The philosophy of wealth. Economic principles newly formulated

LIBRARY

UNlVfiRSITY OF
CALIFOQNIA

SAN DIEGO

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THE

Philosophy of Wealth.

ECONOMIC PRINCIPLES NEWLY FORMULATED.

BY

JOHN B. CLARK, A.M.,

PBOI^SSOB OP HISTORY AND POLITICAL SCIENCE IN SMITH COLLEGE.

/

BOSTON, U.S.A.:

GINN & COMPANY, PUBLISHERS.

1901.

Entered, accordini^ to Act of Congress, in tlic year 1SS5, by

JOHN B. CLARK,
in the OfTice of the Librarian of Congress, at Washington.

Typooraphy by J. 8. Cushino & Co., Boston, U.S.A.
Pkksswokk by Oinn & Co., Boston, U.S.A.

PREFACE.

In a series of articles in the New Englander, com-
menced ten years ago, I endeavored to contribute a
share toward the reformulating of certain leading prin-
ciples of economic science. The traditional system was
obviously defective in its premises. These were as-
sumptions rather than facts, and the conclusions
deduced from them were, for that reason, uncertain.
The assumed premises were, at certain points, at vari-
ance with facts, and the conclusions were, to that ex-
tent, erroneous. The better elements of human nature
were a forgotten factor in certain economic calcula-
tions ; the man of the scientific formula was more
mechanical and more selfish than the man of the actual
world. A degraded conception of human nature
vitiated the theory of the distribution of wealth.

The prevalent theory of value started with a mis-
conception of utility, and of the part which it plays in
exchanges. Economic science, in general, found no
adequate place for the intellectual activities of men,
and made no important use of the fact that society is
an organism, to be treated as a unit in the discussion
of many processes affecting wealth.

IV PKEFACE.

The articles referred to endeavored to contribute
such share as they might toward the needed recon-
struction of economic theories. They endeavored to
broaden the conception of wealth, as the subject of the
science, to find a place in the system for the better
motives of human nature, to construct a new theory
of value, to apply at all points the organic conception
of society, and to suggest other corrections. They
tried, in general, to bring the premises of the science
into better accordance with facts, and to bring the
general spirit of it into greater harmony with the
instinctive demands of a healthy human nature.

In this book the most of these articles are repub-
lished, with varying amounts of revision, and the dis-
cussion is extended, and made to include, among other
points, a study of the nature of production and distri-
bution. The one process is found to consist of a syn-
thesis, and the other of an analysis ; the same elements
which are combined in production are separated, step
by step, in distribution. The process loosely termed
competition is analyzed, and a new theory of "non-
competing groups " is advanced, and applied to the
labor problem. The lines furnished by tliese groups
are found to determine the limits of the combinations
of capital and of labor, which are the distinctive
feature of the present era. A study is made of
the laws determining what forms of industrial organi-
zation shall emerge from the present chaotic condi-

PREFACE. V

tion. The test of economic principles is applied to
the intellectual and spiritual activities of society.

There are two or three points in the system, as here
outlined, which readers of recent economic literature
might naturally suppose were directly borrowed from
that source. These were, however, contained in the
articles already referred to, which were published early
enough to preclude dependence on anything very re-
cently issued. Whatever may be their merits or de-
merits, the theories here advanced are not borrowed
from the writings of other persons.

If this book were intended as a general treatise on
political economy, it would, of course, be very incom-
plete. It omits whatever belongs to that field which is
common to economics and practical politics. It has
nothing to say about protection or currency. Ob-
viously the work cannot be a text-book, in the ordinary
sense of the term. Teachers who do not want a text-
book as the sole or chief means of instruction, and who
prefer to present in their own way the controverted
practical questions of the day, may, perhaps, find a
place for it in the classroom. The place which
it primarily seeks is in the hands of readers and
thinkers who have long been in revolt against the
general spirit of the old political economy.

J. B. Clakk.

PREFACE TO THE SECOND EDITION.

I COMPLY with the suggestion of a friendly critic in
stating the relation which the theory of value advanced
in the fifth chapter of this book bears to that of Profes-
sor Jevons. My theory was attained independently,
very long ago, but proved to coincide with that of Pro-
fessor Jevons in the general fact of establishing a close
connection between utility and value in exchange, and
in regarding utility as subject to mental measurements.
In some more specific points it resembled that theory
without quite coinciding with it. It has been published
without change in any of these respects. Features of
the theory which I still venture to regard as my own
are the identification of value in all its forms with meas-
ure of utility, the distinction between absolute and
effective utility, and the analysis of the part played by
society as an organic whole in the valuing processes of
the market.

Of the twelve chapters of the book, nine treat of
topics falling within the traditional limits of economic
science ; while the remaining three discuss subjects
which a highly orthodox view may perhaps regard as
lying outside of economic limits. If, however, political

Mil PREFACE.

economy undertakes to discuss wealth in all its forms,
and to analyze the forces which actually influence the
distribution of it, it is difficult to see .how these topics
can be excluded from the discussion. Those who be-
lieve in a progressive system of economic science will
probably not desire to exclude them.

J. B. Clakk.

Northampton, Mass.,
Feb. 2, 1887.

CONTENTS.

CHAPTER I.
Wealth

The current conception defective. Light derived from
the Saxon use of terms. Essential attributes of wealth.
Insubstantial commodities included in the definition ;
personal attributes excluded. The nature of service;
wealth, the material element involved in it.

CHAPTER II.

Labor and its Rklation to Wealth .... 10

Labor and service. The economic nature of the effort of
appropriation. Officers of the law producers; also
writers, speakers, musicians, etc. Mental and moral
elements in all labor. Labor not literally the creator
of every commodity. Four varieties of utility, result-
ing from four corresponding kinds of labor.

CHAPTER III.

The Basis of Economic Law 32

Human volition the ultimate cause of economic phenom-
ena. Need of a correct conception of the nature of
man. The conception current among economists of
the past, first, unverified ; and secondly, incorrect. De-
ductive methods useful, provided the premises are cor-

X CONTENTS.

PAGE

rected. Man a part of a social organism. Classifica-
tion of societies. Relations between the society and
the individual. Effects of the social relation on indi-
vidual natures. The expansiveness of higher wants.
The highest wants unselfish ; their effects in the mar-
ket. Desire for personal esteem the counterfeit and
assistant of the highest human motives; its economic
effects. Wants as active or quiescent; their normal
condition. Misuse of the term productive consump-
tion.

CHAPTER IV.

The Elements of Social Service 56

Men, altruistic ; society, egoistic. Production and con-
sumption the reverse of each other. Consumption not
destruction, but utilization ; maximum utilization the
social goal. Secondary consumption. Social produc-
tion as including exchange, and involving distribution.
The nature of sub-products. Exchange and distribu-
tion, practically merged, logically distinct ; the one a
qualitative diffusion of wealth ; the other a quantitative
one. Bargain-making npt a part of the act of ex-
change, but the determining element in distribution.
The competitive process analyzed. True competition
diminishing ; the surviving element a source of danger.

CHAPTER V.

The Theory of Value 70

Need of a definition of value in the generic. Utility in-
cluded in the popular meaning of the term. The idea

CONTENTS. xi

PAGE

of value a secondary abstraction. Value defined as
Measure of Utility. Price a mode of expressing the
measurement. Apparent difficulties of the definition
removed by distinguishing between absolute and effec-
tive utility. Method of measuring effective utility.
Society the measurer, when exchange value is deter-
mined. Society the purchaser of the products of in-
dividuals. The absolute standard of value.

CHAPTER VI.

The Law of Demand and Supply 91

Utilities, not matter, the subjects of exchange and distri-
bution. Wants gratified in the order of their inten-
sity. The purchase limit ; its variations due to changes
in prices, and in the relative intensity of different
wants. The simple adjustment of demand and supply,
in the case, first, of inexpansive wants, and secondly,
of expansive ones. The tendency of increasing produc-
tion to take a qualitative direction. General overpro-
duction of qualitative increments impossible. Fashion
as an economic force. Normal price ; this not station-
ary. Elementary utilities increasingly costly ; form
and place utilities increasingly cheap. The predomi-
nance of the utilities which tend to cheapness. Influ-
ences which render industry as a whole increasingly
productive. True and false Malthusianism. Inaccu-
racies in the orthodox theory of demand and supply ;
an important class of commodities omitted. The
need of basing the law on utilities rather than on
commodities.

Xii CONTENTS.

PAGE

CHAPTER VII.

The Law of Distribution 107

The mode of dividing the product of industry changing.
The moral element in the wage question. The effect
of the consolidation of capital and of labor. Vague-
ness of the ordinary conception of demand and supply ;
their systematic action ; their primary, secondary and
ternary fields. Tabular representation of the synthe-
sis of elements resulting in a single completed product.
Distribution as the reversal of this synthesis ; the divis-
ion purely quantitative. The sale of a completed
product a primary division of social wealth ; that of a
sub-product secondary ; that of a share of a sub-product
ternary; the last the criterion of wages. Tabular rep-
resentation of the principle of non-competing groups.
The groups, as such, agents in distribution. Examina-
tion of the theory that the exchange of surpluses de-
termines prices. Three gradations of competitive ac-
tion ; abnormal comj)etition the cause of combinations.
Contrast between past and present conditions.

CHAPTER VIII.

Wages as affected by Combinations .... 126

Products the source of wages. Statement of the AV age-
Fund doctrine. Errors refuted by applying the prin-
ciple that distribution deals with pure quantity.
Wages, as a value, taken from tlie value created by in-
dustry, but subsequently embodied in usable forms by
a process of exchange. Capital essential to tins ex-
change. Wages of a working group taken from a
specific sub-product, and gauged in amount, first by

CONTENTS. xiii

PAGE

the amount of the siib-pruducl, and secondly, by the
terms of the division made with the employer. Vari-
ations historically shown to be due to changes in both
determining causes. Difference in principle between
the present and the former mode of dividing products;
organization the cause of it. Labor unions a resource
against an unjust division. Disappearance of individ-
ual competition. Necessity for appealing to moral
force in dividing products. Conditions which detei*-
mine whether labor unions shall or shall not follow the
lines of occupation. The boycott as an instrument of
coercion. Recent consolidations of capital ; their
primary and secondary objects, and their effects on real
wages. Increased need of moral agencies.

CHAPTER IX.

The Ethics of Trade . . . . . . . 149

Gloomy outlook afforded by Ricardianism ; the scientific
weakness of the system. Moral force the characteris-
tic of the new rt'gime ; this new only in its mode of
action. Its origin as a social force, and its gradual
extension. Effects of the institution of property.
Different codes prevalent in the village and the mark
of mediaival times ; modern society a fusion of the two
local elements, and morally dualistic. Competition
formerly repressed by moral sentiment ; opportunities
for this agency in the modern market. Disastrous ef-
fects of abandoning the standard of just bargains.
Wealth legitimately acquired by production ; acquisi-
tion by unequal exchanges a prevalent abuse ; oppor-
tunities for repressing it afforded by present condi-
tions ; effect of this upon wages. Competition, in its
surviving fields, tending to become truly free.

XIV CONTENTS.

PAGE

CHAPTER X.
The Principle ok Cooperation 174

Cooperation an old principle in a new form. Economic
science formulated by Adam Smith in an era of ex-
treme individualism ; present tendency to merge the
individual in the organization. CooiJeration a prin-
ciple of organic, not personal independence. Just dis-
tribution its aim. Arbitration an appeal to justice
involving constant recourse to tribunals ; this hostile
to harmonious effort. Tendency of cooperation to in-
crease production and harmonize distribution. Small
limits of possible increase of wages by methods of con-
tention. Interests of capital and labor identical in
production, antagonistic in distribution. Tendency
of the wage system to create a conflict, but to set lim-
its to overt action. Education a means of narrowing
these limits, not of abolishing all conflict ; this latter
possible by cooperation. Effects of profit-sharing ; its
practicability. Four systems of dividing products
now in use ; the principle which insures the survival
of the fittest in each particular field. Difficulties of
new experiments in full cooperation ; the ultimate sur-
vival of this form to be determined by its effects in
successful instances. The easiest form of cooperation
likely to have the greatest immediate extension ; the
best form to have the longest continuance. Rochdale
stores and communal farms ; their minor influence on
the wages question; their educational value. INIuni-
cipal enterprises ; prison and work -house industries.
Effect on general wages of instances of successful
cooperation. The permanence of the principle assured.

CONTENTS. XV

PAGE

The socialistic state ; its principle despotic. Fi'eedom
the basis of cooperation.

CHAPTER XL

Non-Competitive Ecoxomics 203

Competition no longer general. Rational wealth the
economic end of social action ; an approximation to
this end formerly afforded by competition ; the snrvi-
val of the principle in residual fields due to a similar
action ; the principle abandoned where it ceases thus
to act. The highest forms of rational wealth disbursed
non-competitively. Art products placed at the service
of the public ; also means of intellectual and spiritual
education. This disbursal of products of no effect on
the relation of capital to labor. The principle of in-
appropriable utilities; its special application to the
railway problem.

CHAPTER XII.

The Economic Function of the Church . . . 221

Material commodities which minister to spiritual wants ;
special modes of disbursing them. Relations of rich
and poor in this respect. Spiritual poor-relief; the
principle involved not one of charity. This function
committed to the church, and fulfilled with some fidel-
ity. The commodities to be disbursed purchased in
the open market ; the necessity for a revenue, and for
securing it in a non-mercantile way. The prevalence
of semi-mercantile methods. The appeal to the spirit
of caste. Reformation needed in the outward forms
of church activity.

CHAPTER I.

WEALTH.

Practical wisdom was never more in demand than
at present. Questions concerning currency, free-trade,
transportation, etc., are demanding and receiving tlie
attention of political economists, and it is in this part
of their science that the attractive fields lie both for the
writer and the reader. The period of irreconcilable
diversity in the fundamental principles of the science
seems to be past, and one of relative unanimity, in
thought if not in language, appears to have arrived.
May theoretical work, then, be laid definitely aside ?
Not unless fundamental truths are of less importance
here than in other departments of human thinking, and
not unless the unanimity concerning them is something
more than relative. If obscurity still hangs over prin-
ciples, the clear apprehension of which is essential to all
reasoning on the subject, the removal of it, besides hav-
ing an incalculable value in itself, will afford a wel-
come supplement to directly practical work. It will
shed light on the pressing social questions of the day.
In the present state of the i)ublic mind, for exam])le,
financial heresies and strans^e teachings concerninc: the

2 WEALTH.

lights of property find ii ready circulation ; and, if these
false doctrines connect themselves, even remotely, with
fundamental errors of political economy, then the assault
upon the practical fallacies can never be quite success-
ful until the underlying errors be exposed and cor-
rected. Questions on the solution of which the general
prosperity depends cannot be solved without the clear
apprehension of correct principles.

Nothing can be more fundamental in economic
science than the conception of wealth. Is it worth our
while to take issue with the current definitions of it?
Not if the question to be settled is one of terms merely,
and if the underlying thought is clear. Exactly the
reverse of this is true of the definition of wealth which
John Stuart Mill has inherited from Adam Smith, and,
in turn, bequeathed to the so-called orthodox school of
political economy. The terms of this definition are not
seriously objectionable, but the thought which, in the
discussion, they have been made to convey is so incon-
sistent with the significance of the terms themselves as
to carry confusion throughout the science.

Mr. Mill's conception of wealth is so limited as to
exclude much that is obviously a proper subject of
economic study. It has obliged him to revive the per-
nicious classification of labor as productive and unpro-
ductive, and expressly to exclude from the list of pro-
ductive laborers such persons as " the actor, the musical
performer, the public declaimer or reciter, and the

WEALTH. 6

showman " ; also '•' the army and navy, the legislator,
the judge, and the officer of justice." On the other
hand, certain economists under the leadershijj of I\I.
Bastiat, impressed by the evils resulting from the
traditional classification, have found no other remedy
than that of abandoning the conception, wealth, as
the subject of their science.

Yet there is a certain definable thing which is and
must be the subject of political economy. Whether
avowed or not, a definite conception is, in reality, under
discussion in every treatise on tliis science. For this
conception the term wealth, if used in the strictest ac-
cordance with history and etymology, is an accurate
designation. The Saxon tveal indicated a condition of
relative well-being, the state of having one's wants well
supplied as compared with a prevailing standard. No
possession common to all men can constitute such rela-
tive well-being. The limitless gifts of nature do not
produce it, since they are indiscriminating in their min-
istrations ; air and sunlight make no differences among
men, and, though creating absolute well-being, cannot
create that social condition indicated by the term
wealth. This relative condition can be produced only
by that which, besides satisfying wants, is capable of
appropriation.

It is by a transfer of meaning that the term which
primarily designated a condition of life has been applied
to the things which produce the condition. But not

4 WEALTH.

all causes of comparative happiness are included in the
meaning of the word. Wealth, as historically used,
signified the well-being resulting from outward rather
than inward causes. Health and contentment may
make the shepherd happier than the owner of flocks ;
yet the owner only is " well off." Reserving a broader
term to designate well-being in general, usage has em-
ployed the word wealth to signify, first, tlie compar-
ative welfare resulting from material possessions, and
secondly, and by a transfer, the possessions them-
selves.

Wealth then consists in the relative-weal-constituting
elements in man's material environment. It is objective
to the user, material, useful, and appropriable. Let us
apply the term with logical consistency to whatever
possesses these four essential attributes, and note the
effect on the traditional conception of wealth. Mr.
Mill and the orthodox school will be found to exclude
from their classification things which possess these at-
tributes, and to include some which do not. They
recognize as wealth only those things which are suffi-
ciently substantial and durable to constitute a more or
less permanent possession, things which would appear
on tlie inventory, if society were suddenly to cease 'pro-
ducing and consuming, and apply itself, for, say, a
month or two, to taking an account of stock. It is here
maintained that durability is not an essential attribiite
of wealth. Durability is a factor of value, and deter-

WEALTH. O

iiiiiH's, ill so far, the measure of wealth in any partieular
produet. But produets are of all degrees of durability,
and there is no ground for excluding any of them from
the conception of wealth on the ground of this simple
difference of degi'ee. Even the school of writers re-
ferred to would not hesitate to class the ices of the con-
fectioner in the same category with the stone wall of
the mason, though they are at opposite extremes in the
scale of durability. They would, however, exclude
music from the conception, on the ground of its insub-
stantial and perishable character. It is maintained in
this discussion that, in that which constitutes wealth,
there is no difference other than one of degree between
music and a stone wall. The difference in their dura-
bility is, indeed, one of the factors in their relative
value ; but both alike possess the four essential attri-
butes above specified ; they are objective and material
products ; they are useful and appropriable, and fall
within the definition of wealth.

Having unduly limited their conception of wealth in
one direction, the orthodox writers have unduly ex-
tended it in another. They have, for example, classed
as wealth the acquired skill and the technical knowl-
edge of the laborer. Personal attainments, as subjec-
tive and immaterial, are excluded from the meaning of
the term. They are not a possession ; that implies ex-
ternality to the possessor. They are what he is, not
what he has. Popular thought and speech broadly dis-

6 WEALTH.

tiiigiiish the able man from the wealthy man. A man
has a potential fortune, not an actual one, in his abili-
ties. The term indicates a state of being able, and
implies a possibility ; not an attained result. Labor
creates wealth, and acquired abilities are potential
labor. They are to be regarded as the potentiality of
the human factor of production, and it introduces an
element of confusion into the science to class them with
the completed product. If these considerations were
not sufficient to settle the economic status of a man's
subjective qualities, it would, at least, suffice for that
end to apply to them the test of the traditional defini-
tion itself, in which "exchangeable value" is made to
be the essential attribute of wealth. In every exchange
two commodities are alienated, and transferred to new
ownership. Nothing can be subjected to this process
which is an inseparable part of one man's being.

The error of putting abilities and products in the
same category is wide-spread, and appears in the writ-
ings of some of Mr. Mill's opponents. As acute a thinker
as J. B. Say characterizes acquired talents as " a species
of wealth, notwithstanding its immateriality, so little im-
aginary that, in the shape of professional services, it is
daily exchanged for gold and silver." The illustration
is its own best answer. The talents are not alleviated,
and cannot be so ; the lawyer does not deprive himself
of them, nor does his client acquire them, by the ren-
dering of legal service. Their product only is trans-

WEALTH. 7

fcrable, and that only is a commodity. It will hereafter
be shown that the human effort which creates a product
calls into exercise activities physical, mental and moral.
If wealth-creating alnlities are to be confounded with
the product which results from exercising them, every
power acquired by effort, involving, in practice, the
whole man, will have to be classed as a commodity.
The error is mentally confusing, and it is disastrous in
its practical results. Man produces wealth and con-
sumes it; but man himself is always distinct from it.

The illustration just cited suggests an examination of
the " service " theory of M. Bastiat. As alchemists,
searching unsuccessfully for gold, discovered com-
pounds from which oxygen might be extracted, so
those who have sought for a substitute for wealth, as a
fundamental conception of economic science, have at-
tained a compound notion the analysis of which gives
something which is to the economic theory what oxygen
is to the chemical.

According to M. Bastiat it is services only that are
exchanged in the market ; commodities, indeed, pass
from hand to hand ; but they are services materialized,
while others remain without material embodiment.
" Do this for me, and I will do that for you," is the for-
mula for the exchange of services in their immaterial
state ; "give me what you have done, and I will give
you w^hat I have done " is the formula for the exchange
of commodities.

6 WEALTH.

Now a service consists ol' an effort and a gratilica-
tion. In oixler that it may exist, some one must labor,
and some one's want must be satisfied. It is apparent
that effort, as such, gratifies no one. An artisan's
effort gives pleasure only through the medium of the
commodity which he produces. The efforts of a body-
servant give satisfaction only through the modifications
which they effect in the master's environment ; and
apart from this they would certainly not be wanted.
Effort is irksome to the laborer, and, by the law of sym-
pathy, it is irksome to those who witness it ; witliout
outward results, it would be intolerable to an em-
ployer. A musician's effort is displeasing in itself,
though the annoyance which the display of it occa-
sions is counterbalanced, and a large balance of
enjoyment is secured, by the objective effect, — musi-
cal sound. This principle may be easily tested. Let an
accomplished })ianist advertise a concert on one of Mr.
Petersilea's mute piano-fortes, and [)romise to display
a large amount of effort ; how many tickets, at a dollar
each, would he probably sell? Let a voiceless speaker
attempt to entertain an audience by a similar display of
effort; how long would the assembly remain together?
Yet, in either case, absolutely nothing would be want-
ing but the tenuous outward product, — sound.

The objective element inseparable from service is
wealth ; the totality of it is the sum total of social
products. This material element is the result of effort

WEALTH. 9

and the cause of gratilication, and furnishes, iheiefore,
the necessary connection between the elements of ser-
vice. It has invariably the four essential attributes of
wealth ; it is objective to the producer and the utilizer ;
it is material, useful and appropriable. Itjs distin-
guishable in every action that can be termed a service ;
but it is not always tangible, visible and durable. It
is a mark of progressing civilization when the products
of labor, the objective elements in service, take as their
basis the more tenuous materials given in nature. It
marks a certain supremacy over natural forces when
man hews stone and fashions timber ; it marks an intel-
lectual sovereignty when the thought of man impresses
itself on vibrating air or makes electricity its messenger
to remote regions. It is the more ethereal products of
human effort that are the characteristic wealth of a
highly organized society.

CHAPTER II.

LABOR AND ITS RELATION TO WEALTH.

Labor is the former of the two subjective elements
in service, namely, the wealth-creating effort. It is
the making nature subservient to a master, and the
primitive mode of doing this is by simply determining
what master an already useful element shall serve.

Relative weal results from the mere appropriation of
limited natural gifts. With the unlimited gifts monop-
oly is impossible ; the ultra-democracy of air and sun-
light insist on creating, in so far as their ministrations
can do it, a weal that is equal and universal. But prim-
itive man may pluck tlie wild fruit or slay the game in
his natural Eden, and then vindicate by effort his
right to enjoy them. He may select a dwelling-place,
proclaim it his own, and repel intruders ; he may guard
the fruit-yielding tree, and even the hunting ground
itself. This is almost the only form of labor which
exists in the most primitive social state. Man, here,
lives by the mere appropriation of the spontaneous
products of tropical nature, and expends his chief
efforts in guarding his property. The capacity to be
thus owned and utilized is a primary attribute of
wealth.

LABOR AND ITS RELATION TO WHALTH. 11

The condition of appropriation is a relation between
commodities, on the one hand, and persons, on the
other, and im[)lies, therefore, that both the commodity
itself and the society where it exists should be such
that the relation may be established. The commod-
ity must exist in limited quantity, and must be of
a nature capable of being retained in the possession
^f a particular user. The atmosphere, as a whole, is in-
appropriable from its unlimited quantity ; while pleasing
atmospheric effects, cloud scenery, showers or breezes
are limited in quantity, but are inappropriable from
their nature. They minister transiently to whomso-
ever they will, and, in the long run, with impartiality.
Except as rain-drops mingle with the earth, or as
breezes and sunset-colors favor the dwellers in an ele-
vated locality, and thus impart a value to the land
itself, there is no power in man to determine the direc-
tion of their ministrations. The ownership of land
carries with it only a partial control of the benefits of
these elusive elements in nature. Utilities which are,
from their nature, inappropriable constitute an impor-
tant and neglected subject of economic study.

On the part of the society where the commodity
exists something is also requisite, in order that the rela-
tion of ownership may subsist. The attributes of
society which render ownership possible are, it is be-
lieved, usually ignored altogether in treatises on this
subject. The existence of these attributes is secured

12 LAIiOi; AM) ITS RELATION TO WKALTH.

by the labor of a distinct class of persons, whose true
economic function cannot be apprehended without
noticing the effect of their labors upon society, and
thus, indirectly, upon the wealth which exists in
society.

In order that the essential attribute of wealth, appro-
priability, may be realized, the rights of property
must be recognized and enforced, either by j^ersonal
prowess, or by the agency of legal functionaries. In
tlie most primitive of societies the guarding of property
is done by each owner for himself, and constitutes, as
above stated, his only regular labor. The earliest gen-
eral division of labor consists in assigning the protec-
tive function to men, uniting with it the congenial work
of hunting wild game, and reserving the more onerous
industrial functions for women. Civilization partially
reverses this arrangement ; it includes the majority of
men in the industrial ranks, and excludes women from
the heaviest tasks ; but it still reserves a limited class
of men for the work of protecting property. Compar-
atively few ofBcers of justice render property so se-
cure that whatever a man produces becomes his in
the act of production, and remains in his possession,
with but a minimum of thought and effort on his own
part. Useful things are now appropriable in so far
as the condition of society is concerned.

Ill the securing of this result the definition of rights
is as important as their enforcement, and legislators

LABOR AND ITS RELATION TO WEALTH. 13

and judges, us well as sherifls, are, therefore, instru-
mental in producing that social condition which is
necessary in order that the attribute of wealth, appro-
priability, may be realized. Whoever makes, interprets,
or enforces law produces wealth. He imparts to the
commodities of the society w^hich employs him the
essential wealth-constituting attribute of appropriabil-
ity. Commodities may exist in society, and may
possess any degree of utility ; they may even be appro-
priable, as far as they are themselves concerned ; but
if social causes prevent their attaining the state of
appropriation, they lack, in fact, the attribute of ap-
propriability, and are not actual wealth. The produc-
tion of social modifications which result in giving to
commodities the attribute of appropriability is the
chief economic function of legislative and judicial
lal)or. It is as truly a wealth-creating function as
the direct production of useful commodities.

Concerning this important class of laborers much
misconception lias existed. Mr. Mill, repeating tlie
error of Adam Smith, classes them as unproduetive.
M. Bastiat, M. Garnier and others term their efforts
"services," but offer no satisfactory substantive con-
ception of anything as a product of their labor. Mr. J.
B. Say, one degree nearer to the truth, classes them
as producers, on the ground that they enable the in-
dustrial classes to give their undivided efforts to their
own occupation, and thus contribute indirectly to their

14 LABOR AND ITS RELATION TO WEALTH.

products. This indirect mode of proving tliat a class
of laborers is productive, though })lausible and fre-
quently employed, is extremely objectionable. Every
class of producers contributes in this manner to the
jjroducts of every f)ther. llie shoemaker contributes
indirectly to the productions of the farmer, by saving
him the necessity of turning aside from his labor to
mend shoes ; yet he considers that the shoes, and not
a share in the farmer's harvest, are the direct product
of his labor. In like manner the farmer conlril)utcs
indirectly to the ])roducti()ns of the slioemaker, by
saving him the necessity of turning aside from his oc-
cupation to cultivate the ground ; yet the farmer re-
gards his grain, and not a share in the shoes, as the
product of his labor. A direct i)roduct must be ex-
changed if any class of producers is to share in the
wealth created l)y another, and every class must have
a direct product if they are to be classed as produc-
tive laborers. The direct product which legal olhcers
offer in return for tlieir support consists in the attri-
bute of approprial)ility wliich they impart to commod-
ities. They put, as it were, the finishing touch to
tlie products of society, which finishing touch renders
them marketable wealth ; and this modification, which
constitutes a difference between potential and actual
wealth, is that which Ihey exchange for their subsis-
tence. If tlie term ])roduetive were to be taken in a
narrow sense, as meaning productive, not of wealth,

LAIJOi: AND ITS RELATION TO WEALTH. 15

but of Specific useful coininodities, there would be
grouud for classing these laborers as unproductive;
and this is the (uigin of the misapprehension concern-
ing them that has existed from the time of Adam
Smith to the present day. These classes are protec-
tive of useful commodities, but are productive of
wealth.

All forms of labor create wealth;* yet for every
jiroduct nature furnishes the substance and man only
the modes. One class of laborers create, as has been
shown, the attribute of appropriability ; the other
general class create the attribute of utility. The lat-
ter is invariably accomplished by producing modifica-
tions in natural agents objective to the laborer. In-
dustrial labor is always the applying of a human
effort to a natural agent. The modification produced
enables the agent to satisfy a want which it was
previously incapable of satisfying. This want-satis-
fying power imparted by labor is a " utility," and,
if the attribute of appropriability be also conferred,
wealth is created. A natural agent possessing utility
and appropriability is w^ealth, and this only is so.
The natural agent need not be of a substantial or
permanent character ; any substance, force or activity
whatsoever in physical nature, which receives a want-
satisfying power by means of a laborer's efforts,
appropriability being presupposed, becomes wealtli ;
and, though its duration be but momentary, and its
* Particular cases of wasttd effort are not here considered.

IG LABOU AND ITS RELATION TO WEALTH.

character insubstantial or intangible, there is no

ground for excluding it from tlie category so long as
its brief utility continues.

Dr. Roscher has called attention to the intrinsic
absurdity of calling a violin manufacturer a produc-
tive laborer, and the artist who plays the violin an
unproductive one, as is expressly done by Mr. Mill
and his followers. The violin would, thus, be classed
as wealth ; the music, the sole end of its manufacture,
not wealth. The product, music, satisfies a direct
want, the violin only an indirect one ; the latter is
an instrument for producing that which satisfies direct
desire. The direct want-satisfying product is, if any-
thing, more obviously wealth than the indirect one.
Relative durability and tangibility are non-essential
attributes. The mechanic who makes the violin im-
parts utility to wood ; the artist who plays it imparts
utility to air vibrations. One product is perceived
by the senses of sight and touch, the other by the
sense of hearing. One is extremely durable, the
other extremely perishable ; but both alike come un-
der our definition. In both a natural agent has re-
ceived a utility through human effort ; both products
are wealth, and both laborers productive.

So the scul])tor imparts utility to marble, the painter
to colors, the photograplier to chemical agencies and
solar light. The designer and the mechanical draughts-
man im})art a high utility to a small amount of plum-

LABOR AM) ITS RELATION TO WEALTH. 17

l)ag(), and the writer to a small amount of ink. No
utility of a higher order is conceivable tlian that
which the writer imparts to ink and paper, and the
speaker to vibrating air, namely, the capacity for
conveying intelligence. A bridge across a stream
renders an interchange of products possible between
dwellers on opposite banks. Previously each side
produced for itself ; after the building of the bridge
they produce partly for each other, and to the great
advantage of both. Two isolated societies become, by
virtue of the interactivity caused by the bridge, one
organism. Publications are mind-bridges ; they ren-
der an interchange of mental products possible, as
the bridge over the stream does of material prod-
ucts. Mental interactivities take place by means
of the mind-bridge, as physical ones do by the ordi-
nary bridge. Minds are united in organic life by the
one means of communication, as bodily activities are
by the other. If the writings of an author are a
mind-bridge, the words of a speaker are a mind-ferry.
As the ferry-boat conveys a farmer's produce to the
market, so the words of a public speaker, floating on
air, as a boat on water, convey liis intellectual products
to the place where they find their market. The
mason imparts utility to the stone of the bridge, and
the boat-builder to the wood of the boat ; the writer
imparts a higher utility to ink, and the speaker to
sound. All are })roductive laborers; their prodncts.

18 LABOR AND ITS RELATION TO WEALTH.

in each case, are utilities imj)arted to natural agents,
and fall within our definition of wealth. But it is
the intellectual fashioners of tenuous material who
are social workers par excelleme, since the diffusion
of thought which their products ensure gives intellec-
tual life to the social organism.

It is obvious that, in literary and oratorical prod-
ucts, the utility imparted by the human effort vastly
transcends the natural agent which is its substantial
basis. The articulate sounds of the speaker are the
ferry-boat ; the ideas are the cargo, and the latter
may exceed the former in value to an indefinite ex-
tent. In this case boat and cargo are a simultaneous
])roduct; the boat is fitted, in form, to every different
lading, and the two, as an industrial product, are in-
separable. Tliis illustration affords the most search-
ing test of our definition of wealth. The thought,
as existing in the mind of the speaker previous to
its utterance in words, does not fall within the con-
ception. It is subjective to the man, and, like his
mental faculty itself, is inalienable. It only acquires
the attriluite of transferability \\'hen it attaclies itself
to the agent, — the vocal sound. 'I'liis a] )pari'ntly trif-
ling agent transforms it from a simple activity into
an industrial })roduct. Again, with the consumers,
the audience, the thought continues to exist, or, at
least, other tliouglit induced by it does so; but, after
parting with its material vehicle, the sounds that

LABOR AND ITS RELATION TO WEALTH. 19

convey it, it loses the attribute of transferability, and
becomes again a simple activity, not an industrial
product. To again become an industrial product, it
must be freighted again on vocal sounds. Then only
can it be transferred from hand to hand, receive its
price in the market, and, for the brief period of its
duration, be entitled to its place on the inventory of
social wealth.

As the widest range of application is given to the
term natural agent, so an equally broad application
must be given to the term labor. The human activity
which produces wealth is an activity of the entire man,
physical, mental and moral, and there is no industrial
product so simple and so purely material that these
three elements of the human agency are not repre-
sented in it. In proportion as the intellectual element
in the labor predominates over the physical, and as the
moral element predominates over both, the product rises
in the scale of respectability and of value. The labor
of a stone-mason involves a physical effort in the simple
moving of materials, an intellectual effort in their skil-
ful combination, and a moral effort in the conscientious
use of proper materials and methods. The result of
the physical effort is seen in the position of the mate-
rials that have been moved in the construction, that of
the intellectual effort in their strong and tasteful
arrangement, and that of the moral effort in the cer-
tainty that, in ways not obvious to the eye, the inter-

20 LAIJOll AND ITS KKLATIOX TO WEALTH.

ests of the owner have been consulted b}- the builder,
at ins own expense, and tliat the wall is, in all respects,
as strong and as durable as it seems. In literary, profes-
sional, and educational labor, the intellectual element,
of course, predominates to an indefinite extent over the
physical, and the moral element is greatly- increased.
The latter a})pears, in the labor of the writer, in his
sincerity of purpose; in that of the lawyer and the phy-
sician, in their disinterestedness; and, in all the more
intellectual kinds of labor, in their general faithfulness
and conscientiousness. Reliability is an attribute of
the product in each case, and the moral factor in the
labor is that which produces it.

The debated question whether moral qualities are
paid for is thus simply and easily decided. The
product is paid for ; reliability is an attribute of the
product wliich determines its value, and the laborer
who can produce something having the attribute of
reliability can secure an enhanced price for it in the
market. All labor is indirectly paid for; its com-
pensation is in the market value of its product,
and, in so far as moral efforts are represented in an
industrial product, they are paid for as truly as other
activities of the laborer. No activities of man, })liysical,
mental, or moral, are paid for when not embodied in an
industrial i)roduct, and it is of inq)ortance to remember
that labor, as such, is not paid for. No employer takes
pleasure in the sweat of his laborer's brow ; he regrets

LABOK AND ITS KKLATION TO WKALTH. 21

it, and winild willingly pay tlio same (iompeiisatiou to
the same })ersoii if that particular product could ])e
produc(>d, by that person only, without effort. The
product is the desired object in each case, and the
labor, apart from its product, is not paid for and is
never a commodity, and nothing but confusion results
from so viewing and treating it. The statement so
frequently met with in works on Political Economy
that "labor is a commodity and is governed by the
same laws as other connnodities " is one of the mis-
chievous errors that still cling to the science. The law
of wages, the subject of desperate controversy, is, as we
shall soon see, placed in a new and clear light when
one apprehends, in its full bearing, the principle that
the wage of labor is the market value of its product.

In view of the constant presence of these three ele-
ments in labor, the physical, the mental, and the moral,
any effort, in the sup})Osed interest of the working
classes, to depreciate mental labor in comparison with
physical is unintelligent. All labor is mental. To a
large and controlling extent the mental element is
present in the simplest operations. With the laborer
who shovels in the gravel pit the directing and controll-
ing influence of the mind })redominates, to an indefi-
nite extent, over the simple foot-pounds of mechanical
force which he exerts. The latter could be better fur-
nished by an ox. It would take certainly three stout
men to exert as many foot-pounds of force as a single

22 LABOR AND ITS RELATION TO WEALTH.

OX, and if such a laborer is able to secure larger wages
than the third part of the cost of tlie labor of au ox, he
uiay place the difference to the credit of intellectual
labor. The numerical estimate has been made liberal,
since something is to be allowed for the superior physi-
cal form of the man.

Whatever possesses want-satisfying capacity and
appropriabilit}^ is a form of wealth, whatever may be
the source from which it comes. Its origin is unimpor-
tant in the classilication, and it may or may not be the
result of human labor. In some instances it is not so.
The original and. indestructible properties of the soil
are not the result of human effort, and recent German
thought has demonstrated that they possess an original
value, from limitation in quantity, independently of the
increased value which results from their artificial im-
provement. The original forest trees, water powers,
minerals, some wild game, and many other things owe
the value which they possess to their want-satisfying
capacity, and their approprial)ility, not to the mode of
their origin. That origin is not labor. The measure
of their value is determined, in an indirect and general
manner, b}- labor. A man might be willing to give for
oiie of these spontaneous products of nature the amount
of labor which would produce or purchase another
product of equal utility. Labor is the measurer, not
the originator, of their utility, and even as a measurer
is indirect and tardy in its o})eration. The doctrine

LABOK AND ITS IIELATION TO WEALTH. 23

that labi)r is the sole originator of wealth is, perliai)S,
the central doctrine in the system of Adam Smith, and
it was an efficient instrument in his hands for combat-
ing the Mercantilists and the Physiocrats. It was
accepted as a grand truth, as opposed to these perni-
cious systems, and it has served the purpose of a truth
in the liistory of the science. It is, in fact, a grand
error, and the time has abundantly arrived for its criti-
cal examination and essential modification.

Few statements are more common in text-books of
Political Economy than the assertion that " nothing
can constitute wealth which is not the product of
labor." As the statement stands it can only mean
that every commodity classed as wealth must have
actually been produced by labor. In this form it re-
quires but a single illustration to refute it. The
original and indestructible properties of land are
wealth, and they are not the product of labor. It is
less erroneous to say that, though commodities may
be produced by nature, their exchange value is the
product of labor. A diamond accidentall}^ discovered
does not owe its utility to any labor actually expended
in its production ; but it does owe the measure of its
value to a calculation in the mind of the purchaser
as to how much labor -would be necessary in order
to obtain another like it. The seller will demand
and the buyer will give what would })urchase a simi-
lar commodity. Actual labor is not the criterion, but

24 LABOK AND ITS UELATION TO WEALTH,

supposed labor, or mental considerations relative to
labor. Utility is here given in nature without labor ;
value is measured by a calculation in which supposed
labor is a basis. It is only when questions of quan-
tity are considered and the measure of this value de-
termined, that even considerations of labor are intro-
duced. The measure of the exchange value of all
commodities is determined indu-ectly, approximately
and tardiljs by considerations relative to labor. So
much only of this doctrine can be maintained. A few
simple illustrations will sufficiently establish this point.
Suppose a chance medical discovery were to create a
demand for some plant previously valueless. The
plant would have value immediately, and would at
once be exchangeable for something; but, ignoring
the additional value resulting from gathering it, its
value in the field would not be traceable to any labor
«expended in its production. For a time it would be
unknown how much labor would be necessary for its
production, and during this time, neither the fact of
its utility nor the measure of its value could be re-
ferred to considerations of labor. Only after a time
would labor determine this measure. If labor were
a talisman which turned everything to gold, the slag
of a blast-furnace should have value as well as the
iron. The difference between theju is in their
utility, not in their origin. A chance chemical discov-
ery might reveal uses for the slags in their present

LABOK AND ITS RELATION TO WEALTH. 25

form, and they would tlieu become wealth ; but they
would liavc been a jjroduct of labor l)efore they be-
came wealth as well as after. The existence of their
newly-acquired utility could not be referred to labor,
and for a time even their value could not be so deter-
mined. Aside from questions of measure, wealth is
directly traceable, not to labor, but to the want-
satisfying capacity and the appropriability of com-
modities.

Not every form of wealth is created by labor ; but
every form of labor creates wealth. Man toils, not be-
cause labor always precedes wealth, but because wealth
naturally follows labor. The possession of want-satis-
fying products is what the laborer seeks, and desire
is the moving force in the whole process. Labor is
not to be conceived of as the vis a tergo that pushes
wealth forward ; but wealth is to be conceived of as
the siren that lures labor onward. Wealth is always
the cause of labor ; labor is not always the cause of
wealth. There are spontaneous natural products, and
there are industrial products ; the earth may be self-
subdued, or it may be subdued by labor. Nature
subjected and appropriated is wealth ; man's subjec-
tion of nature is labor.

Labor imparts want-satisfying powers, or utilities,
to natural agents. These utilities are of four kinds,
and may be arranged in four corresponding classes,
namely, elenientary utility, form utility, place utility

26 LAl'.OK AND ITS RELATION TO WEALTH.

aiul time utility. New matter can not be created by
man ; but by chemical and vital changes in existing
matter new material may be produced. The produc-
tion of new material creates elementary utility, and
this is preeminently the province of the agriculturist.
Mining involves some change of place in the ore,
but the labor of discovering and freeing it from the
superincumbent earth is, prominently, a creating of
elementary value, and mining should, in general, be
classed with agriculture.

Existing materials generally re([uire changes of
form to fit them for satisfying wants, and the quality
imparted by these changes is form utility. This is
the office of the manufacturer, and, to a large extent,
of the merchant. The forming of wool into cloth, of
iron into tools, of wood into buildings, of stone into
walls, etc., are obvious illustrations. The suljdi-
vision of articles purchased in bulk to suit the wants
of the consumer is to be regarded as the creation of
form utility. The man who desires only a pound of
a particular commodity can afford to pay for it at a
higher rate than if he were compelled to purchase a
supply greatly in excess of his needs. The adaptation
of the quantity to his needs creates an actual utility
for him, and brings many enjoyments within Ids reach
which would be otherwise unattainable. Subdivision
creates form value, and its reward is legitimate.

A material in the requisite form may need removal

LAB(3K AND ITS RELATION TO WEALTH. Z^

to the })ri)per place in order to enable it to satisfy
wants. Transportation confers on commodities the
utility of being where they are wanted, and creates
place utility. This is obviously created when commod-
ities are brought to the consumer, but is not less truly
created when the consumer is carried to the commod-
ity. Place utility lies in the relative position of con-
sumer and commodity, and l)()th freight and passenger
traffic produce it. The fact that it is relative and not
absolute place which determines this utility distin-
guishes it from form value, as in manufactures. Manu-
facturing processes can be resolved, in the last analysis,
into changes of place. The carpenter moves shavings
and chips from the wood which he is shaping. The
mason locates brick and mortar in contact with one an-
otlier. The woolen manufacturer locates fibres of wool
and coloring matter in certain positions. All these
changes of place are irrespective of the consumer, and
result only in giving form to the product, while place
utility requires a relative position of the consumer and
commodity.

A material in the necessary form and place may
not be so at the requisite time for satisfying wants.
Ice in winter, agricultural implements out of season,
and, in general, all commodities at a time when they
are not wanted, are obvious illustrations of products
requiring this additional utility to fit them for con-
sumption. The fact of existing at a time when

28 LAP.On AND ITS llELATION TO WEALTH.

it is WiiiitL'd gives to a coinniodit}' the attribute of time
utility. The creation of this value is the office of
capital, and the nature of capital does not come within
the limits of this discussion ; but it is sufficiently-
obvious that time value results from human effort and
abstinence. Its creation is a chief function of the
merchant, and it is of inestimable benefit to his cus-
tomers. If every consumer were obliged to keep on
hand a supply of what he requires for sustenance and
comfort during indeliiute periods of disuse, the number
of comforts which individuals could enjoy would be
reduced to a minimum. The idle capital of society
would be increased a hundred-fold and the list of
its comforts proportionately reduced. The creation of
time utility by the merchant is one of the most benefi-
cent of human industries, and its reward one of the
most legitimate.

Having defined our conception of Wealth, Labor
and Utility, it may be well to apply to the definition a
few of the cases most difficult of classification under
prevailing systems. All artistic productions are crea-
tions of form utility, and differ from each other only
in the different agents to which this quality is im-
parted ; the architect imparts it to buildings, the sculp-
tor to marble, the painter to colors. The musician
imparts it to the natural agent, sound, and the public
reciter and speaker give a different kind of form value
to the same natural agent. The teacher is a pro-

LABOR AM) ITS RELATION TO WEALTH. 29

ducer of form and place value, iiune especially of the
latter. The confusion which arises from considering
that the product of the teacher's labor is found in
the mind of the pupil has already been noticed. The
pupil is not the natural agent which the teacher uses ;
he is the consumer of that which the teacher produces,
and, in practice, he, or others in his interest, pay the
teacher for his i)roduct. The acquiring of instruction
is the consumption of intellectual nourishment, as eat-
ing is of bodily nourishment; both are facilitated by
the labor of attendants. There is a creation of minor
form utilities in the carving of meat, the cutting of
bread, etc., and of minor place utilities in the passing
of plates and dishes. In the school-room there is a
similar carving and cutting process in the assigning
of lessons ; the student takes his mental nutriment, like
his physical, in portions adapted to his consuming
capacity. As it would be absurd to say that the waiter
and the cook find the product of their labor in a utility
imjiarted to the body of the person who eats, so a
similar absurdity exists in supposing that the teacher
finds his product in a utility imparted to the mind of
the one who learns. Both eating and learning are
acts of consumption. They, in each case, result in a
capacity to labor on the part of the consumer, but
this personal endowment is not to be confused with
the products which may, later, result from the exercise
of it ; working capacity is the natural result oi assim-

30 LABOR AND ITS RELATION TO WEALTH.

ilating iiutriineiit. The teacher is usually the waiter
at the intellectual table, while the cook is the autlior
of the text-books which he uses ; it is, however, an aim
of higher education to unite these functions.

It is unnecessary to state that any natural agent not
originally wealth becomes wealth when it receives,
through the agency of labor or capital, either of the
four utilities above noticed. Air has place utility
when forced into a mine or a diving-bell. Water has
form utility in a fountain, place utility in a street
hydrant or watering cart, and time utility in the res-
ervoir of a manufacturing village, where it is retained
for use during the dry season. If there are any jjrod-
ucts which, at first glance, api)ear as exceptions, they
are, on closer inspection, clearly seen to be illustra-
tions of our definition of Avealth. Some classes merit
more extended consideration than is here possible,
l)ut it is believed that the above classification will be
found to cover the whole field of industrial labor.
Wherever human effort produces commodities, it will
be found to be conferring one of these four utilities on
a natural agent, or, in other words, to be subjecting
nature. 'I'his view is, singularl)' enough, presented
in a work that is old and familiar enough to have
well attracted the notice of those who have ransacked
the (classics for fragmentary allusions to economic
sciciue. Ill the ])icture of the origin of society found
in the book of (lenesis, man is iirst represented in the

LABOR AND ITS RELATION TO WEALTH. 31

primitive i)aiadisiacal state, conscious of no artificial
wants, and supplying his few natural wants from the
gratuitous productions of tropical nature. He eats of
the tree of knowledge, and, by this means, becomes
C(jnscious of his simplest artificial want, and of the
necessity of supplying it by making nature service-
al)le. He passes to the state of actual development,
with the primitive paradise behind him and a restored
paradise, as the ever receding goal of his progress, in
the indefinite future before him, and it is here that
the injunction is laid upon him, or the law is written
within him, the fulfilment of which involves his whole
ecoiu:)mic development, the command, namely, to " re-
plenish the earth and subdue it.""

CHAPTER III.

THE BASIS OF ECONOMIC LAW.

Economic laws depend on the voluntary action of
men, and the science therefore professes, in effect, to
teach how men will act under given circumstances.
If prices rise, it is because some men choose to demand
and others consent to give more money than formerly
for the products of industry. To predict such a rise
is to foretell the action of the human will. Assum-
ing that the will is governed by desires, the meta-
physical view most favorable to prediction, we still
encounter the fact that the motives of human action
are the ultimate determining forces, and that a mis-
conception as to the nature of these motives is liable
to vitiate any conclusion which may be attained.
The value of the results of economic reasoning de-
pends on the correctness of its assumptions with re-
gard to the nature of man. If man is not the being
he is assumed to be, there is no certainty that the
conclusions will be even approximately correct.

It is more than can be here undertaken, to prove,
by the analysis of leading works, that the motiVes
attributed to men have been, in fact, erroneous.

THE BASIS OF ECONOMIC LAW. 33

That must ])e done b}' the reader for himself, by the
study of those works. It is, however, believed and
asserted that a candid reading of the literature of this
subject will produce the conviction that writers have
troubled themselves very little with anthropological
investigation. Their attention has been employed,
and well employed, elsewhere. They have assumed,
as the basis of their science, a certain conce})tion of
man, and have employed their acuteness in determin-
ing what results will follow from the social labors of
this assumed being. The premises have not been
adequately verified; the system is, in so far, an ideal
one, and it is, therefore, a matter of some chance
Avhether its results are correct or not. Economic
science has never been based on adequate anthropo-
logical study.

Inaccuracies in the science which result from inade-
quate conceptions of man are not to be rectified, as
has been asserted, by a proper allowance for "disturb-
ing forces.'' The actual course of a cannon-ball may
be determined by a mathematical computation followed
by the proper allowance for atmospheric resistance ;
but the social activities of men cannot be determined
}jy assuming that man is a being of a certain kind,
elaborating the conclusions with nicety, and then en-
deavoring to introduce the ])ro])er allowance for the
fact that man is, after all, a being of quite a different
kind. As Mr. Rusk in has well said, such disturbing

34 THE BASIS OF ECONOMIC LAW.

influences are rather cheniical than mechanical. " We
made learned experiments upon pure nitrogen, and
have convinced ourselves that it is a very manageable
gas ; but behold ! the thing whicli we have practically
to deal with is its chloride, and this, the moment we
touch it on our established principles, sends us with
our apparatus through the ceiling."

The only right course under such circumstances is
to begin at the beginning and determine by investiga-
tion the nature of man, the subject under considera-
tion ; and this course should be adopted whether
existing conclusions be true or false. The object is
not so much to attain different results from those
already reached, as to attain the same ones by a more
legitimate method. The process which changes some
false results will verify many true ones. The image
which the scientist has constructed as the subject of
liis discussion may or may not resemble the man whom
God has created ; the latter only is the true subject of
political economy. The science, which has rested on
a temporary blocking of assumption, needs to be built
on a permanent foundation of anthropological fact.

Having determined that the man of whom the eco-
nomics of the past has treated is largely the creature
of assumption, consideration will farther develop the
fact that tlie assumed man does not, in fact, resemble
the real one in several important respects, and that
there is not only a possibility, but a moral certainty

THE BASIS OF ECONOMIC LAW. 35

that some erroneous conclusions have resulted from
this discrepancy. The assumed man is too mechan-
ical and too selfish to correspond with the reality ;
he is actuated altogether too little by higher psycho-
logical forces. What is true of a laboring machine
requiring only to be housed and clothed, and to be
fed, — that is, supplied with fuel as a motive power,
— will certainly not be altogether true of a laboring
man in modern society; and what is true of a being
whose affections, aspirations, and conscience are merged
in an abnormal love of acquisition will not be true
of those who accumulate and disburse fortunes in the
actual world.

The inadequate basis on which the traditional sci-
ence rests is, in part, responsible for the growth of
the German Historical School, in which the laws of
wealth are sought by a study of recorded facts, rather
than by deduction from assumed premises. Yet he
must be ill informed who anticipates that, in the work
of this popular and growing school, deductive reason-
ing itself will fall into disuse. No one, perhaps, uses
such reasoning more acutely than Professor Karl Knies,
of Heidelberg, who deserves, as much as any one, the
credit of having given to the historical method a sci-
entific standing. Logic must do its work, but its re-
sults must be verified. What is here claimed is that
its premises need first to be verified. The assumptions
of political economy need to be subjected to a com-

36 THE BASIS OF ECONOMIC LAW.

parison with fiicts. It is on its aiithiupological side
that the traditional science is most defective, and it is
by adequate studies in this direction that results may
be attained which histoiy will coniirm. A broad field
is thus opened for occupation. The first steps may be
slow ; it is easier to view a promised land from a moun-
tain top than to capture it from the Canaanites. It
is easy to take in at a glance the vast results that
will follow from reconciling theory and practice in this
department ; but to trace the elusive laws of human
nature, and to search through the maze of social facts
without losing the grasp upon jn-inciples, will afford
work enough for one generation.

What is here proposed is to point out this field, and
then to cultivate it to a slight extent ; it is to take from
it, as it were, a first sod-crop, which will in nowise
measure the ultimate fertility of the soil. It is pro-
posed to consider certain facts relative to the nature
of man, selecting those which require but little in-
vestigation, and which need only to be stated to be
admitted, and, later, to ajjply these facts to some
economic problems. If any light is thus thrown on
questions now in doubt, if any new starting-point
seems to be attained for future investigation, or if any
modification results in economic princi])les as now un-
derstood, much greater and more valuable results may
be expected from more extended inquiry. The sim-
pler and more obvious the anthropological facts here

THE BASIS OF ECONOMIC LAW. 37

cited, and the more familiar the economic questions
to which they are applied, the stronger is the infer-
ence as to the ultimate value of completer anthropolog-
ical studies. Such studies would give a new character
to political economy. They would verify its truths,
correct its errors, impart to it a kindly and sympa-
thetic quality, and elevate it to a recognition of those
higher soul-forces which it has heretofore practically
ignored. ,

It is not merely man as an individual that needs to
he considered. A man is not independent. So close
is the relation between him and others of his race
that his conduct is dictated and his nature transformed
by it. Though a self-directing being of the highest
organization, he is made, by his relations to others, to
be an atomic portion of a higher organism, — society.

An organism is a living structure ; and, though this
phrase suggests the need of fornuilating a definition
of that indefinable thing, life, it serves to distinguish
an organism from other structures. The parts of an
organism have been said to be so related that "each
is, at the same time, the means and the end of all the
others." The rootlet of a tree shares with the remote
leaf the nutriment which it absorl)s from the earth,
and the leaf shares with the rootlet that which it
gathers from the sunlight and the air. This universal
interdependence of parts is a primary characteristic of
social organisms ; each member exists and labors, not

38 TIIK I5ASIS OF ECONOMIC LA^V.

lor liiiuseli", but for the whole, tuiti is tlepeiuU'iit on tlie
whole for reinuiieration. The iiulividiuil man, like the
rootlet, produces something, puts it into the circulat-
ing system of the organism, and gets from thence that
which his being and growth require ; he produces for
the market, and buys from the market. Every pro-
ducer is serving the world, and the world is serving
every consumer.

The analogy between society and the human body
was familiar to the ancients. It is a discovery of re-
cent times that a society is not merely like an organ-
ism ; it is one in literal fact. It is a late discovery
that social organisms develop earliest in forms corre-
s})onding, not to man, but to the lower animals. The
same characteristics which rank an animal as high or
low in the scale of development give a similar rank
to a society. Social organisms, like animal forms, are
divided into four general classes, distinguished by pro
cisely the same marks as those used in the biological
classification. There are social vertebrates, articulates,
mollusks, and radiates. The distinguishing marks are,
first, differentiation, and, secondly, cephalization, or the
subjection of the body to the control of the brain.
The more uidike are tlie parts in form and function,
and the more the structure is subjected to the direct-
ing influence of a thinking organ, the higher is the
society in the scale of organic development.

Social differentiation is division of labor, a thing

THE r.ASLS OK ECONOMIC LAW. 39

which has but a rudiiiienlary existeiuH: in the most
primitive tribes, which (leveh)ps in the intermediate
tj'pes, and is carried to an indefinite extent in high civ-
ilization. In everything that can be termed a society
a traceable degree of interdependence exists among the
members ; and, with advancing civilization, each mem-
ber labors less and less for himself, and more and more
for the social whole. This is economic altruism, to the
future development of which no limits can be assigned.

The solidarity of society is a primary economic fact.
Political economy treats, not merely of the wealth of
individuals who sustain complicated relations with each
other, but of the wealth of society as an organic unit.
The production and the consumption of wealth by
society will be found to embrace its whole subject. The
world is before us with its resisting elements, the
" thorns and thistles " of Genesis ; and we subdue it,
not by conquering each his little part, but by collec-
tively subjugating all nature.

Society holds two distinct relations toward every
man ; it is the object of his efforts ; he is the object of
its efforts. He produces for the general market ; it is
his study to ascertain a public want, and to create what
will supply it. He buys from the general market ; he
informs himself concei-ning the goods of many pro-
ducers, and buys wherever the things offered are
adapted in quality and price to his necessities. What
he consumes comes from every quarter of the earth.

40 rilK HASIS OF ECONOMIC LAW.

Society is, thus, to be regarded as one party in every
exchange that is made in the open market.

The social rehition reacts on the nature of the indi-
viduaL Man, the molecule of society, is transformed in
his whole being by the unifying jirocess of social devel-
opment. The simple organism is made higher and
better by becoming a part of the secondary organism.
The changes which take place in different individuals
vary according to the position which each assumes in
the organic wliole ; the man who, in the development of
society, becomes a molecule of the brain of the social
organism undergoes widely different modifications in
his own nature from those experienced by the man who
becomes a molecule of the nutritive organ. The sci-
entist differs in mental and physical development from
the hand-worker. Apart from frivolous distinctions of
caste, there exist classes founded on differences of social
function, and accompanied by real differences in the
individual.

Low organisms of every sort have few and simple
wants. Primitive tribes, the mollusks and radiates of
the social classification, have few wants in the aggre-
gate, and tlu'ir individual members have correspond-
ingly few. Multiplicity of wants marks the grade of
the society and of the individual. Simple food, little or
no clothing, and the rudest of shelter suffice for the
tropical savage ; nomads require more varied appli-
ances, and the civilized man demands an indefinite

THE HASIS OF ECONOMIC LAW. 41

number and variety. Man, the consumer, iic(|uires,
through social development, an infinitude of conscious
needs; and society, in its capacity of })roducer, diversi-
fies its mechanism so as to supply them all. Society,
as a consumer, develops an infinitude of wants; and
man, as a producer, s})ecializes his industrial action so
as to assist in supplying one of them.

Closely connected with the growth of mere compli-
cation of social structure is the growth of s})ecific vices
and virtues. The isolated man had no neighbors to
rob, and none to serve ; his possibilities of evil and of
good were limited. In the Mosaic picture the fruit,
knowledge, the eating of wliich started Adam on a
career of moral conflict, awakened in him the con-
sciousness of his simplest artificial and distinctively
social want, that, namely, of clothing, and introduced
him to a life of labor. The growing complexity of
the economic process has been accompanied l)y an in-
creasing need of moral force, and 1)y an increasing
amount of it in actual operation. Social relations,
wants and want satisfactions, sins and virtues multi-
ply in corresponding degree. Together, therefore,
with mere altruism, the economic principle by which
man, in self-interest, is led to work for others, there
grows, in controlling influence, the higher altruism of
unselfishness. Society of the highest type is not
merely differentiated and cephalized. There is, in-
deed, in high civilization, increasing division of labor,

42 THE BASIS OF ECONOMIC I. AW.

and a })rogressive control of the social body liy a think-
ing organ ; l)ut there exists, in as marked a degree,
a growing subordination of brain and members to the
dictates of moral law. This is the great and neglected
economic fact of modern times.

With the growth of ideal inlluences in society as a
whole, comes the chief transformation in individual
nature which is traceable to social inlluence. Men's
wants are not merely multiplied ; they are spiritual-
ized. Human desires extend themselves into scien-
tific, aesthetic and ethical regions, and react directly
and })0\verfnlly on the prodm-tion of wealth. The
relative strength of the animal and the ideal wants in
different individuals is due, in part, to original endow-
ment, and, in part, to acquirement ; and this latter is
largely the result of social infiuences. He whose occu-
pation it is to do much of the thinking of society
cultivates, perforce, his own intellectual nature ; while
he wlio merely feeds or clothes it is under no such
elevating influence, and may suffer from a powerful
pressure in the direction of animal development. By
specializing the economic functions of men, society
specializes its inlluence on their nature.

Every man has liis scale of wants, of varying inten-
sity. The products of social industry apjieal to him
with different degrees of power, from the food that
sustains his life, to the trifles that nnnister to his
caprices. Every man is subject to both the animal and

THE BASIS OF ECONOMIC LAW. 48

the .spiritual desires. The most (uiltured is liable to
hunger, and the rudest has some eraving for knowledge
and some appreciation of the beautiful. All have a
sense of right. Where do the ideal wants fall in the
scale of intensity? Does a man hunger for books some-
what as he hungers for bread, or does he place such
objects among the luxuries or the superfluities? On the
answer, in each man's case, depends the influence which
he will exert on the economic action of society. The
kinds of wealth produced and, as we shall see, the rates
at which they are sold are largely determined by the
acquired natures of men as consumers.

The lowest wants are susceptible of complete satisfac-
tion; the higher are indefinitely expansive. Appetite
ceases to act when sufficient nourishment has been
taken, and the sense of cold, when the body has been
sufiiciently clothed. The pleasurable sense of taste is
capable of less complete satisfaction ; the savage eats
long after luinger has ceased ; and, even in civilized life,
similar phenomena are observed. In like manner, the
desire for personal adornment causes the wardrobe to
be increased and varied long after the need of simple
protection has been fully met.

Wants of this medium sort expand indefinitely, but
decrease in intensity as the desired objects are supplied.
Pleasures of this kind tend to cloy. The first gratifica-
tion is an object of intenser desire than the second, and
the second than the following. An indefinite number

44 THE 15AS1S OF ECONO.MIC T.A\V.

(»f such acijuisitioiis would each afford some gratifica-
tion, but in diininisliiug degree.

The highest wants are not only indefinitely expansive,
but afford undiminished or increased gratification at
each successive attainment of the objects of desire.
The more a man knows, the more ardently lu; seeks
knowledge and the things which secuie knowledge.
The more he enjoys of the beautiful, the more diligently
he continues to seek it in art and nature. The better a
man becomes, the more earnestly he strives after every-
thing that tends to develop character. To the possible
intensity of these supersensuous wants there is no
assignable limit. A philosopher may forego the com-
forts of life for intellectual ends ; and many men prefer
a life of "plain living and high thinking" to the luxu-
ries of })hilistinism. The love of right action, and the
aspiration for woilliy character may subordinate every
lower im})ulsc. lUit it is not merely in i-ascs where the
ideal motives overshad(»w all others that their presence
is felt. They are a modifying intluence in every man's
conduct, and it is to their efficiency in society as a
whole that all progi'css is due.

These ideal Mants are all uiisc^llisli. The true and
the beautiful are desired each for its own sake, and
the desire for personal worthiness opposes self-interest
as an equal antagonist, li^nder the intluence of such
motives, man can never be a being striving solely for
[)ersonal advantage, and society can never be wholly

Til 10 r.ASIS (»I' K(M)N()MI(' LAW. 45

given over to an ignoble scramble for profit. These
motives, of course, find no place in a system of econom-
ics based on selfishness. At best they receive from
such a science a slighting recognition, as " disturbing
elements." Can such a system be maintained? Is
logic on its side, and is the opposition to it a matter
of sentiment? Do the hard facts of life sustain the
economic science which dehumanizes its subject? We
shall try to definitely answer these questions in later
chapters. The unselfish forces of society are doing
practical work. They create the altruism which gives
without return. It is not do nt dca, but simply do,
where they are in control. They have filled the land
with schools, churches, art museums, hospitals and
numberless non-mercantile agencies for social improve-
ment. They have diverted vast amounts of wealth
into ways of which no account can be taken in a sys-
tem based on self-interest and limited to tlie field of
competition. They have, as we shall see, created a
practical department of non-competitive economics,
and are constantly enlarging its sphere by encroach-
ments on the field where competition rules. If the
extreme and narrow view be taken that wealth in
process of disbursement is beyond the limits of eco-
nomic study, this objection may be met upon its own
ground. It may be shown that the market itself is
permeated by moral influences, and that the competi-
tive principle, instead of being supreme and resistless.

4G THE BASIS OF ECONOMIC LAW.

exists at best by sufferance, is subject to constantly
narrowing restrictions, and is liable, in parti-cular
forms, to l)e totally suppressed by the action of that
moral force which is, in reality, supreme.

A want that is universal and insatiable is the desire
for personal esteem. It is a main spring of the ener-
getic action on which the accumulation of wealth de-
})ends. It adjusts itself, in quality, to different natures,
becoming low vanity or worthy ambition for public
favor, according to the weakness or the strength of
particular intellects. All men value their standing
in the community, though they take different ways
to secure it. It is this desire, in the main, that sets
for each class a standard of living, and prompts them
to effort to maintain it. It tends powerfully to ele-
vate the condition of the poor, and is a main reliance
of Malthusianism for the counteracting of that ten-
dency to multii)ly in number which, if unchecked,
would depress to the j)oint of extreme hardship
the condition of the laboring class. It is a chief
incentive to the prodigal expenditures of the very
wealthy ; and at the same time, it impels to the ac-
cumulations which make large expenditures possible.
It creates a limitless market for articles of decoration,
and thus assists in giving a stable value to the pre-
cious metals, which are the basis of currency. Changes
in the supply of whatever ministers to vanity are
neutralized, in ])art, by the elasticity of the demand.

THE BASIS OF ECONOMIC LAW. 47

This desire is the basis of fashion, and, in this fiekl of
action, dominates the production of all form utiUties
into which an testhetic element enters. Consumers
and [)roducers pay attention to its despotic dictates,
since what is most saleable to-day may, by its influence,
become a drug to-morrow.

That which most concerns us, in connection with this
powerful economic force, is its action in supplementing
the ideal motives of human nature. It counterfeits
taste, intellect, and virtue where they have small exist-
ence. It causes low natures to resemble higher ones
in their outward action, and elevates the general con-
duct of society toward the standard set by its best
members. The newly made millionaire with no taste
for art becomes a purchaser of paintings, meritorious or
otherwise, according to his tact in utilizing the judgment
of others in the selection. He fills his library with
volumes ordered, possibly, according to shelf-room, by
the linear foot independently of contents. In the ac-
(;[uisition of wealth the man whom virtue would not
deter from fraud or robbery curbs his impulses from the
love of commercial reputation. Mercantile honor has
its roots in genuine morality ; but its visible effects are
multiplied by the love of personal esteem.

This desire not only counterfeits virtue in natures
where it is lacking ; it cooperates with it where it exists
in full measure. The benevolence which founds col-
leges and hospitals is called out, in part, by their

48 THE BASIS OF ECONOMIC LAW.

luonument-making character. There is niiu;h in the
iiiiine of a public institution. Yet tlie phihinthropy
which disburses fortunes is not more assisted by this
worthy love of esteem than is the virtue which guards
men from contamination during tlie process of acquir-
ing fortunes.

In the last analysis the sense of right in men is a
supreme motive, in the market as elsewhere. It is tlie
centripetal force in economic society. Its action is not
an occasional or "disturbing" influence; it is constant,
and increases with time and civilization. If classed as
a disturbing force, it promises eventually to overshadow
those classed as normal. There is, in fact, nothing
whatever of a disturbing nature about this motive ; its
whole action tends to harmony. It is the one possible
means of realizing, in practice, those "economic harmo-
nies" which Messrs. Cary and Bastiat have thought
they perceived in the unrestrained action of selfish
motives. "Every man for himself" is the principle of
disorganization and chaos ; " every man for mankind "
is th(! principle of organic unity. The more the action
of such motives increases, the more harmoniously and
rajtidly will social development proceed, and tin; more
speedily will the highest activities of the individual man
be called forth. Such motives demand the iirst atten-
tion and the profoundest investigation. A tndy scien-
tific study of their action Avill afford th(> key to a
political economy that shall explain the i'a(;ts of man's

THE BASIS OF ECONOMIC LAW. 49

[)resent life, ;ui(l give promise of a future that shall
answer the cravings of his nature.

The wants of men are either latent or developed,
according to their own intellectual condition, and ac-
cording to the grade of culture of the society to which
they belong. The ignorant man in a civilized state, and
the primitive tribe as a whole, have, at best, but a latent
desire for literature. Wants, when develo})ed, admit of
tliree distinct conditions, according to the possibility of
gratifying them. The desire for what is decidedly
beyond the possibility of attainment is not, in a healthy
nature, either constant or active. The peasant passes
the palace with indifference, and experiences, at most, a
desultory and transient wish to be its occupant. Such
a wish is a day-dream ; it stimulates to no effort, and its
non-fulfilment occasions little discontent. In passing a
dwelling slightly better than his own the laborer may
experience a desire of a different and more effective
character. The desire for that which is attainable by
effort is active, and stimulates to exertion in pursuit of
the object. Failure in such a quest occasions lively
disappointment. When the object has been attained,
the want of it ceases, and the active desires extend them-
selves to remoter objects.

Wants admit of these three conditions ; they are
quiescent when the object of desire is unattainable,
active when it is attainable, and in a different manner
quiescent when it is attained. The first condition is

50 THE BASIS OF ECONOMIC LAW.

necessary to contentment, the second to ambition, and
the third to tran(|uil enjoj-nient. Contentment, aml)i-
tion, and tranquil enjoyment are not inconsistent with
each other ; but, on the contrary, the coexistence of
these three mental states is the natural and healthy
condition of the mind. Despondency sometimes ex-
ists in fact, as other unhealthy conditions exist; but
it is not, in active life, the prevailing state. In a
community ordinaril}* prosperous men tend to con-
tentment, hopefulness, and enjoyment, and the oppo-
site conditions arc the exceptions.

When coml)ined with contentment, ambition fur-
nishes the condition of healthy economii; progress;
without it, it is an element of danger. A low grade
of contentment Avithout ambition is the cause of the
security of caste-ruled despotisms. The safety of re-
publics especially demands tliat, wliere tliis passion
exists, its development should be normal, that it should
strive after what is legitimately within reach and resign
what is beyond. It acts in this manner wherever
wealth is well distributed by a natural process, and
wliere the social system is not regarded as. unsettled
and subject to cliangc. Wliere wealth is ill dis-
tributed, and where the permanence of the social
system seems questionable, there are the conditions
of an abnormal ambition which is an element of
j.eril.

The mere possibility of revolution is a vitiating ele-

THE BASIS OF ECONOMIC LAW. 51

iiient in the mental processes of men. It brings indefi-
nite gains seemingly within the limits of attainment,
and undermines contentment. It renders those ab-
normal gains independent of labor, and palsies the
productive energies. It substitutes an eager and
hungry waiting for spoils for the healthy desire to
earn and to save wealth. It is the basis of deadly
enmity between social classes. The natural union of
contentment, hopefulness and tranquil enjoyment is
general only in those societies, the stability of which
is assured, and the industrial condition of which affords
to members of every class the opportunity for at least
a small amount of progress. The lazy and the improv-
ident may even then repine ; but these are never a ma-
jority. For this reason a republic among whose people
communistic poison has begun its work should cling, as
a ship clings to its anchor, to whatever opens a door of
possible progress to the laboring class. It should give
more than a tolerant hearing to the theories of cooper-
ation and profit-sharing, and should forgive many fail-
ures before rejecting them in practice. It should
treasure moral influences and everything that sup-
plements their action.

The leading English writers on political economy
have introduced a distinction between so-called "pro-
ductive and unproductive consumption," the former
being the consumption of those things, the effect of
which is to enable a man to labor, and the latter, the

62 THE BASIS OF ECONOMIC LAW.

coiisumplioii uf things which give simple gnitilicatioii
without iinptirtiiig kihoring capacity. Tiiis distinc-
tion is of interest from the liigh authority on which
it rests, and from the important question which it is
sought to solve by its use. The economic effects of
hixury and of frugality are the real questions at issue
in the discussion of what is termed productive and
unproductive consumption. Mr. Mill conveys the im-
pression of taking peculiar pleasure in this distinction,
and of conceiving that important light has been gained
by its use.

It is doubtless true that the employment of this
distinction for the purpose indicated is unnecessary,
and that it involves some confusion of thought. Pro-
fuse expenditure differs from frugal living, not in
producing less wealth, but in destroying more. In
itself consumption is never productive, but is usually
more or less destructive. A certain kind of consunq)-
tion is supposed,. by its reaction upon the energies of
man, to result in a subsequent creation of wealth.

It would doubtless be conceded by those who use
this distinction that it is im])ossible to rigidly apply
it in actual life. To draw a line between that which,
when consumed, gives capacity for labor, and that
which docs not, is impracticable. Cond'orts, as well
as necessities, may increase the ability to work, and
necessities, as well as comforts, may give gratification.
'J'hc food of nearl}' every nian satislics wants higher

THE BASIS OF ECONOMIC LAW. 53

in the scale tluin that of simple nourishment; it gives a
sensuous gratification distinct from its nutritive action.
The clothing of every one above destitution satisfies
higher wants than those of warmth and protection,
those, namely, of personal adornment and of social con-
sideration. So with the dwelling, and the entire sur-
roundings. It is impossible to say that food, clothing,
and shelter are productively consumed, or even that
distinguishable portions of them are so.

To consume only productively one must eat the
cheapest food that will adequately nourish, wear the
simplest clothing that will completely protect, and
live in the rudest dwelling that will fully shelter.
All higher wants must remain unsatisfied, and the man
must become a machine, content with tlie fuel that
keeps him in motion. Here is the chief weakness of
tlie classification, and the reason for mentioning it in
this connection; — tt» make a man a machine is to
make him anything but productive.

That such a result can never be realized in fact is self-
evident ; that it should ever be conceived of in thought
is an evidence of how little trouble even the greatest
writers on political economy have given themselves con-
cerning the real nature of the being with whose actions
they deal. If the laborer is an engine, his motive power
is fuel ; if he is a man, his motive power is hope. It is
psychological rather than physiological forces which
keep him in motion. His will, and not merely his

54 THE BASIS OF ECONOMIC LAW.

muscle, is an economic agent, and he is to be lured, not
pushed, in the way of productive effort. Ambition may
have feeble sway in individual cases, but, this side of
the gate of Dante's Inferno, it is never entirely extinct.

We have seen that wants on the margin of actual
possession are the active incentives to effort. Civilized
man struggles no longer for existence, but for progres-
sive comfort and enjoyment. It is the ho[)e of small
and legitimate gains which makes general contentment
possible ; the absence of it breeds a sullen submission to
hardship, tempered, in many cases, by dreams of com-
munistic plunder.

Progress has limits, and many wants must remain
forever unsatisfied. By a kindly provision of human
nature, such wants are generally quiescent. Other
wants near to the border line of actual possession must
be active, with a prospect of satisfaction by effort, if
happiness is to be attained. It is the want of things
which lie far above the line of necessities, and the con-
sumption of which would be classed as unproductive,
which is the constant motive power in industrial prog-
ress. The comforts to be enjoyed to-morrow set in
action the muscular energy gained by the food con-
sumed to-day. It is the so-called " unproductive con-
sumption " which, if soul forces be recognized, is
productive of wealth.

The ultimate foundations of political economy lie
deeper than the strata on which existing systems have

THE r.ASlS OF ECONOMIC LAW. 55

boon reared. The point of divergence between tlie
present science and the true science lies farther back
than ordinary inquiries extend. The economist of the
future niust begin at the beginning of all knowledge,
and, with Socrates, pass through the portal from which
diverge the various walks of scientific inquiry, and over
which the master has written '•'••^vwdi aeavrovP Self-
knowledge is the beginning of every science ; but it is a
pecnliarly comprehensive self-knowledge that is the
basis of the coming economic system. Knowledge of
men is the beginning of this science ; knowledge of the
social organism of which men are members is the middle
and the end of it. Individual desires are molecular
forces in tlie general life of society, and to them all
phenomena of wealth must be ultimately traced. It is
by a deeper analysis than has been dreamed of in our
philosophy that we may hope to attain that higher
insight, that knowledge first of man, and then of
humanity, which is the basis of true economics.

CHAPTER IV.

THE ELEMENTS OF SOCIAL SERVICE.

Men are altruistic in their economic action ; society
is egoistic. Men work for each other ; society works
for itself. For many purposes the most available con-
ception of the entire economic process is that of the
social organism as a producer, laboring to serve each
individual member as a consumer.

Wealth is the means by which society serves its
members. Resolving social service into effort and
gratification, we find, as in our former analysis, an
outward and material connecting link between them.
One man's effort gratifies another man through the
medium of some specific product ; the effort of society
gratifies all its members through the medium of all
products. Serving is creating social wealth, and being
served consists in consuming it.

Productii^n and consumption, the primary elements
of social service, are the reverse of each other in every
particular. Man acts on nature in the one process ;
nature on man in the other. ITtilities come into exist-
ence through the sacrifices of men, and, as a rule, pass
out of existence in the process of promoting their
welfare.

THE ELEMENTS OF SOCIAL SERVICE. 57

Coiisuiuption is utilization, and the destruction of
the object consumed is, in most cases, an unhaj)py
attendant circumstance of the process. It is not its
essential element; most utilities are of such a nature
that they exhaust themselves, slowly or rapidly, as the
case may be, in producing their effect on men. Yet
one form of wealth, land, which is not created by
labor, is not destroyed in utilization. It may be im-
proved or injured to an indefinite extent ; utilities may
be added to it or taken from it ; but to create or to
destroy space on the surface of the earth is beyond
human power. The primary service rendered l)y land is
that of affording standing ground and travelling room ;
although in nearly every locality short of the poles
or the deep sea, it has an ultimate capacity to become
a food producer. A man utilizes or consumes land
when he stands on it or drives across it. He consumes
a mountain when he causes it to lift him a thousand
feet into the air, and to afford a view of the river valley.
In another way he consumes the valley itself by look-
ing upon it and enjoying its beauty. The attractions
of a landscape are utilities, and to enable them to
produce their effect on the human sensibility is one
mode of consumption.

Wealth is commonly and accurately termed "means";
utilization is the end to which it corresponds. Maxi-
mum utilization is the goal of the economic process,
the summum honum of social economy. The mere

58 THE ELEMENTS OF SOCIAL SERVICE.

(|iiantitative increase of wealth is, indeed, a factor in
that result; but it is one factor only. The greatest
social wealth does not necessarily create the greatest
social weal ; that result depends, in a great degree,
on the quality and the distribution of the weal-con-
stituting element. The securing of the greatest quan-
tity, the highest quality, and the most equitable dis-
tribution of wealth is the rational goal of economic
society. How much this involves we shall later see.

In a loose sense production and consumption over-
lap each other in time ; in a more accurate sense they
are completely distinct, and the terminal point of the
one process marks the initial point of the other. The
difference lies in the two uses of the word consump-
tion.

The desire for a useful object induces a secondary
desire for whatever may become a means of securing
it. The need of a dwelling for shelter induces a sec-
ondary desire for the stone, brick, and lumber that
will compose it, and, again, for the trees that will
furnish the lumber, the (;[uarries that will furnish the
stone, etc. If the gratification of these mediate wants
be regarded as a subordinate variety of utilization,
then production and consumption are jointly in prog-
ress in most industrial operations. The utilizing of
trees is the production of lumber, and that of lumber
is the production of houses. The ultimate end is the
direct gratification of a want of man's nature. Pro-

THE ELEMENTS OF SOCIAL SERVICE. 50

duction continues till that goal is reached ; final utili-
zation, or true consumption begins at that point ; but
secondary consumption may be traced backward through
all the steps by which the goal is approached. Every
step that brings us nearer to the end satisfies a mediate
desire. It may not be illogical to apply the term con-
sumption, as is commonly done, to this secondary utili-
zation ; but it is illogical to fail to distinguish its
peculiar quality, and to neglect to use a qualifying ad-
jective to mark the distinction. Consumption in the
full sense is that final utilization which is distinct from
production in time, and the opposite of it in quality.

In this use of terms the production carried on by
society as an organic whole includes the process of
exchange, and involves that of distribution. The
four traditional divisions of economic science are not
distinct and coordinate. In the very act of complet-
ing a product society passes it many times from hand
to hand. One producer, or group of producers digs ore,
another smelts it, another rolls the metal, another cuts
it, with the result that society has produced, perhaps, a
keg of nails. Each step in the process has involved a
transfer of products, and the end is marked by an
exchange of a different kind. In this last exchange
the act by which society disposes of a product com-
pleted and ready for final utilization may be regarded
as the terminal act of social production. The acquir-

60 THE ELEMENTS OK SOCIAL SEKA'IOE.

ing of that product by ihc user uiu}', in like niauucr,
be classed as tlie initial act oi cousuniption.

Division of labor specializes luan's productive action
in two ways. There is, first, a broadly ([ualitative divi-
sion of labor, wliicli assigns to an extensive group of
producers the creation of a single complete product,
like the keg of nails above referred to. A subdivision
assigns each of the general stejjs in the process to a
subordinate group. Mining, smelting, rolling, and cut-
ting are performed by si)ecialists, who, in each case,
give to the material the particular transformation
Avliich they have learned to impart, and pass it to the
next workers in the series. " 'i'ouch and pass on" is
the social order; and each transformation adds to the
material a particular increment of utility, a sub-prod-
uct, as we shall later have (Xicasion to term it. The
creation b}^ society of any complete product involves
a scries of exchanges between the producers of the
sub-products ; and these transfers are integral parts
of the general productive ojieration.

Where several distinct operations are performed in a
singk; manufacturing establishment, there are, of course,
no exchanges between the groups of workmen who per-
form them. Spinning, weaving, and dyeing are mechan-
ically distinct processes ; l)ut S])inners in a mill do not
sell their product to the weavers, and these, again, to
the dyers. Yet sales do, in effect, take place here.
These sales are uni(|uc in (][uality, and stand in a direct

THE ELEMENTS OF SOCIAL SERVICE. 61

relatiuu to dislribiitiuii. The sellers are all the work-
men ; the only buyers are the employers, and the result
of the sale is a division between these parties of the
value which the mill creates. The full discussion of
this transaction is reserved for the chapter on wages.

Logically exchange and distribution are distinct from
each other ; practically they are merged. The same
series of acts performs both functions. Exchanges are
specific transactions Ijetween individuals ; distribution
is a general process performed hy society as a whole.
It is a division of the income of society among its mem-
bers, and is effected by means of all the interchanges of
products which take })lace between individuals.

As ordinarily defined, exchange and distribution are
not even logically distinct. Scientific treatment de-
mands that the logical separation, at least, shall be
maintained; and it may be so by rational definitions.
Exchange is a qualitative diffusion of wealth ; distribu-
tion is a quantitative diffusion. Exchanges determine
in what concrete things a man's wealth shall embody
itself; distribution determines how much of that wealth,
in abstract quantity, there shall be. If a farmer, having
surplus Avheat, sells it for an ec^uivalent in clothing and
implements, his wealth changes its form of embodiment,
but not its amount. His assets acquire a new character
by his visit to the market, but the inventory shows the
same sum total as Ijefore.

Yet there is something in the sales constantly going

62 THE ELEMENTS OF SOCIAL SERVICE.

on in society whicli has the effect of determining what
commodities are to be regarded as, in abstract value, the
equivalents of each other. This influence has assigned
to the farmer's wheat a certain purchasing power, fixed
the quantity of clothing and implements which he can
o'ct for it, and, bv this means, determined his share in
the general wealth of society. This determining influ-
ence is the adjustment of ratios of exchange in the
general market.

An exchange involves, first, a bargain, and secondly,
a double transfer of commodities. The bargain in-
volved in the transfer is not a part of it. The fixing
of the rate at which two commodities shall be ex-
chano-ed is antecedent to the act which changes tlie
ownership of the artiqles. The fixing of a rate of
exchange is an act in social distribution, while the
double transfer of the commodities tliemselves is all
that, in the last analysis, there is in the process of
exchange. The establishment of market prices for
everything determines every producer's share in the
varied results of social industry, and, as already
stated, is identical witli the process of social dis-
tribution. If the fixing of rates be not, in the dis-
cussion, kept sharply distinct from the mere change
of ownership of the commodities themselves, then the
term exchange can have no definiteness of meaning.
If the distinction be made, and if tlie term be ap})lied
to the rate-adjusting operation, it becomes the name

THE ELEMENTS OF SOCIAL SERVICE. G3

of the transaction by means of which society as a
whole divides its income. Exchange in general means,
thus, distribution analyzed into its ultimate acts, and
regarded from_an individualistic point of view.

In the strict use of terms an exchange reduces
itself to a double alienation and a double acquisi-
tion of concrete commodities. "I give," "I take," — ■
acts of will made known in the briefest speech, are
the essence of the double transfer. These acts re-
quire but an instant of time, and no effort but that
of communicating the result. Time may have been
consumed in reaching a decision, and effort in ad-
justing terms. That part of the conversation between
a buyer and a seller which consists in discussing the
(luality of goods has in view an adaptation of prod-
ucts to the needs and tastes of a consumer. It
resolves potential utilities into actual ones. It causes
an article which is capable of rendering a service to
actually render it to the user, and is a part of the
general process of mercantile production.

We shall consider later the fact that actual exchanges
are not always for equivalents, and shall endeavor to
place in its proper category that margin of illegiti-
mate profit which a shrewd trader may make both in
buying and in selling. He who parts with ten units
of value and receives twenty accomplishes, in fact, an
exchange, and a fraud or a robbery besides.

The bargaining processes which determine the selling

64 THE ELEMENTS OF SOCIAL SERVICE.

price of tinished products in the market stand in a less
direct relation to distribution than do those which
adjust wages ; the latter divide a value between em-
ployers and employed. Wages are, as we shall demon-
strate, payments for a certain kind of product ; the
agreement to work for an employer is a contract on the
laborer's part to sell his future interest in the product
which his labor will assist in creating. The man who
agrees to run a sewing-machine in a shoe manufactory
contracts, in effect, to acquire and to sell an undivided
share in the shoes. This bargain determines the return
of his labor more directly, though not more really, than
the later transactions which determine the value of the
shoes as completed and offered in the market.

The primary elements of social service are, then, the
production and the consumption of wealth by the social
organism as a whole. Exchanges, or double transfers of
commodities, are integral parts of social })roduction.
The adjustment of rates of exchange constitutes, in the
aggregate, the process of distribution. This is a divid-
ing of wealth, in abstract quantity, among individuals,
and is incidental to production and consumption by
society.

Competition is a term commonly made to include the
entire process of adjusting rates of exchange, and thus
of determining distribution. It is described as a war-
fare, and when looked at in its entirety, presents, in
fact, the semblance of an indiscriminate melee, in which

THE ELEMENTS OF SOCIAL SERVICE. 65

the element of strife predominates. It is not, however,
a blind contest ; there is a method in it, the analysis of
which is as important as any study in practical eco-
nomics. Strife is increasing in our times because true
competition is diminishing. That which was the basis
of Ricardian economics is slowly passing out of existence
at points where its presence is most needed, leaving
society in a condition anomalous, full of peril, and
demanding a prompt recourse to a new principle of
adjustment in the distributing of the rewards of in-
dustry.

What is loosely termed competition consists, first, of
a rivalry for public favor, resembling, not a battle, but
a race ; and, secondly, of a bargaining process having the
capacity to become a quasi-combat. The former ele-
ment only is true competition, and, where it is present,
it affects the contest which follows, and takes the
greater part of the belligerency out of it.

Ten men offer similar articles in the market, and we
buy from one of them ; but we have no words with him.
If he demands too much, we shall buy from another ; he
knows this, and the knowledge forestalls the excessive
demand. The tacit recognition of the presence of
several buyers, on the one hand, and of several sellers,
on the other, is a substitute for much argument. In
retail traffic bargains are made with a minimum of
"higgling"; the competition preceding actual purchases
takes away the root of strife.

66 THE ELEMENTS OF SOCIAL SEKVICE.

It is where the efforts of rivals to outdo each other
ill serving the pubhc are wanting that strife ensues.
Without the steadying effect of true competition a
bargain becomes a contest of strength in wliich one
man's gain is another man's loss, a transaction which
is liable to strain the personal relations of the partici-
pants, and even to render them surly or desperate, in
cases where vital interests are involved. The deter-
mining influences in such crude adjustments of value
are shrewdness and ultimate endurance ; and a man
does not take a defeat by either method with equa-
nimity. Still less do classes of men do so when the
issue determines their means of livelihood and comfort.

Such is coming to be the situation in the relations
of capital and labor. A contest is here in process on
a scale of magnitude impossible in earlier times, a
battle in which organized classes act as units on the
respective sides. The solidarity of labor on the one
hand, and of capital on the other, is the great economic
fact of the present day ; and this growing solidarity is
carrying us rapidly towards a condition in which all
the laborers in a particular trade and all the capitalists
in that trade, acting, in each case, as one man, will
engage in a blind struggle which, without arbitration,
can only be decided by the crudest force and endur-
ance. The strained relations of the jjartios in the
contest, the surliness and desperation, the threatenings
of literal war, are already the phenomena of it. The

THE ELEMENTS OF SOCIAL SERVICE. 67

essential peril to society lies in no superficial features,
such as rifle-clubs and dynamite laboratories, but in
the fundamental change that has taken place in the
economic relations of the parties. The competitive
principle has been vitiated. The strife-allaying ele-
ment, the healthy rivalry on either side, has yielded
to solidarity, which is rapidly growing. Already the
hope is openly expressed of such a union of all labor
that a universal strike may become possible if not
actual.

To what, then, is a system once supposed to be
nothing if not competitive actually tending? To the
annihilation of competition at the point wliere its strife-
allaying action is most needed. The rivalry between
large producers and small ones has centralized caj)ital,
and substituted production by a few great firms and
corporations for that which was formerly carried on
in numberless little shops. The reduction of the num-
ber of establishments has made producers' unions pos-
sible, effecting monopolies in many directions, and thus
l)artially destroying that variety of competition wliich
formerly fixed the prices of completed products in the
market. The aggregations of capital have given a one-
sided character to transactions between employers and
employed. A corporation ow^ning a village, and with
no present competitor, must hold at great disadvantage
a thousand labonirs who, in dull times, underbid each
other for employment. Under such circumstances

68 THE ELEMENTS OF SOCIAL SEllVICE.

Cobden's formula for a rise of wages, "two bosses
after one man," could scarcely be realized; but his
formula for a fall of wages, " two men after one boss,"
would describe a somewhat constant condition. Indeed,
could the supposed case become actual, could the com-
petition of capitalists in other "villages be completely
excluded, and could all unions of laborers be prevented,
then wages might perhaps be adjusted according to
a formula which barons under the feudal system em-
ployed in dealing with their subjects ; they miglit be
gauged " ad misericordiam,'^ according to the dictates
of a compassion which, in a corporation, might or miglit
not exist.

The supposed case is a highly ideal one. Competi-
tion on the employers' part has never been excluded;
and on the other hand labor unions have long been
actively at work. With the tendency to consolidation
on the side of capital, such unions become inevitable
and right. Yet they oppose to the solidarity of ca2)i-
tal a solidarity of labor, make wage adjustments to be
bargains between two parties without rivalry on either
side, and threaten to introduce into the industrial sys-
tem an element of strife for which there is no analogy
in anything which appears in a system truly competi-
tive, and which, for possible brutality, may perhaps
be accurately likened to a club contest of two cave-
dwelling men. It is Iticardianism, the competitive
system duly " let alone," the natural action of self-in-

THE EJ.KMEISTS OF SOCIAL SKllVICE. 69

tercst in men, that has brought ns face to face with
this condition.

Can an organic unity grow out of a principle of strife?
The answer is obvious ; and the inference is that com-
petition, as it has existed, is not a principle of strife.
Distribution by a bargaining process without true com-
petition is something by which no society could have
developed. The general adoption of this method no
society can survive. The strife already created by it is
rending the social organism, and would ultimately de-
stroy it but for one redeeming fact, — the certain advent
of a new principle of distribution. This social force is
new only in its mode of operation ; fundamentally it is
the same moral force that, when the competitive system
was at its best, was, in reality, supreme in the economic
life of men. We shall examine its working in the fol-
lowing chapters, a study which must begin with an
analysis of the nature of Value, and of the laws that
govern ratios of exchange in the general market.

CHAPTER V.

THE THEORY OF VALUE.

The charm of novelty, at least, should attach to a
philosophy of value, provided only that it prove to
be the true one ; for it is certain that in all that has
been written on this much elucidated theme, a state-
ment of the real nature of the thing discussed is not
to be found. One cause of this marked deficiency is
to be sought in the incomprehensive view which writ-
ers have taken. The great fact that society is an
organic unit has been, for the time, forgotten, and
the attention has been fixed on individuals and their
separate and intricate actions in valuing and exchang-
ing commodities. It is as though the physiologist,
instead of studying the human body as a whole, were
to confine his attention to the microscopic activities
of the separate molecules that compose it. Intricate
and nearly profitless would be such a study, and far
too intricate and profitless has been the study of the
department of social physiology comprehended under
tlie theory of value. This subject can never be
grasped and understood until the organic whole is
made the primary object of attention. The value
theory must receive the benefit of late studies in

THE THEORY OF VALUE. 71

social science. The conception of society as an or-
ganism must be applied to this question, which, of all
questions of political economy, is most dependent on
the comprehensive view thus gained. Then only will
our theories cease to lose themselves in the intricate
tracing of individual activities, which is only social
microscopy.

Who has not learned to his sorrow, how unsatisfy-
ing, in fact, are such discussions of value as claim to
be particularly scientific, and how large a mass of
literature he may patiently read through without sat-
isfying himself exactly what value is ? Aside even
from its want of comprehensiveness, the reader will
find the prevailing mode of discussion leading to
specific difficulties and contradictions, from which he
would give much to be delivered. He will learn
that utility has something to do with value, that it
is, indeed, included in the popular meaning of the
word ; but he will be enjoined to break with this
popular notion, and, in science, to limit the meaning
of the general term to something formerly called
value in exchange. Yet, while encouraged to inter-
pose as wide a gulf as is possible between value pro-
per and utility, the reader will, on the other hand,
find that he is allowed to confound utility with some-
thing once termed value in use. He will find that
definitions are attempted of the two varieties of
value, separately considered ; but he may search

72 THE THE(JKY OF VALUE.

ecoiionuc literature in vain for a satisfactory formula
for value in the generic. What value is, whether
in use or exchange, few have attempted to tell us
at all, and none have told us in a manner that is
clear and satisfying.

Yet who supposes that a universal popular idea is
baseless ? Who would claim that the subtle intui-
tions that determine the ordinary use of terms are
not a guide to scientific truth ? If men continue, in
spite of instructions, to use one term where the econo-
mist uses two, it is evidence that, in some way, the
thing signified must be generically one ; that there
is, in the seemingly dual idea, a unity which the
scientist has not as yet grasped. If the notion of
utility, of usefulness, persists in attaching itself to
the word value, whenever used in common speech,
it is certain that there is a closer connection between
them than has yet been detected. Latin valeo, French
valeur, English value, as well as other foreign syno-
nymes, all include the idea of usefulness, whatever else
they may signify ; and a formula that will harmonize
with this permanent usage, and express the mean-
ing of the term in any connection, is what the mind
instinctively craves.

With due apology for the audacity of the attempt,
and a consciousness of its difficulty, I am about to
hazard the effort to obtain a comprehensive view of
value, and to formulate a definition that shall express

THE THEORY OF VALUE. 73

the fuiulamental thought which is present whenever
the term is used. Instead of finding that utility is
something necessary, indeed, to the existence of value,
but not included in its proper meaning, something
which we must drop out of mind as we become very
scientific, we shall find that utility and value are in-
separably bound in thought, and that the attempt to
dissociate them betrays a failure on the part of the
scientist to follow, with his analysis, the subtle mental
processes that have determined the popular mode of
expression, and given the public a truer notion of
value than science has yet attained.

Value is an abstract term, and analysis will show
that the abstraction is not a primary one. The notion
is not formed by fixing the thought exclusively on
one of the qualities that make up our conception of
some concrete thing. Such a process may be termed
a primary abstraction. The resulting notion, the
quality itself, may become the basis of a secondary or
higher abstraction. The quality may have attributes,
and one of these may be made the object of thought.
As the primary process gave us an attribute of a con-
crete thing, the secondary process gives us an attri-
bute of an attribute. Certain things are useful, and
a primary act of abstraction presents to the mind the
quality, utility. This quality may exist in different
degrees ; some things are more useful than others.
To determine how useful a thing is, is to measure its

74 THE THEORY OF VALUE.

utility. Quantitative measure, then, is an attribute
of the quality, utility. The fixing of the thought
exclusively on this attribute is the secondary process
of abstraction ; it gives us the notion, measure of
utility^ and it is this that I propose maintaining as
the true formula for value in the generic. Value is
quantitative measure of utility. Always and every-
where there is present to the mind that makes_a val-
uation, whether for use or exchange, the conception
of a concrete thing, of a quality of that thing, and^ of
the quantitative measure of that quality.

Value and utility are, therefore, as inseparable as a
measure and that which is measured. The concep-
tion of linear extension could be as logically separated
from the conception of a geographical mile, tys the idea
of utility from that of value.

On the other hand, value and utility are no more to
be confounded with one another than separated; two
inseparable things are not one thing. A measure and
that which is measured are not identical. The metal
lying on the scales possesses the quality, weight ; that
general quality is not identical with the fact that the
weight amounts to just a hundred pounds. The
quality is not to be confounded with the ([uantity of
the quality. Utility is never identical with value,
either in use or exchange.

Still less is value to be confounded with the expres-
sion for it: that would be confusinjj the result of a

THE THEORY OF VALUE, 75

measurement with the object used by the measurer
to convey that result to another mind. A unit of
linear extension is not identical with a foot-rule, nor
a unit of weight, with a metal disc that weighs a
pound. Place a quantity of nails on one arm of the
scales, and a metal disc on the other. The scales
swing freely; the nails are weighed. Are we in dan-
ger of saying that the metal disc is the weight of the
nails ? We say that two weights are equal. There
is a common quality in two objects, and the measure
of that quality is the same in both. Unless very un-
discriminating, we shall not say that a metal disc of
smaller and finer sort, a dime, for instance, is the
value of the nails. There is a quality common to
nails and disc, and the measure of that quality is the
same in both.

We need to pause but a moment to distinguish value
from price ; the latter is a mode of expressing value.
All measurements are expressed by comparisons. In
the rude beginnings of mensuration there is no unit
of linear extension, and the length of an object is
vaguely expressed in terms of anything that chances
to be near it. When a common unit is adopted, say
the length of a human foot of rather prehistoric pro-
portions, measurements are expressed in terms of that
common standard. Extension is the same, whether
expressed in vague general comparisons, or in feet
and inches. Values are expressed in vague general

76 , THE THEORY OF VALUE.

comparisons until the adoption of a unit for measur-
ing utility; utility is the same whether expressed in
the ruder or the more accurate way. Measure of
utility expressed in terms of a conventional unit is
price.

If the essential distinctions have now been clearly
made ; if concrete things, a quality of those things, the
measure of that quality and the conventional expres-
sion for that measure are each so distinct from all the
others that there is no danger of confusing them, we
are prepared to advance to the essential argument,
and prove, if possible, that value is, in fact, always a
measure of utility. For it occurs to us at the outset
— and, if it did not, any text-book of political economy
would remind us — that things having widely differ-
ent degrees of apparent utility have the same value
in the market. We remember the diamond and the
water of Adam Smith's illustration, and his assertion,
true in spite of criticism, that the gem, the costliest of
articles, satisfies a want much less intense than that
satisfied by the water, which costs little or nothing.
Is our theory stranded at the outset?

We must now make a distinction which, so far as I
am aware, has never before been applied in political
economy,* but one which, as I hope to show, is abso-
lutely essential to clear reasoning in this depaitment of
tlie science. The conception of utility itself, unan-
alyzed, is misleading. Simple as the term apparently is,

♦Tins chapter was publislied as a review article, in Jul}', 1881.

THE THEORY OF VALUE. 77

Ihere are two widely different meanings in it, and a
value theory leads to directly opposite results, accord-
ing as, in the use of terms, the one or the other is
adopted. What is utility ? Evidently a capacity to
serve, a power to satisfy wants. To satisfy wants is to
change tlie condition of the person served, to bring him
from a lower degree of happiness to a higher. Without
the useful object the man, for the time being, is in one
condition ; with it he is in anotlj^r. The power thus to
modify subjective conditions is utility ; the difference
between the two conditions affords the measure of that
utility, that which we have termed value. In the
measuring process, or mental valuation, the man rea-
sons : " Without this article my condition, for a time,
would be thus ; with it, it is thus ; the difference meas-
ures the utility of the object."

The cubic mile of air about your dwelling sustains
your life ; of course it has infinite utility. But has it ?
Annihilate it and see. Other air at once takes its
place, and your condition remains unaltered. Under
actual circumstances that particular volume of the life-
sustaining gases appears not to have the power to
modify your condition. Contrast your present state
with your state if there were no air, and you find an
indefinitely wide difference ; contrast your present state
with that in which the annihilation of that particular
volume, and of no other, would have left you, and you
find no difference at all.

78 THE THEORY OF VALUE.

The one mode of estimating gives a measure of what
may be termed absolute utility ; and, in the case of air,
this is indefinitely great. The other estimate measures
what may be termed effective utility ; and, in the case
of air, this is nothing. Effective utility is, then, power
to modify our subjective condition, under actual cir-
cumstances, and is mentally measured by supposing
something which we possess to be annihilated, or some-
thing which we lack to be attained.

Now, is not this the utility with which political
economy has to deal ; and is not the former, or absolute
utility, that with which actual treatises have dealt?
Moreover, is not the difference radical, and the failure
to distinguish it ruinous to any philosophy? Air is
not wealth, we have been taught, solely because no one
can own it. True, of the atmosphere as a whole ; but
cannot a man own some of it? Let him but close
doors and windows, and he will have it. There it is,
in suifficiently complete possession, and undoubtedly
useful, in the prevalent sense of the term. In consis-
tency we should term it wealth. It is not so ; and we
know it ; and our analysis reveals what is lacking, — ef-
fective utility. The i)resence or absence of the particu-
lar volume appropriated is indifferent to us, under actual
circumstances ; the presence of an indefinite supply,
ready to re})lace it, destroys its importance. It is
always in view of actual circumstances that we make
our economic estimate ; and it is effective, and not abso-

THE THEORY OF VALUE. 79

lute utility that is the basis of wealth and value. Ab-
solute utility may, for ^'resent purposes, be forgotten.

The measurement of effective utility in our illustra-
tion was simple ; but it is not in common practice, a
comparison of two simple conditions that is presented
to the mind when mental valuations are made. The
problem is more complicated, though not so complex as
to be difficult of analysis. A few typical cases will
sufficiently illustrate the principles involved. Air in a
closed dwelling was effectively valueless, because its
withdrawal caused no inconvenience ; the owner's con-
dition was the same before and after the withdrawal.
Remove the drinking water from the table before him,
and you modify his status ; it becomes needful that he
refill the glasses, and the sacrifice necessary to ensure
the refilling, in whatever form that sacrifice may be
made, is to be regarded as a subtraction from the sum
total of his gratifications. If we could attain a unit for
the measuring of happiness, it would be a compound
standard like the foot-pound of mechanics, units of in-
tensity multiplied by units of time. Applying such a
standard, too ethereal, indeed, for practical use, to the
condition of the man in our illustration, we should find
that his day's enjoyment had been lessened by the
withdrawal of the water. It did not remain wanting,
but was immediately restored ; yet the restoring process
itself caused a lessening of the sum of our supposed
subject's gratifications. The difference between the

80 THE THEORY OF VALUE.

present sum of his enjoyments, and the sum of enjoy-
ments, had the removal not taken place, measures the
efifective utility of the water. Let us examine a third
and last typical case, and suppose that the water
removed was replaced by that which was less refresh-
ing and serviceable. There are now two modifications
of the owner's subjective status, one caused by the sac-
rifice of replacing the water, and another by the inferi-
ority of tliat which was brought in its stead. His sum
of gratifications is twice lessened ; the measure of the
effective utility of the water is determined, exactly as
before, by comparing his present sum of gratifications
with that which he would have attained had the re-
moval and replacement not taken place.

Now it is estimates like these that are actually made,
in measuring the utility of commodities. There is at
hand a well from which to draw, — a general market ;
and the removal of any article modifies a man's condi-
tion as the removal of the water, in our illustration
— he must replace the article by a sacrifice, and he
may or may not replace it completely. If he replaces
it completely, there is but one subtraction from the
sum of his enjoyments ; if he replaces it but partially,
there are two. In any case the resultant modificd.-
tion of his subjective status entailed by the removal
of the article measures its effective utility. The re-
moval of a coat lessens the owner's enjoyment, not
by the difference between his condition with such a

THE THEORY OF VALUE. 81

garment and bis condition with none, but by the dif-
ference between tlie sum of his enjoyments, had the
coat not been taken, and the sum after the necessary
sacrifice shall have been made to replace it, and the
substitute, perfect or imperfect, shall liave been brought
into use.

An individual man may make all these measure-
ments; value is possible, indeed inevitable, in a con-
dition of isolation. Crusoe compared utilities with
one another, though, having no bargains to make, he
was under the less necessity of forming accurate esti-
mates ; and men, in society, make such estimates in-
dependently. A measurement of utility made by an
individual gives value in use, not at all identical with
what passes under that name in current discussion,
which is utility itself, but the quantitative measure of
that utility to an individual user. We have now to
see that, in a sense, measurements of utility are never
made by any other than a single independent being.
Society, as an organic whole, is to be regarded as one
great isolated being ; and this being may and does
measure utilities like a solitary tenant of an island.
This great personage is complex; it has collections of
men as its members, and single men as its molecules ;
and in studying the internal activities that take place
when the valuations are in process, we shall be led
into a sort of higher or social physiology, which will
develop farther than has yet been done the parallelism

82 THE THEORY OF VALUE.

existing between the individual and the social organ-
ism. It is from this source that, as was stated above,
we are to derive our chief light on the philosophy of
value. After the comprehensive view has been at-
tained and the general movements of the social body
traced, we may adopt, with advantage, the analytical
method, fixing the attention on individuals, and find-
ing how they deal with their neighbors. This is social
microscopy.

Market value is a measure of utility made by society
considered as one great isolated being ; market price
is, of course, that measure expressed in terms of a com-
mon standard. If the market value of a ton of coal
and that of a barrel of flour are equal, it signifies that
society, as an organic whole, estimates their respective
utilities alike ; if the prices of the coal and the flour are
the same, it signifies that society has measured their
utilities by a common standard, and expressed the meas-
urements alike, in terms of that standard.

We need to be detained but a moment by the difli-
culty that, if a loaf of bread is worth, in the market,
only a small fraction of a gem, all the loaves in the
world would be worth but a few gems ; while they
possess indefinitely greater effective utility. It is es-
sential to their present market value that they be
offered and estimated separately. Were they owned
and offered as a wliole, tlieir value would be indefi-
nitely greater. Let some bold and successful monopo-

THE THEORY OF VALUE. 83

list effect what he would term a " corner " in bread,
and its value would indefinitely exceed that of all the
gems in existence.

More serious, in appearance only, is the fact of the
vast service, under actual circumstances, which many
low-priced articles render. How measureless is the
utility, effective as well as absolute, of the poor man's
loaf! Its removal might starve him, though another
were to be had for a dime.

It is society, not the individual, that makes the esti-
mate of utility which constitutes a social or market
valuation. That is a part of our definition, — measure of
service rendered to society as an organic whole.
Though the thing were priceless to its owner, it might
be cheap to society.

But the owner is a j^art of the social body, and is
the organic whole indifferent to his suffering ? If so,
society is an imperfect and nerveless organism. It
ought to feel, as a whole, the sufferings of every
member, and what makes or mars the happiness of
every slightest molecule, should make or mar the hap-
piness of all.

A sympathetic connection between members of so-
ciety exists, and prompts to the relief of suffering ;
a sense of right also exists, and moves the social
organism more powerfully in the same direction. It
results from these influences that poor-laws are enacted
and alms-houses established, and that the man whose

84 THE THEORY OF VALUE.

last obtainable loaf lias been destroyed may call upon
a social agency to replace it. The loss entails upon
the social body a minute expenditure of labor, a slight
sacrifice in the replacement, and this, by the terms
of our definition, gauges the importance of the loaf to
society. The question upon what members of the
social body the loss of wealth shall fall, is_distinct
from the question how great is that loss itself; the

latter question determines the social estimate of

effective utility, which fixes market value ; the former
question is one of equity in the internal arrangement
of society. Within its own membership the social or-
ganism adjusts losses on e(]^uitable principles, tin-owing
them, in the case of a ])auper, first on a local commn-
nity, and then on its individual members in propor-
tion to their taxes. In any case the loss of a neces-
sary article entails upon the social whole the neces-
sity of diverting a quantity of labor from other pro-
ductive directions, and this sacrifice gauges the market
value of the article.

The social organism is never nerveless ; indepen-
dently of synq)athy between man and man, there is
a beautiful law of society as a whole, which makes
the wants of every member a matter of decisive inter-
est to all. It is society as a whole that originally
bought the loaf from its producer ; in a sense, it
bought it for the ])oor man, and for him only, and
would never think td" takinir it from him. Parents

THE THEORY OF VALUE. 85

would not take away a child's toy, not merely because
of affection, but because of the adaptation of the toy
to the child's use. Acting for the family as a whole,
they bought the plaything for the child, and to trans-
fer it to themselves would lessen its service to the
family. Independently of personal sympathies, society
assumes a paternal relation toward particular mem-
bers, buys articles for their use, consigns the articles
to them, and has no desire to tahe them again.

Exchanges are always made between an individual
and society as a whole. In every legitimate bargain
the social organism is a party. Under a regime of
free competition, whoever sells the thing he has pro-
duced, sells it to society. His sign advertises the
world to come and buy, and it is the world, not the
chance customer, that is the real purchaser. Yet it
is equally true that whoever buys the thing he
needs, buys it of society. Under free competition
the world is seeking to serve us, and we buy what the
world, not a chance producer, offers.

When market valuations are made, society is pri-
marily the buyer. Goods in individual hands are offered
to the social whole, and the estimate of utility made
by that purchaser fixes their market value. In the
process the social organism is true to its nature as a
single being, great and complex, indeed, but united
and intelligent. It looks at an article as a man would
do, and mentally measures the modification in its own

86 THE THEORY OF VALUE.

condition which the acquisition of it wouhl occasion,
or whicli the loss of it would occasion, if once pos-
sessed. " With the article my condition is thus ; with-
out it, thus; the difference measures its effective
utility ; " such is the mental process by which individ-
ual or society makes a valuation. The three typical
cases in our former illustration apply equally here.
Would an article in possession, if removed, be replaced
without sacrilice, like the air in a closed room ? The
measure of its effective utility is nothing. Would it
be replaced at some sacrilice? Its effective utility is
gauged by the sacrifice. Would an imperfect substi-
tute take its place ? Its utility is gauged by the two-
fold sacrifice entailed. These cases are all ; for there
is nothing, not paintings by Raphael, nor gems from
monarchs' diadems, for which some substitute, perfect
or imperfect, is not to be had.

When society, as a consumer, has bought a thing,
it must locate it in the organic whole. The locating
process has its laws, and society must estimate what
is offered to it in the market in view of the j^lace in
the social body which, by the laws of this higher
physiology, it is compelled to fill. There are laws of
property, fixed principles of distribution ; these are
facts to be recognized, conditions which determine
the estimate which society is to make. As a molecule
of nutriment in the human system does not diffuse
itself through the body, but passes, by the circulating

THE THEORY OF VALUE. 87

organs to the part that needs it, so useful commodi-
ties, molecules of social nutriment, unerringly follow
the circulatory laws of the social system. Nerve
tissue to the nerves, bone tissue to the bones, each
particle reaches the place for which it is adapted.

It would be interesting, in itself, to analyze the
process of distribution, and determine the forces which
locate, in the social organism, the things which it
buys for consumption. It would, however, extend
this chapter unduly, and would lead us at once into
detailed and analytical modes of study, which are
foreign to our present purpose. It is sufficient, for
the present, to notice that there are fixed laws of
social circulation, and that whatever is taken from
the market is located in, the social body, by laws
which society is not at liberty to violate. It becomes
evident, then, that a thing may have a fixed market
vnlue, while its value in use is indefinitely great or
indefinitely small, according to its location. The poor
man's loaf ; what an intense desire it satisfies ! As
removed, its utility is measured by hunger; as re-
placed, by hard labor. The rich man's loaf; what a
bagatelle in his estimation ! Even its absence would
but modify an abundant bill of fare, while its replace-
ment would cost an inappreciable sacrifice. How
values in use would be augmented could the location
of articles be arbitrarily changed. Yet such a whole-
sale confiscation would mean the most violent of rev-

88 TlIK THKOIIY OF VALUE.

olutions, and would lead to a chaotic condition fatal
to the welfare of all. Yet better systems of social
circiLlation may be before us, in the future, if we
can but wait for their development.

The expression value in exchange has, for the sake
of clearness, been, thus far, avoided ; since, by its
origin and common use, it is adapted to signify some-
thing different from either of the kinds of value wliich
we have considered. It should mean simply indirect
value in use, or the measure of the utility, to the
owner of a thing, of the commodities which he can
get in exchange for that thing in the market. It is
as abstract as any form of value ; it is not the things
themselves which the person can get in exchange,
but the measure of their utility to him. While com-
pletely distinct from market value, it is dependent
on it ; society's estimate of the utility of an article
to itself determines what it will give for it, and what
society gives, the individual seller receives.

The inaccuracy of the term purchasing power, often
used as synonymous with value in exchange, consists
mainly in its implying a power in the commodity
itself to effect a purcliase. Such power resides in
men, not in things. If it be intended to indicate
the quality in things that satisfies wants and influ-
ences men's actions, the name of that quality is utility.
If it be intended to denote the degree to which it
satisfies wants and inllucnces action, the term is meas-

THE THEORY OF VALUE. 89

lire of utilty, or value. If what is meant be the rate
at which exchanges are made, in consequence oi' this
influence, a less misleading expression would be ratio
of exchange, or barter price. This is one of society's
two modes of expressing valuations; as its estimate of
utility expressed in terms of a conventional unit is
ordinary price, so that estimate expressed in general
comparisons is barter price.

It is not intended, just here, to make a treatise on
value ; and the intricacies of this complicated theme
cannot be discussed, nor even alluded to. It would
be a source of satisfaction to apply the broad princi-
ples laid down to the more interesting of them. We
should learn, for example, the incorrectness of the
current doctrine of the absence of any real standard
of measurement for value. The standard exists,
though psychological in character and difficult of use.
Difference of subjective condition, measure of gratifi-
cation, is the basis of the measurements of utility
which give value. The attempt to attain a unit for
such measurements will not lead us into the unprofit-
able intricacies which result from the theory that value
is fundamentally relative, based on mutual comparisons
in which A measures B, and B, A, and there is no
positive unit. Though too immaterial for accurate
use, the standard exists, and the aim should be to
recognize and approximate it.

The aim of this chapter is attained if, without

90 THE THEORY OF VALUE.

attempting to discuss intricate phenomena of value,
it has succeeded in truly stating the fundamental prin-
ciples which govern them ; if it has shown the nature
of value, as a measure of a quality of things, its
inseparable connection with utility, the nature of
utility, absolute and effective, and the part played by
society as an organic unit in valuing processes. After
this we are prepared for microscopy. Now we may
fix the attention on individuals, and their complicated
interactions. They will no longer confuse and lead
into mazes of logical wandering, but will throw the
same light on the general laws with which we start
that the curious movement of microscopic corpuscles
in the blood throw on tlie general movement of the
life-giving current. We should push the analysis to
greater lengths than is done by those current methods
of study whose fault is their minuteness. We should
study the very nature of man himself; for the ultimate
forces of society, as of physical nature, are atomic ;
the individual is the originator and the end of every
movement. He is microcosmical, like the monad of
Leibnitz, a mirror of the universe ; and the philosophy
of value and of other phenomena of society can be
grasped only by a view that is broad enough to
include the entire social organism, but, at the same
time, minute enough to apprehend the nature of the
social atom.

CHAPTER VI.

THE LAW OF DEMAND AND SUPPLY.

Value expresses itself in the quantitative ratio in
which commodities exchange for each other in the mar-
ket. This ratio is determined by Demand and Supply.
It is not matter but utilities which are created by labor
and destroyed by use, and which are, therefore, the
subjects of Production and Consumption ; they are, in
like manner, the subjects of Exchange and Distribution.

A commodity is to be regarded as an aggregate of
utilities held together by a common material basis.
These qualities are of different kinds, and each appeals
with a certain force to the desires of men. The strength
of the desire for a commodity equals the aggregate
strength of the desires for the various services which it
can render.

Consumers gratif}^ their wants in the order of their
intensity, as far as their available means permit. A dry
but useful formula will best define the demand with
which political economy has to deal. Let A, B, C, D,
and E represent different objects of desire ; let the
strength of the wants, in the case of a class of persons,
vary in a scale from 5 to 1, that for A being the most

92 THE LAW OF DEMAND AND SUPPLY.

intense. Let tlie price of each be rei)i'esented l^y a
single unit of value. The scale will stand as follows: —

A, B, C, D, E, = Different objects of desire.
5, 4, 3, 2, 1, = Relative intensity of desires.

The man with one unit of means available for present
use will, i)urchase A ; the one with two units, A and B ;
tlie one with four units, A, B, C, and D. In each case
there will be a definite point where purchases will cease ;
and though an article which lies beyond that limit in
the scale could easily be j)urchased, it will not be so,
because of the mental attitude of the possible purchaser.
The man with three units of means will not bu}' I) nor
E, though he might take them both and have a unit
left.

Demand for what falls within the purchase limit is
the "effectual demand" of the traditional theory. The
limit is determined by the price of the article, and the
available means and the mental status of purchasers.
The subjective factor last named is the most inconstant,
and produces the most sudden changes in the market.

Under a regime of free competition prices are ad-
justed by a simple law. If the supply of a particular
kind of commodity be regarded as fixed, as during brief
intervals it may be, it will be offered at a tentative price,
which will be subsequently raised or lowered until the
quantity offered is found to be within the purchase
limit of persons enough to take it. The tentative price

THE LAW OF DEMAND AND SUPPLY. 93

is, ill many cases, too high ; a pai't of the supply is then
found to lie above the limit, and this, therei'oi'e, remains
unsold. If there is a necessity for selling it, the price is
gradually lowered, and each step of the decline brings
the article within some one's purchase limit, and thus
secures a new "effectual demander."

How far must the pi-ice fall in order to accomplish
this enlargement of the market ? The answer depends
on the nature of the want to which the utilities em-
bodied in the article appeal. The necessaries of life are
the objects of a desire so intense and universal that it
is habitually satisfied by nearly all members of a com-
munity. This want would stand at 5 in our ideal scale,
and the man with but one unit of means would use it
in procuring the articles which supply it. It is impossi-
ble to secure many new customers for the plainest kinds
of food ; no cheapness of provisions will induce more
men to eat than already do so. To induce the present
purchasers to consume more than they have heretofore
done would be another method of enlarging the market ;
but the possibility of doing this is also limited. The
want of mere food is inexpansive ; a definite quantit}"
completely satisfies it, and most persons secure about
that quantity.

Wheat is not the plainest material for food, and the
desire for it could not, with strict accuracy, be placed at
the bottom of the scale; but it is near enough to that
})oint to illnstrate the })rinci])h\ The desire for wheat

94 THE LAW OF DEMAND AND SUPPLY.

is intense, universal and inexpansive ; a definite quan-
tity is now purchased, and but little more is wanted.
This fact is the basis of the very disproportionate
fluctuations in its price which follow changes in the
supply. A large crop of wheat is worth far less in the
aggregate than a small one ; and statistics have led Mr.
Tooke to the conclusion cited by Mr. Mill, that an
unrelieved deficit of one-third in the general corn crop
of England might advance the price tenfold.

With utilities which minister to wants midway in the
scale the case is different. These desires, as we have
seen, are indefinitely expansive, but decrease in inten-
sity as the desired objects are supplied. This is true
of what may be termed the qualitative increments of
the necessaries of life. An improved variety may find
a market where an increased amount fails to do so.
The man who has food enough, such as it is, may easily
become a customer for something better. To leave the
quantity unchanged and improve the quality is to make
a net addition of a qualitative increment. It is to offer
for sale no new commodity, but a new utility of a higher
sort, one which ministers to wants lying midway in the
scale and comparatively expansive.

For this reason the natural growth of production
tends to take a qualitative direction, improving rather
tlian quantitatively increasing the food, clothing, fur-
nishings, etc., of a community. Making no more shoes
tlian formerly, the shops of Lynn may, by making better

THE LAW OF DEMAND AND SUPPLY. 95

shoes, create many more utilities, and in this is afforded
an outlet for an indefinitely increased expenditure of
labor and capital. General over-production of qualita-
tive increments is a theoretical and practical impossi-
bility ; and the turning of productive energies in this
direction has resulted, in fact, in constantly raising the
standard of living of all classes. "Whether the laboring
class has received its due proportion of benefit from this
cause is a question generally answered in the negative ;
but of the fact of an absolute advance in the standard
of living of that class there is no douljt.

Wants of the highest grade are indefinitely expansive,
and increase in intensity with an increased supply of
the objects that gratify them. They are less univer-
sally developed than those of the lower grades ; but
they have, in every man, at least a rudimentary exis-
tence, and are always strengthened by exercise. Cheap
books ensure reading, and thus an increased appetite
for reading. A fall in the general price of publications
ensures larger sales to habitual consumers, and increases
the number of the consuming class. The most expan-
sive of all markets is that for the appliances for intel-
lectual, sesthetic and moral growth. Here is a limitless
outlet for productive energy, and the extent to which
it is utilized is the gauge of genuine economic progress.

Accompanying the highest motives, and imitating
their action, here as elsewhere, is that love of esteem,
that universal and not unwortliy vanity, already re-

96 THE LAM^ OF DEMAND AND SUPPLY.

fened to. This motive creates a highly expansive
market for whatever acts as a badge of social caste.
Yet it is this identical want the working of which pro-
duces the most frequent and sudden fluctuations of
value. It demands conformity to a changing style in
clothing, furnisliings, decorations, dwelling, equipage
and an infinitude of semi-?esthetic form utilities.

The fluctuations in price resulting from this cause
greatly over-balance, within limited intervals, those
resulting from changes in supply. Fashion makes and
destroys utilities capriciously and on a vast scale. The
garment that is to-day as comfortable and as comely as
it ever was, has lost over night the caste-marking power
which is one of its major utilities, and its value is
reduced by a half. Civilization multiplies the finer form
utilities the value of which fashion dominates, and in-
creases the importance of this changeful influence.

Under a regime of free competition most utilities have
a normal price, toward which, during long intervals of
time, the market rate continually tends. This normal
price is that which will afford to the workmen engaged
in the production ordinary wages, to the capitalist cur-
leiit interest, and to the employer an average profit.
If the selling price is above this amount, there is an
inducement to enlarged production, which reduces the
current price to the normal limit. If, for any reason,
tlic market yields less than a iKniunl rate, there is a
necessity for ('urlaik'(l prodiid ion. which raises the

THE LAW OF DEMAND AND SUPPLY. 97

market price to the natural limit. During a long term
of years utilities, as embodied in products, sell for the
cost of production and an average profit.

Amid these changes in the quantity produced tlie
cost of production does not remain stationary. The
normal price is never, during a long interval, fixed.
Certain commodities, when created in increased amount,
have been said to require a more than ijroportionate
increase of labor. To double the present wheat supply
would, according to tlie current theory, involve more
than double the pxcsent expenditure in production.
The law of " diminishing returns " of agriculture be-
comes, ill terms of the formulas here employed, a law
of increasing costliness of elementary utilities. It
means, not that food will be scarce and men hungry,
when the world is more densely peopled, but that the
food supply, enlarged as it must and will be, will cost
more labor jDer capita than at present.

The basis of this accepted principle is the fact that
elementary utilities are created through the action of
the vital forces of the soil, and that nature is not every-
where equally generous. The best land is used first,
and afterwards that which rewards labor less liberally.
The normal price of that which man ^vins from une-
qually liberal nature must rise as the growth of popula-
tion occasions an enlarged demand for food, and as this,
in turn, compels a resort to poorer and poorer soils. More
and more in the sweat of his face must man eat his

98 THE LAW OF DEMAND AND SUPPLY.

bread, though he may procure comforts and intellectual
enjoyments with a constantly lessening effort.

It is con ceded jthat the invention of machines, and the
adoption of improved processes in agriculture retard the
operation of the law of diminishing returns, and hold it,
during considerable intervals, completely in abeyance.
It is conceded that improved means of transportation
have a similar effect. Had the American continent, in
Ricardo's time, been towed bodily across the Atlantic,
and anchored with its shores in contact with the British
Islands, the wheat fields of Dakota would not have been
as near to London, if distance be estimated in cost of
transportation, as they are to-day. i\Iany a mill, a half-
century ago, revolved its wooden wheel in parts of
England from which the grist could by no means then
known be carried to London with so small a deduction
for expenses by the way as can the i:)resent output of
the mills of Minnesota. The relief thus experienced
by the consumers of flour in London is as real as though
wheat-raising in England had become more remunera-
tive. Wheat, in the London market, is an aggregate of
elementary and place utilities, and improved facilities
of transportation have so cheapened the latter as to
counterbalance the increased costliness of the former.

A counteracting influence, to which little justice is
done, is that of the accumulation of capital and the
reduction of interest. The expenditure of capital
enougli will make the best of land out of what now

THE LAW OF DEMAND AND SUPPLY. 99

ranks as the poorest ; and if that cajjital will but con-
tent itself with a sufficiently small proportion of the
returns of cultivation, the reward of the labor itself
may be as large as that now realized from the soils in
use. When a hundred million dollars are available for
dredging the deposit from the mouth of the Mississippi,
and depositing it on the sands of Florida, for a return
of one per cent upon the investment, it is conceiva-
ble that labor may win as much from the use of the
artificially made land as it does from that which is
not burdened by the claims of the capitalist.

It may be maintained that all these influences are
temporary; that the principle at the basis of the law
of the diminishing returns of agriculture is perma-
nent ; and that, in the end, this tendency must over-
come the others. The time may be remote, but it is
said to be coming, when labor applied to the soil must
create a smaller product than now rewards it, and
when man must win by harder and harder effort the
privilege of mere existence. It remains, therefore, to
notice an influence which is a chief basis of economic
optimism, since it is capable of holding the law of
diminishing returns for an indefinite period in abey-
ance.

We do not here combat that essential Malthusianism
which maintains that a retarding of the rate of increase
of population is an ultimate necessity, if humanity is to
fully enjoy the earth, and to perfect itself. The prob-

100 Till-: 1>AW UF DEMAND AND Sll'I'LV.

able coiulition of the I'liture is that of a constantly
increasing population, and of a constantly diminishing
rate of increase. These tendencies, acting together,
would give, at some point in the indclinite future, a
comparatively stationary condition, in which popula-
tion, having become exceedingly dense, would show,
from decade to decade, little, if any, increase. Mal-
thusianism of a certain type would predict a reign of
increasing misery during the indefinitely long period
before the stationary condition is realized. Is there
ground for such a belief in economic law?

The cost of creating form utilities is constantly
lessening; and form utilities are more and more prepon-
derating in the wealth of society. That which human-
ity, as a whole, enjoys costs it a continually lessening
sacrifice.

That which jjroduces form utilities is not the crea-
tive povrer of nature, but the transforming power of
men ; and this power becomes progressively efficient as
production enlarges. New motive powers, machines,
and processes are multiplying, and promise to increase,
beyond any discernible limit, the capacity of man to
transform what nature places in his hand. If elemen-
tary utilities become costlier by one-quarter, and form
utilities cheaper by one-half, the resultant is a gain
for humanity in the enjoyments which it can se-
cure.

A numerical illustration will place this principle in a

THE LAW OF DEMAND AND SUPPLY. 101

clear light. Let us suppose that the iiitlueiices which
retard the action of the principle of diminishing re-
turns in agriculture have done their full work, and
that the law is asserting itself, and causing a day's
subsistence for society to cost, decade after decade, an
increasing proportion of the day's labor. Let us say
that, in the year 2000, two-fifths of the labor of soci-
ety, as a producing organism, is expended in creating
elementary utilities, and three-fifths in creating form
and place utilities. Let us suppose that the lapse of
a century reverses this numerical proportion, causing
three-fifths of the total labor to be expended upon the
elementary utilities ; does it follow that society gets,
in the aggregate, less than before for the total effort
of a day or a year ? Not if the labor expended upon
form and place utilities has gained in efficiency more
than other labor has lost. If the social effort, which
is still available for the creation of the higher utili-
ties, has become twice as effective as before, then the
total labor of the producing organism will secure for
it a far greater aggregate result. Mankind may be in-
definitely better off, on the whole, when three-fifths of
its total effort is crudely agricultural. If it takes ac-
count of stock at the end of a year, estimates its total
gains and sacrifices, and compares them with those re-
corded for a similar period a century before, it will
find this as a result : it has been fed, as during the
earlier year, and it has been better served in every

102 THK LAW OK DEMAND AND SUPPLY.

other tUrection. The two-fifths of its labor force, still
available for the creation of higher utiUties, has fash-
ioned its clothing and built its dwellings in a better
manner ; and it has instructed, amused, and, in aesthetic
and spiritual ways, ministered to it far better than
was possible in the days when a larger but less effi-
cient force was expended in these directions. In the
terms of our formulas, the utilizations of society have
increased, and the organism has approached nearer
to its economic goal. Its intelligence has triumphed
over resisting nature, and, though she succeeds in ex-
acting a larger and larger proportionate effort in the
production of crude subsistence, she undergoes from
decade to decade a more complete subjugation. She
is compelled to minister more and more subserviently
to the higher wants of man.

The law of diminishing returns in agriculture would,
in itself, give promise of a condition in the future in
which food will be as plentiful as now, but in which
the gaining of it will absorb an increased proportion
of the labor, of the social organism. The effect of this
would be to lessen the amount of labor available for
the creation of finer products, and this diminution
would be far more than compensated by the greater
effectiveness of this labor. We may, then, admit the
law of diminishing returns in agriculture, and fear
nothing for the future of humanity. The basis of
economic welfare is broadening, and if this tendency

THE LAW t)F DEMAND AND SUJ'l'LY. 103

is ever reversed, it will be iit a time too far in the
future to be a subject of present consideration.

The inaccuracies of thought in the orthodox theory
of Demand and Supply are chiefly of importance for
their bearing on the outlook for the future of the race.
It will be remembered that Mr. Mill's statement of the
law divides commodities into three classes, namely,
those which cannot be reproduced, those which can be
produced in any quantity at a uniform cost, and those
which can be produced in enlarged quantity, but only
at an increasing cost. Articles of the first class are said
to have no normal or " natural " price ; those of the sec-
ond have a natural price which is uniform, regardless
of the quantity produced ; and those of the third have
a natural price which rises with increasing production.
For commodities the cost of which diminishes with in-
creasing production the theory makes no provision, and
the omission is unfortunate.

If the law of Demand and Supply be based on what
labor creates, not matter but its utilities, it will be seen
that the first class named in the traditional statement
of the theory can scarcely be said to exist. To repro-
duce an article is to reproduce its serviceable qualities ;
and it is, perhaps, never the case that an article is of-
fered for sale of which none of the utilities can be
thus duplicated. Where any of the major utilities of
a commodity can be reproduced, the article is, in so
far, subjected to the ordinary laws of the market, and

104 THE LAW OF DEMAND AND SUPPLY.

its price is, in jjiirt, determined by the cost of repi'O-
duction of those particular utilities.

It is obvious, without careful analysis, that the price
of rare articles is greatly influenced by the possibility
of producing substitutes for them. To multiply ap-
proximate reproductions of a rare painting is to lessen
the intensity of the competition for the painting
itself. A Cremona violin of a given age sells for less
than it would command if other violins of nearly
equal quality could not be manufactured. The price
of the rare instrument consists of two distinguishable
parts, first, the market price of fine violins, as gov-
erned ]jy the cost of production, and, secondly, a
special premium for the unique excellence of the old
instrument.

Accurately stated, the law is tliis : a few commodities
contain certain utilities which cannot be duplicated,
and others which can be so; the former command a
price determined by the direct action of demand and
supply, and the latter tend to sell at a normal rate,
fixed by the cost of reproduction. The market price of
such commodities is the aggregate price of their differ-
ent utilities. Mr. Mill's own illustrations prove this
principle. Rare wines contain properties peculiar to
themselves, and others which are common to a wide
range of similar products. The value of the Johannis-
berger vintage consists of the market value of an equal
quantity of other fine wine, plus a premium for its own

THE LAW OF DEMAND AND SUPPLY. 105

inimitable flavor. The price of antique statues, when
they fall into the market, is somewhat affected by the
value of substitutes which may be multiplied at will;
and the same is true of all the articles enumerated.

If there are commodities of which the supply may
be increased indefinitely at a uniform rate of cost, it is
because the cheapening of the form utilities embodied
in them chances to exactly counterbalance the growing
costliness of the elementary. A fine watch consists
mainly of elementary utilities, in the case, and of form
utilities, in the movement. If the consumption of
watches were to be quadrupled, it might happen that
the greater costliness of the one part Avould offset the
greater cheapness of the other. The second of the
traditional classes may have a fortuitous and transient
existence.

The third class has a somewhat better basis. If the
law of diminishing returns in agriculture were ad-
mitted, it would be necessary to accept the conclusion
that crude nutriment will become costlier as population
increases. It would then be of importance to note
that there is a class not noticed in the traditional the-
ory in the case of which the reverse of the above law
is true. Commodities consisting mainly of form util-
ities are unquestionably becoming cheaper ; and among
these are all products which minister to intellectual,
aesthetic and spiritual wants. If the conditions of the
future were to involve plainer living, they would at

106 THE LAW OF DEMAND AND SUPPLY.

least be more favorable to high thinking ; and we
might welcome a tendency which would make it neces-
sary for men to forego some of the sensuous enjoy-
ments of life, if it, at the same time, enriched them in
intelligence, refinement and moral character. If the
man of the future is to be wiser and better than the
man of to-da}^ we need not be troubled with the ques-
tion whether he will or will not be happier. We do
not admit, however, that the spiritual gain is to be
purchased by a physical sacrifice. The world^is, in
fact, becoming more tolerable to man as an animal^ and
it is Ix'coniing indefinitely more favorable to him as a
rational beinu'.

CHAPTER VII.

THE LAW OF DISTRIBUTION.

That mankind as a whole shall become richer does
not, of necessity, involve an increase of human wel-
fare. That is dependent, not only on the quantity of
wealtli accumulated, but on the mode in which it is
shared. A better division of the results of industry
might atone for some diminution in the amount pro-
duced. As bearing on the prospects of mankind, there
are three practical problems to be solved ; of these the /
first is how to create, with the least sacrifice, the
largest aggregate of utilities; the second is how to '
justly divide the gain ; and the third is how to ensure
in the product that quality which shall cause it to
minister to permanent rather than to transient well-
being. We are now to consider the second of these
problems. The quantity of wealth created is, in fact,
increasing faster than population ; are the equities of
distribution also increasing ?

The mode of dividing the proceeds of social industry
is changing, under our eyes, at a rate so rapid that it
is difficult for a scientific system to keep pace with
it. Demand and supply are the regular agents of
distribution, and have divided the stream of social

108 THE LAW OF DISTRIBUTION.

production into three channels, containing respectively
Rent, Gross Profits, and Wages. Of these, the first
has been traditionally regarded as determined by a
more or less independent law , and it will be conven-
ient for our purposes to accept this theory, and con-
fine our attention to the division which determines
the amount of wages and of profits.

Vital as are the interests centering in the law of
wages, the subject is full of unsettled theoretical
questions of a kind that, as one would suppose, ought
to be forever decided by a little clear and candid
thought. There is, moreover, a moral element in
these questions. Points of fact suggest problems in
equity. What are wages? From what source do
they come? What determines their amount? These
questions suggest the inquiry whether, in nature,
source, and amount, they are what they ought to be,
or whether there is, in the present transactions of
class with class, a series of wrongs wdiich demand a
reform, and, as an alternative, threaten a revolution.

In the absence of a scientific answer to the points
of equity at issue, and of one so clearly proven as to
compel belief, interest dictates the replies given in
the greater number of cases ; and this fact arrays one
social class against another, and makes it possible for
each to claim a moral basis for its action. The con-
tests of interest between capitalists and laborers are
intensified by counter-claims in equity ; and the prob-

THE LAW OF DISTRIBUTION. 109

leiu thrust upon society is not merely how to divide
a sum, but how to adjust rights and obligations.

Politics cannot escape the dominant influence of
these ethico-economic issues. The solidarity of capi-
tal on the one hand, and of labor on the other, are
things of which the founders of our republic thought as
little as the founders of our system of economics.
The strain to which this influence is about to subject
our institutions would be indefinitely less if the counter-
claims in equity could be in so far settled that men
not biased by belligerent feeling might be in substan-
tial agreement concerning them. If it is humanly
possible to thus settle the questions at the basis of the
law of wages, no scientific work can be more immedi-
ately and widely beneficent. These questions tend,
if rightly answered, to public order ; if wrongly an-
swered, to communism ; and, if unanswered, to agita-
tion and peril.

The very allusions to the solidarity of labor and
of capital which it has been necessary to make, may
seem to have placed out of order any farther discus-
sion of the accepted law of demand and supply. That
has been supposed to rest on the antecedent fact of
free competition, to which solidarity is the antithesis.
If labor, on the one hand, and capital, on ,the other,
should ever act as units in the dividing of the prod-
uct of their industrial action, true competition would
be totally suppressed. Such a condition is one im-

110 THE LAW OF DISTRIBUTION.

possible extreme, while the other is the condition of
unhindered competition which crude thinking has
placed ut the basis of economic law. The facts of
actual industry are between the extremes, and a theory
of Distribution must conform to the facts.

Free competition itself is, as we shall later see, not
an unrestricted scramble for gain. Of these two pro-
cesses the former has recently existed, and in certain
fields still exists, while the latter is so completely
antiquated that the most we have to do with it is to
show its monstrosity. The only possible mode of
attaining a true law of distribution is to ascertain how
demand and supply would operate under a regime of
competition in the true sense free, and, secondly, how
that action is modified by the growth of what, in the
absence of an authorized term, I should like to call
soUdarism, or the tendency of both labor and capital
to aggregate, and act, within extensive fields, as units.
There is, indeed, no prospect that competition will ever
be totally suppressed; in spite of all encroachments on
its territory it will doubtless have a residual field of
action in permanent possession.

Nothing is more confusing than the view wliich rep-
resents demand and supply as acting promiscuously
on everything bought and sold. This view implies a
general rece[)tacle termed a market, into which com-
modities are indiscriminately thrown, and in which, in
some way, they receive a valuation. In this theory of

THE LAW OF DISTRIBUTION. Ill

the market and its action labor is usually classed as a
commodity, the price of which is fixed in the same
manner as that of other articles in the promiscuous
assortment.

The action of demand and supply is systematic and^
capable of clear analysis. It proceeds in one way in
the case of products ready for social consumption, in
another in the case of the specific utilities which
workers in the producing series impart, and in still
another in the case of the shares of capitalists and
laborers who jointly create a particular utility. _To
fix the value of clothing ready for use is one thing ;
to divide that value among agriculturists, transporters,
manufacturers and tailors, is another; and to adjust
the proportions falling to capitalists and to laborers in
each of these producing groups is still another. The
entire distributing process consists of a division, a sub-
division and a farther subdivision of the general prod-
uct of social industry. Demand and supply have a
l)rimary, a secondary and a tertiary field of action.

Social production takes place, as already noticed, not
by a single operation, but by a succession of many.
One producing agency begins with crude nature, and
so modifies it as but partially to prepare it for render-
ing its service to men ; another and another continue the
operation. The ultimate result of the action of all is
a completed product, and the particular change effected
by each may be distinguished as a sub-product. The

112

THE LA^Y OF DISTRIBUTION.

elementary utility created by mining is the first sub-
product of a certain series ; the place utility imparted
b}' transportation is a second; tlie form utility result-
ing from smelting- is a third ; that from puddling and
rolling is a fourth ; that from cutting is a fifth ; while
the aggregate of all is the keg of nails of our former
illustration.

In the order of production the series stands as fol-
lows : —

Synthesis Resulting in the Completed Product, Nails.

1st Sub-Product.

Elementary Utility.
Ore.

Resulting from the joint

action of

Capital and Labor.

2d Sub-P.

Place U.
Transporta'n.

Joint result of
C and L'.

3d Sub-P.

Form U.
Smelting.

4th Sub-P.

Form U.
l^uddlinc;, etc.

Joint result of Joint result of
C'andL". C"'andl/".

5th Sub-P.

Form U.
Cutting.

Joint result of
C"" and 1/

The first sub-product is an elementary utility created
by capital and labor; the second is a place utility cre-
ated by another kind of capital and labor ; the third,
fourth and iifth are specific form utilities, each (ircated
by its own variety of cajjital and labor. The com-
plete product, nails, is the outcome of the application
of C, C, C", C" and C"", and of L, L', L", L'" and
L""; it is the resultant of five specific kinds of effort,
each assisted by the form of capital adapted to it.
Social production is, thus, a synthesis of clearly distin-
guishable elements.

Distribution is the reverse of this synthesis ; it is an
analytical process which resolves the above aggregate

THE LAW OF DISTRIBUTION. 113

into its coinpoiieiits. It deals, however, with pure
quantity ; it separates, not commodities into their
component utilities, but values into a series of quan-
titative increments. It determines the amount of
social wealth embodied in a quantity of nails ; it then
fixes the proportion of that sum represented by each of
the sub-products which constitute the nails, and, again,
the proportion of each of these latter amounts which
belongs to capital and to labor. In terms of our
diagram, distribution determines the value of the Com-
pleted Product, resolves that amount into the values
of 1st sub-P. 2d sub-P. etc., and then subdivides the
value of 1st sub-P. between C and L, that of 2d sub-
P. between C and L', etc.

The steps of the actual distribution follow, in time,
the order of production, which is the reverse of the
logical order of division. The secondary subdivision is
made, in realit}', first. The first sub-product is dis-
tributed among capitalists and laborers before the
amount of that sub-product is fixed by an actual sale.
The mining company must usually pay its men before
actually parting with its ore. It i)roceeds thus with
but little risk, since the value of the ore is sufficiently
gauged by current sales by other ore producers. In
like manner the value of the sub-products is, in each
case, determined before that of the completed product is
actually fixed by a final sale. Ore, pig iron, bar iron,
etc., are sold before the particular nails which embody

114 THE LAW OF DISTRIBUTION.

the vahie of all are placed upon the market. The value
of the nails is, in the meanwhile, sufficiently gauged by
other sales of that commodity. .

The final sale of the completed product is, in reality,
a dividing process. It is a quantitative division of the
general product of the industrial organism. That which
fixes the purchasing power of nails assigns to the nail-
producing group its quantitative proportion of the total
utilities resulting from industry. Society is here to be
regarded as the purchaser ; the sellers are the creators
of the last sub-product in the series ; and the parties in
the division effected l)y the sale are the nail-i)roducing
group, on the one hand, and all other grou})S, on the
other. The fate of the whole group is thus, in a sense,
intrusted to the creators of the last utility in the series,
who, b}^ the nature of the arrangement, must act as sell-
ing agents.

The earlier sub-producers have received their aggre-
gate share of the product by the sale of bar iron to the
nail-cutters ; the still earlier ones have obtained theirs
in the sale of pig iron, etc. Each of the earlier sales in
the series effects a division between the groups of pro-
ducers whose work has preceded the sale, and those
whose work is to follow it.

The reward of each particular producing group is de-
termined by the buying of the antecedent sub-products,
and the subsequent selling of them Avith the addition of
audtlier utility. The nail-maker buys material, trans-

THE LAW OF DISTRIBUTION. 115

forms and sells it ; and his product, quantitatively con-
sidered, is the difference in the measure of the utility
of the article, which is caused by the transformation.
He converts that value into currency by buying bars
and selling nails.

The process which divides a sub-product, quantita-
tively considered, between capitalists and laborers differs
in principle from the more general divisions, and de-
mands fuller consideration. In the meanwhile we need
to examine the mode in which demand and supply
operate, as adjusting agents, in affecting the primary
and secondary divisions. Let us, for simplicity, take
an ideal case, and make a tabular representation of the
conditions presented. Let an insular society, discon-
nected from the commercial world, be supposed to
contain a thousand wool-growers, twenty wool-buyers,
fifty manufacturers of woolen goods, and five hundred
merchant-tailors. The series may be represented as
follows : —

500 Tailors, and Employes.
50 Manufacturers, and Operatives.
20 Wool-buyers, and Assistants.
1000 Wool-growers, and Employes.

The total product of the labor of all is the clothing
of the men of the island. The society contains many
other groups, each having, as the result of its industry,
a particular product, sufficient, in quantity, for the

116 THE LAW OF DISTRIBUTION.

wants of all inliabitants. The conditions are, of course,
simplified out of all detailed resemblance to the facts of
life, and yet present, with the greater clearness, the one
great fact of actual social economy which crude think-
ing disregards, to its utter confusion, that, namely, of
certain necessary and permanent limits of competitive
action. The formal modification of the above table
which, in a completer discussion, it would be most nec-
essary to make, is that which would express the relation
of producers of the cruder materials to several groups
of producers of the finer utilities. One man may be-
long to several such groups as those in our table. A
farmer may raise corn as well as keep sheep, and may
thus be a member of the group which feeds the insular
community, as well as to that which clothes it. He
works in two capacities and receives a specific reward
in each. In like manner the wool-buyer may sell his
product to carpet-makers, as well as to makers of cloth,
and so belong, in so far as a part of his effort is con-
cerned, to a group which provides a variety of house
furnishings. The horizontal lines including classes of
sub-producers need, for a nearer resemblance to the
complex system of social iiidustiv, (o be prolonged
througli other general groups. This complication may
be studied at Avill ; it does not affect one primarily
ini|)orlant conclusion lo which a study of the simpler
gi'ou})ing would lead us, iianicly, lliiit ail true competi-
tion is between similar sub-producers. Resolving the

THE LAW OF DISTRIBUTION. 117

compkix process popularly termed competition into the
elements of which, in an earlier chapter, we have found
that it is composed, we now see that the part which is
truly competitive, the rivalry in under-selling, is con-
fined, in every case, between two adjacent horizontal
lines; while the bargaining process takes place across a
line. The fifty manufacturers compete only with each
other ; they buy across the line which separates them
from wool-dealers, and sell across that which separates
them from tailors.

The group which makes clothing for our ideal so-
ciety contains 1,570 specific producing agencies, each
having its employ<5s. Wool-growers and wool-buyers
have some hired men ; manufacturers have many, and
tailors have their necessary quota. There may be
15,000 capitalists and laborers in the general group
which produces the clothing of a hundred thousand
persons. If the groups were completely distinct, and if
the consumption of clothing were per capita^ eighty-
five per cent of the product of this group would be a
surplus.

It is a matter of course that the disposable part
of the product of this group must, in the general
exchanges of society, purchase what its members use
of the surplus products of all other groups. Our
15,000 persons get food, dwellings, furnishings, books,
etc., by selling all the clothing which they do not
use ; and every other group acts in like manner. This

118 THE LAW OF DISTRIBUTION.

is one primary fact in distribution ; but, in itself, it
fixes the price of no specific product in terms of any
other.

It will be remembered that, in the traditional eco-
nomic science, this principle that surplusses offset each
other, has been applied to international trade. With
certain allowances for debts, exports pay for imports;
and this fact is of importance as bearing on the move-
ments of currency. Yet, as affecting the distribution
of wealth, national lines are not of primary conse-
quence. With due allowance for debts and taxes,
it is true of any local division whatever that what
goes out of it pays for what comes into it. This is
true of a county, a township, or a farm ; that which
crosses the boundary of either one of these divisions in
an outward direction pays for what crosses it in an
inward direction. This fact would be worth mention-
ing if counties, townships, and farms coined money,
and troubled themselves about the balance of trade ;
in discussing the distribution of wealth, it is not worth
mentioning. The outcome of the industry of the world
is not divided among states, counties, townshi[)s, and
farms ; but among producing groups and sub-groups,
and then among the capitalists and laborers in each.

Competition follows necessarily and permanently the
lines indicated in our diagram. Tliese demarcations
are made by the nature of the functions of the groups
tlius described. These non-competing groups are

THE LAW OF DISTRIBUTION. 119

totally distinct from those discussed by Professor
Cairnes, which are based on the personal qualities of
laborers. Of these we shall speak later ; their impor-
tance in the process of distribution lies in the fact
that a laborer cannot easily transfer himself from one
class to another. In the grouping represented in our
diagram Ave take no account of person^iel. For aught
that we now know or care, men may pass from group
to group, — and from generation to generation it is
certain that the membership must change, — yet,
through all personal changes the group itself continues
a distinct thing, separated from every other by the
nature of its function.

It is true, in practice, that migration from group to
group is not altogether easy, and this fact bears, in
a manner later to be considered, on the law of wages ;
yet, while a man is in a particular group, the limits
of the competition in which he takes part are fixed
by this fact. The nail-maker of to-day can compete
only with nail-makers : and though he were able to
become a tailor to-morrow, he would, in the new posi-
tion, find equally sharp boundaries drawn about his
competitive action.

The primary field in which the rivalry in under-
selling takes j)lace is in the sale of completed products
to society; the secondary field is in the sale of the
sub-products to classes in the producing groups ; and
the ternary field is in the transactions which adjust
wages and profits within the sub-groups=

120 THE LAW OF DISTRIBUTION.

In each of these provinces of action tliero may exist
three more or less distinct conditions in respect to
competition. There may be, first, the conservative
competition in which economists of a few j^ears ago
were able to see realized a general harmony of social
interests. There may be, secondly, the fiercer contest
in which eventual success comes to a participant
through the extermination of rivals, the process well
named " cut-throat " competition. There may be,
thirdly, a combination of parties in the strife, which
jiroduces a monopoly, tempered, as we shall hereafter
see, by a certain latent competition. The first two
conditions would seem to shade into one another by
easy gradations, while the second and the third would
appear to be the antitheses of each other. The com-
petitive struggle might, seemingly, progress in fierce-
ness from a rivalry conducted on a llve-and-let-live
principle to a war of extermination ; while between
such a war and the combination which excludes all
strife there would appear to be nothing in common.
Yet the first process is the result of a distinct set of
industrial conditions, while the second and third arc
the product of another set. Easy and tolerant com-
petition is the antithesis of monopoly; the cut-throat
process is the father of it.

At the time when economic science was in })r()cess
of formulating, the functions of manufacturer and of
merchant were merged in a large number of produc-

THE LAAV or DISTRIBUTION. 121

tivc <jjroups. Tlie word " .shop," as signifying a place
for retail dealing, is, in itself, a record of a compara-
tively primitive, indnstrial system in which manu-
factures were conducted in a multitude of little shops,
whose owners often retailed their products. Large
remnants of this system exist in every European coun-
try ; but in America it is a thing of the past.

The era of manufacturing by hand for local con-
stituencies was an era of conservative competition.
Custom played here the part ascribed to it by Mr.
Mill, as a restraining agency in the struggle ; but that
custom itself had a basis in a moral sentiment, and in
the conditions of traffic which afforded t<j this moral
force a free field of action.

In retail dealing, even in our own time and country,
competition is far more conservative than in most
industrial fields ; yet the pressure in the direction of
destructive competition in this department is indefi-
nitely stronger than before the general introduction
of machiner}' into manufactures. It is only large sales
that can atone for small profits ; and the artizan retailer
of former times was debarred in two ways from secur-
ing such sales by means of a reduction in prices. He
could less easily increase his product than a modern
retailer can do ; and, secondly, though he were to
increase the amount produced, he had no assurance
of increasing the quantity which he might sell. An
increase in the product of the little shop involved

122 THE LAW OF DISTEIBUTION.

more laborers and larger capital. The spirit of the
time regarded with distrust an attempt of one dealer
to injure his rivals by selling for less than a normal
profit. The " good will " of a business was then no
misnomer, but signified the personal confidence and
kindly feeling existing between a dealer and his local
constituency. He, perhaps, lived and Avorked where
his ancestors had lived and worked before him, and
appeared to inherit a prescriptive right to his cus-
tomers' patronage.

The conservative competition in the sale of finished
products to society transmitted itself through the
industrial groups, and produced an equally tolerant
relation among rival sub-producers. The man who
sold material to the small artificer was, like his patron,
debarred from great increase in production, and from
great opportunity for large sales. Custom, based on
good will and a sense of prescriptive right, governed,
to a large extent, the sales which took place across the
horizontal lines separating one producing class from
another, and made the entire action of competition, in
its primary and secondary fields, moderate and tolerant.
The era was one of uneconomical methods of work, of
divided and localized production, of large profits and
small sales, of high prices to -society as a consumer, of
little general wealth, but of comparative equality and
contentment among the middle class in the community.

What these conditions involved for the working class

THE LAW OF DISTRIBUTION. 123

we shall later see ; in the meanwhile we need to notice
the change in the action of competition, in its primary
and secondary fields, which resulted from the introduc-
tion of machinery and the factory system. The con-
servative influences in the market for completed prod-
ucts were largely thrust aside by the changes follow-
ing the use of steam, and a revolution took place in
each of three distinct spheres, namely, in working
processes, in class relations, and in the ethics of the
market.

The first effect of the industrial change was the ex-
termination of the general class of artisan retailers.
The survivors of the guild-brethren whose shuttles
wrought all fine fabrics for our ancestors are now
crowded into a few fields where hand work is prized
for its own sake. The utility of hand-worked laces and
embroideries, as badges of social caste, still insures
their production on a limited scale. Handicraftsmen
hold, mainly under the protection of fashion, a few
other fields in precarious tenure.

The method by which the machine has, in many
cases, displaced the artisan has been by appealing to
his own interest as a retailer ; it is by offering to him,
in his capacity of shopkeeper, goods for less than they
would cost him as an artificer. The machine, the
enemy of the tradesman in one of his capacities, is his
friend in another. An illustration of this process may
still occasionally be seen. The making of harnesses is

124 THE LAW OF DISTlt IBUTION.

not ;i process in wliich I'lictory woik lias a relatively
large advantage, and the local tradesman may still
make and retail them ; yet he can usually buy them for
less than it costs him to manufacture them, and, except
where an extra price is obtainable, on the ground of
durability, he is compelled by self-interest to allow his
own work to be driven from the field.

The mere retailer is able easily to increase his pro-
duct ; and, in increasing, he cheapens it, by the prin-
ciple which accords the larger trade discount to the
larger purchaser. If he can l)ut increase his sales, he
may lower his prices, to the extent of his larger dis-
counts, without decreasing his rate of profit; but he
may also decrease his percentage of profit without
diminution of his absolute gains. Large purchases
lower the cost of goods, and large sales more than
atone for a smaller percentage of profit. Can the large
sales be secured ? Does the factory system change
the attitude of a local constituency towards a retailer?

It is the man who makes a commodity, rather than
the man who buys and sells it, who appears to a com-
munity to have a prescriptive right to patronage; and
tiie strong sentiment, of good will, which protected the
artisan in his shop does not protect the retailer, who
appears, to popular eye, to be a middle-man intercepting
the profits of others. Mere interest comes more and
more to determine where the public will buy its goods,
and this fact gives a farther impetus to competition in

THE LAW OF DISTRIBUTION. 125

the retail traffic. This transmits itself in intensiiied
form to the lower sub-groups in the series. The retailer,
under pressure of competition from men of his own
class, has no choice but to buy where he can buy the
cheapest, and competition of the most intense kind
arises at the v^ry point where, by the old system of
local manufacture, it was excluded, namely, in the
transactions between the maker and the vendor of com-
modities. Rapid centralization follows this intense
competition ; productive establishments become few,
large and ready for the next transition, that, namely,
to a regime of association and monopoly. The changes
in working methods that must follow the use of steam
were dimly foreseen by early inventors ; the ulterior
effects of it are not yet appreciated. The revolution
which was brewing in Watt's tea-kettle was threefold,
affecting the structure of society and the moral nature
of man.

Note. — There is, of course, a serious incompleteness in any dis-
cussion of Distribution which does not consider the Law of Rent.
The products of whicli we liave spoken, as divided between cai^ital-
ists and laborers, must, if the traditional theory of rent be tacitly
accepted, be regarded as consisting of what remains to the produc-
ing classes after rent has been paid. The traditional theory
enables us to take this view ; it teaches that rent is the first deduc-
tion made from the gross returns of industry, and that it is
determined, in amount, by an independent law. This is not my
real reason for omitting the discussion of it. The Ricardian Law
of Rent appears to me to require an extensive supplementing, which,
for the purposes of the present work, it is better not to attempt.

CHAPTER VIII.

WAGES AS AFFECTED BY COMBINATIONS.

Certain opponents of Mr. Henry George have
committed the strategic error of attacking his system
at an impregnable point, namely, his theory of the
origin of wages. In the third chapter of " Progress
and Poverty" he has proved that they come, not
from capital, but from products. He has, indeed,
fallen into an error greater than that which he re-
futes, in ignoring the productive action of capital.
The product of which he speaks is that of " labor "
alone ; the employer takes the whole of it, returns a
part as wages, and lives on the proceeds of a quasi-
fraud. Of capital as a joint producer, and of the
consequent claims of the man who owns and uses it,
the theory takes no due account. On the single point,
however, that products are the source from which the
laborer derives his maintenance, Mr. George's reason-
ing is as conclusive as anything in mathematics.

The Wage-Fund doctrine once prevalent maintained
that the laborer's pay comes from a portion of capital
antecedently set apart for that purpose. Some influ-
ence, the nature of which has not been clearly ana-
lyzed, has predetermined that the whole of this fund

WAGES AS AFFECTED BY COMBINATIONS. 127

sluill be used in wage puyments. If the number of
laborers be constant, the rate of wages must vary
directly as the size of the fund. If the fund be con-
stant, the rate of wages must vary inversely as the
number of laborers. The problem resolves itself into
a simple question of arithmetical division. Though
this crude form of the doctrine may be antiquated,
there are still many writers who retain so much of
it as to argue vigorously that wages are paid from a
fund of capital antecedently accumulated.

The key to the problem lies in the distinction be-
twe^ir~{U wage 'payment regarded as a value, a thing
of pure quantity, and a wage payment regarded as a
mass of concrete commodities of a kind adapted to
the laborer's use. It is one thing to determine from
what sum the amount of wealth represented by wages
is deducte'd, and quite a different thing to ascertain
how that abstract quantity comes to embody itself
in bread, meat, clothing, implements, etc. If the
laborer can get the value which he requires for his
services, he can embody it in the necessary forms by
a process of exchange. As a problem in distribution
the present inquiry is. What is the real source of the
value which rewards the laborer ?

Labor adds to the wealth of its employer. The
addition is necessary and continuous ; from the mo-
ment when the mill begins to run to the moment
when it stops, labor, assisted by capital in different

128 WAGES AS AFFECTED BY COMBINATIONS.

forms, is increasing the possessions of the man or the
company that employs it. Let the wheel of the en-
gine make a dozen revolutions ; there is an inch more
of cloth upon every loom. The employer recognizes
this addition to his assets, and would not fail to take
account of it if he were making an accurate inventory.
All through the day and the week the sum of his
wealth is growing ; and when he pays his men on
Saturday night, he takes the amount of their wages,
if pure quantity alone be considered, from the value
that has come into existence during the working days.

Let a man pump water into a full tank, and get
what he wants for use from the overflow ; does the
water for consumption come from the tank or from
the pump? In a sense from both; and if important
interests were dependent on the answer given, there
would be here an opportunity for a fierce logomachy
like that which has actually arisen over the origin of
wages. The particular drops which are used come
immediately from the tank ; but the amount in it is
undiminished, and the draught virtually comes from
the supply furnished by the ])unip. Moreover, the
size of the tank lias no influence on the amount of
the overflow ; that is gauged by the volume of the
inflowing stream. In like manner wages are taken
immediately from a reservoir of caj)ital ; but the
iiiiiount: in that reservoir is undiminished, since the
(|niintity which is drawn from it has already been

WAGES AS AFFECTED BY COMBINATIONS. 129

added to it by the stream of products resulting from
industry. It is the volume of products which sets
limits to the amount of wages.

The hydraulic figure will, perhaps, bear straining
to the extent of representing one other fact in the re-
lation of capital to wages. If the water which over-
flows from the tank be regarded as better in quality
than that which is pumped into it, if, for example, it
loses its sediment by standing, the service rendered
by the reservoir corresponds to a certain useful office
performed by capital. The quality of what the work-
man receives is of importance to him, as well as its
quantity. It needs to come to him in available forms.
" The ploughman cannot eat the furrow," says Mr.
George, though the furrow is wealth, and a share
of it is wages, in the sense in which the term is used
in Distribution. The weaver cannot eat the cloth
upon the loom, nor can he even wear it. He must
exchange it, or the employer must do so for him.
Society must take it, and return bread, clothing, etc.
This exchange demands social capital; it would be in-
teresting to inquire how much, but the inquiry would
take us into another department of economic science.
It is safe to assert, without waiting for a full demon-
stration, that society does not lack the capital that is
requisite for the purpose, and that wages are not kept
down by any lack of means of exchanging them
as the needs of the laborer may require.

130 WAGES AS AFFECTED JiY COMBINATIONS.

Wages, in the primary sense of the term, ftie the
workman's share in the value created by the industry
in which he participates. They are a quantity of
wealth, as determined by a process in Distribution.
In a secondary sense they are that abstract value as
embodied in available forms by a process in Exchange.

There is, then, a question of division at issue be-
tween the workmen and their employers. That divi-
sion may be regarded in general or in detail ; wages
as a whole and profits as a whole come from a cer-
tain aggregate sum ; the wages of particular groups
of workmen and the profits of their employers come
from distinguishable portions of that aggregate. The
reward of the working class as a whole comes from
the total value of the completed products of society;
that of particular workmen and groups of workmen
comes from the value of specific sub-products. In terms
of our diagram the amount falling to L, L', L", etc.,
taken as a whole, comes from the value of the prod-
uct, nails ; while the share of L comes from 1st Sub-
P., that of L' from 2d Sub-P., etc. The wage in a
particular case is determined, first, by the amount of
the sub-product from which it is taken, and secondly,
by the terms of the division between C and L, As-
sign fixed proportions of the sub-product to capital and
to labor respectively, and the reward of each will
vary directly as the sub-product. This would be the
case in a system of cooperation, or in one of profit-

WAGES AS AFFECTED BY COMBINATIONS. 131

sharing of a certain kind. Let the sub-product be a
constant quantity, and wages and profits will vary
according to the division between them.

The historical fact of the past three hundred and
fifty years has been that real wages have declined for
three centuries and advanced for a half-century. The
decline was not continuous; there was a rapid fall, a
partial recovery, and a second fall, leaving the work-
men, in other than specially favored countries, in
extreme wretchedness. This great decline in wages
took place during an era of generally conservative
competition; while the advance which has followed
it has been recent, and has taken place in an era
in which the money-getting spirit has overcome the
former conservative influences, and in which compe-
tition, in the fields in which it survives, has been
of an unsparing character. Both of the determining
causes above mentioned have contributed to this
result. There has been a vast increase in the quan-
tity of wealth produced ; and this fact may have suf-
ficed to increase the laborer's reward without any
enlargement of his proportionate share of the sub-
product. Whether the division is, at the present day,
taking place on terms more favorable to the laborer
than those which ruled fifty years ago is of far less
consequence than the question whether the present
principle of division is one which must yield perma-
nently better results than the old one. That real

132 WAGES AS AFFECTED BY COMBINATIONS.

wages are high this year is of little importance in
comparison with the fact that they are adjusted by a
process which promises to make them higher next
year, and still higher in the years following, a pro-
cess which offers a permanent guaranty against the
resumption of the hopeless downward tendency which,
under the former system, was regarded as " natural."

The old principle of division rendered gross injus-
tice inevitable ; the present principle makes equity
possible. A fair bargain demands either a desire for
justice on the part of the participants, or strategic
equality between them. The weak and the powerful
may deal equitably with each other if justice rather
than selfish interests be the end in view ; in the
absence of this moral force weakness must be matched
against weakness, and strength against strength. A

maximum of justice in distribution is attained where
the brute forces are evenly matched, and where moral
influences are efficient. A minimum of justice results
where brute forces are unequal, and moral forces
wanting.

The phenomenon of the long era of declining wages
was the concurrence of strategic inequality between
capitalists and laborers, with a certain disorganization
of the moral forces of society. The crude forces of
capital and labor were not as unequal as they might
have been, and moral forces were not utterly wanting.
The general ethics of the market may have been bet-

WAGES AS AFFECTED BY COMBINATIONS. 133

ter than tliosc wliicli have j)revailecL during the hist
few decades. Tlie hick in tliis direction has been of
organization. Tlie moral forces in distribution have
not been distinctively social forces, but have acted
sporadically upon individuals.

For the present we have to consider the brute
forces of distribution. The employer is, as we have
seen, the purchaser of the laborer's share of a sub-
product. In the transaction capital is necessarily a
unit. Whether the employer be an individual or a
corporation, it is as though there were but one man
wielding the force of the entire capital of a produc-
tive establishment, in the effort to secure advanta-
geous terms from the workmen. If, now, the workmen
act not collectively, but individually, if they compete
vigorously with each other for employment, they di-
vide their forces against themselves, assist the capital-
ist, and forfeit all hope of a successful issue of the
contest. The army of labor fires, as it were, into its
own ranks. The distributive phenomena of the past
have been distinctively those of unbalanced competition.

The strategic inequality in the position of capital-
ists and laborers would be at a maximum if there were
but one employer in a locality, and if employes Avere
numerous, unorganized, and unable to migrate. If,
in addition to this, the ethico-economic rule of " every
man for himself" were a recognized principle of ac-
tion, the result would be a society composed, indeed.

134 WAGES AS AFFECTED liV COMBINATIONS.

of men, but completely deliumuiiized in its organic
action. It would be a collective brute.

Such a condition was not fully realized, but was
approximated during the period of declining wages.
The degree of approximation sufficed to reduce wages
to a starvation limit. There was some competition
among employers ; their shops were small and rela-
tively numerous. There was an appreciable chance
of realizing the condition described by Cobden, by
the formula, " two bosses after one man " ; but this
chance was indefinitely more than offset by the greater
frequency and intensity of the struggles of the men
to secure employment from the "one boss."

Aside from the greater unity of action on the side
of capital, there was a source of unfairness in the dis-
tributive contest in the unequal motives of the com-
petitors on the different sides. The impulse to raise
wages never equalled the impulse to depress them.
The employers had less at stake in the struggle to
enlarge their working forces, than had the laborers
in the contest for employment. The man without
work must obtain it or starve ; the employer with
too few hands must content himself with smaller
gains than he would like to realize. The man hav-
ing to choose between something and nothing, might
soon be compelled to take half-pay. On the other
hand, employers, even in the prosperous seasons in
which they compete with each other for men, have

WAGES AS AFFECTED RY COMBINATIONS. 135

no interest in ruisiug wages to the extent of lessen-
ing their aggregate profits ; and this point is usually
reached after a relativelj^ moderate rise. Employ-
ment at half-pay might save a man from starvation;
but the payment of double wages would, in most
cases, speedily bankrupt the employer.

If these sources of inequality, even in the age of
small industries, left to the laborers nothing but a
precarious subsistence, what was to be expected from
centralization ? In each producing centre, a score of
little shops have yielded to a single great establish-
ment, and if the laborers had remained unorganized,
the competitive process would have been thrown
more hopelessly out of balance ; strife among em-
ployers to secure workmen would have been lessened,
and that among men to secure employment would
have been increased. In addition to this the spirit
of the market has undergone a change ; conservative
influences have been thrown off, and the struggle
for gain has become undisguised and intense. Under
such circumstances, the fate of the workingman, were
he acting in isolation, would indeed be sealed ; his
condition would be determined by a struggle of
brute forces, and these would stand as ten to one
against him. Yet the historical fact of the past
half-century has been that the workman's condition
Has improved. He has thriven on centralization and
an intense struggle for existence.

136

WAGKS AS AFFECTED JiY COMBINATIONS.

Of the two possible causes of higher wages both
have been in action in recent years : there has been
more to divide, and the division has been made under
more equal conditions. The influence with which
we are immediately concerned is the equalization
which has taken place in the brute forces of dis-
tribution, A more nearly balanced competition has
replaced the former one-sided process. Massed labor
has been pitted against massed cai)ital, by trades
unions, and by the more recent and general union of
the Knights of Labor, which aims — with what per-
manent result remains to be seen — to secure the
solidarity of the entire working class.

It will be seen that the twofold process of first
throwing competition out of balance and then restor-
ing its equilibrium, has had the effect of ruling a great
part of it out of existence. The equality has been
secured, not by restoring competition on the side of
capital, but by suppressing it on tlie side of labor.
As the growth of a great corporation, absorbing all
small establishments in a locality, suppresses compe-
tition among employers, the growth of a w^ell-organ-
ized trades union suppresses it among workmen. If
both processes were consummated, and one corporation
produced the entire supply of a particular article, while
a trades union controlled the entire labor force avail-
able for its production, actual competition would be at
an end, and the division of the product would be effected

WAGES AS AFFECTED BY COMBINATIONS. 137

by ;i bargaining process untempered by any of the con-
servative influences by which, in an open market,
contracts are actually made. There would be no alter-
native buyers and sellers ; the laborers would be com-
pelled to sell their share of the product to the one
corporate employer ; and that employer would be
compelled to buy the product of the trades union,
which, in a sense, is a single corporate laborer. The
adjustment, if left to be effected by crude force, would
produce disturbances too disastrous to be tolerated, and
arbitration on a compreliensive scale would be a prime
necessity.

This condition is, as yet, only approximated. The
solidarity of labor and capital is very incomplete. Cor-
porations have not become absolute monopolies in their
respective fields ; trades unions do not include all work-
men. The bargaining process between cajjital and labor
is not the blind and desperate struggle that it might be.
It is tending towards that condition, and becoming, in
a corresponding degree, dependent on arbitration.

The solidarity of labor has developed, first, in the line
of occupation, and, secondly, in a line independent of
occupation. Trades unions are old ; the organization
of the Knights of Labor is new. They represent
respectively two distinct economic conditions, of which
the one is characteristic of the past and the other of
the present. In the one condition trades are dominant
in the field of industry ; in the other they are of reduced
importance.

188 WAGES AS AFFECTED BY COMBINATIONS.

The factory system, with its differeiitiatiuii of manu-
facturing processes, has given to tlie term skilled labor
a significance quite distinct from tliat Avhieh formerly
attached to it. The difference between tlie skilled and
the unskilled workman was once largely personal. The
one had attained, by a long course of industrial educa-
tion, a mental and physical status wiiich made him, for
economic purposes, a different being from the other.
Native endowment played a large part in broadening
the line of demarcation ; men adopted trades for which
nature, hereditary or otherwise, had fitted them, and
attained a success beyond the reach of the personally
unfit. The subdivision of labor has reduced the differ-
ences between trades, by reducing the trades themselves
to a minimum. The occupation of watch-maker once
involved an ability to make an entire watch ; and the
person who could })erform this diflicult industrial func-
tion was in no danger of competition from any but the
few who, like himself, had been able to serve the needed
apprenticeship. This trade, in the full sense, no longer
exists. In its place are a score of far simpler trades,
each limited to the performance of a minute portion of
the watch-making process. The functions requiring
especial deftness and accuracy have been handed over
to machines, and the difficulty of becoming a member of
the watch-producing group has been reduced to a
minimum. Though the occupation now demands far
less of personal su})eri()rity, native and acquired, than

WAGES AS AFFECTED BY COMBINATIONS. 139

was formerly necessary, yet, on the other hand, it
develops greater actual dexterity. The little that the
artisan now does he does exceedingly well. In a sense,
therefore, nearly all the labor engaged in manufacturing
processes is highly skilled; yet but little of it requires
the personal attainments which were necessary under
the old regime.

The subdivision of trades is not equally practicable
in all departments, and some occupations still demand
skilled labor in the original sense of the term. It is
noticeable that in such occupations trades unions are
especially vigorous. No industrial development has
yet lessened tho skill and the moral quality required of
a good locomotive engineer, and the brotherhood of
men of this craft is one of the strongest of the guilds.
Building trades, type-setting, and not a few other em-
ployments, are conducted by methods so similar to
those which prevailed in the old era as to furnish a
basis for vigorous organizations within the lines drawn
by occupation.

Where, however, the subdivision of trades has pro-
ceeded to considerable lengths, the effect has been to
lessen the efficiency of the trades union for the purpose
for which it was designed. It can less easily control
the market for a particular kind of labor. The brother-
hood of locomotive engineers has a certain control of
the market for its own kind of labor, because its mem-
bership includes a large majority of those who practise

140 WAGES AS AFFECTED BY COMBINATIONS.

the craft, iiiid because the difficulty of acquiring the
art renders new men for a long time useless.

In trades which have been so subdivided that the mas-
tership of a few simple operations is all that is required
of one workman, the case is different. The members
of a craft like this stand more nearly on a plane with
the army of the unskilled. Though a union were to
embrace all who now practise such an occupation, it
would be impossible to include all who are capable of
practising it after a brief apprenticeship. It certainly
cannot include all the Chinese, Hungarians, and Ital-
ians. In most cases it by no means includes all Ameri-
cans who are now masters of the trade; and a strike,
though sustained by the entire brotherhood, cannot
com[)el an employer to make concessions, unless it can
prevent him from resorting to the reserve force of the
unemployed. For the preventing of such a resort there
are two methods: first, coercion, crude or refined, which
shall prevent men from taking the places vacated by
striking craftsmen ; and secondly, the formation of a
labor organization which shall proceed independently
of occupation, and endeavor ultimately to include the
reserve force from which, during a strike, the employer
may draw a new quota of men.

Roth of the above methods are now in operation ;
potent influences deter non-union men from accepting
work while a strike is pending ; and a strong effort is

WAGES AS AFFECTED HY COMBINATIONS. 141

making to unite all labor in a general guild. The novel
feature of the former process is the use of the boycott.
This is a mode of coercion applied to employers, not
only for the purpose of extorting direct concessions
from them, but for the purpose of indirectly coercing
the non-union men. The object for which it is most
frequentl}' used is to compel, employers to retain only
members of the guild in their service. The coercive
agency consists in the cutting off of tbe market for the
employer's products.

Were these products sold directly to the workmen, a
sufficiently extensive labor union could effectually boy-
cott the producer by simply refraining from the pur-
chase of the articles. In most cases the direct customers
for the goods do not belong to the working class, and the
boycott, in order to reach the producer, must attack the
retailers who sell his products. These are numerous,
and a boycott which passes only to the second degree
must often coerce scores of men in order to extort the
desired concession from one. Yet boycotts of the third
degree are frequent. A newspaper is coerced by com-
pelling the withdrawal of profitable advertisements ; if
the advertisers are manufacturers, they must be reached
through the retail dealers.

The ultimate weakness of the boycott, as an instru-
ment for benefiting the laborer, lies in the necessity
for thus widening the circle within which it is applied.
The disturbances created by it are out of all proportion

142 WAGES AS AFFECTED BY COMBINATIONS.

to the ends secured. In slightly benefiting a class, it
inflicts a large injury upon society. Even more than
the strike does the boycott need to be held in reserve,
with masterly strategy, and seldom actually applied.
The ultimate power to boycott, if skilfully used by the
director of a labor organization, may force many con-
cessions from employers ; the frequent application of
the force must speedily defeat its own ends. The sur-
prising degree of success which the boycotting system
in its early stages attained, is not to be anticipated
hereafter, unless it is used with consummate wisdom.
It is ruinous policy to push it beyond what may be
termed the tolerance of society.

The success of the boycott, when kept within pru-
dent limits, lies wholly in the power of federated labor
to dictate the conduct of retail dealers ; and this power
is based on competition. It is the existence of rival
dealers that is the decisive fact in the situation. The
boycott promises to benefit the dealer who submits to
it, at the cost of all who resist. The labor union ap-
])roaches the retailer not merely with a threat, but also
with a promise. If A complies with its demand while
B, C, D, and E resist, the union Avill turn to A's shop
a large part of the patronage of the other four. An
anti-boycott union among retail dealers needs to be
universal, in order to be effective ; and, in the absence
of such a complete concert of action, a merchant of
this class is interested to secure, by a prompt surrender

WAGES AS AFFECTED BY CO.MBINATIONS. 143

to the boycutters, an immunity from harm and a pos-
sible benefit. If fully organized, retailers might be
capable of valor in an encounter with labor unions ;
as unorganized, they, as a rule, strive only to outdo
each other in discretion.

Even when the ends for which it is used are eco-
nomic, the boycott, as an instrument, is extra-economic
and definitely illegal. Narrow policy on the part of
laborers demands an exceedingly limited use of it;
broad policy dictates a line of conduct identical with
that demanded by morality, and that is the total sup-
pression of the practice. From this time onward the
success of labor unions depends on the strength of their
moral position ; and it is indefinitely better for them
to voluntarily relinquish an illegal practice than to be
forced to do so by officers of the law.

Rapidly as organizations of workmen have lately
grown, the solidarity of capital is, thus far, greater than
that of labor. Eight men have been said to control the
production of anthracite coal, and combinations of
similar character control that of lumber, glass, nails,
gunpowder, rope, cutlery, and a hundred other staple
articles. In the language of our formulas, the non-com-
peting groups are solidifying into great corporations;
and as competition between the producers of dissimilar
sub-products is impossible by nature, that between the
makers and vendors of the same sub-product is being
suppressed by art. Nail-makers cannot compete with

144 WAGES AS AFFECTED BY COMBINATIONS.

clotli-makers, and they do not compete with each
other.

The object of these combinations is to control the
prices of products. They operate in what we have
termed the primary and secondary fields of distribution,
while labor unions operate in tlie ternary. Employers
combine against the public, and workmen against em-
ployers. The associations of capitalists are able to act
directly against striking and boycotting workmen, and
are, indeed, beginning to do so. This is, however, a
new field for their action ; and even in their original
field their operation reacts in two waj^s upon real
wages.

The raising of the price of a commodity produced by
a confederation of employers is possible only by curtail-
ing production. If the price is raised while production
is unrestrained, goods accumulate till forced sales are
necessary, and the combination is broken.

It is for the interest of every group that its produc-
tion of commodities should be small, and that of other
groups large. In that case the terms of exchange
between the one group and the others will be favorable
to this particular group. By making less nails one par-
ticular class of producers secure for themselves more
food, clothing, etc. Of course this is at the cost of the
other groups, and wlicii they retaliate by a curtailment
of their own production, the gain of the nail-makers
is more than neutralized, and ucw injuries are inllicted

WAGES AS AFFECTED P.Y (COMBINATIONS. 145

on all. lender free competition the production of each
commodity tends towards a normal quantitative limit,
at which point labor is, with allowance for certain vari-
ations, as wdll rewarded in that industry as in others.
If a single industrial group were to curtail its produc-
tion beyond the normal limit, it might gain, but society
would suffer ; while the outcome of a general artificial
curtailment would be a general social injury.

The gain which conies to a particular group by a
lessening of its production accrues mainly to em-
ployers; the injury which it suffers from a similar
action on the part of other groups falls largely on the
men. If nail-producers can so limit their output as to
secure a price higher by a half than the one formerly
prevailing, they can retain most of the gain for them-
selves. Wages in this single industry cannot be greatly
raised independently of the general labor market, A
demand made at the moment when the price of nails
rises may give to the workmen a portion of the gain
realized by their producing group; but the gain cannot
raise these workmen far above the level of others, while
the increase of the employer's profits may be much
greater.

On the other hand, the workmen suffer most from the
injury which is entailed upon society by artificial re-
"strictions upon production. They are preeminently
consumers. They compose a large numerical propor-
tion of society ; they consume the largest [)ortion

146 ^\'AGES AS AFFECTED HY COMBINATIONS.

of their incoines, and they spend it largely for things
which they cannot forego \yithout privation. For these
three reasons they are specially sensitive to the injury
resulting from enhanced prices of articles of ordinary
consumption.

There is a second wa}^ in which employers" combina-
tions react detrimentally upon wages. A curtailment
of the production of a particular commodity means a
lessened demand for labor within the group wliich
produces it. A struggle between the groups to outdo
each other in limiting production would mean, to the
laborers, an effort on the part of each group to thrust
laboring men into other groujis. As the attempt
becomes general, the result is a thrusting of laborers
either into the reserve force of the unemployed, or into
the one department in which employers' combinations
are impossible, namely, agriculture. The power of
agricultural industry to absorb the working force ex-
cluded from other fields is becoming limited, and the
army of the unemployed must receive an increasing
proportion of them. The reaction of this fact upon the
reward of labor is direct and resistless ; no combination
of workmen can undo the depressing effect upon their
own wages of the presence of a large force of idle men.
Ui)on the men thrown out of employment the effect of
curtailed production is obvious ; it is equally so upon
society. It means pauperism, crime, embittered con-
tests, and an added stiain upon republicanism.

WA(JES AS AFFECTED BY COMBINATIONS. 147

Altliough it was not the original object of employers'
unions to directly oppose trades unions, the present
tendency of labor movements is to make it morally
certain that they will be used for that purpose. This
wholesale suppression of competition will bring society
to a point from which the only outcome consistent with
peace will be arbitration under governmental authority.
Rapid progress in this direction is the great economic
fact of the present day. Competition still exists and,
within certain fields, is active. There is competitive
action among merchants, among railroads not in a pool,
among manufacturers not in a combination, and among
workmen outside of a union. Moreover, the latent
possibility of competition among the members of a
combination is an economic fact of vast importance to
society. Yet the fact remains that, in the field where
its work is the most imj)ortant, in the division of the
products of industry between groups, sub-groups and
classes, competition of the individualistic type is rapidly
passing out of existence. The principle which is at the
basis of Ricardian economics is ceasing to have any
general application to the system under which we live.

The problem of the future is the extent to which
movements now in progress will actually go. In their
possible scope they are highly revolutionary. Solidarity
carried to its logical consummation would create a
social condition so utterly uidike the present one that

148 WAGES AS AFFECTED BY CO-MI5INATIONS.

it could liaidly be established without violent overturn'
ings.

The immediate subject for economic study is the con-
dition to which the movement lias already brought us.
The present state of industrial society is transitional
and chaotic. The consolidation of labor is incomplete,
that of capital is so ; and the relation between the two
is not what it was yesterday, nor what it will be
to-morrow. Yet something may be said of social con-
ditions existing in the interim between the old and the
new. The crudeness of the transitional system has
begotten lawlessness. Labor is employing irregular
methods in the contest with capital ; capital is using
injurious methods in its dealings with society. Indi-
vidual competition, the great regulator of the former
era, has, in important fields, practically disappeared.
It ought to disappear ; it was, in its latter days, inca-
pable of working justice. The alternative regulator
is moral force, and this is already in action. It is
accomplishing much, though it is in the infancy of its
distinctively social development. The system of indi-
vidualistic competition was a tolerated and regulated
reign of force ; solidarity, even in its present crude
state, presents the begiuuiugs of a reign of law.

CHAPTER IX.

THE ETHICS OF TRADE.

A WORKING MAN, wlio is well versed in political econ-
omy, once told me that the reading of Ricardo had con-
vinced him tliat there is no hope for the laboring class
under the existing system of industry. Competition, as
he was compelled to think, must sooner or later reduce
workmen to the starvation limit, and keep them there.
In times of exceptional distress, it must drive them be-
low that limit, and only restore them to it through the
lessening of their number by actual death. His hopes
for the future of his class were founded on a change in
the industrial system, which should substitute coopera-
tion for competition.

This man is representative ; his premises are those of
Ricardo and his school, and his conclusions are those to
which many readers are forced.* This fact explains the
popularity of othodox economic literature among de-
clared socialists. It prepares the soil for revolutionary
seed. A demonstration of the hopelessness of the old
economic system is, to a man who retains his natural
optimism, equivalent to a proof that a new system is
coming. The new era has, in fact, begun, but it has
not brought socialism.

* Ricardo's own conclusion was different; his "natural price of labor"
was not literally a starvation rate.

150 THE ETHICS OF TRADE.

The weakness of llicardiauism is known to lie in its
premises ; these are sweeping assumptions at variance
with the facts of life. It may now be seen that the
fundamental principle of this scientific system, that of
free individual competition, is not permanent, and that
the industrial regime to which the old science was in-
tended to apply is self-terminating. There is a promise
of an industrial revolution in the very laws of Ricar-
dianism.

The purely competitive system of industry has had
its youth, its manhood and its decrepitude. It has de-
veloped, first, a conservative rivalry, then a sharp and
destructive contest, and, finally, a movement toward
consolidation and monopoly. The final stage has but
lately been reached, and the system of distribution
which characterizes it is, as yet, imperfectly developed.

Moral force as an economic agent is the characteristic
of the new regime. This agent is new only in the field
of its operation and in the extent of its work. In itself
it is an old and ultra-orthodox economic force. It is a
radical error which represents competition itself as the
outworking of unmixed selfishness. There is an ele-
ment of morality in it ; it is a restrained and qualified
strife, and owes such continuance as it has had to the
forces tliat have held it within bounds. An unrestricted
struggle for wealth is impossible in any collection of
men that can be termed a society ; it has never existed,
in fact, since the time of Adam. It would be a savage

THE ETHICS OF TRADE. 151

and ignoble strife, in which every man's hand would be
against his neighbor. Deprive a pack of wolves of the
tribal instinct that keeps them from rending each other,
and place a single carcass before them, and their con-
duct may illustrate the economic system which would
result from the unrestrained action of selfish motives
among men.

Competition without moral restraints is a monster as
completely antiquated as the saurians of which the geol-
ogists tell us. To find anything approaching it in actual
life we must go farther back than history reaches, be-
yond the lake-dwellers of Switzerland and the cliff
villagers of neolithic times, quite to the isolated troglo-
dyte, the companion of the cave bear. Even here the
illustration will be incomplete ; for the troglodyte had a
family, and, within the precinct of his home, was ruled by
higher motives. The intercourse of this rudest of men
with others of his kind may, however, be conceded,
safely enough, in the absence of evidence to the con-
trary, to have been dictated by the lowest of motives,
and to have tolerably well illustrated the process of
unrestrained competition. The supposition may be a
slander on the troglodyte ; but as he is now past hear-
ing of it, and is not present with his club to avenge it,
we may admit the supposition that the intercourse of
the isolated cave-dwellers with each other presented an
illustration of competitive strife unqualified by moral
forces. Two wild huntsmen pursuing the same animal,

152 THE ETHICS OF TRADE.

and then clubbing and tearing eacli other for the posses-
sion of its body, may illustrate the process.

Though such may have been the conduct of cave-
dwellers toward each other outside of the family circle,
it is certain that, within that circle, the passions else-
where predominant were restrained by sentiments of
affection ; and in this we have the germ of a series of
most important phenomena. In this case love toward
relatives and enmity toward neighbors are the ruling
motives. The differing motives dictate opposite lines
of conduct. Reflection serves to define and formulate
the two opposite modes of action ; that which is cus-
tomary in the treatment of relatives and that which is
characteristic in the treatment of enemies come to be
understood and recognized, and a rude code of rules is
formed for the guidance of numbers of the favored
circle in their treatment of each other. Gradually,
from the depths of a nascent faculty of reason, a deeper
intuition than any yet experienced comes to lay its
sanction on the code which family affection and custom
have established. In the vivid picture-language of
Genesis, the fruit of " the tree of knowledge of good and
evil " is })lucked. A rude perception of right and wrong
is attained. The glimmering light of a moral principle
that is to direct the development of the race makes
itself for the first time perceptible, and the troglodyte
is no longer as an animal, innocent because ignorant,
but "as a god, knowing good and evil." Such is,

THE ETHICS OF TRADE. 153

perhaps, tlie teaching of Genesis and the guess of
science concerning the origin of moral influences in
human society.

The code of right and wrong is, at first, confined to
the family ; but in time sufficiently close intercourse is
established between neighboring families to develop
common ideas of right and wrong in matters pertaining
to a larger circle, and the moral code extends itself to
the neighborhood. Neighborhoods unite into tribes,
and the process repeats itself. In time the final step
is taken ; the moral code receives the sanction of a
legal enactment, with penalties for violation, and is
thus enabled to exert its greatest influence. The
competitive system has now received definite limita-
tions within the circle where the ethical influences are
exerted.

The growth of these influences, in both an extensive
and an intensive way, is a matter of history. They
have grown extensively as tribes have united into
nations, and as nations, by the development of inter-
national law, have taken on the rudimentary form of
what promises to be a world state, an organic unity
bounded by no narrower limits than those of the globe
we inhabit. There is no quarter of the world, at
present, unreached by ethical influences, and none,
consequently, where the competitive impulse is not
subject to some limitations.

Intensively these moral forces have grown with general

154 THE ETHICS OF TKADE.

civilization, acquiring, williin a given local circle, a
constantly increasing power, and restricting the wealth-
getting process more and more. The crude competi-
tion which spared neither life nor limb gave place to
a method which respected the lives of the contestants ;
murder, as an economic process, was prohibited, while
robbery was still tolerated. Human bodies were first
excluded from the list of articles to be competed for.
It was a sort of legal exemption, the first and most
beneficent of homestead laws. The dwelling which
the soul of man inhabits might not be seized by his
creditors and the occupant ejected.

A farther moral development extended the protec-
tion of the law to outward possessions, suppressing first
open robbery, and then obvious fraud, and extending
its influence ultimately to those refined forms of coer-
cion and deceit of which a large survival remains to
be dealt with.

From the time when the institution of property was
put u})()n a moral basis the nature of the competitive pro-
cess changed. In the primitive state it was a struggle to
secure a de facto possession ; in the civilized state it is
a struggle to secure lawful possession. This is possible
only by creating something of value, or by receiving it
from a previous owner by a voluntary cession. Useful
articles are not relinquished without an inducement;
and here is the basis of the system of exchanges which
is the distinctive j)henomenon of civilized society.

THE ETHICS OF TRADE. 155

Those who desire an article of value must seek to
outdo each other in offering to its possessor induce-
ments to part with it. Rivalry in giving is, therefore,
the essence of legitimate competition. It is the func-
tion of moral influences to see to it that the process
retains this character ; it is, in fact, constantly losing
it, and lajising into the cruder state. The refinements
of force and fraud which are beyond the reach of
statute law, are still used in securing de facto posses-
sion without moral right. Competition, in the new era,
is indeed debarred from certain extensive fields ; but
in others it survives, and it is of vital importance that
its methods be made legitimate.

Sir Henry Maine has shown that the family system,
which excluded competition entirely, extended itself
to the village community, which was the germ of
the modern state. Within the village all relations
were fraternal, and property was held largely in com-
mon ; while on the mark, or boundary, the germ of the
modern market, the relations were somewhat hostile.
It was on the mark that members of different com-
munities met to buy and sell. Here they were free
from the moral influences which existed among mem-
bers of the same community, and mercantile processes
were, therefore, relatively unrestrained. Here there
was " higgling," the contention between buyers and
sellers ; thouc^h there was but little of that true com-

156 THE ETHICS OF TRADE.

petition, the rivalry in giving, which is the character-
istic of modern trade.

The highly developed family code acquired its
greatest held of action in the mediaeval village.
The local circle within which mercantile action is
excluded has been reduced to a zero ; but, in com-
pensation, much of the humanity which characterized
tlie dealings of villagers with each other has extended
itself to all members of society in their non-mercantile
relations. The mark, as such, is now extinct ; and,
in western countries, the village community is so.
Modern society consists of a fusion of the two, and
bears the stamp of each of the elements that com-
pose it. In some of its activities the modern com-
munity resembles the mark ; in others it resembles
the village. This dualism is most aj)parent and most
harmful in the domain of practical morals.

The tribal conscience formerly developed fine sensi-
bilities ; the inter-tribal conscience was cruder, and
tolerated mercantile contention and the recognized
'*• tricks of trade." The man of the present day is
actuated, now by one influence, and now b}' the
other, and has two distinct codes of outward conduct.
Moral philosophy, indeed, teaches that his fundamental
character is one and unchanging; but as there is one
code of practical conduct ft)r peace and another for
war, so there is one code for the family, the social
circle, and the church, and a different one for mercan-

THE ETHICS OF TRADE. 157

tile life. The man of business is constantly passing
from the jurisdiction of the one code to that of the
other. Even the laws of war are improving, with the
general growth of moral iniiuences ; and the quasi-
martial laws of trade are subject to similar improve-
ment. Progress in this respect is not uniform ; there
are periods when it is checked by the action of sharp
competition. From such a period we are now emerg-
ing, and a reformation of the morals of trade affords
the chief hope of a better industrial condition.

It is a common remark, that business practices are
not what they should be, and that a sensitive con-
science must be left at home when its possessor goes
to the office or the shop. We helplessly deprecate this
fact ; we lament the forms of business depravity that
come to our notice, but attack them with little
confidence. We are appalled by the great fact of
the moral dualism in which we live, and are inclined
to resign ourselves to the necessity of a twofold life.
We do not realize that moral influences have for
their particular and legitimate function to suppress
the remnants of natural ferocity which show them-
selves in the economic dealings of man with man ;
neither do we realize how radical would be the effect
of a comparatively slight reformation in this direction.
Religion has held itself too much aloof from this
particular work ; and so effectual has been, at times,
the separation of religions life from business life that

158 THE ETHICS OF TRADE.

seeming piety lias, iu too many cases, been consistent
with business meanness. Sucli is the bitter moral
fruit of the competitive system.

It was the effort of mediicval times to secure, by
public sentiment and by positive statutes, a reign of
just prices in all commercial dealings. This precluded,
to a great extent, the effort of rival sellers of com-
modities to secure custom for themselves by offering
their products for less than the established rates. Simi-
lar causes repressed competition in the labor market.
Yet it is not true that the competitive principle was
not then in action. In legislating to enforce just
prices, the law-makers had a criterion for determining
what was just. Custom, in the main, furnished this
criterion, and this was itself determined by a certain
latent and unconscious process of competition. If the
rule of just prices were to be introduced at present,
and open rivalry in buying and selling suppressed,
there would still be need of the criterion of justice,
and the latent competition would again have its work
to do. The ethico-economic fact of the medituval
period, and, let us liope, of the coming period, is the
recognilion of the duty of all to conform to the
standard of justice thus established.

From the media3val stage competition has developed
through two distinct conditions. The former of these
is that in which law of just prices still rules in trans-
actions outside of the general market, but in which

THE ETHICS OF TRADE. 159

the attempt to control the market itself by moral or
statutory regulations is abandoned. Within the
theatre of general exchanges the standard is set by
the undisguised efforts of many persons to outdo
each other in offering products to society as the
general consumer. Turn the market into a general
auction ; let sellers do their best in underbidding
each other in price, which is overbidding in service
rendered; note the results in the prices current, and
then abide by them in separate individual dealings ;
such is the mercantile code in the second stage of
development.

This code is imperfectly obeyed ; and, as violations
of it become frequent, they react on the ethical rule
itself. The third stage of competitive development is
characterized by the gradual abandonment of the rule
which requires that the individual should, in isolated
transactions, conform to market standards. The new
practice allows a man to get what he can by trade,
under any and all circumstances. The system becomes
as undisguisedly predatory as one can be without
violating the rights of property in actual possession.
The man who buys for less than the market price or
sells for more is held to have done a creditable
action.

The theory of the modern bargain appears to be
that of the mediaeval judicial combat : let each do his
worst, and God will protect the right. As in

160 THE ETHICS OF TllADE.

medicTval times providence has often protected the
wrong, and, by this means, revealed the abominations
of the system. There is a standard which determines
the justice or injustice of bargains ; and though the
'■'• higghng of the market " in which competition is
general secures a rude conformity to that standard,
that which takes place between a buyer and a seller
isolated from competitors stands in no relation to
it. Here is a chief seat of business depravity. The
Scriptures are full of references to unjust bargaining;
ancient law-givers attacked it; the codes of the mid-
dle ages endeavored to suppress it, but moralists of
recent years have sighed and resigned themselves to
wait a geological era foi* moral influences to become
strong enough to uproot the evil. It has been
entrenched in the competitive system ; with recent
changes in that system it has become open to
attack. If there is an intelligible law determining
the moral quality of business dealings, it is time that
it were universally taught and a just standard
enforced.

Wealth is legitimately acquired by the operation of
production, not by that of exchange. We have already
endeavored to draw the line where production termi-
nates. An exchange made at rates current in an open
market makes neither party richer ; it is mutually ad-
vantageous and morally commendable. A bargain
which ciiriclies one party at the expense <>f the other

THE ETHICS OF TKADE. 161

must deviate, in its terms, from current standards.
Money-making by exchange is virtual robbery, and is
only 2)revented from being legal robbery by the imper-
fection of the law.

Intelligent persons do not need to be told that deal-
ing in commodities as the merchant deals in them is an
operation which falls, scientifically, under tlie head of
production. The merchant creates form utility, place
utility, and time utility; and his reward is as legitimate
as that of any otlier producer. He has numerous op-
portunities for passing beyond his normal function, and
acquiring wealth by exchange ; but this is always by
unfair dealing. If he buys in gross, sells in detail, and
gives honest goods for an honest price, he is as much a
producer as a farmer or an artisan.

It is the shrewd trading men who create no wealth,
but deal in stocks, produce, real estate, horses, etc., in
a manner that benefits no one but themselves, that
furnish the best illustrations of money-making by the
operation of exchange. Market prices are nothing to
such men ; it is their aim to get more value than they
give, both in buying and in selling. As this is not easy
when the parties with whom they deal are aware of the
value of the property to be transferred, it comes to pass
that lying is a frequent part of the process. The mer-
cantile lie is the chief modern instrument for getting
wealth without creating it. The falsehood had better
not be, in most cases, bald and obvious ; it would then

162 THE ETHICS OF TRADE.

be a crude instrument ill adapted to modern uses. It
needs to be a refined product, adapted to the system
of which it is a part.

What is ordinarily termed a good bargain is, morally,
a bad bargain. It is unequal, and good for one party
only. Whenever such a transaction takes place, some
one is plundered. We should term a purchase or a
sale good only when it conforms to the standard of
equity ; we actually call it so when it departs from that
standard, and we gauge its goodness by the amount of
the departure. It is the sufferer by such a transaction
who usually regrets it; in an ideal society it would
be the gainer who would mourn. Sackcloth and
ashes are the proper covering of the man who has made
a good bargain. What is the fact in the case ? Do the
men who have gained something by this (questionable
means don the garments of humiliation ? Do they feel
shame, or complacency? Are they disposed to conceal
their action, or to boast of it? Are they, in fact, treated
with less honor by other men, or with more? The
whole process is bad; it is odious, and the worst fea-
ture of it is that it is characteristically American.

The sharp bargaining spirit which seeks to get
wealth away from its possessors by all methods toler-
ated by law, is characteristic of the degenerate days
of the competitive system. Moral influence is more
powerful and ])ervasive in America than in most
countries; and if public sentiment among us renders

THE ETHICS OF TRADE. 163

sharp trading respectable, it is due to the fact that
competition has degenerated earlier here than else-
where.

The man who, in Germany, France, or England,
should go from shop to shop to find whose prices were
the lowest would be, if not turned out of doors, at
least treated in such a manner that he would go, and
not return. A certain survival of the medieval code,
the tradition of a time when the just price was the
legal rule, has prevented the men of these countries
from living up to the logic of the competitive system
in its final stage. In America we are more consis-
tent; we accept the results of a degenerate compe-
tition, greatly to the detriment of our morality.
Trade is actually held in greater honor here than else-
where, and it deserves to be held in less ; a part of
our respect for it is due to our peculiar blindness to
its defects. Let us withhold our respect until it is
due, and, that we may justly honor trade, let us make
it honorable.

A perfect ideal of character and conduct usually
serves the purpose rather of a beacon than of a goal.
Like the star toward which the sailor steers, it is a
thing never to be reached, but only distantly ap-
proached. Yet the pilot who depends on a star for
direction is in peril of life if he loses sight of it ; and
something similar to this is true of a society which
loses from view its moral ideal. No fog ever baffled

1G4 THE ETHICS OF TRADE.

a sailor more completely than the dual code of moral-
ity, the outgrowth of a degenerate mercantile system,
has blinded and balHed the people of this country.
The true standard of business dealing has been hid ;
it needs to be brought to the light and placed where
all may see it. Thougii it were never reached, it
would make all the difference between success and
failure, if our course could be turned toward it instead
of from it.

The changes now in progress make it possible to do
more than to gaze at the moral ideal of trade from a
hopeless distance, or even to somewhat lessen the
gulf that separates us from it. Moral force is to
work, hereafter, from a new vantage-ground. There
is, moreover, among the multitude of those whose
occupations are wholly legitimate, and whose con-
sciences are not blinded by the false mercantile code
that has begun to prevail among us, a moral energy
amply adequate to accomplish the reformation of our
business system, could the true principles of practical
ethics be generally taught and accepted.

One form of business immorality is very radical in
its effects, and the removal of it would be more than
a palliative for existing social evils ; it would be, to a
great extent, curative. The evil is the most savage
form of competitive action tolerated by law. Much
of our bargaining is a refinement of fraud : this is a
refinement of highway robbery. It is a survival of

THE ETHICS OF TRADE. 165

troglodyte economy, though its inetjiods are adapted
to the civiHzed state. The aim of the practice is to
get property by force from weak possessors. The
weapon used is not the club of the cave-dweller; it
is unnecessary to kill the victim ; it is only necessary
to pi-esent to him an alternative so hard as to compel
him to relinquish his possessions. The matching of
strength against weakness is contrary to fighting codes ;
equal armor and equal weapons were the rule of
knighthood. The mercantile code permits any amount
of inequality of outfit. We need a revival of the old
German sense of honor ; and especially and particu-
larly do we need a little of that chivalrous spirit
which protected women and children in mediaeval
times. It is one of the enigmas of modern life that
the literal striking of a woman, however lightly, should
brand the offender as a social outcast, while, in an
economic way, the deadliest blows may be struck at
her with impunity ; and that society even honors men
who get rich by such unknightly attacks on the de-
fenceless. The modern sense of personal honor is,
like the modern standard of morality, dualistic.

Special exigencies often render particular persons
unable to bargain on equal terms with those with
whom they are dealing. They may be compelled to
sell something immediately, and the urgency of the
case may allow no time to seek more than one pur-
chaser. They are, for the time being, excluded from

166 THE ETHICS OF TRADE.

any general market. In this case, as in most cases,
freedom iin(j[ualitied bj law is not freedom, but li-
cense. The commercial code which authorizes a trader
to dejjart from the standards furnished by the gen-
eral market gives him, as it were, letters of marque,
authorizing him to prey upon the weak at will.

A borrower, in special exigencies, is often at the
mercy of a single lender. A merchant who is in any
danger of failing in business is often compelled to
accept the offer of a single customer. A land-owner
who cannot pay his mortgages is often compelled to
accept what a single purchaser may choose to offer ;
and men are numerous enough whose business it is
to create and to utilize such exigencies. The actual
creation of the exigencies is most frequently the busi-
ness of the operator in the stock exchange or the pro-
duce exchange ; but the utilizing of them is common
enough everywhere. It is the baldest of robbery, and
is all the worse because the law cannot reach it effec-
tively. The result of recent movements is to lessen
the field for it, and, with public sentiment acting in
the right direction, we may hope for the correction
of the evil.

In other than financial exigencies the true princi-
ple is clearly enough recognized. A boatman does
not stop to make terms with a man in the water be-
fore taking him on board. A ship's captain does not
settle the question of salvage before taking the crew

THE ETHICS OF TRADE. 167

from a wreck. They render the service without ques-
tion, and collect the equitable reward afterwards.
Society demands the prompt rendering of the service ;
the refusal to render it is a crime, and the making of
conditions is a temporary refusal. The boatman who
bargains with a sinking man, virtually says to him, " I
now refuse to rescue you, but will change my mind if
you will give me a certain sum. My refusal to rescue
you is equivalent to drowning you, and I shall drown
you unless you give me some something to which I
have no equitable claim." It is the position of the
highwayman ; and the same is true of those who utilize
financial exigencies in the same way. Financial
drowning brings ruin to families, and is sometimes as
much worse, in its effects, than literal drowning, as
the slow starvation of many persons, or their intellec-
tual and moral ruin, is worse than the quick death
of one person. The moral and legal principle is the
same in both cases, and should be equally recognized
and obeyed.

It is too much to expect that persons whose nature
prompts them to a predatory commercial life will change
their practices while the field continues open for them.
The hope for a radical change in this department
of business ethics lies partly in the fact that the
field is no longer clear for the worst practices which
the competitive system has developed. Where a
mercantile freebooter gains an advantage by the

168 THE ETHICS OF TRADE.

methods above described, his rivals feel compelled
to adopt them, against the protest of their moral
nature, and competition tends to level the mercantile
community downward to the moral standard which
proves most profitable. It is a very ordinary honestv
which is the best policy, in a time of unscrupulous
competition.

The chief bearing of these principles is upon tlie
labor questions of the day. Workmen have hereto-
fore been the most frequent victims of predatory
competition. Large numbers of them have been practi-
cally confined to one employer, as a customer for that
which they have had to sell. Their exigency has often
been extreme, and their relations to each other such
that, when cases of extreme need have occurred, the
effect has been diffused over the entire number.
Not only the few whose necessities have compelled
them to accept whatever was offered, but the entire
class which they rejjresent, have been liable, at such
times, to have their wages lowered. It is, as a rule,
by means of a few exceptional cases that the extreme
results of unbalanced competition are sujffered by the
laboring class ; and it takes place by a process of
rotation, in which, at every step, advantage is taken
by some one of isolated cases of distress.

A few persons are at first crowded out of employ-
ment ; a brief period suffices to reduce these to a
condition where they must accept anything which

THE ETHICS OF TRADE, 169

may be offered for their labor. If some one who is
on the watch for such opportunities now offers them
half the prevailing rate, and they accept it, the effect
may be to displace others, and to reduce them also,
by the hunger argument, to a willingness to accept a
similar reduction. The process may be repeated
indefinitely, until, in the end, general wages are
correspondingly reduced. The many benevolent em-
ployers who engage in the procedure with reluctance
are driven to it by the competition of others. A few
men without employment, and a few employers with-
out souls, are the conditions of a general reduction
of wages below the point to which more legitimate
causes would reduce them. Unemployed men and
soulless employers always exist somewhere. It was
stated, in the interest of railroad managers, at the
time of the general strike of 1877, that the places
of the strikers could all have been filled, at the
reduced rate which was then offered ; and it was on
this supposition that much denunciation was expended
on the leaders of the movement. On general prin-
ciples the statement is very improbable. The vacan-
cies could have been filled, had they occurred a few
at a time, by the process of rotation above described ;
but, after the changes had taken place, it would have
been, to a great extent, the same men who would
have been found in the positions. A few at a time

170 THK KTHICS OF TRADE.

they would liave left their employment, suffered for
a Avhile, and returned to their work.

This rapid rotation, whereby large classes are
reduced to a rate of wages lower than that at
which they can permanently live, lower than any to
which legitimate causes would need to reduce them,
is the only means whereby, in a country like ours,
the extreme results of Ricardo's principle can be
realized. It has never, in our actual experience,
been realized. We have seen wave after wave of
competition, sharper than that which exists in other
countries, sweep over the industrial classes, begin-
ning with retail dealers, and extending itself to
wholesale dealers and manufacturers, until it has
reached the laboring class, and spent its accumulated
strength upon them. Yet wages have rebounded,
after each depression, to a level above that which
is maintained in conservative countries. The cause
is obvious, — our vacant lands. Competition cannot
starve men while free farms arc waiting for them.
Yet thoughtful men must have realized that the reward
of labor in this country has not been as much above
that which has elsewhere prevailed as our resources
would have warranted. Something must, in a meas-
ure, have neutralized our advantages ; and, while
causes like an excessive tariff will occur to every
one, a part of the effect must be attributed to the
sharply competitive spirit of our people. Labor-

THE ETHICS OF TRADE. 171

unions have been late in developing, and unbalanced
competition, under a low code of commercial ethics,
has produced its natural effects.

Free homesteads of good quality are no longer to
be had ; and this fact radically changes the industrial
situation. It lessens the product to be divided be-
tween employers and workmen, and it modifies the
terms of the division. We must depend on new
influences, in both • directions, in the era which is
coming. If the product of industry is materially
lessened, no readjustment of the terms of division
between labor and capital can make good the work-
man's loss. The influence tending to make industry
productive we shall later examine ; that which favor-
ably affects the terms of distribution is not merely
the coijsolidation of labor, but that movement followed
by the moral development for which it opens the way.
The solidarity of labor calls imperatively for arbitration,
in the adjustment of its claims, and accustoms the public
mind to accept a standard of wages determined by jus-
tice rather than force. Within broad limits it puts a
definite stop to the predatory methods which com-
petition has developed. Soulless employers can no
longer use a few unemployed men as a lever with
which to reduce the wages of an entire class. The
process of rotation, by which this has been possible,
is precluded by the establishment of strong trades-
unions. The pecuniary effect of this change is of im-

172 THE ETHICS OF TRADE.

portance to laborers ; the moral reaction which it
, occasions is of incalculable value to employers. Their
better impulses may now assert themselves. The
emploj'er who has long been willing to pay fair
wages, but has been unable to do so because of his
neighbor's competition, is relieved from his dilemma.
The necessity which compelled him to stifle his con-
science is changed to a coercion forcing him to obey
it ; and while right conduct under compulsion may
not redeem him in the eyes of the moralist, it removes
a blight from his business life, and makes a truly moral
development possible. To society as a whole the
changes incident to the altered relations of employers
and workmen involve a change of organic character.
The present interval is morally transitional. The
relaxing of healthy restraints, the growth of mercan-
tile license, has characterized the period now closing.
Trade has become openly predatory, and the weak
have been the victims. The field for such i)ractices
has been partly closed, but the code which jus-
tified them has not been abandoned. We are in dan-
o-er of importing into the new era the ethics of the
old. It would be the anomaly of old wine in new
bottles, the spirit of a decayed system surviving after
its forms had been renewed. With the growth of new
processes of distribution, with arbitration and the
various forms of industrial partnership, a better ethical
code must assert itself. Justice in the division of

THE ETirrCS OF TRADE, 173

products, ecj^uality in exchanges, must become the aim
of social effort. The gain will ])e both material and
moral ; the chanofe which makes workmen richer will
make all classes better ; and what is of more impor-
tance, it will open the way for continued progress.
Wages may sometimes be low, but not because of
an eternal downward tendency ; and the death-line
as a natural limit will forever disappear. The
law which condemned society, as an organic whole,
to a career of brutality will be changed to a law
which will open before it a continuous growth in
righteousness.

Note. — The foregoing theory of business ethics does not condemn
speculation as such. To buy articles when they are cheap with a
view to selling tliem when tliey are dearer, is to acquire wealth by
accretions of time utility, as indicated in Chapter II. The theory
condemns the manipulating of temporary prices by virtual force or
fraud ; but the form of immorality to which it refers as characteristic
of a degenerate system is that which appears in the dealings of one
individual with another, and which consists in using refinements of
force or fraud in such a manner as to effect unequal exchanges. The
standard of equity in the purchase and sale of commodities is deter-
mined by the normal action of demand and supply in an open market.

CHAPTER X.

THE PRINCIPLE OF COOPERATION.

History has lately been said to move in cycles and
epicycles ; its phenomena tend to recur at intervals, in
regular succession. An anarchic condition may be fol-
lowed by despotism, that by democracy, and that again
by anarchy; yet the second anarchy is not like the first;
and when it, in turn, yields to despotism, that also is
different from the former despotism. The course of
history has been in a circle, but it is a circle whose
centre is moving. The same phenomena may recur
indefinitely ; but at each recurrence the whole course of
events will have advanced, and the existing condition
will have its parallel, though not its precise duplicate,
in some previous condition. There is nothing perma-
nent in history, and there is nothing new. That which
is will pass away, and that which will take its i)lace will
be like something that has already existed and passed
away. History moves, like the earth, in an orbit ; but,
like the earth, it moves in an orbit the centre of which
is describing a greater orbit.

That any particular condition has existed in the past,
and has passed away, is no evidence that it will not
return, but is rather an evidence that it will return,

THE PllINCIPLE OF COOPERATION. 175

though in a different form. That village-communities
working on a cooperative plan existed in the Middle
Ages, and that something resembling them existed in
antiquity, is, as far as it goes, an evidence that industrial
cooperation will return, though in a form adapted to its
new surroundings. That a fraternal spirit prevailed
where this plan was in operation, and that justice rather
than force presided over the distribution of wealth,
affords some evidence that this moral force will do a
similar work in the modern world. Productive property
owned in undivided shares by laboring men, contention
over the division of products replaced by general frater-
nity, — this is the ideal which humanity has repeatedly
approached, abandoned, and approached again.

The earlier cycles of the historic movement are too
remote for tracing; the records of the last one are
reasonably distinct. We have been made familiar, of
late, with the village-community of mediaeval times.
Beginning at that point, we may trace the economic
history of Europe through a series of conditions bearing
less and less resemblance to the communal ideal, until
we reach the aphelion of the system, the point of ex-
treme individualism, and begin slowly to tend in an
opposite direction. This turning-point may be located
at a period about a hundred years ago. While Adam
Smith was formulating the present system of political
economy, the world was, in industrial relations, at the
extreme limit of individualistic development. The

176 THE PRINCIPLE OF COOPERATION.

manufacturers of the period were a myriad of capitalist-
artisans, each working in his little shop. The common
carriers were an army of wagoners. The hired workmen
were without union ; and every-man-for-himself was the
rule among them, as among their emplo3'ers.

The feature of the next period, whicli still continues,
is a practical movement tending, not to abolish or to
weaken the institution of private property, but to vest
tlie ownership of capital in organizations rather than in
individuals. These organizations may be private corpo-
rations, village-communities, cities, t)r even states; and
if laboring men are represented in them, there is seen,
in practical working, a form of cooperation.

The word thus signifies a more highly developed
social organization. Within the great organism which
we term the state there are many specific organisms of
an industrial character. Such are nearl}- all our manu-
factories. These have the marks of high development
in a minute differentiation of parts ; labor is minutely
subdivided in these establishments. One man grinds in
the axe-factory, and, during his brief lifetime, is not, in
economic relations, an independent being, but only a
part of the grinding organ of an axe-making creature
whose separate atoms are men. All the laborers of the
factory, taken collectively, compose an organism which
acts as a unit in the making of axes. This working
body, however, with its human molecules, is acting in a
subordinate capacity ; — it is liired. As a whole it is

THE PRINCIPLE OF COOPERATION. 177

serving an employer, and it desires to become indepen-
dent. The same ambition whicli prompts the apprentice
to leave his master, and start in business for himself, is
now prompting these organizations of employes to desire
a similar promotion. Industrial organisms are seeking
what individuals have long been encouraged to seek, —
emancipation. It is the old struggle for personal inde-
pendence, translated to a higher plane of organic life.

The modes in which this end is sought are various ;
and, in so far as the object is realized by any of them,
competition is held in abeyance within the organiza-
tions, and the division of the product is determined by
justice rather than force.

Justice is by no means excluded under the present
system. What we term competition is, in practice,
subject to such moral limitations that it can be so
termed onl}'' in a qualified sense. Moral force, however,
within the competitive system, acts only as a restrain-
ing influence ; it fixes certain limits within which the
self-seeking impulses are encouraged to operate, and
determine by a struggle the division of the fruits of
industry.

The adjustment of wages by arbitration is a depart-
ure from this principle, and, wherever adopted, remands
competition to a subordinate place. The general prev-
alence of it would mean a reign of law rather than of
force, and would mark an era in the moral evolution of
society. The era would, however, be one of quasi-

178 THE PKINCIPLE OF COOPERATION.

litigation. To be successful, the plan of arbitration
requires many tribunals in ceaseless activity. It checks
lockouts and strikes, and allays the antagonism excited
by these overt conflicts. The speedy establishment of
the tribunals is, therefore, the present desideratum.
Yet the arbitrative system is not an ideal one. Its
fundamental defect lies in the fact that it concentrates
the attention of employers and of workmen on the
terms of the division of their joint product. An issue
of this kind, even though amicably adjusted, tends, in
itself, in the direction of antagonism. It fails, more-
over, to secure the largest product for division.

Cooperation works in an opposite way in both re-
spects. It concentrates the thought and energy of all
on production, the process in which the interests of
different classes are identical ; and it develops harmony
of feeling, while securing a large product for distribu-
tion. It avoids the constant readjustment of the terms
of division, which is the characteristic of the arbitra-
tive system, and takes the workman permanently out
of the position in which his gain is his employer's loss.
It makes fraternity possible among men.

Wage workers are now striving, by the crude means
at present available, for more favorable terms of distri-
bution. The amount which it is physically })0ssible for
them to gain by this means is quite limited. How
much would their wages be increased if they could se-
cure all that now goes to employers ? Induce capital-

THE PRINCIPLE OF COOPERATION. 179

ists to loan their money and give their best skill and
energy in management for nothing, and how much
would thereby be added to the general sum of wages?
The data are not at hand for an exact answer ; but a
calculation lately made on the basis of the figures of
the last census would seem to indicate that profits and
interest amount to about one half as much as wages,
and that a distribution that should leave to the em-
ployer nothing, would, at the most, increase wages but
fifty per cent.

Kow it is obvious that no class of men will or can
furnish capital and expend skill and energy for nothing.
It is safe to assert that the average employer would close
his business were his own returns reduced to one half
of their present rate. An increase of one quarter in total
wages would, then, seem to be the utmost that is to be
hoped for under present conditions. Now if the strikes
that aim to bring about this re-adjustment lessen produc-
tion, they farther reduce the available margin on which
the workmen are trying to draw. If an increase of
twenty-five cents on the dollar is all that can be hoped
for while tlie productiveness of industry is unchanged,
a very limited increase is all that can be had if indus-
tries are deranged and their productiveness lessened.
It must be by better means than strikes that any con-
siderable gain is ever to be realized by workmen.

Cooperation aims to increase the margin from which
the increment of gain is to be drawn. It makes in-

180 THE rRINCIPLE OF COOPERATION.

dustry more productive; it gives to the emjjloyer some-
what more, and to the laborer much more than they
now receive. Its moral advantage over the jtresent sys-
tem is greater than its material one, since it settles
questions of division in a manner so obviously just as
to hold all conflicting claims in abeyance. It destroys
the material out of which contests are made.

The ke}^ to the question as to what system ought to
emerge from the present chaotic condition of industry is
found in the fact that employers and workmen sustain to
each other two distinct relations, of which one is antago-
nistic and the other harmonious. In merely dividing the
product of industry their interests conflict ; in creating
it they are in perfect harmony. Competition and even
arbitration bring into prominence the relation which
develops conflict ; cooperation brings into sole view the
relation tending to unity.

We used constantly to be told, and still frequently
hear, that no intelligent conflict between capitalists and
laborers is possible ; that their interests are completely
identical, and that their normal relation is one of para-
disaical harmony. Frequently as this statement was
formerly reiterated, the laborers were not convinced ;
and, in the meanwhile, the practical relation between
them and their employers grew constantly less para-
disaical. There is, in jjrcvalent discussions, a confusion
of thought which an analysis of actual relations ought
easily to remove.

THE PRINCIPLE f)F COOPERATION. 181

We have said that there is harmony of interest be-
tween the two industrial classes in the operation of
production, and diversity of interest in the operation
of distribution. Under a wage system the effect of
this twofold relation is to create a conflict, and at the
same time to set limits to the overt acts to which the
conflict might lead. So long as this system continues,
the utmost that is to be hoped from education is that
the limitations may be applied wisely. Capitalists and
laborers are interested that as much wealth as possible
shall be produced, for both are dependent on the product.
The mill must be run, or neither owner nor employ*^
can receive anything. When, however, the product is
realized, the relation changes ; the question is now one
of mere division. The more there is for the owner, the
less can go to the men ; and no education can remove
this source of conflict.

The crew of a whaling ship are paid, as we shall later
notice, by shares of the cargo ; and if the proportion to
be received by each man were not settled in advance
by contract, they would naturally work with good will
until the cargo should be brought into port, and then
develop a hopeless wrangle over the division of it.
They would not, however, go to the length of burning
the ship, since all would need it for future use; but
would they delay the refitting of it? Would they at-
tempt to enlarge their returns, at the cost of the owner,
to an extent that would prevent him from building

182 THE PRLNCirLE OF COOPERATION.

more ships? Here is the field in which intelligence
may do its work. Ignorance and passion make the
limits of overt action broad, and tolerate much that
discourages production, and even lessens the store of
wealth accumulated. Intelligence narrows the field of
strife, suppresses all violence, and confines within a
minimum range all measures which reduce the product
of industry ; but within the limits as ultimately set, it
allows the conflict to continue.

For clearness of illustration a case has been selected
in which production and distribution are separated in
time ; whalers first secure the oil, and then divide it.
In most industries the two processes go on together ;
wealth is divided day by day, and week by week, as it
is produced, and the relation of emploj-ers and employed
is, therefore, not an alternation in time, from a condi-
tion in which their relations harmonize to one in which
they antagonize, but presents a permanent harmony in
one respect, and a permanent antagonism in another.
Both parties are interested in continued and successful
production ; but in the mere matter of distribution
their antagonism is as permanent as their connection.
To ignore either side of the relation is unintelligent.
If it be incendiary to proclaim an irrepressible conflict
between capital and labor, it is imbecile to reiterate
that there is no possible ground of conflict between
them, and that the contests which actually occur, are
the fruit of ignorance.

THE PKINCU'LE OF COOPEliATiUN. 183

While there is no such thing as changing the mode
of dividing a common possession in such a manner as to
give one partner more without giving the other less,
there is such a thing as making the jjlan of division so
obviously just, as to settle once for all the question of
proportionate shares, and to concentrate the energies of
all on the securing of a large product. Put the parties
who create wealth on such a footing that neither can
claim more than he gets, without violating an obvious
principle of equity, and they will make the division un-
thinkingly, and plan and work only for benefits which
accrue alike to all.

Such is the aim of coo^^eration. It is the principle
of solidarity in a new field. The great consolidations
now in process are for belligerent ends ; this is for an
amicable end. The organization of capital, on the one
hand, and that of labor, on the other, enable these
agents to fight a good battle over the division of prod-
ucts ; cooperation allays strife, and enables them to
expend their whole energy in creating products. Re-
curring again to the diagram which illustrates the proc-
ess of distribution, we find that present consolidations
are taking place between the horizontal lines, while
cooperation always crosses a line, and merges two
classes which are now in a hostile attitude.

This blending of classes is the feature even of that
partial cooperation, known as profit-sharing. The work-
man does not, by this plan, own capital and receive in-

184 THE PRINCIPLE OF COOPERATION.

terest ; but lie uses it, and receives a share of net profits.
He is not a capitalist, but he is an entrepreneur^ or em-
ployer ; and tlie benefit derived from the system, con-
sists in the fact that he performs his part of the direc-
tive function exceedingly well. All the workmen with
their employers constitute, collectively, an exceptionally
good entrepreneur.

Mr. Mill's illustrations of this system, taken from the
workshops of Paris, afe familiar, as are the instances
of the Paris and Orleans railroad, and the Whitwood
collieries described b}' Mr. Sedley Taylor. The Labor
Report of Massachusetts for 1886 shows that profit-
sharing has, for some time, had a foothold in this State.
The introduction of the system into new fields has, of
late, been of almost daily occurrence. The success
already attained places this mode of industry beyond
the limit of schemes which can claim only a theoretical
support. It is, indeed, essentially right, and ought to
succeed; but it also lias succeeded.

An illustration of profit-sharing which is near at
liand and brilliantly successful is afforded by the whale
fishery of New England. This industry places in a
conspicuous light tlic basis of the success of the system,
namely, the increase in production which attends it.

The difference between the product of interested
labor and that of labor which is careless and lazy is
always noticeable ; but in the whale fishery it is excep-
tionally great. An eager search, a zealous pursuit and

THE PKINCirLE OF COOPERATION. 185

a resolute attack are secured only by the stimulus of a
personal interest in the result. Superintendence by
owners is impossible, unless the captain be a proprie-
tor ; and if he is so, the plan becomes, to that extent,
cooperative. Even though the captain were the sole
owner, his best efforts would not ensure a profitable
voyage, unless a heartier obedience could be secured
than is usuall}' seen on ships. Moreover payment by
the day might interest the crew in unduly prolonging
the voyage. Profit-sharing has, therefore, driven the
wage S3'stem from this industry. A summary of results
attained by this method in other fields shows that the
same basis of success exists elsewhere, though not
often in the same degree. Profit-sharing, as a rule,
secures interested and successful efforts, increases the
product to be divided, and while giving to the capitalist
somewhat more, gives to the laborer much more than
can be had under the present plan of eternal belliger-
ency.

It is an advantage of the system of profit-sharing that
it may be gradually developed. It may differ at first
from the wage system by a small gradation, which may
be increased by successive changes. The prevailing
rate of wages may be paid, and a small proportion of
the net profits may be added, as a bonus, in the case of
a few workmen in responsible positions. The amount
distributed and the number of the recipients may be
gradually increased, until the amount received from

186 THE PRINCIPLE OF COOPERATION.

this source constitutes a main dependence of every
workman. Then only is the laborer so lar merged in
the employer as to secure the maximum benefit from
the relation.

Profit-sharing, when fully developed, requires that a
provision be made for unprofitable years by a reserve
fund, from which, when profits for the time disappear,
the stipend necessary for the laborer's maintenance may
be drawn.

It is to be noted as theoretically possible that, in
industries conducted on the share principle, disputes
may arise concerning the size of the shares. The sea-
men on a whaling-ship who receive each a two-hundredth
part of the cargo may strike for the one-hundred-and-
fiftieth. Strikes of this kind do not, in fact, occur,
doubtless because the workmen realize the more ade-
quate justice which is done to them by the share system,
and are unwilling to disturb its successful operation.

The increased willingness of employers to adopt this
system, in some of its gradations, is a noteworthy fact of
the present period. Four systems of industrial organi-
zation are now on trial, with a prospect that the fittest
will, in the end, survive. If the competitive system in
its degenerate state leads to strikes and lockouts, arbi-
tration will survive as between these two. If arbitration
concentrates the attention too much on the mere divi-
sion of the product, profit-sharing may outlive it. If
profit-sharing still leaves as subject for dispute the pro-

THE PRINCIPLE OF COOPERATION. 187

portion of profits to be given to labor, full cooperation
may, in many fields, be the ultimate survivor.

A better mode of industrial organization replaces a
worse, as a better mechanical process replaces an infe-
rior one, by enabling those who use it to undersell their
competitors. The immediate effect of the adoption of
profit-sharing by a few establishments is to increase the
reward of the laborers employed in them. This, of
itself, is a powerful incentive to other workmen in the
same occupation to strive to secure a like increase. If
this leads to strikes, it gives to the profit-sharing estab-
lishment a relative advantage, in addition to that which
is inherent in the plan itself. An employer whose
working force may always be depended on may under-
sell one whose men are watching for opportunities to
increase their wages by a strike. Under present condi-
tions profit-sharing must, in order to survive in the
struggle of systems, prove superior, not to competition
working smoothly and successfully, but to competition
essentially vitiated and subject to incessant friction. It
is safe to assert that the plan of profit-sharing is inher-
ently capable of doing this. In some fields it has proved
superior to competition at its best ; it will easily excel,
in many more fields, the wreck of the old system with
which it is now brought into comparison.

If a corporation were to adoj)t the share system in
dealing with its employes, and were to pay the amount
given to them, in excess of daily wages, in the form of

188 THE PRINCIPLE OF COOPERATION.

stock, the effect would be to gradually transmute the
partial cooperation into the complete form. New estab-
lishments started on this plan have, as a rule, perished
in their infancy. Experience has shown that the mor-
tality among them is increased by loans of capital made
to them either by governments or by philanthropic
societies. Such loans strain the enterprises at their
weakest point, namely, their general management.
Profit-sharing retains the experienced employer as the
general director, and enlists the interest of every work-
man in the oversight of details within his province.
Full cooperation, unless established by tlie gradual
method above spoken of, renders a managing committee
necessary, and the inexperience of the men selected for
this function imperils the enterprise. A loan increases
this danger, by increasing the scale of operations under-
taken, and by causing the enterprise to start under a
burden of debt. Great as are the disadvantages of
small production, a cooperative experiment has the best
chance of success when it submits to them, and acquires
the needed experience as it enlarges its operations.

The survival of full cooperation, in the long rivalry
of systems, depends on its power to excel other systems
in the results which it ultimately yields. Failures at
the outset may deter experiments in this direction, and
make the introduction of this method proceed slowly ;
but they do not change the law of survival. That is a
question, not of initial risks, but of results gained by

THE PRINCIPLE OF COOPERATION. 189

the successful experiment. If one cotton mill run on
the cooperative plan shall ever surpass other mills in
economy of production, to an extent that will enable it
to undersell their product in the market, it may ulti-
mately compel them to adopt this method, though a
score of earlier experiments have failed.

The new political economy must recognize, as one of
its principles, this special and liigher competition by
which systems are tested. Individual competition, tlie
basis of the traditional science, is, in extensive fields, a
thing of the past. It has been vitiated by combinations,
leaving society without its former regulative principle.
Yet is is only temporarily that wages are to be adjusted
by a crude struggle of labor unions with employers'
associations ; the permanent mode of adjustment must
be by some application of moral force. Arbitration,
profit-sharing and full cooperation depart radically from
the old competitive method, and appeal, each in its
own way, to principles of equity, in dividing the pro-
ceeds of industry. Yet among the systems as such
competition should rule, in determining which is fittest
for ultimate survival. Cooperation will, by this process,
have a fair chance in the industrial world. If, in the
comparison with other systems, it is shown that it ought
to survive, it will do so, and that regardless of initial
failures.

The chaotic condition of industrial society opens
wider than it was ever opened before the door for new

190 THE PRINCIPLE OF COOPERATION.

forms of organization. As tlie easiest of adoption, the
plan of adjusting wages by arbitration bids fair to make
the most rapid headway. When thus renovated, the
wage system will bear a far better comparison with the
two cooperative methods, and will have, by so much, a
better chance of surviving. In some large fields it may
continue indefinitely. The comparison between it and
the cooperative systems has yet to be made by the tests
of the market. A practical comparison of the relative
merits of j^rofit-sharing and full cooperation, is still far-
ther in the future. On general principles that system
should come earliest which best adapts itself to an im-
perfect condition of society ; and those forms should
come later which are the expression of a higher develop-
ment. On these grounds, which are not wholly specu-
lative, the two systems which are based on the fraternal
principle of partnership, may be expected to survive
those which are based on a principle of strife.

There are certain establishments nominally coopera-
tive which have little significance, as bearing on the
labor question. The chief of these is the Rochdale
form of the cooperative store. Workmen variously
employed contribute capital, hire men of their own class
as managers, sell goods for cash at market prices, pay a
fixed percentage per annum to the share-holders, and
divide the remaining profits among the customers, on a
pro rata plan, according to the amount of their pur-
cliases. The essential principle of true cooperation is

THE PRINCIl'LE OF COOPERATION. 191

its obliteration of dividing lines in industrial society.
Workmen become, by means of it, employers of their
own labor, and distribution, the cause of strife, is con-
ducted on a new plan. To this result the Rochdale en-
terprise contributes nothing. The men who own the
store remain, as wage workers, in the mills; and the
division of the product of their own industry proceeds
according to the old plan, and with the same liability
to conflict as if the store had never existed. Yet,
by a strange perversity of nomenclature, this process
has been termed "cooperative distribution," apparently
because the store distributes useful articles among the
members of the community who patronize it. The in-
dustry conducted in it is the ordinary mercantile one
of buying in bulk and selling in detail ; and it creates
the various utilities which we have analyzed as the re-
sult of the merchant's function. It is productive in as
complete a sense of the term as the spinning of wool or
the raising of sheep. To term the process "distribu-
tion " is to increase the difficulty which besets the stu-
dent of grasping the essential nature of the distributive
process. This is a division of the abstract value created
by industry, not a carrying of parcels to and fro in
express wagons.

Whatever the Rochdale process is, it is not distribu-
tive, since it leaves the men who own it still working
for wages under their old employers. In the case even
of the managers and clerks in the store itself the wage

192 THE PRINCIPLE OF COOPERATION.

system survives ; these men are paid i'ur their ser-
vices like the clerks of any merchant. The process
is complex, and, in realit}-, is only quasi-cooperative.
It may, perhaps, be termed mixed cooperation, since
the essential peculiarity of it is that men who are em-
ployes in one industry become proprietors in another.
There is a union of capital and labor in the same hands,
but not in the same industry. The store is of value to
the customers which it serves, since it offers to them a
virtual reduction of prices, and at the same time pre-
sents the savings thus effected in periodical dividends,
which the receivers are encouraged to invest as capital
in the enterprise. It has an invaluable educating effect
upon the men who maintain it. It also reacts favorably
upon the character of the mercantile class, since it im-
pels all who would hold their own in competition with
it to sell honest goods at fair prices. It is a valuable
social institution ; but it leaves the labor problem where
it found it.

There has existed, in the case of the English coopera-
tive stores, elements of success which are not to be
found in this country. There was, at the outset, a lack
of retail shops that were either good or cheap. There
was an abnormal extension of the credit system among
dealers ; and there was an absence among them of that
sharply competitive spirit which leads merchants to
strive to outdo each other in reducing prices to a mini-
mum. There was a large homogeneous population of

THE PRINCIPLE OF COOPERATION. 193

manufacturing employes, well organized, and specially
imbued with the teachings of Robert Owen. The asso-
ciation, therefore, had exceptional material in its mem-
bers, and an unusual field for securing custom by the
virtual reduction of prices which it was able to offer.
Tliat similar experiments have been less successful in
this countr}' is, in part, due to the fact that they are
less needed. The absence of the conditions of success
signifies the presence of conditions in which the work
of the store may be done by other agencies, and in
which more important fields are offering for coopera-
tive enterprise.

Competition is here sharper, and retail sliops are bet-
ter than in England ; it is, therefore, less easy for a store
established on the new plan to attract customers. If,
in any locality, this is not true, it is an evidence that,
in this one respect, the local conditions make a coopera-
tive store both desirable and practicable ; and if the
other conditions are favorable, such an enterprise should
be started. If inertness on the part of workmen re-
tards it, there is a field for moral influence to do its
work.

Complete cooperation has succeeded on the largest
scale in agriculture. The economic motive for this
mode of living is less urgent in this department of in-
dustry than in others. Agriculture is not yet central-
ized, as are manufactures, and the relations of the
classes engaged in it are not strained to a dangerous

194 THE nilNCirLE OF COOPERATION.

extent. Yet success in cooperative farming is compara-
tively easy ; and wherever a special motive impels men
to this mode of living, a community may be founded
and made to thrive. Such an extra-economic motive
may be afforded b}^ religion. The Shakers, the Amana
Communists, the Perfectionists and others have been
united by bonds other than those of pecuniary interest.
Such communities are exceptional, and, like the co-
operative stores, contribute little toward the solution
of the labor question. Their success is valuable, not
mainly as a proof that agricultural communism is, in a
local way, possible, but as an evidence that this mode
of living is favorable, as it appears to have been at
Jerusalem of old, to religious brotherhood among men.
The early Christian cnnnnune was a success spiritually,
if not otherwise ; and if a village on the communal plan
can, here and there, be made to thrive economically and
religiously, it may contribute its little share toward
promoting the growth of fraternal feeling among those
who look upon it from the outer world. As in the case
of the Rochdale enterprise, its chief service to society is
educational.

A motive of a directly opposite kind may induce a
large city to adopt measures tending in a communistic
direction. The city may make a complete surrender
to its mercantile environment. It may conclude that
it has more in common with the business corporation
than with the state as a political entity, and that it can

THE PRINCIPLE OF COOPERATION. 195

best promote the comfort of its inhabitants by owning
gas and water works and street railways, and endeav-
oring to manage them in the interest of alL If it suc-
ceeds in such a course the fact is due to the strictly
local patronage of the business enterprises undertaken.
The city does not, thereby, cater to the general outside
public, and it therefore comes into no competition
with private producers, whose better management would
bring their municipal rival to failure. Such public
enterprises are, in a sense, cooperative, since all who
pay taxes are share-holders in them ; but they throw no
light on the relations of capital and labor. Their work
lies in the department of municipal finance.

Prison industry conducted on " public account " is a
useful form of cooperation. The socialistic ideal is
realized in a great reformatory managed on this plan ;
there is " labor applied to public resources," and there
is strict equity in the division of the proceeds. In such
an establishment all the profits and more go to the
laborers. Yet motives of immediate economy favor
the letting of prison labor to contractors ; and if the
plan of working on state account shall ultimately pre-
vail, it will be because of the opportunity which it
affords of effecting the moral reformation of the prison-
ers. Against such a gain no good government would
weigh for a moment the petty economy to be effected
by other methods. Good government is, unhappily,
not among the data of our own present calculations.

196 THE PRINCIPLE OF COOPERATION.

and the contract system may be an available compro-
mise of interests ; yet if our state governments improve,
they may be expected to favor more and more tlie sys-
tem which gives the best moral results. Since, then,
the cooperative form of prison industry has other than
economic ends in view, it sheds no light on the labor
problem.

Public work-houses for tramps would be a natural
adjunct of a reformatoiy system, and would help to
dissociate tlie tramp question from the general labor
problem. It would intercept anarchism near its source,
and relieve the municipalities, on the one hand, and the
labor organizations on the other. In so far as this
measure would clear the market of men whose presence
depresses wages, it would contribute indirectly toward
improving the workmen's condition. It would not
otherwise affect the mode of distributing wealth. If
the great combinations now forming shall end by filling
the market with idle men, such measures as this will
have a new importance.

Upon arbitration, profit-sharing, and full cooperation
must be our dejjendence for the solution of the labor
problem. These measures are named in the direct order
of their availability, and in the reverse order of their
intrinsic excellence. Arbitration is the easiest, and
will doubtless have, in the decades immediately coming,
the greatest extension. It is, however, only the more
radical measures, those which merge classes now hostile,

THE PRINCIPLE OF COOPERATION. 197

that can insure a reign of permanent peace in the
industrial world. Profit-sharing makes the workman,
in a sense, an employer ; and full cooperation makes
him both an employer and a capitalist. In neither
relation is he a disturbing element, for in neither can
he well fail to receive obvious justice.

The question which of the three modes of adjusting
the rewards of labor shall ultimately prevail is to be
determined, not by the comparative difficulty of the
methods, but, as already shown, by their comparative
excellence when they prove successful. Original fail-
ures count for little, and the result of one successful
experiment counts for much, in deciding the question of
ultimate survival. That system will, in each particular
field, survive and continue which, in that field, is per-
manently the best. As different fields offer different
conditions, it is improbable that any one method of
industry will become universal. The three general
systems may continue, each in the field to which it is
specially adapted.

The value of cooperation, partial or complete, is not
limited to its effect on the men who directly par-
ticipate in its benefits. A few cooperative establish-
ments react on the condition of men who still work for
wages; and this effect must become more marked as
the system of arbitration shall obtain a foothold. Tri-
bunals for adjusting wages will need a standard of
justice, in making their awards. At first they may

198 THE PRINCIPLE OF COOPERATION.

proceed blindly, striving only to effect a rude compro-
mise of opposing claims. They may " split differences,"
and content themselves if they thereby arert strikes
and allow business to continue. Where the rate is a
dollar, and the workmen claim a dollar and a half, they
may give a dollar and a quarter. This would be a
welcome escape from the present chaos, but it would
not be arbitration of a highly developed form.

In the end there must be standards of equity in the
division of the products of industry. Certain propor-
tions of a gross return will come to be recognized as a
rightful reward of employers and of employed. The
proportions will vary in different fields ; but if, in au}^
field, a few profit-sharing establishments exist and yield
good results, they will assist in setting the standard to
which arbitration will conform. The rewards of labor
under the wage system may thus be, in a measure,
gauged by those which are realized under the system of
shares. Profit-sharing, even on a limited scale, may
diffuse benefits over the whole industrial field.

The cooperative principle in its different forms is the
Christian socialism of Maurice, Kingsley, Hughes, and
their worthy co-laborers. It meets an imperative hu-
man need, and must grow surely, though not, as re-
formers are wont to estimate progress, rapidly. Time
is requisite for the development of its completer forms ;
and if arbitration can tide over the interval of transi-
tion, and secure outward peace until the conditions of

THE PRINCIPLE OF COOPEKATION. 199

true fniteniity mature, it will effect, ])y its indirect re-
suits, tlie redemption of society.

Tlie condition of success in any general system of
cooperation is mental and moral progress. The perma-
nence of republics has long been known to depend on
these conditions ; they are short lived when the people
are ignorant or bad. Christian socialism is economic
republicanism ; and it can come no sooner, stay no
longer, and rise, in quality, no higher than intelligence
and virtue among the people.

It is only step by step that we can hope to approach
the social ideal that is beginning to reveal itself. Im-
patience at the conditions of natural progress is the
root of political socialism. A few men have had vis-
ions of an ideal state, not indeed the one which will
exist in reality, when the better tendencies now at
work shall be consummated, but an imaginary condi-
tion in which countries shall become workshops under
political control. Men are to be found possessing the
infinite wisdom and virtue necessary for directing such
operations as must be undertaken, and, by a greater
miracle, these men, when found, are to be placed in
power and kept there by popular elections. Human
imperfections are a forgotten fact in the situation.

The socialistic state would destroy personal freedom.
It might be practicable, if men were morally perfect ;
but it would be intolerable. Men will not want it in
the millennium, and they cannot have it earlier. The

200 THE PRINCIPLE OF COfJPERATION.

socialist does not propose to wait foi- the development
of a perfect moral state before realizing his dream.
Evolution is slow, and manufacture rapid ; he will,
therefore, make the ideal state with his own liands. He
will plan it, and secure the popular decree that shall put
it into operation. " Let there be socialism ; " and there
will be socialism — over night, possibly : anarchy will
put an end to the experiment in the morning.

Viewed on but one side the socialistic ideal has a
beauty that captivates the intellect which fairly grasps
it. It bursts on the view like an Italian landscape from
the summit of an Alpine pass, and lures men over the
fatal declivity. Individualism appears to say, " Here is
the world ; take, every one, what you can get of it.
Not too violently, not altogether unjustly ; but with
this limitation, selfishly, let every man make his pos-
sessions as large as he may. For the strong there is
much, and for his children more ; for the weak there is
little, and for his children less."

Socialism appears to say, " Here is the world ; take
it as a family domain. Enjoy it as children, each ac-
cording to his needs ; labor as brethren, each according
to his strength. Let justice supplant miglit in the dis-
tribution, so that, when there is abundance, all may
participate, and when there is scarcity, all may share in
the self-denial. If there is loss of independence, there
will be gain of interdependence ; he wlio tliinks less for
himself, will be forced to think more for his brother.

THE PRINCIPLE OF COOPERATION. 201

If there is loss of biiUe force gained in the rude struggle
of competition, there is gain of moral power acquired
by the interchange of kindly offices. The beautiful
bond which scientists term altruism will bind the
human family together as no other tie can bind them."

Sufferers under an actual system naturally look for
deliverance and for a deliverer. The impression has
prevailed among working men, that a new device of
some kind might free them from their difficulties.
Ideal socialism seems to meet this expectation, and
those who preach it as a practical aim, naturally receive
a hearing. The way in which the old system is de-
fended is often as repulsive as the new system is at-
tractive. When one teacher bids the poor submit, and
another bids them hope, they will not be long in choos-
ing between them. Yet there is no royal road to gen-
eral comfort. There is much to be gained by studying
the changes which are actually in progress, but nothing
by inventing artificial schemes of society. The new
dispensation is coming, but not with observation ; and it
has no particular apostles. Very substantial have been
the gains of recent years ; and in the promise of the
future there may already be discerned an ideal sur-
passing, in its attractiveness, the socialistic dream. It
preserves, what socialism from the outset sacrifices,
freedom. By steps which are never retraced society is
drawing nearer to it ; and the ideal itself is valuable,
not indeed as something to be grasped by a frantic

202 T>1K I'KlNCirLK UK COOPERATION.

effort, but as a means of lightening, by intelligent hope,
the steps by which mankind are destined to approach
it.

CHAPTER XI.

NON-COMPETITIVE ECONOMICS.

Competition is no longer adequate to account for
the phenomena of social industry. What was once
assumed as a universal law is now but partial in its
operation. Economic science needs modernizing ; it
was a half-century after the publication of the Wealth
of Nations that the earlier railroads were built, and it
was a century after its publication that the great rail-
way and telegraph monopolies were effected. During
that century the economic activities of the world have
gained, in intensity, more than they had done during
the entire antecedent period of recorded history.
Diversity of products, rapidity of exchanges and indus-
trial organization are the criteria ; and if we compare
the condition, in these respects, of early Oriental mon-
archies with the condition of the world in 1776, and
that, again, with its present state, we shall find the
second difference greater than the first. Steam and
electricity, migrations and inventions, have brought
this about. Economic theories adapted to a civiliza-
tion midway in its development cannot apply equally
well to a civilization at its present maximum. We
need an economic science adapted to steam, or, more

204 NON-COMPETJTIVE ECUNOMICS.

accurately, to an intensified social activity. The sys-
tem of Adam Smith has advanced, but not suflEiciently ;
and what is lacking is more than the trivial adaptations
sometimes attempted ; it is undetected principles.

There is something deeper than competition in the
economic life of men ; and the relation of competition
to the underlying law has not been analyzed. The
principle whereby the struggle of many men, each for
himself, to secure wealth is made to work out the gen-
eral good of all, has all the beauty that is claimed for
it. We have noticed, however, in an earlier chapter,
the moral limitations that hedge about this struggle.
The contest is never unrestricted. A Spirit of Justice
is ever standing over the contestants, and bidding thera
compete only thus and thus. This they may do ; that
they may not do ; and the prohibitions increase with
time. Competition at best exists by sufferance, and
the power that tolerates and controls it is moral.

We have now to notice a still more decisive manner
in which the moral sovereignty asserts itself. It not
only regulates competition in its modes, but, at will, it
thrusts the whole process aside. It is because there
have long been departments of practical economy not
left to competition, that there has always been, in
science, some need of a province of non-competitive
economics. It is because these activities are increasing
apace with the rajiid developments of the past century,
that the need is now pressing.

NON-COMPETITIVK ECONOMICS. 205

We have seen that the ultimate end of political
economy is not, as is generally assumed, the mere quan-
titative increase of wealth. Society, as an organic unit,
has a higher economic end. That end is the attain-
ment of the greatest quantity, the highest quality, and
the most just distribution of wealth. It is the true
subjection of matter, the placing of it in the most
rational condition, absolute and relative. The matter
and force of external nature are to be brouofht into
that state which, in itself, is best, and they are to be
brought into that relation of ownership which best
promotes the general happiness. Matter modified by
labor in accordance with enlightened reason may be
termed rational wealth ; it is this that society is pur-
suing, and partially realizing.

The actual wealth of society varies more or less from
the ideal standard, and is but partly rational. Much
of it is not of high quality, and much that is so is not
well distributed; it is but partly beneficent, in itself,
and in its relation to owners. Immoral books, poison-
ous beverages, and adulterated articles of food are
wealth of an actual but irrational sort; so also are all
things that minister to vice. These are real commodi-
ties, because, somewhere in society, are men whose
impulses crave them ; they are irrational, because the
reason that is inherent in society as a whole does not
want them, and would cast them out if it could.

The want of a true teleology, the failure to discover

206 NON-COMPETITIVE ECONOMICS.

the TeA.09, or ultimate goal of social tendencies, and the
consequent failure to discriminate between actual and
rational wealth, does not, indeed, deprive current polit-
ical economy of its practical value ; but it lessens that
value, and throws the system more and more out of
harmony with the modern spirit. A little while hence,
and the omission will be disastrous.

The competitive mode of production and distribution
has been adopted by society because, in its day, it has
given the nearest practical approximation to the stand-
ard of rational wealth. Imperfect as are its results,
those of any other system would have been more im-
perfect ; they would have rendered the wealth of so-
ciety less, worse, or worse distributed. As compared
with them, the principle of competition has increased,
improved, and with rude equity divided the products of
industry ; and for this reason only has it been tolerated.

The vast residuum of competition which still exists
continues to do a similar work, and owes to this fact its
prospect of survival. Inherently it has no vitality ; it
needs and possesses a raison d'etre, and, in the absence
of it, would cease to exist. It rests on moral law. In
the department of distribution its working may be less
perfect than in that of production. It may be but a
spontaneous and imperfect agent for dividing wealth,
with approximate justice, among the members of soci-
ety ; yet it is only because it serves this purpose, and
so long as it does so, that it is tolerated ; and there

NON-COMPETITIVE ECONOMICS. 207

never was a time when it would not have been thrust
aside, could society have seen its way to the adoption
of another method which would more nearly have real-
ized the rational end in view. Powerful as the com-
petitive principle appears in practice, it is not supreme,
still less, self-existent; it is the creature of an exigency,
created as the rude servant of a higher power, and con-
tinuing by sufferance. It is perpetually on trial, and
its minutest acts are subject to the scrutiny of that
supreme moral court to whose verdict all systems, eco-
nomic as well as civil and legal, must submit.

Society does not and will not completely abandon the
competitive principle ; it is still needed as an agent of
distribution, and it is the sole means on which we can
rely for the securing of a large product to distribute.
Yet, if what we have claimed be true, society should
hold this agent in abeyance within limited fields of in-
dustry, whenever, within those limits, a better system
is available. This it actually does. Sometimes, as
in railroad operations, competition works sluggishly,
interruptedly, or not at all ; sometimes, as in the
transactions of labor and capital, it works, for a time,
one-sidedly and cruelly, and then almost ceases to do
its work. It may happen that, in exactly that field
in which competition operates unusually ill, another
method may operate especially well, and the compar-
ison of results may be in favor of the latter. If once

208 NON-COMPETITIVE ECONOMICS.

society becomes conscious that this is the fact, farewell
to one particular form of competition.

That the future field of non-competitive economics
will be vast is less surprising than that its present field
is considerable. Arbitration promises to replace the
former agent of distribution in a comprehensive way.
Cooperation is the antithesis of competition ; wherever
it exists the competitive struggle is held, to some ex-
tent, in abeyance. In practice cooperation is most
frequently of an incomplete kind, and a greater or
less residuum of competition remains; but any real-
ization of the one principle means the elimination of
somewhat of the other ; and, moreover, whatever is
done by a public or governmental agency is done, in a
sense, cooperatively. What we have now to consider is
a certain displacement of competition which is of long
standing, and which, therefore, serves to show that
society has always been ready to set the process aside,
whenever it has been able, by other means, to better
attain the rational end which it has had in view.

It is the misfortune of the narrow and illogical defi-
nitions of wealth formerly current, and not yet en-
tirely abandoned, to exclude from their classification
much that is really wealth ; and the excluded portion
is, to a great extent, of the highest and most rational
quality. It embodies itself often in tenuous and un-
substantial matter, as in the vibrating particles that
constitute light and sound; but it ministers to the

NON-COMPETITIVE ECONOMICS. 209

highest wants of human nature, and is tributary to true
and permanent happiness. As we formerly endeav-
ored to show, these finer commodities are to the soul
what those of the grosser sort are to the body ; and if
man is dependent on literal bread for life, he is depend-
ent on loaves of a more spiritual sort for a life that is
worth the living.

Now these most rational forms of wealth have regu-
larly been distributed on more or less communistic prin-
ciples. Beauty and truth have never been monopolized
and sold to the highest bidder. Public agencies have
embodied them in the delicate material forms that come
within our definition of wealth, and have distributed
them freely to all, as the Roman emperors distributed
the corn of Egypt. Not that all such commodities have
been so distributed ; the competitions of the market
have determined the ownership of some of the costliest
of them. There has been an interesting intermingling
of cooperative and competitive action in this depart-
ment, and it will be instructive to ascertain the limits
where the one process ceases and the other begins.

From the days of Athens until now the best products
of art have been, under one or another form of pro-
cedure, purchased by the public and assigned to the
general use. Statues by the Greek masters were in
temples or on the street. The greatest architectural
works of the Romans were public theatres, baths,
basilicas, fora, and temples. The early Christian com-

210 NON-COMPETITIVE ECONOMICS.

muiiity, a state within a state, expeiick'tl its best efforts
in the adornment of churches; and the tiiuni2)lis of the
Renaissance were in works of this kind. Most of the
works of the great masters are now free for the enjoy-
ment of all.

Yet, from the first, also, many products of art have
been sold in the open market and purchased for private
use. Wealthy men have always, whether from taste,
vanity or both, been consumers of artistic products.
The amount of this consumption was small in Greece,
larger in Rome, small again in the early Christian state,
and even at the period of the Renaissance, but is
increasingly large in recent times. The accumulation
of vast fortunes in our own country may be expected
to increase this tendency ; while the frequent gift or
bequest of private fortunes for purposes of public
benefit may be expected to proportionately increase the
amount of such products placed at the free disposal of
the people. This is one regal function of the money
king. Rational wealth in a3sthetic form is, in great
})art, owned and enjoyed non-competitively.

This free disbursal of valuable products is distribu-
tion of an extraordinary kind; and, singularly enough,
it in no way changes the relation of employers to the
employed. Competition is, by this means, suppressed
only among the consumers of particular articles ; the
industrial groups which produce them are not affected.
Artists strive to excel each other in the quality of their

NON-COMPETITIVE ECONOMICS. 211

work, and receive for it the price determined in the
open market by ordinary laws. This producing group
receives its share of the general wealth of society in the
same manner as others, and subdivides it among its
individual members in the same way. The artist must
pay his assistants the market price for their labor. The
supplanting of competition consists in the fact that
other groups get works of art without being obliged
to buy them, and to bid against each other in securing
them. Society pays for the products which it thus
disburses from the proceeds of taxes ; and, as these are
gauged more or less according to the property of the
persons who pay them, while the products purchased
by the means are placed at the free disposal of all, it
would seem that, here at least, men realized the social-
istic ideal, producing according to their ability, and
consuming according to their need.

Yet the consumption of such products is gauged, not
by general need, but by inclination and opportunity ;
and in this difference lies the basis of the system of
disbursing rational wealth. Were competition to deter-
mine the amount which each person might enjoy of
these fine and costly products, the poor would get none
of them ; and, in accordance with the law cited in an
earlier chapter, they would lose their desire for them.
This would involve a personal deterioration ; and it is
this which the state interposes to prevent. For its own
reasons it determines that men shall not thus degener-

212 NON-COMPETITIVE ECONOMICS.

ate ; that they shall be educated to desire and to use
the refining products of tlie artist's labor. The ulti-
mate purpose is non-economic ; it is to elevate the
nature of individual men, and to make the state sounder
and safer. Yet the process contributes to the eco-
nomic end of society ; it enables men to advance directly
toward the summum honum of industrial action. It
keeps alive the popular demand for works of art, and
insures the continued production and consumption of
many of the better forms of wealth.

Commodities which minister to the desire for knowl-
edge come next in order, in the extent to which they
have been disbursed at public expense. Oral instruction
has not always been free, and books have been so still
less frequently. In the later ages of the world, how-
ever, schools of some sort have been cheap enough for
all but the very destitute, and this cheapness has been
the result of some form of public action. Commodities
embodying knowledge have been either given to con-
sumers or sold to them f(5r less than their cost. The
medioBval church assumed this governmental func-
tion among others. The modern public school is either
entirely free or so nearly so as to throw its chief cost
upon the State, and open it to universal use.

Endowments may be regarded as being, originally,
gifts to the public, though administered without official
intervention ; and schools established on this basis are
not, as far as the enjoyment of their products is con-

NON-COMPETITIVE ECONOMICS. 213

cerned, to be separated, in principle, from other public
agencies for [)roducing and disbursing those commodi-
ties which are food for the intellect. The endowed
colleges of England and America are, in their effect on
students, public institutions. While these agencies are
distributing oral instruction in a manner more or less
independent of competition, free libraries, endowed or
otherwise, are doing the same for the more substantial
instruments of education. Here again there is an ulte-
rior end in view ; the welfare of citizens and the safety
of the State demand the free disbursal of these products.
Yet the economic effect of the process is real and im-
portant, and public instruction demands consideration
from the economist, as well as from the educator and
the statesman. Rational wealth in the forms that
nourish the intellect is, to a great extent, distributed
non-competitively.

There are times when the Church is to be regarded as
one of the departments of the State ; the material appli-
ances of religion then fall in the same category as those
of education and artistic culture. The State for ages
nourished the heart as well as the taste and the intellect.
The peculiarity of modern times and of our own country
is the discontinuance of this process. In America,
State and Church have separated ; and, while the State
retains the instruments of instruction, and, to a great
extent, those of resthetic culture, it has thrown the
distribution of religious nutriment back into the market.

214 NON-COMPETITIVE ECONOMICS.

It feeds the intellect and the taste, but leaves the heart,
like the body, to be nourished by each man for himself.
Yet the necessities of the case have not admitted of free
individual action in this department. Men cannot ob-
tain the needed sustenance separately, and voluntary
cooperation has at once assumed the function abandoned
by the State. Churches are the best established of
cooperative societies, and their economic functions are a
fascinating subject of the non-competitive division of
political economy.

In a few countries governmental cooperation is ex-
tended over the field of railway transportation ; and
that the same will, ultimately, be the case in America
is the belief of some persons who realize the evils of
railroad combinations, but fail to see the good which
comes from such competition as still exists in this de-
partment. Pools do not prevent companies from striv-
ing to surpass each other in perfecting their methods,
and in securing, by efficient management, a large pro-
duction of wealth. Here, under a regime of fixed rates
for transportation, lies their sole chance of increasing
their profits.

The incentive to a state management of railroads is,
in principle, identical with that which prompts to the
forms of non-competitive action already noticed. The
object is to insure the production and disbursement of
forms of wealth which are essential to the public wel-
fare. It is not, however, the regular products of rail-

NON-COMPETITIVE ECONOMICS. 215

way operations that are concerned, l)ut certain special
products, the study of which will reveal an important
and, as yet, unanalyzed economic principle, which we
may term that of inappropriable utilities.

Labor imparts utilities to matter, and the impulse to
it is that these may be enjoyed by the laborer. To be
enjoyed they must be owned ; the fruits that the la-
borer raises or the implements that he fashions must
belong to him, and to no other person. It is the nature
of some utilities to be taken completely into the posses-
sion of him who produces them. Others, however,
elude him. It is the nature of certain utilities to flee
from him who creates them, and diffuse themselves
among the members of the community. The builder
of a house is able to appropriate the greater portion of
the utility created. The roof shelters and the walls
enclose that which makes his life enjoyable. If the
house be comely in form, and attractive in surround-
ings, he has the most constant enjoyment of its beauty.
Yet this enjoyment cannot be monopolized ; the taste-
ful exterior of the dwelling, with the beauty of its
shade-trees and lawn, create an inappropriable utility
which distributes itself among neighboring |)roprietors.
Its presence is indicated, and its measure expressed, by
the increased price of adjoining property.

In the case of railroads the inappropriable utilities
are so great as almost to overbalance those which can
be retained by the owners. The railroad creates a

216 NON -COMPETITIVE ECONOMICS.

value far in excess of that wliich its projectors can
realize ; and tliis distributes itself among the adjacent
population, and appears in the enhanced value of lands
and the increased rewards of general industry. It has
often happened that a railroad which enriched the popu-
lation of the section which it traversed, rendered its
projectors bankrupt.

The granting of public aid to railroad companies is a
recognition of the principle of inappropriable utilities ;
it is a payment, by the public, for a value which the
company is compelled to transfer to it from sheer in-
ability to retain it for itself. The land grant is a crude
mode of effecting this payment, which has very properly
been discontinued because of the abuses which it has
entailed. The values created attach in part to the
lands granted to the company, and in part to the alter-
nate sections which, by the practice of our government,
have been reserved for itself. The public and tlie com-
})any thus share e(i[ually in this jjarticular benefit.

Much of the utility created by the building and
operation of the railroad remains inappropriable. The
important fact is, that tliis portion becomes a matter of
indifference to the corporation, l^cnelits which the rail-
road company confers, but for which it can secure no
reward, are of no consequence to it ; they may, there-
fore, be sacrificed witli impunity. Through the work-
ing of this princi])le of inappropriable ntilities, much of
the welfare of large populations is intrusted to corpo-

MON-COMPETlTiVE ECONOMICS. 217

rations having no interest in maintaining it. It will be
subserved as long as the company has nothing to gain
by sacrificing it, not longer.

Recently, in our country, the company or its man-
agers have often had sometliing to gain by sacrificing
the welfare of the inhabitants of the districts through
which they pass. Discriminating rates for transporta-
tion, as well as other abuses, have recklessly made or
marred the welfare of sections of the country. The
State is involved in this ; it has an interest in the elu-
sive but real utilities which a railroad, properly man-
aged, scatters throughout a land. Can it best secure
them by supervising the railways or by owning them ?
Experience thus far strongly favors the former alterna-
tive, as both more profitable and more safe. That
which places the regulating and the owning of railroads
by the state in the same category with public education
is the fact that in both cases does a public agency
intervene in oider to secure the general diffusion of im-
portant utilities.

It is evident that the principle of inappropriable util-
ities is applicable to every form of industry in which
the community has an independent interest, and in
especial to those of an educational and religious charac-
ter. The exem})tion of institutions of this kind from
taxation is a partial refunding of the value diffused by
them through the community.

There is, then, a province of economics not ordinarily

218 NON-COMPETITIVE ECONOMICS.

recognized, because wholly or partially outside of tiae
range of competition. The province has long been a
considerable one, and the changes now in progress, the
development of the system of arbitration and of that of
cooperation, will ultimately give to it a vastly greater
extension. A portion of it has failed to receive atten-
tion from economists in consequence of illogical concep-
tions of wealth, which excluded its highest forms, and
thus restricted the scope of economic science by ruling
out entire provinces of industry. Reinstate these de-
partments of economic life, recognize the true wealth-
producing function of such agents as the church and
the school, and the extent and importance of the non-
competitive division of political economy becomes ap-
parent. We have hastily traced the boundaries of this
division, with especial reference to the older portion of
it. The free disbursal of products essential to the pub-
lic welfare, has been secured by a departure from ordi-
nary distributive methods. The ground of the radical
difference between the two economic methods is a
matter of both scientific and general interest, and we
have found it in a teleologic principle in society, a quest
for a wealth that, in quantity, quality, and distribution,
shall conform to the requirements of enlightened reason.
Within the limits which we have indicated, society has
better attained its end by abandoning its usual competi-
tive mode of action.

We have aimed, incidentally, to bring into view the

NON-(i()MI'K/nTLVE ECONOMICS. 219

sovereignty of moral law in tlie economic practice of
the world. If competition were supreme, it would be
supremely immoral ; if it existed otherwise than by
sufferance, it would be a demon. Nothing could be
wilder or fiercer than an unrestricted struggle of mil-
lions of men for gain, and nothing more irrational than
to present such a struggle as a scientific ideal. If it be
pruned of its greater enormities, as in actual life is
done, if combinations restrict its field, and if arbitration
and cooperation assume some of its functions, it still
requires discernment to see the agency of moral law
amid the abuses that remain. If, however, the sole end
for which the process is tolerated is the suppression of
greater and more general injustice, and if a superior
power is ready to abolish it wherever it fails to fulfil
this end, it may be classed, not as an ideal, but as an
available means of approaching an ideal. In this view
only are we secure from the blank confusion of suppos-
ing that the comprehensive field of economic life is
alone outside of the controlling influence of morality.
The insight that can detect providential design in the
uglier forms of external nature, should detect it, also,
in the repulsive phenomena of organized industry, in
the "higgling of the market," the altercations of the
civil law, and the ignoble scramble for personal profit.

As thus apprehended, there is no apotheosis of selfish-
ness in the theory of political economy, and there is no
necessarily corrupting effect from the practical out-

220 NON-COMPETITIVE ECONOMICS.

working of its principles. Recognizing the competitive
struggle, wherever it survives, as the imperfect agent
of moral law, a man may participate in it without taint.
The bad effects of the contest he does not need to
suffer; and to the lower levels, where the golden calf-
worship is unhindered and blighting, he does not need
to descend. It is his privilege to live on the moun-
tainous slope at the summit of which moral law reigns.
He may buy, sell, and get gain, as well as give thanks
and worship, with Ids eyes uplifted to the hills whence
cometh his help.

CHAPTER XTT.

THE ECONOMIC FUNCTION OF THE CHURCH.

The daily bread of the world is the chief subject
of political economy. If men were purely material,
physical nourishment would suffice for them ; but
spiritual natures require spiritual nutriment. If what
furnishes this nutriment were a purely immaterial
thing, it would, as such, be removed from the domain
of wealth, and thus from the field of economic science ;
but it is not so. It has, in fact, a material basis, and
falls within the limits of the economist's studies ; the
students of this science have other than literal loaves
to consider.

The consideration of forms of wealth which minister
to spiritual wants is, indeed, necessary in the interest
of religion. Certain modern religious problems need
to be approached as well from the material as from the
spiritual side ; it is the economist who can, if he will,
point out the chief danger which threatens the church.
That which now concerns us is the fact that such a
study is necessary in order to complete the science of
political economy.

We have already noticed the wide range of applica-
tion which current definitions of wealth must have if

222 THE ECONOMIC FUNCTION OF THE CHURCH.

consistently adhered to. While wealth always has a
material basis, that basis is not necessarily solid or
durable. Vibrations of air may be shaped into artistic
form by the violin or the voice, and become com-
modities as truly as the stone which is shaped by the
sculptor's chisel. Such products as musical notes,
perishable as they are, produce lasting effects on the
mind, and are valuable accordingly in the market.
Concert tickets convey a title to them, and these are
not to be had without money. The delicate material
commodities which diffuse themselves, for a time,
through the concert hall, are essential to the sjiiritual
effects which follow from their use ; there could be
none of the mental eifects of music without the material
undulations. As long as tremulous air thus holds
within itself the power to impress the soul of man, it
is subject for the economist ; it is his business to investi-
gate its laws as wealth. When these effects exist only
as impressions on the mind, he may turn them over to
the metaphysician ; they are commodities no longer.
Bread is a commodity only while on its way from the
oven to the organ of digestion ; after that it is subject
for the physiologist; and that form of bread for the
mind which we term music is, in like manner, a com-
modity only while in transitu.

Musical forms are not the only ones that can be
impressed on vibrations of air. Marble may be chiselled
into letters as well as images; and air vibrations may

THE ECONOMIC FUNCTION OF THE CHURCH. 223

be shaped into forms of intelligence as well as into
those of beauty. Spoken words may be commodities
in the market, as well as musical notes. They are
recognized as such ; lecture tickets sometimes convey a
title to them, and these are property, sold and paid for.
A preacher's spoken word has, in like manner, its place
on the inventory of social wealth ; sermons, as deliv-
ered, are property. The hymn and the sermon are to
be regarded as forms of nutriment for the soul, which
are commodities while in transitu from their source to
the organ of spiritual digestion.

Regarded in the prosaic light of economy, church
edifices become j)laces where sjjiritual nutriment is
disbursed. Forms of wealth which minister to spiritual
wants are here produced, distributed, exchanged, and
consumed. Economic laws are general, and apply to
higher as well as lower forms of wealth. Spiritually,
we dine in commons, on the cooperative principle, once
a week, Avitli occasional lunches between whiles. The
clergyman is a minister, in that he provides and dis-
tributes food. In former years the meals were prepared
with Spartan simplicity ; but of late they have been
greatly elaborated. In spiritual as in physical meals, it
is the appetizing element that is expensive ; reduced
to simple nutriment, a meal of either kind could be had
very cheaply.

There is, then, a department of economic science
which considers forms of material wealth whicli minister

224 THE econo:mig function of the chukch.

to spiritual wants. The relations of rich and poor are
alike in the lower and the higher economic depart-
ments. The highest forms of wealth have their laws of
distribution, and, in the course of social development,
large classes are deprived of them. The laws of
spiritual poor-relief are of importance to the economist.

The kind of spiritual poor-relief to be discussed here
does not fall under the head of charity. Place a dozen
men, each in his own boat, on the open sea, and start
them for the nearest land. They are on an equality
and completely independent. If any will not row, his
destruction is on his own liead. If any try to row and
fail, it is the great law of charity, and tliat only, whicli
constrains another to help him. If any venture to
burden himself by towing a weaker brother to the
shore, he is compelled to do so by no law legal or
equitable, but the universal law of love.

But that is no picture of actual society. No man
can paddle his own canoe as a member of that great
social oi'ganism in which each individual labors, not
for himself, but for the whole, and is dependent on the
whole for employment and for pay. Independence is
the law of isolation ; interdependence is the law of
society. Again and again, in actual history, society
ceases to desire the product of a ])articular man's
labor. The organic whole is in the position of em-
ployer to the millions who work, and it cannot always
keep them busy ; but it is not at liberty to starve

THE ECOiJOMIC FUNCTION OF THE CHURCH. 225

them. It may take away their comforts ; but, if it
take their lives, it is murder. Civilization has placed
us all in one boat ; by mutual help we are sailing the
homeward-bound ship of humanity. He who will not
help may be thrown overboard, possibly ; but he who,
by force of circumstances, cannot, must be carried to
the end.

It is thus in the nature of the social organism that the
great principle of English law which asserts the ultimate
right of every man to a maintenance finds its philo-
sophical ground. That is an evil teaching which
ventures to question this principle, and it would fare ill
with a state which should attempt to follow such
teaching in practice. Such action would surrender to
the communists the championship of a great truth ; it
would place society in the wrong, and revolutionists in
the right.

When a man who has had no hand in getting his
neighbor into trouble, lends his aid in getting him out,
that is charity. When an organized society relieves
suffering which the society as a whole has caused, that
is justice. Whatever part of the poor-tax goes to
relieve sufferings resulting from general social causes,
is paid, not given ; the claim to it is as equitable as that
of any officer to his salary. We may assume as a
premise the principle asserted in the poor-law of Queen
Elizabeth, which established the right of every man,

226 THE ECONOMIC FUNCTION OF THE CHURCH.

not to be kept in idleness, indeed, but to be kept, while
willing to work, from absolutely starving.

The higher nature may starve as well as the lower ;
and the duty of preventing such starvation has hereto-
fore been made to rest mainly on spirit,ual grounds, and
presented as a high order of charity. We place it on
the ground of justice. The soul of man is not inde-
pendent ; the organic union of mankind includes mind
as well as matter, and it is its nature, in every relation,
to absorb and to subordinate the individual lives which
are its molecules. He who is born into such a society
is never independent in body or mind.

The healthy life of the soul of individual man is prac-
tically dependent on material aids ; the higher life of
the social organism is absolutely so dependent. Inter-
communication is necessary to it. Sometimes by im-
pressing forms of intelligence on insubstantial air,
sometimes by printing them on more durable paper,
an interchange of thought and feeling is established
which unites the life of individuals into a single whole ;
it gives to society an organic soul.

That universal society, which, without any reference
to particular sects, we term the church, controls the
material aids to religious life. These aids are forms of
wealth. The place of worship with its furnishings, the
Bibles and books of song, much of the music, and most
of the spoken words, are property, bought and paid for.
Economic science st()})s at nothing in asserting its juris-

THE ECONOMIC FUNCTION OF THE CHURCH. 227

diction over what really belongs to it. It claims, even
to the farthest echo, the sound of the chimes that call
the worshippers together, when the paid organist rings
them. It ventures to claim the material instrument,
air vibrations still, by which the prayers of the assem-
bled multitude are held in unison and made to become
the prayer of an organic whole. There, however, its
audacious foot halts. The prayer itself is none of its
property; only the strictly material instrument that
expresses it. We have penetrated, in our scientific
temple, to the Gentiles' court, where buying and selling
are admissible ; the inner sanctuary we may not enter.

Living not by literal bread alone, but by spiritual
impulses, foot-pounds of dynamic force which originate
beyond the sphere of matter, but diffuse themselves
through society by material means, man may starve
spiritually in consequence of material privation. Such
a famine is an economic fact, full of peril even to the
lower interests of society. The duty of averting it
has been recognized by civilized states, and a free dis-
bursal of the means of intellectual and aesthetic culture
has partly accomplished this end. The distinctively
religious portion of this food for the mind has, by some
governments, been included in the public disbursal.
That our own government has surrendered this function
has been due, not to any undervaluation of the end to
be gained, but to an inability to gain it by state action.

The general conservation of moral energy is, indeed,

228 THE ECONOMIC FUNCTION OF THE CHURCH.

not altogether surrendered by the government ; codes
of law are efficient educators. The religious depart-
ment of popular education has been handed, as a sacred
trust, to voluntary organizations ; and the duty rests on
them, in simple fidelity to the state, of continuing that
free disbursal of the highest products of human effort
which has always been essential to the public welfare,
and which is becoming doubly so, as the competitive
forms of industry diminish, and as the newer processes
of distribution increase.

The church has not been indifferent to this trust ; it
is the great giver of modern times. Not a week passes
that it does not scatter its valuable products through-
out the community. That which costs millions of
dollars is, in this way, offered without reserve to who-
ever will take it. The offer is not wholly rejected ; in
the evening services of most churches, and in the morn-
ing services of many, there is seen a free disbursal of
the products on which the state is becoming more and
more dependent. Mere denunciation of the church for
delinquency in this direction is as mischievous as it is
unintelligent.

It is, of course, to be expected that, like the other
agencies which dispense rational wealth, the church
should procure Avhat it disburses iu the ordinary mer-
cantile way. The cost of its ])roducts is governed by
ordinary laws. It must pay for buildings, furnishings
and books the prices which demand and suj)ply deter-

THE ECONOMIC FUNCTION OF THE CHUKCH. 229

mine. It must hire musicians and preachers at salaries
which the tests of the market determine for their
services. It is the disbursal of the products that should
not be competitive. Here the principle of free giving
to all who will accept should, in the interest of society,
prevail, and the cost should be defrayed by non-mer-
cantile methods. It may be that all who receive the
products should contribute to the expense of creating
them ; but they should not buy them, and should cer-
tainly not buy the spiritual nutriment which the church
offers in a vitiated form, or in combination with a base
element attached to it for the purpose of making it
saleable. This method of corrupting the merchandise
of the church we shall examine.

The present industrial condition has come suddenly
upon society ; and it is partly for this reason that the
interaction of economic and spiritual forces has only
begun to receive attention. The trend of the old
political economy was in the reverse direction ; and we
are but just becoming fully conscious that the industrial
system depends absolutely on moral influences, and
that these depend on material aids.

Even recent and valuable studies of the causes which
have alienated workingmen from the church have
failed to present clearly the distinctively economic
element in the situation. Tliis element is all that
it is either desirable or legitimate to present here.
Certain causes have vitiated the highest products

230 THE ECONOMIC FUNCTION OF THE CHURCH.

of liunuin effort, and have cliaiiged for the worse the
mode of disbursing them. A low mercantile principle
has, in an insidious way, acquired a degree of control
over one department of church activity. Without the
conscious acquiescence of the members of the church,
and, of late, even against their wishes and efforts, the
organization has become entangled in the meshes of
the commercial system which environs it, and so ceased
to be, to the extent which the public interest demands,
the free disburser of rational wealth.

The causes and the effects of this half-unconscious
breach of trust fall partly within the limits of economic
study. There is difficulty inherent in the plan of
maintaining different social classes at the same table,
literal or spiritual. Under a regime of Spartan sim-
plicity a community may be conceived of as dining
literally in commons ; but it is Spartan broth that they
would get. Repeal the wise laws of Lycurgus against
luxury, and the rich will soon have a table to them-
selves ; and the manner in which this will come about
illustrates what is occurring at our spiritual dining-
table. With gold in his pocket, instead of corroded
iron, a Spartan communist would want something bet-
ter than barley soup. Under such circumstances the
(quality of the food would be likely to be improved.
Under the influence of strong fraternal feeling the
poor might remain for a time ; but to pay tlieir share
would be burdensome, and to remain as beneficiaries

THE ECONOMIC FUNCTION OF THE CHURCH. 231

would be irksome. They would gradually withdraw,
aud each withdrawal would facilitate the process of
improving the quality of the meal and increasing its
expense. The process would naturally continue until
the wealthy should be left alone in the enjoyment of an
elegant and costly entertainment.

Such a case is ideal ; but it becomes actual when we
consider not physical but spiritual living. The Puritan
church of America lived in voluntary commons, in
extreme simplicity. Its spiritual diet was nourishing,
but the opposite of luxurious. Two centuries have
seen the growth of differences of wealth, the adoption
of a more luxurious spiritual table, and the withdrawal
of a majority of the poor.

The introduction of costly elements into religious
services might not have been a vitiating element in the
disbursal of moral nutriment, had the needed revenue
come from the public treasury. It appears not to have
that effect in the Roman Catholic church of European
countries. The revenue system of the American
Protestant church is the peculiar product of a mercan-
tile age. It is not too much to say that this organization
has, in comparative unconsciousness, developed the
most unworthy form of mercantilism which the old
economic regime has brought into existence. The com-
petitive system, in its latter days, has laid an evil hand
upon the activities of the church.

We noticed, in an early chapter of this book, the

232 THE ECONOMIC FUNCTION OF THE CHURCH.

dominant influence of fashion in the production and
sale of many utilities. The product which has a caste-
making power becomes thereby an object of intense
desire. The costliest products of nature and art com-
mand their price because they act as badges of social
station. Give to the homeliest article of common
necessity a supplementary power to mark its possessor
as a superior atom in the social organism, and he will
pay a high price for it. The garment that is cut
according to the latest mode appeals to a simple natural
want and to personal vanity at the same time. The
jewel that is to-day in vogue satisfies an aesthetic want
which counts as one, and an ambitious craving which
counts as ten, in the determining of its market value.
Each of these products is a composite of rational utility
and vanity ; and each depends on the latter element
for its costliness.

The church makes, for financial reasons, a similar com-
bination ; and the disastrous feature of the process is
that the baser and costlier element here vitiates the
better one. The church does not literally sell the
gospel ; it practically gives it away, and gets a revenue
from the base tinsel which it combines with it. It
rents pews, and so grades them as to appeal to the
same subtle weakness of human nature which gives a
high market value to everything which has a caste-
making power. He who pays for one pew ten times
the price that would secure another differently located

THE ECONOMIC FUNCTION OF THE CHURCH. 233

pays little or nothing for spiritual nutriment ; he pays
something for comfort, and much for the gratification
of that subtle ambition which everywhere craves the
high places in the sociiil gradation. The proceeding
draws lines of caste, in indefinite number, throughout
the audience-room, and invokes, for the purpose of
raising a revenue, a spirit which is well known to be
fatal not only to the success of the sj^iritual work for
which the church was founded, but also to the success
of the work which the state demands of it in the new
industrial era.

If a new and higher type of industrial organization
shall develop from the present chaotic condition, it will
be one that will have, as its distinctive principle, frater-
nity among men. It will harmonize warring elements,
and enable humanity to live by accepting, as a great
family, the bounty of nature, working in harmony and
dividing the fruits of labor in peace. As the fountain-
head of the chief moral and spiritual influence, the
church should be the great unifier, the principal author
of that fraternal spirit on which higher industrial de-
velopment depends. It is, in fact, the promoter of
class antagonism; by its method of gaining a revenue
it is widening the gulf that needs to be closed.

A church that openly appeals to the caste spirit de-
stroys its power to assimilate the multitude for whose
welfare it exists, loses its vitalizing principle, and
becomes a lump which, though in itself it were manna,

234 THE ECONOMIC FUNCTION OF THE CHURCH.

will not leaven a measure of meal, though it lie hidden
in it forever. Wiser than the children of light are the
members of the friendly societies, secret orders, and
trades unions which modern economic tendencies have
developed. Whatever of moral nutriment they dis-
burse they scatter among their members on a demo-
cratic principle. The church must do likewise or
surrender its moral leadership. It must fight the
caste-making tendency as it would the Spirit of Dark-
ness, and not foster it, Demas-like, for the revenue
which it offers.

Entering on a course that is as full of peril as it is of
promise, society demands that every moral agency shall
be in the fullest working order. Least of all can it
dispense with the work that addresses itself directly to
the personal character of individual men. Everywhere
we hear the appeal to the church, as the agent that
can most efficiently aid in the economic redemption of
humanity. There can be no retreat in the general
course of moral progress upon which the world has
lately entered ; and institutions as well as men are to
be sifted by it. " On earth peace ; " such is the fruit
by which we are to know a church that is true to the
mission for which it was founded. Fraternity is the
result and the test of true Christianity working through
sound economic forms. This test, if intelligently ap-
plied, will be found to condemn, not the spirit of the
church, but its outward methods. That the organiza-

THE ECONOMIC FUNCTION OF THE CHUliCH. 235

tion which now broadens the gulf between social classes
may become the chief agent in closing it, there is
needed, not the miracle of a totally new spirit among
its members, but the adoption of outward forms less
mercantile than those now prevalent, and more in
harmony with the new economic era.

It is sometimes said that men must be actuated in all
their dealings by Christian love, if the labor question is
ever to be settled. This is demanding a transformation
of human nature, and is equivalent to abandoning the
hope of securing a favorable issue of the contests now
in progress by means of forces at present available.
Humanity is approaching the Christian ideal surely
and not always slowly ; it will be nearer to it next year
than it is now, and it will doubtless be appreciably
nearer to it when the next generation is upon the field
of action. More generations must pass than any one
can estimate before the ideal will be fully attained ;
and in the meanwhile the social conflict is upon us.
Have we nothing to oppose to the brute forces that, in
a night, as it were, have sprung into full activity, ex-
cept the margin of moral improvement which an inter-
val of waiting and working may secure ?

It is the duty of the economist to study social forces
as they are, or at least as they will be in the near
future. Influences which ought now to exist, and
which will exist in a millennial age, are not material
for present economic calculation. The characteristic of

236 THE ECONOMIC FUNCTION OF THE CHURCH.

the changes in actual progress in the business world is
the liberation of moral energy ; an existing force has
been unfettered by the industrial revolution. The com-
petitive system in its degenerate form held under repres-
sion a limitless moral power which the better system
now developing is already beginning to call into action.
The church is the natural conservator of this force, not
only within the limits of its membbrship, but in society
at large. In many ways it diffuses the spiritual impul-
ses that are communicated to it; and while this work
still has, as its chief end, the moulding of character it-
self, it has, as a secondary end, the improvement of the
economic relations of men. The church wields a pri-
mary force in the new economic system, and is, to that
extent, an arbiter of men's earthly fortunes. In a lit-
eral sense its field is the world ; and while it may
hasten the advent of earthly i)eace by gathering men
more rapidly into its spiritual fold, it may also hasten
the spiritual work by promoting outward harmony. To
a certain extent the higher service waits on the lower,
and for the sake of every interest entrusted to its keep-
ing the church is called upon to use the economic
power entrusted to it.

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RUPERT'S GUIDE

TO THK

STUDY OF THE HISTORY AND THE CONSTI-
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By WILLIAM W. RUPERT,

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i2mo. Cloth. 130 pages. For Introduction, 70 cents.

The first part of this work contains a carefully arranged
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