for a limited time to authors and discoverers of something new and useful, of which a model cannot be made, or, as it is phrased in the Constitution of the United States, "the exclusive right to their respective writings and discoveries"; are a part of the results among all English-speaking peoples of the two exceptions in this famous and beneficent Act of Parliament.

In the United States a patent lasts for 17 years, and is not reissued except by a special act of Congress; a copyright lasts for 28 years, and may be renewed by the author, his widow, or children, for 14 years longer. In the constitution of the new German Empire of 1871, this protection of intellectual property (der Schutz des geistigen Eigenthums) is expressly included in the matters which are to be dealt with by the Reichstag or imperial parliament.

Now while patents and copyrights are a monopoly under the definition, they are quite distinct in their purpose and spirit from the monopolies already described. On the whole, Society does well in trying to protect, by law, inventors and thinkers in the sole use and benefit of their respective products for a brief and specified time. There are large difficulties in the way of reaching this end practically, as is proven by the endless and expensive lawsuits in such cases, but the postulate on which it is attempted is sound, namely, that otherwise citizens would have less motive to think and to invent; since in that case only the public-spirited and the rich could or would devote themselves to an important branch of the public progress. A patent or copyright is merely a return service which Society renders for a service received. It violates no man's right of property, as an ordinary monopoly does, but on the other hand is a provision to protect for a time a new right of property created by the thought and efforts of a deserving class of men. The phrase, "intellectual property," used above in translating from the German, is not well chosen, since we have amply learned that anything is property that can be bought and sold, that simple rights of many kinds are constantly on sale in the market, and consequently that patents and copyrights are at once proper and property because they are a technical return-service for other services ready to be rendered to the community.

(b) Revenue Rights. Once at a court ball, Napoleon the First noticed a lady very richly dressed and wearing splendid diamonds, and on asking for her name, ascertained that she was the wife of a tobacco manufacturer of Paris; whereupon it occurred immediately to the quick mind of the French ruler, that the State might just as well have those great profits as an individual; and the sale of tobacco in all its forms became accordingly a State monopoly in the interest of taxation, and so it has continued to this day, and yields now about 400,000,000 francs a year. Other nations have adopted to some small extent this mode of indirect taxation of their people. By legally cutting off the competition of all private dealers in the taxed article, and by preventing to the utmost of their power its being smuggled into the country, Governments are enabled to sell the article at a price enhanced artificially by the monopoly; but all that the people are made to pay extra under the monopoly, saving the costs of maintaining it, goes directly into the treasury of the State; and, so far forth, becomes an unobjectionable mode of taxation. Under all forms of taxation, the aim should clearly be, that the Treasury receive all that the People are made to pay, except the cost of an economical collection.

(c) Tariff Monopolies. The United States has never undertaken, like France and Germany, to vend directly and exclusively an article taxed by themselves for the sole purpose of revenue; but unfortunately they have undertaken and still maintain (1890) monopolies a thousand times more unjust and objectionable than any such revenue-monopoly can be; they have laid distinct tariff-taxes upon thousands of foreign articles, not with the design of getting revenue from them, but with an avowed and realized design of preventing revenue by means of these taxes, since they have made the taxes so high and onerous as to be in many cases absolutely prohibitory of the entry of the goods, and in all cases more or less prohibitory of such entry. Revenue can only be gotten on goods that come in, while the very intent and result of these taxes is to shut the foreign goods out on which they are levied, so as to give certain domestic producers (who have themselves secured this legislation) the monopoly of the home market in these goods.

This is the very core of public wrong-doing. This is the worst form of monopoly that ever existed in a civilized country. Queen Elizabeth's monopolies, which so roused the ire of the Parliament of 1601, were nothing in enormity as compared with these tariff-taxes. Civilization long ago sloughed off such direct grants of personal privilege as were forbidden forever by the Act of 1624, and accordingly there is no need of mentioning these in the present classification. Tariff-taxes for other ends than pure revenue are the worst monopolies in existence, because (1) they compel the people to pay under ostensible taxes many times more than the Treasury gets from them in actual revenue; (2) they are wholly deceptive in their terms, and their operation is clothed in disguises difficult to strip off; (3) they are always put on at the instance and under the pressure of the man (or men) who expects thereby to raise the price of his own wares at the expense of his countrymen; (4) they create under legal forms however unconstitutional privileged classes in the community; (5) their first effect is invariably to make the rich richer and the poor poorer; (6) their ultimate effect is to impoverish the privileged classes themselves by taking away from them the natural spur of competition and self-dependence, in consequence of which their own goods become poor, and their zeal flags, and they come to lean still more heavily on monopoly-supports; (7) they destroy the market for domestic goods to precisely the same extent as they cut off the market for foreign goods, and (8) their whole retinue of evils is wrapped up in the great fact, that the Diversity of Relative Advantage is thereby diminished both as among domestic producers of commodities and as between foreign and domestic producers.

The expression, "natural monopoly," is sometimes used of those, who, under freedom, and using to the utmost their natural gifts and acquired skill, have distanced all local competitors, and may be said to control the market in their own interest, furnishing the best goods at the cheapest rates. This is in no proper sense of the term a "monopoly." Production has no complaint to make of any such pre-eminence in excellence and opportunity. It harms nobody and benefits everybody. Exchange rejoices over every man and woman and child, who so puts his head and heart and hand into his own peculiar product as to outstrip all others in that one line in point of ease and excellence, and so be able to offer a service at once better and cheaper than any one else can offer it then and there; and when all men and women and children, so far as they are employed commercially, come to possess a "natural monopoly" each in his own specialty, then Exchanges become as profitable and progressive as possible then and there, because the ever-blessed diversity of relative advantage has its utmost limit.

4. We come now to consider the natural Limits, if any such there be, to the Production of material commodities. This point has been much discussed. For example, Dr. Chalmers, a Scotch clergyman of great intelligence, profoundly moved by the condition of the poor in Glasgow, published in 1822 an interesting but not over-sound treatise entitled "Political Economy," in which the proposition is maintained, that the universal market is strictly limited, and therefore that, were it not for the unproductive consumption of the rich and luxurious, and the equally unproductive consumption of national wars, there would soon be a general glut of material commodities, and consequently Production would have to cease for the lack of a vent for its products. Pretty soon we shall be able to detect the enormous fallacy in this proposition. On the other hand, in 1803, Jean-Baptiste Say, a very competent French economist, in chapter xv of his well-known treatise, fully developed this very important proposition, if true, namely, that production may go on indefinitely in all directions without ever a fear of reaching a general glut of products.

What is a market? What is a limited market? What is an illimitable market? A market, as we have already seen in substance, is nothing in the world but certain persons somewhere with return-services in their hands desirous to part with these in order to get, that is, to buy, some other services offered in exchange. Each set of services is equally a market in relation to the other set. A market is always persons having something in their hands to sell. Buyers and sellers are equally a market in relation to each other. Whenever anybody goes forth to buy, he must of course take with him something with which to pay for what he wants to buy, that is to say, he must become a seller the very instant he becomes a buyer; and whenever anybody wants to sell something, he must of course want something already in the hands of somebody else, in which to take his pay, that is, he becomes a buyer the moment he becomes a seller. This helps us to see perfectly what a market is. Defined in the terms of persons, a market is two men, each glad to get the product of the other, and to render in return his own product; defined in the terms of things, a market for products is products in market.

Now, what can limit the universal market for material products? Clearly, it can only be limited either in the element of Desires or in the element of Return-Services. But the desires of all men, even of one man, which the efforts of other men may satisfy, have never yet come to a stand-still. Who ever heard of even one man, who was in possession of all the products of all kinds, that he wanted? Even if there were one such man somewhere, there are millions upon millions of other men, whose desires for products such as the efforts of other men can furnish are unlimited in number and infinite in degree. It is not possible, therefore, that there should be a lack of human desires anywhere, that could put any bound to the production of commodities or hinder in the least its ever-swelling march.

If only two things can limit the universal market, and if there never has been and never can be any lack on the part of some men of Desires which the efforts of other men can satisfy through exchange, can there ever be any lack in the second element of a market, namely, in Return-services? It is not meant to be asserted, that there are not definite limitations at any one time or place, or in the whole world at any given period, in the capacities of men then and there to produce material commodities, with their knowledge of things and powers of invention; but what is meant to be asserted is this, that wherever Production is most busy and universal in response to the desires of some men somewhere, there will be the greatest plenty of return-services, with which to pay for the services of these "some men somewhere" offered in response to the desires of the first set of producers. Therefore, no general glut of products is possible to occur. The more and the more kinds of commodities produced anywhere, the better market that for the more and the more kinds of commodities produced somewhere else. The nearer Industry may seem to be about to come to the goal of a limit, the farther off from that goal it is in reality. The aggregate of human industrial powers has indeed a potential limit at any one moment, but the knowledge of things and the power of invention and the means of transportation are enlarging every moment of time; so that, that potential limit never can become an actual limitation. Human industry will go on enlarging and diversifying itself so long as the world shall stand.

Let us put this vastly important argument in other and briefer words: the Desires of men which the Efforts of other men can satisfy through exchange are unlimited in number and indefinite in degree; and therefore, mutual industrial efforts can continue to be put forth in exchange, until these unlimited and indefinite desires of all men are all met,—a goal which clearly never can be reached.

This proposition demolishes at a stroke the fallacy, that pervades Dr. Chalmers' book but just now alluded to; and, what is more to the present point, demolishes equally fallacies current and prevalent in the United States at this hour. What our national industries need and all they need, what they always needed and all they ever will need, is a quick market for their products; products in market is the only market for products; but the United States for 30 years past has been putting vast obstacles in the shape of formidable taxation in the way of the presence of products from abroad in our domestic market, and consequently and inexorably the market for domestic products has been lost in foreign countries, to the immense and irreparable damage of domestic producers as well as to the foreign producers themselves.

No general glut of exchangeable products is possible to take place in this world under natural liberty and just law, because under these the diversity of relative advantage and consequently the profitableness of commercial exchanges is all the time widening everywhere, tending to bring the whole earth into a commercial and blessed union.

On the other hand, while a general glut of products is impossible to occur under a decent freedom, a partial glut in respect to certain commodities in certain places is very common. Through want of foresight as to a prospective demand, or miscalculation as to its probable amount, particular services are sometimes offered in too great abundance or of a kind not now adapted to the chosen market, and in respect to these the market may truly be said to be glutted. This frequently happens with editions of books; more copies are printed than can be sold at paying prices. Also, when the fashion changes, which is after all less capricious than is commonly supposed, the goods that were fashionable but are so no longer, are very apt to be somewhere in excess of the demand for them. Nothing can then hinder a partial or total loss in their value in the hands of their last holders. Precautions, however, may well be taken to avoid losses of this character, through the cultivation of foresight, and by studying as accurately as possible the nature of human desires and the not altogether irregular changes that have been observed to take place in them. This constitutes the art of mercantile sagacity; and the most successful producers in all the departments of exchange are those who best develop this attainable sagacity, who adapt their particular services closest to the existing and to the coming demands; who, to excellence in the substance of their products, add taste and attractiveness to their form; and who, as the result of this, tend rather to lead the fashions of the many than to follow in their wake. It cannot be wrong to repeat here in substance, what has indeed been said already in another connection, that Production as a general rule is no dead level of monotonous exertion,—no going forth and coming back on precisely the same track,—since its sphere is Life with all its wants and Man with all his desires; since there is scope and verge enough for the development of ingenious minds in almost all of its departments; and since its ultimate goal is beyond the ken of man.

5. We must now study with considerable pains the ultimate facts and the essential functions of Lands in connection with the Production of material commodities. This has always been the most vexed question in our Science; but it is approaching, even if it has not already reached, a satisfactory and final solution. The present writer believes that his own studies and researches have thrown some original and important light upon the perplexing problem of the Value of lands and of their produce. His present readers are surely entitled to his clearest possible presentation of all the facts and principles of this radical question.

The French "physiocrats" of a hundred years ago, founders of the first School in Political Economy, excellent men for the most part as well as good economists in general, thought, that lands were property in a peculiar and eminent sense, that they were the ultimate source of all values but their own, and that consequently lands should bear the weight of the national taxes. English economists, constituting with their followers in other countries the second School in our Science, while not going to the length of the physiocrats, still maintained that the value of lands and of the produce of lands were distinct in important respects from all other values whatever. In our own time and country, Henry George, though belonging for the most part to the third economic School, is a great stickler for a single tax on lands in lieu of all other taxes. We must, then, concentrate all the lights we can gather on these points of dispute and difficulty.

(a) The presumption in science is always against the existence of a few outlying cases, whenever the induction has been long and carefully conducted by many persons, and the generalization appears on all other grounds to be sound and comprehensive. All induction proceeds upon the premise, that Nature is uniform in those essential resemblances that constitute a class of things in science. Nature has so often justified confidence in her essential resemblances even under the greatest differences in external circumstance and apparent diversity, that the presumption becomes immensely strong in her favor, whenever a generalization patiently gathered from many particulars seems to cover the whole ground concerned except a few obstinate-looking items, that have not yet been closely studied. Two to one these items also will presently fall into their predestined place. We have already seen abundant grounds for believing, that Values arise from human services rendered and received: is it at all likely, considering the nature of scientific generalization and the history of all the more advanced sciences, that in Political Economy, lands and their produce should be found to constitute an outlying exception to the law of all other valuable things?

(b) There is one vital distinction to be made at the outset and held to throughout the discussion, namely, that, between all lands as a physical thing, which God made and gave to all men in common without any effort of their own, and some lands now as a valuable thing, in all probability made such through the action of human desires and human efforts brought to bear upon what was merely physical but what has now become valuable. The failure to distinguish between lands as such and valuable lands as such, has always wrought confusion and mischief in the land problem. The two things are utterly different and incommensurable. There are vast stretches of lands on the surface of the earth, to which no value ever attached or ever will attach. They are lands, and that is all. Political Economy has nothing to say of them, and nothing to do with them. Because they are never bought or sold, because they never give birth to "produce," they lie wholly outside the field of Value. Then there are immense areas of lands now valuable, that were once as valueless as the first class. With these Political Economy has a great deal to do, and also with the way in which they passed from valueless to valuable. Then there is a third class of lands, that have not yet been studied as they ought and till recently have not been studied at all, namely, those known to have been valuable at one time, but which have now lost their value either wholly or in large measure. There are such lands as these in every State of our Union, and in every civilized country beneath the sun; and Political Economy has already learned something, and is destined to learn much more, about the processes by which lands pass from out the first great class into the second, and from the second into the third. Valueless, Valuable, Unvalued,—these three words describe to the economist all the lands of the world.

(c) If we may trust the simple record in Genesis, the whole earth was given of God to the whole race, under the direction that they "replenish and subdue it." All the lands were then certainly valueless, although some of them were doubtless possessed of Utility, that is, a capacity to gratify human desires through a direct appropriation, which is a very different thing from Value, which last is the rendering and receiving of equivalents as between two persons. It seems very plain, that under this word, "Subdue," and under the human services implied in that, came in the first idea of ownership in land. When a family or tribe commenced the work of subjugation upon a piece of land, when they enclosed it, settled on it, tilled it, in any way whatever improved it by their own toil, then could first the idea of ownership dawn upon their minds, then first began that land to be capable of value, since now that family might reasonably say to another, If you want this field, you must give us an equivalent for what we have expended on it to improve it. If the transfer took place, what was it that was sold? What was it that was paid for by the party of the second part? It could not be the inherent quality of the soil, it could not be anything that the first family had gratuitously entered upon, because similar free land with all its inherent qualities lay open to occupation on every hand, and the second family would surely say, For as much effort as you have put upon your land to better it, we can make other free land as good as yours, consequently we can give you no more at the most than a fair equivalent for your efforts already expended. If the parcel were sold, therefore, the value of it must have been determined, not by the gratuitous elements involved but the onerous elements involved. The physical thing, land, which cost nothing, has now become the valuable thing, land, through a series of human efforts expended of such kind as call out human desires for the results reached, and justify the rendering of return-services for them; and that which the buyer pays for is never the free old but always the onerous new; new utilities, that cost something, have been added to and intermixed with old utilities, that cost nothing; and solely in consequence of this expenditure of efforts on the part of some men, answering to the desires and calling out the efforts of other men, do parcels of land pass out from the first great class into the second great class. So far as it can be gathered from the nature of the case, and from the known steps of past experience, this is the simple and rational process by which valueless lands become valuable, and less valuable become more valuable lands.

(d) This line of proof, strong in itself, is strengthened by observing how land-parcels gradually and practically pass out from the second into the third class of lands,—from the Valuable into the Unvalued. As it is only human Efforts wisely bestowed upon valueless lands or in some connection with them, that ever make these valuable, so it is, that these Efforts intermitted for a time, or less wisely bestowed, or reckoned less in harmony with the present and prospective desires of other men, invariably cause a loss of value in valuable lands; and, if such neglect or unwisdom of effort continue long enough, nothing is more certain, than that lands so treated will lose their value altogether, nobody will give anything for them, they will drop out from the second class into the third by the same path (only in inverse order), by which they crept at first from valueless to valuable. Under the writer's own observation in different parts of New England, whole tiers of farms once valuable and productive have lost that character either wholly or for the most part, taxes can no longer be collected from them, nobody will really give anything for them in exchange, they are abandoned of their former owners, they are left to lie waste or to grow up into forest again. It follows from all this beyond a doubt, and the logical issue is one of vast consequence to mankind, that Value is no attribute of matter, no inherent quality of lands as such wherever situated, but it comes and goes, it is a relation of mutual purchase between human services rendered and received.

(e) Land-parcels becoming valuable in the way but just now indicated, and so long as they continue valuable, that is, salable, are technically Commodities, according to our triple division of all Valuables. They belong in this grand division, that we are specially studying in this chapter, for the same reason as a horse does or a steam-engine does. Men did not originally make the land as a congeries of matter, neither do men make horses, nor do they make the iron ore out of which most parts of the steam-engine is made; but men do modify bits of the land as God made it, they subdue it, they improve it in manifold ways, they make it desirable in the eyes of other men, and thus or otherwise they come into possession of it, gain for themselves a right to sell it, prepare it to be sold and sell it, on the same principle as men raise and break and train horses and prepare them to be sold and sell them, and just as men by many processes transform the iron ore into a steam-engine and sell that. Ricardo, in his famous doctrine of Rent, says a good deal about "the original and indestructible powers of the soil"; but as a matter of fact, there are no such powers, since the elements and properties that constitute land are all the time changing under chemical and other action; and even if there were such powers, it would still be impossible to separate what God did for the land from what men have done in order to fit it to be sold; and what men have ever been authorized to take pay from other men for what God did in the creation of the world? The simple truth is, that Value is never of God's creation but only of men's exertion. There never was any land anywhere fit for cultivation and sale without more or less expenditure of human labor and reserved capital upon it; and the "powers" of the land, whatever they are, instead of being "indestructible," are in a constant process of wearing out, and require a constant application of labor and capital to keep up their fertility. Valuable pieces of land, accordingly, like all other commodities, derive their utility partly from the free contribution of Nature, and partly from the onerous contribution of men; but, on the other hand, they derive their value, whether the value be then increasing or diminishing, wholly from human desires and corresponding efforts.

(f) It is but a step from this impregnable position to another, namely, that Henry George is wholly wrong in his view, that there is Value in lands as God made them and gave them to men in common; and consequently, wholly wrong in his doctrine, that a single tax on land values would be just and equal to land owners, and might well be made to take the place of all other taxes on all other persons. He says: "If we are all here by the equal permission of the Creator, we are all here with an equal title to the enjoyments of his bounty." What bounty? If he means the original utility which God put into all lands in common, and which certain men have done nothing to better, there is nobody to dispute his proposition. But he does not mean that, because there is nothing of any significance that could come out of that. What he means is, that it is God and not man who makes lands valuable. He makes no distinction between Utility and Value in lands. He lumps the two together in one, and calls the aggregate the Creator's "bounty." He goes on to say: "There is on earth no power which can rightfully make a grant of exclusive ownership in land." Well! Is there any power on earth which can rightfully deny to any man or family the proprietorship of his own exclusive efforts, nobody's else rights being infringed thereby? Or can deny to him or them the results of such efforts, however embodied? When valueless lands are made valuable by human efforts expended to that end, does not the "value" belong to those who made it? When valuable lands have been made more valuable than they were by the efforts and foresight of their owners, the rights of others untouched, does not the "increment" belong to those who have created it? The truth is, if Henry George's powers of radical analysis had been at all equal to his remarkable power of rhetorical presentation, the world would never have been treated to his popular and imposing land-fallacies. Prudhon's "Property is theft," and George's "Single tax on land," rest on the same basis of socialism.

(g) All valuable land-parcels are material Commodities, made to be such by onerous human efforts of some sort expended upon or in some connection with the free Utilities furnished by Nature; the utilities are one thing in origin and function, and the values are a very different thing both in origin and function; and the present point is, that nearly all valuable lands everywhere are Capital also, that is to say, products reserved to aid in a further and future production. Capital is a relatively small class under the immensely large class Values. Capital is by no means coincident with Commodities, since vast lines of the latter are consumed with no reference to a further production by means of their use. But capital is always either commodities or claims, and valuable bits of land are always commodities and nearly always capital; because all tillage and pasture lands, all forests grown for wood and timber, and lands of all sorts rented or held for resale at a higher price, are capital under the definition, are "products reserved as an aid to further production." The peculiarity of all farming lands is this, they are themselves commodities, in whose creation God's free gifts and men's onerous labors have conspired; and they are held in reserve by their owners as capital, for the sake of producing by their means with the help of more of God's free gifts further valuable commodities, such as grain, and fruit and timber. Farms in their highest reach of previous culture still need for crops the sun and the rain. Indeed the sun is the most useful and powerful force in the world. Oh! how it warms and lifts and quickens! Give it and the rain and the dew but a fair chance on lands properly prepared for them, and endless fields blossom like the rose and are white to the harvest!

Agriculture always has been and always will be the vocation of the masses of mankind. Under a fair freedom, and a decent law, and a reasonable industry, Agriculture is always profitable; because it is natural, that is, designed by God for the welfare of mankind; because it lies at the basis of all other industries,—most of the food of mankind, most of the raw material of all manufactures, most of the subject-matter of all national and international commerce,—come out of the farms of the world; because it has been ordered so in the nature of things, that, under a tolerable freedom, a given amount of agricultural products tends constantly to buy, that is, to pay for, more and more of almost all kinds of manufactured products, for a reason to be explained shortly, thus tending strongly to uplift the farming masses in a scale of comforts; and because there is no other main line of human activities so constantly and so prodigiously and so gratuitously assisted by Natural Agents as is Agriculture. As Milton has profoundly expressed it in the "Hymn to the Nativity," the Sun is indeed to Mother Earth "her lusty paramour." But at this very time of writing a wail is coming up in ever deepening tones from Italy and France and Germany and Russia and especially the United States, that a colossal blunder in legislation common to all these countries now, say rather a colossal crime of the powerful few against the humble many, in the shape of tariff-monopolies, neutralizes in large part these natural advantages of agriculture, makes farming unprofitable and farmers unable to pay their taxes, diverts young men in increasing numbers from the farms to the towns, plasters the lands over with mortgages, shuts out from their natural markets the products of the land, thus depressing their price, and shuts off from farmers by outrageous taxes their natural supplies, thus augmenting their price. Farmers in all these countries are revolving between the upper and the nether millstones. Count Giusso, ex-Mayor of Naples, and now a deputy from that city, has just made a speech in the Italian Parliament, which sets forth in strong terms the great depression in Agriculture, and the critical condition of the public finances, brought about by the new policy of protectionism there. He says: "The Utopian idea of creating an industrial Italy on the ruins of an agricultural Italy, has been a colossal error big with disastrous results. We have preferred the shop to the land; we have preferred the coal we do not possess to our Italian sun; we have preferred the motive force of steam to the most powerful motive force in the universe, the sun; and we are naturally suffering the sad consequences." Exports increased in Italy in 1888 by $24,000,000, and imports by $42,000,000; and the Count quotes the cry coming up from one end of the Peninsula to the other: "Give us the means of selling our products, and we will pay the taxes." England is the only considerable country in the world, whose customs-revenue increased in the fiscal year 1888-89 over the year before; this English increase was over 5 per centum, which means an increase both in imports and exports, whose movements are almost absolutely free so far as England is concerned; while in all the countries mentioned above, which are under a different system in that respect, there was a deficit of revenue from tariff-taxes as compared with the year before, and a decrease in both exports and imports.

(h) If nearly all bits of valuable lands be capital, as we have just seen strong grounds for believing, then it follows of course, that the Rent of leased lands whether for buildings or harvests is the same in nature with the Interest on money loaned, and is the measure of the service rendered by the owners to the actual users of the Capital. This proposition, seen in its radical proofs and in its logical corollaries, takes the very life out of Henry George's land-theories, and out of the popular remedies thereto annexed. The writer firmly believes also, that this proposition in the grounds of it and in the inferences from it might have been used by Mr. Gladstone and his followers with telling effect in the animated discussions of the Irish land-question in the British Parliament during the decade 1880-90. In the debates on the Irish Land Bill passed in 1881, the representatives of the land-owners in Ireland held to their right to take all the rent they could extort by the help of the law; on the other hand the representatives of the Irish rent-payers held to their right as cultivators and maintainers to withhold rent in large part or altogether; and Mr. Gladstone, as representative of the nation, while insisting on the right of the owners to certain rents, insisted equally on the right of the cultivators to certain important privileges in the soil. Our present proposition with those that spring out of it, though it was not used by Gladstone, as it might well have been to smooth his pathway through the roughness of that legislation, yet justifies at one and the same time the discontent of the Irish rent-payer, the claim of the Irish land-holder to an assured rent of some sort, and the fundamental principle of the Irish Land Bill of 1881. That bill gives a certain modified ownership and control to the actual cultivators and maintainers of the soil. That is right.

The principle of land-values herewith enunciated, their uprise and increase and frequent decay also in all land-parcels, justifies completely the concessions to tenants in that bill; while the old and still commonly accepted English principles of land, and the false yet famous doctrine of Rent promulgated by Ricardo at the beginning of the century, are wholly against Gladstone and his concessions in that bill. Let us now see whither simple analysis and logical processes will quickly bring us in this whole matter. Valuable land was once valueless, and always remained so, until, by virtue of human efforts expended upon it or in some direct connection with it, coupled with the desires of certain other men for that land or its produce, accompanied with a readiness on the part of these men to render some equivalent for it or its use, first imparted value to that particular patch; moreover, it has been found in practice ten thousand times, just as one would expect, knowing the origin of value in general, that, unless human efforts are further and constantly expended on or in connection with that piece, and unless desires of other men continue to turn towards it in the way of exchange, its value will silently and inevitably escape from it; therefore, whoever has come into possession of that valuable piece of land by purchase or inheritance, and foregoes the use of it in favor of another as a tenant, is morally and commercially entitled to the stipulated return for that use, which is rent; but also, if that other, aside from the current use which is always a wearing-out process, contributes in any way to the continuance and increase of the value and fertility of the land, then and so far he gains rights in the land and becomes a sort of joint owner of it, since what he has done in the way of maintenance and improvement is inextricably mingled with what the other owners or users have done, and is of the same nature with that; and, therefore, the modified ownership of certain tenants recognized in Gladstone's bill is in strict accordance with ultimate justice, as it is also in strict accord with right, that the legal owner should continue to receive a return in the shape of rent for all the fertility and opportunity actually contributed by him, and no more. The discontent of the Irish peasantry has largely come from an instinct or intelligence more unerring than the economics of the land-owners, namely, that they are called on to pay rent for what they themselves have contributed in addition to the rent for what they have received. The true origin of value in land, and the only way in which value in land is kept up, seems to have penetrated deeper into the minds of Irish tenants than into the minds of many British statesmen.

(i) If the bulk of all valuable land-parcels be capital, as it is, then one might expect beforehand to find a law of diminishing returns from such lands, agricultural labor and skill remaining the same; because, all capital is tools made such by the expenditure of human efforts on changeable material, and then by the practice of abstinence, and tools from their very nature are always wearing out. Increase of efforts in connection with any form of capital unimproved by new inventions and uninvigorated by fresh skill, though they may indeed increase the aggregate return, cannot, for the reason just given, secure an increase proportioned to the increase of the efforts. The English writers generally, and Mr. Ricardo in particular, justly lay much stress on this proposition, although they have not taken lands to be capital, and have proven the law of diminishing returns in a different way from ours, and consequently have not set the propositions of land in their best and most ultimate relations. Their method of proving the law, however, is short and conclusive: If by doubling the efforts upon a piece of land, double the produce could be secured, and by quadrupling it, quadruple, and so on, there would be no reason why any man should ever cultivate more than a square acre, or even a square rod. He has a strong motive to confine his culture to a small space, just so long as the amount of produce is in the ratio of the efforts expended, because there is less locomotion of tools and fertilizers and crops. The fact that he extends his culture from one acre to another, and then to distant acres, notwithstanding the inconvenience and expense of transportation, is an irrefragable proof of the proposition in question. Increase of agricultural efforts and expenditures on a given space of land will secure a larger amount of produce, but as a general law, the increased amount will not be proportioned to the increased expenditure.

It is through this law of diminishing returns, that the Creator has secured the gradual occupation, by men, of almost the whole earth. There is a strong and natural tendency to leave the old acres to advance upon new, the old countries to emigrate to new, whenever the returns begin to bear a more unfavorable ratio to the labors bestowed. The farmer will advance from the first to the second acre as soon as he thinks that more produce can be obtained from it by a given amount of efforts than can be gotten by a like expenditure of additional efforts upon the first acre, allowance being made for the increased inconvenience; and so, cultivation has gradually extended itself and men have become dispersed over the whole earth. Other principles leading to dispersion have undoubtedly co-operated, but this is the fundamental one, operative at all times, changing the course of population, and consequently of empire.

(j) It follows from the points already made, that all permanent improvements in agriculture retard the operation of the law of diminishing returns. The recent introduction of the silo, for example, upon the long-used and wearing-out farms of New England promises, if the public law would quit throwing in obstacles, to help restore the fertility of many of them. The discovery of new and more available fertilizers, the invention of better agricultural implements, the light thrown by chemistry upon agriculture, the consequent adoption of better methods of culture and rotation of crops, the more perfect adaptation to the various soils of the kinds of produce sought to be raised from them,—all these and similar improvements tend to increase the ratio of produce to the labor, and to disguise the law just established. The lands that are now under cultivation may be made, under more skilful modes of culture to yield indefinitely more than at present, and the vast still uncultivated lands of the world may come to render an incalculable quantity of food to the world's population; but yet, as improvements are naturally less continuous in this than in most other departments of production, as invention has much less play, as there is less opportunity for the division and co-operation of laborers, as nothing can materially shorten the time during which the fruits of the earth must ripen, it is certain that possible improvements will never override the law of diminishing returns; and, consequently, that the value of agricultural produce tends constantly to rise relatively to manufactured products generally.

(k) The last point to be made under the general topic we are now discussing, is, that the best tenure of lands in the interest of the production of material commodities is the fee simple in the hands of the actual cultivators. This is the old Teutonic holding; but special circumstances in the British Islands have gradually changed these small holdings once cultivated by the hands of their free owners into large estates, the parts of which are leased out at will or for a term of years to tenants or "farmers" as they are there called, who, in turn, being small capitalists, as the land-owners are large capitalists, furnish the stock and hire the laborers and thus become the actual cultivators, and even often sublet parts of their own leased holdings to tenants of the next degree below, who can furnish less stock and can hire fewer laborers. The word "farmer" as used in the United States has a quite different meaning from that it bears in Great Britain; it means here a man cultivating his own fields with his own funds in his own way, and it means there a man cultivating another's fields with his own funds in a way and on terms made a matter of contract between the two; and these two modes of culture are so distinct that they are not likely to lie alongside of each other to any great extent for a very long time in the same country. Since her great Revolution, and under the action of the law requiring the equal partition of every man's landed estate among all his children, France has had for the most part the small holding tilled by the owner's own hands, instead of the great estates of the old régime, the average being about 14 acres to each owner, and nearly one fourth of the entire population being proprietors of land either in town or country; in the United States the plough is guided almost wholly by the man who owns the soil he tills; while in Great Britain the original peasant proprietor has almost entirely disappeared. Each system has its advocates and arguments.

The question at bottom is, whether capital in the form of tillable land is more effective when held in large masses and loaned out to men, who possess small capitals in another form than land, and are willing to apply these for a return upon that land, or when held in small masses and used as capital by the owners themselves, who also own some capital in another form than land and are willing to apply this to their own profit upon their land. We hold, that the latter method is better than the former, both for the maintenance and improvement of the land itself as capital and also for the current production of commodities from it, because, (1) when one owns the farm he works, from the very nature of permanent ownership he takes a greater interest in it, perhaps he has inherited it from his fathers, perhaps he has bought it and paid for it at the hardest, at any rate it is his own, and as all men work from motives and the energy of the work is proportioned to the constant press of the motives, then must the owner of the capital, whose abstinence makes it capital, be under the strongest possible motive at once to improve his capital and also to make the current produce from it as great as possible, since the capital itself and all it yields is his own; moreover, (2) ownership improves the moral character of the cultivators, it tends to make them industrious, thrifty, frugal, independent, hopeful of the future, anxious to give their children better privileges than they themselves had, and it would seem as if the masses of men are educated by nothing so much, at least by nothing more, as and than by the ownership of land, wherever such tenure is possible and easy to the masses; and (3) the outward testimony is abundant from many lands, that the peasant proprietor is a happier and more virtuous man, a more productive and progressive one, than the mere tenant and farm-laborer, while there is much perhaps less conclusive testimony that leased lands are inferior in point of improvements and productiveness to the same lands when cultivated by their owners and to contiguous or at least similar lands still so cultivated.

It is a cognate point yet worthy of separate mention, that a general division of lands into farms only moderately large and approximately equal is most favorable to the largest aggregate production. Such a division takes place of itself wherever the lands are held in fee simple, and the cost of land-transfers is slight, and there are no such obstacles as slavery or primogeniture, as has happened practically in New England and in the Middle and Western States, and as is now happening of its own accord more or less at the South. The Greek writer, Aristotle, quoted some centuries before Christ from "the African," probably some Carthaginian writer on agriculture, the now familiar saying, "the best manure for the land is the foot of the owner." This homely word long attributed to Dr. Franklin, who stole it for his "Poor Richard's Almanack" more than a century ago, is based on the sound principle, that personal supervision to be most effective must be limited in its sphere, and that the best agricultural skill becomes weak when it attempts to exhibit itself on too broad a surface. Because a man can cultivate 100 acres better than any of his neighbors, it does not prove that he will cultivate 50 acres additional to them better than a neighbor of inferior skill, who is the owner of these 50 and no more. When the freeholds are small and nearly equal a wide competition among the farmers comes naturally into play, success is seen to depend upon personal efforts of intelligence and will, and interest and hope become the motives to the most productive cultivation. There is a high pleasure in possession and in self-guided exertion, and an impulse is broadly felt over the whole region to get as much as possible out of the land and at the same time to keep good and ever improve its condition. To protect and advance his own interests, to attend upon the seasons, to watch and wait, to foresee and plan and labor,—all this develops the farmer, and gives him energy and independence; and wherever there is a broad basis of such independent yeomanry to lean back upon, when heavy taxes are to be raised and strong blows of battle are to be struck, the national safety and position are assured.

6. We come now in the last place to consider the Costs of Production of material commodities of all sorts. Valuable patches of land, all prepared for Production in its several kinds, are the most important Commodities in the world, and the largest also in volume of Value. What did it cost "to subdue" the present tillable lands of this country? How much did it cost to get ready for grazing the broad pastures? To make accessible the forests that yield the timber? To open up the mines also and bring them into "touch" with the population? These questions are of great consequence, not that the actual past cost of any class of these more permanent "commodities" in the commercial world will be any safe guide to their present value, since cheaper and cheaper means of subduing the rugged forms of Nature are all the while coming into play, and all things that did cost more once tend pitilessly to fall to what similar things cost now; and since also it is never "efforts" alone that determine the value of anything, but efforts in conjunction with the "desires" of other men. Still, the amount of efforts expended at any given time upon these more stable commodities to make them productive, that is, their cost of production, is always gauged in general by an estimate of what the "desires" for them will be when completed; and this makes their cost of production a sort of loose measure of their value at the time. The main reason, however, why the cost of production of these primal commodities, namely, valuable land-patches, whatever may be expected to be produced from them afterwards, is so important, is, that as a general rule, the less the cost of any commodity meeting a universal want the wider and surer is its market. The larger the circle of the buyers of anything the more certain its sale; because, the world over, the men of small incomes are manifold larger in number than the men of large incomes. Society is like a pyramid: the lowest course of masonry is the longest and widest,—has the most stones or bricks in it,—and ever fewer towards the top.

If we reckon valuable lands as the primary commodities, then the secondary commodities will be of two classes, namely, (1) the produce of these valuable lands, whether animal or vegetable or mineral, such as cattle and cereals and coal; and (2) vendible material products obtained by human efforts from non-valuable land and sea, such as furs and fish. This division of material commodities into primary and secondary, and the distinction among secondary commodities according as their source is costly and costless, has never before been drawn in Political Economy; and it is fully believed, that the thoughtful reader and student will pretty soon perceive its advantages in helping clear up one of the most confused and perplexing sections of our Science, namely, that which relates to the causes and measures of Rent. We are now to inquire into the elements of the cost of production of each of these three classes of commodities; and we may find ourselves surprised at the simplicity and certainty of these elements.

1. We will now look into the Cost of Production of valuable land-patches themselves, the first and most important class of commodities. Here, as everywhere else in Valuables, we discover certain free gifts of Nature, without whose presence indeed the value could never come into being, but which are not constituents of the value, because they are gratuitous, given of God, and because the natural competition among buyers and sellers inevitably flings out from all effect on value of the otherwise possible action of these free and bountiful gifts, as have been already fully illustrated in chapter first. No piece of land ever yet had one particle of Value until human efforts of some sort had been expended on it or in some connection with it, for two excellent reasons, first, no man would ever even think of saying to another in reference to such a piece of land "Give me something for it and I will pass it over to you," and second, even if he did think of such an absurdity the other would reply "Why should I give you anything for something to which you have not the least claim, especially as I can take for nothing just such pieces all around here?" It must be remembered, not only that God gave the whole earth to all mankind without distinction, but also that his bountiful hand scattered all peculiar kinds of patches in great number upon each of the Continents. There is a plenty of Utility (gratuitous) in land-parcels just as God made them, but no possibility of Value (onerous) till other hands than His have touched and benefited them.

What, then, are the onerous elements that enter into the value of land-parcels and constitute their Cost of Production? There are only two such elements, namely, Cost of Labor and Cost of Capital. To find out exactly what "Labor" is, and what there is in it entitling and assuring its reward in "Wages," will be the task and perhaps also the pleasure of the next chapter; but it will suffice for the present discussion to say, that Labor is human exertion put forth for the sake of a commercial return. Lands can by no possibility be brought out of a state of nature into a state of value without the expenditure of Labor; and the actual or estimated cost of this labor, accordingly, is the first constituent of the Cost of Production of valuable lands considered as Commodities. Labor, however, can not apply itself to free lands in order to make them valuable without the co-operation of another onerous element, namely, Capital, in some of its many forms. For example, if forest lands are to be made tillable, the trees must first be cut down, and this will require besides the muscular exertion of the laborer something in the way of an axe, which is capital, the result of previous labor reserved to assist in further production: if native prairie is to be subdued to a valuable commodity, something of the nature of a plough must be employed in the process, and horses or a steam engine to propel it, and a plough and horses are capital, and still require fresh labor to make them useful in production. But capital always costs something; and, therefore, the cost of the Capital enters in as a second constituent into the cost of production of Land-Commodities. But these two costs are all. We shall search in vain for any other onerous element in the cost of producing commodities. There are two variables only in the Cost of Production, which itself is the sum of the two subordinate costs.

(a) And now let us analyze first the Cost of Labor in this connection, and then second the Cost of Capital, and we shall soon reach radical and unchangeable ground, and find in the sum of these two an aggregate Cost of Production, and also all of the variables that can ever enter into such Cost. It is plain to reason, that only by Labor non-valuable land-pieces ever did or ever can become valuable. Captain John Smith understood this in 1607 at Jamestown as well as anybody understands it now: there were 48 gentlemen, and only 12 tillers of the soil, among the 105 colonists, who originally landed there: "nothing is to be expected hence," he wrote of the new country, but by "labor:" new supplies of laborers, aided by a wise allotment of land-parcels to each colonist, secured after five years of struggle the lasting fortunes of Virginia: "men fell to building houses and planting corn": the very streets of Jamestown were sown with tobacco; and in fifteen years the colony numbered 5000 souls.

Now the cost of Labor is analyzable into three variables only, namely, (1) the efficiency of the labor; (2) the rate of nominal wages paid; (3) the cost to the employer of that valuable, in which the wages are paid. Let us see: what an employer wants is to get things done; consequently, if an employer hire two men to work for him at the same rate of wages, and if one be twice as efficient a laborer as the other, the cost of the labor of the first is only one half the cost of the labor of the second: therefore, a high rate of wages does not mean a high cost of labor whenever and wherever the laborers are very efficient. As a rule, it is found, that the cost of labor in reference to a given product is the least in those countries, like the United States and Great Britain, in which the rates of nominal wages are the highest; because, it is found also, that a high efficiency of laborers accompanies both as a cause and as an effect high rates of wages.