UNIVERSITY OF CALIFORNIA
AT LOS ANGELES
THE SCIENCE OF POLITICAL ECONOMY
But let none expect any great promotion
of the sciences, especially in their effective
part, unless natural philosophy be drawn
out to particular sciences ; and again unless
these particular sciences be brought back
again to natural philosophy. From this de-
fect it is that astronomy, optics, music,
many mechanical arts, and what seems
stranger, even moral and civil philosophy
and logic, rise but little above their founda-
tions, and only skim over the varieties and
surface of things, viz., because after these
particular sciences are formed and divided
off they are no longer nourished by natural
philosophy, which might give them strength
and increase ; and therefore no wonder if
the sciences thrive not when separated
from their roots. Bacon, Novum Organum.
sHsn&n/
THE COMPLETE WORKS
OF HENRY GEORGE
THE SCIENCE OF
POLITICAL ECONOMY
BOOKS I AND II
NEW YORK: DOUBLEDAY
PAGE & COMPANY 3 1904
PEEFATOEY NOTE.
FT1HIS work, begun in 1891, after returning from a
_I_ lecturing tour through Australia and a trip around
the world, grew out of the author's long-cherished purpose
to write a small text-book, which should present in brief
the principles of a true political economy. This " Primer
of Political Economy " was to set forth in direct, didactic
form the main principles of what he conceived to be an
exact and indisputable science, leaving controversy for a
later and larger work.
Before proceeding far, however, the author realized the
difficulty of making a simple statement of principles while
there existed so much confusion as to the meaning of
terms. He therefore felt impelled to change his plan, and
first to present the larger work, which should recast polit-
ical economy and examine and explicate terminology as
well as principles ; and which, beginning at the beginning,
should trace the rise and partial development of the science
in the hands of its founders a century ago, and then show
its gradual emasculation and at last abandonment by its
professed teachers accompanying this with an account of
the extension of the science outside and independently of
the schools, in the philosophy of the natural order now
spreading over the world under the name of the single tax.
Soon after this work had got well under way the author
laid it aside to write a brochure in reply to a papal encyc-
lical (" The Condition of Labor," 1891), and again later
vi PREFATORY NOTE.
to write a book exposing Mr. Herbert Spencer's recantation
of principles on the land question ("A Perplexed Philoso-
pher," 1892). Save for these interruptions, and occasional
newspaper and magazine writing, and lecturing and polit-
ical speaking, he devoted himself continuously to his great
undertaking until he entered the mayoralty campaign,
toward the close of which death came, October 29, 1897.
" The Science of Political Economy," if entirely finished
as planned by the author, would have shown Book V., on
Money, extended, and the nature and function of the laws
of Wages, Interest and Bent fully considered in Book IV. ;
but the work as left was, in the opinion of its author,
in its main essentials completed, the broken parts, to quote
his own words a few days before his death, " indicating
the direction in which my [his] thought was tending."
The author's preface is fragmentary. It bears in the
manuscript a penciled date, " March 7, 1894," and is here
transcribed from a condensed writing used by him in his
preliminary " roughing-out " work.
Aside from the filling in of summaries in four chapter
headings (indicated by foot-notes), the addition of an
index, and the correction of a few obvious clerical errors,
the work is here presented exactly as it was left by the
author the desire of those closest to him being that it
should be given to the world untouched by any other
hand.
HENRY GEORGE, JR.
NEW YORK, February 1, 1898.
PREFACE.
IN " Progress and Poverty " I recast political economy
in what were at the time the points which most needed
recasting. Criticism has but shown the soundness of the
views there expressed.
But " Progress and Poverty " did not cover the whole
field of political economy, and was necessarily in large
measure of a controversial rather than of a constructive
nature. To do more than this was at the time beyond the
leisure at my command. Nor did I see fully the necessity.
For while I realized the greatness of the forces which
would throw themselves against the simple truth which
I endeavored to make clear, I did think that should
"Progress and Poverty" succeed in commanding anything
like wide attention there would be at least some of the
professed teachers of political economy who, recognizing
the ignored truths which I had endeavored to make clear,
would fit them in with what of truth was already under-
stood and taught.
The years which have elapsed since the publication of
"Progress and Poverty" have been on my part devoted
to the propagation of the truths taught in " Progress and
Poverty" by books, pamphlets, magazine articles, news-
paper work, lectures and speeches, and have been so
greatly successful as not only far to exceed what fifteen
years ago I could have dared to look forward to in this
time, but to have given me reason to feel that of all the
viii PREFACE.
men of whom I have ever heard who have attempted any-
thing like so great a work against anything like so great
odds, I have been in the result of the endeavor to arouse
thought most favored.
Not merely wherever the English tongue is spoken, but
in all parts of the world, men are arising who will carry
forward to final triumph the great movement which " Prog-
ress and Poverty " began. The great work is not done,
but it is commenced, and can never go back.
On the night on which I finished the final chapter of
" Progress and Poverty " I felt that the talent intrusted
to me had been accounted for felt more fully satisfied,
more deeply grateful than if all the kingdoms of the earth
had been laid at my feet ; and though the years have jus-
tified, not dimmed, my faith, there is still left for me
something to do.
But this reconstruction of political economy has not
been done. So I have thought it the most useful thing I
could do to drop as far as I could the work of propaganda
and the practical carrying forward of the movement to
do this.
GENERAL CONTENTS.
GRAND DIVISIONS.
GENERAL INTRODUCTION.
BOOK I. THE MEANING OF POLITICAL ECONOMY.
BOOK II. THE NATURE OF WEALTH.
BOOK III. THE PRODUCTION OF WEALTH.
BOOK IV. THE DISTRIBUTION OF WEALTH.
BOOK V. MONEY THE MEDIUM OF EXCHANGE AND MEA-
SURE OF VALUE.
SUB-DIVISIONS.
PAGE
GENERAL INTRODUCTION . xxix
BOOK I.
THE MEANING OF POLITICAL ECONOMY.
INTRODUCTION TO BOOK L
CHAPTER I.
THE THREE FACTORS OF THE WORLD.
SHOWING THE CONSTITUENTS OP ALL WE PERCEIVE.
Meaning of factor ; and of philosophy ; and of the world What
we call spirit What we call matter What we call energy
GENEEAL CONTENTS.
PAGB
Though these three may be at bottom one, we must separate
them in thought Priority of spirit 9
CHAPTER II.
MAN, HIS PLACE AND POWERS.
SHOWING OUR RELATIONS TO THE GLOBE, AND THE QUALITIES
THAT ENABLE US TO EXTEND OUR KNOWLEDGE OF IT AND OUR
POWERS ON IT.
Man's earliest knowledge of his habitat How that knowledge
grows, and what civilized men now know of it The essential
distinction between man and other animals In this lies his
power of producing and improving ...... 11
.CHAPTER m.
HOW MAN'S POWERS ARE EXTENDED.
SHOWING THAT THEIR USE OP REASON WELDS MEN INTO
THE SOCIAL ORGANISM OR ECONOMIC BODY.
Extensions of man's powers in civilization Due not to improve-
ment in the individual but in the society Hobbes's "Levia-
than" The Greater Leviathan This capacity for good also
capacity for evil 19
CHAPTER IV.
CIVILIZATION WHAT IT MEANS.
SHOWING THAT CIVILIZATION CONSISTS IN THE WELDING OF
MEN INTO THE SOCIAL ORGANISM OR ECONOMIC BODY.
Vagueness as to what civilization is Guizot quoted Deriva-
tion and original meaning Civilization and the State Why
a word referring to the precedent and greater has been taken
from one referring to the subsequent and lesser . . .24
CHAPTER V.
THE ORIGIN AND GENESIS OF CIVILIZATION.
SHOWING THE NATURE OF REASON; AND HOW IT IMPELS TO
EXCHANGE, BY WHICH CIVILIZATION DEVELOPS.
Reason the power of tracing caxisal relations Analysis and syn-
thesisLikeness and unlikeuess between man and other ani-
GENERAL CONTENTS. xi
PAGE
mals Powers that the apprehension of causal relations gives
Moral connotations of civilization But begins with and in-
creases through exchange Civilization relative, and exists in
the spiritual 29
CHAPTER VI.
OF KNOWLEDGE AND THE GROWTH OF KNOWLEDGE.
SHOWING THAT THE GROWTH OF KNOWLEDGE IS BY COO'PER-
ATION, AND THAT IT INHERES IN THE SOCIETY.
Civilization implies greater knowledge This gain conies from
cooperation The incommunicable knowing called skill The
communicable knowing usually called knowledge The rela-
tion of systematized knowledge to the means of storing know-
ledge, to skill and to the economic body Illustration from as-
tronomy 39
CHAPTER VII.
OF SEQUENCE, CONSEQUENCE AND LAWS OF NATURE.
SHOWING THE PROPER MEANING OF SEQUENCE AND OF CON-
SEQUENCE, AND WHY WE SPEAK OF LAWS OF NATURE.
Coexistence and succession Sequence and consequence Causes
in series ; names for them Our direct knowledge is of spirit
Simplest perception of causal relation Extensions of this
The causal search unsatisfied till it reaches spirit And finds
or assumes intent Early evidences of this Why we must
assume a superior spirit Evidences of intent The word
nature and its implication of will or spirit The word law
The term " law of nature " 44
CHAPTER VHI.
OF THE KNOWLEDGE PROPERLY CALLED SCIENCE.
SHOWING THAT SCIENCE DEALS ONLY WITH LAWS OP NATURE,
AND THAT IN THE CURRENT POLITICAL ECONOMY THIS HAS
BEEN FORGOTTEN.
Proper meaning of science It investigates laws of nature, not
laws of man Distinction between the two Their confusion
in the current political economy Mason and Lalor's "Primer
of Political Economy " quoted Absurdity of this confusion
Turgot on the cause of such confusions 58
xii GENERAL CONTENTS.
CHAPTER IX.
THE ECONOMY CALLED POLITICAL ECONOMY.
SHOWING THE MEANING, UNITS AND SCOPE OP POLITICAL
ECONOMY.
PAGE
The word economy The word political Origin of the term
"political economy" and its confusions It is not concerned
with the body politic, but with the body economic Its units,
and the system or arrangement of which it treats Its scope . 65
CHAPTER X.
THE ELEMENTS OF POLITICAL ECONOMY.
SHOWING HOW POLITICAL ECONOMY SHOULD PEOCEED AND
WHAT RELATIONS IT SEEKS TO DISCOVER.
How to understand a complex system It is the purpose of such
a system that political economy seeks to discover These
laws, natural laws of human nature The two elements rec-
ognized by political economy These distinguished only by
reason Human will affects the material world only through
laws of nature It is the active factor in all with which polit-
ical economy deals 74
CHAPTER XL
OP DESIRES AND SATISFACTIONS.
SHOWING THE WIDTH AND IMPORTANCE OF THE FIELD OF
POLITICAL ECONOMY.
Action springs from desire and seeks satisfaction Order of de-
siresWants or needs Subjective and objective desires
Material and immaterial desires The hierarchy of life and
of desires 81
CHAPTER XH.
THE FUNDAMENTAL LAW OF POLITICAL ECONOMY.
SHOWING THAT THE LAW FROM WHICH POLITICAL ECONOMY PRO-
CEEDS IS THAT MEN SEEK TO SATISFY THEIR DESIRES WITH
THE LEAST EXERTION.
Exertion followed by weariness The fact that men seek to sat-
isfy their desires with the least exertion Meaning and ana-
logue Exemplified in trivial things Is a law of nature and
GENERAL CONTENTS. xiii
PAGR
the fundamental law of political economy Substitution of
selfishness for this principle Buckle quoted Political econ-
omy requires no such assumption The necessity of labor not
a curse 86
CHAPTER XIII.
METHODS OP POLITICAL ECONOMY.
SHOWING THE NATURE OP THE METHODS OP INVESTIGATION
THAT MAY BE USED IN POLITICAL ECONOMY.
Deductive and inductive schools "New American Cyclopedia"
quoted Triumph of the inductionists The method of in-
duction and the method of deduction Method of hypothesis.
Bacon's relation to induction Real error of the deduction-
ists and the mistake of the inductionists Lalor's Cyclopedia
quoted Result of the triumph of the inductionists A true
science of political economy must follow the deductive method
Da vis's "Elements of Inductive Logic" quoted Double as-
surance of the real postulate of political economy Method of
mental or imaginative experiment 92
CHAPTER XIV.
POLITICAL ECONOMY AS SCIENCE AND AS ART.
SHOWING THAT POLITICAL ECONOMY IS PROPERLY A SCIENCE,
AND THE MEANING IT SHOULD HAVE IP SPOKEN OP AS ART.
Science and art There must be a science of political economy,
but no proper art What must be the aim of an art of politi-
cal economy White art and black art Course of further
investigation 101
BOOK II.
THE NATURE OF WEALTH.
INTRODUCTION TO BOOK H 115
CHAPTER I.
CONFUSIONS AS TO THE MEANING OF WEALTH.
SHOWING THE FAILURE OP THE CURRENT POLITICAL ECONOMY TO
DEFINE WEALTH, AND THE CONFUSIONS THEREFROM, CULMI-
NATING IN THE ABANDONMENT OF POLITICAL ECONOMY BY ITS
PROFESSED TEACHERS.
Wealth the primary term of political economy Common use
of the word Vagueness more obvious in political economy
xiv GENERAL CONTENTS.
PAGE
Adam Smith not explicit Increasing confusion of subsequent
writers Their definitions Many make no attempt at defini-
tion Perry's proposition to abandon the term Marshall and
Nicholson Failure to define the term leads to the abandon-
ment of political economy This concealed tinder the word
"economic" The intent expressed by Macleod Results to
political economy 117
CHAPTER H.
CAUSES OF CONFUSION AS TO THE MEANING OF WEALTH.
SHOWING THE REAL DIFFICULTY THAT BESETS THE
ECONOMIC DEFINITION OF WEALTH.
Effect of slavery on the definition of wealth Similar influences
now existing John S. Mill on prevalent delusions Genesis
of the protective absurdity Power of special interests to
mold common opinion Of injustice and absurdity, and the
power of special interests to pervert reason Mill an example
of how accepted opinions may blind men Effect upon a
philosophical system of the acceptance of an incongruity
Meaning of a saying of Christ Influence of a class profiting
by robbery shown in the development of political economy
Archbishop Whately puts the cart before the horse The power
of a great pecuniary interest to affect thought can be ended only
by abolishing that interest This shown in American slavery . 131
CHAPTER HI.
WHAT ADAM SMITH MEANT BY WEALTH.
SHOWING HOW ESSENTIALLY ADAM SMITH'S PRIMARY CONCEPTION
OF WEALTH DIFFERED FROM THAT NOW HELD BY HIS SUCCES-
SORS.
Significance of the title " Wealth of Nations" Its origin shown
in Smith's reference to the Physiocrats His conception of
wealth in his introduction Objection by Malthus and by Mac-
leod Smith's primary conception that given in " Progress and
Poverty " His subsequent confusions 143
CHAPTER IV.
THE FRENCH PHYSIOCRATS.
SHOWING WHO THE FIRST DEVELOPERS OF A TRUE SCIENCE
OF POLITICAL ECONOMY WERE, AND WHAT THEY HELD.
Quesnay and his followers The great truths they grasped and
the cause of the confusion into which they fell This used to
discredit their whole system, but not really vital They were
GENERAL CONTENTS. xv
PAGE
real free traders The scant justice yet done them Reference
to them in "Progress and Poverty " Macleod's statement of
their doctrine of natural order Their conception of wealth
Their day of hope and their fall 148
CHAPTER V.
ADAM SMITH AND THE PHYSIOCRATS.
SHOWIKG THE RELATION BETWEEN ADAM SMITH AND THE
PHYSIOCEATS.
Smith and Quesnay The " Wealth of Nations " and Physiocratic
ideas Smith's criticism of the Physiocrats His failure to ap-
preciate the single tax His prudence . . . . . 160
CHAPTER VI.
SMITH'S INFLUENCE ON POLITICAL ECONOMY.
SHOWING WHAT THE "WEALTH OF NATIONS" ACCOMPLISHED
AND THE COURSE OF THE SUBSEQUENT DEVELOPMENT OF PO-
LITICAL ECONOMY.
Smith, a philosopher, who addressed the cultured, and whose at-
tack on mercantilism rather found favor with the powerful land-
owners Not entirely exempt from suspicion of radicalism, yet
pardoned for his affiliation with the Physiocrats Efforts of
Malthus and Ricardo on respectabilizing the science The fight
against the corn-laws revealed the true beneficiaries of protec-
tion, but passed for a free-trade victory, and much strength-
ened the incoherent science Confidence of its scholastic ad-
vocates Say's belief in the result of the colleges taking up
political economy Torrens's confidence Failure of other
countries to follow England's example Cairnes doubts the
effect of making it a scholastic study His sagacity proved
by the subsequent breakdown of Smith's economy The true
reason 170
CHAPTER VH.
INEFFECTUAL GROPINGS TOWARD A DETERMINA-
TION OF WEALTH.
SHOWING THE OPPOSITION TO THE SCHOLASTIC ECONOMY
BEFORE "PROGRESS AND POVERTY."
Illogical character of the "Wealth of Nations "Statements of
natural right Spence, Ogilvie, Chalmers, Wakefield, Spencer,
Dove, Bisset Vague recognitions of natural right Protec-
tion gave rise to no political economy in England, but did else-
xvi GENERAL CONTENTS.
PAGB
where Germany and protectionist political economy in the
United States Divergence of the schools Trade-unionism
in socialism ........... 182
CHAPTER VIH.
BREAKDOWN OF SCHOLASTIC POLITICAL ECONOMY.
SHOWING THE REASON, THE RECEPTION, AND EFFECT ON PO-
LITICAL ECONOMY OF " PROGRESS AND POVERTY."
"Progress and Poverty" Preference of professors to abandon
the " science " rather than radically change it, brings the break-
down of scholastic economy The " Encyclopaedia Britannica"
The "Austrian school" that has succeeded the "classical" 200
CHAPTER IX.
WEALTH AND VALUE.
SHOWING THE REASON FOR CONSIDERING THE NATURE OF
VALUE BEFORE THAT OF WEALTH.
The point of agreement as to wealth Advantages of proceeding
from this point 210
CHAPTER X.
VALUE IN USE AND VALUE IN EXCHANGE.
SHOWING THE TWO SENSES OF VALUE; HOW THE DISTINCTION
HAS BEEN IGNORED, AND ITS REAL VALIDITY ; AND THE REASON
FOR CONFINING THE ECONOMIC TERM TO ONE SENSE.
Importance of the term value Original meaning of the word
Its two senses Names for them adopted by Smith Utility
and desirability Mill's criticism of Smi h -Complete ignor-
ing of the distinction by the Austrian school Cause of this
confusion Capability of use not usefulness Smith's distinc-
tion a real one The dual use of one word in common speech
must be avoided in political economy Intrinsic value . . 212
CHAPTER XL
ECONOMIC VALUE ITS REAL MEANING AND FINAL
MEASURE.
SHOWING HOW VALUE IN EXCHANGE HAS BEEN DEEMED A RELATION
OF PROPORTION ; AND THE AMBIGUITY WHICH HAS LED TO THIS.
The conception of value as a relation of proportion It is really
a relation to exertion Adam Smith's perception of this His
reasons for accepting the term value in exchange His con-
fusion and that of his successors 226
GENERAL CONTENTS. xvii
CHAPTER XH.
VALUE IN EXCHANGE REALLY RELATED TO LABOR.
SHOWING THAT VALUE DOES NOT COME PROM EXCHANGEABILITY,
BUT EXCHANGEABILITY FROM VALUE, WHICH IS AN EXPRESSION
OP THE SAVING OF LABOR INVOLVED IN POSSESSION.
PAGE
Root of the assumption that the sum of values cannot increase
or diminish The fundamental idea of proportion We can-
not really think of value in this way The confusion that
makes us imagine that we do The tacit assumption and re-
luctance to examine that bolster the current notion Imagina-
tive experiment shows that value is related to labor Common
facts that prove this Current assumption a fallacy of undis-
tributed middle Various senses of "labor " Exertion positive
and exertion negative Re-statement of the proposition as to
value Of desire and its measurement Causal relationship of
value and exchangeability Imaginative experiment showing
that value may exist where exchange is impossible Value and
expression of exertion avoided 235
CHAPTER XIH.
THE DENOMINATOR OF VALUE.
SHOWING WHAT VALUE IS, AND ITS RELATIONS.
What value is The test of real value Value related only to
human desire This perception at the bottom of the Austrian
school But its measure must be objective How cost of
production acts as a measure of value Desire for similar
things and for essential things Application of this principle
Its relation to land values 250
CHAPTER XIV.
THE TWO SOURCES OF VALUE.
SHOWING THAT THERE IS A VALUE PROM PRODUCTION AND
ALSO A VALUE PROM OBLIGATION.
Value does not involve increase of wealth Value of obligation
Of enslavement Economic definition of wealth impossible
without recognition of this difference in value Smith's con-
fusion and results Necessity of the distinction Value from
production and value from obligation Either gives the essen-
tial quality of commanding exertion The obligation of debt
Other obligations Land values most important of all forms
of value from obligation Property in land equivalent to
groperty in men Common meaning of value in exchange
eal relation with exertion Ultimate exchangeability is for
labor Adam Smith right Light thrown by this theory of
value . 257
xviii GENERAL CONTENTS.
CHAPTER XV.
THE MEANING OF WEALTH IN POLITICAL ECONOMY.
SHOWING HOW VALUE FROM PRODUCTION IS WEALTH IN
POLITICAL ECONOMY.
PAGE
Wealth as fixed in "Progress and Poverty" Course of the
scholastic political economy The reverse method of this work
The conclusion the same Reason of the disposition to in-
clude all value as wealth Metaphorical meanings Bull and
pun Metaphorical meaning of wealth Its core meaning Its
use to express exchangeability Similar use of money Ordi-
nary core meaning the proper meaning of wealth Its use in
individual economy and in political economy What is meant
by increase of wealth Wealth and labor Its factors nature
and man Wealth their resultant Of Adam Smith Danger
of carrying into political economy a meaning proper in indi-
vidual economy Example of " money " " Actual wealth " and
"relative wealth" "Value from production" and "value
from obligation " The English tongue has no single word for
an article of wealth Of " commodities "Of "goods" Why
there is no singular in English The attempt to form one by
dropping the "s " and Anglo-German jargon .... 270
CHAPTER XVI.
THE GENESIS OF WEALTH.
SHOWING HOW WEALTH ORIGINATES AND WHAT IT ESSEN-
TIALLY IS.
Reason of this inquiry Wealth proceeds from exertion prompted
by desire, but all exertion does not result in wealth Simple
examples of action, and of action resulting in wealth "Rid-
ing and tying " Sub-divisions of effort resulting in increments
of wealth Wealth essentially a stored and transferable ser-
vice Of transferable service The action of reason as natural,
though not as certain and quick as that of instinct Wealth
is service impressed on matter Must be objective and have
tangible form 285
CHAPTER XVH.
THE WEALTH THAT IS CALLED CAPITAL.
SHOWING WHAT THE WEALTH CALLED CAPITAL REALLY IS.
Capital is a part of wealth used indirectly to satisfy desire
Simple illustration of fruit Wealth permits storage of labor
The bull and the man Exertion and its higher powers Per-
GENEEAL CONTENTS. xix
PAGE
sonal qualities cannot really be wealth or capital The taboo
and its modern form Common opinion of wealth and capital 293
CHAPTER XVIII.
WHY POLITICAL ECONOMY CONSIDERS ONLY WEALTH.
SHOWING THAT POLITICAL ECONOMY, AS PROPERLY STATED,
COVERS ALL THE RELATIONS OF MEN IN SOCIETY INTO WHICH
IT IS NECESSARY TO INQUIRE.
Political economy does not include all the exertions for the
satisfaction o* material desires ; but it does include the greater
part of them, and it is through value that the exchange of
services for services is made Its duty and province . . 301
CHAPTER XIX.
MORAL CONFUSIONS AS TO WEALTH.
SHOWING HOW RICH AND POOR ARE CORRELATIVES, AND
WHY CHRIST SYMPATHIZED WITH THE POOR.
The legitimacy of wealth and the disposition to regard it as
sordid and mean The really rich and the really poor They
are really correlatives The good sense of Christ's teaching . 304
CHAPTER XX.
OF THE PERMANENCE OF WEALTH.
SHOWING THAT VALUES FROM OBLIGATION SEEM REALLY TO
LAST LONGER THAN VALUES FROM PRODUCTION.
Value from production and value from obligation The one
material and the other existing in the spiritual Superior
permanence of the spiritual Shakespeare's boast Maecenas's
buildings and Horace's odes The two values now existing
Franchises and land values last longer than gold and gems
Destruction in social advance Conclusions from all this . 308
CHAPTER XXI.
THE RELATION OF MONEY TO WEALTH.
SHOWING THAT SOME MONEY IS AND SOME MONEY IS NOT
WEALTH.
Where I shall treat of money No categorical answer can yet
be given to the question whether money is wealth Some
money is and some is not wealth 313
GENERAL CONTENTS.
BOOK III.
THE PRODUCTION OF WEAI/TH.
CHAPTER I.
THE MEANING OF PRODUCTION.
SHOWING THE MEANING AND PROPER USE OF PRODUCTION.
PAGE
Production a drawing forth of what before exists Its difference
from creation Production other than of wealth Includes
all stages of bringing to be Mistakes as to it . . . 323
CHAPTER H.
THE THREE MODES OF PRODUCTION.
SHOWING THE COMMON CHARACTER, YET DIFFERENT MODES
OF PRODUCTION.
Production involves change, brought about by conscious will
Its three modes : (1) adapting, (2) growing, (3) exchanging
This the natural order of these modes 327
CHAPTER HI.
POPULATION AND SUBSISTENCE.
SHOWING THAT THE THEORY OF A TENDENCY IN POPULATION TO
INCREASE FASTER THAN SUBSISTENCE HAS PREVIOUSLY BEEN
EXAMINED AND CONDEMNED.
The Malthusian theory Discussed in "Progress and Poverty" . 333
CHAPTER IV.
THE ALLEGED LAW OF DIMINISHING RETURNS
IN AGRICULTURE.
SHOWING WHAT THIS ALLEGED LAW IS.
John Stuart Mill quoted as to the importance, relations and
nature of this law The reductio ad absurdum by which it
is proved Contention that it is a misapprehension of the uni-
versal law of space 335
GENERAL CONTENTS. sad
CHAPTER V.
OF SPACE AND TIME.
SHOWING THAT HUMAN REASON IS ONE, AND SO FAR AS IT
CAN GO MAY BE RELIED ON.
Purpose of this work Of metaphysics Danger of thinking of
words as things Space and time not conceptions of things,
but of relations of things They cannot, therefore, have
independent beginning or ending The verbal habit which
favors this idea How favored by poets and by religious
teachers How favored by philosophers Of Kant Of Scho-
penhauer Mysteries and antinomies that are really confusions
in the meaning of words Human reason and the eternal reason
Philosophers who are really word-jugglers .... 339
CHAPTER VI.
CONFUSION OF THE SPACIAL LAW WITH AGRI-
CULTURE.
SHOWING THE GENESIS OP THIS CONFUSION.
What space is The place to which man is confined Extension
a part of the concept, land Perception is by contrast Man's
first use of land is by the mode of adapting His second, and
for a long time most important, use is by growing The third,
on which civilization is now entering, is exchanging Political
economy began in the second, and growing still attracts most
attention The truth and error of the Physiocrats The suc-
cessors of Smith, while avoiding the error of the Physiocrats,
also ignored their truth ; and with their acceptance of the Mal-
thusian theory, and Ricardo's explanation of rent as relating
to agricultural land, they fell into, and have continued the
habit of treating land and rent as agricultural Difficulty of
the single tax in the United States 351
CHAPTER VII.
THE RELATION OF SPACE IN PRODUCTION.
SHOWING THAT SPACE HAS RELATION TO ALL MODES OF
PRODUCTION.
Matter being material, space must have relation to all produc-
tion This relation readily seen in agriculture The concen-
tration of labor in agriculture tends up to a certain point to
increase and then to diminish production But it is a mis-
apprehension to attribute this law to agriculture or to the
mode of growing It holds in all modes and sub-divisions of
xxii GENERAL CONTENTS.
PAGl
these modes Instances : of the production of brick, of the mere
storage of brick Man himself requires space The division of
labor as requiring space Intensive and extensive use of land 357
CHAPTER Vin.
THE RELATION OF TIME IN PRODUCTION.
SHOWING THAT ALL MODES OF PRODUCTION HAVE RELATION
TO TIME.
Difference between apprehensions of space and time, the one
objective, the other subjective Of spirits and of creation
All production requires time The concentration of labor in
time . . . 365
CHAPTER IX.
COOPERATION ITS TWO WAYS.
SHOWING THE TWO WAYS OF COOPERATION.
CoSperation is the union of individual powers in the attainment
of common ends Its ways and their analogues : (1) the com-
bination of effort ; (2) the separation of effort Illustrations :
of building houses, of joint-stock companies, etc. Of sailing a
boat The principle shown in naval architecture The Erie
Canal The baking of bread Production requires conscious
thought The same principle in mental effort What is on
the one side separation is on the other concentration Extent
of concentration and specialization of work in modern civiliza-
tion The principle of the machine Beginning and increase
of division of labor Adam Smith's three heads A better
analysis 371
CHAPTER X.
COOPERATION ITS TWO KINDS.
SHOWING THE TWO KINDS OF COOPERATION, AND HOW THE
POWER OF THE ONE GREATLY EXCEEDS THAT OF THE OTHER.
The kind of cooperation which, as to method of union or how of
initiation, results from without and may be called directed
or conscious cooperation Another proceeding from within
which may be called spontaneous or unconscious cooperation
Types of the two kinds and their analogues Tacking of a
full-rigged ship and of a bird Intelligence that suffices for
the one impossible for the other The savage and the ship
Unconscious cooperation required in ship-building Conscious
cooperation will not suffice for the work of unconscious The
fatal defect of socialism The reason of this is that the power
of thought is spiritual and cannot be fused as can physical
GENERAL CONTENTS. xiiii
PAGE
force Of "man power "and "mind power" Illustration from
the optician Impossibility of socialism Society a Leviathan
greater than that of Hobbes 382
CHAPTER XI.
THE OFFICE OF EXCHANGE IN PRODUCTION.
SHOWING THAT IN MAN THE LACK OP INSTINCT IS SUPPLIED
BY THE HIGHER QUALITY OP REASON, WHICH LEADS TO EX-
CHANGE.
The cooperation of ants and bees is from within and not from
without ; from instinct and not from direction Man has little
instinct ; but the want supplied by reason Reason shows
itself in exchange This suffices for the unconscious coopera-
tion of the economic body or Greater Leviathan Of the three
modes of production, exchanging is the highest Mistake of
writers on political economy The motive of exchange . . 397
CHAPTER Xn.
OFFICE OF COMPETITION IN PRODUCTION.
SHOWING THAT COMPETITION BRINGS TRADE, AND CONSE-
QUENTLY SERVICE, TO ITS JUST LEVEL.
"Competition is the life of trade," an old and true adage The
assumption that it is an evil springs from two causes one
bad, the other good The bad cause at the root of protection-
ism Law of competition a natural law Competition neces-
sary to civilization 402
CHAPTER XIII.
OF DEMAND AND SUPPLY IN PRODUCTION . 404
CHAPTER XIV.
ORDER OF THE THREE FACTORS OF PRODUCTION.
SHOWING THE AGREEMENT OP ALL ECONOMISTS AS TO THE
NAMES AND ORDER OP THE FACTORS OP PRODUCTION.
Land and labor necessary elements in production Union of a
composite element, capital Reason for dwelling on this agree-
ment as to order 405
CHAPTER XV.
THE FIRST FACTOR OF PRODUCTION LAND.
SHOWING THAT LAND IS THE NATURAL OR PASSIVE FACTOR
IN ALL PRODUCTION.
The term land Landowners Labor the only active factor , 408
xxiv GENERAL CONTENTS.
CHAPTER XVI.
THE SECOND FACTOR OP PRODUCTION LABOR.
SHOWING THAT LABOR IS THE HUMAN OK ACTIVE FACTOR
IN ALL PRODUCTION.
PAGE
The term labor It is the only active factor in producing wealth,
and by nature spiritual 411
CHAPTER XVH.
THE THIRD FACTOR OF PRODUCTION CAPITAL.
SHOWING THAT CAPITAL IS NOT A PRIMARY FACTOR, BUT PROCEEDS
FROM LAND AND LABOR, AND IS A FORM OR USE OF WEALTH.
Capital is essentially labor raised to a higher power Where it
may, and where it must aid labor In itself it is helpless . 413
BOOK IV.
THE DISTRIBUTION OF WEALTH.
INTRODUCTION TO BOOK IV 421
CHAPTER I.
THE MEANING OF DISTRIBUTION.
SHOWING THE MEANING AND USES OF THE WORD DISTRIBUTION ;
THE PLACE AND MEANING OF THE ECONOMIC TERM ; AND THAT
IT IS CONCERNED ONLY WITH NATURAL LAWS.
Derivation and uses of the word Exchange, consumption and
taxation not proper divisions of political economy Need of a
consideration of distribution It is the continuation and end
of what begins in production, and thus the final division of
political economy The meaning usually assigned to distribu-
tion as an economic term, and its true meaning . . . 423
CHAPTER H.
THE NATURE OF DISTRIBUTION.
SHOWING THE FALLACY OF THE CONTENTION THAT DISTRIBUTION
IS A MATTER OF HUMAN LAW; THAT THE NATURAL LAWS OF
DISTRIBUTION ARE MANIFEST NOT ON WEALTH ALREADY PRO-
DUCED, BUT ON SUBSEQUENT PRODUCTION J AND THAT THEY ARE
MORAL LAWS.
John Stuart Mill's argument that distribution is a matter of hu-
man law Its evidence of the unscientific character of the
GENERAL CONTENTS. xxv
PAGE
scholastic economy The fallacy it involves and the confusion
it shows Illustration from Bedouin and from civilized society
Natural laws of distribution do not act upon wealth already
produced, but on future production Reason of this Illustra-
tion of siphon and analogy of blood ..... 430
CHAPTER HI.
THE COMMON PERCEPTION OF NATURAL LAW IN
DISTRIBUTION.
SHOWING THE COMMON AND INERADICABLE PERCEPTION OF
NATURAL LAWS OP DISTRIBUTION.
Mill's admission of natural law in his argument that distribution
is a matter of human law Sequence and consequence Human
will and the will manifest in nature Inflexibility of natural
laws of distribution Human will powerless to affect distribu-
tion This shown by attempts to affect distribution through
restriction of production Mill's confusion and his high char-
acter 440
CHAPTER IV.
THE REAL DIFFERENCE BETWEEN LAWS OF
PRODUCTION AND OF DISTRIBUTION.
SHOWING THAT DISTRIBUTION HAS REFERENCE TO ETHICS,
WHILE PRODUCTION HAS NOT.
The laws of production are physical laws ; the laws of distribu-
tion moral laws, concerned only with spirit This the reason
why the immutable character of the laws of distribution is more
quickly and clearly recognized 450
CHAPTER V.
OF PROPERTY.
SHOWING THAT PROPERTY DEPENDS UPON NATURAL LAW.
The law of distribution must be the law which determines owner-
ship John Stuart Mill recognizes this ; but extending his error,
treats property as a matter of human institution solely His
assertion quoted and examined His utilitarianism His
further contradictions 454
CHAPTER VI.
CAUSE OF CONFUSION AS TO PROPERTY.
SHOWING WHY AND HOW POLITICAL ECONOMISTS PELL INTO
SUCH CONFUSIONS WITH REGARD TO PROPERTY.
Mill blinded by the pre-assumption that land is property He all
but states later the true principle of property, but recovers by
xxvi GENERAL CONTENTS.
PAGE
substituting in place of the economic term " land," the word in
its colloquial use The different senses of the word illustrated
from the shore of New York harbor Mill attempts to justify
property in land, but succeeds only in justifying property in
wealth . 460
BOOK V.
MONET THE MEDIUM OF EXCHANGE AND
MEASURE OF VALUE.
INTRODUCTION TO BOOK V 477
CHAPTER I.
CONFUSIONS AS TO MONEY.
SHOWING THE DIVERGENCE IN COMMON THOUGHT AND AMONG
ECONOMISTS AS TO MONEY.
Present confusions as to money Their cause How to disen-
tangle them 479
CHAPTER n.
THE COMMON UNDERSTANDING OF MONEY.
SHOWING THAT THE COMMON USE OF MONEY IS TO BUY THINGS
WITH, AND THAT ITS ESSENTIAL CHARACTER IS NOT IN ITS MA-
TERIAL, BUT IN ITS USE.
The use of money to exchange for other things Buying and sell-
ing Illustration of the travelers Money not more valuable
than other things, but more readily exchangeable Exchanges
without money Checks, etc., not money Different money in
different countries But money not made by government fiat
Does not necessarily consist of gold and silver Or need intrin-
sic value Its essential quality and definition .... 482
CHAPTER HI.
MEDIUM OF EXCHANGE AND MEASURE OF VALUE.
SHOWING HOW THE COMMON MEDIUM OP EXCHANGE BECOMES THE
COMMON MEASURE OP VALUE, AND WHY WE CANNOT FIND A COM-
MON MEASURE IN LABOR.
Money is most exchanged Why not measure value by labor?
Smith's unsatisfactory answer The true answer Labor can
afford no common measure, and commodities are preferably
GENERAL CONTENTS. xxvii
PAGE
taken Survivals of common measures Difference in common
measures does not prevent exchange 495
CHAPTER IV.
THE OFFICE OF CREDIT IN EXCHANGES.
SHOWING THAT THE ADVANCE OP CIVILIZATION ECONOMIZES
THE USE OF MONEY.
Tendency to over-estimate the importance of money Credit
existed before the use of money began And it is now and
always has been the most important instrument of exchange
Illustration of shipwrecked men Adam Smith's error as to
barter Money's most important use to-day is as a measure of
value 504
CHAPTER V.
THE GENESIS OF MONEY.
SHOWING THAT THE LAW OP GRATIFYING DESIRES WITH THE
LEAST EXERTION PROMPTS THE USE FROM TIME TO TIME OF
THE MOST LABOR-SAVING MEDIUM AVAILABLE.
Money not an invention, but developed by civilization It grows
with the growth of exchanges Exchange first of general com-
modities Then of the more convenient commodities Then
of coin, whose commodity value comes to be forgotten Illus-
tration of the American trade dollar The lessening uses of
commodity money and extensions of credit money Two ele-
ments in exchange value of metal coin : intrinsic, or value of
the metal itself ; and seigniorage Meaning of seigniorage
Exchange value of paper money is seigniorage Use of money
is not for consumption, but exchange Proprietary articles as
mediums of exchange Mutilated coins When lessening metal
value in coins does not lessen circulating value The essential
being that both represent the same exertion This the reason
why paper money exchanges equally with metal money of like
denomination 512
CHAPTER VI.
THE TWO KINDS OF MONEY.
SHOWING THAT ONE ORIGINATES IN VALUE FROM PRODUC-
TION AND THE OTHER IN VALUE FROM OBLIGATION.
Money peculiarly the representative of value Two kinds of
money in the more highly civilized world Commodity money
and value from production Credit money and value from obli-
gation Of credit money Of commodity money Of intrinsic
value Gold coin the only intrinsic value money now in cir-
culation in the United States, England, France or Germany 526
GENERAL INTRODUCTION
For tho' the Giant Ages heave the hill
And break the shore, and evermore
Make and break, and work their will ;
Tho' world on world in myriad myriads roll
Bound us, each with different powers
And other forms of life than ours,
What know we greater than the soul?
Tennyson.
GENERAL INTRODUCTION.
REASON OP TfflS WORK.
I SHALL try in this work to put in clear and systematic
form the main principles of political economy.
The place I would take is not that of a teacher, who
states what is to be believed, but rather that of a guide,
who points out what by looking is to be seen. So far from
asking the reader blindly to follow me, I would urge him
to accept no statement that he himself can doubt, and to
adopt no conclusion untested by his own reason.
This I say, not in unfelt deprecation of myself nor in
idle compliment to the reader, but because of the nature
and present condition of political economy.
Of all the sciences, political economy is that which to
civilized men of to-day is of most practical importance.
For it is the science which treats of the nature of wealth
and the laws of its production and distribution ; that is to
say, of matters which absorb the larger part of the thought
and effort of the vast majority of us the getting of a liv-
ing. It includes in its domain the greater part of those
vexed questions which lie at the bottom of our politics and
legislation, of our social and governmental theories, and
even, in larger measure than may at first be supposed, of
our philosophies and religions. It is the science to which
must belong the solving of problems that at the close of a
century of the greatest material and scientific development
xxxii GENERAL INTRODUCTION.
the world has yet seen, are in all civilized countries clouding
the horizon of the future the only science that can enable
our civilization to escape already threatening catastrophe.
Yet, surpassing in its practical importance as political
economy is, he who to-day would form clear and sure ideas
of what it really teaches must form them for himself. For
there is no body of accepted truth, no consensus of recog-
nized authority, that he may without question accept. In
all other branches of knowledge properly called science the
inquirer may find certain fundamentals recognized by all
and disputed by none who profess it, which he may safely
take to embody the information and experience of his time.
But, despite its long cultivation and the multitude of its
professors, he cannot yet find this in political economy.
If he accepts the teaching of one writer or one school, it
will be to find it denied by other writers and other schools.
This is not merely true of the more complex and delicate
questions, but of primary questions. Even on matters
such as in other sciences have long since been settled, he
who to-day looks for the guidance of general acceptance
in political economy will find a chaos of discordant opin-
ions. So far indeed are first principles from being agreed
on, that it is still a matter of hot dispute whether protec-
tion or free trade is most conducive to prosperity a ques-
tion that in political economy ought to be capable of as
certain an answer as in hydrodynamics the question
whether a ship ought to be broader than she is long, or
longer than she is broad.
This is not for want of what passes for systematic study.
Not only are no subjects so widely and frequently discussed
as those that come within the province of political economy,
but every university and college has now its professor
of the science, whose special business it is to study and
to teach it. But nowhere are inadequacy and confusion
more apparent than in the writings of these men; nor is
GENERAL INTRODUCTION. xxxiii
anything so likely to give the impression that there is not
and cannot be a real science of political economy.
But while this discordance shows that he who would
really acquaint himself with political economy cannot rely
upon authority, there is in it nothing to discourage the
hope that he who will use his own reason in the honest
search for truth may attain firm and clear conclusions.
For in the supreme practical importance of political
economy we may see the reason that has kept and still
keeps it in dispute, and that has prevented the growth of
any body of accepted and assured opinion.
Under existing conditions in the civilized world, the
great struggle among men is for the possession of wealth.
Would it not then be irrational to expect that the science
which treats of the production and distribution of wealth
should be exempt from the influence of that struggle?
Macaulay has well said that if any large pecuniary interest
were concerned in disputing the attraction of gravitation,
that most obvious of all facts would not yet be accepted.
What, then, can we look for in the teaching of a science
which directly concerns the most powerful of "vested
rights" which deals with rent and wages and interest,
with taxes and tariffs, with privileges and franchises and
subsidies, with currencies and land-tenures and public
debts, with the ideas on which trade-unions are based and
the pleas by which combinations of capitalists are de-
fended ? Economic truth, under existing conditions, has
not merely to overcome the inertia of indolence or habit ;
it is in its very nature subject to suppressions and distor-
tions from the influence of the most powerful and vigilant
interests. It has not merely to make its way ; it must con-
stantly stand on guard. It cannot safely be trusted to any
selected body of men, for the same reasons that the power
of making laws and administering public affairs cannot be
so trusted.
xxxiv GENERAL INTRODUCTION.
s It is especially true to-day that all large political ques-
tions are at bottom economic questions. There is thus in-
troduced into the study of political economy the same
disturbing element that setting men by the ears over the
study of theology has written in blood a long page in the
world's history, and that at one time, at least, so affected
even the study of astronomy as to prevent the authori-
tative recognition of the earth's movement around the
sun long after its demonstration. The organization of
political parties, the pride of place and power that they
arouse and the strong prejudices they kindle, are always
inimical to the search for truth and to the acceptance of
truth.
And while colleges and universities and similar institu-
tions, though ostensibly organized for careful investigation
and the honest promulgation of truth, are not and cannot
be exempt from the influences that disturb the study of
political economy, they are especially precluded under
present conditions from faithful and adequate treatment
of that science. For in the present social conditions of
the civilized world nothing is clearer than that there is
some deep and wide-spread wrong in the distribution, if
not in the production, of wealth. This it is the office of
political economy to disclose, and a really faithful and
honest explication of the science must disclose it.
But no matter what that injustice may be, colleges and
universities, as at present constituted, are by the very law
of their being precluded from discovering or revealing it.
For no matter what be the nature of this injustice, the
wealthy class must, relatively at least, profit by it, and this
is the class whose views and wishes dominate in colleges
and universities. As, while slavery was yet strong, we
might have looked in vain to the colleges and universities
and accredited organs of education and opinion in our
Southern States, and indeed for that matter in the North,
GENERAL INTRODUCTION. xxxv
for any admission of its injustice, so under present condi-
tions must we look in vain to such sources for any faithful
treatment of political economy. Whoever accepts from
them a chair of political economy must do so under the
implied stipulation that he shall not really find what it is
his professional business to look for.*
In these extraneous difficulties, and not in any difficulty
inherent in political economy itself, lies the reason why,
to-day, after all the effort that since Adam Smith wrote has
been devoted to its investigation, or presumed investiga-
tion, he who would really know what it teaches can find
no consistent body of undisputed doctrine that he may
safely accept ; and can turn to the colleges and universities
only with the certainty that, wherever else he may find the
truth, he cannot find it there.
Yet, if political economy be the one science that cannot
safely be left to specialists, the one science of which it is
needful for all to know something, it is also the science
which the ordinary man may most easily study. It re-
quires no tools, no apparatus, no special learning. The
phenomena which it investigates need not be sought for
in laboratories or libraries ; they lie about us, and are con-
stantly thrust upon us. The principles on which it builds
are truths of which we all are conscious, and on which in
every-day matters we constantly base our reasoning and
our actions. And its processes, which consist mainly in
analysis, require only care in distinguishing what is essen-
tial from what is merely accidental.
In proposing to my readers to go with me in an attempt
to work out the main principles of political economy, I am
not asking them to think of matters they have never
thought of before, but merely to think of them in a careful
* On tills subject, Adam Smith's opinion of colleges and universi-
ties (Article II., PartllL, Chapter L, Book V., "Wealth of Nations")
may still be read with much advantage.
xxxvi GENEEAL INTRODUCTION.
and systematic way. For we all have some sort of political
economy. Men may honestly confess an ignorance of
astronomy, of chemistry, of geology, of philology, and
really feel their ignorance. But few men honestly confess
an ignorance of political economy. Though they may
admit or even proclaim ignorance, they do not really
feel it. There are many who say that they know nothing
of political economy many indeed who do not know what
the term means. Yet these very men hold at the same
time and with the utmost confidence opinions upon matters
that belong to political economy, such as the causes which
affect wages and prices and profits, the effects of tariffs,
the influence of labor-saving machinery, the function and
proper substance of money, the reason of " hard times " or
" good times," and so on. For men living in society, which
is the natural way for men to live, must have some sort of
politico-economic theories good or bad, right or wrong.
The way to make sure that these theories are correct, or
if they are not correct, to supplant them by true theories,
is by such systematic and careful investigation as in this
work I propose.
But to such an investigation there is one thing so neces-
sary, one thing of such primary and constant importance,
that I cannot too soon and too strongly urge it upon the
reader. It is, that in attempting the study of political
economy we should first of all, and at every step, make
sure of the meaning of the words that we use as its terms,
so that when we use them they shall always have for us
the same meaning.
"Words are the signs or tokens by which in speech or
writing we communicate our thoughts to one another. It
is only as we attach a common meaning to words that we
can communicate with one another by speech. And to
understand one another with precision, it is necessary that
GENERAL INTRODUCTION. xzxvii
each attach precisely the same meaning to the same word.
Thus, two men may look on the ocean from the same place,
and one honestly insist that there are three ships in sight,
while the other as honestly insists that there are only two,
if the one uses the word ship in its general meaning of
navigable vessel, and the other uses it in its technical
meaning of a vessel carrying three square-rigged masts.
Such use of words in somewhat different senses is pecu-
liarly dangerous in philosophic discussion.
But words are more than the means by which we com-
municate our thoughts. They are also signs or tokens in
which we ourselves think the labels of the thought-
drawers or pigeonholes in which we stow away the various
ideas that we often mentally deal with by label. Thus, we
cannot think with precision unless in our own minds
we use words with precision. Failure to do this is a
great cause of the generation and persistence of economic
fallacies.
In all studies it is important that we should attach defi-
nite meanings to the terms we use. But this is especially
important in political economy. For in other studies most
of the words used as terms are peculiar to that study. The
terms used in chemistry, for instance, are used only in
chemistry. This makes the study of chemistry harder in
beginning, for the student has to familiarize himself with
new words. But it avoids subsequent difficulties, for these
words being used only in chemistry, their meaning is not
likely to be warped by other use from the one definite
sense they properly bear in chemistry.
Now the terms used in political economy are not words
reserved to it. They are words in every-day use, which
the necessities of daily life constantly require us to give to,
and accept for, a different than the economic meaning.
In studying political economy, in thinking out any of its
xxxviii GENERAL INTRODUCTION.
problems, it is absolutely necessary to give to such terms
as wealth, value, capital, land, labor, rent, interest, wages,
money, and so on, a precise meaning; and to use them
only in this a meaning which always differs, and in some
cases differs widely, from the common meaning. But not
only have we all been accustomed in the first place to use
these words in their common meanings ; but even after we
have given them as politico-economic terms a definite
meaning, we must, in ordinary talk and reading continue
to use and accept them in their ordinary sense.
Hence arises in political economy a liability to confusion
in thought from lack of definiteness in the use of terms.
The careless as to terms cannot take a step without falling
into this confusion, and even the usually careful are liable
to fall into confusion if at any moment they relax their
vigilance. The most eminent writers on political economy
have given examples of this, confusing themselves as well
as their readers by the vague use of a term. To guard
against this danger it is necessary to be careful in begin-
ning, and continuously to be careful. I shall therefore in
this work try to define each term as it arises, and there-
after, when using it as an economic term, try to use it in
that precise sense, and in no other.
To define a word is to mark off what it includes from
what it does not include to make it in our minds, as it
were, clear and sharp on its edges so that it will always
stand for the same thing or things, not at one time mean
more and at another time less.
Thus, beginning at the beginnings, let us consider the
nature and scope of political economy, that we may see its
origin and meaning, what it includes and what it does not
include. If in this I ask the reader to go with me deeper
than writers on political economy usually do, let him not
think me wandering from the subject. He who would
build a towering structure of brick and stone, that in stress
GENERAL INTRODUCTION. xudx
and strain will stand firm and plumb, digs for its founda-
tion to solid rock.
Should we grudge such pains in laying the foundations
of a great science, on which in its superstructure so much
must rest ?
In nothing more than in philosophy is it wise that we
should be " like a man which built an house, and digged
deep, and laid the foundation on a rock."
BOOK I.
THE MEANING OF POLITICAL ECONOMY
Though but an atom midst immensity,
Still I am something, fashioned by Thy hand !
I hold a middle rank 'twixt heaven and earth
On the last verge of mortal being stand
Close to the realms where angels have their birth,
Just on the boundaries of the spirit-land !
The chain of being is complete in me
In me is matter's last gradation lost,
And the next step is spirit Deity !
I can command the lightning, and am dust !
Bowing's translation of Dershavin.
CONTENTS OF BOOK I.
THE MEANING OF POLITICAL ECONOMY.
PAGE
INTRODUCTION TO BOOK 1 7
CHAPTER I.
THE THREE FACTORS OF THE WORLD.
SHOWING THE CONSTITUENTS OF ALL WE PERCEIVE.
Meaning of factor ; and of philosophy ; and of the world What
we call spirit What we call matter What we call energy
Though these three may be at bottom one, we must separate
them in thought Priority of spirit 9
CHAPTER II.
MAN, HIS PLACE AND POWERS.
SHOWING OUR RELATIONS TO THE GLOBE, AND THE QUALITIES
THAT ENABLE US TO EXTEND OUR KNOWLEDGE OP IT AND OUR
POWERS ON IT.
Man's earliest knowledge of his habitat How that knowledge
grows, and what civilized men now know of it The essential
distinction between man and other animals In this lies his
power of producing and improving 11
CHAPTER m.
HOW MAN'S POWERS ARE EXTENDED.
SHOWING THAT THEIR USE OP REASON WELDS MEN INTO
THE SOCIAL ORGANISM OR ECONOMIC BODY.
Extensions of man's powers in civilization Due not to improve-
ment in the individual but in the society Hobbes's "Levia-
than " The Greater Leviathan This capacity for good also
capacity for evil 19
3
4 CONTENTS OF BOOK L
CHAPTER IV.
CIVILIZATION WHAT IT MEANS.
PAGE
SHOWING THAT CIVILIZATION CONSISTS IN THE WELDING OF
MEN INTO THE SOCIAL ORGANISM OE ECONOMIC BODY.
Vagueness as to what civilization is Guizot quoted Deriva-
tion and original meaning Civilization and the State Why
a word referring to the precedent and greater has been taken
from one referring to the subsequent and lesser . . .24
CHAPTER V.
THE ORIGIN AND GENESIS OF CIVILIZATION.
SHOWING THE NATURE OF REASON ; AND HOW IT IMPELS TO
EXCHANGE, BY WHICH CIVILIZATION DEVELOPS.
Reason the power of tracing causal relations Analysis and syn-
thesis Likeness and unlikeness between man and other ani-
mals Powers that the apprehension of causal relations gives
Moral connotations of civilization But begins with and in-
creases through exchange Civilization relative, and exists in
the spiritual 29
CHAPTER VI.
OF KNOWLEDGE AND THE GROWTH OF KNOWLEDGE.
SHOWING THAT THE GROWTH OF KNOWLEDGE IS BY COOPER-
ATION, AND THAT IT INHERES IN THE SOCIETY.
Civilization implies greater knowledge This gain comes from
cooperation The incommunicable knowing called skill The
communicable knowing usually called knowledge The rela-
tion of systematized knowledge to the means of storing know-
ledge, to skill and to the economic body Illustration from as-
tronomy 39
CHAPTER VII.
OF SEQUENCE, CONSEQUENCE AND LAWS OF NATURE.
SHOWING THE PROPER MEANING OF SEQUENCE AND OF CON-
SEQUENCE, AND WHY WE SPEAK OF LAWS OF NATURE.
Coexistence and succession Sequence and consequence Causes
in series ; names for them Our direct knowledge is of spirit
Simplest perception of causal relation Extensions of this
The causal search unsatisfied till it reaches spirit And finds
or assumes intent Early evidences of this Why we must
assume a superior spirit Evidences of intent The word
nature and its implication of will or spirit The word law
The term "law of nature" 44
CONTENTS OF BOOK I.
CHAPTER
OF THE KNOWLEDGE PEOPERLY CALLED SCIENCE.
PAGE
SHOWING THAT SCIENCE DEALS ONLY WITH LAWS OP NATURE,
AND THAT IN THE CURRENT POLITICAL ECONOMY THIS HAS
BEEN FORGOTTEN.
Proper meaning of science It investigates laws of nature, not
laws of man Distinction between the two Their confusion
in the current political economy Mason and Lalor's "Primer
of Political Economy " quoted Absurdity of this confusion
Turgot on the cause of such confusions 58
CHAPTER IX.
THE ECONOMY CALLED POLITICAL ECONOMY.
SHOWING THE MEANING, UNITS AND SCOPE OP POLITICAL
ECONOMY.
The word economy The word political Origin of the term
"political economy" and its confusions It is not concerned
with the body politic, but with the body economic Its units,
and the system or arrangement of which it treats Its scope . 65
CHAPTER X.
THE ELEMENTS OF POLITICAL ECONOMY.
SHOWING HOW POLITICAL ECONOMY SHOULD PROCEED AND
WHAT RELATIONS IT SEEKS TO DISCOVER.
How to understand a complex system It is the purpose of such
a system that political economy seeks to discover These
laws, natural laws of human nature The two elements rec-
ognized by political economy These distinguished only by
reason Human will affects the material world only through
laws of nature It is the active factor in all with which polit-
ical economy deals 74
CHAPTER XI.
OF DESIRES AND SATISFACTIONS.
SHOWING THE WIDTH AND IMPORTANCE OP THE FIELD Of
POLITICAL ECONOMY.
Action springs from desire and seeks satisfaction Order of de-
sires Wants or needs Subjective and objective desires
Material and immaterial desires The hierarchy of life and
of desires , . 81
6 CONTENTS OF BOOK L
CHAPTER XH.
THE FUNDAMENTAL LAW OF POLITICAL ECONOMY.
PAOB
SHOWING THAT THE LAW FROM WHICH POLITICAL ECONOMY PRO-
CEEDS IS THAT MEN SEEK TO SATISFY THEIR DESIRES WITH
THE LEAST EXERTION.
Exertion followed by weariness The fact that men seek to sat-
isfy their desires with the least exertion Meaning and ana-
logue Exemplified in trivial things Is a law of nature and
the fundamental law of political economy Substitution of
selfishness for this principle Buckle quoted Political econ-
omy requires no such assumption The necessity of labor not
a curse ............ 86
CHAPTER
METHODS OF POLITICAL ECONOMY.
SHOWING THE NATURE OF THE METHODS OF INVESTIGATION
THAT MAY BE USED IN POLITICAL ECONOMY.
Deductive and inductive schools "New American Cyclopedia"
quoted Triumph of the inductionists The method of in-
duction and the method of deduction Method of hypothesis.
Bacon's relation to induction Real error of the deduction-
ists and the mistake of the inductionists Lalor's Cyclopedia
quoted Result of the triumph of the inductionists A true
science of political economy must follow the deductive method
Davis's "Elements of Inductive Logic" quoted Double as-
surance of the real postulate of political economy Method of
mental or imaginative experiment ...... 92
CHAPTER XIV.
POLITICAL ECONOMY AS SCIENCE AND AS ART.
SHOWING THAT POLITICAL ECONOMY IS PROPERLY A SCIENCE,
AND THE MEANING IT SHOULD HAVE IF SPOKEN OF AS ART.
Science and art There must be a science of political economy,
but no proper art What must be the aim of an art of politi-
cal economy White art and black art Course of further
investigation .......... 101
INTRODUCTION TO BOOK I.
THE earliest, and as I think sufficient, definition of
Political Economy, is, the science that treats of the
nature of wealth, and of the laws of its production and
distribution. But as this definition seems never to have
been fully understood and adhered to by the accepted
teachers of political economy, and has during late years
been abandoned by those who occupy the position of of-
ficial teachers in all our leading colleges and universities,
let us, beginning at the beginnings, endeavor to see for
ourselves just what political economy is.
CHAPTER I.
THE THREE FACTORS OF THE WORLD.
SHOWING THE CONSTITUENTS OP ALL WE PERCEIVE.
Meaning of factor ; and of philosophy ; and of the world What we
call spirit What we call matter What we call energy Though
these three may be at bottom one, we must separate them in
thought Priority of spirit.
THE word factor, in commercial use, means one who
acts as agent for another. In mathematical use, it
means one of the quantities which multiplied together form
a product. Hence in philosophy, which may be defined as
the search for the nature and relations of things, the word
factor affords a fit term for the elements which bring
about a result, or the categories into which analysis enables
us to classify these elements.
In the world I use the term in its philosophic sense of
the aggregate or system of things of which we are cog-
nizant and of which we ourselves are part we are enabled
by analysis to distinguish three elements or factors :
1. That which feels, perceives, thinks, wills ; which to
distinguish, we call mind or soul or spirit.
2. That which has a mass or weight, and extension or
form ; which to distinguish, we call matter.
3. That which acting on matter produces movement;
which to distinguish, we call motion or force or energy.
9
10 THE MEANING OF POLITICAL ECONOMY. Book L
We cannot, in truth, directly recognize energy apart
from matter; nor matter without some manifestation of
energy ; nor mind or spirit unconjoined with matter and
motion. For though our own consciousness may testify
to our own essentially spiritual nature, or even at times to
what we take to be direct evidence of pure spiritual exis-
tence, yet consciousness itself begins with us only after
bodily life has already begun, and memory by which alone
we can recall past consciousness is later still in appearing.
It may be that what we call matter is but a form of energy ;
and it may perhaps be that what we call energy is but a
manifestation of what we call mind or soul or spirit ; and
some have even held that from matter and its inherent
powers all else originates. Yet though they may not be
in fact separable by us, and though it may be that at
bottom they are one, we are compelled in thought to dis-
tinguish these three as independent, separable elements,
which in their actions and reactions make up the world as
it is presented to our perception.
Of these from our standpoint, that which feels, perceives,
thinks, wills, comes first in order of priority, for it is this
which is first in our own consciousness, and it is only
through this that we have consciousness of any other exis-
tence. In this, as our own consciousness testifies, is the
initiative of all our own motions and movements, so far as
consciousness and memory shed light ; and in all cases in
which we can trace the genesis of anything to its begin-
ning we find that beginning in thought and will. So clear,
so indisputable is the priority of this spiritual element that
wherever and whenever men have sought to account for
the origin of the world they have always been driven to
assume a great spirit or God. For though there be athe-
istic theories, they always avoid the question of origin,
and assume the world always to have been.
CHAPTER II.
MAN, HIS PLACE AND POWERS.
SHOWING OUR RELATIONS TO THE GLOBE, AND THE QUALI-
TIES THAT ENABLE US TO EXTEND OUR KNOWLEDGE OP IT
AND OUR POWERS ON IT.
Man's earliest knowledge of his habitat How that knowledge grows,
and what civilized men now know of it The essential distinc-
tion between man and other animals In this lies his power of
producing and improving.
WE awake to consciousness to find ourselves, clothed in
flesh, and in company with other like beings, resting
on what seems to us a plane surface. Above us, when the
clouds do not conceal them, the sun shines by day and the
moon and stars by night. Of what this place is, and of
our relations to it, the first men probably knew little more
than is presented to us in direct consciousness, little more
in fact than the animals know ; and, individually, we our-
selves could know little more. But the observations and
reflections of many succeeding men, garnered and system-
atized, enable us of the modern civilization to know, and
with the eyes of the mind almost to see, things to which the
senses untaught by reason are blind.
By the light of this gathered knowledge we behold our-
selves, the constantly changing tenants of the exterior of
a revolving sphere, circling around a larger and luminous
sphere, the sun, and beset on all sides by depths of space,
to which we can neither find nor conceive of limits.
11
12 THE MEANING OF POLITICAL ECONOMY. Boole I.
Through this immeasurable space revolve myriads of lu-
minous bodies of the nature of our sun, surrounded, it is
confidently inferred from the fact that we know it to be
the case with our sun, by lesser, non-luminous bodies that
have in them their centers of revolution.
Our sun, but one, and far from one of the largest, of
countless similar orbs, is the center of light and heat and
revolution to eight principal satellites (having in their
turn satellites of their own), as well as to an indefinite
number of more minute bodies known to us as asteroids
and of more erratic bodies called comets. Of the princi-
pal satellites of the sun, the third in point of distance from
it, and the fourth in point of size, is our earth. It is in
constant movement around the sun, and in constant revo-
lution on its own axis, while its satellite, the moon, also
revolving on its own axis, is in constant movement around
it. The sun itself, revolving too on its own axis, is, with
all its attendant bodies, in constant movement around
some, probably moving, point in the universe which
astronomers have not yet been able to determine.
Thus we find ourselves, on the surface of a globe seem-
ingly fixed, but really in constant motion of so many dif-
ferent kinds that it would be impossible with our present
knowledge to make a diagram indicating its real movement
through space at any point a globe large to us, yet only
as a grain of sand on the sea-shore compared with the
bodies and spaces of the universe of which it is a part.
We find ourselves on the surface of this ceaselessly mov-
ing globe, as passengers, brought there in utter insensibil-
ity, they know not how or whence, might find themselves
on the deck of a ship, moving they know not where , and
who see in the distance similar ships, whether tenanted or
how tenanted they can only infer and guess. The im-
measurably great lies beyond us, and about and beneath
Chap. II. MAN, HIS PLACE AND POWERS. 13
us the immeasurably small. The microscope reveals in-
finitudes no less startling to our minds than does the tele-
scope.
Here we are, depth upon depth about us, confined to the
bottom of that sea of air which envelops the surface of this
moving globe. In it we live and breathe and are con-
stantly immersed. Were our lungs to cease taking in and
pumping out this air, or our bodies relieved of its pressure,
we should die.
Small as our globe seems in the light of astronomy, it
is not really of the whole globe that we are tenants, but
only of a part of its surface. Above this mean surface,
men have found it possible only with the utmost effort and
fortitude to ascend something less than seven miles ; below
it our deepest mining shafts do not pierce a mile. Thus
the extreme limits in depth and height to which man may
occasionally adventure, though not permanently live, are
hardly eight miles. In round numbers the globe is 8000
miles in diameter. Thus the skin of the thinnest-skinned
apple gives no idea of the relative thinness of the zone of
perpendicular distance to which man is confined. And
three fourths of the surface of the globe at its junction
with the air is covered by water, on which, though man
may pass, he cannot dwell; while considerable parts of
what remain are made inaccessible by ice. Like a bridge
of hair is the line of temperature that we must keep. In-
vestigators tell us of the existence of temperatures thou-
sands of degrees above zero and thousands of degrees below
zero. But man's body must maintain the constant level
of a fraction over 98 degrees above zero. A rise or fall
of seven degrees either way from this level and he dies.
With the permanent rise or fall of a few more degrees in
the mean temperature of the surface of the globe it would
become uninhabitable by us.
14 THE MEANING OF POLITICAL ECONOMY. Book L
And while all about us, even what seems firmest, is in
constant change and motion, so is it with ourselves. These
bodies of ours are in reality like the flame of a gas-burner,
which has continuous and denned form, but only as the
manifestation of changes in a stream of succeeding parti-
cles, and which disappears the moment that stream is cut
off. What there is real and distinctive in us is that to
which we may give a name but cannot explain nor easily
define that which gives to changing matter and passing
motion the phase and form of man. But our bodies and
our physical powers themselves, like the form and power
of the gas-flame, are only passing manifestations of that
indestructible matter and eternally pulsing energy of which
the universe so far as it is tangible to us is made up. Stop
the air that every instant is drawn through our lungs and
we cease to live. Stop the food and drink that serve to
us the same purpose as coal and water to the steam-engine,
and, as certainly, if more slowly, the same result follows.
In all this, man resembles the other animals that with
him tenant the superficies of the same earth. Physically
he is merely such an animal, in form and structure and
primary needs closely allied to the mammalia, with whose
species he is zoologically classified. Were man only an
animal he would be but an inferior animal. Nature has
not given him the powers and weapons which enable other
animals readily to secure their food. Nor yet has she
given him the covering which protects them. Had he like
them no power of providing himself with artificial clothing,
man could not exist in many of the regions he now in-
habits. He could live only in the most genial and equable
parts of the globe.
But man is more than an animal. Though in physical
equipment he may in nothing surpass, and in some things
fall below other animals, in mental equipment he is so
vastly superior as to take hi out of their class, and to
Chap. II. MAN, HIS PLACE AND POWERS. 15
make him the lord and master of them all to make him
veritably, of all that we may see, " the roof and crown of
things." And what more clearly perhaps than all else in-
dicates the deep gulf which separates him from all other
animals is that he alone of all animals is the producer, or
bringer forth, and in that sense a maker. In this is a
difference which renders the distinction between the high-
est animal and the lowest man one not of degree but of
kind, and which, linked with the animals though he be,
justifies the declaration of the Hebrew Scripture, that man
is created in the likeness of the All-Maker.
Consider this distinction : We know of no race of men
so low that they do not raise fruits or vegetables, or
domesticate and breed animals; that do not cook food;
that do not fashion weapons ; that do not construct habita-
tions ; that do not make for themselves garments ; that do
not adorn themselves or their belongings with ornamenta-
tion; that do not show at least the rude beginnings of
drawing and painting and sculpture and music. In all the
tribes of animated nature below man there is not the
slightest indication of the power thus shown. No animal
save man ever kindled a fire or cooked a meal, or made a
tool or fashioned a weapon.
It is true that the squirrel hides nuts ; that birds build
nests ; that the beaver dams streams ; that bees construct
combs, in which they store the honey they extract from
flowers ; that spiders weave webs ; that one species of ants
are said to milk insects of another kind. All this is true,
just as it is also true that there are birds whose melody
far surpasses the best music of the savage, and that on
tribes below man nature lavishes an adornment of attire
that in taste as well as brilliancy surpasses the meretricious
adornments of primitive man.
But in all this there is nothing akin to the faculties
which in these things man displays. What man does, he
16 THE MEANING OF POLITICAL ECONOMY. BooTc L
does by taking thought, by consciously adjusting means
to ends. He does it by adapting and contriving and ex-
perimenting and copying ; by effort after effort and trial
after trial. What he does, and his ways of doing it, vary
with the individual, with social development, with time and
place and surroundings, and with what he sees others do.
But the squirrel hides its nuts; the birds after their
orders build their nests, and in due time force their young
to fly ; the beaver constructs its dam ; the bees store their
honey; the spiders weave, and the ants do the work of
their societies, without taking thought, without toilsomely
scheming for the adapting of means to ends, without
experimenting or copying or improving. What they do of
such things, they do not as originators who have discovered
how to do it ; nor yet as learners or imitators or copyists.
They do it, first as well as last, unfalteringly and unalter-
ingly, forgetting nothing and improving in nothing. They
do it, not by reason but by instinct ; by an impulse inhering
in their nature which prompts them without perplexity or
trial on their part to go so far, but gives them no power
to go farther. They do it as the bird sings or the dog
barks, as the hen sits on her eggs or the chick picks its
way from the shell to scratch the ground.
Nature provides for all living things beneath man by
implanting in them blind, strong impulses which at proper
times and seasons prompt them to do what it is necessary
they should do. But to man she grants only such impel-
lings of instinct as that which prompts the mother to press
the new-born babe to her breast and the babe to suckle.
With exceptions such as these, she withdraws from man
her guiding power and leaves him to himself. For in him
a higher power has arisen and looks out on the world a
power that separates him from the brute as clearly and as
widely as the brute is separated from the clod ; a power
that has in it the potency of producing, of making, of
Chap. II. MAN, HIS PLACE AND POWERS. 17
causing things to be ; a power that seeks to look back into
a past ere the globe was, and to peer into a future when
it will cease to exist ; a power that looks on Nature's show
with curiosity like that with which an apprentice might
scan a master's work, and will ask why tides run and
winds blow, and how suns and stars have been put to-
gether ; a power that in its beginnings lacks the certainty
and promptness of instinct, but which, though infinitely
lower in degree, must yet in some sort be akin to that from
which all things proceed.
As this power, which we call reason, rises in man, na-
ture withdraws the light of instinct and leaves him to his
own devices to rise or fall, to soar above the brute or to
sink lower. For as the Hebrew Scriptures have phrased
it, his eyes are opened and before him are good and evil.
The ability to fall, no less than the ability to rise the very
failures and mistakes and perversities of man show his
place and powers. There is among the brutes no drunk-
enness, no unnatural vice, no waste of effort in accom-
plishing injurious results, no wanton slaughter of their
own kind, no want amid plenty. We may conceive of
beings in the form of man, who, like these animals, should
be ruled by such clear and strong instincts that among
them also there would be no liability to such perversions.
Yet such beings would not be men. They would lack the
essential character and highest powers of man. Fitted
perfectly to their environment they might be happy in a
way. But it would be as the full-fed hog is happy. The
pleasure of making, the joy of overcoming, the glory of
rising, how could they exist for such beings ? That man
is not fitted for his environment shows his higher quality.
In him is that which aspires and still aspires.
Endowed with reason, and deprived, or all but deprived,
of instinct, man differs from other animals in being the
producer. Like them, for instance, he requires food. But
18 THE MEANING OF POLITICAL ECONOMY. Book I.
while the animals get their food by taking what they find,
and are thus limited by what they find already in exis-
tence, man has the power of getting his food by bringing
it into existence. He is thus enabled to obtain food in
greater variety and in larger quantity. The amount of
grass limits the number of wild cattle, the amount of their
prey limits the number of the carnivora ; but man causes
grasses and grains and fruits to grow where they did not
grow before ; he breeds animals on which he feeds. And
so it is with the fulfilment of all his wants ; the satisfaction
of all his desires. By the use of his animal powers, man
can cover perhaps as much ground in a day as can a horse
or a dog ; he can cross perhaps about as wide a stream.
But by virtue of the power that makes him the producer
he is already spanning continents and oceans with a speed,
a certainty and an ease that not even the birds of most
powerful wing and swiftest flight can rival.
CHAPTER III.
HOW MAN'S POWERS ARE EXTENDED.
SHOWING THAT THEIR USE OF REASON WELDS MEN INTO
THE SOCIAL ORGANISM OR ECONOMIC BODY.
Extensions of man's powers in civilization Due not to improve-
ment in the individual but in the society Hobbes's "Leviathan"
The Greater Leviathan This capacity for good also capacity
for evil.
MAN, as we have any knowledge of him, either in the
present or in the past, is always man differing from
other animals in the same way, feeling the same essential
needs, moved by the same essential desires, and possessed
of the same essential powers.
Yet between man in the lowest savagery and man in
the highest civilization how vast the difference in the
ability of satisfying these needs and desires by the use of
these powers. In food, in raiment, in shelter; in tools
and weapons ; in ease of movement and of transportation ;
in medicine and surgery ; in music and the representative
arts ; in the width of his horizon ; in the extent and pre-
cision of the knowledge at his service the man who is
free to the advantages of the civilization of to-day is as
a being of higher order compared to the man who was
clothed in skins or leaves, whose habitation was a cave or
rude hut, whose best tool a chipped flint, whose boat a
hollowed log, whose weapons the bow and arrows, and
19
20 THE MEANING OF POLITICAL ECONOMY. Book I.
whose horizon was bounded, as to the past, by tribal tra-
dition, and as to the present by the mountains or sea-shore
of his immediate home and the arched dome which seemed
to him to shut it in.
But if we analyze the way in which these extensions of
man's power of getting and making and knowing and
doing are gained, we shall see that they come, not from
changes in the individual man, but from the union of
individual powers. Consider one of those steamships now
crossing the Atlantic at a rate of over five hundred miles
a day. Consider the cooperation of men in gathering
knowledge, in acquiring skill, in bringing together mate-
rials, in fashioning and managing the whole great struc-
ture; consider the docks, the storehouses, the branching
channels of trade, the correlation of desires reaching over
Europe and America and extending to the very ends of
the earth, which the regular crossing of the ocean by such
a steamship involves. Without this cooperation such a
steamship would not be possible.
There is nothing whatever to show that the men who
to-day build and navigate and use such ships are one whit
superior in any physical or mental quality to their ances-
tors, whose best vessel was a coracle of wicker and hide.
The enormous improvement which these ships show is not
an improvement of human nature ; it is an improvement
of society it is due to a wider, fuller union of individual
efforts in the accomplishment of common ends.
To consider in like manner any one of the many and
great advances which civilized man in our time has made
over the power of the savage, is to see that it has been
gained, and could only have been gained, by the widening
cooperation of individual effort.
The powers of the individual man do not indeed reach
their full limit when maturity is once attained, as do those
of the animal 5 but, the highest of them at least, are capable
Chap. III. HOW MAN'S POWERS AEE EXTENDED. 21
of increasing development up to the physical decay that
comes with age, if not up to the verge of the grave. Yet,
at best, man's individual powers are small and his life is
short. What advances would be possible if men were
isolated from each other and one generation separated
from the next as are the generations of the seventeen-year
locusts? The little such individuals might gain during
their own lives would be lost with them. Each generation
would have to begin from the starting-place of its prede-
cessor.
But man is more than an individual. He is also a social
animal, formed and adapted to live and to cooperate with
his fellows. It is in this line of social development that
the great increase of man's knowledge and powers takes
place.
The slowness with which we attain the ability to care
for ourselves and the qualities incident to our higher gifts
involve an overlapping of individuals that continues and
extends the family relation beyond the limits which obtain
among other mammalia. And, beyond this relation, com-
mon needs, similar perceptions and like desires, acting
among creatures endowed with reason and developing
speech, lead to a cooperation of effort that even in its
crudest forms gives to man powers that place him far
above the beasts and that tends to weld individual men
into a social body, a larger entity, which has a life and
character of its own, and continues its existence while its
components change, just as the life and characteristics of
our bodily frame continue, though the atoms of which it
is composed are constantly passing away from it and as
constantly being replaced.
It is in this social body, this larger entity, of which in-
dividuals are the atoms, that the extensions of human
power which mark the advance of civilization are secured.
The rise of civilization is the growth of this cooperation
22 THE MEANING OP POLITICAL ECONOMY. Book I.
and the increase of the body of knowledge thus obtained
and garnered.
Perhaps I can better point out what I mean by an illus-
tration :
The famous treatise in which the English philosopher
Hobbes, during the revolt against the tyranny of the
Stuarts in the seventeenth century, sought to give the
sanction of reason to the doctrine of the absolute authority
of kings, is entitled " Leviathan." It thus begins :
Nature, the art whereby God hath made and governs the world, is
by the art of man, as in many other things, so in this also imitated,
that it can make an artificial animal. . . . For by art is created that
great Leviathan called a commonwealth or state, in Latin civitas,
which is but an artificial man ; though of greater stature and strength
than the natural, for whose protection and defense it was intended ;
and in which the sovereignty is an artificial soul, as giving life and
motion to the whole body ; the magistrates and other officers of judi-
cature and execution, artificial joints ; reward and punishment, by
which fastened to the seat of the sovereignty every joint and mem-
ber is moved to perform his duty, are the nerves, that do the same
in the body natural ; the wealth and riches of all the particular mem-
bers, are the strength; salus populi, the people's safety, its business;
counselors by whom all things needful for it to know are suggested
unto it, are the memory ; equity and laws, an artificial reason and
will; concord, health; sedition, sickness; and civil war, death.
Lastly, the pacts and covenants, by which the parts of this body
politic were at first made, set together, and united, resemble that
fiat, or the "Let us make man," pronounced by God in the creation.
Without stopping now to comment further on Hobbes's
suggestive analogy, there is, it seems to me, in the system
or arrangement into which men are brought in social life,
by the effort to satisfy their material desires an integra-
tion which goes on as civilization advances something
which even more strongly and more clearly suggests the
idea of a gigantic man, formed by the union of individual
men, than any merely political integration.
This Greater Leviathan is to the political structure or
conscious commonwealth what the unconscious functions
Chap. III. HOW MAN'S POWEES AEE EXTENDED. 23
of the body are to the conscious activities. It is not made
by pact and covenant, it grows ; as the tree grows, as the
man himself grows, by virtue of natural laws inherent in
human nature and in the constitution of things ; and the
laws which it in turn obeys, though their manifestations
may be retarded or prevented by political action are them-
selves utterly independent of it, and take no note whatever
of political divisions.
It is this natural system or arrangement, this adjust-
ment of means to ends, of the parts to the whole and the
whole to the parts, in the satisfaction of the material de-
sires of men living in society, which, in the same sense as
that in which we speak of the economy of the solar system,
is the economy of human society, or what in English we
call political economy. It is as human units, individuals
or families, take their place as integers of this higher man,
this Greater Leviathan, that what we call civilization
begins and advances.
But in this as in other things, the capacity for good is
also capacity for evil, and prejudices, superstitions, errone-
ous beliefs and injurious customs may in the same way be
so perpetuated as to turn what is the greatest potency of
advance into its greatest obstacle, and to engender degra-
dation out of the very possibilities of elevation. \Aiid it
is well to remember that the possibilities of degradation
and deterioration seem as clear as the possibilities of ad-
vance. In no race and at no place has the advance of man
been continuous.^ At the present time, while European
civilization is advancing, the majority of mankind seem
stationary or retrogressive. And while even the lowest
peoples of whom we have knowledge show in some things
advances over what we infer must have been man's primi-
tive condition, yet it is at the same time true that in other
things they also show deteriorations, and that even the most
highly advanced peoples seem in some things below what
we best imagine to have been as the original state of man.
CHAPTER IV.
CIVILIZATION- WHAT IT MEANS.
SHOWING THAT CIVILIZATION CONSISTS IN THE WELDING OP
MEN INTO THE SOCIAL ORGANISM OR ECONOMIC BODY.
Vagueness as to what civilization is Guizot quoted Derivation
and original meaning Civilization and the State Why a word
referring to the precedent and greater has been taken from one
referring to the subsequent and lesser.
THE word civilization is in common use. But it is
used with vague and varying meanings, which refer
to the qualities or results that we attribute to the thing,
rather than to the thing itself the existence or possibility
of which we thus assume.
Sometimes our expressed or implied test of civilization
is in the methods of industry and control of natural forces.
Sometimes it is in the extent and diffusion of knowledge.
Sometimes in the kindliness of manners and justice and
benignity of laws and institutions. Sometimes it may be
suspected that we use the word as do the Chinese when
they class as barbarians all humanity outside of the " Cen-
tral Flowery Kingdom." And there is point in the satire
which tells how men who had lost their way in the wilder-
ness, exclaimed at length when they reached a prison:
" Thank God, we are at last in civilization ! "
This difficulty in determining just what civilization is,
does not pertain to common speech alone, but is felt by
24
Chap. IV. CIVILIZATION- WHAT IT MEANS. 25
the best writers on the subject. Thus Buckle, in the two
great volumes of the general introduction to his " History
of Civilization in England," which was all his untimely
death permitted him to complete, gives us his view of what
civilization depends on, what influences it, what promotes
or retards it ; but does not venture to say what civilization
is. And thus Guizot, in his " General History of Civiliza-
tion in Modern Europe," says of civilization itself :
It is so general in its nature that it can scarcely be seized ; so com-
plicated that it can scarcely be unraveled ; so hidden as scarcely to
be discernible. The difficulty of describing it, or recounting its his-
tory, is apparent and acknowledged ; but its existence, its worthiness
to be described and to be recounted, is not less certain and manifest.
Yet, surely, it ought to be possible to fix the meaning of a
word so common and so important ; to determine the thing
from which the qualities we attribute to civilization pro-
ceed. This I shall attempt, not only because I shall have
future occasion to use the word, but because of the light
the effort may throw on the matter now in hand, the
nature of political economy.
The word civilization comes from the Latin civis, a
citizen. Its original meaning is, the manner or condition
in which men live together as citizens. Now the relations
of the citizen to other citizens, which are in their concep-
tion peaceable and friendly, involving mutual obligations,
mutual rights and mutual services, spring from the rela-
tion of each citizen to a whole of which each is an integral
part. That whole, from membership in which proceeds
the relationship of citizens to each other, is the body
politic, or political community, which we name the state,
and which, struck by the analogy between it and the
human body, Hobbes likened to a larger and stronger man
made up by the integration of individual men, and called
Leviathan.
26 THE MEANING OF POLITICAL ECONOMY. Book I.
Yet it is not this political relation, but a relation like
it, that is suggested in this word civilization a relation
deeper, wider and closer than the relation of the citizen to
the State, and prior to it.
There is a relation between what we call a civilization
and what we call a state, but in this the civilization is the
antecedent and the state the subsequent. The appearance
and development of the body politic, the organized state,
the Leviathan of Hobbes, is the mark of civilization already
in existence. Not in itself civilization, it involves and
presupposes civilization.
And in the same way the character of the state, the
nature of the laws and institutions which it enacts and
enforces, indicate the character of the underlying civiliza-
tion. For while civilization is a general condition, and
we speak of mankind as civilized, half civilized or uncivi-
lized, yet we recognize individual differences in the char-
acteristics of a civilization, as we recognize differences in
the characteristics of a state or in the characteristics of a
man. We speak of ancient civilization and modern civili-
zation ; of Asiatic civilization and European civilization ;
of the Egyptian, the Assyrian, the Chinese, the Indian,
the Aztec, the Peruvian, the Roman and the Greek civili-
zations, as separate things, having such general likeness
to each other as men have to men, but each marked by
such individual characteristics as distinguish one man from
other men. And whether we consider them in their grand
divisions or in their minor divisions, the line between what
we call civilizations is not the line of separation between
bodies politic. The United States and Canada, or the
United States and Great Britain, are separate bodies politic,
yet their civilization is the same. The making of the
Queen of Great Britain Empress of India does not substi-
tute the English civilization for the Indian civilization in
Bengal, nor the Indian civilization for the English civiliza-
Chap.ir. CIVTLIZATION-WHAT IT MEANS. 27
tion in Yorkshire or Kent. Change in allegiance involves
change in citizenship, but in itself involves no change in
the civilization. Civilization is evidently a relation which
underlies the relations of the body politic as the uncon-
scious motions of the body underlie the conscious motions.
Now, as the relations of the citizen proceed essentially
from the relation of each citizen to a whole the body pol-
itic, or Leviathan, of which he is a part is it not clear,
when we consider it, that the relations of the civilized man
proceed from his relations to what I have called the body
economic, or Greater Leviathan ? It is this body economic,
or body industrial, which grows up in the cooperation of
men to supply their wants and satisfy their desires, that
is the real thing constituting what we call civilization.
Of this the qualities by which we try to distinguish what
we mean by civilization are the attributes. It does indeed,
I think, best present itself to our apprehension in the
likeness of a larger and greater man, arising out of and
from the cooperation of individual men to satisfy their
desires, and constituting, after the evolution which finds
its crown in the appearance of man himself, a new and
seemingly illimitable field of progress.
This body economic, or Greater Leviathan, always pre-
cedes and always underlies the body politic or Leviathan.
The body politic or state is really an outgrowth of the
body economic, in fact one of its organs, the need for
which and appearance of which arises from and with its
own appearance and growth. And from this relation of
dependence upon the body economic, the body politic can
never become exempt.
Why, then, it may be asked, is it that we take for the
greater and precedent a word drawn from the lesser and
subsequent, and find in the word civilization, which ex-
presses an analogy to the body politic, the word that
serves us as a name for the body economic ? The reason
28 THE MEANING OF POLITICAL ECONOMY. BooTcI.
of this is worth noting, as it flows from an important
principle in the growth of human knowledge. Things
that come first in the natural order are not always first
apprehended. As the human eye looks out, but not in, so
the human mind as it scans the world is apt to observe
what is of the superstructure of things before it observes
what is of the foundation.
The body politic is more obvious to our eyes, and, so to
speak, makes more noise in our ears, than the unseen and
silent body economic, from which it proceeds and on which
it depends. Thus, in the intellectual development of
mankind, it and its relations are noticed sooner and receive
names earlier than the body economic. And the words so
made part of our mental furniture, afterwards by their
analogies furnish us with words needed to express the
body economic and its relations when later in intellectual
growth we come to recognize it. Thus it is that while the
thing civilization must in the natural order precede the
body politic or state, yet when in the development of
human knowledge we come to recognize this thing, we take
to express it and its relations words already in use as ex-
pressive of the body politic and its relations.
But without at present pursuing further that record of
the history of thought that lies in the meaning of words,
let us endeavor to see whence comes the integration of
men into a body economic and how it grows.
CHAPTER V.
THE ORIGIN AND GENESIS OF CIVILIZATION.
SHOWING THE NATURE OP REASON ; AND HOW IT IMPELS TO
EXCHANGE, BY WHICH CIVILIZATION DEVELOPS.
Eeason the power of tracing causal relations Analysis and syn-
thesisLikeness and unlikeness between man and other animals
Powers that the apprehension of causal relations gives Moral
connotations of civilization But begins with and increases
through exchange Civilization relative, and exists in the spirit-
ual.
MAN is an animal ; but an animal plus something more
the divine spark differentiating him from all other
animals, which enables him to become a maker, and which
we call reason. To style it a divine spark is to use a fit
figure of speech, for it seems analogous to, if not indeed
a lower form of, the power to which we must attribute the
origin of the world ; and like light and heat radiates and
enkindles.
The essential quality of reason seems to lie in the power
of tracing the relationship of cause and effect. This power,
in one of its aspects, that which proceeds from effect to
cause, thus, as it were, taking things apart, so as to see
how they have been put together, we call analysis. In
another of its aspects, that which proceeds from cause to
effect, thus, as it were, putting things together, so as to
see in what they result, we call synthesis. In both of
29
30 THE MEANING OF POLITICAL ECONOMY. Book I.
these aspects, reason, I think, involves the power of pic-
turing things in the mind, and thus making what we may
call mental experiments.
Whoever will take the trouble (and if he has the time,
he will find in it pleasure) to get on friendly and intimate
terms with a dog, a cat, a horse, or a pig, or, still better,
since these animals, though they have four limbs like ours,
lack hands, with an intelligent monkey, will find many
things in which our "poor relations" resemble us, or
perhaps rather, we resemble them.
To such a man these animals will exhibit traces at least
of all human feelings love and hate, hope and fear, pride
and shame, desire and remorse, vanity and curiosity,
generosity and cupidity. Even something of our small
vices and acquired tastes they may show. Goats that
chew tobacco and like their dram are known on shipboard,
and dogs that enjoy carriage-rides and like to run to fires,
on land. "Bummer" and his client "Lazarus" were as
well known as any two-legged San Franciscan some thirty-
five or forty years ago, and until their skins had been
affectionately stuffed, they were "deadheads" at free
lunches, in public conveyances and at public functions.
I bought in Calcutta, when a boy, a monkey which all the
long way home would pillow her little head on mine as I
slept, and keep off my face the cockroaches that infested
the old Indiaman by catching them with her hands and
cramming them into her maw. When I got her home, she
was so jealous of a little brother that I had to part with
her to a lady who had no children. And my own children
had in New York a little monkey, sent them from Para-
guay, that so endeared herself to us all that when she died
from over-indulgence in needle-points and pinheads it
seemed like losing a member of the family. She knew
my step before I reached the door on coming home, and
when it opened would spring to meet me with chattering
Chap. V. ORIGIN AND GENESIS OF CIVILIZATION. 31
caresses, the more prolonged the longer I had been away.
She leaped from the shoulder of one to that of another at
table ; nicely discriminating between those who had been
good to her and those who had offended her. She had all
the curiosity attributed to her sex in man, and a vanity
most amusing. She would strive to attract the attention,
of visitors, and evince jealousy if a child called off their
notice. At the time for school-children to pass by, she
would perch before a front window and cut monkey shines
for their amusement, chattering with delight at their
laughter and applause as she sprang from curtain to
curtain and showed the convenience of a tail that one may
swing by.
How much " human nature " there is in animals, who-
ever treats them kindly knows. We usually become most
intimate with dogs. And who that has been really inti-
mate with a generous dog has not sympathized with the
children's wish to have him decently buried and a prayer
said over him? Or who, when he saw at last the poor
beast's stiffened frame, could, despite his accustomed
philosophy which reserves a future life to man alone, re-
frain from a moment's hope that when his own time came
to cross the dark river his faithful friend might greet him
on the other shore ? And must we say, Nay ? The title
by which millions of men prefer to invoke the sacred
name, it is not "the All Mighty," but "the Most Mer-
ciful."
One of the most striking differences between man and
the lower animals is that which distinguishes man as the
unsatisfied animal. Yet I am not sure that this is in itself
an original difference ; an essential difference of kind. I
am, on the contrary, as I come closely to consider it, in-
clined rather to think it a result of the endowment of man
with the quality of reason that animals lack, than in itself
an original difference.
32 THE MEANING OF POLITICAL ECONOMY. Book I.
For, on the one side, we see that men when placed in
conditions that forbid the hope of improvement do become
almost if not quite as stolidly content with no greater
satisfactions than their fathers could obtain as the mere
animals are. And, on the other side, we see that, to some
extent at least, the desires of animals increase as oppor-
tunities for gratifying them are afforded. Give a horse
lump-sugar and he will come to you again to get it, though
in his natural state he aspires to nothing beyond the herb-
age. The pampered lap-dogs whose tails stick out from
warm coats on the fashionable city avenues in winter seem
to enjoy their clothing, though they could never solve the
mystery of how to get it on, let alone how to make it.
They come to want the daintiest food served in china on
soft carpets, while dogs of the street will fight for the
dirtiest bone. I know a cat in the mountains that lives
in the woods all the months when leaves are green, but
when they turn and die seeks the farmer's hearth. The
big white puss that lies curled in the soft chair beside the
stove in the hall below, and who will swell and purr with
satisfaction when I scratch her head and stroke her back
as I pass down, hardly dared sneak into the house a few
weeks ago, but now that she finds she is welcome is content
with nothing less than the softest couch and the warmest
fire. And the shaggy dog that likes so well to sit in a boat
and watch the water as it plashes by, makes me wonder
sometimes if he would not want a nicely cushioned naph-
tha launch if he could make out how to get one. Even
man is content with the best he can get until he begins to
see he can get better. A handsome woman I have met,
who puts on for ball or opera an earl's ransom in gems,
and must have a cockade in her coachman's hat and bicycle
tires on her carriage-wheels, will tell you that once her
greatest desire was for a new wash-tub and a better
cooking-stove.
Chap. V. ORIGIN AND GENESIS OF CIVILIZATION. 33
The more we come to know the animals the harder we
find it to draw any clear mental line between them and
us, except on one point, as to which we may see a clear
and profound distinction. This, that animals lack and
that men have, is the power of tracing effect to cause, and
from cause assuming effect. Among animals this want is
to some extent made up for by finer sense-perceptions and
by the keener intuitions that we call instinct. But the line
that thus divides us from them is nevertheless wide and
deep. Memory, which the animals share with man, enables
them to some extent to do again what they have been first
taught to do ; to seek what they have found pleasant, and
to avoid what they have found painful. They certainly
have some way of communicating their impressions and
feelings to others of their kind which constitutes a rudi-
mentary language, while their sharper senses and keener
intuitions serve them in some cases where men would be
at fault. Yet they do not, even in the simplest cases, show
the ability to " think a thing out," and the wiliest and most
sagacious of them may be snared and held by devices the
simplest man would with a moment's reflection "see his
way through." *
Is it not in this power of "thinking things out," of
"seeing the way through" the power of tracing causal
relations that we find the essence of what we call rea-
son, the possession of which constitutes the unmistakable
difference, not in degree but in kind, between man and the
brutes, and enables him, though their fellow on the plane
of material existence, to assume mastery and lordship over
them all?
Here is the true Promethean spark, the endowment to
* I do not of course include the animals of fairy tale, nor the
superordinary" dogs that Herbert Spencer's correspondents write to
him about. See Herbert Spencer's "Justice," Appendix D, or my
"A Perplexed Philosopher," p. 285.
34 THE MEANING OF POLITICAL ECONOMY. Book I.
which the Hebrew Scriptures refer when they say that
God created man in His own image; and the means by
which we, of all animals, become the only progressive
animal. Here is the germ of civilization.
It is this power of relating effect to cause and cause to
effect which renders the world intelligible to man ; which
enables him to understand the connection of things around
him and the bearings of things above and beyond him ; to
live not merely in the present, but to pry into the past
and to forecast the future ; to distinguish not only what
are presented to him through the senses, but things of
which the senses cannot tell ; to recognize as through mists
a power from which the world itself and all that therein
is must have proceeded; to know that he himself shall
surely die, but to believe that after that he shall live
again.
It is this power of discovering causal relations that en-
ables him to bring forth fire and call out light ; to cook
food ; to make for himself coats other than the skin with
which nature clothes him ; to build better habitations than
the trees and caves that nature offers ; to construct tools ;
to forge weapons ; to bury seeds that they may rise again
in more abundant life; to tame and breed animals; to
utilize in his service the forces of nature ; to make of water
a highway ; to sail against the wind and lift himself by
the force that pulls all things down; and gradually to
exchange the poverty and ignorance and darkness of the
savage state for the wealth and knowledge and light that
come from associated effort.
All these advances above the animal plane, and all that
they imply or suggest, spring at bottom from the power
that makes it possible for a man to tie or untie a square
knot, which animals cannot do ; that makes it impossible
that he should be caught in a figure-4 trap as rabbits and
birds are caught, or should stand helpless like a bull or a
Chap. V. OEIGIN AND GENESIS OF CIVILIZATION. 35
horse that has wound his tethering-rope around a stake
or a tree, not knowing in which way to go to loose it.
This power is that of discerning the relation between cause
and effect.
We measure civilization in various ways, for it has
various aspects or sides; various lines along which the
general advance implied in the word shows itself as in
knowledge, in power, in wealth, in justice and kindliness.
But it is in this last aspect, I think, that the term is most
commonly used. This we may see if we consider that the
opposite of civilized is savage or barbarous. Now savage
and barbarous refer in common thought and implication
not so much to material as to moral conditions, and are
synonyms of ferocious or cruel or merciless or inhuman.
Thus, the aspect of civilization most quickly apprehended
in common thought is that of a keener sense of justice and
a kindlier feeling between man and man. And there is
reason for this. While an increased regard for the rights
of others and an increased sympathy with others is not
all there is in civilization, it is an expression of its moral
side. And as the moral relates to the spiritual, this aspect
of civilization is the highest, and does indeed furnish the
truest sign of general advance.
Yet for the line on which the general advance primarily
proceeds, for the manner in which individual men are
integrated into a body economic or greater man, we must
look lower. Let us try to trace the genesis of civilization.
Gifted alone with the power of relating cause and effect,
man is among all animals the only producer in the true
sense of the term. He is a producer, even in the savage
state; and would endeavor to produce even in a world
where there was no other man. But the same quality of
reason which makes him the producer, also, wherever
exchange becomes possible, makes him the exchanger.
And it is along this line of exchanging that the body
36 THE MEANING OF POLITICAL ECONOMY. BooTtl.
economic is evolved and develops, and that all the advances
of civilization are primarily made.
But while production must have begun with man, and
the first human pair to appear in the world, we may con-
fidently infer, must have begun to use in the satisfaction
of their wants a power essentially different in kind from
that used by animals, they could not begin to use the
higher forms of that power until their numbers had in-
creased. With this increase of numbers the cooperation
of efforts in the satisfaction of desires would begin. Aided
at first by the natural affections, it would be carried be-
yond the point where these suffice to begin or to continue
cooperation by that quality of reason which enables the
man to see what the animal cannot, that by parting with
what is less desired in exchange for what is more desired,
a net increase in satisfaction is obtained.
Thus, by virtue of the same power of discerning causal
relations which leads the primitive man to construct tools
and weapons, the individual desires of men, seeking satis-
faction through exchange with their fellows, would operate,
like the microscopic hooks which are said to give its felting
quality to wool, to unite individuals in a mutual coopera-
tion that would weld them together as interdependent
members of an organism, larger, wider and stronger than
the individual man the earlier and Greater Leviathan that
I have called the body economic.
With the beginning of exchange or trade among men
this body economic begins to form, and in its beginning
civilization begins. The animals do not develop civiliza-
tion, because they do not trade. The simulacra of civili-
zation which we observe among some of them, such as
ants and bees, proceed from a lower plane than that of
reason from instinct. While such organization is more
perfect in its beginnings, for instinct needs not to learn
Chap. V. ORIGIN AND GENESIS OF CIVILIZATION. 37
from experience, it lacks all power of advance. Reason
may stumble and fall, but it involves possibilities of what
seem like infinite progression.
As trade begins in different places and proceeds from
different centers, sending out the network of exchange
which relates men to each other through their needs and
desires, different bodies economic begin to form and to
grow in different places, each with distinguishing char-
acteristics which, like the characteristics of the individual
face and voice, are so fine as only to be appreciated rela-
tively, and then are better recognized than expressed.
These various civilizations, as they meet on their margins,
sometimes overlap, sometimes absorb, and sometimes over-
throw one another, according to a vitality dependent on
their mass and degree, and to the manner in which their
juxtaposition takes place.
We are accustomed to speak of certain peoples as un-
civilized, and of certain other peoples as civilized or fully
civilized, but in truth such use of terms is merely relative.
To find an utterly uncivilized people we must find a people
among whom there is no exchange or trade. Such a people
does not exist, and, so far as our knowledge goes, never
did. To find a fully civilized people we must find a people
among whom exchange or trade is absolutely free, and has
reached the fullest development to which human desires can
carry it. There is, as yet, unfortunately, no such people.
To consider the history of civilization, with its slow
beginnings, its long periods of quiescence, its sudden flashes
forward, its breaks and retrogressions, would carry me
further than I can here attempt. Something of that the
reader may find in the last grand division of " Progress
and Poverty," Book X., entitled, "The Law of Human
Progress." What I wish to point out here is in what
civilization essentially and primarily consists.
38 THE MEANING OF POLITICAL ECONOMY. Book I.
But this is to be remembered : Neither what we speak
of as different civilizations nor yet what we call civilization
in the abstract or general has existence in the material or
is directly related to rivers and mountains, or divisions
of the earth's surface. Its existence is in the mental or
spiritual.
CHAPTER VI.
OF KNOWLEDGE AND THE GROWTH OF
KNOWLEDGE.
SHOWING THAT THE GROWTH OF KNOWLEDGE IS BY COOP-
ERATION, AND THAT IT INHERES IN THE SOCIETY.
Civilization implies greater knowledge This gain comes from co-
operation The incommunicable knowing called skill The com-
municable knowing usually called knowledge The relation of
systematized knowledge to the means of storing knowledge, to
skill and to the economic body Illustration from astronomy.
IN contrasting man in the civilized state with man in
his primitive state I have dwelt most on the gain in
the power of gratifying material desires, because such gains
are most obvious. Yet as thought precedes action, the
essential gain which these indicate must be in knowledge.
That the ocean steamship takes the place of the hollow
log, the great modern building of the rude hut, shows a
larger knowledge utilized in such constructions.
To consider the nature of this gain in knowledge is to
see that it is not due to improvement in the individual
power of knowing, but to the larger and wider cooperation
of individual powers; to the growth of that body of
knowledge which is a part, or rather, perhaps, an aspect
of the social integration I have called the body economic.
If we could separate the individuals whose knowledge,
correlated and combined, is expressed in the ocean steam-
ship or great modern building, it is doubtful if their sepa-
40 THE MEANING OF POLITICAL ECONOMY. Book I.
rate knowledge would suffice for more than the construc-
tions and tools of the savage.
The knowledge that comes closest to the individual is
what we call skill, which consists in knowing how to
govern the organs directly responsive to the conscious
will, so as to bring about desired results. Whoever, in
mature years, has learned to do some new thing, as for
instance to ride a bicycle, knows how slowly and painfully
such knowledge is acquired. At first each leg and foot,
each arm and hand, to say nothing of the muscles of the
chest and neck, seems to need separate direction, which
the conscious mind cannot give so quickly and in such
order as to prevent the learner from falling off or running
into what he would avoid. But as the effort is continued,
the knowledge of how to direct these muscles passes from
the domain of the conscious to that of the subconscious
mind, becoming part of what we sometimes call the memory
of the muscles, and the needed correlation takes place with
the will to bring about the result, or automatically. For
a while, even after one has learned to hold on and keep his
wheel moving, the exertion needed will be so great and his
attention will be so absorbed in this, that he can look
neither to right nor to left, nor notice what he passes.
But with continued effort, the knowledge required for
the proper movement of the muscles becomes so fully stored
in the subconscious memory that at length the learner may
ride easily, indulging in other trains of thought and notic-
ing persons and scenery. His hard-gotten knowledge has
passed into skill.
So in learning to use a typewriter. We must at first
find out, and with a separate effort strike the key for each
separate letter. But as this knowledge takes its place in
the subconscious memory, we merely think the word, and
without further conscious direction, the fingers, as we need
the letters, strike their keys.
Chap.VL KNOWLEDGE AND GEOWTH OF KNOWLEDGE. 41
This is how all skill is gained. We may see it in the
child. We may see him gradually acquiring skill in doing
things that we have forgotten that we ourselves had to
learn how to do. When a new man comes into the world
he seems to know only how to cry. But by degrees, and
evidently in the same way by which so many of us over
fifty have learned to ride a bicycle, he learns to suck ; to
laugh ; to eat ; to use his eyes ; to grasp and hold things ;
to sit ; to stand ; to walk ; to speak ; and later, to read, to
write, to cipher, and so on, through all the kinds and de-
grees of skill.
Now, because skill is that part of knowledge which
comes closest to the individual, becoming as it were a part
of his being, it is the knowledge which is longest retained,
and is also that which cannot be communicated from one
to another, or so communicated only in very small degree.
You may give a man general directions as to how to ride
a bicycle or operate a typewriter, but he can get the skill
necessary to do either only by practice.
As to this part of knowledge at least, it is clear that the
advances of civilization do not imply any gain in the
power of the individual to acquire knowledge. Not only
do antiquities show that in arts then cultivated the men of
thousands of years ago were as skilful as the men of to-day,
but we see the same thing in our contact with people whom
we deem the veriest savages, and the Australian black
fellow will throw a boomerang in a way that excites the
wonder of the civilized man. On the other hand, the
European with sufficient practice will learn to handle the
boomerang or practise any of the other arts of the savages
as skilfully as they, and wild tribes to whom the horse and
firearms are first introduced by Europeans become excel-
lent riders and most expert marksmen.
It is not in skill, but in the knowledge which can be
communicated from one to another, that the civilized man
42 THE MEANING OF POLITICAL ECONOMY. Book I.
shows his superiority to the savage. This part of know-
ledge, to which the term knowledge is usually reserved,
as when we speak of knowledge and skill, consists in a
knowing of the relation of things to other external things,
and may, but does not always or necessarily, involve a
knowing of how to modify those relations. This know-
ledge, since it is not concerned with the government of the
organs directly responsive to the conscious will, does not
come as close to the individual as skill, but is held rather
as a possession of the organ of conscious memory, than as
a part of the individual himself. While thus subject to
loss with the weakening or lapse of that organ, it is also
thus communicable from one to another.
Now, this is the knowledge which constitutes the body
of knowledge that so vastly increases with the progress of
civilization. Being held in the memory, it is transferable
by speech ; and as the development of speech leads to the
adoption of means for recording language, it becomes
capable of more permanent storage and of wider and easier
transferability in monuments, manuscripts, books, and
so on.
This ability to store and transmit knowledge in other
and better ways than in the individual memory and in
individual speech, which comes with the integration of
individual men in the social body or body economic, is
of itself an enormous gain in the advance of the sum of
knowledge. But the gain in other and allied directions
that comes from the larger and closer integration of indi-
viduals in the social man is greater still. Of the sys-
tematized knowledges, that which we call astronomy was
probably one of the earliest. Consider the first star-gazers,
who with no instrument of observation but the naked eyes,
and no means of record save the memory, saw by watch-
ing night after night related movements in the heavenly
bodies. How little even of their own ability to gather and
Chap. VI. KNOWLEDGE AND GKOWTH OF KNOWLEDGE. 43
store knowledge could they apply to the getting of such
knowledge. For until civilization had passed its first
stages, the knowledge and skill required to satisfy their
own material needs must have very seriously lessened the
energy that could be applied to the gaining of any other
knowledge.
Compare with such an observer of the stars, the star-
gazer who watches now in one of the great modern observa-
tories. Consider the long vistas of knowledge and skill,
of experiment and meditation and effort, that are involved
in the existence of the building itself, with its mechanical
devices; in the great lenses; in the ponderous tube so
easily adjusted ; in the delicate instruments for measuring
time and space and temperature ; in the tables of logarithms
and mechanical means for effecting calculations; in the
lists of recorded observations and celestial atlases that may
be consulted ; in the means of communicating by telegraph
and telephone with other observers in other places, that
now characterize a well-appointed observatory, and in the
means and appliances for securing the comfort and freedom
from distraction of the observer himself ! To consider all
these is to begin to realize how much the cooperation of
other men contributes to the work of even such a special-
ized individual as he who watches the stars.
CHAPTER VII.
OF SEQUENCE, CONSEQUENCE AND LAWS OF
NATURE.
SHOWING THE PROPER MEANING OF SEQUENCE AND OF CON-
SEQUENCE, AND WHY WE SPEAK OF LAWS OF NATURE.
Coexistence and succession Sequence and consequence Causes in
series ; names for them Our direct knowledge is of spirit
Simplest perception of causal relation Extensions of this The
causal search unsatisfied till it reaches spirit And finds or as-
sumes intent Early evidences of this Why we must assume a
superior spirit. Evidences of intent The word nature and its
implication of will or spirit The word law The term "law of
nature."
WHETHER all our knowledge of the relations of
things in the external world conies to us primarily
by experience and through the gates of the senses, or
whether there is some part of such knowledge of which
we are intuitively conscious and which belongs to our
human nature as its original endowment, are matters as
to which philosophers are, and probably always will be, at
variance. But into such discussions, mainly verbal as
they are, it is needless for us to enter. For what concerns
us here the distinctions made in ordinary perceptions and
common speech will suffice.
In the phenomena presented to him, man must early
notice two kinds of relation. Some things show themselves
tt
Cliap.VIL OF THE LAWS OF NATURE. 45
with other things, and some things follow other things.
These two kinds of relation we call relations of coexistence,
and relations of succession or sequence. Since what con-
tinues is not so apt to attract our attention as what
changes, it is probable that the first of these two relations
to be noticed is that of succession. Light comes with the
appearance of the luminous bodies of the firmament, and
darkness with their disappearance. Night succeeds day,
and day night ; spring the winter, and summer the spring ;
the leaf, the bud ; and wind and rain the heavy threaten-
ing cloud. The approach to fire is followed by a pleasant
sensation as we get close enough to it, and by a most painful
sensation if we get too close. The eating of some things
is succeeded by satisfaction; the eating of other things
by pain.
But to note the relation of things in succession does not
content man. The essential quality of reason, the power
of discerning causal relations, leads him to ask why one
thing follows another, and in the relation of sequence to
assume or to seek for a relation of con-sequence.
Let us fix in our minds the meaning of these two words.
For even by usually careful writers one of them is some-
times used when the other is really meant, which brings
about confusion of thought where precision is needed.
The proper meaning of sequence is that which follows
or succeeds. The proper meaning of consequence is that
which follows from. To say that one thing is a sequence
of another, is to say that the one has to the other a relation
of succession or coming after. To say that one thing is a
consequence of another, is to say that the one has to the
other a relation not merely of succession, but of necessary
succession, the relation namely of effect to cause.
Now of the sequences which we notice in external nature,
some are variable, that is to say, they do not always follow
what is given as the antecedent, while some are invariable,
46 THE MEANING OF POLITICAL ECONOMY. Book I.
that is to say, they always follow what is given as the
antecedent. As to these invariable sequences, which we
properly call consequences, we give a name to the causal
connection between what we apprehend as effect and what
we assume as cause by calling it a law of nature. What
we mean by this term is a matter too important to be left
in the uncertainty and confusion with which it is treated
in the standard economic works. Let us therefore, before
beginning to use the term, try to discover how it has come
into use, that we may fully understand it.
When, proceeding from what we apprehend as effect or
consequence, we begin to seek cause, it in most cases hap-
pens that the first cause we find, as accounting for the
phenomena, we soon come to see to be in itself an effect
or consequence of an antecedent which to it is cause.
Thus our search for cause begins again, leading us from
one link to another link in the chain of causation, until
we come to a cause which we can apprehend as capable of
setting in motion the series of which the particular result
is the effect or consequence.
In a series of causes, what we apprehend as the begin-
ning cause is sometimes called "primary cause" and
sometimes " ultimate cause ; " while " final cause," which
has the meaning of purpose or intent, lies deeper still.
This use of seemingly opposite names for the same thing
may at first puzzle others as at first it puzzled me. But
it is explained when we remember that what is first and
what last in a chain or series depends upon which end we
start from. Thus, when we proceed from cause towards
effect, the beginning cause comes first, and is styled the
" primary cause." But when we start from effect to seek
cause, as is usually the case, for we can know cause as
cause only when it lies in our own consciousness, the
cause nearest the result comes first, and we call it the
" proximate cause j " and what we apprehend as the begin-
Chap.VII. OF THE LAWS OF NATURE. 47
ning cause is found last, and we call it the " ultimate " or
" efficient cause," or, at least where an intelligent will is
assumed, as the all-originator, the "final cause;" while
those which lie between either end of the chain are styled,
sometimes "secondary," and sometimes "intermediate
causes."
Now the only way in which we can hope to discover
what to us is yet unknown is by reasoning to it from what
to us is known. What we know most directly and imme-
diately is that in us which feels and wills ; that which to
distinguish from our own organs, parts or powers we call
the ego, or I ; that which distinguishes us, ourselves, from
the external world, and which is included in the element
or factor of the world that in Chapter I. we called spirit.
Man himself, in outward and tangible form at least, is
comprehended in nature, even in what, when we make the
distinction between subjective and objective, we call ex-
ternal nature. His body is but a part of the, to us, inde-
structible matter, and the motion which imbues it and
through which he may modify external things, is but part
of the, to us, indestructible energy which existed in nature
before man was, and which will remain, nothing less and
nothing more, after he is gone. As I brought into the
world no matter or motion, but from the time of my first
tangible existence as a germ or cell have merely used the
matter and motion already here, so I take nothing away
when I depart. Whether, when I am done with it, my
body be cremated or buried or sunk in the depths of the
sea, the matter which gave it form and the energy which
gave it movement do not cease to be, but continue to exist
and to act in other forms and other expressions.
That which really distinguishes man from external na-
ture ; that which seems to come into the world with the
dawning of life and to depart from it with death, is that
whose identity I recognize as " me," through all changes
48 THE MEANING OF POLITICAL ECONOMY. Boole I.
of matter and motion. It is this which not only receives
the impressions brought to it through the senses, but by
the use of the power we call imagination contemplates
itself, as one may look at his own face in a mirror. In
this way the ego or I of man may reason, not only upon
the phenomena of the external world as presented to it
through the senses, but also upon its own nature, its own
powers, and its own activities, and regard the world, ex-
ternal and internal, as a whole, having for its components
not merely matter and energy, but also spirit.
Whatever doubts any one may entertain or profess to
entertain of the existence of what we have called spirit,
can come only, I think, from a confusion in words. For
the one thing of which each of us must be most certain is
that " I am." And it is through this assurance of our own
existence that we derive certainties of all other existence.
The simplest causal relation we perceive is that which
we find in our own consciousness. I scratch my head, I
slap my leg, and feel the effects. I drink, and my thirst is
quenched. Here we have perhaps the closest connection
between consequence and cause. The feeling of head or
leg or stomach, which here is consequence, transmitted
through sense to the consciousness, finds in the direct
perceptions of the same consciousness, the cause an
exertion of the will. Or, reversely, the conscious exertion
of the will to do these things produces through the senses
a consciousness of result. How this connection takes place
we cannot really tell. When we get to that, the scientist
is as ignorant as the savage. Yet, savage or scientist, we
all know, because we feel the relation in such cases between
cause and consequence.
Passing beyond the point where both cause and effect
are known by consciousness, we carry the certainty thus
derived to the explanation of phenomena as to which cause
and effect, one or both, lie beyond consciousness. I throw
Chap.ril. OF THE LAWS OF NATURE. 49
a stone at a bird and it falls. This result, the fall of the
bird, is made known to me indirectly through my sense of
sight, and later when I pick it up, by my sense of touch.
The bird falls because the stone hit it. The stone hit it
because put in motion by the movement of my hand and
arm. And the movement of my hand and arm was be-
cause of my exertion of will, known to me directly by
consciousness.
What we apprehend as the beginning cause in any series,
whether we call it primary cause or final cause, is always
to us the cause or sufficient reason of the particular result.
And this point in causation at which we rest satisfied is
that which implies the element of spirit, the exertion of
will. For it is of the nature of human reason never to
rest content until it can come to something that may be
conceived of as acting in itself, and not merely as a
consequence of something else as antecedent, and thus
be taken as the cause of the result or consequence from
which the backward search began. Thus, in our instance,
leaving out intermediate links in the chain of causation,
and proceeding at once from result to ultimate cause, or
sufficient reason, we say correctly that the bird fell because
I hit it that is, because I exerted in an effective way the
will to hit it.
But I know, by consciousness, that in me the exertion
of will proceeds from some motive or desire. And reason-
ing from what I know to explain what I wish to discover,
I explain similar acts in others by similar desires.
So, if one man brain another by striking him with a
club, or bring about his death more gradually by giving
him a slow poison, we should feel that we were being played
with and our intelligence insulted if on asking the cause
of death we were told it was because a club struck him,
or because breath failed him. We are not satisfied until
we know what will was exerted to put into action the
60 THE MEANING OP POLITICAL ECONOMY. BooTcI.
proximate causes of the result. Nor does this completely
satisfy us. After we know the how, we are apt to ask the
why the purpose or motive that prompted this exertion
of will. It is not till we get some answer to this that we
feel completely satisfied.
And thus, we sometimes make a still shorter cut in our
causal explanation, by dropping will itself, and speaking
of the desire which prompts to the exertion of will as the
cause of an effect. I see another walk or run or climb a
tree. From what I know of the causes of my own acts, I
recognize in this an exertion of will prompted by desire
the tangible manifestation of an intent ; and say, he walks
or runs or climbs the tree because he wants to get or do
or avoid something. So when we see the bird fly, the fish
swim, the mole or gopher burrow in the ground, we also
recognize in their acts similar intent the exertion of will
prompted by desire.
Now, this motive or intent or purpose or desire to bring
about an end, which sets an efficient cause to work, was
recognized by Aristotle, and the logicians and meta-
physicians who so long followed him, as properly a cause,
and a beginning cause, and called in their terminology the
" final cause." This term has now, however, become limited
in its use to the idea of purpose or intent in the mind of
the Supreme Being, and the " doctrine of final causes," now
largely out of fashion, is understood to mean the doctrine
which, as the last or final explanation of the existence and
order of the world, seeks to discover the purpose or intent
of the Creator. The argument from the assumption of
what are now called final causes for the existence of an
intelligent Creator is called the " teleological argument,"
and is by those who have the vogue in modern philosophy
regarded with suspicion, if not with contempt. Neverthe-
less, the recognition of purpose or intent as a final or
beginning cause is still to be found in that homely logic
Chap.ni. OF THE LAWS OF NATURE. 51
that fills the common speech of ordinary people with
" becauses."
How early and how strong is the disposition to seek
cause in the exertion of will prompted by desire is shown
in the prattle of children, in folk-lore and fairy tales. We
are at first apt to attribute even to what we afterwards
learn are inanimate things the exertion of will and the
promptings of desire such as we find in our own conscious-
ness, and to say, not as figures of speech, but as recogni-
tions of cause, that the sun smiles and the clouds threaten
and the wind blows for this or that purpose or with this
or that intent.
And in the earliest of such recognitions we find the
moral element, which belongs alone to spirit. What
mother has not soothed her child by threatening or pre-
tending to whip the naughty chair or bad stone that caused
her little girl or boy to stumble, and has not held the little
thing in rapt silence with stories of talking animals and
thinking trees ? But as we look closer, we see that the
power of reason is not in animals, nor volition in sticks
and stones. Yet still seeking cause behind effect, and not
satisfied that we have found cause until we have come to
spirit, we find rest for a while by accounting for effects
that we cannot trace to will in men or animals, on the
assumption of will in supersensible forms, and thus gratify
the longing of the reason to discover cause, by peopling
rivers and mountains and lakes and seas and trees and
seasons with spirits and genii, and fairies and goblins, and
angels and devils, and special gods.
Yet, in and through this stage of human thought grows
the apprehension of an order and co-relation in things,
which we can understand only by assuming unity of will
and comprehensiveness of intent of an all-embracing
system or order which we personify as Nature, and of a
great " I am " from whose exertion of will all things visible
62 THE MEANING OF POLITICAL ECONOMY. Book I.
and invisible proceed, and which is the first or all-begin-
ning cause. In every direction the effort of the reason to
seek the cause of what it perceives, forces this upon the
thoughtful mind.
The bird flies because it wants to fly. In this will or
spirit of the bird we find an ultimate cause or sufficient
reason to satisfy us so far as such action is concerned.
But probably no man ever lived, and certainly no child,
who, seeing the easy sweep of birds through the open
highways of air, has not felt the wish to do likewise. Why
does not the man also fly when he wants to fly? We
answer, that while the bird's bodily structure permits of
the gratification of a will to fly, the man's bodily structure
does not. But what is the reason of this difference ? Here
we come to a sphere where we can no longer find the cause
of result in the individual will. Seeking still for will, as
the only final explanation of cause, we are compelled to
assume a higher and more comprehensive will or spirit,
which has given to the bird one bodily structure, to the
man another.
Or take the man himself. The child cries because it
wants to cry and laughs because it wants to laugh. But
that its teeth begin to come at the proper age is it be-
cause it wants teeth ? In one sense, yes ! When its teeth
begin to come it begins to need teeth ; or rather will shortly
begin to need teeth, to fit for its stomach the more solid
food it will then require. But in another, and in what we
are discussing, the real sense, no ! The need for teeth
when they begin to come is not a need of the child as it
then is, but a need of the child as it will in future be ; a
totally different being so far as consciousness is concerned.
The yet sucking child can no more want teeth, in the sense
of desiring teeth, than the adult can want to have those
teeth pulled out for the sake of the pulling. The coming
of teeth is not pleasant, but painful seemingly more
Chap. VII. OF THE LAWS OF NATURE. 63
painful and probably more dangerous than is the pulling
of teeth by modern dentistry. It is clearly not by the
will of the child that we can explain the coming of teeth.
Nor yet can we explain it by the will of the mother. She
may desire that the child's teeth should come. But she
cannot make her will effective in any larger degree than
by rubbing the child's gums. Nor can the most learned
physician help her further than by lancing them, should
they seriously swell. To find a sufficient cause for this
effect, we are compelled to assume a higher will and more
comprehensive purpose than that of man ; a will conscious
from the very first of what will yet be needed, as well as
of what already is needed.
The things that show most clearly the adaptation of
means to ends, so that we can at once understand their
genesis and divine their cause, are things made by man,
such as houses, clothing, tools, adornments, machines ; in
short, what we call human productions. These, as evincing
the adaptation of means to ends, have an unmistakable
character. The coming upon a piece of clothing, or a
brooch or ring, or tomahawk or bow, or the embers and
fragments of a cooked meal, would have been as quick and
even surer proof of the presence of man on his supposed
desert island than were to Robinson Crusoe the footprints
in the sand. For of all the beings that our senses give us
knowledge of, man is the only one that in himself has the
power of adapting means to ends by taking thought.
Yet, so soon as man looks out, he finds in the world
itself evidences of the same power of adapting means to
ends that characterize his own works. Hence, recognizing
in the sum of perceptible things exclusive of himself, or
rather of his essential principle or ego, but inclusive, not
merely of his bodily, but also of his mental frame a system
or whole, composed of related parts, he personifies it in
thought and calls it Nature.
64 THE MEANING OF POLITICAL ECONOMY. Book I.
Still, while we personify this, which is to our apprehen-
sion the greatest of systems, and give to it in our English
speech the feminine gender, it is, I think, as sailors per-
sonify a ship, or engine-drivers a locomotive. That is to
say, the general perception of the sum of related parts or
system, that we call Nature, does not include the idea of
the originating will, or first or final cause of all. That,
we conceive of as something essentially distinct from
Nature, though animating Nature, and give it another
name, such as Great Spirit, or Creator, or God. Those
who contend that Nature is all, and that there is nothing
above or beyond or superior to Nature, do so, I think, by
confounding two distinct conceptions, and using the word
Nature as meaning what is usually distinguished by the
word God.
We all, indeed, frequently use the word Nature to
avoid the necessity of naming that which we feel to be
unnamable, in the sense of being beyond our comprehen-
sion, and therefore beyond our power of denning. Yet I
think that not merely the almost universal, but the clearest,
and therefore best, perceptions of mankind, really dis-
tinguish what we call Nature from what we call God, just
as we distinguish the ship, or other machine, that we per-
sonify, from the will which we recognize as exerted in its
origination and being ; and that at the bottom our idea is
that of Pope :
All are but parts of one stupendous whole,
Whose body Nature is, and God the soul.
It is from this conception of Nature as expressing or as
animated by the highest will, that we derive, I think, the
term " law of Nature."
We come here to another instance of the application to
greater things of names suggested by the less. In original
meaning, the word law refers to human will, and is the
U. OF THE LAWS OF NATUEE. 66
name given to a command or rule of conduct imposed
by a superior upon an inferior, as by a sovereign or state
upon those subject to it. At first the word law doubtless
referred only to human law. But when, later in intellec-
tual development, men came to note invariable coexis-
tences and sequences in the relations of external things,
they were, of the mental necessity already spoken of, com-
pelled to assume as cause a will superior to human will,
and adapting the word they were wont to use for the
highest expression of human will, called them laws of
Nature.
Whatever we observe as an invariable relation of things,
of which in the last analysis we can affirm only that " it
is always so," we call a law of Nature. But though we use
this phrase to express the fact of invariable relation,
something more than this is suggested. The term itself
involves the idea of a causative will. As John Stuart Mill,
trained to analysis from infancy, and from infancy exempt
from theological bias, says :
The expression " law of Nature " is generally employed by scientific
men with a sort of tacit reference to the original sense of the word
law, namely, the expression of the will of a superior the superior,
in this instance, being the Ruler of the universe.
Thus, then, when we find in Nature certain invariable
sequences, whose cause of being transcends the power of
the will testified to by our own consciousness such, for
instance, as that stones and apples always fall towards the
earth ; that the square of a hypothenuse is always equal to
the sum of the squares of its base and perpendicular ; that
gases always coalesce in certain definite proportions ; that
one pole of the magnet always attracts what the other
always repels; that the egg of one bird subjected to a
certain degree of warmth for a certain time brings forth a
chick that later will clothe itself with plumage of a certain
56 THE MEANING OF POLITICAL ECONOMY. Book I.
kind and color, and the egg of another bird under the same
conditions brings forth a chick of a different kind ; that at
a certain stage of infancy teeth appear, and later decay and
drop out j and so on through the list of invariable sequences
that these will suggest we say, for it is really all that we
can say, that these sequences are invariable because they
belong to the order or system of Nature ; or, in short, that
they are " laws of Nature."
The dog and cow sometimes look wise enough to be
meditating on anything. If they really could bother their
heads with such matters or express their ideas in speech,
they would probably say that such sequences are invari-
able, and then rest. But man is impelled by his endow-
ment of reason to seek behind fact for cause. For that
something cannot come from nothing, that every conse-
quence implies a cause, lies at the very foundation of our
perception of causation. To deny or ignore this would be
to cease to reason which we can no more cease in some
sort of fashion to do than we can cease to breathe.
Thus, whether civilized or uncivilized, man is compelled,
of mental necessity, to look for cause beneath the phe-
nomena that he begins really to consider, and no matter
what intermediate cause he may find, cannot be content
until he reaches will and finds or assumes intent. This
necessity is universal to human nature, for it belongs to
that quality or principle of reason which essentially dis-
tinguishes man from the brute. The notion that
The heathen in his blindness,
Bows down to wood and stone,
is of the real ignorance of pretended knowledge. Beneath
the belief of the savage in totems and amulets and charms
and witchcraft lurks the recognition of spirit; and the
philosophies that have hardened into grotesque forms of
religion contain at bottom that idea of an originating will
Chap.FIL OF THE LAWS OF NATURE. 57
which the Hebrew Scriptures express in their opening
sentence : " In the beginning God created the heaven and
the earth."
To such recognition of will or spirit, reason, as it
searches from effect for cause, must come before it can
rest content. Beyond this, reason cannot go. Why is it
that some things always coexist with other things? and
that some things always follow other things? The Mo-
hammedan will answer : " It is the will of God." The man
of our Western civilization will answer : " It is a law of
Nature." The phrase is different, but the answer one.
CHAPTER VIII.
OF THE KNOWLEDGE PROPERLY CALLED
SCIENCE.
SHOWING THAT SCIENCE DEALS ONLY WITH LAWS OF NA-
TURE, AND THAT IN THE CURRENT POLITICAL ECONOMY
THIS HAS BEEN FORGOTTEN.
Proper meaning of science It investigates laws of nature, not
laws of man Distinction between the two Their confusion in
the current political economy Mason and Lalor's "Primer of
Political Economy" quoted Absurdity of this confusion Tur-
got on the cause of such confusions.
SCIENCE is a word much abused just now, when all
sorts of pretenders to special knowledge style them-
selves scientists and all sorts of ill- verified speculations are
called sciences ; yet it has a well-defined, proper meaning
which may easily be kept in mind. Literally, the word
science means knowledge, and when used to distinguish
a particular kind of knowledge, should have the meaning
of the knowledge that is, of the highest and deepest
knowledge. This is, indeed, the idea which attaches to
the word. In its proper and definite meaning, science
does not include all knowledge or any knowledge, but that
knowledge by or in which results or phenomena are related
to what we assume to be their cause or sufficient reason,
and call a law or laws of nature.
58
Cliap.VIIL KNOWLEDGE PROPERLY CALLED SCIENCE. 59
As the knowledge we call skill is that part of knowledge
which comes closest to the individual, being retained in
the subconscious memory, and hence nearly or completely
incommunicable ; so, on the contrary, science properly so
called is that part of knowledge which comes closer to the
higher faculty of reason, being retained in the conscious
memory, and hence most easily and completely commu-
nicable through the power of speech in which reason finds
expression, and through the arts that are extensions of and
subservient to speech, such as writing, printing and the
like. Something of skill even animals may acquire.
Trained dogs, trained goats, trained monkeys and trained
bears are common, and even what are called trained fleas
are exhibited. But it is impossible to teach an animal
science, since animals lack the causal faculty by which
alone science is apprehended. It is in youth, when the
joints are most flexible and the muscles most supple, that
skill is most readily acquired. But it is in the years that
bring the contemplative mind that we most appreciate and
best acquire science. And so, while the advantages of
civilization do not imply increased skill, they do imply the
extension of science.
With human laws what is properly called science has
nothing whatever to do, unless it be as phenomena which
it subjects to examination in the effort to discover in
natural law their cause. Thus there may be a science of
jurisprudence, or a science of legislation, as there may be
a science of grammar, a science of language, or a science
of the mental structure and its operations. But the object
of such sciences, properly so called, is always to discover
the laws of nature in which human laws, customs and
modes of thought originate the natural laws which lie
behind and permanently affect, not merely all external
manifestations of human will, but even the internal affec-
tions of that will itself.
60 THE MEANING OF POLITICAL ECONOMY. BooTc I.
Human laws are made by man ; and share in all his
weaknesses and frailties. They must be enforced by
penalties subsequent to and conditioned upon their viola-
tion. Such penalties are called sanctions. Unless ac-
companied by some penalty for its violation, no act of
legislative body or sovereign prince becomes law. Lack-
ing sanction, it is merely an expression of wish, not a
declaration of will. Human laws are acknowledged only
by man ; and that not by all men in all times and places,
but only by some men that is, by men living in the time
and place where the political power that imposes them has
the ability to enforce their sanctions ; and not even by all
of these men, but generally by only a very small part of
them. Limited to the circumscribed areas which we call
political divisions, they are even there constantly fluctuat-
ing and changing.
Natural laws, on the other hand, belong to the natural
order of things ; to that order in which and by which not
only man himself but all that is, exists. They have no
sanctions in the sense of penalties imposed upon their
violation, and enforced subsequent to their violation ; they
cannot be violated. Man can no more resist or swerve a
natural law than he can build a world. They are acknow-
ledged not only by all men in all times and places, but also
by all animate and all inanimate things; and their sway
extends not merely over and throughout the whole earth
of which we are constantly changing tenants, but over and
through the whole system of which it is a part, and so far
as either observation or reason can give us light, over and
through the whole universe, visible or invisible. So far
as we can see, either by observation or by reason, they
know not change or the shadow of turning, but are the
same yesterday, to-day, to-morrow ; for they are expres-
sions, not of the mutable will of man, but of the immutable
will of God.
Chap. Fill. KNOWLEDGE PEOPERLY CALLED SCIENCE. 61
I dwell again on the distinction between laws of nature
and laws of man, because it is of the first necessity in be-
ginning the study of political economy that we should
grasp it firmly and keep it clearly in mind. This necessity
is the greater, since we shall find that in the accredited
economic treatises laws of nature and laws of man are
confused together in what they call laws of political
economy.
It is not worth while to make many quotations to show
a confusion which one may see by taking up the economic
work approved by college or university that first comes to
his hand ; but that what passes in these institutions for
the science of political economy may speak for itself, I
shall make one quotation.
I take for that purpose the best book I can find that puts
into compact form the teachings of the scholastic econo-
mistsone that is, I think, superior in this to Mrs. Millicent
Garrett Fawcett's "Political Economy for Beginners,"
which at the time I wrote " Progress and Poverty " seemed
to me the best short statement of accepted economic teach-
ings I then knew of. It is " The Primer of Political Econ-
omy, in Sixteen Definitions and Forty Propositions," by
Alfred B. Mason and John J. Lalor (Chicago, A. C. McClurg
& Co.).* Messrs. Mason and Lalor, who have since proved
themselves to be men of ability, were in 1875, when they
wrote the primer, fresh from a university course of political
economy and a subsequent study of the approved authori-
ties, and their primer has been widely indorsed and largely
used in institutions of learning. This is the first of their
sixteen definitions, and their explanation of it :
* In writing this book I have vainly tried to find some such con-
densation that would do for the "new-school" scholastic economy
what Mrs. Fawcett and Messrs. Mason and Lalor have done for the
old, and can only conclude that its teachings are too vague to permit
of such condensation.
62 THE MEANING OF POLITICAL ECONOMY. Book I.
DEFINITION I. Political Economy is the Science which teaches
the laws that regulate the Production, Distribution and Exchange
of Wealth.
Everything in this world is governed by law. Human laws are
those made by man. All others are natural laws. A law providing
for the education of children in schools is a human law. The law
that children shall keep growing, if they live, until they are men and
women, and shall then slowly decay and at last die, is a natural law.
An apple falls from a tree and the earth moves around the sun in
obedience to natural laws. The laws which regulate the production,
distribution and exchange of wealth are of both kinds. The more
important ones, however, are natural.
In this Messrs. Mason and Lalor aptly illustrate the
essential difference between natural law and human law.
But the way in which the two are mixed together as eco-
nomic laws suggests the examination-paper of a Philadel-
phia boy more interested in hooking catfish and stoning
frogs than in Lindley Murray. To the question, " Name
and describe nouns ? " the answer was :
Nouns are three in number and sometimes more. There are
proper nouns, common nouns, bloody nouns * and other nouns.
Proper nouns are the properest nouns, but common nouns are the
commonest. Bloody nouns are the big ones. Other nouns are no
good.
Yet ridiculous as is this confusion of human law and
natural law, and absurd as is a definition that leaves one
to guess which is meant by " laws," this little primer cor-
rectly gives what is to be found in the pretentious treatises
it endeavors to condense and that even in the most
systematic and careful of them, as I shall hereafter have
occasion to show.
It is only with the implication that by law is meant
natural law, that we can say, " Everything in this world is
* A name given by boys in Philadelphia to large bullfrogs.
Chap.VIII. KNOWLEDGE PROPERLY CALLED SCIENCE. 63
governed by law." To say, as the little summary of the
scholastic political economy from which I have quoted
says, that political economy is the science which teaches
the laws, some of them natural laws and some of them
human laws, which regulate the production, distribution
and exchange of wealth, is like saying that astronomy is
the science which teaches the laws, some of them laws of
matter and motion and some of them Bulls of Popes and
Acts of Parliament, which regulate the movements of stars
and comets.
The absurdity of this is not so strikingly obvious in the
ponderous treatises from which it is derived as in this little
primer, because the attention of the reader is in them con-
fused by the utter want of logical arrangement, and dis-
tracted by the shoveling in on him, as it were, of great
masses of irrelevant matter, which makes it a most difficult,
and with the majority of readers an utterly hopeless task
to dig out what is really meant a task usually abandoned
by the ordinary reader with a secret feeling of shame at
his own incapacity to follow such deep and learned men,
who seem lightly to revel in what he cannot understand.
The expositions of what passes for the science of political
economy in our schools do indeed for the most part con-
tain some things that really belong to science. But in far
larger part what properly belongs to science is, in the
literature of political economy that has grown up since
his time, confused and overlaid with what Turgot, over a
hundred years ago, spoke of as an art the art, namely,
" of those who set themselves to darken things that are
clear to the open mind."
What this truly great Frenchman of the eighteenth cen-
tury said is worth quoting, for it finds abundant and con-
stant illustration in the writings of the professors of
political economy of the nineteenth century, and especially
in the latest of them :
64 THE MEANING OF POLITICAL ECONOMY. Book I.
This art consists in never beginning at the beginning, but in rush-
ing into the subject in all its complications, or with some fact that
is only an exception, or some circumstance, isolated, far-fetched or
merely collateral, which does not belong to the essence of the ques-
tion and goes for nothing in its solution. . . . Like a geometer who
treating of triangles should begin with white triangles as most sim-
ple, in order to treat afterwards of blue triangles, then of red trian-
gles, and so on.
If political economy is a science and if not it is hardly
worth the while of earnest men to bother themselves with
it it must follow the rules of science, and seek in natural
law the causes of the phenomena which it investigates.
"With human law, except as furnishing illustrations and
supplying subjects for its investigation, it has, as I have
already said, nothing whatever to do. It is concerned
with the permanent, not with the transient ; with the laws
of nature, not with the laws of man.
CHAPTER IX.
THE ECONOMY CALLED POLITICAL ECONOMY.
SHOWING THE MEANING, UNITS AND SCOPE OP POLITICAL
ECONOMY.
The word economy The word political Origin of the term "political
economy" and its confusions It is not concerned with the body
politic, but with the body economic Its units, and the system or
arrangement of which it treats Its scope.
THE word economy, drawn from two Greek words,
house and law, which together signify the manage-
ment or arrangement of the material part of household
or domestic affairs, means in its most common sense the
avoidance of waste. We economize money or time or
strength or material when we so arrange as to accomplish
a result with the smallest expenditure. In a wider sense
its meaning is that of a system or arrangement or adapta-
tion of means to ends or of parts to a whole. Thus, we
speak of the economy of the heavens ; of the economy of
the solar system ; the economy of the vegetable or animal
kingdoms ; the economy of the human body ; or, in short,
of the economy of anything which involves or suggests the
adaptation of means to ends, the coordination of parts in
a whole.
As there is an economy of individual affairs, an economy
of the household, an economy of the farm or workshop
or railway, each concerned with the adaptation in these
65
66 THE MEANING OF POLITICAL ECONOMY. Book I.
spheres of means to ends, by which waste is avoided and
the largest results obtained with the least expenditure, so
there is an economy of communities, of the societies in
which civilized men live an economy which has special
relation to the adaptation or system by which material
wants are satisfied, or to the production and distribution
of wealth.
The word political means, relating to the body of citi-
zens or state, the body politic ; to things coming within the
scope and action of the commonwealth or government ; to
public policy.
Political economy, therefore, is a particular kind of
economy. In the literal meaning of the words it is that
kind of economy which has relation to the community or
state ; to the social whole rather than to individuals.
But the convenience which impels us to abbreviate a
long term has led to the frequent use of " economic " when
" politico-economic " is meant, so that we may by usage
speak of the literature or principles or terms of political
economy as "economic literature," or "economic princi-
ples," or " economic terms." Some recent writers, indeed,
seem to have substituted the term " economics " for politi-
cal economy itself. But this is a matter as to which the
reader should be on his guard, for it has been used to make
what is not really political economy pass for political econ-
omy, as I shall hereafter show.
Adam Smith, who at the close of the last century gave
so powerful an impulse to the study of what has since been
called political economy that he is, not without justice,
spoken of as its father, entitled his great book, "An
Inquiry into the Nature and Causes of the Wealth of
Nations ;" and what we call political economy the Germans
call national economy.
No term is of importance if we rightly understand what
it means. But, both in the term " political economy," and
Chap. IX. ECONOMY CALLED POLITICAL ECONOMY. 67
in that of "national economy," as well as in the phrase
" wealth of nations," lurk suggestions which may and in
fact often do interfere with a clear apprehension of the
ground they properly cover.
The use of the term " political economy " began at a time
when the distinction between natural law and human law
was not clearly made, when what I have called the body
economic was largely confounded with what is properly
the body politic, and when it was the common opinion in
Europe, even of thoughtful men, that the production and
distribution of wealth were to be regulated by the legisla-
tive action of the sovereign or state.
The first one to use the term is said to have been
Antoine de Montchretien in his " Treatise on Political
Economy " (" Traite de 1'e'conomie politique "), published in
Rouen, France, 1615. But if not invented by them, it was
given currency, some 130 or 140 years after, by those
French exponents of natural right, or the natural order,
who may to-day be best described as the first single-tax
men. They used the term " political economy " to distin-
guish from politics the branch of knowledge with which
they were concerned, and from this called themselves
Economists. The term is used by Adam Smith only in
speaking of " this sect," composed of " a few men of great
learning and ingenuity in France." But although these
Economists were overwhelmed and have been almost for-
gotten, yet of their "noble and generous system" this
term remained, and since the time of Adam Smith it has
come into general use as expressive of to accept the most
common and I think sufficient definition that branch of
knowledge that treats of the nature of wealth, and the laws
of its production and distribution.
But the confusion with politics, which the Frenchmen
of whom Adam Smith speaks endeavored to clear away
by their adoption of the term "political economy," still con-
68 THE MEANING OF POLITICAL ECONOMY. Book I.
tinues, and is in fact suggested by the term itself, which
seems at first apt to convey the impression of a particular
kind of politics rather than of a particular kind of econ-
omy. The word political has a meaning which relates it
to civil government, to the exercise of human sovereignty
by enactment or administration, without reference to those
invariable sequences which we call natural laws. An area
differentiated from other areas with reference to this
power of making municipal enactments and compelling
obedience to them, we style a political division ; and the
larger political divisions, in which the highest sovereignty
is acknowledged, we call nations. It is therefore impor-
tant to keep in mind that the laws with which political
economy primarily deals are not human enactments or
municipal laws, but natural laws; and that they have
no more reference to political divisions than have the
laws of mechanics, the laws of optics or the laws of gravi-
tation.
It is not with the body politic, but with that body social
or body industrial that I have called the body economic,
that political economy is directly concerned ; not with the
commonwealth of which a man becomes a member by the
attribution or acceptance of allegiance to prince, potentate
or republic ; but with the commonwealth of which he be-
comes a member by the fact that he lives in a state of
society in which each does not attempt to satisfy all of his
own material wants by his own direct efforts, but obtains
the satisfaction of some of them at least through the
cooperation of others. The fact of participation in this
cooperation does not make him a citizen of any particular
state. It makes him a civilized man, a member of the
civilized world a unit in that body economic to which
our political distinctions of states and nations have no
more relation than distinctions of color have to distinctions
of form.
Chap. IX. ECONOMY CALLED POLITICAL ECONOMY. 69
The unit of human life is the individual. From our first
consciousness, or at least from our first memory, our
deepest feeling is, that what we recognize as " I " is some-
thing distinct from all other things, and the actual merge-
ment of its individuality in other individualities, however
near and dear, is something we cannot conceive of. But
the lowest unit of which political economy treats often
includes the family with the individual. For though
isolated individuals may exist for a while, it is only under
unnatural conditions. Human life, as we know it, begins
with the conjuncture of individuals, and even for some
time after birth can continue to exist only under conditions
which make the new individual dependent on and subject
to preceding individuality ; while it requires for its fullest
development and highest satisfactions the union of indi-
viduals in one economic unit.
While, then, in treating of the subject-matter of political
economy, it will be convenient to speak of the units we
shall have occasion to refer to as individuals, it should be
understood that this term does not necessarily mean sepa-
rate persons, but includes, as one, those so bound together
by the needs of family life as to have, as our phrase is,
" one purse."
An economy of the economic unit would not be a polit-
ical economy, and the laws of which it would treat would
not be those with which political economy is concerned.
They would be the laws of personal or family conduct.
An economy of the individual or family could treat the
production of wealth no further than related to the pro-
duction of such a unit. And though it might take cog-
nizance of the physical laws involved in its agriculture and
mechanics, of the distribution of wealth in the economic
sense it could not treat at all, since any apportionment
among the members of such a family of wealth obtained
by it would be governed by the laws of individual or family
70 THE MEANING OF POLITICAL ECONOMY. Book I.
*
life, and not by any law of the distribution of the results
of socially conjoined effort.
But when in the natural course of human growth and
development economic units come into such relations that
the satisfaction of material desires is sought by conjoined
effort, the laws which political economy seeks to discover
begin to appear.
The system or arrangement by which in such conditions
material satisfactions are sought and obtained may be
roughly likened to a machine fed by combined effort, and
producing joint results, which are finally divided or dis-
tributed in individual satisfactions a machine resem-
bling an old-time grist-mill to which individuals brought
separate parcels of grain, receiving therefrom in meal, not
the identical grain each had put in, nor yet its exact equiva-
lent, but an equivalent less a charge for milling.
Or to make a closer illustration : The system or arrange-
ment which it is the proper purpose of political economy
to discover may be likened to that system or arrangement
by which the physical body is nourished. The lowest unit
of animal life, so far as we can see, is the single cell, which
sucks in and assimilates its own food ; thus directly satis-
fying what we may style its own desires. But in those
highest forms of animal life of which man is a type, myr-
iads of cells have become conjoined in related parts and
organs, exercising different and complex functions, which
result in the procurement, digestion and assimilation of
the food that nourishing each separate cell maintains the
entire organism. Brain and stomach, hands and feet,
eyes and ears, teeth and hair, bones, nerves, arteries and
veins, still less the cells of which all these parts are com-
posed, do not feed themselves. Under the government of
the brain, what the hands, aided by the legs, assisted by
the organs of sense, procure, is carried to the mouth, mas-
ticated by the teeth, taken by the throat to the alembic of
Chap. IX. ECONOMY CALLED POLITICAL ECONOMY. 71
the stomach, where aided by the intestines it is digested,
and passing into a fluid containing all nutritive substances,
is oxygenized by the lungs ; and impelled by the pumping
of the heart, makes a complete circuit of the body through
a system of arteries and veins, in the course of which
every part and every cell takes the nutriment it requires.
Now, what the blood is to the physical body, wealth, as
we shall hereafter see more fully, is to the body economic.
And as we should find, were we to undertake it, that a
description of the manner in which blood is produced and
distributed in the physical body would involve almost, if
not quite, a description of the entire physical man with all
his powers and functions and the laws which govern their
operations ; so we shall find that what is included or in-
volved in political economy, the science which treats of
the production and distribution of wealth, is almost, if
not quite, the whole body social, with all its parts, powers
and functions, and the laws under which they operate.
The scope of political economy would be roughly ex-
plained were we to style it the science which teaches how
civilized men get a living. Why this idea is sufficiently
expressed as the production and distribution of wealth will
be more fully seen hereafter ; but there is a distinction as
to what is called getting a living that it may be worth
while here to note.
We have but to look at existing facts to see that there
are two ways in which men (i.e., some men) may obtain
satisfaction of their material desires for things not freely
supplied to them by nature.
The first of these ways is, by working, or rendering
service.
The second is, by stealing, or extorting service.
But there is only one way in which man (i.e., men in
general or all men) can satisfy his material desires that
is by working, or rendering service.
72 THE MEANING OF POLITICAL ECONOMY. Book I.
For it is manifestly impossible that men in general or
all men, or indeed any but a small minority of men, can
satisfy their material desires by stealing, since in the
nature of things working or the rendering of service is the
only way in which the material satisfactions of desire can
be primarily obtained or produced.
Stealing produces nothing ; it only alters the distribution
of what has already been produced.
Therefore, however it be that stealing is to be considered
by an individual economy or by an economy of a political
division, and with whatever propriety a successful thief
who has endowed churches and colleges and libraries and
soup-houses may in such an economy be treated as a public
benefactor and spoken of as Antony spoke of Cgesar
He hath brought many captives home to Borne,
Whose ransoms did the general coffers fill,
a true science of political economy takes no cognizance
of stealing, except in so far as the various forms of it may
pervert the natural distribution, and thus check the nat-
ural production of wealth.
Yet, at the same time, political economy does not con-
cern itself with the character of the desires for which sat-
isfaction is sought. It has nothing to do, either with the
originating motive that prompts to action in the satisfac-
tion of material desires, nor yet with the final satisfaction
which is the end and aim of that action. It is, so to speak,
like the science of navigation, which is concerned with the
means whereby a ship may be carried from point to point
on the ocean, but asks not whether that ship may be a
pirate or a missionary barque, what are the expectations
which may induce its passengers to go from one place to
another, or whether or not these expectations will be grati-
fied on their arrival. Political economy is not moral or
Chap. IX. ECONOMY CALLED POLITICAL ECONOMY. 73
ethical science, nor yet is it political science. It is the
science of the maintenance and nutriment of the body
politic.
Although it will be found incidentally to throw a most
powerful light upon, and to give a most powerful support
to, the teachings of moral or ethical science, its proper
business is neither to explain the difference between right
and wrong nor to persuade to one in preference to the
other. And while it is in the same way what may be
termed the bread-and-butter side of politics, it is directly
concerned only with the natural laws which govern the
production and distribution of wealth in the social organ-
ism, and not with the enactments of the body politic or
state.
CHAPTER X.
THE ELEMENTS OF POLITICAL ECONOMY.
SHOWING HOW POLITICAL ECONOMY SHOULD PROCEED AND
WHAT RELATIONS IT SEEKS TO DISCOVER.
How to understand a complex system It is the purpose of such a
system that political economy seeks to discover These laws, nat-
ural laws of human nature The two elements recognized by po-
litical economy These distinguished only by reason Human
will affects the material world only through laws of nature It is
the active factor in all with which political economy deals.
TO understand a complex machine the best way is first
to see what is the beginning and what the end of its
movements, leaving details until we have mastered its gen-
eral idea and comprehended its purpose. In this way we
most easily see the relation of parts to each other and to the
object of the whole, and readily come to understand to the
minutest movements and appliances what without the clue
of intention might have hopelessly perplexed us.
When the safety bicycle was yet a curiosity even in the
towns of England and the United States, an American
missionary in a far-off station received from an old friend,
unaccompanied by the letter intended to go with it, a
present of one of these machines, which for economy in
transportation had not been set up, but was forwarded in
its unassembled parts. How these parts were to be put
together was a perplexing problem, for neither the mission-.
74
Chap. X. THE ELEMENTS OF POLITICAL ECONOMY. 75
ary himself nor any one he could consult could at first
imagine what the thing was intended to do, and their
guesses were of almost everything but the truth, until at
length the saddle suggested a theory, which was so suc-
cessfully followed that by the time, months afterwards,
another ship brought -the missing letter, the mission-
ary was riding over the hard sand of the beach on his
wheel.
In the same way an intelligent savage, placed in a great
industrial hive of our civilization before some enormous
factory throbbing and whirring with the seemingly inde-
pendent motion of pistons and wheels and belts and looms,
might, with no guide but his own observation and reason,
soon come to see the what, the how and the why of the
whole as a connected device for using the power obtained
by the transformation of coal into heat in the changing of
such things as wool, silk or cotton into blankets or piece-
goods, stockings or ribbons.
Now the reason which enables us to understand the
works of man as soon as we discover the reason that has
brought them into existence, also enables us to interpret
nature by assuming a like reason in nature. The child's
question, " What is it for ? "what is its purpose or intent ?
is the master key that enables us to turn the locks that
hide nature's mysteries. It is in this way that all dis-
coveries in the field of the natural sciences have been
made, and this will be our best way in the investigation
we are now entering upon. The complex phenomena of
the production and distribution of wealth in the elaborate
organization of modern civilization will only puzzle us, as
the many confused and confusing books written to explain
it show, if we begin, as it were, from the middle. But if
we seek first principles and trace out main lines, so as to
comprehend the skeleton of their relation, they will readily
become intelligible.
76 THE MEANING OF POLITICAL ECONOMY. Boolcl.
The immense aggregate of movements by which, in
civilization, wealth is produced and distributed, viewed
collectively as the subject of political economy, constitute
a system or arrangement much greater than, yet analogous
to, the system or arrangement of a great factory. In the
attempt to understand the laws of nature, which they illus-
trate and obey, let us avoid the confusion that inevitably
attends beginning from the middle, by proceeding in the
way suggested in our illustration the only scientific way.
These movements, so various in their modes, and so
complex in their relations, with which political economy
is concerned, evidently originate in the exertion of human
will, prompted by desire ; their means are the material and
forces that nature offers to man and the natural laws which
these obey; their end and aim the satisfaction of man's
material desires. If we try to call to mind as many as we
can of the different movements that are included in the
production and distribution of wealth in modern civiliza-
tion the catching and gathering, the separating and
combining, the digging and planting, the baking and
brewing, the weaving and dyeing, the sewing and washing,
the sawing and planing, the melting and forging, the
moving and transporting, the buying and selling we
shall see that what they all aim to accomplish is some sort
of change in the place, form or relation of the materials
or forces supplied by nature so as better to satisfy human
desire.
Thus the movements with which political economy is
concerned are human actions, having for their aim the
attainment of material satisfactions. And the laws that it
is its province to discover are not the laws manifested in
the existence of the materials and forces of nature that
man thus utilizes, nor yet the laws which make possible
their change in place, form or relation, but the laws of
man's own nature, which affect his own actions in the
Cliap.X. THE ELEMENTS OP POLITICAL ECONOMY. 77
endeavor to satisfy his desires by bringing about such
changes.
The world, as it is apprehended by human reason, is by
that reason resolvable, as we have seen, into three elements
or factors spirit, matter and energy. But as these three
ultimate elements are conjoined both in what we call man
and in what we call nature, the world regarded from the
standpoint of political economy has for its original ele-
ments, man and nature. Of these, the human element is
the initiative or active factor that which begins or acts
first. The natural element is the passive factor that
which receives action and responds to it. From the
interaction of these two proceed all with which political
economy is concerned that is to say, all the changes that
by man's agency may be wrought in the place, form or
condition of material things so as better to fit them for
the satisfaction of his desires.
Between the material things which come into existence
through man's agency and those which come into existence
through the agency of nature alone, the difference is as
clear to human reason as the difference between a moun-
tain and a pyramid, between what was on the shores of
Lake Michigan when the caravels of Columbus first plowed
the waters of the Caribbean Sea and the wondrous White
City, beside which in 1893 the antitypes of those caravels,
by gift of Spain, were moored. Yet it eludes our senses
and can be apprehended only by reason.
Any one can distinguish at a glance, it may be said,
between a pyramid and a mountain, or a city and a forest.
But not by the senses uninterpreted by reason. The ani-
mals, whose senses are even keener than ours, seem inca-
pable of making the distinction. In the actions of the most
intelligent dog you will find no evidence that he recognizes
any difference between a statue and a stone, a tobacconist's
wooden Indian and the stump of a tree. And things are
78 THE MEANING OF POLITICAL ECONOMY. Book I.
now manufactured and sold as to which it requires an
expert to tell whether they are products of man or products
of nature.
For the essential thing that in the last analysis distin-
guishes man from nature can, on the material plane that
is cognizable by the senses, appear only in the garb and
form of the material. Whatever man makes must have
for its substance preexisting matter ; whatever motion he
exerts must be drawn from a preexisting stock of energy.
Take away from man all that is contributed by external
nature, all that belongs to the economic factor land, and
you have, what? Something that is not tangible by the
senses, yet which is the ultimate recipient and final cause
of sensation ; something which has no form or substance
or direct power in or over the material world, but which
is yet the originating impulse which utilizes motion to
mold matter into forms it desires, and to which we must
look for the origin of the pyramid, the caravel, the indus-
trial palaces of Chicago and the myriad marvels they con-
tained.
I do not wish to raise, or even to refer further than is
necessary, to those deep problems of being and genesis
where the light of reason seems to fail us and twilight
deepens into dark. But we must grasp the thread at its
beginning, if we are to hope to work our way through a
tangled skein. And into what fatal confusions those fall
who do not begin at the beginning may be seen in current
economic works, which treat capital as though it were the
originator in production, labor as though it were a product,
and land as though it were a mere agricultural instrument
a something on which cattle are fed and wheat and
cabbages raised.
We cannot really consider the beginning of things, so
far as a true political economy is forced to concern itself
with them, without seeing that when man came into the
.X. THE ELEMENTS OF POLITICAL ECONOMY. 79
world the sum of energy was not increased nor that of
matter added to ; and that so it must be to-day. In all the
changes that man brings about in the material world, he
adds nothing to and subtracts nothing from the sum of
matter and energy. He merely brings about changes in
the place and relation of what already exists, and the first
and always indispensable condition to his doing anything
in the material world, and indeed to his very existence
therein, is that of access to its material and forces.
So far as we can see, it is universally true that matter
and energy are indestructible, and that the forms in which
we apprehend them are but transmutations from forms
they have held before ; that the inorganic cannot of itself
pass into the organic ; that vegetable life can only come
from vegetable life; animal life from animal life; and
human life from human life. Notwithstanding all specu-
lation on the subject, we have never yet been able to trace
the origin of one well-defined species from another well-
defined species. Yet the way in which we find the orders
of existence superimposed and related, indicates to us design
or thought a something of which we have the first
glimpses only in man. Hence, while we may explain the
world of which our senses tell us by a world of which our
senses do not tell us, a world of what Plato vaguely called
ideas, or what we vaguely speak of as spirit, yet we are
compelled when we would seek for the beginning cause
and still escape negation to posit a primary or all-causative
idea or spirit, an all-producer or creator, for which our
short word is God.
But to keep within what we do know. In man, con-
scious will that which feels, reasons, plans and contrives,
in some way that we cannot understand is clothed in
material form. Coming thus into control of some of the
energy stored up in our physical bodies, and learning, as
we may see in infancy, to govern arms, legs and a few
80 THE MEANING OF POLITICAL ECONOMY. Book I.
other organs, this conscious will seeks through them to
grasp matter and to set to work, in changing its place and
form, other stores of energy. The steam-engine rushing
along with its long train of coal or goods or passengers,
is in all that is evident to our senses but a new form of
what previously existed. Everything of it that we can
see, hear, touch, taste, weigh, measure or subject to chem-
ical tests, existed before man was. What has brought
preexisting matter and motion to the shape, place and
function of engine and train is that which, prisoned in
the engineer's brain, grasps the throttle; the same thing
that in the infant stretches for the moon, and in the child
makes mud-pies. It is this conscious will seeking the
gratification of its desires in the alteration of material
forms that is the primary motive power, the active factor,
in bringing about the relations with which political econ-
omy deals. And while, whatever be its origin, this will is
in the world as we know it an original element, yet it can
act only in certain ways, and is subject in that action to
certain uniform sequences, which we term laws of nature.
CHAPTER XI.
OF DESIRES AND SATISFACTIONS.
SHOWING THE WIDTH AND IMPORTANCE OF THE FIELD OF
POLITICAL ECONOMY.
Action springs from desire and seeks satisfaction Order of desires-
Wants or needs Subjective and objective desires Material and
immaterial desires The hierarchy of life and of desires.
A LL human actions at least all conscious and voluntary
J\_ actions are prompted by desire, and have for their
aim its satisfaction. It may be a desire to gain something
or a desire to escape something, as to obtain food or to
enjoy a pleasing odor, or to escape cold or pain or a noi-
some smell ; a desire to benefit or give pleasure to others,
or a desire to do them harm or give them pain. But
whether positive or negative, physical or mental, benefi-
cent or injurious, so invariably is desire the antecedent
of action that when our attention is called to any human
action we feel perplexed if we do not recognize the ante-
cedent desire or motive, and at once begin to look for it,
confident that it has to the action the relation of cause to
effect.
So confident, indeed, are we of this necessary causal
relation between action and desire, that when we cannot
find, or at least with some plausibility surmise, an ante-
cedent desire of which the action is an expression, we will
not believe that the action took place, or at the least, will
81
82 THE MEANING OF POLITICAL ECONOMY. Book I.
not believe that it was a voluntary, conscious action, but
will assume, as the older phraseology put it, that the man
was possessed by some other human or extra-human will ;
or, as the more modern phrase puts it, that he was insane.
For so unthinkable is conscious, voluntary action without
antecedent desire, that we will reject the testimony of
others or even the testimony of our own senses rather than
believe that a conscious act can take place without motive.
And as desire is the prompter, and the satisfaction of
desire is the end and aim, of all human action, all that men
seek to do, to obtain or to avoid may be embraced in one
term, as satisfactions, or satisfactions of desire.
But of these desires and their corresponding satisfac-
tions, some are more primary or fundamental than others ;
and it is only as these desires obtain satisfaction that other
desires arise and are felt. Thus the desire for air is per-
haps the most fundamental of all human desires. Yet its
satisfaction is under normal conditions so easily had that
we usually are not conscious of it it is in fact rather a
latent than an actual desire. But let one be shut off from
air, and the desire to get it becomes at once the strongest
of desires, casting out for the moment all others. So it is
with other desires, such as those for food and drink, the
satisfaction of which is necessary to the maintenance of
life and health and the avoidance of injury and pain, and
which we share in common with the brute. These primary
desires lie as it were beneath, or are fundamental to, the
manifold desires which arise in man when they are satis-
fied. For, while the desires of other animals seem com-
paratively speaking few and fixed, the desires of man are
seemingly illimitable. He is indeed the never-satisfied
animal ; his desires under normal conditions growing with
his power of satisfying them, without assignable limit.
In the same way as we distinguish between necessities
and luxuries, so do we often distinguish between what we
Chap. XL OF DESIRES AND SATISFACTIONS. 83
call " wants n or " needs " and what we speak of simply as
desires. The desires whose satisfaction is necessary to
the maintenance of life and health and the avoidance of
injury and pain those desires, in short, which come
closest to the merely animal plane we are accustomed to
call "wants" or "needs." At least this is the primary
idea, though as a matter of fact we often speak of needs
or wants in accordance with that usual standard of comfort
which we call reasonable, and which is in a large degree
a matter of habit. And thus while the satisfaction of
desire of some kind is the end and aim of all human
action, we recognize, though vaguely, a difference in rel-
ative importance when we say that the end and aim of
human effort is the satisfaction of needs and the gratifica-
tion of desires.
Without desire man could not exist, even in his animal
frame. And those Eastern philosophies, of which that of
Schopenhauer is a Western version, that teach that the
wise man should seek the extinction of all desire, also
teach that such attainment would be the cessation of in-
dividual existence, which they hold to be in itself an evil.
But in fact, as man develops, rising to a higher plane, his
desires infallibly increase, if not in number at least in
quality, becoming higher and broader in their end and aim.
Now, of human desires and their corresponding satis-
factions, some may be subjective, that is, relating to the
individual mind or thinking subject ; and some objective,
that is, relating to the external world, the object of its
thought. And by another distinction, some may be said
to be immaterial, that is, relating to things not cognizable
by the senses, i.e., thought and feeling; and some to be
material, that is, relating to things cognizable by the
senses, i.e., matter and energy.
There is a difference between these two distinctions, but
practically it is not a large one. A subjective desire as
84 THE MEANING OF POLITICAL ECONOMY. Book I.
when I desire greater love or greater knowledge or hap-
piness for and in my own mind is always an immaterial
desire. But it does not follow that an objective desire is
always a material desire, since I may desire greater love
or knowledge or happiness for and in the mind of another.
Yet we have to remember: 1. That much that we are
prone to consider as immaterial seems to be so only be-
cause the words we use involve a purely ideal abstraction
of qualities from things they qualify, and without which
they cannot exist as things really conceived. Love,
knowledge or happiness presupposes something which
loves, knows or feels, as whiteness presupposes a thing
which is white. 2. That while such qualities as love,
knowledge or happiness may be predicated of objective
though immaterial things, yet, normally at least, we can
have no cognizance of such an immaterial thing, or of its
states or conditions, except through the material. De-
prived of the senses of sight, sound, touch, taste and smell,
the gates through which the ego becomes conscious of the
material world, how, in any normal way, could I or you
know of the love, knowledge, happiness or existence of any
other such being? Except, indeed, there be some direct
way in which spirit may have knowledge of spirit a way
it may be that is opened when that through the material
by the gates of the senses is closed the exclusion of the
material is therefore a practical exclusion of the objective.
I speak of this for the purpose of showing how nearly
the field of material desires and satisfactions, within which
the sphere of political economy lies, comes to including all
human desires and satisfactions. J^ftd when we consider
how in man the subjective is bound in with the objective,
the spiritual with the material, the importance of material
desires and satisfactions to human life as a whole is even
clearer. For though we may be forced to realize, as the
innermost essential of man, a something that is not
material; yet this spirit or soul, as in this life we know it,
Chap. XL OF DESIRES AND SATISFACTIONS. 85
is incased and imprisoned in matter^ jEven if subjective
existence be possible without the booy/the ego as we know
it, deprived of touch with matter through the senses, would
be condemned to what may be likened to solitary impris-
onment.
As vegetable life is built, so to speak, upon inorganic
existence, and the animal may be considered as a self-
moving plant, plus perhaps an animal soul ; so man is an
animal plus a human soul, or reasoning power. And while,
for reasons I have touched on, we are driven when we
think of ultimate origins to consider the highest element
of which we know as the originating element, yet we are
irresistibly compelled to think of it as having first laid the
foundation before raising the superstructure. This is the
profound truth of that idea of evolution which all theories
of creation have recognized and must recognize, but which
is not to be confounded with the materialistic notion of
evolution which has of late years been popularized among
superficial thinkers. The wildest imagination never
dreamed that first of all man came into being; then the
animals ; afterwards the plants ; then the earth ; and finally
the elementary forces. In the hierarchy of life, as we
know it, the higher is built upon the lower, order on order,
and is as summit to base. And so in the order of human
desires, what we call needs come first, and are of the
widest importance. Desires that transcend the desires of
the animal can arise and seek gratification only when the
desires we share with other animals are satisfied. And
those who are inclined to deem that branch of philosophy
which is concerned with the gratification of material needs,
and especially with the way in which men are fed, clothed
and sheltered, as a secondary and ignoble science, are like
a general so absorbed in the ordering and moving of his
forces as utterly to forget a commissariat ; or an architect
who should deem the ornamentation of a facade more im-
portant than the laying of a foundation.
CHAPTER XII.
THE FUNDAMENTAL LAW OF POLITICAL
ECONOMY.
SHOWING THAT THE LAW FROM WHICH POLITICAL ECONOMY
PROCEEDS IS THAT MEN SEEK TO SATISFY THEIR DESIRES
WITH THE LEAST EXERTION.
Exertion followed by weariness The fact that men seek to satisfy
their desires with the least exertion Meaning and analogue
Exemplified in trivial things Is a law of nature and the funda-
mental law of political economy Substitution of selfishness for
this principle Buckle quoted Political economy requires no
such assumption The necessity of labor not a curse.
THE only way man has of satisfying his desires is by
action.
Now action, if continued long enough in one line to
become really exertion, a conscious putting forth of effort,
produces in the consciousness a feeling of reluctance or
weariness. This comes from something deeper than the
exhaustion of energy in what we call physical labor ; for
whoever has tried it knows that one may lie on his back
in the most comfortable position and by mere dint of sus-
tained thinking, without consciously moving a muscle, tire
himself as truly as by sawing wood ; and that the mere
clash and conflict of involuntary or undirected thought or
feeling, or its continuance in one direction, will soon bring
extreme weariness.
86
Chap. XII. THE LAW OF POLITICAL ECONOMY. 37
But whatever be its ultimate cause, the fact is that labor,
the attempt of the conscious will to realize its material
desire, is always, when continued for a little while, in itself
hard and irksome. And whether from this fact alone, or
from this fact, conjoined with or based upon something
intuitive to our perceptions, the further fact, testified to
both by observation of our own feelings and actions and
by observation of the acts of others, is that men always
seek to gratify their desires with the least exertion.
This, of course, does not mean that they always succeed
in doing so, any more than the physical law that motion
tends to persist in a straight line means that moving
bodies always take that line. But it does mean the mental
analogue of the physical law that motion seeks the line of
least resistance that in seeking to gratify their desires
men will always seek the way which under existing physi-
cal, social and personal conditions seems to them to involve
the least expenditure of exertion.
Whoever would see this disposition of human nature
exemplified in trivial things has only to watch the passers-
by in a crowded street, or those who enter or depart from
a frequented house. He will be instructed and perhaps
not a little amused to note how slight the obstruction
or semblance of obstruction that will divert their steps ;
and will see the principle observed by saint and sinner
by " wicked man on evil errand bent," and " Good Samar-
itan intent on works of mercy."
Whether it proceed from experience of the irksomeness
of labor and the desire to avoid it, or further back than
that, have its source in some innate principle of the human
constitution, this disposition of men to seek the satisfaction
of their desires with the minimum of exertion is so uni-
versal and unfailing that it constitutes one of those in-
variable sequences that we denominate laws of nature, and
from which we may safely reason. It is this law of nature
88 THE MEANING OF POLITICAL ECONOMY. Book I.
that is the fundamental law of political economy the
central law from which its deductions and explanations
may with certainty be drawn, and, indeed, by which alone
they become possible. It holds the same place in the
sphere of political economy that the law of gravitation
does in physics. Without it there could be no recognition
of order, and all would be chaos.
Yet the failure clearly to apprehend this as the funda-
mental law of political economy has led to very serious
and wide-spread mistakes as to the nature of the science ;
and has indeed, in spite of the vigorous assertions and
assumptions of its accredited professors, prevented it from
truly taking in popular esteem the place of a real science,
or from long holding in scholastic circles the credit it had
for a while gained. For the principle that men always
seek to satisfy their desires with the least exertion, there
has been substituted, from the time that political economy
began to claim the attention of thoughtful men, the prin-
ciple of human selfishness. And with the assumption that
political economy takes into its account only the selfish
feelings of human nature, there have been linked, as laws
of political economy, other assumptions as destitute of
validity.
To show how completely the idea has prevailed that the
foundation of political economy is the assumption of
human selfishness, I shall not stop to quote from the
accredited writers on the subject, nor yet from those who
have made of it a ground of their repugnance to the
political economy that has been with justice styled " the
dismal science" such as Carlyle, Dickens or Buskin. I
take for that purpose a writer who, while he fully accepted
what was at his time (1857-60) the orthodox political econ-
omy, deeming it " the only subject immediately connected
with the art of government that has yet been raised to a
science," and was well conversant with its literature, was
Chap. XII. THE LAW OF POLITICAL ECONOMY. 89
not concerned with it as a controversialist, but only as a
historian of the development of thought.
Buckle's understanding of political economy was that
it eliminated every other feeling than selfishness. In his
" Inquiry into the Influence Exercised by Religion, Litera-
ture and Government " (Vol. I., Chapter V., of his " History
of Civilization in England "), he says that in the " Wealth
of Nations," which he regards as " probably the most
important book which has ever been written," Smith
" generalizes the laws of wealth, not from the phenomena
of wealth, nor from statistical statements, but from the
phenomena of selfishness; thus making a deductive ap-
plication of one set of mental principles to the whole set
of economical facts."
And in his " Examination of the Scotch Intellect during
the Eighteenth Century " (Vol. II., Chapter VI.), he returns
in greater detail to the same subject. Adam Smith, he
says, wrote two great books, with an interval of seventeen
years between them. In both he employed the same
method, that form of deduction " which proceeds by an
artificial separation of facts in themselves inseparable."
In the first of these, the "Theory of Moral Sentiments,"
he " so narrowed the field of inquiry as to exclude from it
all consideration of selfishness as a primary principle, and
only to admit its great antagonist, sympathy." In the
second, the " Wealth of Nations," which Buckle regards as
a correlative part of Smith's one great scheme, though still
greater than its predecessor, Smith, on the contrary, " as-
sumes that selfishness is the main regulator of human
affairs, just as in his previous work he had assumed sym-
pathy to be so." Or, as Buckle, later on, repeats :
He everywhere assumes that the great moving power of all men,
all interests and all classes, in all ages and in all countries, is selfish-
ness. The opposite power of sympathy he entirely shuts out ; and I
hardly remember an instance in which even the word occurs in the
90 THE MEANING OF POLITICAL ECONOMY. Book I.
whole course of his work. Its fundamental assumption is, that each
man exclusively follows his own interest, or what he deems to be his
own interest. ... In this way Adam Smith completely changes the
premises he had assumed in his earlier work. Here, he makes men
naturally selfish ; formerly, he had made them naturally sympathetic.
Here, he represents them pursuing wealth for sordid objects, and for
the narrowest personal pleasures ; formerly, he represented them
as pursuing it out of regard to the sentiments of others, and for the
sake of obtaining their sympathy. In the " Wealth of Nations " we
hear no more of this conciliatory and sympathetic spirit ; such ami-
able maxims are altogether forgotten, and the affairs of the world
are regulated by different principles. It now appears that benevo-
lence and affection have no influence over our actions. Indeed,
Adam Smith will hardly admit common humanity into his theory of
motives. If a people emancipate their slaves, it is a proof, not that
the people are acted on by high moral considerations, nor that their
sympathy is excited by the cruelty inflicted on these unhappy crea-
tures. Nothing of the sort. Such inducements to conduct are
imaginary and exercise no real sway. All that the emancipation
proves, is, that the slaves were few in number, and, therefore, small
in value. Otherwise they would not have been emancipated.
So, too, while in his former work he had ascribed the different
systems of morals to the power of sympathy, he, in this work, ascribes
them entirely to the power of selfishness.
This presumption, so well stated and defended by
Buckle, that political economy must eliminate everything
but the selfish feelings of mankind, has continued to
pervade the accredited political economy up to this time,
whatever may have been the effects upon the common
mind of the attacks made upon it by those, who, not
putting their objections into logical and coherent form,
could be spoken of as sentimentalists, but not political
economists. Yet, however generally the accepted writers
on political economy may have themselves supposed the
assumption of universal selfishness to be the fundamental
principle of political economy, or how much ground they
may have given for such a supposition on the part of their
readers, a true political economy requires no such assump-
Chap. XII. THE LAW OF POLITICAL ECONOMY. 91
tion. The primary postulate on and from which its whole
structure is built is not that all men are governed only by
selfish motives, or must for its purposes be considered as
governed only by selfish motives ; it is that all men seek
to gratify their desires, whatever those desires may be,
with the least exertion. This fundamental law of political
economy is, like all other laws of nature, so far as we are
concerned, supreme. It is no more affected by the selfish-
ness or unselfishness of our desires than is the law of
gravitation. It is simply a fact.
The irksomeness or weariness that inevitably attends
all continued exertion caused earlier men to look on the
necessity of labor to production as a penalty imposed upon
our kind by an offended Deity. But in the light of modern
civilization we may see that what they deemed a curse is
in reality the impulse that has led to the most enormous
extensions of man's power of dealing with nature. So
true is it that good and evil are not in external things or
in their laws of action, but in will or spirit.
CHAPTER XIII.
METHODS OF POLITICAL ECONOMY.
SHOWING THE NATURE OF THE METHODS OF INVESTIGATION
THAT MAY BE USED IN POLITICAL ECONOMY.
Deductive and inductive schools "New American Cyclopedia''
quoted Triumph of the inductionists The method of induction
and the method of deduction Method of hypothesis Bacon's re-
lation to induction Eeal error of the deductionists and the mistake
of the inductionists Lalor's Cyclopedia quoted Result of the
triumph of the inductionists A true science of political econ-
omy must follow the deductive method Davis's "Elements of
Inductive Logic " quoted Double assurance of the real postulate
of political economy Method of mental or imaginative experiment.
A MISCONCEPTION of the fundamental law on which
a science is based must lead to divergences and con-
fusions as the attempt to develop that science proceeds.
In the case of political economy, the result of the as-
sumption that its fundamental principle is human selfish-
ness is shown in disputes and confusions as to its proper
method. These began shortly after it was recognized as
deserving the attention of the institutions of learning, and
are an increasingly noticeable feature in economic litera-
ture for some sixty or seventy years. Adam Smith and
the most prominent of his successors followed the deduc-
tive method. But ere long there began to be questionings
as to whether the inductive method was not the proper
92
Chap. XIII. METHODS OF POLITICAL ECONOMY. 93
one. Having on their side the weight of authority, the
defenders of the deductive method, or " old school" politi-
cal economy, as it began to be called, held for a long time
their formal position, though compelled by the incon-
gruities of the system they were endeavoring to uphold to
make damaging deductions and weakening admissions;
while the opposition to them, called by various names, but
generally known as inductive or " new school" economists,
gathered strength.
What lay beneath this contest, which was largely verbal,
and in which there was confusion on both sides, I shall
have occasion to speak of hereafter; but as to how it
seemed to stand in the scholastic world at the beginning
of the seventh decade of our century I quote from the
article " Political Economy " in the " New American Cyclo-
pedia" (1861), which, as written by an opponent of the
then orthodox school (Henry Carey Baird), with an evident
desire to be entirely fair, will I think better show the actual
situation at that time than anything else I can find :
The progress thus far made in political economy has been slow and
uncertain, and there is in its entire range hardly a doctrine or even
the definition of an important word which is universally or even
generally accepted beyond dispute. . . . Amid all their discords and
disagreements it is possible to divide political economists under two
general heads : those who treat the subject as a deductive science,
" in which all the general propositions are in the strictest sense of
the word hypothetical ; " and those who treat it by the inductive or
Baconian method. Of the first-named school are all the English
economists and most of those of continental Europe who have ac-
quired any reputation. As the representatives of the last, Mr. Henry
C. Carey and his followers are most prominent.*
* As illustrating the looseness with which the words "inductive"
and " deductive " have been thrown around in this discussion as to
the proper method of political economy, it may be worth mentioning
that the same Henry C. Carey, who is here cited as the most promi-
nent representative of the inductive school, as opposed to the deduc-
94 THE MEANING OF POLITICAL ECONOMY. Boole L
Thus, in 1861, the deductive method, even to the view
of an adherent of the opposing school, still formally held
sway in the scholastic world. But at present, as the cen-
tury nears its close, it has so utterly lost its hold that so
far as I can discover, there is not now a prominent college
or university anywhere in which the professed teachers of
what is reputed to be political economy adhere to what
was then called the deductive method.
Yet this triumph in scholastic opinion of the advocates
of what is called the inductive method is in reality but the
triumph of one set of confusions over another set of con-
fusions, in which the determining element has been the
vague consciousness that the previously authoritative
political economy was not a true political economy.
Where a new set of confusions is pitted against an old
set of confusions, the victory must finally and for a time
remain with the new ; for the reason that on the old lies
the burden of defending what is indefensible, while the
new has for a while only the easier task of attack. What
this passing phase of economic thought really shows is the
utter confusion into which the whole scholastic political
economy has fallen from lack of care as to first principles.
In my view of the matter those who have said that the
deductive method was the proper method of political econ-
omy have been right as to that, but wrong in principles
from which they have made deductions ; while those who
contended for the inductive method have been wrong as
to that, but right as to the weaknesses of their opponents.
As to the course of what has been called the science of
tive school of Smith, Bicardo and Mill, is in the biographical notice
of him in the latest successor of the "New American Cyclopedia,"
the revised edition of "Johnson's Universal Cyclopedia" (1895), said
to be " the founder of a school of political economy whose principles
are anti-socialistic and more deductive than those of Smith, Bicardo
and Mill."
Chap. XIII. METHODS OF POLITICAL ECONOMY. 95
political economy and the destructive revolution which it
has of late years undergone, I shall have occasion to speak
in the next book. I am here concerned in clearing only
what might be a perplexity to the reader in regard to the
proper methods of the real science.
The human reason has two ways of ascertaining truth.
The first of these is that of reasoning from particulars to
generals in an ascending line, until we come at last to one
of those invariable uniformities that we call laws of nature.
This method we call the inductive, or a posteriori. But
when we have reached what we feel sure is a law of na-
ture, and as such true in all times and places, then an
easier and more powerful method of ascertaining truth is
open to us the method of reasoning in the descending
line from generals to particulars. This is the method that
we call the deductive, or a priori method. For knowing
what is the general law, the invariable sequence that we
call a law of nature, we have only to discover that a par-
ticular comes under it to know what is true in the case of
that particular.
In the relation of priority the two methods stand in the
order in which I have named them induction being the
first or primary method of applying human reason to the
investigation of facts, and deduction being the second or
derivative. So far as our reason is concerned, induction
must give the facts on which we may proceed to deduction.
Deduction can safely be based only on what has been sup-
plied to the reason by induction ; and where the validity
of this first step is called in question, must apply to induc-
tion for proof. Both methods are proper to the careful
investigation that we speak of as scientific : induction in
its preliminary stages, when it is groping for the law of
nature ; deduction when it has discovered that law, and is
thus able to proceed by a short cut from the general to
the particular, without any further need for the more
96 THE MEANING OF POLITICAL ECONOMY. Book I.
laborious and, so to speak, uphill method of induction,
except it may be to verify its conclusions.
There is a further method of investigation, which con-
sists in a combination of these two original methods of
the reason, and which has been found most effective in the
discovery of truth in the physical sciences. When our
inductions so point to the existence of a natural law that
we are able to form a surmise or suspicion of what it may
prove to be, we may tentatively assume the existence of
such a law, and proceed to see whether particulars will fall
into place in deductions made from it. This is the method
of tentative deduction, or hypothesis.
The inductive method is sometimes, as in the last quota-
tion I have made, spoken of as the Baconian method, and
the great name of Bacon has been freely used to give
plausibility to what the advocates of the "new school" in
political economy have called the inductive method. But
whatever originality there may have been in his classifica-
tions and devices, Bacon did not invent the inductive
method. It was by that method that man's reason has
from the first enabled him to apprehend laws of nature
that he has subsequently used as bases for deduction. It
was thus that he must have learned what we are accus-
tomed to think the simplest of nature's uniformities such
as, that after an interval a new moon succeeds the old
moon ; that the sun, after apparently tending to the south
for a while, turns again to the north ; that fire will burn,
and that water will quench fire. What Bacon did was
not to invent or discover the inductive method, but to
formulate some rules for its application and to apply it to
the investigation of fields of knowledge from which it had
been long shut out by a blind reliance upon authority
by a false assumption that wiser men who had gone before
had taught all there was worth knowing on certain sub-
jects, and that there remained for those who came after
Chap. XIIL METHODS OF POLITICAL ECONOMY. 97
nothing further to do than to make deductions from
premises their predecessors had supplied.
Where the application of the inductive method was
really needed in what is now called by the " new lights "
the "classical" political economy was to test the premises
from which its deductions were made, and to clear them
of what had no better warrant than a disposition to use
political economy to justify existing social arrangements.
It was not needed to take the place of the deductive
method, where that was applicable. For the deductive
method, when applied to the further extension of what
has already been validly ascertained, constitutes the most
powerful means of extending knowledge that the human
mind can avail itself of.
In its use of the deductive method after its premises
had been settled, the classical political economy was not
in error. The error that gave insecurity to its whole
structure lay deeper still, in the insufficient inductions on
which those premises rested. But, instead of addressing
themselves to these flaws in its accepted premises, the
various schools of economists generally classed as induc-
tive have denied that there were any general principles
that could with certainty be laid down as the basis for
deduction. Thus, if such a question be asked them as,
does free trade or protection best promote a general pros-
perity? or, what is the best system of land-tenure? or,
what is the best system of taxation ? or, what are the limits
of governmental interference with industry, or trade-union
regulations ? no general answer can be given. It can only
be said that one thing may be best in one place and time,
and another in another place and time, so that the matter
can be determined only by special investigations. In other
words, to quote the phrase of Professor James, of the
University of Pennsylvania, an adherent of the "new
school " (article, " Political Economy," in Lalor's " Cyclo-
98 THE MEANING OF POLITICAL ECONOMY. Book I.
pedia of Political Science, Political Economy and United
States History," 1884), they have opposed "the theory
which seeks eternally valid natural laws in economics,
and which considers the natural condition of unlimited
personal freedom as the only justifiable one, without regard
to the needs of special times and nations."
The result, therefore, of the triumph of the " induction-
ists" over the " deductionists " in the accredited organs of
economic teaching, has been to destroy in the "new"
political economy even the semblance of coherency that
it had in the " old," and to decompose it into a congeries
of unrelated doctrines and unverified speculations which
only its professors can presume to understand, and as to
which they can dispute and quarrel with each other in the
wild abandon that results from the absence of any recog-
nized common principle.
But to me it seems clear that if political economy can
be called a science at all, it must as a science, that is to
say from the moment the laws of nature on which it
depends are discovered, follow the deductive method of
examination, using induction only to test the conclusions
thus obtained. For the particulars which are included in
its province are too vast and too complex to admit of any
hope of bringing them into order and relation by direct
induction.
To quote from the latest elementary text-book of logic
of which I know, Professor Noah K. Davis's " Elements of
Inductive Logic " (Harper Bros., New York, 1893), p. 197 :
The great object of the scientist is to obtain by rigid induction the
laws of nature, and to follow them by rigid deduction to their conse-
quences. A science at first wholly inductive becomes, as soon as a
law has been proved, more or less deductive, and as it progresses,
rising to higher and wider but fewer inductions, the deductive
processes increase in number and importance, until it is no longer
properly an inductive, but a deductive science. Thus, hydrostatics,
acoustics, optics and electricity, commonly called inductive sciences,
Cliap. XIII. METHODS OF POLITICAL ECONOMY. 99
have passed under the dominion of mathematics, from inductive to
deductive sciences and mechanics has a like history. Celestial
mechanics as founded in the " Principia " of Newton is mainly induc-
tive, as elaborated in the "M6canique Celeste" of Laplace, is
mainly deductive. By pursuing this latter process it has multiplied
its matter and reached its present high perfection. A revolution is
quietly progressing in all the natural sciences. Bacon changed their
method from deductive to inductive, and it is now rapidly reverting
from inductive to deductive. The task of logic is to explicate and
regulate these methods.
Now the law of nature which forms the postulate of a
true science of political economy is not, as has been erro-
neously assumed, that men are invariably and universally
selfish. As a matter of fact, this is not true. Nor can we
abstract from man all but selfish qualities in order to make
as the object of our thought on economic matters what
has been called the " economic man," without getting what
is really a monster, not a man.
The law of nature which is really the postulate of a true
science of political economy is that men always seek to
gratify their desires with the least exertion, whether those
desires are selfish or unselfish, good or bad.
That this is a law of nature we have the highest possible
warrant, wider in fact than we can have for any of the
laws of external nature, such for instance as the law of
gravitation. For the laws of external nature can be appre-
hended only objectively. But that it is a law of nature
that men seek to gratify their desires with the least exer-
tion, we may see both subjectively and objectively. Since
man himself is included in nature, we may subjectively
reach the law of nature that men seek to gratify their
desires with the least exertion, by an induction derived
from consciousness of our own feelings and an analysis of
our own motives of action ; while objectively we may also
reach the same law by an induction derived from obser-
vation of the acts of others.
100 THE MEANING OF POLITICAL ECONOMY. Boo* I.
Proceeding from a law of nature thus doubly assured,
the proper method of a political economy which becomes
really a science by its correct apprehension of a funda-
mental law, is the method of deduction from that law, the
method of proceeding from the general to the particular ;
for this is the method which will enable us to attain incom-
parably greater results. To abandon that method and
resort to what the " new lights " of political economy seem
really to mean by induction, would be as though we were
to discard the rules of arithmetic and endeavor by direct
inquiries in all parts of the world to discover how much
one number added to another would make, and what
would be the quotient of a sum divided by itself.
Thus, in the main, the science of political economy re-
sorts to the deductive method, using induction for its tests.
But in its more common investigations its most useful
instrument is a form of hypothesis which may be called
that of mental or imaginative experiment,* by which we
may separate, combine or eliminate conditions in our own
imaginations, and thus test the working of known prin-
ciples. This is a most common method of reasoning,
familiar to us all, from our very infancy. It is the great
working tool of political economy, and in its use we have
only to be careful as to the validity of what we assume as
principles.
* See lecture delivered by me before the students of the Univer-
sity of California on "The Study of Political Economy," April, 1877,
reprinted in "Popular Science Monthly," March, 1880.
CHAPTER XIV.
POLITICAL ECONOMY AS SCIENCE AND
AS AET.
SHOWING THAT POLITICAL ECONOMY IS PROPERLY A
SCIENCE, AND THE MEANING IT SHOULD HAVE IF SPOKEN
OF AS ART.
Science and art There must be a science of political economy, but
no proper art What must be the aim of an art of political econ-
omyWhite art and black art Course of further investigation.
THERE is found among economic writers much dis-
pute not only as to the proper method of political
economy, but also as to whether it should be spoken of as
a science or as an art. There are some who have styled
it a science, and some who have styled it an art, and some
who speak of it as both science and art. Others again
make substantially the same division, into abstract or
theoretical or speculative political economy, on the one
side, and concrete or normative or regulative or applied
political economy, on the other side.
Into this matter, however, it is hardly worth while for
us to enter at any length, since the reasons for considering
a proper political economy as a science rather than an art
have been already given. It is only necessary to observe
that where systematized knowledge may be distinguished,
as it sometimes is, into two branches, science and art, the
101
102 THE MEANING OF POLITICAL ECONOMY. Book I.
proper distinction between them is that the one relates to
what we call laws of nature ; the other to the manner in
which we may avail ourselves of these natural laws to
attain desired ends.
This first branch of knowledge, it is clear, is in political
economy the primary and most important. It is only as
we know the natural laws of the production and distribu-
tion of wealth that we can previse the result of the adjust-
ments and regulations which human laws attempt. And
as whoever wishes to understand and treat the diseases
and accidents of the human frame would properly begin
by studying it in its normal condition, noting the position,
relation and functions of the organs in a state of perfect
health; so any study of the faults, aberrations and in-
juries which occur in the economy of society comes best
after the study of its natural and normal condition.
There may be disputes as to whether there is yet a
science of political economy, that is to say, whether our
knowledge of the natural economic laws is as yet so large
and well digested as to merit the title of science. But
among those who recognize that the world we live in is in
all its spheres governed by law, there can be no dispute as
to the possibility of such a science.
And as there can be only one science of chemistry, one
science of astronomy and one science of physiology, which,
in so far as they are really sciences, must be true and in-
variable, so, while there may be various opinions, various
teachings, various hypotheses (or in a loose and improper
but exceedingly common use of the word, various theories),
of political economy, there can be only one science. And
it, in so far as it is really a science that is to say, in so
far as we have really discovered and related the natural
laws which are within its province must in all times and
places be true and invariable. For we live in a world
where the same effects always follow the same causes and
Chap. XIV. AS SCIENCE AND AS ART. 103
where nothing is capricious, unless indeed it be that some-
thing within us which desires, wills and chooses. But this
in man, that seems, to a certain extent at least, indepen-
dent of the external nature that is recognized by our
senses, can manifest itself only in accordance with natural
laws, and can accomplish its external purposes only by
using those laws.
When we shall have worked out the science of political
economy when we shall have discovered and related the
natural laws which govern the production and distribution
of wealth, we shall then be in position to see the effect of
human laws and customs. But it does not seem to me
that a knowledge of the effect which natural laws of the
production and distribution of wealth bring about in the
outcome of human laws, customs and efforts, can be
properly spoken of as an art of political economy, or that
the knowledge properly classified under the term political
economy, can be divided, as some writers have attempted
to divide it, into a science and an art. There is a science
of astronomy, which ha? its applications in such arts as
those of navigation and surveying ; but no art of astronomy.
There is a science of chemistry, which has its applications in
many arts ; but no art of chemistry. And so the science of
political economy finds its applications in politics and its
various subdivisions. But these applications can hardly
be spoken of as constituting an art of political economy.
Yet if we choose, as some have done, to speak of political
economy as both science and art, then the art of political
economy is the art of securing the greatest production and
the fairest distribution of wealth; the art whose proper
object it is to abolish poverty and the fear of poverty, and
so lift the poorest and weakest of mankind above the hard
struggle to live. For if there be an art of political econ-
omy, it must be the noble art that has for its object the
benefit of all members of the economic community.
104 THE MEANING OF POLITICAL ECONOMY. Book I.
But just as when men believed in magic they held that
there was both a white magic and a black magic an art
which aimed at alleviating suffering and doing good, and
an art which sought knowledge for selfish and evil ends
so, in this view, it may be said that there is a white polit-
ical economy and a black political economy. Where a
knowledge of the laws of the production and distribution
of wealth is used to enrich a few at the expense of the
many, or even where a reputed knowledge of those laws
is used to bolster up such injustice, and by darkening
counsel to prevent or delay the reform of it, such art of
political economy, real or reputed, is truly a black art.
This is the art of which the great Turgot spoke.
For our part, having seen the nature and scope of the
science of political economy, for which we adopt the older
definition the science that investigates the nature of
wealth and the laws of its production and distribution let
us proceed in this order, endeavoring to discover : (1) the
nature of wealth ; (2) the laws of its production ; and then
(3) the laws of its distribution. When this is done we
shall have accomplished all that is necessary for a true
science of political economy, as I understand it. It will
not be necessary for us to consider the matter of the con-
sumption of wealth ; nor, indeed, as I shall hereafter show,
is a true political economy concerned with consumption,
as many of the minor economic writers have assumed it
to be.
BOOK II.
THE NATUEE OF WEALTH
Definitions are the basis of systematic reasoning.
Aristotle.
The mixture of those things by speech which
are by nature divided is the mother of all error.
Hooker.
Bacon made us sensible of the emptiness of the
Aristotelian philosophy; Smith, in like manner,
caused us to perceive the fallaciousness of all the
previous systems of political economy ; but the lat-
ter no more raised the superstructure of this science,
than the former created logic. . . . "We are, how-
ever, not yet in possession of an established text-
book on the science of political economy, in which
the fruits of an enlarged and accurate observation
are referred to general principles that can be ad-
mitted by every reflecting mind ; a work in which
these results are so complete and well arranged as
to afford to each other mutual support, and that may
everywhere and at all times be studied with advan-
tage. J. B. Say, 1803.
We may cite as examples of such inchoate but yet
incomplete discoveries the great "Wealth of Na-
tions" by Adam Smith a work which still stands
out, and will ever stand out, as that of a pioneer,
and the only book on political economy which dis-
plays its genius to every kind of intelligent reader.
But among the specialists and the schools, this work
of genius which swayed all Europe in its day, is laid
upon the shelf as an antiquated affair, superseded
by the smaller and duller men who have pulled his
system to pieces and are offering us the fragments
as a science most of whose first principles are still
tinder dispute. Professor (Greek) J. P. Mdhaffy,
"The Present Position of Egyptology," "Nineteenth
Century," August, 1894.
CONTENTS OF BOOK II.
THE NATURE OF WEALTH.
PAGE
INTRODUCTION TO BOOK H. ...... 115
CHAPTER I.
CONFUSIONS AS TO THE MEANING OF WEALTH.
SHOWING THE FAILURE OF THE CURRENT POLITICAL ECONOMY TO
DEFINE WEALTH, AND THE CONFUSIONS THEREFROM, CULMI-
NATING IN THE ABANDONMENT OF POLITICAL ECONOMY BY ITS
PROFESSED TEACHERS.
Wealth the primary term of political economy Common use
of the word Vagueness more obvious in political economy
Adam Smith not explicit Increasing confusion of subsequent
writers Their definitions Many make no attempt at defini-
tion Perry's proposition to abandon the term Marshall and
Nicholson Failure to define the term leads to the abandon-
ment of political economy This concealed under the word
"economic" The intent expressed by Macleod Results to
political economy 117
CHAPTER II.
CAUSES OF CONFUSION AS TO THE MEANING OF WEALTH.
SHOWING THE REAL DIFFICULTY THAT BESETS THE
ECONOMIC DEFINITION OF WEALTH.
Effect of slavery on the definition of wealth Similar influences
now existing John S. Mill on prevalent delusions Genesis
107
108 CONTENTS OF BOOK H.
PAGE
of the protective absurdity Power of special interests to
mold common opinion Of injustice and absurdity, and the
power of special interests to pervert reason Mill an example
of how accepted opinions may blind men Effect upon a
philosophical system of the acceptance of an incongruity
Meaning of a saying of Christ Influence of a class profiting
by robbery shown in the development of political economy
Archbishop Whately puts the cart before the horse The power
of a great pecuniary interest to affect thought can be ended only
by abolishing that interest This shown in American slavery . 131
CHAPTER m.
WHAT ADAM SMITH MEANT BY WEALTH.
SHOWING HOW ESSENTIALLY ADAM SMITH'S PRIMARY CONCEPTION
OF WEALTH DIFFERED FROM THAT NOW HELD BY HIS SUCCES-
SORS.
Significance of the title " Wealth of Nations" Its origin shown
in Smith's reference to the Physiocrats His conception of
wealth in his introduction Objection by Malthus and by Mac-
leod Smith's primary conception that given in " Progress and
Poverty " His subsequent confusions 143
CHAPTER IV.
THE FRENCH PHYSIOCRATS.
SHOWING WHO THE FIRST DEVELOPERS OF A TRUE SCIENCE
OF POLITICAL ECONOMY WERE, AND WHAT THEY HELD.
Quesnay and his followers The great truths they grasped and
the cause of the confusion into which they fell This used to
discredit their whole system, but not really vital They were
real free traders The scant justice yet done them Reference
to them in " Progress and Poverty '' Macleod's statement of
their doctrine of natural order Their conception of wealth
Their day of hope and their fall 148
CHAPTER V.
ADAM SMITH AND THE PHYSIOCRATS.
SHOWING THE RELATION BETWEEN ADAM SMITH AND THE
PHYSIOCRATS.
Smith and Quesnay The " Wealth of Nations " and Physiocratic
ideas Smith's criticism of the Physiocrats His failure to ap-
preciate the single tax His prudence 160
CONTENTS OP BOOK IL . 109
CHAPTER VI.
SMITH'S INFLUENCE ON POLITICAL ECONOMY.
SHOWING WHAT THE "WEALTH OF NATIONS" ACCOMPLISHED
AND THE COURSE OF THE SUBSEQUENT DEVELOPMENT OF PO-
LITICAL ECONOMY.
PAGE
Smith, a philosopher, who addressed the cultured, and whose at-
tack on mercantilism rather found favor with the powerful land-
owners Not entirely exempt from suspicion of radicalism, yet
pardoned for his affiliation with the Physiocrats Efforts of
Malthus and Ricardo on respectabilizing the science The fight
against the corn-laws revealed the true beneficiaries of protec-
tion, but passed for a free-trade victory, and much strength-
ened the incoherent science Confidence of its scholastic ad-
vocates Say's belief in the result of the colleges taking up
political economy Torrens's confidence Failure of other
countries to follow England's example Cairnes doubts the
effect of making it a scholastic study His sagacity proved
by the subsequent breakdown of Smith's economy The true
reason 170
CHAPTER VH.
INEFFECTUAL GROPINGS TOWARD A DETERMINATION
OF WEALTH.
SHOWING THE OPPOSITION TO THE SCHOLASTIC ECONOMY
BEFORE "PROGRESS AND POVERTY."
Illogical character of the "Wealth of Nations" Statements of
natural right Spence, Ogilvie, Chalmers, Wakefield, Spencer,
Dove, Bisset Vague recognitions of natural right Protec-
tion gave rise to no political economy in England, but did else-
where Germany and protectionist political economy in the
United States Divergence of the schools Trade-unionism
in socialism 182
CHAPTER VIH.
BREAKDOWN OF SCHOLASTIC POLITICAL ECONOMY.
SHOWING THE REASON, THE RECEPTION, AND EFFECT ON PO-
LITICAL ECONOMY OF " PROGRESS AND POVERTY."
"Progress and Poverty" Preference of professors to abandon
the " science " rather than radically change it, brings the break-
down of scholastic economy The " Encyclopaedia Britannica "
The "Austrian school" that has succeeded the "classical" 200
110 CONTENTS OP BOOK DL
CHAPTER IX.
WEALTH AND VALUE.
SHOWING THE REASON FOR CONSIDERING THE NATURE Of
VALUE BEFORE THAT OF WEALTH.
PAGE
The point of agreement as to wealth Advantages of proceeding
from this point 210
CHAPTER X.
VALUE IN USE AND VALUE IN EXCHANGE.
SHOWING THE TWO SENSES OP VALUE; HOW THE DISTINCTION
HAS BEEN IGNORED, AND ITS REAL VALIDITY ; AND THE REASON
FOR CONFINING THE ECONOMIC TERM TO ONE SENSE.
Importance of the term value Original meaning of the word
Its two senses Names for them adopted by Smith Utility
and desirability Mill's criticism of Smith Complete ignor-
ing of the distinction by the Austrian school Cause of this
confusion Capability of use not usefulness Smith's distinc-
tion a real one The dual use of one word in common speech
must be avoided in political economy Intrinsic value . . 212
CHAPTER XI.
ECONOMIC VALUE ITS REAL MEANING AND FINAL
MEASURE.
SHOWING HOW VALUE IN EXCHANGE HAS BEEN DEEMED A RELATION
OF PROPORTION ; AND THE AMBIGUITY WHICH HAS LED TO THIS.
The conception of value as a relation of proportion It is really
a relation to exertion Adam Smith's perception of this His
reasons for accepting the term value in exchange His con-
fusion and that of his successors 226
CHAPTER XH.
VALUE IN EXCHANGE REALLY RELATED TO LABOR.
SHOWING THAT VALUE DOES NOT COME FROM EXCHANGEABILITY,
BUT EXCHANGEABILITY FROM VALUE, WHICH IS AN EXPRESSION
OF THE SAVING OF LABOR INVOLVED IN POSSESSION.
Root of the assumption that the sum of values cannot increase
or diminish The fundamental idea of proportion We can-
not really think of value in this way The confusion that
makes us imagine that we do The tacit assumption and re-
luctance to examine that bolster the current notion Imagina-
tive experiment shows that value is related to labor Common
CONTENTS OF BOOK II. Ill
PAGE
facts that prove this Current assumption a fallacy of undis-
tributed middle Various senses of ' ' labor " Exertion positive
and exertion negative Re-statement of the proposition as to
value Of desire and its measurement Causal relationship of
value and exchangeability Imaginative experiment showing
that value may exist where exchange is impossible Value and
expression of exertion avoided . 235
CHAPTER
THE DENOMINATOR OF VALUE.
SHOWING WHAT VALUE IS, AND ITS RELATIONS.
What value is The test of real value Value related only to
human desire This perception at the bottom of the Austrian
school But its measure must be objective How cost of
production acts as a measure of value Desire for similar
things and for essential things Application of this principle
Its relation to land values 250
CHAPTER XIV.
THE TWO SOURCES OF VALUE.
SHOWING THAT THERE IS A VALUE FROM PRODUCTION AND
ALSO A VALUE FROM OBLIGATION.
Value does not involve increase of wealth Value of obligation
Of enslavement Economic definition of wealth impossible
without recognition of this difference in value Smith's con-
fusion and results Necessity of the distinction Value from
production and value from obligation Either gives the essen-
tial quality of commanding exertion The obligation of debt
Other obligations Land values most important of all forms
of value from obligation Property in land equivalent to
property in men Common meaning of value in exchange
Real relation with exertion Ultimate exchangeability is for
labor Adam Smith right Light thrown by this theory of
value 257
CHAPTER XV.
THE MEANING OF WEALTH IN POLITICAL ECONOMY.
SHOWING HOW VALUE FROM PRODUCTION IS WEALTH IN
POLITICAL ECONOMY.
Wealth as fixed in "Progress and Poverty" Course of the
scholastic political economy The reverse method of this work
The conclusion the same Reason of the disposition to in-
clude all value as wealth Metaphorical meanings Bull and
pun Metaphorical meaning of wealth Its core meaning Its
112 CONTENTS OF BOOK H.
PAGE
use to express exchangeability Similar use of money Ordi-
nary core meaning the proper meaning of wealth Its use in
individual economy and in political economy What is meant
by increase of wealth Wealth and labor Its factors nature
and man Wealth their resultant Of Adam Smith Danger
of carrying into political economy a meaning proper in indi-
vidual economy Example of " money " " Actual wealth " and
"relative wealth'.' "Value from production" and "value
from obligation " The English tongue has no single word for
an article of wealth Of " commodities "Of "goods" Why
there is no singular in English The attempt to form one by
dropping the "s" and Anglo-German jargon .... 270
CHAPTER XVI.
THE GENESIS OF WEALTH.
SHOWING HOW WEALTH ORIGINATES AND WHAT IT ESSEN-
TIALLY IS.
Reason of this inquiry Wealth proceeds from exertion prompted
by desire, but all exertion does not result in wealth Simple
examples of action, and of action resulting in wealth "Rid-
ing and tying" Sub-divisions of effort resulting in increments
of wealth Wealth essentially a stored and transferable ser-
vice Of transferable service The action of reason as natural,
though not as certain and quick as that of instinct Wealth
is service impressed on matter Must be objective and have
tangible form 285
CHAPTER XVH.
THE WEALTH THAT IS CALLED CAPITAL.
SHOWING WHAT THE WEALTH CALLED CAPITAL REALLY IS.
Capital is a part of wealth used indirectly to satisfy desire
Simple illustration of fruit Wealth permits storage of labor
The bull and the man Exertion and its higher powers Per-
sonal qualities cannot really be wealth or capital The taboo
and its modern form Common opinion of wealth and capital 293
CHAPTER XVHI.
WHY POLITICAL ECONOMY CONSIDERS ONLY WEALTH.
SHOWING THAT POLITICAL ECONOMY, AS PROPERLY STATED,
COVERS ALL THE RELATIONS OF MEN IN SOCIETY INTO WHICH
IT IS NECESSARY TO INQUIRE.
Political economy does not include all the exertions for the
satisfaction of material desires ; but it does include the greater
part of them, and it is through value that the exchange of
services for services is made Its duty and province . . 301
CONTENTS OF BOOK H. 113
CHAPTER XIX.
MOEAL CONFUSIONS AS TO WEALTH.
SHOWING HOW RICH AND POOR ARE CORRELATIVES, AND
WHY CHRIST SYMPATHIZED WITH THE POOR.
PAGE
The legitimacy of wealth and the disposition to regard it as
sordid and mean The really rich and the really poor They
are really correlatives The good sense of Christ's teaching . 304
CHAPTER XX.
OF THE PERMANENCE OF WEALTH.
SHOWING THAT VALUES FROM OBLIGATION SEEM REALLY TO
LAST LONGER THAN VALUES PROM PRODUCTION.
Value from production and value from obligation The one
material and the other existing in the spiritual Superior
Eennanence of the spiritual Shakespeare's boast Maecenas's
uildings and Horace's odes The two values now existing
Franchises and land values last longer than gold and gems
Destruction in social advance Conclusions from all this . 308
CHAPTER XXI.
THE RELATION OF MONEY TO WEALTH.
SHOWING THAT SOME MONEY IS AND SOME MONEY IS NOT
WEALTH.
Where I shall treat of money No categorical answer can yet
be given to the question whether money is wealth Some
money is and some is not wealth 313
INTRODUCTION TO BOOK II.
SINCE political economy is the science which treats of
the nature of wealth and the laws of its production
and distribution, our first step is to fix the meaning that
in this science properly attaches to its primary term.
I shall in the first place show the need for an exhaustive
inquiry, by showing the confusion that from the time of
Adam Smith has attached to this term, and the utter
incoherency with regard to it into which the scholastic
economy has now fallen.
I shall next try to ascertain the causes of this confusion.
This will lead to a consideration of economic development,
and in the absence in our literature of any intelligent his-
tory of political economy, I shall attempt briefly to trace
its course, from the time of Adam Smith and his prede-
cessors, the French economists called Physiocrats, to its
virtual abandonment in the teachings of the English and
American colleges and universities at the present time.
Having seen that the only point as to wealth on which
the scholastic economists now agree is that it has value,
and that their confusions as to wealth proceed largely from
confusions as to value, I shall then try to determine the
proper meaning of the term value. That fixed, we shall
be in a position to fix the real meaning and relations of the
term wealth, and shall proceed to do so.
Although in this book it will be seen that I am giving
many chapters to a subject which preceding systematic
115
116 THE NATURE OF WEALTH. Book II.
writers have passed over in a few lines, even where, as is
the case with many of them, they have not utterly ignored
it, I am sure that the reader will ultimately find in the ease
and certainty with which subsequent inquiries may be
conducted an ample reward for the care thus taken in the
beginning.
CHAPTER I.
CONFUSIONS AS TO THE MEANING OF WEALTH.
SHOWING THE FAILURE OP THE CURRENT POLITICAL ECON-
OMY TO DEFINE WEALTH, AND THE CONFUSIONS THERE-
FROM, CULMINATING IN THE ABANDONMENT OF POLITICAL
ECONOMY BY ITS PROFESSED TEACHERS.
Wealth the primary term of political economy Common use of
the word Vagueness more obvious in political economy Adam
Smith not explicit Increasing confusion of subsequent writers
Their definitions Many make no attempt at definition Perry's
proposition to abandon the term Marshall and Nicholson Fail-
ure to define the term leads to the abandonment of political econ-
omy This concealed under the word "economic" The intent
expressed by Macleod Results to political economy.
THE purpose of the science of political economy is, as
we have seen, the investigation of the laws that gov-
ern the production and distribution of wealth in social or
civilized life. In beginning its study, our first step is
therefore to see what is the nature of the wealth of socie-
ties or communities ; to determine exactly what we mean
by the word wealth when used as a term of political
economy.
There are few words in more common use than this
word wealth, and in the general way that suffices for
ordinary purposes we all know what we mean by it. But
when it comes to denning that meaning with the precision
117
118 THE NATURE OF WEALTH. Book II.
necessary for the purposes of political economy, so as to
determine what is and what is not properly included in the
idea of wealth as political economy must treat of it, most
of us, though we often and easily use the word in ordinary
thought and speech, are apt to become conscious of indefi-
niteness and perplexity.
This is not strange. Indeed, it is a natural result of the
transference to a wider economy of a term we are accus-
tomed to use in a narrower economy. In our ordinary
thought and speech, referring, as it most frequently does,
to every-day affairs and the relations of individuals with
other individuals, the economy with which we are usually
concerned and have most frequently in mind is individual
economy, not political economy the economy whose
standpoint is that of the unit, not the economy whose
standpoint is that of the social whole or social organism ;
the Greater Leviathan of natural origin of which I have
before spoken.
The original meaning of the word wealth is that of
plenty or abundance ; that of the possession of things con-
ducive to a certain kind of weal or well-being. Health,
strength and wealth express three kinds of weal or well-
being. Health relates to the constitution or structure, and
expresses the idea of well-being with regard to the physi-
cal or mental frame. Strength relates to the vigor of the
natural powers, and expresses the idea of well-being with
regard to the ability of exertion. "Wealth relates to the
command of external things that gratify desire, and ex-
presses the idea of well-being with regard to possessions
or property. Now, as social health must mean something
different from individual health, and social strength some-
thing different from individual strength ; so social wealth,
or the wealth of the society, the larger man or Greater
Leviathan of which individuals living in civilization are
Chap. I. CONFUSIONS AS TO MEANING. 119
components, must be something different from the wealth
of the individual.
In the one economy, that of individuals or social units,
everything is regarded as wealth the possession of which
tends to give wealthiness, or the command of external
things that satisfy desire, to its individual possessor, even
though it may involve the taking of such things from
other individuals. But in the other economy, that of
social wholes, or the social organism, nothing can be re-
garded as wealth that does not add to the wealthiness of
the whole. What, therefore, may be regarded as wealth
from the individual standpoint, may not be wealth from
the standpoint of the society. An individual, for instance,
may be wealthy by virtue of obligations due to him from
other individuals ; but such obligations can constitute no
part of the wealth of the society, which includes both
debtor and creditor. Or, an individual may increase his
wealth by robbery or by gaming ; but the wealth of tjhe
social whole, which comprises robbed as well as robber,
loser as well as winner, cannot be thus increased.
It is therefore no wonder that men accustomed to the
use of the word wealth in its ordinary sense, a sense in
which no one can avoid its continual use, should be liable,
unless they take great care, to slip into confusion when
they come to use the same word in its economic sense.
But what does seem strange is that indefiniteness, per-
plexity and confusion as to the meaning of the economic
term wealth, are even more obvious in the writings of
the professional economists who are accredited by colleges
and universities and other institutions of learning with
the possession of special knowledge which authorizes them
to instruct their fellows on economic subjects. While as
for the professional statisticians who in long arrays of
figures attempt to estimate the aggregate wealth of states
120 THE NATURE OF WEALTH. Book II.
and nations, they seem for the most part innocent of any
suspicion that what may be wealth to an individual may
not be wealth to a community.*
Adam Smith, who is regarded as the founder of the
modern science of political economy, is not very definite
or entirely consistent as to the real nature of the wealth
of nations, or wealth in the economic sense. But since
his time the confusions of which he shows traces, instead
of being cleared up by the writings of those who in our
schools and colleges are recognized as political economists,t
has become progressively so much worse confounded that
in the latest and most elaborate of these treatises all at-
tempts to define the term seem to have been abandoned.
In "Progress and Poverty" (1879), I showed the utter
confusion as to wealth into which the scholastic political
economy had fallen, by printing together a number of
varying and contradictory definitions of its sub-term cap-
ital, as given by accredited economic writers.} Although
I was then obliged to fix the meaning of the main term
wealth in order to fix the meaning of the sub-term
* A curious, if not comical, instance of the loose way in which pro-
fessed statisticians jump at conclusions is afforded in the controversy
I had in "Frank Leslie's Weekly" (1883) with Professor Francis A.
Walker, then superintendent of the United States Census, and which
was afterwards reprinted as an appendix to the American edition of
my "Social Problems."
t " Progress and Poverty," although it has already exerted a wider
influence than any other economic work written since the "Wealth
of Nations," is not so recognized, not being even alluded to in the
elaborate history of political economy which, on account of the utter
chaos into which the teachings of that science have fallen, takes in
the last edition of the " Encyclopaedia Britannica " the place before
accorded to the science itself, and which has since been reprinted in
separate form. ("A History of Political Economy," by John Kells
Ingram, LL.D., Macmillan & Co., 1888.)
t "Progress and Poverty," Book I., Chapter H., "The Meaning of
the Terms."
Chap. I. CONFUSIONS AS TO MEANING. 121
capital, with which I was immediately concerned, the
confusion among the accredited economists has " got no
better very fast," the " economic revolution " which has in
the meanwhile displaced from their chairs the professors
of the then orthodox political economy in order to give
place to so-called "Austrians," or similar professors of
"economics," having only made confusion worse con-
founded. Let me, therefore, in order to show in the most
up-to-date way the confusion existing among scholastic
economists as to the primary term of political economy,
put together what definitions of the economic term
wealth I can find in the works of representative and
accredited economic writers since Adam Smith to the
present time, placing them in chronological order as far
as possible :
J. B. Say Divides wealth into natural and social, and
applies the latter term to whatever is susceptible of ex-
change.
Malthus Those material objects which are necessary,
useful or agreeable to man.
Torrens Articles which possess utility and are produced
by some portion of voluntary effort.
McCulloch Those articles or products which have ex-
changeable value, and are either necessary, useful or
agreeable to man.
Jones Material objects voluntarily appropriated by
man.
Rae All I can find on this subject in his " New Princi-
ples of Political Economy" (1833) is that "individuals
grow rich by the acquisition of wealth previously existing ;
nations by the creation of wealth that did not before
exist."
Senior All those things, and those things only, which
are transferable, are limited in supply, and are directly or
indirectly productive of pleasure or preventive of pain. . . .
122 THE NATUEE OF WEALTH. Book II.
Health, strength and knowledge, and the other acquired
powers of body and mind, appear to us to be articles of
wealth.
Vethake All objects, immaterial as well as material,
having utility, excepting those not susceptible of being
appropriated, and those supplied gratuitously by nature.
By the wealth of a community or nation is meant all the
wealth which is possessed by the persons composing it,
either in their individual or corporate capacities.
John Stuart Mill All useful and agreeable things which
possess exchangeable value ; or in other words, all useful
and agreeable things except those which can be obtained,
in the quantity desired, without labor or sacrifice.
Fawcett Wealth may be denned to consist of every
commodity which has an exchangeable value.
Bo wen The aggregate of all things, whether material
or immaterial, which contribute to comfort and enjoyment
and which are objects of frequent barter and sale.
Jevons "What is (1) transferable, (2) limited in supply,
(3) useful.
Mason and Lalor, 1875 Anything for which something
can be got in exchange.
Leverson The necessaries and comforts of life produced
by labor.
Shadwell All articles the possession of which affords
pleasure to anybody.
Macleod Anything whatever that can be bought, sold
or exchanged, or whose value can be measured in money.
. . . Wealth is nothing but exchangeable rights.
De Laveleye Everything which answers to men's ra-
tional wants. A useful service and a useful object are
equally wealth. . . . Wealth is what is good and useful
a good climate, well-kept roads, seas teeming with fish, are
unquestionably wealth to a country, and yet they cannot
be bought.
Chap. I. CONFUSIONS AS TO MEANING. 123
Francis A. Walker All articles of value and nothing
else.
Macvane All the useful and agreeable material objects
we own or have the right to use and enjoy without asking
the consent of any other person. Wealth is of two gen-
eral kinds natural wealth and wealth produced by labor.
Clark Usage has employed the word wealth to sig-
nify, first, the comparative welfare resulting from material
possessions, and secondly, and by a transfer, the posses-
sions themselves. Wealth then consists in the relative-
weal-constituting elements in man's material environment.
It is objective to the user, material, useful and appropri-
able.
Laughlin Defines material wealth as something which
satisfies a want ; cannot be obtained without some sacrifice
of exertion, and is transferable ; but also speaks of imma-
terial wealth without defining it.
Newcomb That for the enjoyment of which people pay
money. The skill, business ability or knowledge which
enables their possessors to contribute to the enjoyment of
others, including the talents of the actor, the ability of the
man of business, the knowledge of the lawyer and the skill
of the physician, is to be considered wealth when we use
the term in its most extended sense.
Bain A commodity is material worked up after a de-
sign to answer to a definite demand or need, and wealth is
simply the sum total of commodities.
Ruskin This brilliant essayist and art critic can hardly
be classed as a scholastically accepted political economist,
and I have refrained from giving his definition of wealth
in what otherwise would have been its proper place. But
his "Unto this Last" (1866) consists of four essays on
political economy, and the brilliant flashes of ethical truth
which they like his other works contain have led many
admirers to regard him as a profound economist. He is
124: THE NATURE OF WEALTH. EooJc II.
anything but complimentary to the "modern soi-disant
science," as he calls it, against which he brings the charge
that while claiming to be the science of wealth it cannot
tell what wealth is. In the preface to these essays he says :
" The real gist of these papers, their central meaning and
aim is to give, as I believe, for the first time in plain
English, a logical definition of wealth; such definition
being absolutely needed for a basis of economical science."
It would be well, therefore, without assuming that Ruskin
in any way represents the scholastic political economy,
which he likened to an astronomy unable to say what a
star was, to give his definition. That definition, to use
his own words is " The possession of useful articles that
we can use," or as again stated somewhat later on, " The
possession of the valuable by the valiant."
The endeavor to get together these definitions of wealth
by economic writers has involved considerable effort, but
it is likely to be noticeable by its omissions. The fact is,
that many of the best-known writers on political economy,
such for instance as Ricardo, Chalmers, Thorold Rogers
and Cairnes, make no attempt to give any definition of
wealth. The same thing is to be said of the two volumes
of Karl Marx entitled " Capital ;" and also of the two vol-
umes on the same subject by Bb'hm-Bawerk, which also
have been translated into English, and are much quoted
by that now dominant school of scholastic political econ-
omy known as the " Austrian." And while many of the
writers who make no attempt to define wealth, do have a
good deal to say about it, what they say is too diffused
and incoherent either to quote or condense. There are
many who without saying so, evidently hold the opinion
thus frankly expressed by Professor Perry in his " Ele-
ments of Political Economy" (1866) :
This word wealth has been the bane of political economy. It is
the bog whence most of the mists have arisen which have beclouded
Chap. I. CONFUSIONS AS TO MEANING. 125
the whole subject. From its indefiniteness and the variety of asso-
ciations it carries along with it in different minds, it is totally unfit
for any scientific purpose whatever. It is itself almost impossible
to be defined, and consequently can serve no useful purpose in a
definition of anything else. . . . The meaning of the word wealth
has never yet been settled ; and if political economy must wait until
that work be done as a preliminary, the science will never be satis-
factorily constructed. . . . Men may think, and talk, and write, and
dispute till doomsday, but until they come to use words with defi-
niteness, and mean the same thing by the same word, they reach com-
paratively few results and make but little progress. And it is just
at this point that we find the first grand reason of the slow advance
hitherto made by this science. It undertook to use a word for scien-
tific purposes which no amount of manipulation and explanation could
make suitable for that service. Happily there is no need to use this
word. In emancipating itself from the word wealth as a technical
term, political economy has dropped a clog, and its movements are
now relatively free.
To make this exhibition of definitions as fairly repre-
sentative as possible I have wished to include in it that of
Professor Alfred Marshall, Professor of Political Economy
in the University of Cambridge, England, whose " Princi-
ples of Economics " (of which only the first volume, issued
in 1890, and containing some 800 octavo pages, has yet
been published) may be considered the latest and largest,
and scholastically the most highly indorsed, economic work
yet published in English.
It cannot be said of him, as of many economic writers,
that he does not attempt to say what is meant by wealth,
for if one turns to the index he is directed to a whole
chapter. But neither in this chapter nor elsewhere can I
find any paragraph, however long, that may be quoted as
defining the meaning he attaches to the term wealth. The
only approach to it is this :
All wealth consists of things that satisfy wants, directly or indi-
rectly. All wealth therefore consists of goods ; but not all kinds of
goods are reckoned as wealth.
126 THE NATURE OF WEALTH. Book II.
But for the distinction between goods reckoned as
wealth and goods not reckoned as wealth, which one would
think was about to follow, the reader looks in vain. He
merely finds that Professor Marshall gives him the choice
of classifying goods into external-material-transferable
goods, external-material-non-transferable goods, external-
personal-transferable goods, external-personal-non-trans-
ferable goods, and internal-personal-non-transferable
goods ; or else into material-external-transferable goods,
material-external-non-transferable goods, personal-exter-
nal-transferable goods, personal-external-non-transferable
goods, and personal-internal-non-transferable goods. But
as to which of these kinds of goods are reckoned as wealth
and which are not, Professor Marshall gives the reader no
inkling, unless, indeed, he may be able to find it in Wag-
ner's " Volkswirthschaf tslehre," to which the reader is re-
ferred at the conclusion of the chapter as throwing " much
light upon the connection between the economic concept
of wealth and the juridical concept of rights in private
property." I can convey the impression produced on my
mind by repeated struggles to discover what the Professor
of Political Economy in the great English University of
Cambridge holds is to be reckoned as wealth, only by say-
ing that it seems to comprise all things in the heavens
above, the earth beneath and the waters under the earth,
that may be useful to or desired by man, individually or
collectively, including man himself with all his natural or
acquired capabilities, and that all I can absolutely affirm,
for it is the only thing for which I can find a direct state-
ment, is, that " we ought for many purposes to reckon the
Thames a part of England's wealth."
The same utter, though perhaps somewhat less elaborate,
incoherency is shown by Professor J. Shield Nicholson,
Professor of Political Economy in the great Scottish
University of Edinburgh, whose " Principles of Political
Chap. I. CONFUSIONS AS TO MEANING. 127
Economy " appeared in first volume (less than half as big
as that of Professor Marshall's) in 1893, and has not yet
(1897) been succeeded by another. Looking up the index
for the word " wealth " one finds no less than fifteen refer-
ences, of which the first is " popular conception of," and
the second " economic conception of." Yet in none of
these, nor in the whole volume, though one wade through
it all in the search, is anything like a definition of wealth to
be found, the only thing resembling a direct statement
being the incidental remark (p. 404) that "land is in
general the most important item in the inventory of na-
tional wealth" a proposition which logically is as untrue
as that we ought to reckon the Thames a part of England's
wealth. I
Now, wealth is the object-noun, or name given to the
subject-matter, of political economy, the science that seeks
to discover the laws of the production and distribution of
wealth in human society. It is therefore the economic
term of first importance. Unless we know what wealth
is, how possibly can we hope to discover how it is pro-
cured and distributed ? Yet after a century of what passes
for the cultivation of this science, with professors of
political economy in every college, the question, " What is
wealth ? " finds at their hands no certain answer. Even to
such questions as, "Is wealth material or immaterial?" or
" Is it something external to man or does it include man
and his attributes ? " we get no undisputed reply. There
is not even a consensus of opinion. And in the latest and
most pretentious scholastic teaching the attempt to obtain
any has been virtually, where not definitely, abandoned,
and the economic meaning of wealth reduced to that of
anything having value to the social unit.
It is clear that failure to define its subject-matter or
object-noun must be fatal to any attempted science ; for it
shows lack of the first essential of true science. And the
128 THE NATURE OF WEALTH. Book II.
fate of rejection even by those who profess to study and
teach it has already befallen political economy at the hands
of the accredited institutions of learning.
This fact will not be obvious to the ordinary reader, for
it is concealed to him under a change in the meaning of
a word.
Since the term comes into our language from the Greek,
the proper word for expressing the idea of relationship to
political economy is "politico-economic." But this is a
term too long, and too alien to the Saxon genius of our
mother tongue, for frequent repetition. And so the word
" economic " has come into accepted use in English, as ex-
pressing that idea. We are justified therefore, in suppos-
ing, and as a matter of fact do generally suppose when we
first hear of them, that the works now written by the pro-
fessors of political economy in our universities and col-
leges, and entitled "Elements of Economics," "Principles
of Economics," " Manual of Economics," etc., are treatises
on political economy. Examination, however, will show
that many of these at least are not in reality treatises on
the science of political economy, but treatises on what
their authors might better call the science of exchanges,
or the science of exchangeable quantities. This is not the
same thing as political economy, but quite a different thing
a science in short akin to the science of mathematics.*
In this there is no necessity for distinguishing between
what is wealth to the unit and what is wealth to the whole,
and moral questions, that must be met in a true political
economy, may be easily avoided by those to whom they
seem awkward.
A proper name for this totally different science, which
Jbhe professors of political economy in so many of the lead-
* The attempts by titular professors of political economy to find
mathematical expression for what they call "economics" must be
familiar to those who have toiled through recent scholastic literature.
Chap. I. CONFUSIONS AS TO MEANING. 129
ing colleges and universities on both sides of the Atlantic
have now substituted in their teaching for the science they
are officially supposed to expound, would be that of " cat-
allactics," as proposed by Archbishop Whately, or that of
"plutology,"as proposed by Professor Hern, of Melbourne ;
but it is certainly not properly " economics," for that by
long usage is identified with political economy.
Both the reason for, and what is meant by, the change
of title from political economy to economics, which is so
noticeable in the writings of the professors of political
economy in recent years, are thus frankly shown by Mac-
leod (Vol. I., Chapter VII., Sec. 11, " Science of Econom-
ics"):
We do not propose to make any change at all in the name of the
science. Both the terms "Political Economy" and "Economic Sci-
ence," or "Economics," are in common use, and it seems better to
discontinue that name which is liable to misinterpretation, and which
seems to relate to politics, and to adhere to that one which most
clearly defines its nature and extent and is most analogous to the
names of other sciences. We shall, therefore, henceforth discon-
tinue the use of the term " political economy " and adhere to that of
"economics." Economics, then, is simply the science of exchanges,
or of commerce in its widest extent and in all its forms and varieties ;
it is sometimes called the science of wealth or the theory of value.
The definition of the science which we offer is :
Economics is the science which treats of the laws which govern
the relations of exchangeable quantities.
Now the laws which govern the relations of exchange-
able quantities are such laws as 2 + 2 = 4; 4 1 = 3;
2x4 = 8; 4 H- 2 = 2 ; and their extensions.
The proper place for such laws in any honest classifica-
tion of the sciences is as laws of arithmetic or laws of
mathematics, not as laws of economics. And the attempt
of holders of chairs of political economy to take advantage
of the usage of language which has made " economic " a
short word for " politico-economic " to pass off their " sci-
130 THE NATURE OF WEALTH. Book II.
ence of economics " as if it were the science of political
economy, is as essentially dishonest as the device of the
proverbial Irishman who attempted to cheat his partners
by the formula, " Here's two for you two, and here's two
for me too."
To this, in less than a century after Say congratulated
his readers on the first establishment of chairs of political
economy in universities, has the scholastic political econ-
omy come.
Professor Perry, writing thirty years ago, thought that
by emancipating itself from the word wealth as a tech-
nical term, political economy would drop a clog and its
movements would become relatively free. In what is now
taught from the chairs of political economy in our leading
colleges on both sides of the Atlantic the clog has indeed
been dropped, with results which very strongly suggest
the increased freedom of movement which comes from
the dropping of its tail by a boy's kite. Without the clog
of an object-noun, political economy as there taught has
plunged out of existence, and the science of values which
is taught in its place has no answer whatever to give even
to questions which Professor Perry would have thought
completely settled at the time he wrote.
CHAPTER II.
CAUSES OF CONFUSION AS TO THE MEANING
OF WEALTH.
SHOWING THE REAL DIFFICULTY THAT BESETS THE
ECONOMIC DEFINITION OF WEALTH.
Effect of slavery on the definition of wealth Similar influences now
existing John Stuart Mill on prevalent delusions Genesis of the
protective absurdity Power of special interests to mold common
opinion Of injustice and absurdity, and the power of special in-
terests to pervert reason Mill an example of how accepted opin-
ions may blind men Effect upon a philosophical system of the
acceptance of an incongruity Meaning of a saying of Christ
Influence of a class profiting by robbery shown in the development
of political economy Archbishop Whately puts the cart before
the horse The power of a great pecuniary interest to affect
thought can be ended only by abolishing that interest This shown
in American slavery.
THE neglect of political economy in the classical world
has been explained by modern economists as due to
the effect of slavery in causing labor to be regarded as
degrading.*
But in this a quicker and more direct effect of slavery
in preventing the cultivation of political economy has been
overlooked.
* See, forinstance, McCulloch's "Principles of Political Economy"
(1825), Part I.
131
132 THE NATUEE OF WEALTH. SookU.
Except perhaps as the crucified fomenter of a servile
rebellion, the only class in which any philosopher of the
ancient world might have got a hearing that could have
brought his name and teachings down to us, was that
wealthy class, whose riches were largely in their slaves.
For in any social condition in which privilege and wealth
are inequitably distributed, what Jefferson said of Jesus*
must be true of all moral or economic teachers "All the
learned of His country, intrenched in its power and riches,
were opposed to Him, lest His labors should undermine
their advantages."
The first question which a coherent political economy
must answer is, what is wealth ? This, in a state of society
in which the ruling class were universally slaveholders,
was too delicate a question for any accredited philosopher
to have fairly met. Even the most astute among them
could go no further than to say, with the intellectual giant
Aristotle, that wealth " is all things whose value is mea-
sured by money," or with the Roman jurist Ulpian, " that
is wealth which can be bought and sold." From this
point, the very point to which our modern political econ-
omy has in current scholastic teachings now come again,
though there may be economies of finance and economies
of exchange and economies of agriculture (there were
many such among the Greeks and Romans, their agricul-
tural economy even teaching how slaves should be sold as
soon as age and infirmity began to lessen the work that
could be extorted from them), there was and could be no
political economy.
But this indisposition to recognize the distinction be-
tween what may be wealth to the individual and what is
* " Syllabus of an estimate of the merits of the doctrines of Jesus."
("The Writings of Thomas Jefferson," collected and edited by Paul
Leicester Ford, Putnam's Sons, Vol. VIH., p. 227.)
ClMp.II. CAUSES OF CONFUSION. 133
wealth to the society, which has prevented the growth of
any science of political economy wherever, either in the
ancient or the modern world, the ownership of human
beings has been an important element in the wealth of the
wealthy class, has not entirely ceased to show itself with
the abolition of chattel slavery. Even the men who have
seen that there was a connection between the failure of the
restless and powerful thinkers of the classic world to de-
velop a political economy and their acceptance of slavery,
have in their own development of political economy been
unconsciously affected by a similar retarding and aberrat-
ing influence. Chattel slavery is only one of the means by
which individuals become wealthy without increase in the
general wealth, and as in modern civilization it has lost
importance, other means to the same end have taken its
place. But wherever and from whatever causes society is
divided into the very rich and the very poor, the primary
question of political economy, what is wealth ? must be a
delicate one to men sensibly or insensibly influenced by
the feelings and opinions of the dominating class. For
in such social conditions much that commonly passes for
wealth must really be only legalized robbery, and nothing
can be more offensive to those enjoying the profit of rob-
bery than to call it by its true name.
In the preliminary remarks to his " Principles of Politi-
cal Economy " John Stuart Mill says :
It often happens that the universal belief of one age of mankind
a belief from which no one was, nor without an extraordinary
effort of genius and courage, could at that time be free becomes to
a subsequent age so palpable an absurdity, that the only difficulty
then is to imagine how such a thing can ever have appeared credible.
It has so happened with the doctrine that money is synonymous with
wealth. The conceit seems too preposterous to be thought of as a
serious opinion. It looks like one of the crude fancies of childhood,
instantly corrected by a word from any grown person. But let no
134 THE NATURE OF WEALTH. Book II.
one feel confident that he should have escaped the delusion if he had
lived at the time when it prevailed.
Let no one be confident indeed !
Yet it is a mistake to liken the absurdities of the mer-
cantile or protective system to the crude fancies of child-
hood. This has never been their origin or their strength.
In the petty commerce in marbles and tops that goes on
among school-boys no boy ever imagined that the more
he gave and the less he got in such exchange the better
off he should be. No primitive people were ever yet so
stupid as to suppose that they could increase their wealth
by taxing themselves. Any child that could understand
the proposition would see that a dollar's worth of gold
could not be more valuable than a dollar's worth of any-
thing else, as readily as it would see that a pound of lead
could not be heavier than a pound of feathers. Such
ideas are not the fancies of childhood. Their growth,
their strength, their persistence, as we may clearly see in
the newer countries of America and Australia, where they
have appeared and gathered force since Adam Smith's
time, is due to the growth of special interests in artificial
restrictions on trade as a means of increasing individual
wealth at the expense of the general wealth.
The power of a special interest, though inimical to the
general interest, so to influence common thought as to
make fallacies pass as truths, is a great fact without which
neither the political history of our own time and people
nor that of other times and peoples can be understood.
A comparatively small number of individuals brought
into virtual though not necessarily formal agreement of
thought and action by something that makes them indi-
vidually wealthy without adding to the general wealth,
may exert an influence out of all proportion to their num-
bers. A special interest of this kind is, to the general in-
Chap. II. CAUSES OF CONFUSION. 135
terests of society, as a standing army is to an unorganized
mob. It gains intensity and energy in its specialization,
and in the wealth it takes from the general stock finds
power to mold opinion. Leisure and culture and the cir-
cumstances and conditions that command respect accom-
pany wealth, and intellectual ability is attracted by it. On
the other hand, those who suffer from the injustice that
takes from the many to enrich the few, are in that very
thing deprived of the leisure to think, and the opportuni-
ties, education and graces necessary to give their thought
acceptable expression. They are necessarily the "unlet-
tered," the "ignorant," the "vulgar," prone in their con-
sciousness of weakness to look up for leadership and
guidance to those who have the advantages that the pos-
session of wealth can give.
Now, if we consider it, injustice and absurdity are sim-
ply different aspects of incongruity. That which to right
reason is unjust must be to right reason absurd. But an
injustice that impoverishes the many to enrich the few
shifts the centers of social power, and thus controls the
social organs and agencies of opinion and education.
Growing in strength and acceptance by what it feeds on,
it has only to continue to exist to become at length so
vested or rooted, not in the constitution of the human
mind itself, but in that constitution of opinions, beliefs and
habits of thought which we take, as we take our mother
tongue, from our social environment, that it is not per-
ceived as injustice or absurdity, but seems even to the
philosopher an integral part of the natural order, with
which it were as idle if not as impious to quarrel as with
the constitution of the elements. Even that highest gift,
the gift of reason, is in its bestowal on man subjected to
his use, and the very mental qualities that enable us to
discover truth may be perverted to fortify error, and are
always so perverted wherever an anti-social special interest
136 THE NATURE OF WEALTH. Book II.
gains control of the thinking and teaching functions of
society.
In this lies the explanation of the fact that looking
through the vista of what we know of human history we
everywhere find what are to us the most palpable absurdi-
ties enshrining themselves in the human mind as unques-
tionable truths whole nations the prey of preposterous
superstitions, abasing themselves before fellow-creatures,
often before idiots or voluptuaries, whom their imagina-
tion has converted into the representatives of Deity ; the
great masses toiling, suffering, starving, that those they
bear on their shoulders may live idly and daintily. Wher-
ever and whenever what we may now see to be a palpable
absurdity has passed for truth, we may see if we look close
enough that it has always been because behind it crouched
some powerful special interest, and that the man has
hushed the questioning of the child.
This is of human nature. The world is so new to us
when we first come into it ; we are so compelled at every
turn to rely upon what we are told rather than on what
we ourselves can discover ; what we find to be the common
and respected opinion of others has with us such almost
irresistible weight, that it becomes possible for a special
interest by usurping the teaching province to make to us
black seem white and wrong seem right.
Let no one indeed feel confident that he could have es-
caped any delusion, no matter how preposterous, that has
ever prevailed among men, if he had lived when and where
it was accepted. From as far back as we can see, human
nature has not changed, and we have but to look around
us to discover in operation to-day the great agency that
has made falsehood seem truth.
Of the fact of which, in what I have quoted, John Stuart
Mill speaks with reference to the doctrine that money is
synonymous with wealth the fact that accepted opinion
Chap. II. CAUSES OF CONFUSION. 137
may blind even able and courageous men he himself, in
the same book and almost in the same paragraph, gives
unconscious illustration, in the timidity with which he
touches the question of the nature of wealth, when it leads
beyond what Adam Smith had already shown, that it was
not synonymous with money. He recognizes, indeed,
that what is wealth to an individual is not therefore wealth
to the community or nation, and definitely states, or rather
concedes, that debt, even funded debt, is no part of the
wealth of the society. But the way in which he does this
is suggestive. He says :
The canceling of the debt would be no destruction of wealth, but
a transfer of it ; a wrongful abstraction of wealth from certain mem-
bers of the community, for the profit of the government or of the
taxpayers.
The gratuitous word " wrongful " shows the bias. And
even this recognition that debt cannot be wealth in the
economic sense is ignored in the subsequent definition of
wealth.
So strongly indeed was John Stuart Mill, who seems to
me a very type of intellectual honesty, under the influence
of the accustomed ideas of his time and class, that al-
though he saw with perfect clearness that the wealth that
comes to individuals by reason of their monopoly of land
really comes to them through force and fraud, yet he
seemingly never dreamed that land was no part of national
wealth. Nor yet, does he seem even to dream that the
people of a country, once they had been forcibly deprived
of it, could recover what he saw to be their natural right.
In all the history of dead absurdities there can be no sen-
tence more strikingly illustrative of the power of accepted
opinion to hide absurdity than this of his :
The land of Ireland, the land of every country, belongs to the
people of that country. The individuals called landowners have no
138 THE NATURE OF WEALTH. Book II.
right in morality and justice to anything but rent, or compensation
for its salable value.
This is simply to say that the ownership of the land of
Ireland gave the people who morally owned it the right to
buy it from those who did not morally own it.
What was it that hid from this trained logician and
radically minded man the patent absurdity of saying that
the individuals called landowners had no right to land,
except that which is the sum and expression of all ex-
changeable rights to land rent ?
Whoever will examine his writings will see that it was
his previous acceptance of certain doctrines doctrines
with which a succession of ingenious men had endeavored
to bring into semblance of logical coherence a political
economy vitally defective, and which resembled the elabo-
rate system of cycles and epicycles with which the ingenu-
ity of astronomers previous to Copernicus had endeavored
to account for the movements of the heavenly bodies.
When an incongruous substance, such for instance as a
bullet, is implanted in the human body, the physical system,
as soon as it despairs of its removal, sets about the en-
deavor to accommodate itself to the incongruity, frequent-
ly with such success that at length the incongruity is not
noticed. The stout, masterful man with whom I have just
now been talking, and whom you might liken to a bull if
it were not for the intelligence of his face, has long carried
a bullet under his skin. And men have even been known
to live for years with bullets in their brains.
So, too, with philosophical systems. When an incon-
gruity is accepted in a philosophical system, the abilities
of its professors are at once set to work to accommodate
other parts of the system to the incongruity, frequently
with such success that philosophical systems containing
fatal incongruities have been known to command accep-
Chap. II. CAUSES OF CONFUSION. 139
tance for long generations. For the mind of man is even
more plastic than the body of man, and the human imagi-
nation, which is the chief element in the building up of
philosophical systems, furnishes a lymph more subtle than
that which the blood supplies to the bodily system.
Indeed, the artificialities and confusions by which an
incongruity is made tolerable to a philosophic system, for
the very reason that they cannot be understood except by
those who have submitted their minds to a special course
of cramping, become to them a seeming evidence of su-
periority, gratifying a vanity like that of the contortionist
who has painfully learned to walk a little way on his hands
instead of his feet and to twist his body into unnatural
and unnecessary positions ; or like that of the conveyancer
or lawyer, who has in the same way painfully learned to
perform such tricks with language.
And just as the long toleration by the physical system
of such an incongruity as a bullet, a tumor or a dislocation,
by reason of the efforts which the system has made to rec-
oncile to it other parts and functions, renders it more diffi-
cult of removal or remedy, so the toleration in a philosoph-
ical system of an incongruity makes its removal or remedy
far more difficult to those who have bent their minds to
the system as it has by ingenious men been adapted to the
incongruity, than it is to those who approach the subject
from first principles, and who if they may have more to
learn have less to unlearn. For it is true, as Bacon said,
that " a cripple in the right way may beat a racer in the
wrong one. Nay, the fleeter the racer is who has once
missed his way, the farther he leaves it behind."
This, I think, is what was meant in the concise but deep
philosophy of Christ by such sayings as that the Kingdom
of Heaven, or system of right-doing, though revealed unto
babes, is hidden from those deemed wise and prudent, and
that what the common people heard gladly was foolishness
140 THE NATURE OF WEALTH. Bool II.
to the learned scribes and pharisees. With illustrations
of this principle the history of accepted opinion in every
time and place abounds.
It is not to the fancies of childhood that we must look
for an explanation of the strength of long dominant
absurdities. Michelet (" The People") truly says: "No
consecrated absurdity would have stood its ground in this
world if the man had not silenced the objection of the child."
But not to depart from the matter in hand : It is evi-
dent that the existence of a powerful class whose incomes
could not fail to be endangered by a recognition of the fact
that what makes them individually wealthy is not any part
of the wealth of society, but only robbery, must from the
beginning of the cultivation of political economy in modern
times have beset its primary step, the determination of
what the wealth of society consists of, with something of
the same difficulty that prevented its development in classic
times. And when the development commenced, and
especially after it had been taken charge of by the colleges
and universities, which as at present constituted must be
peculiarly susceptible to the influence of the wealthy
classes, it is evident that the efforts of able men to bring
into some semblance of coherency a system of political
economy destitute of any clear and coherent definition of
wealth must have surrounded the subject with greater
perplexities and helped powerfully to prevent the need of
a definition of wealth from being felt.
This is precisely what we see when we examine the dif-
ferent attempts to define wealth in the economic sense,
and note the increasing confusions that have attended
them, culminating in the acceptance of the common mean-
ing of the word wealth anything that has exchangeable
power as the only meaning that can be given to the eco-
nomic term; and the consequent abandonment of the
possibility of a science of political economy.
Chap. II. CAUSES OF CONFUSION. 141
Archbishop Whately, in the chapter on ambiguous terms
appended to his " Elements of Logic," says in speaking of
one of the ambiguities of the word wealth, that which
led to the use of wealth as synonymous with money :
The results have been fraud, punishment and poverty at home, and
discord and war without. It has made nations consider the wealth
of their customers a source of loss instead of profit ; and an advan-
tageous market a curse instead of a blessing. By inducing them to
refuse to profit by the peculiar advantages in climate, soil or indus-
try, possessed by their neighbors, it has forced them in a great
measure to give up their own. It has for centuries done more, and
perhaps for centuries to come will do more, to retard the improve-
ment of Europe than all other causes put together.
In this, the Archbishop, though famous as a logician,
" puts the cart before the horse."
These are not the effects of the confusion of a term.
The confusion of the term is one of the effects of the in-
fluence upon thought of the same special interest that in
its efforts to give wealth to individuals at the expense of
the general wealth, has done and is doing all this.
Nor can this power of a great pecuniary interest to
affect thought, and especially to affect thought in those
circles of society whose opinions are most respected, ever
be done away with save by the abolition of its cause the
social adjustment or institution that gives power to obtain
wealth without earning it. The pecuniary interest in the
ownership of slaves was never very large in the United
States. But it so dominated the thought of the whole
country that up to the outbreak of the civil war the term
abolitionist was to good, kindly and intelligent people
even in the North an expression that meant everything
vile and wicked. And whatever else might have been the
issue of the war, had the pecuniary interest in the main-
tenance of slavery remained, it would still have continued
to show itself in thought. But as soon as the supplies of
142 THE NATURE OF WEALTH. Book II.
the slave-owning interest were cut off by the freeing of
the slaves this power upon opinion vanished. Now, no
preacher, professor or politician, even in the South, would
think of advocating or defending slavery ; and in Boston,
where he narrowly escaped mobbing, stands a public statue
of William Lloyd Garrison.
CHAPTER III.
WHAT ADAM SMITH MEANT BY WEALTH.
SHOWING HOW ESSENTIALLY ADAM SMITH'S PRIMARY CON-
CEPTION OP WEALTH DIFFERED FROM THAT NOW HELD
BY HIS SUCCESSORS.
Significance of the title "Wealth of Nations" Its origin shown in
Smith's reference to the Physiocrats His conception of wealth
in his introduction Objection by Malthus and by Macleod
Smith's primary conception that given in "Progress and Poverty"
His subsequent confusions.
IF, considering the increasing indefiniteness among pro-
fessed economists as to the nature of wealth, we com-
pare Adam Smith's great book with the treatises that have
succeeded it, we may observe on its very title-page some-
thing usually unnoticed, but really very significant. Adam
Smith does not propose an inquiry into the nature and
causes of wealth, but "an inquiry into the nature and
causes of the wealth of nations"
The words I here italicize have become the descriptive
title of the book. This is known, not as " Adam Smith's
Inquiry," or "Adam Smith's Wealth," but as "Adam
Smith's Wealth of Nations." Yet these limiting words,
"of nations," seem to have been little noticed and less
understood by the writers who in increasing numbers for
almost a hundred years have taken this great book as a
143
144 THE NATURE OF WEALTH. Boole II.
basis for their elucidations and supposed improvements.
Their assumption seems to be that it is wealth generally or
wealth without limitation which Adam Smith treats of and
which is the proper subject of political economy, and that
if he meant anything by his determining words " of na-
tions," he referred to such political divisions as England,
France, Holland, etc.
Some superficial plausibility is perhaps given to this
view from the fact that one of the divisions of the " Wealth
of Nations," Book III., is entitled " Of the Different Prog-
ress of Opulence in Different Nations," and that in it illus-
trative reference is made to various ancient and modern
states. But that in his choice of the limiting words " of
nations " as indicating the kind of wealth into the nature
and causes of which he proposed to inquire, Adam Smith
referred to something other than the political divisions of
mankind called states or nations, is sufficiently clear.
While he is, as I have said, not very definite and not
entirely consistent in his use of the term wealth, yet it
is certain that what he meant by " the wealth of nations,"
of the nature and causes of which he proposed to inquire,
was something essentially different from what is meant by
wealth in the ordinary use of the word, which includes as
wealth everything that may give wealthiness to the indi-
vidual considered apart from other individuals. It was
that kind of wealth the production of which increases and
the destruction of which decreases the wealth of society as
a whole, or of mankind collectively, which he sought to
distinguish from the word "wealth" in its common or
individual sense by the limiting words, " of nations," in the
meaning not of the larger political divisions of mankind,
but of societies or social organisms.
In the body of the " Wealth of Nations " there occurs
again the phrase which furnished Adam Smith the title
for his ten years' work. In Book IV., speaking of those
Chap. III. WHAT SMITH MEANT BY WEALTH. 145
members of " the French republic of letters " who at that
time called themselves and were called " Economists," but
who have been since distinguished from other economists,
real or pretended, by the name of Physiocrats,* a school
who might be better still distinguished as the Single Taxers
of the Eighteenth Century, he says (the italics are mine) :
This sect, in their works, which are very numerous, and which
treat not only of rvhat is properly called political economy, or of the
nature and causes of the wealth of nations, but of every other branch
of the system of civil government, all follow implicitly, and without
any sensible variation, the doctrines of Mr. Quesnai.
This recognition of the fact that, not wealth in the loose
and common sense of the word, but that which is wealth
to societies considered as wholes, or as he phrased it, " the
wealth of nations," is the proper subject-matter of what is
properly called political economy shows the origin of the
title Adam Smith chose for his book. He had doubtless
thought of calling it a "Political Economy," but either
from the consciousness that his work was incomplete, or
from the modesty of his real greatness, finally preferred
the less pretentious title, which expressed to his mind the
same idea, "An inquiry into the Nature and Causes of
the Wealth of Nations."
It has been much complained of Adam Smith that he
does not define what he means by wealth. But this has
been exaggerated. In the very first paragraph of the
introduction to his work he thus explains what he means
by the wealth of nations, the only sense of the word wealth
which it is the business " of what is properly called politi-
cal economy " to consider :
* From physiocratie, or government in the nature of things, or nat-
ural order, a name suggested, in 1768, by Dupont de Nemours, one
of the most active of their number.
146 THE NATUEE OF WEALTH. Book II.
The annual labor of every nation is the fund which originally sup-
plies it with all the necessaries and conveniences of life which it
annually consumes, and which consist always either in the immedi-
ate produce of that labor, or in what is purchased with that produce
from other nations.
Again, in the last sentence of this introduction he speaks
of " the real wealth, the annual produce of the land and
labor of the society." And in other places throughout the
book he also speaks of this wealth of society or wealth of
nations, or real wealth, as the produce of land and labor.
What he meant by the produce of land and labor was of
course not the produce of land plus the produce of labor,
but the joint produce of both that is to say : the result of
labor, the active factor of all production, exerted upon land,
the passive factor of all production, in such a way as to fit
it (land or matter) for the gratification of human desires.
Malthus, indorsed by McCulloch and a long line of com-
mentators upon Adam Smith, objects to his definition that
" it includes all the useless products of the earth, as well
as those which are appropriated and enjoyed by man."
And in the same way Macleod, a recent writer whose ability
to say clearly what he wants to say makes his " Elements
of Economics," despite its essential defects, a grateful relief
among economic writings, objects that if
the annual produce of land and labor, either separately or combined,
is wealth, then every useless product of the earth is wealth, as well
as the most useful the tares as well as the wheat. If a diver fetch
a pearl oyster from the deep sea, the shell is as much the " produce
of land and labor " as the pearl itself. So if a nugget of gold or a
diamond is obtained from a mine, the rubbish it is found in and
brought up with is as much the "produce of land and labor" as the
gold or the diamond ; and innumerable instances of this sort may be
cited.
The communication of thought by speech would be at
an end if Adam Smith could be asked to explain that the
Chap. III. WHAT SMITH MEANT BY .WEALTH. 147
produce of labor means what the labor is exerted to get,
not what it is incidentally obliged to remove in the process
of getting that. Yet most of the complaints of his failure
to say what he means by wealth have no better basis than
these objections.
In truth whoever will attend to the obvious meaning of
the word he uses will see that what Adam Smith meant by
" the wealth of nations " or wealth in the sense it is to be
considered in " what is properly called political economy,"
is in reality what in the chapter of " Progress and Poverty "
entitled " The Meaning of the Terms " (Book I., Chapter II.)
is given as the proper meaning of the economic term
namely, that of " natural products that have been secured,
moved, combined, separated, or in other ways modified by
human exertion, so as to fit them for the gratification of
human desires."
Through the first and most important part of his work,
this is the idea which Smith has constantly in mind and
to which he constantly adheres in tracing all production
of wealth to labor. But having grasped this idea of the
nature of wealth without having clearly defined its relation
to other ideas still lying in his mind, he falls into the sub-
sequent confusion of also classing personal qualities and
debts as wealth.
CHAPTER IV.
THE FRENCH PHYSIOCRATS.
SHOWING WHO THE FIRST DEVELOPERS OF A TRUE SCIENCE
OF POLITICAL ECONOMY WERE, AND WHAT THEY HELD.
Quesnay and his followers The great truths they grasped and the
cause of the confusion into which they fell This used to dis-
credit their whole system, but not really vital They were real
free traders The scant justice yet done them Reference to
them in "Progress and Poverty" Macleod's statement of their
doctrine of natural order Their conception of wealth Their
day of hope and their fall.
THE first developers in modern times of something
like a true science of political economy, or, rather
(since social truths, though they may be covered up and
for a while ignored, must since the origin of human so-
ciety always have been here to be seen), the men who first
got a hearing large enough and wide enough to bring
down their names and their teachings to our times, were
the French philosophers whom Adam Smith speaks of in
the sentence before quoted, as the sect who "all follow
implicitly, and without any sensible variation, the doctrines
of Mr. Quesnai."
Francois Quesnai, or Quesnay, as the name is now usu-
ally spelled, a French philosopher, who, as McCulloch says,
was " equally distinguished for the subtlety and originality
of his understanding and the integrity and simplicity of
his character," was born June 4, 1694, twenty-eight years
148
Chap. IV. THE FRENCH PHYSIOCRATS. 149
before Adam Smith, at Mercy, some ten leagues from Paris.
Beginning life in the manual labor of the farm, he was
without either the advantages or, as they often prove to
men of parts, the disadvantages of a scholastic education.
With much effort he taught himself to read, became ap-
prentice to a surgeon, and at length began practice for
himself at Mantes, where he acquired some means and
came to the knowledge of Marshal de Noailles, who spoke
of him to the queen, who in her turn recommended him
to the king. He finally settled in Paris, bought the place
of physician to the king, and was made by the monarch
his first physician. Abstaining from the intrigues of the
court, he won the sincere respect of Louis XV., with whom
as his first physician he was brought into close personal
contact. The king made him a noble, gave him a coat of
arms, assigned him apartments in the palace, calling him
affectionately his thinker, and had his books printed in
the royal printing-office. And around him, in his apart-
ments in the palace of Versailles, this " King's Thinker "
was accustomed to gather a group of eminent men who
joined him in an aim the grandest the human mind can
entertain being nothing less than the establishment of
liberty and the abolition of poverty among men, by the
conformation of human laws to the natural order intended
by the Creator.
These men saw what has often been forgotten amid the
complexities of a high civilization, but is yet as clear as
the sun at noonday to whoever considers first principles.
They saw that there is but one source on which men can
draw for all their material needs land ; and that there is
but one means by which land can be made to yield to
their desires labor. All real wealth, they therefore saw,
all that constitutes or can constitute any part of the wealth
of society as a whole, or of the wealth of nations, is the
result or product of the application of labor to land.
1BO THE NATURE OF WEALTH. Book II.
They had not only grasped this first principle from
which any true economy, even that of a savage tribe or an
isolated individual, must start but they had grasped the
central principle of a true political economy. This is the
principle that in the natural growth of the social organism
into which men are integrated in society there is developed
a fund which is the natural provision for the natural needs
of that organism a fund which is not merely sufficient
for all the material wants of society, and may be taken
for that purpose, its intended destination, without depriv-
ing the unit of anything rightfully his ; but which must be
so taken to prevent the gravest injuries to individuals and
the direst disasters to the state.
This fund Quesnay and his followers styled the produit
net the net, or surplus, or remaining, product. They
called it this, evidently because they saw it as something
which remained, attached, as it were, to the control of
land, after all the expenses of production that are resolvable
into compensation for the exertion of individual labor are
paid. What they really meant by the produit net, or net
product, is precisely what is properly to be understood in
English by the word " rent " when used in the special sense
or technical meaning which it has acquired since Ricardo's
time as a term of political economy. Net product is really
a better term than rent, as not being so liable to confusion
with a word in constant use in another sense ; and John
Stuart Mill, probably without thought of the Physiocrats,
came very close to the perception that governed their
choice of a term when, he spoke of economic rent as " the
unearned increment of land values."
That Quesnay and his associates saw the enormous sig-
nificance of this "net product" or "unearned increment"
for which our economic term is " rent," is clear from their
practical proposition, the impot unique, or single tax. By
this they meant just what its modern advocates now mean
Chap. IF. THE FRENCH PHYSIOCRATS. 151
by it the abolition of all taxes whatever on the making,
the exchanging or the possession of wealth in any form,
and the recourse for public revenues to economic rent;
the net or surplus product ; the (to the individual) unearned
increment which attaches to land wherever in the progress
of society any particular piece of land comes to afford to
the user superior opportunities to those obtainable on land
that any one is free to use.
In grasping the real meaning and intent of the net prod-
uct, or economic rent, there was opened to the Physiocrats
a true system of political economy a system of harmonious
order and beneficent purpose. They had grasped the key
without which no true science of political economy is pos-
sible, and from the refusal to accept which the scholastic
economy that has succeeded Adam Smith is, after nearly
a hundred years of cultivation, during which it has sunk
into the contemptible position of " the dismal science," now
slipping into confessed incompetency and rejection.
But misled by defective observation and a habit of
thought that prevailed long after them, and indeed yet
largely prevails (a matter to which I shall subsequently
more fully allude), the Physiocrats failed to perceive that
what they called the net or surplus product, and what we
now call economic rent, or the unearned increment, may
attach to land used for any purpose. Looking for some
explanation in natural law of what was then doubtless
generally assumed to be the fact, and of which I know of
no clear contradiction until " Progress and Poverty " was
written, that agriculture is the only occupation which
yields to the landlord a net or surplus product, or unearned
increment (rent), over and above the expenses of produc-
tion, they not unnaturally under the circumstances hit
upon a striking difference between agriculture, which
grows things, and the mechanical and trading occupations,
which merely change things in form, place or ownership,
152 THE NATUKE OF WEALTH. Boole II.
as furnishing the explanation for which they were in
search. This difference lies in the use which agriculture
makes of the generative or reproductive principle in
nature.
This supposed fact, and what seemed to them the ra-
tional explanation of it, in the peculiar use made in agri-
culture of the principle of growth and reproduction which
characterizes all forms of life, vegetable and animal, the
Physiocrats expressed in their terminology by styling
agriculture the only productive occupation. All other
occupations, however useful, they regarded as sterile or
barren, insomuch as under the fact assumed such occu-
pations give rise to no net produce or unearned increment,
merely returning again to the general fund of wealth, or
gross product, the equivalent of what they had taken from
it in changing the form, place or ownership of material
things already in existence.
This was their great and fatal misapprehension, since it
has been effectually used to discredit their whole system.
Still, it was not really a vital mistake. That is to say,
it made no change in their practical proposals. The fol-
lowers of Quesnay insisted that agriculture, in which they
admitted fisheries and mines, was the only productive
occupation, or in other words the only application of labor
that added to the sum of wealth ; while manufactures and
exchange, though useful, were sterile, merely changing the
form or place of wealth without adding to its sum. They,
however, proposed no restrictions or disabilities whatever
on the occupations they thus stigmatized. On the con-
trary, they were what the so-called "English free traders"
who have followed Adam Smith never yet have been
free traders in the full sense of the term. In their practical
proposition, the single tax, they proposed the only means
by which the free trade principle can ever be carried to its
logical conclusion the freedom not merely of trade, but
Chap. IV. THE FEENCH PHYSIOCRATS. 153
of all other forms and modes of production, with full free-
dom of access to the natural element which is essential to
all production. They were the authors of the motto that
in the English use of the phrase " Laissez fair el " "Let
things alone," has been so emasculated and perverted, but
which on their lips was, " Laissez faire, laissez aller," " Clear
the ways and let things alone ! " This is said to come
from the cry that in medieval tournaments gave the signal
for combat. The English motto which I take to come
closest to the spirit of the French phrase is, "A fair field
and no favor ! "
It is for the reason that of all modern philosophers they
not only were the first, but were really true free traders,
that I dedicated to the memory of Quesnay and his fellows
my " Protection or Free Trade " (1885), saying :
By thus carrying the inquiry beyond the point where Adam Smith
and the writers who have followed him have stopped, I believe I have
stripped the vexed tariff question of its greatest difficulties, and have
cleared the way for the settlement of a dispute which otherwise might
go on interminably. The conclusions thus reached raise the doctrine
of free trade from the emasculated form in which it has been taught
by the English economists to the fullness in which it was held by the
predecessors of Adam Smith, those illustrious Frenchmen, with whom
originated the motto " Laissez fairc," and who, whatever may have
been the confusions of their terminology or the faults of their method,
grasped a central truth which free traders since their time have ignored.
These French " Economists," now more definitely known
as Physiocrats, or single taxers, had got hold of what in
its bearings on philosophy and politics is probably~the
greatest of truths ; but had got hold of it through curi-
ously distorted apprehensions. It was to them, however,
like a rainbow seen through clouds. They did not see the
full sweep of the majestic curve, and endeavored to piece
out their lack of insight with a confused and confusing
terminology. But what they did see showed them its trend,
and they felt that natural laws could be trusted where
154 THE NATURE OF WEALTH. SookIL
attempts to order the world by human legislation would
be certain to go astray.
Yet nothing better shows the importance of correct
theory to the progress of truth against the resistance of
powerful special interests than the complete overthrow of
the Physiocrats. Their mistake in theory has sufficed to
prevent, or perhaps rather to furnish a sufficient excuse to
prevent the justice and expediency of their practical pro-
posal from being considered.
I know of no English writer on the Physiocrats or their
doctrines who seems to have understood them or to have
had any glimmering that the truth which lay behind then-
theory that agriculture is the only productive occupation
was an apprehension of what has since been known as
the Ricardian doctrine of rent, carried out further than
Ricardo carried it, to its logical results ; but apprehended,
as indeed Ricardo himself seems to have apprehended it,
only in its relations to agriculture.
In " Progress and Poverty," after working out what I
believe to be the simple yet sovereign remedy for the con-
tinuance of wide-spread poverty amid material progress, I
thus, in the chapter entitled "Indorsements and Objec-
tions " (Book VIII., Chapter IV.), refer to the Physiocrats :
In fact, that rent should, both on grounds of expediency and jus-
tice, be the peculiar subject of taxation, is involved in the accepted
doctrine of rent, and may be found in embryo in the works of all
economists who have accepted the law of Ricardo. That these prin-
ciples have not been pushed to their necessary conclusions, as I have
pushed them, evidently arises from the indisposition to endanger or
offend the enormous interest involved in private ownership in land,
and from the false theories in regard to wages and the cause of pov-
erty which have dominated economic thought.
But there has been a school of economists who plainly perceived,
what is clear to the natural perceptions of men when uninfluenced
by habit that the revenues of the common property, land, ought to
be appropriated to the common service. The French Economists of
the last century, headed by Quesnay and Turgot, proposed just what
Chap. IV. THE FRENCH PHYSIOCRATS. 155
I have proposed, that all taxation should be abolished save a tax upon
the value of land. As I am acquainted with the doctrines of Ques-
nay and his disciples only at second hand through the medium of the
English writers, I am unable to say how far his peculiar ideas as to
agriculture being the only productive avocation, etc., are erroneous
apprehensions, or mere peculiarities of terminology. But of this I
ana certain from the proposition in which his theory culminated that
he saw the fundamental relation between land and labor which has
since been lost sight of, and that he arrived at practical truth, though,
it may be, through a course of defectively expressed reasoning.
The causes which leave in the hands of the landlord a "produce
net" were by the Physiocrats no better explained than the suc-
tion of a pump was explained by the assumption that nature abhors
a vacuum ; but the fact in its practical relations to social economy
was recognized, and the benefit which would result from the perfect
freedom given to industry and trade by a substitution of a tax on
rent for all the impositions which hamper and distort the application
of labor, was doubtless as clearly seen by them as it is by me. One
of the things most to be regretted about the French Revolution is
that it overwhelmed the ideas of the Economists, just as they were
gaining strength among the thinking classes, and were apparently
about to influence fiscal legislation.
Without knowing anything of Quesnay or his doctrines, I have
reached the same practical conclusion by a route which cannot be
disputed, and have based it on grounds which cannot be questioned
by the accepted political economy.
The best English account of the Physiocratic views that
I now know of is that given by Henry Dunning Macleod,
in his "Elements of Economics" (1881). He seems to
have no notion of the truth that lay at the bottom of a
mistake that has caused their great services to be all but
forgotten, and which I shall take opportunity in a subse-
quent book more fully to explain. To him it is " simply
incomprehensible how men of the ability of the Physio-
crats could maintain that a country could not be enriched
by the labor of artisans and by commerce." This he styles
" one of those aberrations of the human intellect which we
can only wonder at and not explain." But nevertheless
he awards them the honor of being the founders of the
156 THE NATURE OF WEALTH. ZooJcII.
science of political economy, declares that in spite of their
errors ''they are entitled to imperishable glory in the his-
tory of mankind," and gives in his own language an out-
line of their doctrine, from which (Book I., Chapter V.,
Sec. 3) I take the following :
The Creator lias placed man upon the earth with the evident in-
tention that the race should prosper, and there are certain physical
and moral laws which conduce in the highest degree to ensure his
preservation, increase, well-being, and improvement. The correla-
tion between these physical and moral laws is so close that if either
be misunderstood, through ignorance or passion, the others are also.
Physical nature, or matter, bears to mankind very much the relation
which the body does to the soul. Hence the perpetual and necessary
relation of physical and moral good and evil on each other.
Natural justice is the conformity of human laws and actions to
natural order, and this collection of physical and moral laws existed
before any positive institutions among men. And while their obser-
vance produces the highest degree of prosperity and well-being
among men, the non-observance or transgression of them is the cause
of the extensive physical evils which afflict mankind.
If such a natural law exists, our intelligence is capable of under-
standing it ; for, if not, it would be useless, and the sagacity of the
Creator would be at fault. As, therefore, these laws are instituted
by the Supreme Being, all men and all states ought to be governed
by them. They are immutable and irrefragable, and the best possi-
ble laws : therefore necessarily the basis of the most perfect govern-
ment, and the fundamental rule of all positive laws, which are only
for the purpose of upholding natural order, evidently the most
advantageous for the human race.
The evident object of the Creator being the preservation, the in-
crease, the well-being, and the improvement of the race, man neces-
sarily received from his origin not only intelligence, but instincts
conformable to that end. Every one feels himself endowed with the
triple instincts of well-being, sociability, and justice. He understands
that the isolation of the brute is not suitable to his double nature,
and that his physical and moral wants urge him to live in the society
of his equals in a state of peace, good-will, and concord.
He also recognizes that other men, having the same wants as him-
self, cannot have less rights than himself, and therefore he is bound
to respect this right, so that other men may observe a similar obli-
gation towards him.
Chap. IF. THE FRENCH PHYSIOCEATS. 167
These ideas the product of reason, the necessity of work, the
necessity of society, and the necessity of justice imply three others
liberty, property, and authority, which are the three essential terms
of all social order.
How could man understand the necessity of labor to obey the ir-
resistible instinct of his preservation and well-being, without con-
ceiving at the same time that the instrument of labor, the physical
and intellectual qualities with which he is endowed by nature, be-
longs to him exclusively, without perceiving that he is master and
the absolute proprietor of his person, that he is born and should re-
main free?
But the idea of liberty cannot spring up in the mind without asso-
ciating with it that of property, in the absence of which the first
would only represent an illusory right, without an object. The free-
dom the individual has of acquiring useful things by labor supposes
necessarily that of preserving them, of enjoying them, and of dispos-
ing of them without reserve, and also of bequeathing them to his
family, who prolong his existence indefinitely. Thus liberty con-
ceived in this manner becomes property, which may be conceived in
two aspects as it regards movable goods on the earth, which is the
source from which labor ought to draw them.
At first property was principally movable ; but when the cultiva-
tion of the earth was necessary for the preservation, increase, and
improvement of the race, individual appropriation of the soil became
necessary, because no other system is so proper to draw from the
earth all the mass of utilities it can produce ; and, secondly, because
the collective constitution of property would have produced many
inconveniences as to sharing of the fruits, which would not arise
from the division of the land, by which the rights of each are fixed
in a clear and definite manner. Property in land, therefore, is the
necessary and legitimate consequence of personal and movable prop-
erty. Every man has, then, centered in him by the laws of Provi-
dence, certain rights and duties ; the right of enjoying himself to the
utmost of his capacity, and the duty of respecting similar rights in
others. The perfect respect and protection of reciprocal rights and
duties conduces to production in the highest degree, and the obtain-
ing the greatest amount of physical enjoyments.
The Physiocrats, then, placed absolute freedom, or property as
the fundamental right of man freedom of Person, freedom of Opin-
ion, and freedom of Contract, or Exchange ; and the violation of
these as contrary to the law of Providence, and therefore the cause
of all evil to man. Quesnay's first publication, "Le Droit Naturel,"
158 THE NATUBE OF WEALTH. Book II.
contains an inquiry into these natural rights ; and he afterwards, in
another called " General Maxims of the Economical Government of
an Agricultural Kingdom," endeavored to lay down in a series of
thirty maxims, or fundamental general principles, the whole bases
of the economy of society. The 23d of these declares that a nation
suffers no loss by trading with foreigners. The 24th declares the
fallacy of the doctrine of the balance of trade. The 25th says : " Let
entire freedom of commerce be maintained; for the regulation of
commerce, both internal and external, the most sure, the most true,
the most profitable to the nation and to the state, exists in entire
freedom of competition." In these three maxims, which Quesnay
and his followers developed, was contained the entire overthrow of
the existing system of Political Economy ; and notwithstanding cer-
tain errors and shortcomings, they are unquestionably entitled to be
considered as the founders of the science of Political Economy.
Wealth, in the economic sense of the wealth of societies,
or the wealth of nations, Macleod goes on to state, the
Physiocrats held to consist exclusively of material things,
drawn from land to man the source of all material things
by the exertion of labor, and possessing value in ex-
change, or exchangeability ; a distinction which they recog-
nized as essentially different from, and not necessarily
associated with, value in use or usefulness. That man
can neither create nor annihilate matter they repeated
again and again in such phrases as: "Man can create
nothing," and " Nothing can come out of nothing." They
expressly excluded land itself and labor itself, and all
personal capacities and powers and services, from the
category of wealth, and were far ahead of their time in
deriving the essential quality of money from its use in
serving as a medium of exchange, and in including all
usury laws in the restrictions that they would sweep
away.
That these men rose in France, and as it were in the
very palace of the absolute king, just as the rotten Bour-
bon dynasty was hastening to its fall, is one of the most
striking of the paradoxes with which history abounds.
Chap.tr. THE FEENCH PHYSIOCRATS. 159
Never, before nor since, out of the night of despotism
gleamed there such clear light of liberty.
They were deluded by the idea the only possibility in
fact, under existing conditions of carrying their views into
effect in their time that the power of a king whose pre-
decessor had said, " I am the state ! " might be utilized to
break the power of other special interests, and to bring lib-
erty and plenty to France, and through France to the world.
They had their day of hope, and almost it must have
seemed of assured triumph, when in 1774, three months
before Quesnay's death, Turgot was made Finance Minister
of Louis XVI., and at once began clearing the ways by
cutting the restrictions that were stifling French industry.
But they leaned on a reed. Turgot was removed. His
reforms were stopped. The pent-up misery of the masses,
which they had been so largely instrumental in showing
utterly repugnant to the natural order, burst into the blind
madness of the great revolution. The Physiocrats were
overthrown, many of them perishing on the guillotine, in
prison or in exile. In the reaction which the excesses of
that revolution everywhere produced among those most
influencing thought, the propertied and the powerful, the
Physiocrats were remembered merely by their unfortunate
misapprehension in regarding agriculture as the only pro-
ductive occupation.
France will some day honor among the noblest the cen-
turies have given her the names of Quesnay, and Gournay,
and Turgot, and Mirabeau, and Condorcet, and Dupont,
and their fellows, as we shall have in English, intelligent
explanations, if not translations of their works. But,
probably for the reason that France has as yet felt less
than the English and Teutonic and Scandinavian nations
the influence of the new philosophy of the natural order,
best known as the Single Tax, the teachings of these men
seem at present, even in France, to be practically forgotten.
CHAPTER V.
ADAM SMITH AND THE PHYSIOCRATS.
SHOWING THE RELATION BETWEEN ADAM SMITH AND THE
PHYSIOCRATS.
Smith and Quesnay The "Wealth of Nations" and Physiocratie
ideas Smith's criticism of the Physiocrats His failure to ap-
preciate the single tax His prudence.
ON the continental trip he made between 1764 and
1766, after resigning his Glasgow professorship of
moral philosophy to accompany as tutor the young Duke of
Buccleuch, Adam Smith made the personal acquaintance
of Quesnay and some of the " men of great learning and
ingenuity," who regarded the " King's Thinker " with an
admiration "not inferior to that of any of the ancient
philosophers for the founders of their respective systems,"
and was, while in Paris, a frequent and welcome visitor at
the apartments in the palace, where, unmindful of the
gaieties and intrigues of the most splendid and corrupt
court of Europe that went on but a floor below them, this
remarkable group discussed matters of the highest and
most permanent interest to mankind.
This must have been a fruitful time in Adam Smith's
intellectual life. During this time the almost unknown
Scottish tutor, notable among his few acquaintances for
his fits of abstraction, must have been mentally occupied
160
Chap.V. SMITH AND THE PHYSIOCRATS. 161
with the work which ten years after was to begin a fame
that for more than a century has kept him at the very head
of economic philosophers and in the first rank of the per-
manently illustrious men of his generation.
Upon this work he entered immediately after his return
from the continent, in the leisure afforded him by the
ample pension that the trustees of the Duke had agreed
should continue until he could be provided with a profit-
able government place. The Duke himself, on coming to
his majority and estates, seems to have made no effort to
release himself from this payment by securing such a
place for the man whom he always continued to regard
with respect and affection, thinking doubtless that its
duties, however nearly nominal, might somewhat interfere
with his freedom to devote himself to his long work. And
when, the " Wealth of Nations " having been at last pub-
lished, its author was appointed by Lord North to be one
of the Commissioners of Customs in Scotland an appoint-
ment which seems to have been due to the gratitude of the
Premier for hints received from that book as to new
sources of taxation rather than to any pressure of the
Buccleuch interest, and which raised the simple-mannered
student to comparative opulence the Duke insisted on
making no change in his payment, but continued the
pension for life.
The " liberal and generous system " of the French Econ-
omists could not fail to appeal powerfully to a man of
Adam Smith's disposition, and the " Wealth of Nations "
bears ample evidence of the depth of the opinion he in one
place expresses in terms, that this system, "with all its
imperfections, is perhaps the nearest approximation to the
truth that has yet been published upon the subject of
political economy." It was indeed his original intention
as stated to his friend and biographer, Professor Dugald
Stewart, to dedicate to Quesnay the fruits of his ten years'
162 THE NATURE OF WEALTH. Book II.
application. But the French philosopher died in 1774,
two years before the Scotsman's great work saw the light.
Thus it appeared without any indication of an intention
which, had it been expressed, might, in the bitter prejudice
soon afterwards aroused against the Physiocrats by the
outbreak of the French Revolution, have seriously mili-
tated against its usefulness.
The resemblance of the views expressed in this work to
those held by the Physiocrats has, however, been noticed
by all critics, and both on the side of their opponents and
their advocates there have not been wanting intimations
that Smith borrowed from them. But while he must have
been eminently ready to absorb any idea that commended
itself to his mind, there is no reason to regard these views
as not originally Adam Smith's own. The keenness of
observation and analysis, the vigor of imagination and
solidity of learning, that characterize the " Wealth of Na-
tions " are shown in the " Theory of the Moral Sentiments,"
written before Smith had left the University of Glasgow,
and which indeed led to the invitation that he should ac-
company the young nobleman on his trip. They are shown
as well in the paper on the formation of languages, and
the papers on the principles which lead and direct philo-
sophical inquiry, as illustrated in the history of various
sciences, which are usually published with that work. It
appears from the " Theory of the Moral Sentiments " that
Adam Smith was even then meditating some such a book
as the "Wealth of Nations," and there is no reason to
suppose that without knowledge of the Physiocrats it
would have been essentially different.
It is a mistake to which the critics who are themselves
mere compilers are liable, to think that men must draw
from one another to see the same truths or to fall into the
same errors. Truth is, in fact, a relation of things, which
is to be seen independently because it exists independently.
Chap.V. SMITH AND THE PHYSIOCRATS. 163
Error is perhaps more likely to indicate transmission from
mind to mind; yet even that usually gains its strength
and permanence from misapprehensions that in them-
selves have independent plausibility. Such relations of
the stars as that appearance in the north which we call
the Dipper or Great Bear, or as that in the south which
we call the Southern Cross, are seen by all who scan the
starry heavens, though the names by which men know
them are various. And to think that the sun revolves
around the earth is an error into which the testimony of
their senses must cause all men independently to fall,
until the first testimony of the senses is corrected by
reason applied to wider observations.
In what is most important, I have come closer to the
views of Quesnay and his followers than did Adam Smith,
who knew the men personally. But in my case there was
certainly no derivation from them. I well recall the day
when, checking my horse on a rise that overlooks San
Francisco Bay, the commonplace reply of a passing team-
ster to a commonplace question, crystallized, as by light-
ning-flash, my brooding thoughts into coherency, and I
there and then recognized the natural order one of those
experiences that make those who have had them feel there,
after that they can vaguely appreciate what mystics and
poets have called the "ecstatic vision." Yet at that time
I had never heard of the Physiocrats, or even read a line
of Adam Smith.
Afterwards, with the great idea of the natural order in
my head, I printed a little book, "Our Land and Land
Policy," in which I urged that all taxes should be laid on
the value of land, irrespective of improvements. Casually
meeting on a San Francisco street a scholarly lawyer,
A. B. Douthitt, we stopped to chat, and he told me that
what I had in my little book proposed was what the French
" Economists " a hundred years before had proposed.
164= THE NATUKE OF WEALTH. BooTcIL
I forget many things, but the place where I heard this,
and the tones and attitude of the man who told me of it,
are photographed on my memory. For, when you have
seen a truth that those around you do not see, it is one of
the deepest of pleasures to hear of others who have seen
it. This is true even though these others were dead years
before you were born. For the stars that we of to-day see
when we look were here to be seen hundreds and thou-
sands of years ago. They shine on. Men come and go,
in their generations, like the generations of the ants.
This pleasure of a common appreciation of truth not yet
often accepted, Adam Smith must have had from his in-
tercourse with the Physiocrats. Widely as he and they
may have differed, there was yet much that was common
in their thought. He was a free trader as they were,
though perhaps not so logical and thorough-going. And
though differing in temper and widely differing in condi-
tions, both were bent on struggling against what must
have seemed at the time insuperable difficulties.
Adam Smith's knowledge of, and admiration for, the
Physiocrats must at least have affected his thought and
expression, sometimes by absorption and sometimes per-
haps by reaction. But no matter how much of his eco-
nomic views were original with him and how much he
imbibed consciously or unconsciously from them, it is
certain that his political economy, as far as it goes on all
fours, is the system of natural order proclaimed by them.
What Adam Smith meant by the wealth of nations is in
most cases, and wherever he is consistent, the material
things produced from land by labor which constitute the
necessities and conveniences of human life ; the aggregate
produce of society, using the word produce as expressive
of the sum of material results, in the same way that we
speak of agricultural produce, of factory produce, of the
produce of mines, or fisheries, or the chase. Now this is
Chap.r. SMITH AND THE PHYSIOCEATS. 165
what the Physiocrats meant by wealth, or as they some-
times termed it, the gross product of land and labor.
But this is also, as I shall hereafter show, the primary
or root meaning of the word wealth in its common use.
And whoever will read Smith's " Considerations Concerning
the First Formation of Languages," originally published
with his "Moral Sentiments," in 1759, will see from his
manner of tracing words to their primary uses, that when-
ever he came to think of it, he would have recognized the
original and true meaning of the word wealth to be that
of the necessities and conveniences of human life, brought
into being by the exertion of labor upon land.
The difference between Smith and the Physiocrats is
this:
The Physiocrats, on their part, clearly laid down and
steadily contended that nothing that did not have material
existence, or was not produced from land, could be included
in the category of the wealth of society. Adam Smith, how-
ever, with seeming inadvertence, has fallen in places into
the inconsistency of classing personal qualities and obliga-
tions as wealth. This is probably attributable to the fact
that what it seemed to him possible to accomplish was
much less than what the Physiocrats aimed at. The task
to which he set himself, that in the main of showing the
absurdity and impolicy of the mercantile or protective
system, was sufficiently difficult to make him comparatively
regardless of speculations that led far beyond it. With
the disproval of the current notion that the wealth of
nations consists of the precious metals, his care as to what
is and what is not a part of that wealth relaxed. He went
with the Physiocrats in their condemnation of the attempts
of governments to check commerce, but stopped both
where they had carried tha idea of freeing all production
from tax or restraint to the point of a practical proposi-
tion, and where they had fallen into obvious error. He
166 THE NATURE OF WEALTH. Book II.
neither proposed the single tax nor did he fall into the
mistake of declaring agriculture the only productive occu-
pation. That there is a natural order he saw ; and that
to this natural order our perceptions of justice conform,
he also saw. But that involved in this natural order is a
provision for the material needs of advancing society he
seems never to have seen.
Whether Adam Smith's failure to grasp the great truth
that the French "Economists" perceived, though u as
through a glass, darkly," was due to their erroneous way
of stating it, or to some of those environments of the
individual mind which seem on special points to close its
powers of perception, there is no means that I know of for
determining. Adam Smith saw that the Physiocrats must
be wrong in regarding manufactures and exchanges as
sterile occupations, but he did not see the true answer to
their contention, the answer that would have brought into
the light of a larger truth that portion of truth they had
wrongly apprehended. The answer he makes to them in
Book IV., Chapter IX., of the " Wealth of Nations " could
hardly have been entirely satisfactory to himself. In this
he does not venture to contend that the labor of artificers,
manufacturers and merchants is as productive of wealth
as the labor of agriculturists. He only contends that it is
not to be considered as utterly sterile, and that " the rev-
enue of a trading and manufacturing country must, other
things being equal, always be much greater than that of
one without trade and manufactures," because " a smaller
quantity of manufactured produce purchases a great
quantity of rude produce." That he himself, indeed, re-
garded agriculture as at least the most productive of occu-
pations is shown directly in other places in his great work.
And there is one part of this answer that is extremely
unsatisfactory and utterly out of its author's usual temper.
No one better than Adam Smith could see the fallacy of
Chap.V. SMITH AND THE PHYSIOCRATS. 167
comparing a philosopher who declared that the political
body would thrive best under conditions of perfect liberty
and perfect justice with a physician who " imagined that
the health of the human body could be preserved only by
a certain precise regimen of diet and exercise." And that
he should resort to an illustration which depended for its
effect upon such a suppressio veri to explain or emphasize
his dissent from a man whom he esteemed so highly as
Quesnay, shows a latent uncertainty. Both in quality and
in temper of mind, Smith seems the last of men to use such
an argument except in despair of finding a better one.
There are passages in the " Wealth of Nations " where
Adam Smith checks his inquiry with a suddenness that
shows an indisposition to venture on ground that the pos-
sessing classes would deem dangerous. But in nothing he
left after him (just before his death he destroyed all manu-
scripts he did not wish published), is there an indication
that he was more than puzzled by the attempt of the
Physiocrats to explain the great truth that they saw mth
wrong apprehension. He clearly perceived that " the prod-
uce of labor constitutes the natural recompense or wages
of labor," and that it was the appropriation of land that
had deprived the laborer of his natural due. But he had
evidently never looked further into the phenomena of rent
than to see that " the landlords, like all other men, love to
reap where they never sowed." He passes over the great
subject of the relations of men to the land they inhabit,
as though the appropriation by a few of what nature has
provided as the dwelling-place and storehouse of all must
now be accepted as if it were a part of the natural order.
And so, indeed, in his times and conditions it must have
appeared to him.
Even if Adam Smith had seen the place of the single
tax in the natural order, as the natural means for the
supply of the natural needs of civilized societies, prudence
168 THE NATUEE OF WEALTH. BooTcII.
might well have suggested that his inquiry should not be
carried so far. I mean, not merely that prudence of the
individual which impelled Copernicus to withhold until
after his death any publication of his discovery of the
movement of the earth about the sun ; but that prudence
of the philosopher which, from a desire to do the utmost
that he can for Truth and Justice in his own time, may
prevent him from advancing a larger measure of truth
than his own time can receive.
In that part of the eighteenth century when the Physio-
crats dreamed that they were on the verge of carrying
their great reform and Smith wrote painfully his " Wealth
of Nations," there was a wide difference between the con-
ditions of France and Scotland.
Sheltered under the friendship of a king whose dynasty
had reduced the great feudal landlords to servitors and
courtiers; seeking with the aphorism, "Poor peasants,
poor kingdom ; poor kingdom, poor king," to arouse the
strongest power in the state to the relief of the most
downtrodden ; cherishing the hope that the emancipation
of man might be accomplished by the short and royal road
of winning the mind and conscience of a young and ami-
able sovereign, the French philosophers might have some
prospect of getting a hearing in their advocacy of the
single tax. But, on the other side of the Channel, the
"landed interest," gorged with the spoil of Church and
Crown and peasants and clansmen, reigned supreme. For
a solitary man of letters to have attacked this supreme
power in front would have been foolishness.
That Adam Smith, " all-round man " that he was, pos-
sessed both the prudence of the man and the prudence of
the philosopher, is shown by the fact that he managed to
do what he did, without arousing in greater degree the ire
of the defenders of vested wrongs. Whoever will intelli-
gently read the "Wealth of Nations" will find it full of
Ckap.V. SMITH AND THE PHYSIOCRATS. 169
radical sentiment, an arsenal from which lovers of liberty
and justice may still draw weapons for victories remaining
to be won. Yet its author was a college professor, travel-
ing tutor of a duke, held a lucrative government position
and died Lord Rector of Glasgow University.
For the present times at least, the Scotsman succeeded
where the Frenchman failed. It is he, not Quesnay, who
has come down to us as the " father of political economy."
This position is recognized even by economists who differ
from what they deem his school. Thus Professor James,
of the University of Pennsylvania, himself belonging to
the "new school," says of Adam Smith in the article
"Political Economy" in Lalor's Cyclopedia, 1884:
All theories and development of the preceding ages culminate in
him, all lines of development in the succeeding ages start from him.
His work has been before the public over one hundred years, and yet
no second book has been produced that deserves to be compared with
it in originality and importance. The subsequent history of the
science is mainly the history of attempts to broaden and deepen the
foundation laid by Adam Smith, to build the superstructure higher
and render it more solid.
It is for this reason that I take Adam Smith's " Wealth
of Nations" as the great landmark in the history of
Political Economy.
CHAPTER VI.
SMITH'S INFLUENCE ON POLITICAL ECONOMY.
SHOWING WHAT THE "WEALTH OF NATIONS" ACCOMPLISHED
AND THE COURSE OP THE SUBSEQUENT DEVELOPMENT OP
POLITICAL ECONOMY.
Smith, a philosopher, who addressed the cultured, and whose attack
on mercantilism rather found favor with the powerful landowners
Not entirely exempt from suspicion of radicalism, yet pardoned
for his affiliation with the Physiocrats Efforts of Malthus and
Eicardo on respectabilizing the science The fight against the
corn-laws revealed the true beneficiaries of protection, but passed
for a free-trade victory, and much strengthened the incoherent
science Confidence of its scholastic advocates Say's belief in
the result of the colleges taking up political economy Torrens's
confidence Failure of other countries to follow England's ex-
ample Cairnes doubts the effect of making it a scholastic study
His sagacity proved by the subsequent breakdown of Smith's
economy The true reason.
DAM SMITH was not a propagandist or a politician,
as were the Physiocrats. He was simply a philoso-
pher, addressing primarily a small, comfortable and cul-
tured class, whose sympathies and feelings were identified
with the existing social order, and he wielded a power
which requires the fruition of time and the opening of
opportunity for its culmination in action a power which
men of affairs are in its first beginnings apt to underrate.
When the first few copies of my "Progress and Pov-
erty " were printed in an author's edition in San Francisco,
170
Chap. VI. ADAM SMITH'S INFLUENCE. 171
a large landowner (the late General Beale, proprietor of
the Tejon Ranch, and afterwards United States Minister to
Austria), sought me to express the pleasure with which he
had read it as an intellectual performance. This, he said,
he had felt at liberty to enjoy, for to speak with the free-
dom of philosophic frankness, he was certain my work
would never be heard of by those whom I wished it to
affect.
In the same way, but to a much greater degree, the
small class whom alone the "Wealth of Nations" could
first reach were able to enjoy its greatness as an intellec-
tual performance that widened the circle of thought. Few
of them were disturbed by any fear of its ultimate effect
on special interests. At that time a popular press was
not yet in existence, and books of this kind were addressed
only to the "superior orders." The House of Commons,
the nominal representative of the unprivileged in Great
Britain, was filled by the appointees of the great land-
owners ; and the oligarchy that ruled in the British Islands
was really stronger than the similar class under the abso-
lute monarchy of France. It was only a few years before
the publication of the " Wealth of Nations " that the land-
lord's right of pit and gallows, i.e., of life and death, had
been abolished in Scotland, not as a matter of justice, but
by purchase, as a matter of dynastic expediency ; and work-
men in coal-pits and salt-works were still virtually slaves,
being formally denied the right of habeas corpus.
Adam Smith had avoided arousing antagonism from the
landed interests. And in turning the aggressive side of
the new science against the mercantile system, as he styled
what has since been known as the protective system, he
found favor with, rather than excited prejudice among,
the cultured class the only class to which such a book as
his could at that time be addressed. Such a class, under
the conditions then existing in Great Britain, is apt to feel
172 THE NATUKE OF WEALTH. Boole II.
contempt tinged with anger for traders beginning to aspire
towards sharing the power and place of " born masters of
the soil." Thus the indignation with which he speaks of
how " the sneaking arts of underling tradesmen are erected
into political maxims for the conduct of a great empire,"
and with which he compares " the capricious ambition of
kings and ministers" "the violence and injustice of the
rulers of mankind, for which, perhaps, the nature of human
affairs can scarce afford a remedy," with " the impertinent
jealousy, the mean rapacity, the monopolizing spirit of
merchants and manufacturers who neither are nor ought
to be the rulers of mankind," could not fail to strike a
sympathetic chord in the spirit then intellectually as
politically dominant in Great^Britain. This would render
unnoticed the quiet way in which he shows that " superi-
ority^of birth " is but " an ancient superiority of fortune " *
and attributes the difference between the philosopher and
the street porter to the difference in the accidents under
which they have been placed.
Yet with the outbreak of the French Revolution the
radicalism of the " Wealth of Nations " did not pass en-
tirely unnoticed. A note appended by Dugald Stewart, in
1810, to the second edition of the biography of Adam
Smith, first read before the Royal Society of Edinburgh
in 1793, explains as a reason why he had in the first edi-
tion confined himself to a much more general view of the
" Wealth of Nations " than he had once intended, that :
The doctrine of a free trade was itself represented as of a revolu-
tionary tendency ; and some who had formerly prided themselves on
an intimacy with Mr. Smith, and on their zeal for the propagation
of his liberal system, began to call in question the expediency of
subjecting to the disputations of philosophers the arcana of state
policy and the unfathomable wisdom of the feudal ages.
* "Wealth of Nations," Book V., Chapter IL, Part U.
Chap. VI. ADAM SMITH'S INFLUENCE. 173
And William Playfair, in his annotated edition of the
" Wealth of Nations " (London, 1805), deems it necessary
to apologize for Smith's sympathy with the Physiocrats by
declaring that " the real fact is that Dr. Smith, as well as
many of the Economists themselves, was ignorant of the
secret belonging to the sect" that " simply pretending to
reduce to practice the Economical Table, they were silently
laboring to overturn the thrones of Europe." This igno-
rance, since it was shared at the same time by " a monarch
of such eminent abilities and penetration" as the great
Frederick of Prussia, Playfair thinks may be well par-
doned to Dr. Smith. And pardoned it was. Or rather
the objections made to Dr. Smith on the score of radicalism
attracted so little attention that it is only by delving in
forgotten literature that any trace of them can be found.
The larger fact is that Adam Smith, opening the study of
political economy at a lower level than the Physiocrats,
found less resistance, and his book began to secure so per-
manent a recognition for the new science that its continu-
ance to our time is properly traced to him as its founder
rather than to them.
In 1798, five years after Stewart read his biography of
Smith before the Royal Society of Edinburgh, and eight
years after the author of the " Wealth of Nations," lament-
ing with his last breath that he had done so little, was laid
to rest in the Edinburgh Cannongate, the English clergy-
man Malthus brought forward his famous theory of popu-
lation. This at once, like " a long-felt want," took its place
in the crystallizing system of political economy which
Smith had brought into shape, and which, if it was lacking
in a clear and consistent definition of wealth, was not on
that account objectionable to the spirit of the learned in-
stitutions which soon began to make its teaching a func-
tion of their official faculties. A few years after Malthus
came Ricardo, to correct mistakes into which Smith had
174 THE NATURE OF WEALTH. Book II.
fallen as to the nature and cause of rent, and to formulate
the true law of rent ; but to do this by laying stress on the
fact that rent would increase as the necessities of increas-
ing population forced cultivation to less and less produc-
tive land, or to less and less productive points on the same
land.
Thus, the theory of wages into which Adam Smith fell
when, as though fearful of the radical conclusions to which
it must lead, he suddenly abandons his true perception
that " the produce of labor constitutes the natural recom-
pense or wages of labor," to consider the master as provid-
ing from his capital the wages of his workmen, together
with the theory of the tendency of population to increase
faster than subsistence, and the apprehension of the
theory of rent as resulting from the forcing of exertion to
less and less productive land, with what was deemed its
corollary, " the law of diminishing productiveness in agri-
culture," became cardinal doctrine. These linking with
and buttressing each other, in what soon became the ac-
cepted system of political economy as developed from the
" Wealth of Nations," did away effectually with any fear
that the study of natural laws of the production and dis-
tribution of wealth might be dangerous to the great House
of Have. For in this way political economy was made to
serve the purpose of an assumed scientific demonstration
that the shocking contrasts in the material conditions of
men which our advancing civilization presents, result not
from the injustice and mistakes of human law, but from
the immutable law of Nature the decrees of the All-origi-
nating, All-maintaining Spirit.
So far from showing any menace to the great special
interests, a political economy, so perverted, soon took its
place with a similarly perverted Christianity to soothe the
conscience of the rich and to frown down discontent on
the part of the poor. In text-books and teachings from
Chap. VI. ADAM SMITH'S INFLUENCE. 175
which Adam Smith's recurring perceptions of the natural
equality of men were eliminated, it became indeed "the
dismal science." It was held by its admirers that it needed
only to be sufficiently taught them to convince even the
" lower orders/' that things as they are are things as they
ought to be, except perhaps that " the monopolizing spirit
of merchants and manufacturers,' 7 and " the sneaking arts
of underling tradesmen" should no longer be permitted
to be erected into maxims for governmental interferences
with trade.
Thus as the system of political economy presented by
Adam Smith began to attract the attention of the thought-
ful and cultured, it did not meet the resistance it would
have encountered had the special interests which it threat-
ened been really those of the growing class of merchants
and manufacturers. On the other hand, the apparent
turning of its aggressive side against merchants and manu-
facturers prevented the powerful landed interest from
perceiving fully its relation to their own monopoly until
it had gained the weight of recognized philosophic au-
thority.
Now the course of social development in the civilized
world generally, but particularly in Great Britain, in the
era of steam which immediately followed Adam Smith,
was enormously to increase the relative social weight of
the mercantile and manufacturing classes. But when,
fifty years after the death of Adam Smith, what he called
the mercantile system came into political issue in the
agitation for the repeal of the corn-laws, it was not among
merchants and manufacturers, but in the power of the
landed interest, that the strong defense of this system
was seen to He. The repeal of the corn-laws was carried
against the strenuous resistance of the landowners by a
combination of merchants and manufacturers with the
working-classes, urged by bitter discontent and growing
176 THE NATUEE OF WEALTH. Boole II.
aspirations. But it was not carried until it became evident
to the more thoughtful that if the agitation went on it
would be sure to lead to an inquiry into the right by which
a few individuals called landowners, claimed the land of
the British Islands as their property.
The truth is that merchants and manufacturers, as
merchants and manufacturers, are not the ultimate bene-
ficiaries of the protective system, and that mercantile
interests can long profit by it only when sheltered behind
some special monopoly. This has been shown in the
United States, where the owners of coal and mineral and
timber and sugar land have constituted the backbone
of the political strength that has carried protection to such
monstrous length.
The repeal of the English corn-laws passed in Great
Britain for a victory of free trade as far as it was practicable
to carry free trade. And in scholastic circles in that coun-
try and in the United States, and throughout the civilized
world that took its intellectual impulse from England, it
greatly increased the hopefulness of the professed econo-
mists.
Thus strengthened by this powerful impulse, there con-
tinued to grow up under the sanction and development of
a series of able and authoritatively placed men, whose
efforts were devoted to smoothing away difficulties and
covering up incongruities, an accredited system of political
economy which found its most widely accepted expounder
in John Stuart Mill, and reached perhaps its highest point
of authority in scholastic circles about or shortly after the
centennial of the publication of the " Wealth of Nations."
Yet it was as wanting in coherence as the image that
Nebuchadnezzar saw in his dream. It contained much
real truth well worked out. But this was conjoined with
fallacies which could not stand examination. The attempt
to define its object-noun, wealth, and the sub-term of
Chap. VI. ADAM SMITH'S INFLUENCE. 177
wealth, capital, made them much more indefinite and
confused than they had been left by Adam Smith. And
it was never attempted to bring together what were given
as the laws of the distribution of wealth, as that would
have shown at a glance their want of relation.
This political economy had no real hold on common
thought, and was regarded even by ordinarily intelligent
men as a scholastic or esoteric science. But it was spoken
of by its professors with the utmost confidence as an
assured science, and their belief in its success was greatly
increased.
From the beginning until well past the middle of the
nineteenth century the temper of the recognized expound-
ers of the political economy which took shape from Adam
Smith's foundation was hopeful and confident. They
believed they had hold of a true science, which needed
only development to be universally recognized.
In what was printed as the introduction to the first
American edition of Jean Baptiste Say's treatise on polit-
ical economy* which being translated into English and
widely circulated on both sides of the Atlantic became for
a long time, in the United States at least, perhaps the most
popular of the expositions of the science that Adam Smith
had founded Say points out certain difficulties that polit-
ical economy must have to encounter : " that opinions in
political economy are not only maintained by vanity, but
by the self-interest enlisted in the maintenance of a vicious
order of things ; " that " writers are found who possess the
lamentable faculty of composing articles for journals,
pamphlets and even whole volumes upon subjects which,
according to their own confession, they do not under-
stand ; " and that " such is the indifference of the public
* The original work was published in 1803. But this introduction
bears internal evidence of having been written not earlier than 1814.
178 THE NATURE OF WEALTH. Boole II.
that they rather prefer trusting to assertions than be at the
trouble of investigating them."
But he continues :
Everything, however, announces that this beautiful, and above
all, useful science, is spreading itself with increasing rapidity. Since
it has been perceived that it does not rest upon hypothesis, but is
founded upon observation and experience, its importance has been
felt. It is now taught wherever knowledge is cherished. In the
universities of Germany, of Scotland, of Spain, of Italy, and of the
north of Europe, professorships of political economy are already es-
tablished. Hereafter this science will be taught in them, with all the
advantages of a regular and systematic study. Whilst the Univer-
sity of Oxford proceeds in her old and beaten track, within a few
years that of Cambridge has established a chair for the purpose of
imparting instruction in this new science. Courses of lectures are
delivered in Geneva and various other places ; and the merchants of
Barcelona have, at their own expense, founded a professorship on
political economy. It is now considered as forming an essential part
of the education of princes ; and those who are called to that high
distinction ought to blush at being ignorant of its principles. The
Emperor of Russia has desired his brothers, the Grand Dukes Nicho-
las and Michael, to pursue a course of study on this subject under
the direction of M. Storch. Finally, the Government of France has
done itself lasting honor by establishing in this kingdom, under the
sanction of public authority, the first professorship of political
economy.
This hopefulness as to what was to be accomplished
by the regular and systematic study of political economy
pervaded for a long time all economic writings. Even
when it was necessary to admit that the unanimity that
had been confidently expected had not come, it was always
just about to come.
Thus Colonel Torrens, in the introduction to his " Essay
on the Production of Wealth," says in 1821 :
In the progress of the human mind, a period of controversy among
the cultivators of any branch of science must necessarily precede the
period of unanimity. With respect to political economy, the period
Chap. VI. ADAM SMITH'S INFLUENCE. 179
of controversy is passing away, and that of unanimity rapidly ap-
proaching. Twenty years hence there will scarcely exist a doubt
respecting any of its fundamental principles.
With the great defeat of protection in 1846, the confi-
dence of political economists became even greater than
before. But the predictions that the example of Great
Britain in abolishing protective duties would be quickly
followed throughout the civilized world predictions based
on the assumption that this partial victory for freedom
had been won by the advance of an intelligent political
economy, were not realized; and fostered by such tre-
mendous political events as the great fight between the
American States and the Franco-German war, a wave of
reaction in favor of protection seemed to sweep over pretty
nearly all the civilized world outside of Great Britain.
And while in the scholastic world, of the English-speak-
ing countries at least, the triumph of Adam Smith's oppo-
sition to the principles of the mercantile system seemed to
have established firmly an accepted science of political
economy, and chairs for its teaching formed an indispensa-
ble adjunct of every institution of education, the real inco-
herencies which had been slurred over began more and
more to show themselves.
In 1856 Professor J. E. Cairnes, delivering in Dublin
University on the Whately Foundation a series of lectures
afterwards reprinted under the title of "The Character
and Logical Method of Political Economy," quoted what he
called the unlucky prophecy of Torrens, made in 1821, that
the period of controversy had passed and that of unanimity
was rapidly approaching, and that in twenty years from
then there would scarcely exist a doubt respecting any of
th e fundamental principles of political economy. Professor
Cairnes did this only to give point to a statement that fun-
damental questions "are still vehemently debated, not
merely by sciolists and smatterers, who may always be
180 THE NATURE OF WEALTH. BooTcII.
expected to wrangle, but by the professed cultivators and
recognized expounders of the science," and that :
So far from the period of controversy having passed, it seems
hardly yet to have begun controversy, I mean, not merely respect-
ing propositions of secondary importance, or the practical application
of scientific doctrines (for such controversy is only an evidence of the
vitality of a science, and is a necessary condition of its progress), but
controversy respecting fundamental principles which lie at the root
of its reasonings, and which were regarded as settled when Colonel
Torrens wrote.
Cairnes continues with a passage, which as showing a
perception by a leading professor of political economy
of the effect of the establishment of professorships, from
which Say a generation before had hoped so much and
from which up to this very time so much continued as it
still continues to be hoped by those who know no better,
is worth my quoting :
When Political Economy had nothing to recommend it to public
notice but its own proper and intrinsic evidence, no man professed
himself a political economist who had not conscientiously studied
and mastered its elementary principles ; and no one who acknowledged
himself a political economist discussed an economic problem without
constant reference to the recognized axioms of the science. But
when the immense success of free trade gave experimental proof of
the justice of those principles on which economists relied, an obser-
vable change took place both in the mode of conducting economic
discussions and in the class of persons who attached themselves to
the cause of political economy. Many now enrolled themselves as
political economists who had never taken the trouble to study the
elementary principles of the science ; and some, perhaps, 'whose
capacities did not enable them to appreciate its evidence ; while even
those who had mastered its doctrines, in their anxiety to propitiate
a popular audience, were too often led to abandon the true grounds
of the science, in order to find for it in the facts and results of free
trade a more popular and striking vindication. It was as if mathe-
maticians, in order to attract new adherents to their ranks, had con-
sented to abandon the method of analysis, and to rest the truth of
their formulas on the correspondence of the almanacs with astro-
Chap. VI. ADAM SMITH'S INFLUENCE. 181
nomical events. The severe and logical style which characterized the
cultivators of the science in the early part of the century has thus
been changed to suit the different character of the audience to whom
economists now addressed themselves. The discussions of Political
Economy have been constantly assuming more of a statistical char-
acter ; results are now appealed to instead of principles ; the rules of
arithmetic are superseding the canons of inductive reasoning ; till the
true course of investigation has been well-nigh forgotten, and Politi-
cal Economy seems in danger of realizing the fate of Atalanta.
At the present time it is clearly to be seen that the worst
fears of Cairnes have been more than realized. The period
of controversy instead of having passed, had indeed, it has
since been proved, hardly then begun. The accelerating
tendency since his time as in the period of which he then
spoke, has been away from, not towards, uniformity ; con-
troversy has become incoherence, and what he then thought
to be the science of political economy has been destroyed
at the hands of its own professors.
But while Cairnes realized the true drift of a tendency
that most of his contemporaries did not understand, and saw
the real effect of a study of political economy for the pur-
pose of filling professorships and writing books, he did not
see the real cause which so much faster and farther than he
could have imagined has given sober reality to his more
than half-rhetorical prediction. The reason of the con-
stantly increasing confusion of the scholastic political econ-
omy has lain in the failure of the so-called science to define
its subject-matter or object-noun. Statistics cannot aid us
in the search for a thing until we know what it is we want to
find. It is the Tower of Babel over again. Men who at-
tempt to develop a science of the production and distribu-
tion of wealth without first deciding what they mean by
wealth cannot understand each other or even understand
themselves.
CHAPTER VII.
INEFFECTUAL GROPINGS TOWARD A DETER-
MINATION OF WEALTH.
SHOWING THE OPPOSITION TO THE SCHOLASTIC ECONOMY
BEFORE "PROGRESS AND POVERTY."
Illogical character of the "Wealth of Nations" Statements of nat-
ural right Spence, Ogilvie, Chalmers, Wakefield, Spencer, Dove,
Bisset Vague recognitions of natural right Protection gave rise
to no political economy in England, but did elsewhere Germany
and protectionist political economy in the United States Diver-
gence of the schools Trade-unionism in socialism.
rflHE " Wealth of Nations " won great vogue by its strik-
1 ing qualities and its prudence in avoiding antagonism
with landowners. It made a nucleus around which the
scholastic classes could rally, assuming that they were
teaching a science of political economy, without seriously
hurting any powerful interest. What Smith had done
was after all an evasion a settlement which left the
cardinal principles unsettled. He had shown how greatly
the division of labor increases the productiveness of labor,
and without daring to go too far had shown that to leave
labor unrestricted would increase the annual product. He
had in short turned the aggressive side of the science
against the protective, or, as he styled it, the mercantile
system, thus putting on its feet a political economy which
taught a sort of free trade that did not seriously object to
182
Chap.FH. INEFFECTUAL GKOPINGS. 183
taxes on labor and the products of labor for raising the
revenues of government.
What wealth, or its sub-term, capital, was, Smith did
not really say, nor yet did he make clear the division of
their joint produce between the human factor and the
natural factor, nor venture to show what was the cause
and warrant of poverty. In political economy as he left
it there were no axioms nothing that would correlate and
hold together. But such was his genius and prudence, and
his adaptability to the temper of his time, that he got a
hearing where more daring thinkers failed, and a science
of political economy began to grow on his foundations.
Malthus by giving a scientific semblance to a delusion
which tallied with popular impressions, and Ricardo by
giving form to a scientific interpretation of rent, soon
provided what passed for axioms, one of which was wrong,
and the other of which was wrongly or at least inade-
quately stated. While between them, all was left at sea.
Yet such was the feeling that there ought to be a polit-
ical economy, and so agreeable to the ruling class was
what was offered as such, that chairs for the study of it
began to multiply. They were of course filled by men
who taught what they had learned, with the constant pres-
sure on them of the class dominant in all colleges a class
which, whatever be the faults of a political economy, are
disposed to accept things as they are as the best order of
things possible, and to view with intense opposition any
radical change that would provoke real discussion. And
as nearly every professor of political economy thought it
incumbent on him to write a text-book, or at least to do
something to show a reason for his existence, there was
much going over old ground and picking out of small
differences, but no questioning of anything that could
arouse vital debate. And given a state of society in which
the many were poor and the few were rich, any attempt to
184 THE NATURE OF WEALTH. Boole II.
point out a true political economy, if it got attention,
would inevitably arouse much debate.
Thus in fact political economy, as it found teachers and
professors and the standing of a science, was to the class
who had appropriated land as belonging to them exclu-
sively a very comfortable doctrine. It applied the doctrine
of "letting things alone," without any suggestion of the
question of how things came to be. It was, as it was
styled by Clement C. Biddle, the American translator of
Say, "the liberal doctrine that the most active, general
and profitable employments are given to the industry and
commerce of every people by allowing to their direction
and application the most perfect freedom compatible with
the security of property." As to what constitutes property
there was no dispute. And if one did not look too closely,
and beyond the usages of the times, in the more advanced
European nations there could be no dispute. Property?
Why property was of course what was susceptible of
ownership. Any fool would know that !
Nor after the surrender of the Peel ministry, in time to
prevent it, was any question of the sanction of property
raised. English slavery had disappeared in its last forms
before the nineteenth century began, and though the
question of the ownership of slaves in the tropical colonies,
and finally in the Southern United States, was likely if
continuously debated to bring up the larger question, this
did not appeal to the feelings of the people. So it was
settled for the time, as to the colonies by the device of
buying off the slave-owners at public expense ; and in the
United States by the arbitrament of war.
The question of the validity of property was never really
raised in England until after the publication of " Progress
and Poverty" began to call it up. But the attention
which that has aroused has since brought to light some
definite utterances, which show, as I take it, that the
CTiap.VII. INEFFECTUAL GEOPINGS. 185
doctrines of the French Physiocrats would have found
hospitable reception in Great Britain had it been possible
at the time to have really made them known.
Thus H. M. Hyndman has dug up from the British
Museum a lecture by Thomas Spence, delivered before
the Philosophical Society of Newcastle, on November 8,
1775, a year prior to the publication of the " Wealth of
Nations," and for which the Society, as Spence puts it, did
him " the honor " to expel him. In this lecture Spence
declares that all men " have as equal and just a property
in land as they have in liberty, air, or the light and heat
of the sun," and he proposes what now would be again
called " the single tax "that the value of land should be
taken for all public expenses, and all other taxes of what-
ever kind and nature should be abolished. He draws a
glowing picture of what humanity would be if this simple
but most radical reform were adopted. But so much
against the wishes of all that had authority was he, that
his proposal was utterly forgotten until dug out of its
burial-place more than a century after.
So, in 1889, D. C. Macdonald, a single-tax man, and a
solicitor of Aberdeen, dug out of the Advocates' Library
of Edinburgh, and the British Museum, in London, copies
of a book printed in 1782 by William Ogilvie, Professor
of Humanities in King's College, Aberdeen, entitled " An
Essay on the Right of Property in Land, with Respect to
its Foundation in the Law of Nature, its Present Estab-
lishment by the Municipal Laws of Europe, and the Regu-
lations by which it might be Rendered More Beneficial to
the Lower Ranks of Mankind." Professor Ogilvie, though
he makes no reference to any other authority than that of
Moses, had evidently some knowledge of the Physiocrats,
and most unquestionably declares that land is a birthright
which every citizen still retains. He advocates the taxation
of land, with the entire abolition of all other taxes, though,
186 THE NATURE OF WEALTH. Book II.
as if despairing of so radical a reform, he proposes some
palliatives such as allotments to actual settlers, leases, etc.
He doubtless saw the utter hopelessness of making the
fight under existing conditions, for it seems probable that
his book was never published, only a few copies being
printed for private circulation by the author.
Among the scholastically accepted writers in the first
thirty years of the century are two who seem to have some
glimmerings of the truth perceived by the Physiocrats, of
the relations between land and labor, though in a curi-
ously distorted way. Dr. Chalmers, who was a divinity
professor in the University of Edinburgh, and a strong
Malthusian, contended that the owners of land ultimately
paid all taxes levied on labor, and contended that titles
(which he regarded as so much retained by the state for
beneficial purposes) should be maintained. All others he
would have ultimately abolished, and the revenues of the
state ultimately raised from the value of land. This, he
thought, would be simpler and better, and avoid much
dispute, "relieving government from the odium of taxes
which so endanger the cause of order and authority." He
was a stanch supporter of primogeniture, opposed to any-
thing which aimed at the division of the land, and would
have the country enjoy the spectacle of a noble and splen-
did aristocracy, of which the younger branches should be
supported by places of at least 1000 a year in the public
services. And, while he would have the landlords pay all
taxes, he thought it " wholesome and befitting that they
should have the political ascendancy also." For "the
lords of the soil, we repeat, are naturally and properly the
lords of the ascendant." Chalmers was a good example of
the toadying spirit of so many of the Scottish ministers.
He afterward joined in the disruption of the Kirk by the
Free Kirk movement. Yet, in spite of his obsequience,
he did not succeed in popularizing the single tax with the
iL INEFFECTUAL GROPINGS. 187
British aristocracy, who fought the repeal of the corn-laws
as long as they could. He passed as an economist almost
into oblivion.
Another curious example of the perversion of the doc-
trine of the relation between land and labor was given by
Edward Gibbon "Wakefield, who visited this country in its
more democratic days in the first quarter of the century,
ere the natural result of our thoughtless acceptance of
land and true property as alike wealth, and our desire to
get in the first place an owner for land had begun to show
so fully its effects. He was impressed with the difference
between the society growing up here and that to which he
had been used, and viewing everything from the stand-
point of those accustomed to look on the rest of mankind
as created for their benefit, he deemed the great social and
economic disadvantage of the United States to be "the
scarcity of labor." To this he traces the rudeness of the
upper class its want of those refinements, enjoyments
and delicacies of life, common to the aristocracy of Eng-
land. How could an English gentleman emigrate to a
country where he might actually have to black his own
boots, and where no one could count on a constant supply
of labor ready to accept as a boon any opportunity to per-
form the most menial and degrading service ? He saw, as
Adam Smith before him saw, that this " scarcity of labor"
came from the cheapness of land where the vast area of
the public domain was open for settlement at nominal prices.
Without the slightest question that the land was made for
landlords, and that laborers were intended to furnish a
supply of labor for the upper classes, he wished the new
countries which England had yet to settle to be socially,
politically and economically newer Englands ; and, without
waiting for the slower process of speculation, he wished to
bring about in these new countries such salutary " scarcity
of employment " as would give cheap and abundant labor
188 THE NATURE OF WEALTH. Booltll.
from the very start of settlement. He, therefore, proposed
that land should not be given, but sold at the outset, at
what he called a sufficient price a price high enough to
make laborers work for others until they had acquired the
fund necessary to pay a price for what nature offered with-
out money and without price. The money received by the
state in this way he proposed to devote in paying the
passage of suitable and selected immigrants. This would
give from the start two classes of immigrants to settle the
great waste places which England still retained, especially
in Australia and New Zealand the better class, who would
pay their own expenses, and buy from the government
their own land, which would at first have a value ; and the
assisted class, who, being selected from the best workers
in the old country, would at once be able to supply all the
required labor. Thus the new country where this plan was
adopted would from the first, while wages were still enough
higher than in England to make working-men, especially
if assisted, desire to go there, offer the inducement to a
wealthy and cultivated class of a " reasonable " and ready
supply of labor, and save them from such hardships from
the lack of it as made the United States so unattractive to
the " better class " of Englishmen.
This plan was very attractive to the more wealthy and
influential class of Englishmen concerned in, or thinking
of, emigrating to the newer colonies, and was finally adopted
by the corporation concerned in settling West Australia,
and afterwards the other Australian colonies. But even
its obvious inferences never affected the teaching of
political economy.
In 1850 two works appeared in England, which, though
neither of them was from the ranks of the scholastic econ-
omists, were both premonitions of a coming demand for a
political economy which would take some consideration of
the interest of the masses. One of these was by Herbert
Chap.VIL INEFFECTUAL GROPINGS. 189
Spencer, then young and unknown, and was entitled
"Social Statics, or The Conditions Essential to Human
Happiness Specified, and the First of Them Developed."
Chapter IX. of this book, " The Right to the Use of the
Earth," is a telling denial of what the economists of Smith's
school had quietly assumed could not be questioned, the
validity of property in land. It got no attention in Eng-
land, having been noticed in the " British Quarterly Re-
view " only in 1876, when his sociological works began first
to be heard of. It was however reprinted in the United
States in 1864, with a note by the author, and when, about
1877, Appleton & Co., of New York, became the American
publishers of his philosophical writings, they reprinted
this with his other works, and on the strength of them it
began to get into circulation.
This was the only work of the kind I knew of when
writing "Progress and Poverty;" and in "A Perplexed
Philosopher" (1892), I have given a full account of it, and
of Mr. Spencer's shifting repudiation and final recantation
of what he had said in denial of property in land.
In the same year (1850) appeared in London "The
Theory of Human Progression and Natural Probability of
a Reign of Justice." It was published anonymously and
dedicated to Victor Cousin of France. The argument of
" The Theory of Human Progression " is that there is a
probability of the reign of justice on earth, or millennium,
foretold by Scriptural prophecy. One of his primary
postulates is the inspiration of the Bible and the divinity
of the founder of the Christian religion, which in his view
is Scottish Presbyterianism, and which he treats as the true
religion, all others being false. But, though adhering to
the doctrine of the fall of man, who is by nature vile and
wicked, he is an evolutionist in believing in the natural
necessary advance of mankind by the progress of know-
ledge, or to use his phrase, by the progress of correct ere-
190 THE NATURE OF WEALTH. Book II.
dence in the natural order and necessary sequence of the
sciences, to a reign of justice, in which is to grow a reign
of benevolence.
The elements of correct credence as he enunciates them
(p. 94) are :
1. The Bible.
2. A correct view of the phenomena of material nature.
3. A correct philosophy of the mental operations.
The three things which he links together as respectively
cause and effect, involving the conditions of society, are
(p. 120):
Knowledge and freedom.
Superstition and despotism.
Infidelity and anarchy.
And the four propositions which best give an idea of
the scope of his work and the course of his thought are
(p. 160):
1. On the sure word of divine prophecy we anticipate a reign of
justice on the earth.
2. That a reign of justice necessarily implies that every man in
the world shall at some future time be put in possession of all his
rights.
3. That the history of civilized communities shows us that the
progression of mankind in a political aspect is from a diversity of
privileges toward an equality of rights.
4. That one man can have a privilege only by depriving another
man or many other men of a portion of their rights. Consequently
that a reign of justice will consist in the destruction of every privi-
lege, and in the restitution of every right.
These propositions are extended to twenty-one main
propositions and twelve sub-propositions, but they are all
involved in the first four. The tenth sub-division of the
twentieth proposition and the twenty-first proposition as a
whole are, however, well worth quoting as giving an idea
of the character of the man and his thought :
CUap.VII. INEFFECTUAL GROPINGS. 191
. . . Knowledge does necessarily produce change, as much as heat
necessarily produces change ; and where knowledge becomes more
and more accurate, more and more extensive, and more and more
generally diffused, change must necessarily take place in the same
ratio and entail with it a new order of society, and an amended con-
dition of man upon the globe. Wherever, then, the unjust interests
of the ruling classes are required to give way before the progress of
knowledge and those ruling classes peremptorily refuse to allow the
condition of society to be amended, the sword is the instrument
which knowledge and reason may be compelled to use ; for it is not
possible, it is not within the limits of man's choice, that the progress
of society can be permanently arrested when the intellect of the
masses has advanced in knowledge beyond those propositions, of
which the present condition is only the realization.
21. We posit, finally, that the acquisition, scientific ordination,
and general diffusion of knowledge will necessarily obliterate error
and superstition, and continually amend the condition of man upon
the globe, until his ultimate condition shall be the best the circum-
stances of the earth permit of. On this ground we take up (what
might in other and abler hands be an argument of no small interest,
namely) the natural probability of a millennium, based on the clas-
sification of the sciences, on the past progress of mankind, and on
the computed evolution of man's future progress. The outline alone
of this argument we shall indicate, and we have no hesitation in
believing that every one who sees it in its true light will at once see
how the combination of knowledge and reason must regenerate the
earth and evolve a period of universal prosperity which the Divine
Creator has graciously promised, and whose natural probability we
maintain to be within the calculation of the human reason.
The book which, so far as my knowledge goes, " The
Theory of Human Progression" most nearly resembles
in motive, scope and conclusions is Herbert Spencer's
" Social Statics," published in the same year, though evi-
dently without knowledge of each other. Both seem to
have little knowledge of and make slight reference to
writers on political economy Spencer referring in one
place to Smith, Mill and Chalmers, while Dove quotes no
authority later than Moses. Both go largely over the same
ground, and both reach substantially the^same practical
192 THE NATUEE OF WEALTH. Book II.
conclusion; both assert the same grand doctrine of the
natural rights of men, which is the essence of Jeffersonian
democracy and the touchstone of true reform ; both de-
clare the supremacy of a higher law than human enact-
ments, and both believe in an evolutionary process which
shall raise men to higher and nobler conditions. Both
express clearly and well the fundamental postulates of the
single tax, and both are of course absolute free traders.
Spencer devotes more space to the land question, and more
elaborately proves the incompatibility of private ownership
of land with the moral law, and declares the justice and
necessity of appropriating rent for public revenues with-
out saying anything of the mode ; while Dove dwells at
more length on the wickedness and stupidity of tariffs,
excises and the other modes of raising revenues from taxes
on the products of labor, and clearly indicates taxation as
the method of appropriating rent for public purposes.
But while the English agnostic might have regarded the
Scottish Calvinist as yet in the bonds of an utterly un-
scientific superstition, there is one respect in which the
vigor and courage of Dove's thought shines superior to
Spencer's. Spencer, after demonstrating the absolute in-
validity of any possible claim to the private ownership of
land, goes on to say that great difficulties must attend the
resumption by mankind at large of their rights to the soil ;
that had we to deal with the parties who originally robbed
the human race of their heritage, we might make short
work of the matter; but that unfortunately most of our
present landowners are men who have either mediately or
immediate^ given for their estates equivalents of honestly
earned wealth, and that to "justly estimate and liquidate
the claims of such is one of the most intricate problems
society will one day have to solve."
But the orthodox Presbyterian utterly refuses thus to
bend the knee to Baal in the slightest concession. While
il. INEFFECTUAL GROPINGS. 193
he is not more clear than Spencer in demonstrating that
landowners as landowners have no rights whatever, there
is not one word in his book that recognizes in any way
their claims. On the contrary, he declares that slavery is
man-robbery, and that the 20,000,000 compensation given
by the British Parliament to the West India planters on
the emancipation of their slaves was an act of injustice
and oppression to the British masses, and (p. 139) adds :
No man in the world and no association in the world could ever
have an equitable right to tax a laborer for the purpose of remunerat-
ing a man-robber ; and, although the measure is now past and done
with, we very much question whether some analogous cases will
not be cleared up by the mass of the nation ere many years pass
over the heads of Englishmen. When the question of landed
property comes to a definite discussion there may be little thought
of compensation.
Yet neither in England nor in the United States, where
an edition seems to have been published in Boston at the
expense of Senator Sumner, did Dove get any attention,
and I never heard of it until after the publication of
" Progress and Poverty," when, in Ireland in 1882, I was
presented with a copy by Charles Eason, head of the
Dublin branch of the great news-publishing house of
Smith & Sons.
In 1854 appeared another book by Patrick Edward
Dove, in which the authorship of " The Theory of Human
Progression " was announced " The Elements of Political
Science, in two books: first, on Method, second, on
Doctrine." And in 1856 appeared a third book, "The
Logic of the Christian Faith," being a dissertation on
skepticism, pantheism, the a priori argument, the a pos-
teriori argument, the intuitional argument and revelation,
also under title of the author, and with a dedication to
Charles Sumner, Senator of the United States, who, with-
out his knowledge, had procured a republication of Dove's
194 THE NATURE OF WEALTH. Book II.
first book in Boston, being moved thereto doubtless by its
vigorous words on slavery.
In 1859 appeared in London " The Strength of Nations,"
by Andrew Bisset, who has since (1877) published " The
History of the Struggle for Parliamentary Government
in England," a review of the systematic attempt of the
families of Plantagenet, Tudor and Stuart to enslave the
English people, which is mainly occupied with the attempt
of Charles I., the resistance to it, and his final execution.
" The Strength of Nations " very suggestively calls atten-
tion to the fact that feudal tenures were conditioned on
the payment of rent or special services to the state, and
thus the much-lauded abolition of what was left of the
feudal incidents by the Long Parliament was a relief of
the landholders of the payment of what measured at
present prices would suffice for the whole expenditure of
England, and the saddling of it on general taxation ; and
that from this dates the beginning of the English national
debt.
These books have produced very little effect upon polit-
ical economy, and some of them have passed out of print
without any perceptible effect at all. It is likely that there
were others in addition to what I have mentioned, and it
is certain that there were others that occasionally found
their way into print which irregularly and spasmodically
expressed some touch of the idea formulated in lines of
the Wat Tyler rising :
When Adam delved and Eve span,
Who was then a gentleman?
Some notion of the incongruity of the idea that a small
fraction of mankind were intended to' eat, and eat luxuri-
ously without working, and another and far larger portion
to have nothing but work to enable them to eat, and be
compelled to beg as a boon the opportunity to do that,
Chap.VIL INEFFECTUAL GROPINGS. 196
runs in broken flashes through much of the reform litera-
ture. But in political economy as it. up to 1880 existed
all such questioning was tabooed, and the utmost that
could be found in any of the writers recognized by the
schools was a timid suggestion that the future unearned
increment of land values might sometime be recognized
as belonging to the community, a proposition that, though
it amounted to nothing whatever, as landlords were ready
to sell land for what would give them any unearned
increment not yet in sight, caused John Stuart Mill who
had been giving some adhesion to it to be looked on
askance by some, as an awful radical.
The struggle for the repeal of the corn-laws in England
did not lead to any development of a protectionist political
economy. Books and pamphlets enough were written in
favor of protection, but they were merely appeals to old
habits of thought and vulgar prejudices, and the forces in
favor of repeal carried them down. Elsewhere, however 4 ,
it was different. On the Continent the conditions under
which the tentative victory of free trade was won in Eng-
land were lacking. Cut up into hostile nations, burdened
with demands for revenue, the mercantile system got a
practical hold that could not be broken by the half-hearted
measures of its English opponents, and the gleam of hope
which came with the English-French treaty negotiated be-
tween Cobden and Napoleon III. was destroyed by the
tremendous struggles which followed the fall of the latter.
In Germany the outburst of national feeling which fol-
lowed the struggles with France and the unification of
German states gave rise to a school of German economists
who taught a national economy, in which under various
names, such as romantic, inductive and national, protec-
tionism was advocated.
When it came to making peace between England and
the United States after the War of Independence, the
196 THE NATURE OF WEALTH. SooTcII.
American Commissioners were instructed to stipulate for
a complete free trade between the two countries. They
failed in this, owing to the prevalence of the protective
sentiment in Great Britain at the time. When the Arti-
cles of Confederation gave way to the Constitution, the
need for an independent source of revenue took the easy
means of laying a Federal tariff upon foreign productions,
though free trade between the States was guaranteed ; and
the growth of selfish interests caused by and promotive of
a constantly increasing demand for greater revenue built
up a strong party in favor of protection, which had its
way when the slavery question taking sectional shape put
the States in which protectionism was dominant in control
of the government with the secession of the South. This
interest sought warrant in a scheme of political economy,
and found it in drawing from the German economists and
in the writings of Henry C. Carey of Philadelphia, whose
theory in many respects differed from the English philos-
ophy, noticeably in its advocacy of protection. In America
this protectionist semblance of a political economy had its
chief seat in the University of Pennsylvania, and the sup-
port of a powerful party in which the ideas of Jefferson
were opposed by those of Hamilton ; while in Great Britain
the works of Carlyle and the course of modern study and
development had in scholastic circles popularized the
German.
Among the schools, moreover, there was a divergence
which began to assume greater proportions as the success
of the anti-corn-laws struggle began to be shown in the
accomplishment of all that any of its advocates dared to
propose. This took shape in a contention as to value, which
inclined to emphasize the fact that the admission that some
immaterial things were conceded to be wealth destroyed
the ability to keep any immaterial things having value out
of that category, and consequently that wealth in the
Chap.ril. INEFFECTUAL GROPINGS. 197
common sense was the only thing to be considered in
political economy, which was really a science of exchanges.
With the efforts of Jevons, Macleod and others this began
to make way, and naturally affiliated with the historical,
the inductive, the socialistic and other protectionist schools
which grew from the Continental teachings. Instead of
working for greater directness and simplicity, it really
made of political economy an occult science, in which
nothing was fixed, and the professors of which, claiming
superior knowledge, could support whatever they chose to.
During the century another form of protectionism had
been growing up, originating in England, but gaining
adherents everywhere. Like the others, it recognized no
difference between land and products of labor, counting
them all as wealth, and aimed by main strength at im-
provement in the conditions of labor. Recognizing the
workers as a class naturally separate from employers, it
aimed to unite the laborers in combinations, and to invoke
in their behalf the power of the state to impose restrictions,
shorten hours, and in various ways to serve their interests
at the expense of the primarily employing class. The
German mind, learned, bureaucratic and incomprehensible,
put this in the form of what passed for a system in Karl
Marx's ponderous two volumes entitled " Capital," written
in England in 1867, but published in German and not
translated into English until after his death in 1887.
Without distinguishing between products of nature and
the products of man, Marx holds that there are two kinds of
value use value and exchange value and that through
some alchemy of buying and selling the capitalist who
hires men to turn material into products gets a larger
value than he gives. Upon this economic proposition of
Marx (it can hardly be called a theory), or others similar
to it, political schemes with slight variations have been
promulgated after the manner of political platforms.
198 THE NATURE OF WEALTH. Sook II.
Under the name of socialism, a name which all such
movements have now succeeded in appropriating, all such
plans are embraced. We sometimes hear of "scientific
socialism," as something to be established, as it were, by
proclamation, or by act of government. In this there is a
tendency to confuse the idea of science with that of some-
thing purely conventional or political, a scheme or pro-
posal, not a science. For science, as previously explained,
is concerned with natural laws, not with the proposal of
man with relations which always have existed and always
must exist. Socialism takes no account of natural laws,
neither seeking them nor striving to be governed by them.
It is an art or conventional scheme like any other scheme
in politics or government, while political economy is an
exposition of certain invariable laws of human nature.
The proposal which socialism makes is that the collectivity
or state shall assume the management of all means of
production, including land, capital and man himself; do
away with all competition, and convert mankind into two
classes, the directors, taking their orders from government
and acting by governmental authority, and the workers,
for whom everything shall be provided, including the di-
rectors themselves. It is a proposal to bring back man-
kind to the socialism of Peru, but without reliance on
divine will or power. Modern socialism is in fact without
religion, and its tendency is atheistic. It is more destitute
of any central and guiding principle than any philosophy
I know of. Mankind is here ; how, it does not state ; and
must proceed to make a world for itself, as disorderly as
that which Alice in Wonderland confronted. It has no
system of individual rights whereby it can define the ex-
tent to which the individual is entitled to liberty or to
which the state may go in restraining it. And so long as
no individual has any principle of guidance it is impossible
that society itself should have any. How such a combina-
Chap. VII. INEFFECTUAL GROPINQS. 199
tion could be called a science, and how it should get a fol-
lowing, can be accounted for only by the " fatal facility of
writing without thinking," which the learned German
ability of studying details without any leading principle
permits to pass, and by the number of places which such
a bureaucratic organization would provide. However,
through government repression and its falling in with
trade-union notions it has made great headway in Ger-
many, and has taken considerable hold in England.
This was the condition of things at the beginning of the
eighth decade of the century, when the English political
economy, the only economy making any pretensions to a
science, received from a newer and freer England what has
proved a fatal blow.
CHAPTER VIII.
BREAKDOWN OF SCHOLASTIC POLITICAL
ECONOMY.
SHOWING THE REASON, THE RECEPTION, AND EFFECT ON PO-
LITICAL ECONOMY OF "PROGRESS AND POVERTY."
"Progress and Poverty" Preference of professors to abandon the
" science " rather than radically change it, brings the breakdown
of scholastic economy The "Encyclopaedia Britannica" The
"Austrian school" that has succeeded the "classical."
IN January, 1880, preceded in 1879 by an author's
edition in San Francisco, appeared my " Progress and
Poverty," and it was followed later in the same year by an
English edition and a German edition, and in 1882 by
cheap paper editions both in England and the United
States. The history of the book is briefly this : I reached
California by sea in the early part of 1858, and finally
became an editorial writer. In 1869 I went East on
newspaper business, returning to California in the early
summer of 1870. John Russell Young was at that time
managing editor of the New York Tribune, and I wrote
for him an article on " The Chinese on the Pacific Coast,"
a question that had begun to arouse attention there, taking
the side popular among the working-classes of the Coast,
in opposition to the unrestricted immigration of that
people. Wishing to know what political economy had to
say about the causes of wages, I went to the Philadelphia
200
Chap.VIII. THE SCHOLASTIC BREAKDOWN. 201
Library, looked over John Stuart Mill's " Political Econ-
omy," and accepting his view without question, based my
article upon it. This article attracted attention, especially
in California, and a copy I sent from there to John Stuart
Mill brought a letter of commendation.
While in the East, the contrast of luxury and want that
I saw in New York appalled me, and I left for the West
feeling that there must be a cause for this, and that if
possible I would find out what it was. Turning over the
matter in my mind amid pretty constant occupation, I at
length found the cause in the treatment of land as prop-
erty, and in a pamphlet which I took an interval of leisure
to write, "Our Land and Land Policy" (San Francisco,
1871), I stated it. Something like a thousand copies of
this were sold ; but I saw that to command attention the
work must be done more thoroughly, and refraining from
any effort to press it at the East until I knew more, I
engaged with others in starting (December, 1871) a small
San Francisco daily paper, which occupied my attention,
though I never forgot my main purpose, until December,
1875, when, becoming entangled with an obligation to a
rich man (U. S. Senator John P. Jones), whose note we
had at his own request taken, I went out penniless. I
then asked the Governor (Irwin), whom I had supported,
for a place that would give me leisure to devote myself to
thoughtful work. He gave me what was much of a sine-
cure, and which has now been abolished the position of
State Inspector of Gas-meters. This, while giving, though
irregularly, enough to live on, afforded ample leisure. I had
intended to devote this to my long-cherished plan ; and
after some time spent in writing and speaking, with inter-
vals of reading and study, I brought out " Progress and
Poverty " in an author's edition, in August, 1879.
In this book I took the same question that had perplexed
me. Stating the world- wide problem in an introductory
202 THE NATURE OF WEALTH. BooTcII.
chapter, I found that the explanation of it given by the
accepted political economy was that wages are drawn from
capital, and constantly tend to the lowest amount on which
labor will consent to live and reproduce, because the
increase in the number of laborers tends naturally to fol-
low and overtake any increase in capital. Examining this
doctrine in Book L, consisting of five chapters, entitled
"Wages and Capital," I showed that it was based upon
misconceptions, and that wages were not drawn from
existing capital, but produced by labor. In Book II.,
" Population and Subsistence," I devoted four chapters to
examining and disproving the Malthusian theory. Then
in Book III., "The Laws of Distribution," I showed
(in eight chapters) that what were given as laws did not
correlate, and proceeded to show what the laws of rent,
interest and wages really were. In Book IV. (four chapters),
I proved that the effect of material progress was to increase
the proportion of the product that would go to rent. In
Book V. (two chapters), I showed this to be the primary
cause of paroxysms of industrial depression, and of the
persistence of poverty amid advancing wealth. In Book
VI., "The Remedy" (two chapters), I showed the inade-
quacy of all remedies for industrial distress short of a
measure for giving the community the benefit of the increase
of rent. In Book VII. (five chapters), I examined the jus-
tice ; in Book VIII. (four chapters), the exact relation and
practical application of this remedy ; and in Book IX. (four
chapters), I discussed its effect on production, on distribu-
tion, on individuals and classes, and social organization
and life ; while in Book X. (five chapters), I worked out
briefly the great law of human progress, and showed the
relation to this law of what I proposed. The conclu-
sion (one chapter), " The Problem of Individual Life," is
devoted to the problem that arises in the heart of the
individual.
Cliap.VIIL THE SCHOLASTIC BREAKDOWN. 203
This work was the most thorough and exhaustive ex-
amination of political economy that had yet been made,
going over in the space of less than six hundred pages the
whole subject that I deemed it necessary to explain, and
completely recasting political economy. I could get no
one to print the work except my old partner in San
Francisco, William M. Hinton, who had gone into the
printing business, and who had sufficient faith in me to
make the plates. I sold this author's edition in San Fran-
cisco at a good price, which almost paid for the plates, and
sent copies to publishers in New York and London, offer-
ing to furnish them with plates. With the heavy expense
met, Appleton & Co., of New York, undertook its printing,
and though I could get no English publisher at the time,
before the year of first publication was out they got Kegan
Paul, Trench & Co. to undertake its printing in London. In
the meantime, before publishing this book, I had delivered
a lecture in San Francisco which led to the formation
of the Land Reform Union of San Francisco, the first of
many similar movements since.
"Progress and Poverty" has been, in short, the most
successful economic work ever published. Its reasoning
has never been successfully assailed, and on three con-
tinents it has given birth to movements whose practical
success is only a question of time. Yet though the scho-
lastic political economy has been broken, it has not been,
as I at the time anticipated, by some one of its professors
taking up what I had pointed out ; but a new and utterly
incoherent political economy has taken its place in the
schools.
Among the adherents of the scholastic economy, who
had been claiming it as a science, there had been from the
time of Smith no attempt to determine what wealth was ;
no attempt to say what constituted property, and no at-
tempt to make the laws of production or distribution cor-
204 THE NATURE OF WEALTH. Eook II.
relate and agree, until there thus burst on them from a
fresh man, without either the education or the sanction of
the schools, on the remotest verge of civilization, a recon-
struction of the science, that began to make its way and
command attention. What were their training and labo-
rious study worth if it could be thus ignored, and if one
who had never seen the inside of a college, except when
he had attempted to teach professors the fundamentals of
their science, whose education was of the mere common-
school branches, whose alma mater had been the forecastle
and the printing-office, should be admitted to prove the
inconsistency of what they had been teaching as a science ?
It was not to be thought of. And so while a few of these
professional economists, driven to say something about
"Progress and Poverty," resorted to misrepresentation,
the majority preferred to rely upon their official positions
in which they were secure by the interests of the dominant
class, and to treat as beneath contempt a book circulating
by thousands in the three great English-speaking countries
and translated into all the important modern languages.
Thus the professors of political economy seemingly re-
jected the simple teachings of "Progress and Poverty,"
refrained from meeting with disproof or argument what it
had laid down, and treated it with contemptuous silence.
Had these teachers of the schools frankly admitted the
changes called for by " Progress and Poverty," something
of the structure on which they built might have been re-
tained. But that was not in human nature. It would
not have been merely to accept a new man without the
training of the schools, but to admit that the time science
was open to any one to pursue, and could be successfully
continued only on the basis of equal rights and privileges.
It would not merely have made useless so much of the
knowledge that they had laboriously attained, and was
their title to distinction and honor, but would have con-
THE SCHOLASTIC BREAKDOWN. 205
verted them and their science into opponents of the tre-
mendous pecuniary interests that were vitally concerned
in supporting the justification of the unjust arrangements
which gave them power. The change in credence that this
would have involved would have been the most revolu-
tionary that had ever been made, involving a far-reaching
change in all the adjustments of society such as had hardly
before been thought of, and never before been accom-
plished at one stroke ; for the abolition of chattel slavery
was as nothing in its effects as compared with the far-
reaching character of the abolition of private ownership
of land. Thus the professors of political economy, having
the sanction and support of the schools, preferred, and
naturally preferred, to unite their differences, by giving
up what had before been insisted on as essential, and to
teach what was an incomprehensible jargon to the ordinary
man, under the assumption of teaching an occult science,
which required a great study of what had been written by
numerous learned professors all over the world, and a
knowledge of foreign languages. So the scholastic polit-
ical economy, as it had been taught, utterly broke down,
and, as taught in the schools, tended to protectionism
and the German, and to the assumption that it was a
recondite science on which no one not having the indorse-
ment of the colleges was competent to speak, and on which
only a man of great reading and learning could express an
opinion.
The first evidence of the change was given in the " En-
cyclopaedia Britannica," which in Vol. XIX. of the ninth
edition, printed in 1886, discarded the dogmatic article on
the science of political economy, which had been printed
in previous editions, and on the plea that political economy
was really in a transition state, and a dogmatic treatise
would not be opportune, gave the space instead to an
article on the science of political economy by Professor
206 THE NATURE OF WEALTH. Book II.
J. K. Ingrain, which undertook to review all that had been
written about it, and was almost immediately reprinted in
an 8vo volume with an introduction by Professor E. J.
James, of the University of Pennsylvania, the leading
American protectionist institution of learning.
This confession that the old political economy was dead
was written in the " good God, good devil," or historical
style, and consisted in a notice of the writers on political
economy, from the most ancient times, through a first, a
second and a third modern phase, to the coming or histor-
ical phase.
Adam Smith is put down as leading in the third modern
school the system of natural liberty. Among the prede-
cessors of Smith are reckoned the French Physiocrats,
whose proposition for a single tax on the value of land is
related to their doctrine of the productiveness of agricul-
ture and the sterility of manufactures and commerce,
"which has been disposed of by Smith and others, and
falls to the ground with the doctrine on which it was
based ;" and Smith himself is treated as a respectable " has-
been," whose teachings must now give way to the wider
criticism and larger knowledge of the historical school.
Writers of France, Spain, Germany, Italy and northern
nations are referred to in the utmost profusion, but there
is no reference whatever to the man or the book that was
then exerting more influence upon thought and finding
more purchasers than all the rest of them combined, an
example which has been followed to this day in the elabo-
rate four- volume" Dictionary of Political Economy," edited
by R. H. Inglis Palgrave.
This action was enough. The encyclopaedias and dic-
tionaries printed since have followed this example of the
Britannica. Chambers, which was the first to print a new
and revised edition, and Johnson's, which soon followed,
concluded in 1896, discarded what they had previously
Chap.rill. THE SCHOLASTIC BREAKDOWN. 207
printed as the teaching of political economy for articles
in the style of the Britannica's ; while the new dictionaries
are repeatedly giving place to the jargon which has been
introduced as economic terms.
As for the University of Pennsylvania, the great au-
thority of American scholastic protectionism, it may be
said that it soon after relegated to a back seat its Professor
of Political Economy, Professor Robert Ellis Thompson,
a Scotsman, who had been up to that time teaching the
best scientific justification of protectionism that could be
had, and has put in his place the Professor E. J. James
already spoken of, and thrown its whole influence and re-
sources into the teaching of protection by the Anglicized
historical and inductive method, under a new though
rarely mentioned name. The new science speaks of the
" science of economics" and not of "political economy;"
teaches that there are no eternally valid natural laws ; and,
asked if free trade or protection be beneficial or if the trusts
be good or bad, declines to give a categorical answer, but
replies that this can be decided only as to the particular
time and place, and by a historical investigation of all
that has been written about it. As such inquiry must, of
course, be left to professors and learned men, it leaves the
professors of "economics," who have almost universally
taken the places founded for professors of " political econ-
omy," to dictate as they please, without any semblance of
embarrassing axioms or rules. How this lends itself to
an acquiescence in the views or whims of the wealthy class,
dominant in all colleges, the University of Pennsylvania,
controlled in the interests of protectionists for revenue
only, was the first to find out, but it has been rapidly and
generally followed.
Such inquiry as I have been able to make of the recently
published works and writings of the authoritative pro-
fessors of the science has convinced me that this change
208 THE NATURE OF WEALTH. Book II.
has been general among all the colleges, both of England
and the United States. So general is this scholastic utter-
ance that it may now be said that the science of political
economy, as founded by Adam Smith and taught authori-
tatively in 1880, has now been utterly abandoned, its teach-
ings being referred to as teachings of " the classical school "
of political economy, now obsolete.
What has succeeded is usually denominated the Austrian
school, for no other reason that I can discover than that
" far kine have long horns." If it has any principles, I have
been utterly unable to find them. The inquirer is usually
referred to the incomprehensible works of Professor Alfred
Marshall of Cambridge, England, whose first 764-page
volume of his "Principles of Economics," out in 1891, has
not yet given place to a second ; to the ponderous works of
Eugen V. Bohm-Bawerk, Professor of Political Economy,
first in Innsbruck and then at Vienna, " Capital and In-
terest " and " The Positive Theory of Capital," translated
by Professor William Smart of Glasgow ; or to Professor
Smart's " Introduction to the Theory of Value on the Lines
of Menger, Wieser and Bohm-Bawerk," or to a lot of Ger-
man works written by men he never heard of and whose
names he cannot even pronounce.
This pseudo-science gets its name from a foreign lan-
guage, and uses for its terms words adapted from the
German words that have no place and no meaning in an
English work. It is, indeed, admirably calculated to serve
the purpose of those powerful interests dominant in the
colleges under our organization, that must fear a simple
and understandable political economy, and who vaguely
wish to have the poor boys who are subjected to it by
their professors rendered incapable of thought on economic
subjects. There is nothing that suggests so much what
Schopenhauer ("Parerga and Paralipomena ") said of the
works of the German philosopher Hegel than what the
Cliap.VIII. THE SCHOLASTIC BREAKDOWN. 209
professors have written, and the volumes for mutual ad-
miration which they publish as serials :
If one should wish to make a bright young man so stupid as to
become incapable of all real thinking, the best way would be to
commend to him a diligent study of these works. For these monstrous
piecings together of words which really destroy and contradict one
another so causes the mind to vainly torment itself in the effort to
discover their meaning that at last it collapses exhausted, with its
capacity for thinking so completely destroyed that from that time on
meaningless phrases count with it for thoughts.
It is to this state that political economy in the teachings
of the schools, which profess to know all about it, has now
come.
CHAPTER IX.
WEALTH AND VALUE.
SHOWING THE REASON FOR CONSIDERING THE NATURE OP
VALUE BEFORE THAT OF WEALTH.
The point of agreement as to wealth Advantages of proceeding
from this point.
WE have seen the utter confusion that exists among
economists as to the nature of wealth, and have
sufficiently shown its causes and results. Let us return
now to the question we have in hand, and that must first
be settled before we can advance on solid ground : What
is the meaning of wealth as an economic term ?
The lack of defmiteness and want of consistency as to
the nature of the wealth of nations, with which Adam
Smith began, have in the hands of his accredited succes-
sors resulted in confusion so much worse confounded that
the only proposition as to wealth on which we may say
that all economists are agreed is that all wealth has value.
But as to whether all that has value is wealth, or as to
what forms of value are wealth and what not, there is wide
divergence. And if we consider the definitions that are
given in accepted works either of the term wealth or of
the sub-term of wealth, capital, it will be seen that the
confusions as to the nature of wealth which they show
seem to proceed from confusions as to the nature of value.
210
Chap. IX. WEALTH AND VALUE. 211
It is quite possible, I think, to fix the meaning of the
term wealth without first fixing the meaning of the term
value. This I did in "Progress and Poverty," where
my purpose in defining the meaning of wealth was to
fix the meaning of its sub-term, capital, in order to see
whether or not it is true that wages are drawn from
capital. But as in the present work, being a treatise on
the whole subject of political economy, it will be necessary
to treat independently of the nature of value, it will, I
think, be more conducive to orderly and concise arrange-
ment to consider the nature of value before proceeding
definitely to the consideration of the nature of wealth.
And since minds that have been befogged by accepted
confusions may be more easily opened to the truth by
pointing out in what these confusions consist, and how
they originate, this mode of proceeding to a determination
of the nature of wealth through an examination of the
nature of value will have the advantage of meeting on the
way the confusions as to value which in the minds of the
students of the scholastic economy have perplexed the idea
of wealth.
CHAPTER X.
VALUE IN USE AND VALUE IN EXCHANGE.
SHOWING THE TWO SENSES OF VALUE; HOW THE DISTINC-
TION HAS BEEN IGNORED, AND ITS REAL VALIDITY j AND
THE REASON FOR CONFINING THE ECONOMIC TERM TO ONE
SENSE.
Importance of the term value Original meaning of the word-
Its two senses Names for them adopted by Smith Utility and
desirability Mill's criticism of Smith Complete ignoring of the
distinction by the Austrian school Cause of this confusion-
Capability of use not usefulness Smith's distinction a real one
The dual use of one word in common speech must be avoided in
political economy Intrinsic value.
THE term value is of most fundamental importance
in political economy ; so much so that by some writers
political economy has been styled the science of values.
Yet in the consideration of the meaning and nature of
value we come at once into the very quicksand and f ogland
of economic discussion a point which from the time of
Adam Smith to the present has been wrapped in increasing
confusions and beset with endless controversy. Let us
move carefully, even at the cost of what may seem at the
moment needless pains, for here is a point from which
apparently slight divergences may ultimately distort con-
clusions as to matters of the utmost practical moment.
212
Chap. X. THE TWO SENSES OF VALUE. 213
The original and widest meaning of the word " value " is
that of worth or worthiness, which involves and expresses
the idea of esteem or regard.
But we esteem some things for their own qualities or
for uses to which they may be directly put, while we esteem
other things for what they will bring in exchange. We
do not distinguish the kind or reason of regard in our use
of the word esteem, nor yet is there any need of doing
so in our. common use of the word value. The sense in
which the word value is used, when not expressed in
the associated words or context, is for common purposes
sufficiently indicated by the conditions or nature of the
thing to which value is attributed. Thus, the one word
value has in common English speech two distinct senses.
One is that of usefulness or utility as when we speak of
the value of the ocean to man, the value of the compass in
navigation, the value of the stethoscope in the diagnosis
of disease, the value of the antiseptic treatment in surgery ;
or when, having in mind the merits of the mental produc-
tion, its quality of usefulness to the reader or to the public,
we speak of the value of a book.
The other and, though derived, utterly distinct sense of
the word value, is that of what is usually, and for most
purposes even of political economy, sufficiently described
as exchangeability or purchasing power as when we speak
of the value of gold as greater than that of iron ; of a book
in rich binding as being more valuable than the same book
in plain binding ; of the value of a copyright or a patent ;
or of the lessening in the value of steel by the Bessemer
process, or in that of aluminium by the improvements in
extraction now going on.
The first sense of the word value, which is that of use-
fulness, the quality that a thing may have of ministering
directly to human needs, was distinguished by Adam Smith
as " value in use."
214= THE NATUEE OF WEALTH. BookIL
The second sense of the word value, which is that of
worth in transfer or trade, the quality that a thing may
have of ministering indirectly to human desire through
its exchangeability for other things, was distinguished by
Adam Smith as " value in exchange."
Adam Smith's words are (Book I., Chapter IV.) :
The word " value," it is to be observed, has two different meanings,
and sometimes expresses the utility of some particular object, and
sometimes the power of purchasing other goods which the possession
of that object conveys. The one may be called "value in use ; " the
other, "value in exchange." The things which have the greatest
value in use have frequently little or no value in exchange ; and, on
the contrary, those which have the greatest value in exchange have
frequently little or no value in use. Nothing is more useful than
water ; but it will purchase scarce anything ; scarce anything can be
had in exchange for it. A diamond, on the contrary, has scarce any
value in use, but a very great quantity of goods may frequently be
had in exchange for it.
These two terms, adopted by Adam Smith, as best ex-
pressing the two distinct senses of the word value, at once
took their place in the accepted economic terminology, and
have since his 'time been generally used.
But though the terms of distinction which he used have
been from the first accepted, this has not been the case
with the distinction itself. From the first, his successors
and commentators began to question its validity, declaring
that nothing could have exchange value for which there
was not demand ; that demand implied some kind of utility
or usefulness, and hence that what has value in exchange
must also have value in use ; and that Smith had been led
into confusion by a disposition to import moral distinc-
tions into a science that knows nothing of moral distinc-
tions. This view has been generally, so far indeed as I
know universally, accepted by political economists.*
* There is a latent confusion in the use of a word to which I must
here call attention, as I have in previous writings slipped into this
Chap. X. THE TWO SENSES OF VALUE. 215
Thus, John Stuart Mill (whom I take as the best ex-
ponent of the scholastically accepted political economy up
to the time when the Austrian or psychological school
began to become the " fad " of confused professors), begins
his treatment of value by pointing out that " the smallest
error on that subject infects with corresponding error all
our other conclusions, and anything vague or misty in our
conceptions of it creates confusion and uncertainty in
everything else." And he thus proceeds ("Principles of
Political Economy," Book III., Chapter I., Sec. 1) :
We must begin by settling our phraseology. Adam Smith, in a
passage often quoted, has touched upon the most obvious ambiguity
of the word " value ; " which, in one of its senses, signifies usefulness,
in another, power of purchasing ; in his own language, value in use
and value in exchange. But (as Mr. De Quincey has remarked) in
illustrating this double meaning, Adam Smith has himself fallen into
another ambiguity. Things (he says) which have the greatest value
in use have often little or no value in exchange ; which is true, since
that which can be obtained without labor or sacrifice will command
no price, however useful or needful it may be. But he proceeds
use myself. The word " utility " correctly expresses the idea of what
gives value in use the quality of usefulness. And the word "de-
sirability " is sometimes used by economists to express the contrasted
idea, of what gives value in exchange, the quality of being desired,
though not necessarily satisfying a need or useful purpose. Such use
seems convenient and has some sanction in economic writing, and I
see that I have fallen into it in Part I., Chapter V., of my "A Per-
plexed Philosopher," where I say:
"If we inquire what is the attribute or condition concurring with
the presence, absence or degree of value attaching to anything we
see that things having some form of utility or desirability, are valu-
able or not valuable, as they are hard or easy to get."
Yet in reality such use of the word is not correct. There is a dif-
ficulty in using the word "desirability" in distinction to "utility."
"Utility" means the capability of being used, and by analogy "de-
sirability" should mean the capability of being desired. Yet if it
did, it would not be the word we need to contrast with utility. For
words of distinction must be words of restriction, as are "utility"
216 THE NATURE OF WEALTH. Boole II.
to add, that things which have the greatest value in exchange, as a
diamond for example, may have little or no value in use. This is
employing the word " use, " not in the sense in which political economy
is concerned with it, but in that other sense in which use is opposed to
pleasure. Political economy has nothing to do with the comparative
estimation of different uses in the judgment of a philosopher or of
a moralist. The use of a thing, in political economy, means its
capacity to satisfy a desire, or serve a purpose. Diamonds have this
capacity in a high degree, and unless they had it, would not bear any
price. Value in use, or, as Mr. De Quincey calls it, " teleologic "
value, is the extreme limit of value in exchange. The exchange value
of a thing may fall short, to any amount, of its value in use ; but that
it can ever exceed the value in use implies contradiction ; it supposes
that persons will give, to possess a thing, more than the utmost value
which they themselves put upon it, as a means of gratifying their
inclinations.
The word "value," when used without adjunct, always means, in
political economy, value in exchange.
or "usefulness " expressing a capability in some things which other
things do not have. "Desirability," however, even if it had or we
could give it the sense of capability of being desired, would not be
a word of restriction, since anything without exception may be de-
sired, and what we really want is not a word which expresses the
capability of being desired, but the fact of being desired. " Desir-
ability " in its well-established use, however, does not mean the capa-
bility of being desired, as "utility " means the capability of being used.
When we say that a thing is desirable or undesirable, we do not mean
that it may or may not be desired, nor that it is or is not desired,
but that it ought or ought not to be desired. Thus, a desirable
exchange or trade is an exchange which, with reference to the party
considered, will prove a good one. An undesirable exchange is one
that will to the party considered prove a bad one. So we speak of
a desirable book, horse, beverage, food, medicine, appetite, habit,
thought, feeling or gratification, with reference to an ultimate benefit
or injury to the person or persons specially considered or to mankind
generally. So, indeed, we may speak even of a desirable or unde-
sirable desire. The reason why there is no word in the English lan-
guage which expresses the idea I wish to express^ and which if at
liberty to coin a word I should call " desiredness, " is that the one
word, "value," serving in common speech for both senses, there is
no common need for it.
Chap.X. THE TWO SENSES OF VALUE. 217
Here is a queer settlement of phraseology. Let us pick
out the positive statements. They are : That Adam Smith
was wrong in saying that things which have the greatest
value in exchange, as a diamond, may have little or no
value in use, because the use of a thing in political econ-
omy, which knows nothing of any moral estimate of uses,
means its capacity to satisfy a desire or serve a purpose
a capacity which diamonds have in high degree, and unless
they had it would not have any value in exchange ("bear
any price")- Value in use is the highest possible (" ex-
treme limit of ") value in exchange. The exchange value
of a thing can never exceed the use value of a thing. To
suppose that it could implies a contradiction that persons
will give to possess a thing more than its utmost use value
to them ("value which they themselves put upon it as a
means of gratifying their inclinations ").
In this there is a complete identification of value in use,
utility or usefulness, with value in exchange, exchange-
ability or purchasing power. What then becomes of
Mill's other statement in the same paragraph ? If Adam
Smith was wrong in saying that the exchange value of a
thing may be more than its use value, how could he be
right in saying that the exchange value of a thing may be
less than its use value ? If value in use is the highest limit
of value in exchange, is it not necessarily the lowest limit ?
If diamonds derive their exchange value from their capacity
to satisfy a desire or serve a purpose, do not beans ? If
value in exchange means merely value in use, why does
Mr. Mill distinguish between the two senses of the word
value, that of usefulness, and that of purchasing power!
Why does he tell us that the word value, when used with-
out adjunct, always means in political economy value in
exchange? Why keep up a distinction where there is
really no difference ?
In this identification of utility with " desiredness " (which
I have merely quoted Mill to illustrate, for it began imme-
218 THE NATURE OF WEALTH. Boole II.
diately after Adam Smith, and was well rooted in the cur-
rent political economy long before Mill, as he indeed
declares, saying in the first paragraph of his treatment of
values, "Happily there is nothing in the laws of value
which remains for the present or any future writer to clear
up ; the theory of the subject is complete ") is the begin-
ning of that theory of value as springing from marginal
utilities of which Jevons was the first English expounder,
and which has been carried to elaborate development by
what is known as the Austrian or psychological school.
This school, setting aside all distinction between value in
use and value in exchange, makes value without distinc-
tion an expression of the intensity of desire, thus tracing
it to a purely mental or subjective origin. In this theory
the intensity of the desire of the bread-eater to eat bread
fixes the extreme or marginal utility of bread. This again
fixes the utility of the products of which bread is made
flour, yeast, fuel, etc. and of the tools used in making it
ovens, pans, etc. and again of the natural materials
used in making these products, and finally of the land and
labor.
But all this elaborate piling of confusion on confusion
originates, as we may see in Mill, in a careless use of
words. Nothing indeed could more strikingly illustrate
the need of the warning as to the use of words in political
economy which I endeavored to impress on the reader in
the introductory chapter of this work than the spectacle
here presented of the author of the most elaborate work
on logic in the English language falling into vital error, in
what he himself declares to be a most fundamental ques-
tion of political economy, from failure to apprehend a
distinction in the meaning of two common words. Yet
here plainly enough is the source of Mill's acceptance of
what much inferior thinkers to Adam Smith had deemed
a correction of the great Scotsman. The gist of his argu-
Chap.X. THE TWO SENSES OF VALUE. 219
ment is that the capability of " a use," in the sense of sat-
isfying a desire or serving a purpose, is identical with
usefulness. But this is not so. Every child learns long
before he reaches his teens that the capability of a use is
not usefulness. Here, for instance, is a dialogue such as
every one who has gone to an old-fashioned primary school
or mixed as a boy with boys must have heard time and
again :
First Boy What's the use of that crooked pin you're
bending ?
Second Boy What's the use ! Its use is to lay it on
a seat some fellow is just going to sit down on, and to
make him jump and squeal, and to hear the teacher charg-
ing around while you're busy studying your lesson, and
don't know anything about what's the matter.
This is certainly a use; but would any one, even a
school-boy, attribute usefulness to such a use ?
So, the wearing of nose-rings by some savages; the
tattooing of their bodies by other savages, and by sailors ;
the squeezing of their waists by civilized women ; the mon-
strous structures into which the hair of fashionable Euro-
pean ladies was built in the last century ; the hooped skirts
worn during a part of this ; the pitiful distortion practised
on the feet of upper-class female infants by the Chinese,
are all uses. But do they therefore imply usefulness ?
Again, the thumb-screws brought from Russia by Drum-
mond and Dalziel, when they were sent to Scotland by
Charles II. to force Episcopacy upon the Covenanters, had
" a use." The racks which the English captors of the ships
of the Spanish Armada were said to have found in those
vessels, intended, as was believed, for the purpose of con-
verting English Protestants to the true faith of Rome, had
also a capacity of satisfying a devilish desire. They had
unquestionably at that time value in exchange, and indeed,
if still in existence, would have value in exchange now, for
220 THE NATURE OF WEALTH. Book II.
they would be purchased for museums ; and I do not see
how they could at that time have been refused, or if in
existence, could now be refused, a place in any category
of articles of wealth. But were they useful articles ? No
one would now say so. There were, it is true, at that time
some people who might have contended for their useful-
ness. But consider the supposition under which alone
this claim for their usefulness could have been made, for
it points to an essential distinction between the meaning
of usefulness and that of mere capacity for use. The
thumb-screws and racks could have been considered as
useful only on the assumption that the eternal salvation of
men, their exemption from endless torture, depended on
their acceptance of certain theological beliefs, and there-
fore that the rooting out of schism and heresy, even by the
use of temporal torture, was conducive to the true welfare
and final happiness of the generality of mankind.
To consider this is to see that what is really the essen-
tial idea of usefulness, of that quality of a thing which
Adam Smith distinguished as utility or value in use, is,
not the capability of any use, but the capability of use in
the satisfaction of the natural, normal and general desires
of men.
And in this Adam Smith, following the Physiocrats,
recognized a distinction that he did not create, and that
no confusions of current economic teaching can eradicate ;
a distinction that does not come from the refinements of
philosophers or moralists, but that rests on common per-
ceptions of the human mind the distinction, namely, be-
tween things which in themselves or in their uses conduce
to well-being and happiness and the things which in them-
selves or in their uses involve fruitless effort or ultimate
injury and pain. The capacity of satisfying some desire,
no matter how idle, vicious or cruel, is indeed all that is
necessary to exchangeability or value in exchange. But
Chap. X. THE TWO SENSES OF VALUE. 221
to give usefulness or value in use something more is neces-
sary, and that is the capacity to satisfy, not any possible
desire, but those desires which we call needs or wants, and
which, lying lower in the order of desires, are felt by all
men.*
Value in use and value in exchange may and often do
attach to the same things, and, as a matter of fact, doubt-
less the great majority of things having value in exchange
have also value in use. But this connection is not neces-
sary, and the two qualities have no relation whatever to
each other. A thing may have use value in the highest
degree, yet very little exchange value or none at all. A
thing may have exchange value in very high degree and
little or no use value. Air has the highest value in use,
as without air we could not live a minute. But this
supreme utility does not give air exchange value. The
Bambino of Rome or the Holy Coat of Treves could prob-
ably be exchanged, as similar venerated objects have been
at times exchanged, for enormous sums ; but the use value
of the one is that of a wax doll baby, that of the other an
old rag. The two qualities of value in use and value in
exchange are as essentially different and unrelatable as
are weight and color, though as we sometimes speak of
heavy browns and light blues, so do we in common speech
use the word value now to express one of these qualities
and now the other. The quality of value in use is an in-
trinsic or inherent quality attaching to the thing itself, and
giving to it fitness to satisfy man's needs. It cannot have
value in use except it has that, and as it has that, no matter
what be its value in exchange. And its use value is the
same whether much can be obtained for it in exchange or
"no one would pick it up." The quality of value in ex-
change, on the other hand, is not intrinsic or inherent.
* As explained in Book I., Chapter XL
222 THE NATURE OF WEALTH. Book II.
There is, to be sure, a special sense in which, comf orm-
ably to usage, we may speak in certain cases of an intrinsic
value as applying to the part of the value which comes
wholly from the estimate of man, and where in reality in-
herent or intrinsic value cannot exist. The cases in which
we do this are cases in which we wish to distinguish be-
tween the exchange value which a thing may have in a
higher or more valuable form and that exchange value
which still remains if it were reduced to a lower or less
valuable form. Thus, a silver pitcher or a United States
silver coin would loose exchange value if beaten into in-
gots; or a coil of lead pipe or a ship's anchor and cable
would lose in exchange value if melted into pigs. Yet
they would retain the exchange value of the metal from
which they were made. This value in exchange which
would remain in a lower form we are accustomed to speak
of as " intrinsic value." But in using this term we should
always remember its merely relative sense. Value in the
economic sense, or value in exchange, can never really be
intrinsic. It refers not to any property of the thing itself,
but to an estimate that is placed on it by man to the toil
and trouble that men will undergo to acquire possession
of it, or the amount of other things costing toil and trouble
that they will give for it.
Nor is there any common measure in the human mind
between usefulness and exchangeability. Whether we
most esteem a thing for the intrinsic qualities that give it
usefulness, or for its intrinsic quality of commanding other
things in exchange, depends upon conditions.
A daring fellow recently crossed from the coast of Nor-
way to the United States in a sixteen-foot boat. Suppos-
ing him to come to New York, and one of our hundredfold
millionaires, in the fashion of an Arabian Nights' Sultan,
to say to him : " If you will make a trip at my direction
you may fill up your boat at my expense with anything
Chap. X. THE TWO SENSES OF VALUE. 223
you choose to take from New York, regardless of its cost."
What would he fill it up with? That could not be an-
swered in a word, as it would entirely depend upon where
the millionaire wanted him to go. If he were merely to
cross the North River from New York to Jersey City, he
would disregard value in use and fill up with what had the
highest value in exchange, in comparison to bulk and
weight gold, diamonds, paper money. To carry the more
of these he would leave out everything having value in use
that he could get along without for an hour or two even
to extra sails, anchor, sea-drag, compass, a morsel of food
or a drink of water. But if he were to cross the Atlantic
again, his first care would be for things useful in the
management of his boat and the maintenance of his own
life and comfort during the long months of danger and
solitude before he could hope again to reach land. He
would regard value in use, disregarding value in exchange.
If he had not lost the prudence which, no less than daring,
is required successfully to make such a trip, it may well be
doubted whether he would not prefer to carry its weight
in fresh water than to take a single diamond or gold piece
and prefer .another can of biscuit or condensed beef to
the last bundle of thousand-dollar notes that he might take
instead.
Adam Smith was right. The distinction between value
in use and value in exchange is an essential one. It is so
clear and true and necessary that, as we have seen, John
Stuart Mill could not refrain from partially recognizing it
in the very breath in which he had eliminated it altogether,
and the later economists who have carried the confusion
which he expresses to a point of more elaborate confusion
are also compelled to recognize it the moment they get out
of the fog of ill-understood words. Despite all attempts
to confuse and obliterate them, " value in use " and " value
in exchange " must still hold their place in economic ter-
224 THE NATURE OF WEALTH. Book II.
minology. The terms themselves are perhaps not the
happiest that might be chosen. But so long have they
now been used that it would be difficult to substitute any-
thing in their place. It is only necessary to do what Adam
Smith could hardly have deemed necessary point out
what they really mean. They were taken indeed by him
from common speech, and still retain the great advantage
to any economic term of being generally intelligible.
In common speech the one word value, as I have already
said, usually suffices to express either value in use or value
in exchange. For which sense of the word value is meant
is ordinarily indicated with sufficient clearness either by
the context or by the situation or nature of the thing spoken
of. But in cases where there is no indication thus sup-
plied, or the indication is not sufficiently clear, the use of
the word "value" will at once provoke a question equivalent
to " Do you mean value for use or value for exchange ? "
Thus, if a man says to me, " That is a valuable dog, he
saved a child from drowning ; " I know that the value he
means is value in use. If he says, however, "That is a
valuable dog, his brother brought a hundred dollars ; " I
know that he has in mind value in exchange. Even where
he says simply, " That is a valuable dog," there is generally
some indication that enables me to tell what sense of value
he has in mind. If there is none, and I am interested
enough to care, I ask for it by such question as " Why ? "
or "What for?"
In economic reasoning, however, the danger of using
one word to represent two distinct and often contrasted
ideas is very much greater than in common speech, and if
the word is to be retained, one of its senses must be
abandoned. Of the two meanings of the word value, the
first, that of value in use, is not called for, or called for
only incidentally in political economy ; while the second,
that of value in exchange, is called for continually, for
Chap. X. THE TWO SENSES OF VALUE. 225
this is the value with which political economy deals. To
economize the use of words, while at the same time
avoiding liability to misunderstanding and confusion, it
is expedient, therefore, to restrict the use of the word
value, as an economic term, to the meaning of value in
exchange, as was done by Adam Smith, and has since his
time generally been followed ; and to discard the use of
the single word value in the sense of value in use, sub-
stituting for it where there is occasion to express the
idea of value in use, and the close context does not clearly
show the limitation of meaning, either the term " value in
use " or some such word as usefulness or utility. This I
shall endeavor to do in this work using hereafter the
single term value, as meaning purchasing power or " value
in exchange."
CHAPTER XI.
ECONOMIC VALUE-ITS REAL MEANING AND
FINAL MEASURE.
SHOWING HOW VALUE IN EXCHANGE HAS BEEN DEEMED A
EELATION OF PROPORTION; AND THE AMBIGUITY WHICH
HAS LED TO THIS.
The conception of value as a relation of proportion It is really a
relation to exertion Adam Smith's perception of this His rea-
sons for accepting the term value in exchange His confusion
and that of his successors.
VALUE, as an economic term, means, as we have seen,
what in defining it from the other sense of the word
value, is known as value in exchange, or exchangeability.
And to this meaning alone I shall, when using the word
value without adjunct, hereafter confine it.
But from what does this quality of value in exchange,
or exchangeability, proceed ? And by what may we mea-
sure it ?
As to this the current teachings of political economy
are, that value, the quality or power of exchangeability, is
a relation between each exchangeable thing and all other
exchangeable things. Thus, it is said, there can be no
general increase or decrease of values, since what one val-
uable thing may gain in exchange power, some other val-
uable thing or things must lose 5 and what one loses some
228
Chap. XI. ECONOMIC VALUE. 227
other or others must gain. In other words, the relation
of value being a relation of ratio or proportion, any change
in one ratio must involve reverse changes in other ratios,
since the sum total of ratios can neither be increased nor
diminished. There may be increase or decrease of value
in any one or more things, as compared with any other
one or more things; but no increase or decrease in all
values at once. All prices, for instance, may increase or
diminish, because price is a relation of exchangeability
between all other exchangeable things and one particular
exchangeable thing, money ; and increase or decrease of
price (greater or less exchangeability of other things for
money) involves correlatively decrease or increase of the
exchangeability of money for other things. But increase
or decrease in value generally (i.e., all values) is a contra-
diction in terms.
This view has a certain plausibility. Yet to examine it
is to see that it makes value dependent on value without
possibility of measurement except arbitrarily and rela-
tively, by comparing one value with another ; that it leaves
the idea of value swimming, as it were, in vacancy, with-
out connection or fixed starting-point, such as we attach
to all other qualities of relation, and without which any
definite idea of relation is impossible.
Thus, such qualities as size, distance, direction, color,
consanguinity and the like are only comprehensible and
intelligible to us by reference to some fixed starting-point,
to which and not to all other things having the same
quality the relation is made. Size and distance, for in-
stance, are comprehended and intelligibly expressed as
relations to certain measures of extension, such as the
barleycorn, the foot, the meter, diameters of the earth, or
diameters of the earth's orbit ; direction, as a relation to
the radii of a sphere, which, proceeding from a central
point, would include all possible directions; color, as a
228 THE NATURE OF WEALTH. Book II.
relation to the order in which certain impressions are re-
ceived through the human eye ; consanguinity, as a relation
in blood to the primary blood-relationship, that between
parent and child ; and so on.
Now, has not also the idea of value some fixed starting-
point, by which it becomes comprehensible and intelligible,
as have all other ideas of relation ?
Clearly it has. What the idea of value really springs
from, is not the relation of each thing having value to all
things having value, but the relation of each thing having
value to something which is the source and natural mea-
sure of all value namely, human exertion, with its atten-
dant irksomeness or weariness.
Adam Smith saw this, though he may not have consis-
tently held to it, as was the case with some other things he
clearly saw for a moment, as through a rift in clouds which
afterwards closed up again. In the first paragraphs of
Chapter V., Book I., " Wealth of Nations," he says :
Every man is rich or poor according to the degree in which he
can afford to enjoy the necessaries, conveniences and amusements of
human life. But after the division of labor has once thoroughly
taken place, it is but a very small part of these with which a man's
own labor can supply him. The far greater part of them he must
derive from the labor of other people, and he must be rich or poor
according to the quantity of that labor which he can command, or
which he can afford to purchase. The value of any commodity,
therefore, to the person who possesses it, and who means not to use
or consume it himself, but to exchange it for other commodities, is
equal to the quantity of labor which it enables him to purchase or
command. Labor, therefore, is the real measure of the exchangeable
value of all commodities.
The real price of everything, what everything really costs to the
man who wants to acquire it, is the toil and trouble of acquiring it.
What everything is really worth to the man who has acquired it, and
who wants to dispose of it or exchange it for something else, is the
toil and trouble which it can save to himself, and which it can impose
upon other people. What is bought with money or with goods is
purchased by labor, as much as what we acquire by the toil of our
Chap. XL ECONOMIC VALUE. 229
own body. That money or those goods indeed save us this toil.
They contain the value of a certain quantity of labor, which we ex-
change for what is supposed at the time to contain the value of an
equal quantity. Labor was the first price, the original purchase
money that was paid for all things. It was not by gold or by silver,
but by labor, that all the wealth of the world was originally pur-
chased; and its value, to those who possess it, and who want to
exchange it for some new productions, is precisely equal to the
quantity of labor which it can enable them to purchase or command.
Wealth, as Mr. Hobbes says, is power. But the person who either
acquires or succeeds to a great fortune, does not necessarily acquire
or succeed to any political power, either civil or military. His for-
tune may perhaps afford him the means of acquiring both, but the
mere possession of that fortune does not necessarily convey to him
either. The) power which that possession immediately and directly
conveys to him is the power of purchasing ; a certain command over
all the labor, or over all the produce of labor which is then in the
market. His fortune is greater or less precisely in proportion to the
extent of this power ; or to the quantity of other men's labor, or,
what is the same thing, of the produce of other men's labor which it
enables him to purchase or command. The exchangeable value of
everything must always be precisely equal to the extent of this
power which it will convey to its owner.
This is perfectly clear, if we attend only to the meaning
Adam Smith puts upon the words he uses somewhat
loosely. The sense in which he uses the word labor is
that of exertion, with its inseparable attendants, toil and
trouble. What he means by price, is cost in toil and
trouble, as he indeed incidentally explains,* and by wealth
* "Price," as an economic term, has come to mean value in terms
of money, or at least in terms of one particular commodity ; but Adam
Smith did not make this distinction. He uses the word "price"
sometimes where he means "cost," and sometimes where he means
"value." This use of price for value he once in a while indicates,
as where, in Chapter VI., he speaks of ")price or exchangeable value,"
but in general he leaves it to inference. Where it is necessary for
him to make the distinction between what we now call value and
what we now call price, he usually speaks of the one as " real price "
and of the other as "nominal price," meaning by "real price " value
in labor, and by "nominal price" value in money.
230 THE NATURE OF WEALTH. Book II.
he evidently means the products or tangible results of
human exertion. What he says is that value is the equiva-
lent of the toil and trouble of exertion, and that its mea-
sure is the amount of toil and trouble that it will save to
the owner or enable him by exchange to induce others to
take for him.
And he again repeats this statement a little further on
in the same book :
Equal quantities of labor, at all times and places, may be said to
be of equal value to the laborer. In his ordinary state of health,
strength and spirits ; in the ordinary degree of his skill and dexterity,
he must always lay down the same portion of his ease, his liberty,
and his happiness. The price which he pays must always be the
same, whatever may be the quantity of goods which he receives in
return for it. Of these indeed it may sometimes purchase a greater
and sometimes a smaller quantity ; but it is their value which varies,
not that of the labor which purchases them. At all times and places
that is dear which it is difficult to come at, or which it costs much
labor to acquire ; and that cheap which is to be had easily, or with
very little labor. Labor alone, therefore, never varying in its own
value, is alone the ultimate and real standard by which the value of
all commodities can at all times and places be estimated and com-
pared. It is their real price ; money is their nominal price only. . . .
Labor, therefore, it appears evidently, is the only universal, as well
as the only accurate measure of value, or the only standard by which
we can compare the values of different commodities at all times and
at all places.
How then is it that Adam Smith, when he needed a
term which should express the second sense of the word
value, did not adopt a phrase that would bring out the
fundamental meaning of value in this sense, such, for in-
stance, as " value in toil," or " value in exertion," or " value
in labor ; " but instead of any of them chose a phrase,
"value in exchange," which refers directly to only a
secondary and derivative meaning ?
The reasons he himself gives, in what immediately fol-
lows the first two paragraphs I have quoted :
Chap. XL ECONOMIC VALUE. 231
But though labor be the real measure of the exchangeable value
of all commodities, it is not that by which their value is commonly
estimated. It is often difficult to ascertain the proportion between
two different quantities of labor. The time spent in two different
sorts of work will not always alone determine this proportion. The
different degrees of hardship endured, and of ingenuity exercised,
must likewise be taken into account. There may be more labor in
an hour's hard work than in two hours' easy business ; or in an hour's
application to a trade which it cost ten years' labor to learn, than in
a month's industry at an ordinary and obvious employment. But it
is not easy to find any accurate measure either of hardship or inge-
nuity. In exchanging, indeed, the different productions of different
sorts of labor for one another, some allowance is commonly made for
both. It is adjusted, however, not by any accurate measure, but by
the higgling and the bargaining of the market, according to that sort
of rough equality which, though not exact, is yet sufficient for carry-
ing on the business of common life.
Every commodity, besides, is more frequently exchanged for, and
thereby compared with, other commodities than with labor. It is
more natural therefore to estimate its exchangeable value by the
quantity of some other commodity, than by that of the labor which
it can purchase. The greater part of people, too, understand better
what is meant by a quantity of a particular commodity than by a
quantity of labor. The one is a plain and palpable object ; the other
an abstract notion, which, though it can be made sufficiently intelli-
gible, is not altogether so natural and obvious.
There are here two reasons assigned for the choice of
the term "value in exchange," to denote what Smith saw
with perfect, though only momentary clearness, really to
mean " value in exertion," or in the phraseology he uses,
" value in labor."
The first, and it is a weighty one, is that the term " value
in exchange" was already familiar, and would be best
understood in bringing out the distinction he wished to
dwell upon the difference between value in the economic
sense and " value in use."
The second, which indicates a confusion in the philoso-
pher's own mind the swiftness with which the clouds
drifted over the star he had just seen is that he could
232 THE NATURE OF WEALTH. BooklL
think of nothing by which to measure the toil and trouble
of exertion except time of application, which he truly saw
could only measure quantity and not quality that is to
say, duration, not intensity. He failed to recognize the
obvious fact that if the toil and trouble of exertion dis-
pensed with be the measure of value, then, correlatively,
value must be the real measure of the toil and trouble of
that exertion, and that the something he was seemingly
looking for some material thing or attribute which, as a
yardstick measures length and a standard weight mea-
sures mass, should, independently of " the higgling of the
market," measure the toil and trouble of exertion is not to
be found, because it cannot exist, the only possibility of
such a measurement lying in "the higgling of the market."
For since toil and trouble, which constitute the resistance
to exertion, are subjective feelings which cannot be objec-
tively recognized until brought, through their influence
upon action, into the objective field, there is no way of
measuring them except by the inducement that will tempt
men to undergo them in exertion, which can be determined
only by competition or " the higgling of the market."
So, for a good reason and a bad reason, Adam Smith,
for the purpose of expressing the economic sense of the
word value, chose the term "value in exchange." It
would be too much to say that he made a bad choice,
especially considering his time and the main purpose he
had in mind, which was to show the absurdity of what
was then called the mercantile system, and has since been
re-christened the protective system. But the ambiguity
involved in the term "value in exchange" has been a
stumbling-block in political economy from his day to this,
and, indeed, to the ambiguity concealed in his own chosen
term Adam Smith himself fell a victim. Or perhaps,
rather, it should be said, that the ambiguity of the term
allowed him to retain confusions that were already in his
Chap. XL ECONOMIC VALUE. 233
mind, save when in the paragraphs just quoted he
momentarily brushed them away, only to have them recur
again. It will be noticed that, in these paragraphs, Smith
clearly distinguishes between labor and commodities, evi-
dently meaning by commodities things produced by labor ;
and that he seems clearly to understand by wealth the
products of labor. But in other places he drops into the
confusion of treating labor itself as a commodity, and of
classing personal qualities, such as industry, skill, know-
ledge, etc., as articles of wealth ; just as, in Chapter VIII.,
he clearly sees and correctly states the true origin and
nature of wages where he says: "The produce of labor
constitutes the natural recompense or wages of labor,"
only almost immediately to abandon it and proceed to
treat wages as supplied from the capital of the employer.
Adam Smith was never called upon to revise or in any
way to reconsider the statement of his great book as to
the nature of value, the discussion on the subject having
arisen since his death. His successors in political economy
have been with few exceptions, not men of original
thought, but the mere imitators, compilers and straw-
splitters who usually follow a great work of genius. They
have, without looking further, accepted the term used by
him, "value in exchange," not merely in the same way
that he accepted it, as a convenient, because a readily
understood, name for a quality, but as expressing the na-
ture of that quality. Thus Adam Smith's explanation of
the essential relation of value to the exertion of labor has
been virtually, if not utterly, ignored. And from looking
further than exchangeability for an explanation of the
nature of value, these succeeding economists have been
dissuaded and debarred not only by certain facts not un-
derstood, such as the fact that many things having value
do not originate in labor, and by erroneous conceptions,
such as that which treats labor itself as a commodity j but
234 THE NATUEE OF WEALTH. Book II.
by a greatly effective, though doubtless in most cases a
very vague recognition of the fact that danger to existing
social institutions would follow any too searching an
inquiry into the fundamental principle of value. A world
of ingenuity has been expended and monstrous books have
been written that it will tire a man to read and almost
make him doubt his own sanity to try to understand, to
'solve the problem of the fundamental nature of value in
exchange. Yet they have resulted in what are but pon-
derous elaborations of confusion, for the good and sufficient
reason that the essence or foundation of what we call value
in exchange does not lie in exchangeability at all, but in
something from which exchangeability springs the toil
and trouble attendant upon exertion.
Let me endeavor, even at some length, to prove this in
a succeeding chapter, for most vital and far-reaching eco-
nomic issues are involved in this settlement of the meaning
of a term.
CHAPTER XII.
VALUE IN EXCHANGE REALLY RELATED
TO LABOR.
SHOWING THAT VALUE DOES NOT COME FROM EXCHANGE-
ABILITY, BUT EXCHANGEABILITY FROM VALUE, WHICH IS
AN EXPRESSION OF THE SAVING OF LABOR INVOLVED IN
POSSESSION.
Root of the assumption that the sum of values cannot increase or
diminish The fundamental idea of proportion We cannot really
think of value in this way The confusion that makes us imagine
that we do The tacit assumption and reluctance to examine that
bolster the current notion Imaginative experiment shows that
value is related to labor Common facts that prove this Current
assumption a fallacy of undistributed middle Various senses of
"labor" Exertion positive and exertion negative Ke-statement
of the proposition as to value Of desire and its measurement-
Causal relationship of value and exchangeability Imaginative
experiment showing that value may exist where exchange is im-
possibleValue an expression of exertion avoided.
FROM the assumption that economic value is not merely
what we have found it convenient to call value in
exchange, but in reality is exchangeability a quality of
power by which the owner of a valuable thing may, by
surrendering his ownership to some one else, obtain from
him by similar transfer the ownership of another valuable
thing value is thought of as proceeding from ,lue, and
existing in a circle of which each part must have a relation
of proportion or ratio to all other parts. It is this that
235
236 THE NATUEE OP WEALTH. Book II.
gives axiomatic semblance to the proposition that while
there may be increase or decrease in some values, this
must always involve reversely decrease or increase in some
other values, and hence that increase or decrease of all
values, or of the sum of values, is impossible. If value be
really a relation of proportion, this indeed is self-evident.
But is value really a relation of proportion or ratio ?
What is the fundamental idea of proportion or ratio ? Is
it not that of the relation of the parts of a whole to that
whole? When we use such a phrase as one-eighth we
mean the relation of a part represented as one of eight
equal partitions to a whole represented by one. When we
use such a phrase as 10 per cent, we mean a relation of a
part represented by ten of 100 equal partitions to a whole
represented by 100. So such propositions as
or .153 + .147 = .3; or 4 :8 ::6 : 12;
depend for their validity upon the relations of the propor-
tions spoken of to a whole or totality, which is the sum of
all possible proportions. That there cannot be increase or
decrease in all proportions follows from the axiom that a
whole is equal to the sum of its parts.
But if value be a relation of proportion or ratio, what
is the whole which it implies ? How shall we express this
totality? Or by what calculus shall we fix the relations
of its parts, the numberless and constantly changing arti-
cles of value ? Might we not as well try to think of or
express the relation of each particular hair of our heads to
the sum of the hairs in the heads of all humanity ?
The truth is that we cannot think of value in this way,
nor do we really try to, and the more ingenious and elabo-
rate the attempts that have been made to give something
like solid support and logical coherency to the prevailing
theory that value is really nothing more than exchange-
ability only the more clearly show its utter inadequacy.
Thus the latest and most elaborate of these attempts, that
Chap. XII. VALUE IN EXCHANGE AND LABOE. 237
of the Austrian or psychological school, which has been of
recent years so generally accepted in the universities and
colleges of the United States and England, and which de-
rives value from what it calls " marginal utilities," is an
attempt to emulate in economic reasoning the stories told
of East Indian jugglers, who throwing a ball of thread into
the air, pull up by it a stouter thread, then a rope, and
finally a ladder, on which they ascend until out of sight,
and then come down again !
For whoever will work his way through the perplexities
of their reasoning will find that the adherents of this school
derive the value of pig-iron, for instance, or even of iron
ore in the vein, from the willingness of consumers to pay
for higher and more elaborate products into the produc-
tion of which iron enters, deriving that willingness from
a mental estimate on the part of consumers of the utility
of these products to them. Thus, as coolly as such stories
of Indian jugglers ignore the law of gravitation, do they
ignore that law which to political economy is what gravi-
tation is to physics, the law that men seek to satisfy their
desires with the least exertion a law from which proceeds
the universal fact that as a matter of exchange no one will
pay more for anything than he is obliged to.
These elaborate attempts to link value on utility, and
utility on individual will or perception, in order to find a
support for the idea of value, only show that there is no
resting-place in the supposition that value proceeds from
exchangeability, and can only be relative to other values.
The plausibility of this supposition comes from confusion
in the use of a simple word.
Of all words in common use in the English tongue the
word " thing " is the widest. It includes whatever may be
an object of thought an atom or a universe ; a fact or a
fancy ; what comes into consciousness through our senses
and what constitutes the peopling and furniture of our
238 THE NATURE OF WEALTH. Book II.
dreams j that which analysis cannot further resolve and
that which has no other coherence than a verbal habit or
mistake. But this comprehensiveness of the word we are
sometimes apt to forget, or not fully to keep in mind, aad
to use such phrases as "all things" or "anything" when
we really have in mind only things of one particular kind.
When we wish [to test the proposition that value is a
relation of exchangeability between valuable things, we
usually proceed to make a mental experiment with some
few valuable things, for it would be impossible to take
them all, and tiresome to attempt it. For the things se-
lected for this experiment we are apt, as examination and
observation will show, and as is evident in the writings of
economists, to take such things as are most widely known
and commonly exchanged, turning the particular into the
general when required, by the formula, expressed or im-
plied, "and other valuable things." Thus, for instance,
we think of money, or as the most widely known repre-
sentative of money, a piece of gold, and say to ourselves :
" Here is a piece of gold. Why is it valuable ? It is that
it can be exchanged for wheat, hardware, cotton goods and
other valuable things. If it could not be so exchanged it
would have no value, and the measure of its value is the
value of the wheat, hardware, cotton goods and other val-
uable things for which it is exchangeable. If the relation
of exchangeability alters so that for the same piece of gold
one can obtain more wheat, hardware, cotton goods and
other valuable things, the value of the gold rises, and that
of the other valuable things falls. If the relation of ex-
changeability alters so that the piece of gold will exchange
for less of these things, the value of the gold falls and that
of the other things rises." Then, we reverse the standpoint
of examination, taking in turn wheat, hardware or cotton
goods, as representative of a particular instance of value,
and gold, as representing other valuable things j and seeing
Chap. XII. VALUE IN EXCHANGE AND LABOR. 239
that their value depends upon their exchangeable relation
in the same way as that of gold in our first experiment,
we conclude that value is indeed a relation of exchange-
ability, and that that is the beginning and end of it.
Thus, that value depends on value, and springs from
value and can only be measured by value that is, by the
selection of some particular article having value, from
which relatively and empirically the value of other articles
may be measured seems to us perfectly clear, and we
accept the doctrine that there can be no general increase
or decrease in values, as if it were but another statement
of the axiom that a whole is equal to the sum of its parts,
and consequently that all those parts can never be increased
or diminished at the same time. The habitual use of money
as a common measure of value is apt to prevent any reali-
zation of the fact that we are reasoning in a circle.
I think I have correctly described the line of reasoning
which makes the derivation of value from exchangeability
so plausible. I do not of course mean to say that labor is
never taken into account. It is often expressly mentioned
and always implied to be one of the valuable things in the
category of valuable or exchangeable things. But the
weight of the examination is, I think, always thrown upon
such things as I have named things resulting from the
exertion of labor ; while labor itself is passed over lightly
as one of the " other valuable things," and attention never
rests upon it.
And, furthermore, I am inclined to think that there
always lurks in this examination which is in reality an
examination of the relative value of products of labor
the tacit assumption that the quantity of the valuable
things (thought of as products of labor) existing at the
specific moment presumed in the examination is a fixed
quantity, so that there can be no exchange between those
possessed of valuable things (i.e., products of labor) and
240 THE NATURE OF WEALTH. BooTcIL
those possessed of no valuable things (i.e., no products of
labor). This, I think, is the case even where there is an
assumption of giving the value of labor a place in the
category of considered values, for what the reputed econ-
omists since Smith have called the " value of labor " is in
reality the value of the products of labor paid to laborers
in wages, which has been usually assumed to come from a
(at any given moment) fixed quantity, capital. And on
another side, any rigorous examination of the nature of
value has been prevented by the universal disposition of
economists, not really questioned until "Progress and
Poverty" was published, to slur over the nature of the
value of land, and practically to assume, what was indeed
the common assumption, that it was of the same origin as
the value attaching to such things as gold, wheat, hard-
ware, cotton goods or similar products of labor.
That it takes two to make an exchange, as certainly as
" it takes two to make a quarrel," is clear. But that value
in one person's hands does not, as is impliedly or expressly
taught in economic works, necessarily involve the existence
of value in the hands of others, may be seen by another
imaginative experiment :
Let us imagine some remote and as yet undiscovered
island, where men still live as in the Biblical account our
first parents lived before the Fall, taking their food from
never-failing trees, quenching their thirst from ample and
convenient springs, sleeping in the balmy air, and without
thought of clothing, even of aprons of fig-leaves. The
power of exerting labor they would of course possess, as
Adam and Eve possessed it from the first ; but of that
exertion itself and of the toil it involves, we may imagine
them as ignorant as Adam and Eve in their first estate are
supposed to have been. On that island there would clearly
be no value. Yet if valuable articles were brought there,
would they necessarily lose their value? Could they be
Chap. XII. VALUE IN EXCHANGE AND LABOE. 241
parted with only by gift, and would there be no possibility
of exchanging them ?
Imagine, now, a ship containing such merchandise as
would tempt the fancy of a primitive people to come in
sight of the island and cast anchor. Would exchange
between the ship's people and the islanders be impossible
because of the lack on the part of the islanders of anything
having value? By no means. If nothing else would
suffice, the offer of bright cloths and looking-glasses would
surely tempt the Eves, if it did not the Adams ; and though
never exerted before, the islanders would exert their power
of labor to fill the ship with fruit or nuts or shells, or
whatever else of the natural products of the island their
exertion could procure, or to pull her on the beach so that
she might be calked, or to fill and roll her water-casks.
There was nothing of value in the island before the ship
came. Yet the exchanges that would thus take place would
be the giving of value in return for value ; for on the part
of the islanders value that did not exist before would be
brought into existence by the conversion of their labor
power through exertion into wealth or services. There
would thus be what so many of our economists say is im-
possible, a general increase of values. Even if we suppose
the islanders to relapse into their former easy way of living
when their visitors sailed off, there would still remain on
the island, where there was no value before, some things
having value, and this value would attach to these things
until they were destroyed or so long as such desire as
would prompt any of the islanders to render labor in
exchange for them remained. On the other side, the value
that the ship would carry off would certainly be not less
than the value she contained on arrival, and in all proba-
bility would be much more.
Now the way thus illustrated is the way in which the
value that attaches to the greater number of valuable
242 THE NATUKE OP WEALTH. Book II.
things originates. I do not mean merely to say that this
was the way of the first appearance of value among men,
but that it is the way in which the value that attaches to
what are properly articles of wealth now originates. I do
not mean merely to say, as Adam Smith said, that it was
" by labor that all the wealth of the world icas originally
purchased." I mean to say that it is by labor that it is now
purchased.
Nothing, indeed, can be clearer than this. Even in the
richest of civilized countries, the ultimate purchasers of
the greater mass of valuable things, are not those who have
in store valuable things that they can give in exchange.
The great body of the people in any civilized society con-
sist of what we call the working-class, who live almost
literally from hand to mouth, and who have in their pos-
session at any one time little, or practically nothing, of
value. Yet they are the purchasers of the great body of
articles of value. Where does the value which they thus
exchange for value which is already in concrete form come
from 1 Does it not come from the conversion of their labor
power, through exertion, into value ? Is not the exchange
which is constantly going on, the exchange of the potenti-
ality of labor, or raw labor power for labor power that by
that transfer has already been converted into value ? In
common phrase, they exchange their labor for commodities.
How does this fact the fact that the great body of val-
uable things pass into the hands of those who have no
value to give for them except as they make valuable what
before had no value, and are consumed, by being eaten,
drunk, burned up or worn out, by them consort with the
theory that value is a relation of exchangeability between
valuable things, and that there can be no general increase
or decrease of values ? Does it not utterly invalidate the
theory? Must there not be a constant increase of value
to make up for the constant destruction of value, and in
Chap. XII. VALUE IN EXCHANGE AND LABOR. 243
spite of it, to permit such growth of aggregate values as
we see going on in progressive countries ? And in times
when the ability to convert labor into values is checked by
what we call "want of employment" and great numbers
of workers are idle, is there not a clear lessening of the
sum of values, a general decrease in values, as compared
with the times when there is what we call " abundance of
employment/ 7 and the great majority of them are at work,
turning labor power through exertion into value?
The truth is that current theories of value have resulted
from the efforts of intelligent men to mold into a sem-
blance of coherency teachings built upon fundamental
incoherencies. Let me point out what gives them plausi-
bility, the fallacy involved in the inclusion of labor as an
" other valuable thing," while the real stress of the exami-
nation is laid upon the relative values of such things as
gold, wheat, hardware and cotton goods things that are
products of labor. It is a fallacy which our habit of
speaking of the buying and selling and exchanging of
labor, and our habit of thinking of the value of labor as
we think of the value of gold or wheat or hardware or
cotton goods, conceals from attention, but which is in
reality a fallacy of the kind named by the old logicians
" the fallacy of undistributed middle."
Here we come to another instance of the care needed in
political economy in the use of words. By the word
"labor" we sometimes mean the power of laboring as
when we speak of the exertion of labor, or of labor being
employed, or of labor being idle or wasting. Sometimes
we mean the act of laboring as when we speak of the
irksomeness or toil of labor, or of the results or products
of labor. Sometimes we mean the results of laboring
as is the case in most or all of the instances in which
we speak of buying, selling or exchanging labor the
real thing bought, sold or exchanged being the results of
244 THE NATUEE OF WEALTH. Book II.
laboring, that is to say, wealth or services. And sometimes,
again, we mean the persons who do labor or the persons
who have the power and the willingness to labor.
It is clear that labor in the first-mentioned sense of the
word, that of the power or ability of laboring, is not an
exchangeable thing and cannot come into any category of
values. It resides in the individual body and cannot be
taken out of that body and transferred to another, any
more than can sight or hearing, or wisdom or courage or
skill. I may avail myself of another's skill, courage or
wisdom, of his hearing or of his sight, by getting him to
exert them for my benefit. And so I may avail myself of
another's ability to labor by getting him to do me services,
or to produce things which I am to own. But the power
of laboring he cannot give, nor I receive. While there
are results of its expenditure that may be transferred,
the power itself is intransferable, and therefore unex-
changeable.
Now the failure to keep in mind these different senses
of the word labor, the failure to distribute the term, as
the logicians would say, operates to shut off inquiry as to
whether the cause of value is not to be found in labor.
For since in some senses labor is thought of as having
value in exchange, the term, without distinction as to its
various senses, is apt to pass in our minds into the category
of exchangeable things, with gold or wheat or hardware or
cotton goods, or " other products of labor ; " and thus the
question is unconsciously begged.
But, when we realize that, in whatever other sense of the
word we may say that labor is a valuable thing, we must
carefully exclude the sense of labor power, or ability to
labor, a confusion is cleared up which has made the search
for the true nature of what we call value in exchange a
fruitless " swinging round a circle." For since value does
not exist in labor power, but does appear where that power
Chap. XII. VALUE IN EXCHANGE AND LABOR. 245
takes tangible form through exertion, the fundamental
relation of value must be a relation to exertion.
But a relation to exertion in what sense? A rela-
tion to exertion positively, or a relation to exertion nega-
tively ?
I exchange gold for silver, let us say. In this I give
something positively and receive something positively. I
get rid of gold and acquire silver. The other party to the
exchange gets rid of silver and acquires gold. But when
I exchange gold for exertion or toil, do I get rid of gold
and acquire toil, and does he get rid of toil and acquire
gold ? Clearly not. No one wants exertion or toil ; all of
us want to get rid of it. It is not exertion in a positive
sense which is the object of exchange, but exertion in a
negative sense ; not exertion given or imposed, but exer-
tion avoided or saved; or ; to use the algebraic form, the
relation of the quality of value is not to plus-exertion, but
to minus-exertion. Value, in short, is equivalent to the
saving of exertion or toil, and the value of anything is the
amount of toil which the possession of that thing will save
the possessor, or enable him, to use Adam Smith's phrase,
" to impose upon other people," through exchange. Thus,
it is not exchangeability that gives value ; but value that
gives exchangeability. For since it is only by exertion
that human desires can be satisfied (those cravings or im-
pulses that can be satisfied without exertion not rising to
the point of desire) whatever will dispense its owner from
the toil and trouble of exertion in the satisfaction of desire
in that acquires exchangeability.
Let me put the proposition in another form :
The current theory is that it is when and because a thing
becomes exchangeable that it becomes valuable. My con-
tention is that the truth is just the reverse of this, and
it is when and because a thing becomes valuable that it
becomes exchangeable.
246 THE NATURE OF WEALTH. Book II.
It is not the toil and trouble which a thing lias cost that
gives it value. It may have cost much and yet be worth
nothing. It may have cost nothing and yet be worth
much. It is the toil and trouble that others are now
willing, directly or indirectly, to relieve the owner of, in
exchange for the thing, by giving him the advantage of
the results of exertion, while dispensing him of the toil
and trouble that are the necessary accompaniments of
exertion. Whether I have obtained a diamond, for
instance, by years of hard toil or by merely stooping to
pick it up a movement which can hardly be called an
exertion, since it is in itself but a gratification of curiosity
which does not involve irksomeness has nothing what-
ever to do with its value. That depends upon the amount
of toil and trouble that others will undergo for my benefit
in exchange for it; or what amounts to the same thing,
which they will dispense me of in the satisfaction of my
desire, by giving me things in exchange, for which others
will undergo toil and trouble.
That which may be had without the toil and trouble of
exertion has no value. That for which the desire to pos-
sess is not strong enough to prompt to the toil and trouble
of exertion has likewise no value. But everything having
value, has that value only when, where and to the degree
that its possession will, without exertion on the part of its
possessor, satisfy through exchange a desire that prompts
to exertion.
In other words, the value of a thing is the amount of
laboring or work that its possession will save to the
possessor.
Desire itself, which is the prompter to exertion, cannot
be measured, as the most recent school of pseudo-econo-
mists attempt vainly to measure it. It is a quality or
affection of the will or individual Ego, which, being in its
nature subjective, can have no objective measurement
Chap. XII. VALUE IN EXCHANGE AND LABOR. 247
until it passes through action into the field of objective
existence. Even in the individual it is not a fixed quality
or affection, but resembles more the illumination produced
by a movable search-light, which, as it brings one object
in the landscape into focus, throws another into shade.
All that we can say of it is that it has a certain scale or
order of appearance, so that when the more primitive
desires that we call "wants" or "needs" slumber in sat-
isfaction, other desires appear ; or as they are enkindled
again, these others disappear.
But desire impels to action, as what we call energy or
force impels to movement. And while we can no more
measure desire in itself than we can measure force in itself,
we can measure it in the same way that we measure energy
or force by the resistance it will overcome. Now, while
the resistance to movement is inertia probably resolvable
into gravitation and chemical affinities ; so the resistance
to the gratification of desire is the toil and trouble of exer-
tion. It is this that is expressed by and measured in
values.
To repeat : Since the desire for material satisfactions is
universal among men, and the only way in which these
satisfactions can be obtained from Nature is by exertion,
which men always seek to avoid, whatever will satisfy de-
sire without calling for exertion is for that reason desired
of itself, not for its own uses, but because it affords the
means of gratifying other desires, and thus becomes
exchangeable whenever the existence of others than its
owner makes exchange possible. Normally, at least, value
and exchangeability are thus always associated and seem-
ingly identical. But in the causal relationship, value
comes first. That is to say, it is not true, as economists
since the time of Adam Smith have erroneously taught,
that a thing is valuable because it is exchangeable. On
the contrary, it is exchangeable because it is valuable. Ex-
248 THE NATURE OF WEALTH. Boole II.
change is in fact the mutual transfer of value. Of all
other qualities of things, value is the only quality of which
exchange takes note.
A little use of imaginative experiment will make it clear
that what we call value in exchange is in reality not depen-
dent on exchangeability, but may exist when exchange is
impossible.
A Eobinson Crusoe during his period of isolation could
make no exchanges, for there was no one with whom he
could exchange, and it was only the hope of being some-
time discovered and relieved that could have prompted him
to take his pieces of eight ashore. Yet, as this hope faded
it is not true that his estimate of the different things he
possessed would be entirely based on their utility to him,
and that he would have no sense of the relation which we
call value in exchange. Even if the hope of being some-
time relieved had entirely disappeared from his thought,
something essentially the same as value in exchange would
be brought out in his mind by any question of getting or
saving one of two or more things. Of several things to
him equally useful, which he might find in the wreck of his
ship or on the shore line under conditions which would
enable him to secure but one ; or of several equally useful
to him, which were threatened by a deluge of rain or an
incursion of savages, it is evident that he would " set the
most store by" that which would represent to him the
greatest effort to replace. Thus, in a tropical island his
valuation of a quantity of flour, which he could replace only
by cultivating, gathering and pounding the grain, would
be much greater than that of an equal quantity of bananas,
which he might replace at the cost of plucking and carry,
ing them ; but on a more northern island this estimate of
relative value might be reversed.
And so all things which to get or retain would require
of him toil would come to assume in his mind a relation
Chap. XII. VALUE IN EXCHANGE AND LABOR. 249
of value distint from and independent of their usefulness,
a relation based on the greater or less degree of exertion
that their possession would enable him to avoid in the
gratification of his desires.
It is this relation which lies at the bottom of value in
the economic sense, or value in exchange. In the last
analysis value is but an expression of exertion avoided.
To sum up :
Value in exchange, or value in the economic sense, is
worth in exertion. It is a quality attaching to the owner-
ship of things, of dispensing with the exertion necessary
to secure the satisfaction of desire, by inducing others to
take it. Things are valuable in proportion to the amount
of exertion which they will command in exchange, and
will exchange with each other in that proportion.
The value of a thing in any given time and place is the
largest amount of exertion that any one will render in
exchange for it. But as men always seek to gratify their
desires with the least exertion, this is the lowest amount
for which a similar thing can otherwise be obtained.
But while value means always the same quality that
of dispensing with exertion in the satisfaction of desire
yet there are various sources from which this quality
originates. These may be broadly divided into two that
which originates in the toil and trouble involved in pro-
duction, and that which originates in obligation to undergo
toil and trouble for the benefit of another. The failure to
note this difference in the sources of value is the cause of
great perplexity.
CHAPTER XIII.
THE DENOMINATOR OF VALUE.
SHOWING WHAT VALUE IS, AND ITS RELATIONS.
What value is The test of real value Value related only to human
desire This perception at the bottom of the Austrian school-
But its measure must be objective How cost of production acts
as a measure of value Desire for similar things and for essential
things Application of this principle Its relation to land values.
VALUE in the economic sense or value in exchange is,
as we have seen, worth in exchange. It is a quality
attaching to the ownership of things, of dispensing with
the exertion necessary to secure the satisfaction of desire,
by inducing others to take it in return for them. Things
are valuable in proportion to the amount of exertion that
they will thus command, and will exchange with each other
in that proportion.
The value of a thing in any time and place is thus the
largest amount of exertion that any one will render in
exchange for it. And since men always seek to gratify
their desires with the least exertion this is, or always tends
to be, the lowest amount for which such a thing can other-
wise be obtained.
This of course is not to say that whatever anything may
exchange for is its value. In individual and especially in
unaccustomed transactions the point at which any par-
ticular exchange takes place may considerably vary. But
250
Chap. XIII. THE DENOMINATOR OF VALUE. 251
that our idea of value assumes a normal point, and what
this point really is, may be seen in common speech. Thus
we frequently say of the exchange of a certain thing that
it brought less than its value, or that it brought more than
its value. Now in this, which we refer to as a real or true
value, differing from the assumption of value in the par-
ticular exchange, we mean something more definite than
customary or habitual value, for this, as in our times we
know, is subject in regard to particular things to consider-
able and not infrequent changes. What we really mean
by this real value, and what is its true test, we show in the
way we attempt to prove that a thing was exchanged at
more or less than its value. We say that a thing was ex-
changed at less than its value because some one else would
have given more for it. Or that a thing was exchanged at
more than its value because some one else would have given
the same thing for a less return. And so what we deem
the point of real value, or actual equivalence, we speak of
as market value, from the old idea of the market or meet-
ing place of those who wish to make exchanges, where
competition or the higgling of the market brings out the
highest bidding or the lowest offering in transactions of
exchange. And when we wish to ascertain the exact value
of a thing we offer it at auction or in some other way sub-
ject it to competitive offers.
Thus I am justified in saying that the value of a thing
in any time and place is the largest amount of exertion
that any one will render in exchange for it ; or to make
the estimate from the other side, that it is the smallest
amount of exertion for which any one will part with it in
exchange.
Value is thus an expression which, when used in its
proper economic sense of value in exchange, has no direct
relation to any intrinsic quality of external things, but
only to man's desires. Its essential element is subjective,
252 THE NATURE OF WEALTH. Book II.
not objective ; that is to say, lying in the mind or will of
man, and not lying in the nature of things external to the
human will or mind. There is no material test for value.
Whether a thing is valuable or not valuable, or what may
be the degree of its value, we cannot really tell by its size
or shape or color or smell, or any other material quality,
except so far as such investigations may enable us to infer
how other men may regard them. For the point of equiva-
lence or equation that we express or assume when we speak
of the value of a thing is a point where the desire to obtain
in one mind so counterbalances in its effect on action the
desire to retain in another mind that the thing itself may
pass in exchange from the possession of one man to the
possession of another with mutual willingness.
Now this fact that the perception of value springs from
a feeling of man, and has not at bottom any relation to the
external world a fact that has been much ignored in the
teachings and expositions of accepted economists is what
lies at the bottom of the grotesque confusions which, under
the name of the Austrian school of political economy, have
within recent years so easily captured the teachings of
pretty much all the universities and colleges in the English-
speaking world.
Vaguely feeling that there was something wrong in the
accepted theory of value, they have taken the truth that
value is not a quality of things but an affection of the
human mind towards things, and attempted at the risk of
fatal consequences to the ancient landmarks of English
speech to account for, classify and measure value through
what is and ever must remain the subjective that is to
say, pertaining to the individual Ego.
The fault of all this is that it begins at the wrong end.
What is subjective is in itself incommunicable. A feel-
ing so long as it remains merely a feeling can be known
only to and can be measured only by him who feels it.
Chap. XIII. THE DENOMINATOR OP VALUE. 253
It must come out in some way into the objective through
action before any one else can appreciate or in any way
measure it. Even if we ourselves may measure the strength
of a desire while it is as yet merely felt, we can make no
one else adequately understand it until it shows itself in
action.
Value has of course its origin in the feeling of desire.
But the only measure of desire it can afford is akin to the
rough and ready way of measuring sorrow which was pro-
posed at a funeral by the man who said : " I am sorry for
the widow to the amount of five dollars. How much are
the rest of you sorry ? " Now, what value determines is
not how much a thing is desired, but how much any one is
willing to give for it ; not desire in itself, but what the
elder economists have called effective demand that is to
say, the desire to possess, accompanied by the ability and
willingness to give in return.
Thus it is that there is no measure of value among men
save competition or the higgling of the market, a matter
that might be worth the consideration of those amiable
reformers who so lightly propose to abolish competition.
It is never the amount of labor that has been exerted in
bringing a thing into being that determines its value, but
always the amount of labor that will be rendered in ex-
change for it. Nevertheless, we properly speak of the value
of certain things as being determined by the cost of pro-
duction. But the cost of production that we thus refer to
is not the expenditure of labor that has taken place in
producing the identical thing, but the expenditure of labor
that would now be required to produce a similar thing
not what the thing itself has cost, but what such a thing
would now cost.
The desire to obtain, which renders men willing to
undergo exertion, is, save in rare cases, not the desire for
an identical thing, but the desire for a similar thing. Thus,
254 THE NATURE OF WEALTH. BooTtIL
a desire for wheat is not a desire for certain particular
grains of wheat ; but a desire for wheat generally, or for
wheat of a certain kind. So a desire for coats, or knives,
or drinking-glasses or so on, is, save in very rare cases, not
a desire for particular, identical things, but a desire for
similar things. Now, the value of a thing in any given
time and place is the largest amount of labor that any one
will render (or cause others to render) in exchange for it.
But as men always seek to gratify their desires with the
least exertion, this highest amount of labor which any one
will give for a similar thing in any time and place, tends
always to be the lowest amount for which such a thing
can in any other way be obtained.
Thus the point of equation between desire and satisfac-
tion, or as we usually say, between demand and supply,
tends in a case of things that can be produced by labor to
the cost of production that is to say, not what the pro-
duction of the thing has cost, but the present cost of
producing a similar thing. Desire remaining, whatever
increases the amount of labor that must be expended to
obtain similar things by making them will thus tend to
increase the value of existing things ; and whatever tends
to decrease the cost of obtaining similar things by making
them will tend to decrease the value of existing things.
But there are some cases in which the desire for a
product of labor is not a desire for a similar thing, but
for a particular and identical thing. Thus, when that
great genius and great toady, Sir Walter Scott, carried
off a wine-glass from which George IV. had drunk, it was
to satisfy a desire not for a similar glass, but for that
particular glass, which had been honored by the lips of
royalty. Where such a desire is felt by only one person
or one economic unit, as where I or my family may value
a chair or table or book which once belonged to some one
we loved, our valuation is analogous to value in use, and
Chap. XIII. THE DENOMINATOR OF VALUE. 255
does not affect its economic or exchange value, except
perhaps as it might make us loath to part with it at its
true exchange value. But where more than one person
or unit has this desire, which is the case where the posses-
sion of a particular article comes to gratify ostentation, it
acquires an exchange value which is not limited by the
cost of producing a similar tiding. Thus, an original
picture of a dead master, or an original copy of an old
edition of a book, which identically cannot now be produced
by any amount of exertion, may have a value not limited
by the cost of production, and this may rise to any height
to which sentiment or ostentation may carry desire.
The cases I have here taken to illustrate the principle
have but small practical application, though they are con-
tinually called to attention, and any theory of value must
include them. But the principle itself has the widest and
most important applications, which steadily increase in
importance with the growth of civilization. The value that
attaches to land with the growth of civilization is an
example of the same principle which governs in the case
of a picture by a Raphael or Rubens, or an Elgin marble.
Land, which in the economic sense includes all the natural
opportunities of life, has no cost of production. It was
here before man came, and will be here, so far as we can
see, after he has gone. It is not produced. It was created.
And it was created and still exists in such abundance as
even now far to exceed the disposition and power of man-
kind to use it. Land as land, or land generally the
natural element necessary to human life and production
has no more value than air as air. But land in special,
that is, land of a particular kind or in a particular locality,
may have a value such as that which may attach to a par-
ticular wine-glass or a particular picture or statue ; a value
which unchecked by the possibility of production has no
limit except the strength of the desire to possess it.
256 THE NATURE OF WEALTH. Book II.
This attaching of value to land in special that is to say,
land in particular localities with respect to population
is not merely a most striking feature in the progress of
modern civilization, but it is, as I shall hereafter show, a
consequence of civilization, lying entirely within the natu-
ral order, and furnishing perhaps the most conclusive
proof that the intent of that order is the equality of men.
If left by just municipal laws to its natural development,
the strength of the desire to use particular land can never
become the desire to use land generally, and can never rise
to the point of lowering wages by compelling workers to
give for the use of land any part of what is the natural
and just earnings of their labor. But where land is monop-
olized and the resort of population to unmonopolized
land is shut out either by legal restriction or social con-
ditions, then the desire to use particular land may be based
upon the desire to use land generally, or land the natural
element; and its strength, measured in the only way in
which we can measure the strength of a desire, the willing-
ness to undergo toil and trouble for its gratification, may
become when pushed to full expression, nothing less than
the strength of the desire for life itself, for land is the
indispensable prerequisite to life, and " all that a man hath
will he give for his life."
But in every case the value of land, consisting in the
amount of exertion that can be commanded from those
who desire to use it by those who have the power of giving
or refusing consent to its use, is in the nature of an obli-
gation to render service rather than in that of an exchange
of service.
CHAPTER XIV.
THE TWO SOURCES OF VALUE.
SHOWING THAT THERE IS A VALUE FROM PRODUCTION AND
ALSO A VALUE FROM OBLIGATION.
Value does not involve increase of wealth Value of obligation Of
enslavement Economic definition of wealth impossible without
recognition of this difference in value Smith's confusion and
results Necessity of the distinction Value from production and
value from obligation Either gives the essential quality of com-
manding exertion The obligation of debt Other obligations
Land values most important of all forms of value from obligation
Property in land equivalent to property in men Common mean-
ing of value in exchange Real relation with exertion Ultimate
exchangeability is for labor Adam Smith right Light thrown
by this theory of value.
WE now come to a point of much importance. For it
is to the failure to note what I wish in this chapter
to point out that the confusions that have so perplexed
the terms value and wealth in the study of political
economy have arisen.
It is usually, if not indeed invariably assumed in all
standard economic works that the conversion of labor
power through exertion into services or wealth is the only
way in which value originates.
Yet what we have already seen is enough to show us
that this cannot be so.
It is not the exertion that a thing has cost, in past time,
that gives it value, but the exertion that its possession will
257
258 THE NATUEE OF WEALTH. Book II.
in future time dispense with, for even the immediate is in
strictness future. Thus value may be created by mere
agreement to render exertion, or by the imposition of such
obstacles to the satisfaction of desire as will necessitate a
greater exertion for the attainment of the satisfaction. In
the same way, the value of some things may be increased,
or sometime perhaps produced, without the production of
real wealth ; or even by the destruction of real wealth.
For instance: I with another may agree to exchange,
but consummate in the present but one side of the full
exchange, substituting for the other side an agreement or
obligation to complete it in the future. That is to say, I
may give or receive things having present value in return
for an obligation to render labor or the results or repre-
sentatives of labor at some definite or indefinite future
time. Or, both of us may exchange similar obligations.
The obligations thus created may, and frequently do, at
once assume value and become exchangeable for exertion
or the results of exertion. Or, a government or joint-stock
company may issue obligations of the same kind, in the
form of bonds or stock, which may at once assume a value
dependent as in the case of an individual upon the strength
of the belief that the obligations will be faithfully re-
deemed, irrespective of any counter payment or obligation.
There is in all this no increase of wealth ; but there is a
creation of value a value arising out of obligation and
dependent entirely upon expectation, but still a value an
exchangeable quantity, the possession of which could com-
mand through exchange other valuable things.
Or, again : Suppose the discoverers of the Isle of Eden,
we have imagined, to have been of the same kidney as the
Spanish discoverers of America, and instead of tempting
the islanders to work for them by exciting their desire for
new satisfactions, had compelled them to work by whip-
ping, or killing them if they refused. The discoverers
Chap. XIV. THE TWO SOUECES OF VALUE. 259
might thus have carried off, as the Spanish conquistadors
carried off, what readily, exchanging for exertion in other
parts of the world, would there have great value not
merely precious metals or stones, woods or spices but
even the natives themselves. For carried to any country
where the power to compel them to work was by municipal
law transferable, these human beings would have value,
just as the ability to compel their service in their native
island would have value.
Now in Individual Economy, which takes cognizance
only of the relations of the individual to other individuals,
there is no difference between these two kinds of value.
Whether an individual has the power of commanding
exertion from others because he has added to the general
stock, or simply because he holds the power of demanding
exertion from others makes no difference to him or to them.
In either case he gets and they give.
But in political economy, which is the economy of the
Society or the aggregate, there is a great difference. Value
of the one kind the value which constitutes an addition
to the common stock involves an addition to the wealth
of the community or aggregate, and thus is wealth in the
politico-economic sense. Value of the other kind the
value which consists merely of the power of one individual
to demand exertion from another individual adds nothing
to the common stock, all it effects is a new distribution
of what already exists in the common stock, and in the
politico-economic sense, is not wealth at all.
In the development of political economy from Adam
Smith these two and totally different kinds of values have
been confused in one word. Smith started in by recog-
nizing as value that which added to wealth, but he after-
wards, and with seeming carelessness included as value that
which adds to the wealth of the individual, but adds
nothing whatever to the wealth of the community. This
260 THE NATUEE OF WEALTH. Book II.
consorted with the common idea that the wealth of a com-
munity is the sum of the wealth of individuals, and enabled
all that has value to the individual to be included as po-
litico-economic wealth. It consorted as wealth with the
disposition of the wealthy class to give a moral sanction
to whatever was to them superiority, and has thus been
perpetuated by economist after economist.
But it was impossible to treat as one and the same
quality a value that added to the wealth of the community
and a value that did not, and yet to make a politico-eco-
nomic definition of wealth. This therefore has been the
point on which the political economy founded by Adam
Smith has been constantly at sea. It could not be a
political economy until it had defined wealth, and it
could not define wealth until it had recognized a distinction
between two kinds of value.
This difficulty might have been avoided in the beginning
by giving to the two kinds of value separate names, but
the word value has so long been used for both, that the
best a science of political economy can do now, is to dis-
tinguish between value of the one kind and value of the
other kind.
This however it is necessary to attempt. The best thing
I can do is to distinguish value, not as one, but as of two
kinds.
By a clear distinction, the various ways in which value
may originate, embrace (1) the value which comes from
the exertion of labor in such a way as to save future exer-
tion in obtaining the satisfaction of desire; and, (2) the
value which comes from the acquisition of power on the
part of some men to command or compel exertion on the
part of others, or, which is the same thing, from the im-
position of obstacles to the satisfaction of desire that
render more exertion necessary to the production of the
same satisfaction.
Chap. XIV. THE TWO SOURCES OF VALUE. 261
Value arising in the first mode may be distinguished as
" value from production," and value arising in the second
mode may be distinguished as " value from obligation "
for the word obligation is the best word I can think of
to express everything which may require the rendering
of exertion without the return of exertion.
Value in the sense of exchange value, the only sense in
which it can be properly used in political economy, since
this has now been fixed by usage, is one and the same
quality, just as the water that flows through the outlet of
the Nile or Mississippi is one and the same stream. But
as we distinguish the sources of these waters as the White
Nile and the Blue Nile, or as the Upper Mississippi, the
Missouri, the Ohio, etc., so we may distinguish as to origin,
between value from production and value from obligation.
The mere recognition that there is such a difference in the
origins of value would of itself do much to extricate po-
litical economy from the utter maze into which a century
of cultivation has brought it in the closing years of the
nineteenth century.
But while making this distinction it must be remembered
that the essential character of value is always that of equiva-
lence to exertion in the satisfaction of desire. The value of
a thing, in short, is the amount of toil and trouble which it
will save to the possessor (as in the case of a Crusoe), or
(as is the usual case) others may be willing to undertake in
exchange for it. This is not necessarily the toil and trouble
which the purchaser will agree in his own person to undergo,
but the toil and trouble which he had power to command
or to induce others to undergo, and of which he can thus
dispense the seller in the attainment of his desire. No
matter how this quality attaches to them, whether by value
from production, or by value from obligation, things have
value when, so long, and so far, as they will purchase ex-
emption from toil and trouble in the attainment of desire.
262 THE NATURE OF WEALTH. SooJcIL
That "debt is slavery" is not merely a metaphorical
expression. It is literally true in this, that debt involves,
though it may be in limited degree, the same obligation of
rendering exertion without return as does slavery. When
under the form of exchange I receive services or commod-
ities from another, asking him to forego the receipt on his
part of what I should by the terms, expressed or implied,
of our exchange, receive in return from him, I assume an
obligation, though probably to a limited extent and with
limited sanctions, to render to him labor, or the results of
labor, without, so far as it goes, any return on his part.
Such a debt may be a mere debt of conscience, which he
may have no means of proving, or have no legal means of
collecting, even if he could prove it ; or it may be a mere
debt of honor, which is the name we give to debt held
morally binding, but which the municipal law may refuse
to help us to collect ; or it may be witnessed by other per-
sons or writings, or by the assignment of releases of specific
things as in mortgages ; or by the agreements of others to
pay if I do not, as is the case of negotiable notes. But
while all this may affect the ease with which I may dispose
of my obligation to another and the value I can get in re-
turn for it, the essential principle of these different forms
of obligation is the same. It is the same in so far as it
goes as the obligation to render exertion, as that which
gave their exchangeable value to slaves, and which is in
fact the type of all debts of obligation.
The term " value from obligation " will at once be recog-
nized as including an immense body of the values dealt
with by banks, stock exchanges, trust companies, or held
by private individuals, and which are commonly known as
obligations or securities. But it may require a little re-
flection to see how much else there is having value which
is really value from obligation. All debts and claims of
whatever kind, whether they be what the lawyers call
THE TWO SOURCES OF VALUE. 263
choses in action or mere debts of honor or good faith un-
recognized by law, all special privileges and franchises,
patents, and the beneficial interests known as good- will, in
so far as they have value, have it as value from obligation.
The value of slaves wherever slavery exists and only a few
years ago the market value of slaves in the United States
was estimated in round numbers at three thousand million
dollars is clearly a value of obligation, springing not from
production, but from the obligation imposed on the slave
to work for the master. So too with the value of public
pensions and the incumbency of profitable offices and
places, when they are made matters of bargain and sale,
which is in some cases yet done in England and which is
I fear to a still larger extent yet done in the United States,
though surreptitiously, as it is habitually done in China
where " civil service reform " has for centuries prevailed.
In English newspapers one may yet occasionally read
advertisements for the sale of advowsons for the cure of
souls. The exchange value that they have is of course
from obligation. Up to a few years ago there were similar
advertisements for the sale of commissions in the army
and navy. These are but survivals of an earlier and per-
haps clearer type of nomenclature. The value they have
is clearly a value from obligation. And the same thing is
true under more modern forms, of rights given by protec-
tive duties, by civil-service regulations, and franchises, and
patents, and forms of good-will. All these things have
value only as " value from obligation."
Among the valuable assessments of the large landholders
of feudal times was the right of holding markets, of keep-
ing dove-cotes, of succeeding in certain instances to the
property of tenants; or of grinding grain, of coining
money, of collecting floatwood, etc. The values of these
were clearly " values from obligation." But that they have
passed insensibly into the single right of exacting a rent
264 THE NATURE OF WEALTH. Book II.
for the use of land is proof that the value of this right
the right, as it is called, of private ownership of land is
in reality a " value from obligation."
These ways of giving an additional value to things al-
ready in existence or of bringing out value in things which
may have no more tangible existence than an act of mind,
a verbal promise, a paper note, an act of legislature, a de-
cision of court or a common habit or custom, are clearly
of totally different origin and nature from the ways in
which value originates by the expenditure of labor in the
production of wealth or services, and readily to distinguish
them we need a classifying name. It is because the word
obligation best consorts with existing customs, and best
expresses the common character of the element distinct
from production that gives value, that I speak of value
from obligation as distinct from value from production.
For the common character of all that I am here speaking
of is that their possession enables the possessor to com-
mand or compel others to render exertion without any
return of exertion on his part to them. This power to
command labor without the return of labor constitutes on
the other side an obligation, and it is this that gives value.
Thus a verbal promise, a bank-account, a promissory
note, or any other instrument of indebtedness, an annuity,
an insurance policy, things which frequently have value,
derive that value from the fact that they express an obli-
gation fixed, unfixed or merely contingent to render exer-
tion to the holder or assignee without return. Thus value
may be increased sometimes even by the destruction of
valuable things, as the Dutch East India Company kept
up the value of spices in Europe by destroying great
quantities of spices in the islands where they grew ; and
as our " protective " tariff makes certain things more valu-
able in the United States than they would otherwise be,
by imposing fines and penalties on bringing them into the
Chap. XIV. THE TWO SOURCES OF VALUE. 265
country; or as strikes, as we have recently seen in Aus-
tralia, in England and in America, may increase the value
of coal or other products ; or as a drought, which causes
great loss of the corn crop over wide areas, may increase
the value of corn, or as a war which lessens the supply of
cotton in England may increase the value of cotton there.
All such additions to value are of " value from obliga-
tion," which can no more affect the general stock than can
what Jack wins from Tom in a game of cards.
But the most important of these additions to value
which do not increase wealth are unquestionably to be
found in land value, the form of value from obligation
which in the progress of mankind to civilization tends
most rapidly to increase, and which has already in the
modern world assumed perhaps more than the relative
importance that slavery once held in the ancient world.
In an England or a United States, or any other highly
civilized country, this importance is already so great that
the selling value of the land is the selling value of all im-
provements and personal property, in short of all " value
from production;" while it is the one thing which the
natural progress of society, in short all improvements of
whatever kind, tend constantly to augment. Yet this
value is not a part of wealth in the economic sense. It
can have, so far as the individual is concerned, none of
the moral sanctions of property. It rightfully belongs to
no individual or individuals but to the community itself.
Considered by the vulgar as the highest form and very
type of wealth, land in reality is to the political economist
not wealth at all.
And this is the reason that neither by Adam Smith nor
by those who succeeded him, however much they may have
differed as to tweedledum and tweedledee, has the true
character and dual nature of value been realized. For to
recognize that is to come to the conclusion of the Physio-
266 THE NATUEE OF WEALTH. Book II.
crats that, in the economic sense, land is not wealth. And
this involves a revolution, albeit to society a beneficent
revolution, greater than the world has yet seen.
Yet it is perfectly clear. Let us go back in thought to
our imaginary Isle of Eden, and suppose that its dis-
coverers, instead of making merchandise of the inhabitants
themselves, had done at once what the American mission-
aries have done gradually in the Hawaiian Islands made
themselves owners of the land of the island, and with
power to enforce their claim by punishment, had forbidden
any islander to pluck of a tree or drink of a spring with-
out their permission. Land before valueless would at once
become valuable, for the islanders having nothing else to
give would be compelled to render exertion, or the prod-
ucts of exertion, for the privilege of continuing in life.
And that this quality attaching to things, of purchasing
by exchange exemption from the toil and trouble in the
attainment of desire, is what is commonly meant by value
in exchange a little analysis will show. " The value of a
thing is just what you can get for it," is a saying, current
among men who have never bothered their heads with po-
litical economy, which concisely expresses the conception
of value. A thing has no value for which nothing can be
got in exchange, and it has value when, so long as, and to
the degree that, it may be exchanged for some other thing
or things.
But all things having value cannot be exchanged for
all other things having value. I could not, for instance,
exchange a million dollars' worth of cheese-cakes for a
building worth a million dollars. What then is the one
thing for which all things having value must directly or
indirectly exchange ? We are apt to ignore that question,
because we habitually think of value in terms of money,
which serves us as a flux for the exchange of all values,
and because we are apt to think of labor as a valuable
Chap. XIV. THE TWO SOURCES OP VALUE. 267
thing, without distinguishing the different senses in which
we use the word. But if we press the question, we see
that everything having value must be ultimately exchange
able into human exertion, and that it is in this that its
value consists. There are some valuable things that cannot
readily, and some that it is practically impossible to ex-
change for exertion such, for instance, as an equatorial
telescope, a locomotive, a steamship, a promissory note or
bond of large amount, or a bank-note or greenback of high
denomination. But they derive their value from the fact
that they can be exchanged for things that can in turn be
exchanged for exertion.
Money itself derives its power of serving as a medium
or flux of exchanges from the fact that it is of all things
that which is most readily exchangeable for exertion, and
it utterly loses value when it ceases to be exchangeable for
exertion. This we have seen in the United States in the
case of the Continental currency, in the case of the notes
of broken State banks and in the case of the Confederate
currency. Thus value ends as it begins, with the power
of commanding exertion, and is always measured by that
power.
Again, as before, we find that Adam Smith was right in
the clear though evanescent gleam that he got of the nature
of value. Value in the economic sense is not a mere rela-
tion of exchangeability between valuable things, which,
save relatively, as between one particular thing and an-
other particular thing, can neither increase nor diminish.
The real relation of value is with human exertion, or rather
with the toil and trouble that are the inseparable adjuncts
of exertion ; and the true and absolute value of anything,
that which makes it comparable with that of any or all
other things in all times and places, is the difficulty or ease
of acquiring it. That is of high value which is hard to
get ; that is of low value which is easy to get j while that
268 THE NATURE OF WEALTH. Boole II.
which may be had without exertion and that which no one
will undergo exertion to get are of no value at all. Cheap-
ness or low value is the result of abundance ; dearness or
high value the result of scarcity. The one means that the
satisfactions of desire may be obtained with little effort,
the other that they can be obtained only with much effort.
Thus there may be general increase or decrease of value as
clearly and as truly as there may be general scarcity or
general abundance.
The recognition of this simple theory of value will enable
us as we proceed to clear up with ease and certainty many
points which have perplexed the economists who have
ignored it, and are to their students stumbling-blocks,
which make them doubt whether any real science of
political economy is possible. In its light all the complex
phenomena of value and exchange become clear, and are
seen to be but illustrations of that fundamental law of
the human mind which impels men to seek the gratifica-
tion of their desires with the least exertion.
Whatever increases the obstacles, natural or artificial,
to the gratification of desire on the part of the ultimate
users or consumers of things, thus compelling them to ex-
pend more exertion or undergo more toil and trouble to
obtain those things, increases their value ; whatever lessens
the exertion that must be expended or the toil and trouble
that must be undergone, decreases value. Thus, wars,
tariffs, pirates, public insecurity, monopolies, taxes and
restrictions of all kinds, which render more difficult the
satisfaction of the desire for certain things, increase their
value, and discoveries, inventions and improvements which
lessen the exertion required for bringing things to the
satisfaction of desire, lessen their value.
Here we may see at once the clear solution of a ques-
tion which has perplexed and still perplexes many minds
the question whether the artificial increase of values by
Chap. XIV. THE TWO SOURCES OF VALUE. 269
governmental restriction is or is not in the interest of the
community. When we regard value as a simple relation
of exchangeability between exchangeable things, there may
seem room for debate. But when we see that its relation
is to the toil and trouble which must be undergone by ulti-
mate users in the satisfaction of desire, there is no room
for debate. Scarcity may be at times to the relative in-
terest of the few ; but abundance is always to the general
interest.
CHAPTER XV.
THE MEANING OF WEALTH IN POLITICAL
ECONOMY.
SHOWING HOW VALUE PROM PRODUCTION IS WEALTH IN
POLITICAL ECONOMY.
Wealth as fixed in "Progress and Poverty "Course of the scholastic
political economy The reverse method of this work The con-
clusion the same Reason of the disposition to include all value
as wealth Metaphorical meanings Bull and pun Metaphor-
ical meaning of wealth Its core meaning Its use to express
exchangeability Similar use of money Ordinary core meaning
the proper meaning of wealth Its use in individual economy and
in political economy What is meant by increase of wealth-
Wealth and labor Its factors nature and man Wealth their
resultant Of Adam Smith Danger of carrying into political
economy a meaning proper in individual economy Example of
"money" "Actual wealth "and "relative wealth" "Value from
production " and "value from obligation "The English tongue
has no single word for an article of wealth Of "commodities"
Of "goods" Why there is no singular in English The at-
tempt to form one by dropping the " s " and Anglo-German jargon.
WE are now in a position to fix the meaning of
wealth as an economic term.
In " Progress and Poverty," which I desired to make
as brief as possible, and where my main purpose was to
fix the meaning of the word capital, I fixed the meaning
of the word wealth directly, as "natural products so
270
Chap. XV. WEALTH IN POLITICAL ECONOMY. 271
secured, moved, combined or altered by human labor as to
fit them for human satisfaction." This also was the way
in which, as I understand it, the Physiocrats, who came
substantially to the same conclusion, had denned it. But
the scholastic political economists, instead of either dis-
covering for themselves or taking my hint, continued on
the road by which Adam Smith had avoided saying finally
what wealth was. They continued to discuss the word
value, so confused in its various senses, in such manner
as to give not only no conclusion as to the real meaning of
wealth, but finally to actually destroy political economy
itself.
Thus the confusion into which, after more than a hun-
dred years of cultivation, the teaching of political econ-
omy has fallen as to the meaning of its principal term a
confusion which is in reality even greater than in ordinary
speech, that makes no pretensions to exactness in the use
of the word is clearly due to confusions as to the meaning
of the term value. The scholastic development of po-
litical economy since Adam Smith has not only confused
the distinction between value in use and value in exchange,
but it has tended to cover up the vital distinction between
the two sources of value in exchange ; that originating in
the storing up of labor, and that originating in what I have
called obligation often power, devoid of moral right, to
compel the expenditure of labor.
This is the condition in which the orthodox political
economy now is. It has not only not discovered what its
principal term, wealth in the economic sense, really is, but
it has so confounded other terms as to give little light on
the search.
In this work therefore I have adopted a different method
from that employed in " Progress and Poverty." Finding
it necessary to discuss the meaning of the term value in
a fuller way than I had before done, and seeing that in
272 THE NATURE OF WEALTH. Book II,
the current political economy the only consensus of opinion
was that all wealth had value, I adopted a method the
reverse of that of " Progress and Poverty," and instead of
beginning with wealth, began with value. Commencing
with Adam Smith and inquiring what was meant by value,
I found that in value were included two absolutely differ-
ent things, namely, the quality of value from production,
and the quality of value from obligation, one of which
kinds of value resulted in wealth and the other of which
did not. Now, value from production, which is the only
kind of value which gives wealth, consists in application
of labor in the production of wealth which adds to the
common stock of wealth. Wealth, therefore, in political
economy consists in natural products so secured, moved,
combined or altered by human labor as to fit them for
human satisfaction. Value from obligation, on the other
hand, though a most important element of value, does not
result in increase in the common stock, or in the produc-
tion of wealth. It has nothing whatever to do with the
production of wealth, but only with the distribution of
wealth, and its proper place is under that heading.
Thus in the way I have in this work adopted, that of
proceeding analytically from value, we come to precisely
the same conclusion as that reached in "Progress and
Poverty," where we proceeded directly and by deduction
we come to the result that wealth in the politico-eco-
nomic sense consists in natural substances that have been
so secured, moved, combined or altered by human labor
as to fit them for human satisfaction. Such substances are
wealth and always have value. When they cease to have
value they of course cease to be wealth.
Thus, proceeding by the way adopted in this work, we
reach precisely the same conclusion as to wealth as by the
way adopted in my previous work. The advantages of
adopting this mode here are that a conclusion reached by
Chap. XV. WEALTH IN POLITICAL ECONOMY. 273
the methods familiar to the students of the scholastic po-
litical economy can with difficulty be ignored by them, and
that in going in this way over the subject of value much
has been seen both for the present and the future that was
necessary to a full treatise on the science of political econ-
omy and that may elsewhere be dispensed with.
I wish therefore particularly to call the attention of the
reader to what has been here done. Not that I hope that
anything that I can do, unaccompanied or unsucceeded by
a great change in general conditions, can long keep down
the disposition which this tendency of political economy
that I have alluded to shows.
As there is a reason for everything, in the mental world
as truly as in the physical world, so there is a reason for
this disposition to include in the term wealth everything
that has value, without regard to the origin of that value.
It springs at bottom from the desire on the part of those
who dominate the accredited organs of education and
opinion (who wherever there is inequality in the distribu-
tion of wealth are necessarily the wealthy class) to give to
the mere legal right of property the same moral sanction
that justly attaches to the natural right of property, or at
the very least to ignore anything that would show that
the recognition of a legal right may involve the denial of
a moral right. As the defenders of chattel slavery, and
those who did not wish to offend the slave power, not long
since dominant in the United States, were obliged to stop
their examination of ownership with purchase, assuming
that the purchase of a slave carried with it the same right
of ownership as did the purchase of a mule or of a bale of
cotton, so those who would defend the industrial slavery
of to-day, or at least not offend the wealth power, are
obliged to stop their examination of the nature of wealth
with value, assuming that everything that has value is
therefore wealth, thus involving themselves and leaving
274 THE NATURE OF WEALTH. Boole II.
their students in a fog of confusions as to the nature of
the thing whose laws they profess to examine.
But to whomsoever wishes really to understand political
economy there is now no difficulty in coming to a clear and
precise determination of the nature of wealth, whichever
way he may elect to begin.
The power of the imagination, nay even that power of
recognizing likeness and unlikeness, in which perception
itself consists, always expands by metaphor the primary
or fundamental meaning of a word in common use, and it
is by reason of this, even more than by the adoption of
new root words, that a language grows in copiousness,
flexibility and beauty. Thus such words as light and dark-
ness, sunshine and rain, to eat and to drink, are put by
metaphor and simile to a multiplicity of uses in common
speech. We speak of the light of hope, or the light that
beats upon a throne, or the light of events ; of a dark pur-
pose, or a dark saying, or a darkened intellect; of the
sunshine of love or prosperity, or of a sunny countenance ;
of a rain of bullets, or a rain of misfortunes, or a rain of
questions or epithets; of a ship eating into the wind, of
rust eating iron, or of a man eating his own words ; of a
sword drinking blood, or of a lover drinking in the looks,
words or actions of a loved one. But such use of words
in common speech causes no confusion as to their original
and fundamental meaning, the core from which all figura-
tive use of them proceeds. The broad humor of the Irish
bull comes from our prompt recognition of the difference
between core meaning and figurative meaning; and the
offensiveness of the deliberate pun, from the impertinence
of the implied assumption that we will not quickly recog-
nize this difference.
Now, in common speech the word wealth takes on
such figurative meanings as do all other words in common
use. We speak of the night's wealth of stars, of a poet's
Chap. XV. WEALTH IN POLITICAL ECONOMY. 275
wealth of imagery, of an orator's wealth of expression, of
a woman's wealth of hair, of a student's wealth of know-
ledge, or of the wealth of resource of a general, a states-
man or an inventor ; of a porcupine's wealth of quills or a
bear's wealth of fur. But such uses of the word wealth
impose no difficulty. They are merely metaphorical ex-
pressions of abundance. So, too, it is with what is called
natural wealth. We speak of rich ore and poor ore, of
rich land and poor land, of a naturally rich country and a
naturally poor country ; of a wealth of forest or mines or
fisheries ; of a wealth of lakes or rivers, or a wealth of
beautiful scenery. But where anything more than abun-
dance is expressed in such uses of the word wealth it
is that of natural opportunity, or that of utility, or value
in use, with which in its fundamental sense wealth has
nothing to do. With that fundamental or core meaning
of the word wealth, from which all such figurative uses
spring, is inextricably blended the idea of human produc-
tion. Whatever exists without man's agency, was here
before he came, and will, so far as we can see, be here after
he is gone ; or whatever is included in man himself, how-
ever well the figurative use of the word wealth may serve
to express its abundance or usefulness, cannot be wealth
in the fundamental or core meaning of the word.
So, too, is the still more common use of the word
wealth to express the power of exchangeability or of
commanding exertion. As commonly used the word
wealth when applied to the possessions of an individual
includes all purchasing power, and is indeed in most cases
synonymous with exchange value. But this use of the
word is really representative, like the similar use we make
of the word money. We say that a man has so much
money, or so many dollars or pounds, without meaning,
or being understood as meaning, that he has in his posses-
sion so much actual money. We mean only that he has
276 THE NATUEE OF WEALTH. Book II.
what would exchange for so much money. Such repre-
sentative use of the word money or of the terms of
money does not, in every-day affairs, in the least confuse
us as to the real meaning of the word. If asked to explain
what money is, no one would think of saying that sheep
and ships, and lands and houses are money, although he
is in the constant habit of speaking of their possession as
the possession of money.
So it is with the common use of the word wealth.
Many things are commonly spoken of as wealth which we
all know, in the true and fundamental meaning of the
word, are not wealth at all.
If you take an ordinarily intelligent man whose powers
of analysis have not been muddled by what the colleges
call the teaching of political economy, and ask him what
he understands at bottom by wealth, it will be found at
last, though it may require repeated questioning to elimi-
nate metaphor and representation, that the kernel of his
idea of wealth is that of natural substances or products so
changed in place, form or combination by the exertion of
human labor as to fit them or fit them better for the satis-
faction of human desire.
This, indeed, is the true meaning of wealth, the meaning
of what I have called " value from production." It is the
meaning to which in political economy the word wealth
must be carefully restricted. For political economy is the
economy of communities or nations. In the economy of
individuals, to which our ordinary speech usually refers,
the word wealth is commonly applied to anything having
an exchange value as between individuals. But when
used as a term of political economy the word wealth
must be limited to a much more definite meaning. Many
things are commonly spoken of as wealth in the hands of
the individual, which in taking account of collective or
general wealth cannot be included. Such things having
Chap. XV. WEALTH IN POLITICAL ECONOMY. 277
exchange value, are commonly spoken of as wealth, since
as between individuals or between sets of individuals they
represent the power of obtaining wealth. But they are
not really wealth, inasmuch as their increase or decrease
does not affect the sum of wealth. Such are bonds, mort-
gages, promissory notes, bank-bills, or other stipulations
for the transfer of wealth. Such are franchises, which
represent special privileges, accorded to some and denied
to others. Such were slaves, whose value represented
merely the power of one class to appropriate the earnings
of another class. Such are lands or other natural oppor-
tunities, the value of which results from the acknowledg-
ment in favor of certain persons of an exclusive legal right
to their use, and the profit of their use, and which repre-
sents only the power thus given to the mere owner to de-
mand a share of the wealth produced by use. Increase in
the value of bonds, mortgages, notes or bank-bills cannot
increase the wealth of a community that includes as well
those who promise to pay as those who are entitled to re-
ceive. Increase in the value of franchises cannot increase
the wealth of a community that includes those who are
denied special privileges as well as those who are accorded
them. The enslavement of a part of their number could
not increase the wealth of a people, for more than the en-
slavers gained the enslaved would lose. Increase in land
values does not represent increase in the common wealth,
for what landowners gain by higher prices the tenants or
ultimate users, who must pay them, are deprived of. And
all this value which, in common thought and speech, in
legislation and law, is undistinguished from wealth, could,
without the destruction or consumption of anything more
than a few drops of ink and a piece of paper, be utterly
annihilated. By enactment of the sovereign political
power debts might be canceled, franchises abolished or
taken by the state, slaves emancipated, and land returned
278 THE NATURE OF WEALTH. Book II.
to the general usufructuary ownership of the whole people,
without the aggregate wealth being diminished by the
value of a pinch of snuff, for what some would lose others
would gain. There would be no more destruction of
wealth than there was creation of wealth \vhen Elizabeth
Tudor enriched her favorite courtiers by the grant of
monopolies or when Boris Godoonof made Russian peas-
ants merchantable property.
All articles of wealth have value. If they lose value,
they cease to be wealth. But all things having value are
not wealth, as is erroneously taught in current economic
works.* Only such things can be wealth the production
of which increases and the destruction of which decreases
the aggregate of wealth. If we consider what these things
are, and what their nature is, we shall have no difficulty in
defining wealth.
When we speak of a community increasing in wealth
as when we say that England has increased in wealth since
the accession of Victoria, or that California is now a
wealthier country than when it was a Mexican territory
we do not mean to say that there is more land, or that the
natural powers of the land are greater, for the land is the
same and its natural powers are the same. Nor yet do
we mean that there are more people in the same area, for
when we wish to express that idea we speak of increase of
population. Nor yet do we mean that the debts or dues
owing by some of these people to others of their number
have increased. But we mean that there is an increase of
certain tangible things, having a value that comes from
production, such as buildings, cattle, tools, machinery,
* See, for instance, a book used as a text-book in many of the
American and English colleges, the " Political Economy," by Francis
A.Walker, third edition, New York, 1888, Sec. 7. "Wealth com-
prises all articles of value and nothing else."
Cliap.XV. WEALTH IN POLITICAL ECONOMY. 279
agricultural and mineral products, manufactured goods,
ships, wagons, furniture and the like. The increase of
such things is an increase of wealth ; their decrease is a
lessening of wealth ; and the community that, in propor-
tion to its numbers, has most of such things is the wealthi-
est community. The common character of these things is
that of natural substances or products which have been
adapted by human labor to the satisfaction of human
desire.
Thus, wealth, as alone the term can be used in political
economy, consists of natural products that have been se-
cured, moved or combined, so as to fit them for the grati-
fication of human desires. It is, in other words, labor
impressed upon matter in such a way as to store up, as the
heat of the sun is stored up in coal, its power to minister
to human desires. Nothing that nature supplies to man
without the expenditure of labor is wealth ; nor yet does
the expenditure of labor result in wealth unless there is a
tangible product which retains the power of ministering
to desire ; nor yet again can man himself, nor any of his
powers, capabilities or acquirements, nor any obligation
to bestow labor or yield up the products of labor from one
to another, constitute any part of wealth. Nature and
man or, in economic terminology, land and labor are
the two necessary factors in the production of wealth.
Wealth is the resultant of their joint action.
And though Adam Smith nowhere formally defined
wealth, being mainly occupied with showing that it did
not consist exclusively in money or the precious metals ;
and though incidentally he fell into confusion in regard
to it, yet, as may be seen from the passages in the " Wealth
of Nations" before quoted,* this was his idea of wealth
when he came to look at it directly the idea of products
* Page 28.
280 THE NATURE OF WEALTH. Book II.
of labor, still retaining the power, impressed on them b^
labor, of ministering to human desire.
Now in our common use of the word wealth we make
no distinction between the various kinds of things that
have value, as to the origin of that value, but class them
all together under the one word, wealth, speaking of the
sum of value which an individual may have at his com-
mand as his wealth, or sometimes as his money. This
metaphorical use of words is so embedded in common
speech that it would be hopeless to object to it in common
usage.
So far indeed as such use of the word wealth is con-
fined to the province of individual economy, the relations
of man to man, no harm whatever results. But as I said
in the introductory, of all the sciences, political economy is
that which comes closest to the thought of the masses of
men. All men living in society have some sort of political
economy, even though they do not recognize it by that
name ; and no matter how much they may profess igno-
rance, there is nothing as to which they less feel ignorance.
From this comes a danger that the loose use of a word in
common thought, where it does no harm, may be insensibly
transferred to thought on economic questions, where it may
do great harm.
To take an example : Our common habit of estimating
possessions in terms of money does no harm whatever, so
long as it is confined to the sphere of individual affairs, in
which that use has grown up. When, sticking strictly to
the idea of the individual, we speak of a man owning or
making or obtaining so much money, we are perfectly well
understood, both in our own minds and by others, as
meaning not really money, but money's-worth. Yet, in
passing insensibly into the field of political economy, this
habit of speaking of money's-worth as money gave enor-
mous strength to what Adam Smith called the mercantile
Chap. XV. WEALTH IN POLITICAL ECONOMY. 281
system of political economy, or what is now called the pro-
tective system a system which has for centuries molded
the polity of nations of the European civilization, and
which, though now more than a hundred years after the
publication of the "Wealth of Nations," still continues
largely to mold it. Both on this account and on account
of other delusions which have taken root in the sphere of
economic thought from the habit of commonly using the
word money as synonymous with money's-worth, it is to
be wished there were some word or phrase in common use
that would express the distinction even when not absolutely
necessary, between actual money and money's-worth.
The occasional use of some such distinction in common
speech between wealth and wealth's-worth is even more
to be wished for. There is more danger of injurious con-
fusion from the insensible transference to the economic
sphere of the vague uses of the word wealth which
suffice for the individual sphere than is the case with simi-
lar common uses of the word money. And although the
scholastic political economists have been since the time
of Adam Smith largely alive to the confusions introduced
into political economy by treating money and money's-
worth as synonymous, and thus, so far as their influence
has reached, helped to guard against any danger from the
transference of the common use of the word money to
economic thought; the sanction of the most respectable
colleges and universities is now given to uses of the eco-
nomic term wealth in a way that only conscious metaphor
permits in common speech.
Now since our metaphorical use of the word wealth in
the sense of wealth's-worth or value is so deeply rooted, it
is to be wished that in common speech, or at least wher-
ever common speech tends into the province of political
economy, as it continually does, we should distinguish
between true wealth and metaphorical or representative
282 THE NATURE OF WEALTH. Book II.
wealth, by the use of such words as "actual wealth"*
and " relative wealth," meaning by the one that which is
actually wealth, as being a product of labor, and by the
other that which is not in itself wealth, although, possess-
ing value, it will exchange for wealth. Yet this would be
too much to try, and I think all may be had that it is
possible to gain by clearly showing, as I have tried to do,
that there are two kinds of value, one the value from pro-
duction that adds to wealth, and the other the value from
obligation that does not.
The sum of wealth in civilized society consists of things
of many different kinds having the common character of
holding in store, as it were, the ability of labor to minister
to desire. Yet there is in English no single word which
will clearly and definitely express the idea of an article of
wealth, nor has the usage of economists yet fairly adapted
any single word to that meaning as an economic term.
The word " commodity " will serve in many cases. But
while it would be hard to speak of such an article of
wealth as a railroad, a bridge, a massive building, or the
result of the plowing of a field as a commodity, there are
other things, usually accounted commodities, since they
have value in exchange, that are not properly articles of
wealth such as lands, bonds, mortgages, franchises, etc.
The word " goods " as commonly used also comes near
to the idea of " articles of wealth." But it has connota-
tions if not limitations which make its meaning too narrow
fully to express the idea. And even if these were set
aside, as they are by a friend of mine, the wife of the
superintendent of a Western zoological garden, who,
coming to New York with her husband on the annual trip
* With a certain justification which will be indicated in the next
chapter the lawyers have already appropriated the term "real estate,"
or real wealth, to what is in greater part not wealth at all.
Chap. XV. WEALTH IN POLITICAL ECONOMY. 283
he makes to buy wild animals, jokingly speaks of " shop-
ping for menagerie goods," there would still remain an
insuperable difficulty. " Goods," in the meaning of articles
of wealth, has in English no singular, and it is impossible
to make any, because the singular form of the same word
already holds the place with a different meaning. While
we cannot speak of "a single goods," still less can we
make a singular by dropping the " s." Even though usage
should confirm our speaking of the stock of a dealer in
wild animals as goods, it would be to destroy the well-
established use of the word to speak of a tiger, a hyena or
a cobra-de-capello as " a good."
In its most general use " good " is an adjective, express-
ing a quality which can be thought of only as an attribute
of a thing. As a noun, " good " does not mean a tangible
thing at all, but a state or condition or quality of being.
To try to force either a noun of accepted meaning or an
adjective 0f accepted meaning to do duty as the singular
of a noun of totally different meaning is to injure our Eng-
lish tongue, both as a vehicle of intelligible speech and an
instrument of precise thought.
To what confusions of thought as well as of speech the
attempt to force a singular of the word " goods " leads,
may be seen in recent university text-books of political
economy., such as that of Professor Marshall of Cambridge
University, England. Whoever tries to discover what they
mean by wealth will find himself struggling with a jargon
in which he will have more difficulty in recognizing his
mother tongue than in pigeon-English a jargon of such
terms as " material goods " and " immaterial goods," " inter-
nal goods " and " external goods," " free goods " and " eco-
nomic goods," "personal goods" and "collective goods,"
" transferable goods " and " non-transferable goods," with
occasional bursts of such thunderous sound as " external-
material-transferable goods," " internal-non-transferable
284 THE NATURE OF WEALTH. Book II.
goods," "material-external-non-transferable goods" and
"personal-external-transferable goods," with all their re-
spective singulars.
There is in English no singular of the word " goods,"
and the reason is that there is no need for one, since when
we want to express the idea of a single item or article in a
lot of goods, it is better to use the specific noun, and to
speak of a needle or an anchor, a ribbon or a blanket, as
the case may be ; and where I shall have occasion to speak
of a single item of wealth, without reference to kind, or
of the plural forms of the same idea, I shall speak of an
article or of articles of wealth.
CHAPTER XVI.
THE GENESIS OF WEALTH.
SHOWING HOW WEALTH ORIGINATES AND WHAT IT
ESSENTIALLY IS.
Reason of this inquiry Wealth proceeds from exertion prompted
by desire, but all exertion does not result in wealth Simple ex-
amples of action, and of action resulting in wealth " Biding and
tying " Sub-divisions of effort resulting in increments of wealth
Wealth essentially a stored and transferable service Of trans-
ferable service The action of reason as natural, though not as
certain and quick as that of instinct Wealth is service impressed
on matter Must be objective and have tangible form.
IT is so all-important that we should know precisely and
certainly just what the chief factor of political econ-
omy, wealth, is, so that we may hereafter be in no doubt
whatever about it but may confidently reason from our
knowledge of its nature, that I propose to reinforce all that
has been said by showing just how wealth originates and
what in essence it actually is.
Wealth is a result of human exertion. But all human
exertion does not result in wealth. Not merely is there
failure and misadventure in the application of effort to
the production of wealth, but the production of wealth is
not the only purpose of human effort.
All human actions proceed from desire and have their
aim and end in the satisfaction of desire. But if we con-
285
286 THE NATURE OF WEALTH. Boole II.
sider those actions of men which aim at material satisfac-
tions, we see that there is a distinction as to the way in
which satisfaction is sought. In some the satisfaction
sought is direct and immediate. In others it is indirect
and delayed.
To put myself in imagination in the position of my most
remote ancestor : I am moved by the desire we call hunger
or appetite, or it is aroused in me by the sight of a tree
laden with fruit. I pluck and eat the fruit, and am satis-
fied. Or I feel the desire called thirst, and stooping down
to a spring, I drink, and am again satisfied. Action and
satisfaction are in such cases confined to the same person,
and the connection between them is direct and immediate.
Or, my wife is with me. She feels the same desires;
but is not tall enough to pluck the fruit and cannot as
well climb a tree or so readily stoop to the spring. So,
impelled by that primordial impulse that ordains that the
desire of the man shall be to the woman no less than the
desire of the woman to the man, I pluck fruit that she may
eat, and hollowing my hands give her to drink. In this
case the action is on the part of one person ; the satisfaction
proceeding from the action is obtained by another.* This
transfer of the direct result of action we speak of as a ser-
vice rendered and received. But the connection between
action and satisfaction is still direct and immediate, the
causal relation between the two having no intermediate
link.
These two examples are types of the ways in which
many of our actions attain satisfaction. These are the
ways in which in nearly all cases the animals satisfy their
desires. If we except the storing and hiving animals, and
* There is of course on my part both a desire and a satisfaction
a desire that her desires may be satisfied and a satisfaction when they
are satisfied. But these are secondary, the primary end and aim of
my action being the satisfaction of her desires.
Chap. XVI. THE GENESIS OF WEALTH. 287
the almost accidental cases in which a predatory animal
kills a victim too large to be consumed at once, there is
nothing in their actions which goes beyond the direct
and immediate satisfaction of desire. The cow that has
browsed all day or the bird that has brought worms to
her young has done nothing towards the satisfaction of
desire that will recur to-morrow.
In such cases there is no suggestion of anything we
would call wealth. And in a world where all human de-
sires were satisfied in this direct and immediate way there
would be no wealth, no matter how great the activities of
man or how abundant the spontaneous offerings of nature
for the satisfaction of his desires.
But man is a reasoning being, who looks beyond the
immediate promptings of desire, and who adapts means
to ends. An animal would merely eat of the fruit or
drink of the spring to the full satisfaction of present de-
sire. But the man bethinking himself of the recurrence
of desire might, after satisfying his immediate desire,
carry off with him some of the fruit to insure a like satis-
faction on the morrow, or with a still longer prevision plant
its kernel with a view to satisfaction in future years. Or
with a view to the future satisfaction of thirst, he might
enlarge the spring or scoop out a vessel in which to carry
water, or dig a channel or construct a pipe. In such cases
action would be spent not in the direct and immediate
satisfaction of desire, but in the doing of what might in-
directly and in the future aid in satisfying desire.
In these cases is something which did not exist in the
previous cases, and which, save among the storing animals,
has nothing analogous to it in animal life.* This something
is wealth. It consists of natural substances or products,
so changed in place, form or combination by the exertion
* Page 15.
288 THE NATUEE OF WEALTH. Book II.
of human labor as better to fit them for the satisfaction
of human desires.
The essential character of wealth is that of the embodi-
ment or storage in material form of action aiming at the
satisfaction of desire, so that this action obtains a certain
permanence a capability of remaining for a time as at
a stopping-place, whence it may be taken, either to yield
satisfaction to desire, or to be carried forward towards the
satisfaction of desire requiring yet more effort.
Where two men wishing to travel over a determined
road have between them but one horse, they frequently
" ride and tie." That is, John rides forward for a certain
space, leaving Jim to follow on foot. He then ties the
horse, pushing forward himself on foot. When Jim comes
up, he unties the horse, and in his turn rides forward for
some distance past John, and then tying the horse again
for John to take, pushes forward. And so on to the
journey's end. In this tying of the horse, so that he may
be taken and ridden forward again, is something analogous
to the way in which effort towards the satisfaction of desire
is fixed or tied up in wealth, from which it may be taken
for the gratification of desire, or for the purpose of being
carried forward by additional effort to a point where it
may serve to gratify desires requiring larger effort.
Thus, for the satisfaction of desire by the eating of bread,
effort must first be expended to grow the grain ; then to
harvest it ; then to grind it into flour ; then to bake the
flour into bread. At each of these stages (and they may
be sub-divided) there is an increment of wealth : that is to
say, some part of the effort required to reach the point of
yielding the final satisfaction has been accomplished, and
is tied or stored in concrete form, so that what has been
gained towards the final result may be utilized in the re-
maining stages of the process. Grain is an article of wealth
expressing the effort necessary in growing and harvesting,
Chap. XVI. THE GENESIS OF WEALTH. 289
in such form that it may be from thence carried forward
to the satisfaction of desire, either by feeding it to do-
mestic animals, converting it into starch or alcohol, etc.,
or by turning it into flour and making bread. Flour again
is an article of wealth embodying the effort necessary to
the production of grain and the further effort required in
grinding ; and bread an article of wealth embodying that
and the additional effort required in baking, in a form in
which consumption (in this case eating) will give the satis-
faction to desire of which bread is capable.
The idea of wealth cannot be reduced to that of satisfac-
tion, since, even when the intent and the result of the effort
is the satisfaction of a desire on the part of the expender
of the effort, there is necessarily an intermediate step, in
which the expended effort pauses or is stored up for an
interval in concrete form, and whence it may be released
not merely to satisfy the desire of the expender of the
effort, but that of another as well. If I pluck fruit to-day
for the satisfaction of to-morrow's appetite, the satisfaction
I then obtain when eating it would not be to me then the
direct result of an effort, but would yield me satisfaction
as the result of a service a service of which I myself
would be the direct beneficiary, but still no less truly a
service than it would be in the case of my wife were she
the recipient of the satisfaction obtained by eating it.
Thus if we wish to bring the idea of wealth into a larger
generalization, the term of widest inclusiveness that we
could select would be a word which would express the idea
of service without limitation as to mode. The essential
idea of wealth is really that of service embodied in material
form, and all our enjoying of wealth, or exchanging of
wealth, or giving of wealth, or obtaining of wealth, is
really at bottom the enjoying or exchanging or giving
or obtaining of service, a word which involves the possi-
bility of distinction in person between the exertor of
290 THE NATURE OF WEALTH. Book II.
effort and the recipient of the final satisfaction, which is
its aim.
Service of some sort is essential to life, as it may well be
doubted if even in what the microscope may show us of
the lowest rounds of life's ladder there is anything that
comes into life and maintains life self-contained and self-
sufficing.
But the first and simplest form of service, that in which
the recipient gets directly the satisfaction brought about
by the action (and to which for the sake of distinction the
term service should be reserved), though it is capable of
being given, received and exchanged, is so capable only
within very narrow limits, since the action is spent in such
direct service and is over and done, whereas in action re-
sulting in wealth the action is not spent, but is stored or
tied in intermediate and material form, to be spent in
gratification when required. In direct service the power
of human action to satisfy human desire is like the exer-
tion of the power of electricity in the lightning-flash or
the spark of the Leyden jar. But in indirect service,
through the medium of wealth, the action remains unused
for a time in readily exchangeable form, whence it may be
called forth for use, as the power of electricity remains in
transportable and exchangeable form in the storage bat-
tery. So narrow indeed are the limits to the exchange of
direct service for direct service that though this sometimes
takes place even in our highest civilization, it is clear that
were it the only mode in which the action of one person
could be used in procuring satisfaction to another, nothing
like what we call civilization could exist, nor indeed do I
think that human life, in any stage in which we know it,
could continue.
I may black your boots with the understanding that you
shall in return shave my face, or gratify you by telling a
story on condition that you shall gratify me by singing a
Chap. XVI. THE GENESIS OF WEALTH. 291
song, and the possibilities of such exchange may be some-
what widened by the understanding that though I black
your boots or tell you the story to-day, you may give me
the shave or sing the song at a future time, and do this
either for me or for any one whom I may present to re-
ceive in my place the promised service. But manifestly
the exchange of services that may take place in that way
is as nothing compared with the exchange that becomes
possible when service is embodied in concrete form in
wealth and may be passed from hand to hand and used
at will in the satisfaction of desire.
By this transmutation of labor into wealth the exchange
even of such services as cannot be transmuted into wealth,
since they must be rendered directly to the person, is
much facilitated. I desire, for instance, such service from
another as the carrying of a bag or message, or the con-
veyance of myself and baggage from one place to another
by cab, or stage, or train. There is no equivalent service on
my part desired by those for whose services I wish, nor if
there was could I stop to render it ; but by the interven-
tion of wealth the satisfaction of desire on both sides be-
comes possible, and the exchange is completed there and
then ; those from whom I obtain the service receiving from
me some article of wealth or representative of wealth which
they can in turn exchange either for wealth or for direct
services from others. It is thus, and only thus, that the
great body of exchanges of direct services that take place
in civilization becomes possible. Indeed, without wealth it
is difficult to see how men could avail themselves of one
another's powers to a much greater extent than do the
animals ; for that some animals exchange services, whoever
has watched monkeys reciprocally ridding each other of
fleas must have realized. Wealth is produced by man and
consequently there could be no wealth in the world until
after man came, just as bees must have preceded the honey
292 THE NATURE OF WEALTH. BooJcIL
which they make. But though man has no wealth-making
instinct as the bees have a honey-making instinct, yet
reason supplies its place, and man produces wealth just as
naturally and certainly as the bees make honey so natu-
rally and so certainly that save in unnatural and temporary
conditions, men destitute of all forms of wealth have never
been found.
The essential idea of wealth being that of exertion im-
pressed on matter, or the power of rendering service stored
in concrete form, to talk of immaterial wealth as some
professed economists now talk, is as much a contradiction
in terms as it would be to talk of square circles or triangu-
lar squares. Nothing can be really an object of wealth
that is not tangible to the senses. Nor in the strict sense
of the term, can wealth include any natural substance, or
form, or power, unmodified by man's exertion, nor any
human power or capacity of exertion. To talk of natural
wealth, or to talk of human skill, knowledge or eaergy as
included in wealth is also a contradiction in terms.
CHAPTER XVII.
THE WEALTH THAT IS CALLED CAPITAL.
SHOWING WHAT THE WEALTH CALLED CAPITAL REALLY IS.
Capital is a part of wealth used indirectly to satisfy desire Simple
illustration of fruit Wealth permits storage of labor The bull
and the man Exertion and its higher powers Personal qualities
cannot really be wealth or capital The taboo and its modern
form Common opinion of wealth and capital.
AS we have seen, all wealth is not devoted in consump-
J\. tion to the satisfaction of desire. Much of it is de-
voted to the production of other forms of wealth. That
part of wealth so devoted to the production of other wealth
is what is properly called capital.
Capital is not a different thing from wealth. It is but
a part of wealth, differing from other wealth only in its
use, which is not directly to satisfy desire, but indirectly
to satisfy desire, by associating in the production of other
wealth.
I have spoken of wealth as the concrete result, the tan-
gible embodiment, by change wrought in material things,
of labor exerted towards the satisfaction of desire, without
as yet having reached or completely reached the point of
satisfaction, consumption.
Now, if this concrete result of labor, wealth, be used,
not in directly satisfying desire by consumption, but for
the purpose of obtaining more wealth, it becomes in that
293
294 THE NATURE OF WEALTH. Book II.
use what we term capital. It is wealth devoted not to the
final use of wealth, the satisfaction of desires, but turned
aside, as it were, to pass through another stage, by which
more wealth may be secured and the final possibilities of
satisfaction increased.
To return to the simplest illustration given in the chap-
ter treating of wealth : The man who, finding a fruit-tree,
plucks and eats, spends his labor in the most direct and
primitive form, that of satisfying desire. His desire is for
the moment satisfied, but the labor he has exerted is all
spent ; no result remains which will help to the future
satisfaction of desire.
But if not content with the satisfaction of present desire
he carries off some of the fruit to where he may in the
future more conveniently obtain it, he has in this gathered
fruit a concrete result of the expenditure of labor. His
labor expended in the gathering and removal of the fruit
which he retains has been as it were stored up, as energy
may be stored up by bending a bow or raising a stone, to
be utilized again at a future time. This stored-up labor,
concretely in this case this gathered and transported fruit,
is wealth, and will retain this character of wealth or stored-
up labor, until it is (1) consumed, by being applied to the
gratification of desire ; or (2) destroyed, as by decay, the
ravages of insects or animals, or some other change which
takes away its potency of aiding in the satisfaction of
desire.
But the man who has thus obtained the possession of
wealth by gathering fruit and carrying it to a more con-
venient place may utilize its potency of ministering to
desire in different ways. Let us suppose him to divide
this wealth, this gathered fruit, into three portions. One
portion he will eat as he feels desire j another portion he
will give to some other man in exchange for some other
form of wealth ; and the third portion he will plant in order
Chap. XVIL WEALTH THAT IS CALLED CAPITAL. 295
that in the future he may more readily and more abun-
dantly satisfy his desire for such fruit.
All three of these portions are alike wealth. But the
first portion is merely wealth ; its use is the final use of
all wealth the satisfaction of desire. But the second and
third portions are not simply wealth they are capital ;
their use is in obtaining more or other wealth, which in its
turn may be used for the satisfaction of desire.
In other words, all capital is wealth; but all wealth is
not capital. Capital is wealth applied to the production
of more or other wealth. It is stored labor, not applied
by one further step to the ultimate end and aim of all
labor, the satisfaction of desire ; but in the production of
more wealth to the further storage of labor.
By the storage of labor, which is involved in the pro-
duction of wealth, it becomes possible for man to change
the time in which a given exertion shall be utilized in the
satisfaction of desire, thus greatly increasing the sum of
satisfactions which given exertion may procure. And by
the using of wealth as capital, which is the calling of past
exertion to the service of present exertion, he is enabled
to concentrate exertion upon a given point, at a given time,
and to call in, as it were by the way, forces of nature which
far transcend in their power those which nature has put
at his use in the human frame.
To illustrate : Nature gives to the bull in his massive
skull and sharp horns a weapon of offense by which almost
the whole strength of his frame may be concentrated upon
one or two narrow points, thus utilizing the maximum of
force upon the minimum of resistance. She has given to
man no such weapon, for his clenched fist, the nearest
approach to the horns of the bull his bodily resources
furnish, is a far inferior weapon. But by turning his
labor into capital in the shape of a spear he is enabled on
occasion to concentrate nearly the whole force of his body
296 THE NATURE OF WEALTH. Book II.
upon an even narrower point than can the bull ; and by
turning labor into capital in the form of a bow or crossbow
or sling, he may exert in one instant the force that can be
accumulated during longer intervals of time ; and finally,
as the result of many transmutations of labor into capital,
he can exert in the rifle chemical forces more potent than
any of the forces of which the energies of his own body
give him command.
Wealth, in short, is labor, which is raised to a higher or
second power, by being stored in concrete forms which
give it a certain measure of permanence, and thus permit
of its utilization to satisfy desire in other times or other
places. Capital is stored labor raised to a still higher or
third power by being used to aid labor in the production
of fresh wealth or of larger direct satisfactions of desire.
It is likewise to be observed that capital being a form
of wealth that is to say, wealth used for the purpose of
aiding labor in the production of more wealth or greater
satisfactions nothing can be capital that is not wealth,
and the term capital is subject to all the restrictions and
limitations that apply to the term wealth. Personal
qualities such as knowledge, skill, industry, are qualities
of labor and can never be properly treated as capital.
While in common speech it may be permissible to speak in
a metaphorical sense of such qualities as capital, meaning
thereby that they are susceptible of yielding to their pos-
sessors advantages akin to the advantages given by capital,
yet to transfer this metaphorical use of speech to eco-
nomic reasoning is, as many ponderous treatises will
testify, provocative of fundamental confusion.
And so, while the possession of slaves, of special privi-
leges, of public debts, of mortgages, or promissory notes,
or other things of the kind I have spoken of in treating
of spurious wealth, may in the hands of the individual
possessor be equivalent to the possession of capital, they
Chap. XVII. WEALTH THAT IS CALLED CAPITAL. 297
can constitute no part of real capital. All the public debts
of the world do not add in the slightest degree to the capi-
tal of the world are incapable of aiding by one iota in the
production of wealth; while the greater part of what
figures in our official reports as capital invested in rail-
roads, etc., is in reality nothing but the inflation of expec-
tation. Capital in the economic sense is a tangible, material
thing matter changed in place, form or condition, so as
to fit it for human uses, and applied to aiding labor in the
production of wealth or direct satisfactions.
To recur to our first simple illustration : A high chief
of the Hawaiian Islands in the old heathen days might, on
discovering a tree laden with fruit, have eaten his fill and
then laid the tree under taboo. He might thus have ob-
tained for himself something of the same advantages that
he would have obtained by carrying some of the fruit to
a more, convenient place, for the inhibition upon others
might have led some of them, in return for the privilege
of taking it, to consent to bring him some. But the result
would not have been the same to the community as a
whole. His Laziness could have obtained the fruits of
labor, but only by virtually taking the labor of others.
And so the son of an Hawaiian missionary, who in the
legal ownership of land holds the Christian equivalent of
the old heathen power of taboo, may in return for the
privilege of permitting others to apply labor to his land
compel them to bring him wealth or capital. The posses-
sion of this power so far as he himself is concerned is
equivalent to the possession of wealth or capital, but not
so to the community. It implies no addition to the sum
of production or to the power of future production. It
implies merely a power of affecting the distribution of
wha,t may already by other agencies be produced.
This fact that part of what is really wealth is capital,
and that what is not wealth is not capital, is so clear that
298 THE NATURE OF WEALTH. SoolcIL
it is really recognized in ordinary speech if we pay atten-
tion to the core, or original meaning of the words. As I
say in " Progress and Poverty," when speaking of capital
(Book I., Chapter II., " The Meaning of the Terms") :
If the articles of actual wealth existing at a given time in a given
community were presented in situ to a dozen intelligent men who had
never read a line of political economy, it is doubtful if they would
differ in respect to a single item, as to whether it should be accounted
capital or not. Money which its owner holds for use in his business
or in speculation would be accounted capital; money set aside for
household or personal expenses would not. That part of a farmers
crop held for sale or for seed, or to feed his help in part payment of
wages, would be accounted capital ; that held for the use of his own
family would not be. The horses and carriage of a hackman would
be classed as capital ; but an equipage kept for the pleasure of its
owner would not. So, no one would think of counting as capital
the false hair on the head of a woman, the cigar in the mouth of a
smoker, or the toy with which a child is playing ; but the stock of a
hair-dealer, of a tobacconist, or the keeper of a toy-store, would be
unhesitatingly set down as capital. A coat which a tailor had made
for sale would be accounted capital ; but not the coat he had made
for himself. Food in the possession of a hotel-keeper or a restaura-
teur would be accounted capital ; but not the food in the pantry of a
housewife, or in the lunch-basket of a workman. Pig-iron in the
hands of the smelter, or founder, or dealer, would be accounted capi-
tal ; but not the pig-iron used as ballast in the hold of a yacht. The
bellows of a blacksmith, the looms of a factory, would be capital ; but
not the sewing-machine of a woman who does only her own work ; a
building let for hire, or used for business or productive purposes ;
but not a homestead. In short, I think we should find that now, as
when Dr. Adam Smith wrote, " that part of a man's stock which he
expects to yield him a revenue is called his capital." And, omitting
his unfortunate slip as to personal qualities, and qualifying some-
what his enumeration of money, it is doubtful if we could better list
the different articles of capital than did Adam Smith in the passage
which in the previous part of this chapter I have condensed.
Now, if, after having thus separated the wealth that is capital
from the wealth that is not capital, we look for the distinction
between the two classes, we shall not find it to be as to the charac-
ter, capabilities, or final destination of the things themselves, as has
been vainly attempted to draw it, but it seems to me that we shall
Chap. X7IL WEALTH THAT IS CALLED CAPITAL. 299
find it to be as to whether they are or are not in the possession of the
consumer.* Such articles of wealth as in themselves, in their uses,
or in their products, are yet to be exchanged are capital ; such articles
of wealth as are in the hands of the consumer are not capital. Hence,
if we define capital as wealth in course of exchange, understanding
exchange to include, not merely the passing from hand to hand, but
also such transmutations as occur when the reproductive or trans-
forming forces of nature are utilized for the increase of wealth, we
shall, I think, comprehend all the things that the general idea of
capital properly includes, and shut out all it does not. Under this
definition, it seems to me, for instance, will fall all such tools as are
really capital. For it is as to whether its services or uses are to be
exchanged or not which makes a tool an article of capital ; or merely
an article of wealth. Thus the lathe of a manufacturer used in
making things which are to be exchanged is capital ; while the lathe
kept by a gentleman is not. Thus wealth used in the construction
of a railroad, a public telegraph line, a stage-coach, a theater, a
hotel, etc., may be said to be placed in the course of exchange. The
exchange is not effected all at once, but little by little, with an
indefinite number of people. Yet there is an exchange, and the
"consumers" of the railroad, the telegraph line, the stage-coach,
theater or hotel, are not the owners, but the persons who from time
to time use them.
Nor is this definition inconsistent with the idea that capital is that
part of wealth devoted to production. It is too narrow an under-
standing of production which confines it merely to the making of
things. Production includes not merely the making of things, but
the bringing of them to the consumer. The merchant or storekeeper
is thus as truly a producer as is the manufacturer or farmer, and his
stock or capital is as much devoted to production as is theirs. But
it is not worth while now to dwell upon the functions of capital,
which we shall be better able to determine hereafter. Nor is the
* Money may be said to be in the hands of the consumer when de-
voted to the procurement of gratification, as, though not in itself de-
voted to consumption, it represents wealth which is ; and thus what
in the previous paragraph I have given as the common classification
would be covered by this distinction, and would be substantially
correct. In speaking of money, in this connection, I am, of course,
speaking of coin, for although paper money may perform all the
functions of coin it is not wealth, and cannot therefore be capital.
["Progress and Poverty," Book I., Chapter II.]
300 THE NATURE OF WEALTH. Book II.
definition of capital I have suggested of any importance. I am not
writing a text-book, but only attempting to discover the laws which
control a great social problem, and if the reader has been led to form
a clear idea of what things are meant when we speak of capital my
purpose is served.
But before closing this digression let me call attention to what is
often forgotten namely, that the terms "wealth," "capital," "wages,"
and the like, as used in political economy, are abstract terms and that
nothing can be generally affirmed or denied of them that cannot be
affirmed or denied of the whole class of things they represent. The
failure to bear this in mind has led to much confusion of thought,
and permits fallacies, otherwise transparent, to pass for obvious
truths. Wealth being an abstract term, the idea of wealth, it must
be remembered, involves the idea of exchangeability. The posses-
sion of wealth to a certain amount is potentially the possession of
any or all species of wealth to that equivalent in exchange. And
consequently, so of capital.
CHAPTER XVIH.
WHY POLITICAL ECONOMY CONSIDERS
ONLY WEALTH.
SHOWING THAT POLITICAL ECONOMY, AS PROPERLY STATED,
COVERS ALL THE RELATIONS OF MEN IN SOCIETY INTO
WHICH IT IS NECESSARY TO INQUIRE.
Political economy does not include all the exertions for the satis-
faction of material desires ; but it does include the greater part of
them, and it is through value that the exchange of services for
services is made Its duty and province.
POLITICAL economy has been defined, and I think
sufficiently, as " the science which treats of the na-
ture of wealth and the laws of its production and distri-
bution." The object-noun or subject-matter of political
economy is therefore wealth. Now, as we have already
seen, wealth is not the only result of human exertion, nor
is it indeed the end and aim and final cause of human
exertion. That is not reached until wealth is spent or
consumed in satisfaction of desire. Wealth itself is in fact
only a halting-place or storehouse on the way between
prompting desire and final satisfaction ; a point at which
exertion, journeying towards the satisfaction of desire, re-
mains for a time stored up in concrete form, and from
whence it may be called forth to yield the satisfaction
which is its ultimate aim. And there are exertions aiming
301
302 THE NATURE OF WEALTH. BooTtIL
at the satisfaction of desire which do not pass through
the form of wealth at all.
Why then should political economy concern itself merely
with the production and distribution of wealth ? Is not
the proper object of the science the production and distri-
bution of human satisfactions, and would not this defini-
tion, while including wealth, as material satisfactions
through material services, also include services that do
not take concrete form ?
My answer is that I am not engaged in laying out a new
science, but only endeavoring to explain and straighten
out one that has been already much pursued. I wish,
therefore, as far as possible, to follow old roads and to use
accustomed terms, only swerving from them where they
clearly lead to error, of which there are indeed instances
enough.
And further than this, I think that reflection will show
that a consideration of the production and distribution of
wealth will include about all that there is any practical use
of considering of the production and distribution of satis-
factions.
While wealth does not include the sum of all exertions
for the satisfaction of material desires, it does include what
in a highly civilized society are the far greater part of them,
and is, as it were, the exchange point or clearing-house
where the transfer of services devoted not to the production
of wealth, but to the direct procurement of satisfactions, is
made.
Thus the barber, the singer, the physician, the dentist,
the actor, do not produce wealth, but direct satisfactions.
But not only are their efforts which are expended in this
way mainly devoted to the procurement of wealth, which
they get in exchange for their services, but any exchange
between themselves of services for services takes place
through the medium of wealth. That is to say, the actor
Chap, XVIII. WHY WEALTH ALONE CONSIDEEED. 303
does not pay his barber in recitations, or the singer pay
his physician in tones, nor yet reversely does the barber
or physician often pay in shaves or medical advice for the
satisfaction of hearing, acting or singing. Each habitually
exchanges his services for wealth or the representative of
wealth, and exchanges this for other services that he may
desire. Thus in civilized society it is only in rare and ex-
ceptional cases that there is any direct exchange of services
for services. To this we may add that the laws which
govern the production and distribution of services are
essentially the same as those which govern the production
and distribution of wealth. Thus we see that all the ends
of political economy may be reached if its inquiry be an
inquiry into the nature of wealth and the laws that govern
its production and distribution.
Political economy has a duty and a province of its own.
It is not and it cannot be the science of everything ; for
the day in which any one scheme can include the whole
province of human knowledge has long passed, and must
with the increase of human knowledge further recede.
Even to-day the science of politics, though closely related,
is, as I conceive it, clearly distinct from the science of
political economy, to say nothing of the almost numberless
other schemes which treat of man's relations to other
individuals and to the relations with which he is brought
in contact.
CHAPTER XIX.
MORAL CONFUSIONS AS TO WEALTH.
SHOWING HOW RICH AND POOR ARE CORRELATIVES, AND
WHY CHRIST SYMPATHIZED WITH THE POOR.
The legitimacy of wealth and the disposition to regard it as sordid
and mean The really rich and the really poor They are really
correlatives The good sense of Christ's teaching.
S to the desire for wealth in the politico-economic sense,
as I have described it, there is nothing sordid or mean.
Wealth, on the contrary, is a perfectly legitimate object
of desire and effort. To obtain it is simply to increase the
powers of the individual over nature, and is prompted by
the same essentially noble desire as in any way to increase
our powers or our knowledge, or in any way to raise our-
selves above the level of the mere animal, from which we
start; while no one can increase his own wealth in the
common sense by increasing value from production, with-
out at the same time doing something for every one else.
How then is it that wealth is so widely regarded askance
by our moral perceptions ; that we are told that we should
not seek it, and hardly even use it; that the highest
expressions of our deepest knowledge look at it so con-
temptuously, if not repugnantly, and that political econ-
omy, which is the science of the nature, production and
exchange of wealth, should be so widely regarded as a
selfish and hard science ?
301
Chap. XIX. MORAL CONFUSIONS. 305
If we go into this question at all we must go deeper
than has yet, I think, been done.
There is a distinction on which our examination of
wealth and value may throw light, the distinction we
commonly make between the rich and the poor. We mean
by a rich man a man who is possessed of much having
value, that is to say, of much wealth or of much power of
commanding wealth or services from others. And by a
poor man we mean a man who possesses little or nothing
of such values. But where is the line of division between
rich and poor ? There is no line distinctly recognized in
common thought, and a man is called rich or poor accord-
ing to the standard of average comfort prevailing in the
society or rather the grade of society in which the estimate
is made. Among Connemara peasants, as in the song, a
woman of three cows might be esteemed wealthy ; while
among Esquimaux, as in Mark Twain's story, the posses-
sion of a few iron fish-hooks might be as convincing a
proof of riches as the loading of a Christian woman with
diamonds by an American millionaire. There are circles
of human life in New York City in which no man would
be deemed poor who could see his way to a night's lodging
and a breakfast in the morning, and there are other circles
in which a Vanderbilt could say that a man possessed of
only a million dollars could with economy live as comfor-
tably as though he were rich.
But is there not some line the recognition of which will
enable us to say with something like scientific precision
that this man is rich and that man is poor ; some line of
possession which will enable us truly to distinguish between
rich and poor in all places and conditions of society ; a line
of the natural, mean, or normal possession, below which
in various degrees is poverty, and above which in varying
degrees is wealthiness ? It seems to me that there must be.
And if we stop to think of it, we may see that there is.
306 THE NATURE OF WEALTH. Book II.
If we set aside for the moment the narrower economic
meaning of service, by which direct service is conveniently
distinguished from the indirect service embodied in wealth,
we may resolve all the things which indirectly satisfy
human desire into one term, service; just as we resolve
fractions into a common denominator. Now, is there not
a natural or normal line of the possession or enjoyment of
service ? Clearly there is. It is that of equality between
giving and receiving. This is the equilibrium which Con-
fucius expressed in the golden word of his teaching that
in English we translate into " reciprocity." Naturally the
services which a member of a human society is entitled to
receive from other members are the equivalents of those
he renders to others. Here is the normal line from which
what we call wealthiness and what we call poverty take
their start. He who can command more service than he
need render, is rich. He is poor, who can command less
service than he does render or is willing to render ; for in
our civilization of to-day we must take note of the mon-
strous fact that men willing to work cannot always find
opportunity to work. The one has more than he ought to
have ; the other has less. Rich and poor are thus correla-
tives of each other ; the existence of a class of rich involv-
ing the existence of a class of poor, and the reverse ; and
abnormal luxury on the one side and abnormal want on
the other have a relation of necessary sequence. To put
this relation into terms of morals, the rich are the robbers,
since they are at least sharers in the proceeds of robbery j
and the poor are the robbed.
This is the reason, I take it, why Christ, who was not
really a man of such reckless speech as some Christians
deem Him to have been, always expressed sympathy with
the poor and repugnance of the rich. In His philosophy
it was better even to be robbed than to rob. In the king-
dom of right-doing which He preached, rich and poor
Chap. XIX. MORAL CONFUSIONS. 307
would be impossible, because rich and poor in the true
sense are the results of wrong-doing. And when He said,
" It is easier for a camel to pass through the eye of a needle
than for a rich man to enter the kingdom of heaven !" He
simply put in the emphatic forms of Eastern metaphor a
statement of fact as coldly true as the statement that two
parallel lines can never meet.
Injustice cannot live where justice rules, and even if the
man himself might get through, his riches his power of
compelling service without rendering service must of
necessity be left behind. If there can be no poor in the
kingdom of heaven, clearly there can be no rich !
And so it is utterly impossible in this, or in any other
conceivable world, to abolish unjust poverty, without at
the same time abolishing unjust possessions. This is a
hard word to the softly amiable philanthropists who, to
speak metaphorically, would like to get on the good side
of God without angering the devil. But it is a true word
nevertheless.
CHAPTER XX.
OF THE PERMANENCE OF WEALTH.
SHOWING THAT VALUES FROM OBLIGATION SEEM REALLY TO
LAST LONGER THAN VALUES FROM PRODUCTION.
Value from production and value from obligation The one material
and the other existing in the spiritual Superior permanence of
the spiritual Shakespeare's boast Maecenas's buildings and
Horace's odes The two values now existing Franchises and
land values last longer than gold and gems Destruction in social
advance Conclusions from all this.
IN making the distinction between values from produc-
tion that really constitute wealth in political economy,
and values from obligation, which are not really wealth
at all, and may at best be classified as " relative wealth "
in contradistinction to "real wealth," there is an im-
portant and to our usual ways of thinking an unexpected
difference to be mentioned between them with relation to
permanence and to the effect of the progress of society
upon their value.
Value from production, or real wealth, consists of material
things. These things are taken as it were by labor from
the reservoirs of nature, and by virtue of their materiality
tend back to those reservoirs again from the moment they
are taken, just as water, taken from the ocean, tends back
to the ocean. The great body of wealth is, indeed, pro-
duced for a purposed consumption that involves immediate
destruction. And since I think we may properly speak in
308
Chap. XX. PERMANENCE OF WEALTH. 309
a different sense of the consumption of a book by reading
it, or of a picture or statue by looking at it, even the parts
not subject to purposed and almost immediate destruction,
are subject to destruction by the action of the elements,
by mechanical and chemical disintegration, and finally by
being lost. Indeed, the far greater part of material things
if not absolutely all of them, after they have been brought
into existence, require the constant exertion of labor to
keep them in existence and prevent their relapsing into
nature's reservoirs again.
But things having a value which does not come from
the exertion of labor and which represents only the power
given by human law, agreement or custom of appropriating
the proceeds of exertion, have their real existence in the
human mind or will, the spiritual element of man. The
papers which we use in transferring them, or proclaiming
them, or evidencing them, are not the things themselves,
but mere aids to memoiy. The essence of a debt is not
the due-bill or promissory note, but a moral obligation or
mental agreement ; the essence of a franchise is not the
written charter or engrossed act of legislature, but the
will of the sovereign, theoretically supposed to be the will
of all ; the ownership of land is not in the title-deeds, but
in the same sovereign will or supposed general agreement.
As the spiritual part of man mind, will and memory-
continues the same while the matter of which his body is
composed is continually passing, so a mental impression,
recorded by tradition, belief or custom in what may be
styled the social mentality, may endure while physical
changes wrought by man are lost. It is probable that the
oldest records of man's presence on the earth are .to be
found in words yet current, and that nursery rhymes and
children's games antedate the most massive monuments.
It was no idle boast of Shakespeare that his verse would
outlast marble and brass. The stately buildings raised by
310 THE NATURE OF WEALTH. Book II.
the powerful prime minister of Augustus Caesar have failed
to perpetuate his memory ; but far further than his world
extended, the name of Maecenas yet lives for us in the odes
of Horace.
Now, in the same way, the values which cannot be in-
cluded in the category of wealth are as a class much more
enduring than the values which are properly so included.
We of the modern civilization generally limit the time
during which debts, promissory notes, and similar obliga-
tions of the individual can be legally enforced. But there
are devices by which a value which is in reality but an
obligation to render future labor may be continued for
longer periods ; while many values of similar nature we
treat as perpetual, as is the case with public debts, with
some franchises, and with exclusive rights to land. These
may retain their value unimpaired, while the value of the
great body of articles of wealth lessens and disappears.
How little of the wealth in existence in England two
hundred years ago exists now ! And the infinitesimal part
that still exists has been maintained in existence only by
constant care and toil. But stock in the public debt of
England incurred then still retains value. So do perpetual
pensions granted to their favorites and lemans by English
kings long dust. So do advowsons, rights of fishery and
market, and other special privileges. While such fran-
chises as that of the New Eiver Company, and the right
to the exclusive use of land in many places have enormously
increased in value. These things have cost no care or
trouble to maintain. On the contrary, they have been
sources of continual revenue to their owners have enabled
their owners to call continually upon generation after
generation of Englishmen to undergo toil and trouble for
their benefit. Yet their value, that is to say their power
of continuing to do this, remains still, not merely unim-
paired, but in many cases enormously increased.
Chap. XX. PERMANENCE OF WEALTH. 311
Of all articles of value from production those which
longest retain the quality of value are precious metals and
gems. In the coin and jewelry passing from hand to hand
in the exchanges of modern civilization there are doubtless
some particles of metal and some precious stones that had
value at the very dawn of history and have retained it ever
since. But these are rare and indistinguishable exceptions.
So far as we can see with any certainty, the quality of
value has longer and more constantly attached to the
ownership of land, which is not an article of wealth, than
to any other valuable thing. The little piece of land in
the Sabine hills, which Maecenas gave to Horace, had
doubtless been bought and sold and exchanged for cen-
turies before that, and has, I doubt not, a value to this
day. And so, certainly, with some of the building sites of
Rome. Through all the mutations in the fortunes of the
Imperial City, some of them have doubtless continually
held a value, sometimes lower and sometimes higher. It
is this permanence of value which has led the lawyers to
distinguish property in land, though it is not wealth at all,
as real estate or real property. Its value remains so long
as population continues around it and custom or municipal
law guarantees the special privilege of appropriating the
profits of its use.
And between articles of wealth and things of the nature
of special privileges, like franchises and property in land,
which though having value are not wealth, there is still
another very important distinction to be noted. The
general tendency of the value attached to the one is to
decrease and disappear with social advance. The general
tendency of the value attaching to the other is to increase.
For social advance, involving, as it does, increase of
population, extensions of exchange and improvement of
the arts, tends constantly, by lessening the cost of produc-
tion, steadily to reduce the value of the great body of
312 THE NATURE OF WEALTH. Book II.
articles of wealth already in existence, and having value
from production. In some cases indeed the effect of social
advance is suddenly and utterly to destroy these values.
The value of almost all the products of labor has been of
late years steadily and largely reduced in this way, while
the value of much costly machinery has been and still is
being destroyed by discoveries, inventions and improve-
ments, which render their use in production antiquated.
But the growth of population and the augmentations of
the productive power of labor increase enormously the
value of such special privileges as franchises and land-
ownership in the highways and centers of social life.
It will be seen from our analysis, as indeed from obser-
vation, that the amount of wealth at any time existing
is very much less than is usually assumed. The vast
majority of mankind live not on stored wealth, but on
their exertion. The vast majority of mankind, even in
richest civilized countries, leave the world as destitute of
wealth as they entered it.
It is the constant expenditure of labor that alone keeps
up the supply of wealth. If labor were to cease, wealth
would disappear.
And while this fact, that value from mere obligation
has a permanence which does not belong to value from
production, may have a bearing upon speculations too deep
to be entered on here, and suggests perhaps truth on the
part of those who say that the material universe may be
a mere reflex and correspondence of the moral and mental
universe, and that we may find reality not in what we call
life, but in what we call death, and while it may make
comprehensible the resurrection from the dead which to
many has been most perplexing, it has immediate bearing
on many things to which any consideration of the true
nature and bearings of wealth comes close if it does not
closely touch.
CHAPTER XXI.
THE RELATION OF MONEY TO WEALTH.
SHOWING THAT SOME MONEY IS AND SOME MONEY IS NOT
WEALTH.
Where I shall treat of money No categorical answer can yet be
given to the question whether money is wealth Some money is
and some is not wealth.
THE subject of money, in my view of the matter, properly
belongs to this Book, which treats of the nature of
wealth. But the subject is at the time I write so compli-
cated and confused by current discussions, especially in
the United States, as to require for its complete elucidation
a fullness of treatment that would too much expand this
Book. And, moreover, these current discussions of what
is and what ought to be money involve principles which
do not find their proper place in the discussion of the
nature of wealth, but which will be treated in the succeeding
books on Production and Distribution. For these reasons,
I shall postpone the full treatment of Money until after
the laws of Production and the laws of Distribution have
been discussed. But one question is certain to occur to
the reader which must be answered here the question,
" Is money wealth ? "
To this no categorical answer can be given, for the reason
that what we properly call money is in all countries in our
313
314 THE NATUEE OF WEALTH. BooklL
present stage of civilization of essentially different kinds.
Some of the money in use to-day is wealth, and some of
it is not wealth. Some, such for instance as the gold
coins of the United States and England, is wealth to the
full amount of its circulating value. Some, such as the
silver, copper and bronze coins of the same countries, is
wealth, but not wealth to the full extent of its circulating
value. While some, such as the paper money, which now
constitutes so large a part of the money of the civilized
world, is not wealth at all. For, as we have seen, nothing
is wealth in the economic sense, unless and in so far as the
value which attaches to it is a value of production. The
value arising from obligation constitutes no part of the
wealth of nations.
UNIVERSITY OF CALIF^-'"* <VT I,OS ANGELES
from which it was borrowed.
3 1158 00315 1882
UC SOUTHERN REGIONAL LIBRARY FACILITY
A 000219142 7
