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Title: Principles of Political Economy

Author: Arthur Latham Perry

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PRINCIPLES OF POLITICAL ECONOMY.

PROFESSOR PERRY'S WORKS ON POLITICAL ECONOMY.

1. INTRODUCTION TO POLITICAL ECONOMY.
Fifth Edition. 12mo. 357 pp. Price, $1.50.

2. PRINCIPLES OF POLITICAL ECONOMY.
8vo. 585 pp. Price, $2.00.

3. POLITICAL ECONOMY. Twenty-First Edition.
Crown 8vo. 600 pp. Price, $2.50.

PRINCIPLES
OF

POLITICAL ECONOMY

BY
ARTHUR LATHAM PERRY, LL.D.
Orrin Sage Professor of History and Political Economy in Williams
College

"No task is ill where Hand and Brain
And Skill and Strength have equal gain,
And each shall each in honor hold,
And simple manhood outweigh gold."

Whittier.

NEW YORK
CHARLES SCRIBNER'S SONS
1891

COPYRIGHT, 1890,
BY ARTHUR LATHAM PERRY.

Dedication.

TO MY PERSONAL FRIEND OF LONG STANDING
J. STERLING MORTON
OF NEBRASKA

A FRIEND OF THE PEOPLE ALSO

FOUNDER OF ARBOR DAY

PREFACE.
It is now exactly twenty-five years since was published my first book upon
the large topics at present in hand. It was but as a bow drawn at a venture,
and was very properly entitled "Elements of Political Economy." At that
time I had been teaching for about a dozen years in this Institution the
closely cognate subjects of History and Political Economy; cognate indeed,
since Hermann Lotze, a distinguished German philosopher of our day,
makes prominent among its only five most general phases, the "industrial"
element in all human history; and since Goldwin Smith, an able English
scholar, resolves the elements of human progress, and thus of universal
history, into only three, namely, "the moral, the intellectual, and the
productive."
During these studious and observant years of teaching, I had slowly come to
a settled conviction that I could say something of my own and something of
consequence about Political Economy, especially at two points; and these
two proved in the sequel to be more radical and transforming points than
was even thought of at the first. For one thing, I had satisfied myself, that
the word "Wealth," as at once a strangely indefinite and grossly misleading
term, was worse than useless in the nomenclature of the Science, and would
have to be utterly dislodged from it, before a scientific content and
defensible form could by any possibility be given to what had long been
called in all the modern languages the "Science of Wealth." Accordingly, so
far as has appeared in the long interval of time since 1865, these "Elements"
were the very first attempt to undertake an orderly construction of
Economics from beginning to end without once using or having occasion to
use the obnoxious word. A scientific substitute for it was of course required,
which, with the help of Bastiat, himself however still clinging to the
technical term "Richesse," was discerned and appropriated in the word
"Value"; a good word indeed, that can be simply and perfectly defined in a
scientific sense of its own; and, what is more important still, that precisely
covers in that sense all the three sorts of things which are ever bought and
sold, the three only Valuables in short, namely, material Commodities,

personal Services, commercial Credits. It is of course involved in this
simple-looking but far-reaching change from "Wealth" to "Value," that
Economics become at once and throughout a science of Persons buying and
selling, and no longer as before a science of Things howsoever manipulated
for and in their market.
For another thing, before beginning to write out the first word of that book,
I believed myself to have made sure, by repeated and multiform inductions,
of this deepest truth in the whole Science, which was a little after embodied
(I hope I may even say embalmed) in a phrase taking its proper place in the
book itself,—A market for Products is products in Market. The fundamental
thus tersely expressed may be formulated more at length in this way: One
cannot Sell without at the same instant and in the same act Buying, nor Buy
anything without simultaneously Selling something else; because in Buying
one pays for what he buys, which is Selling, and in Selling one must take
pay for what is sold, which is Buying. As these universal actions among
men are always voluntary, there must be also an universal motive leading
up to them; this motive on the part of both parties to each and every Sale
can be no other than the mutual satisfaction derivable to both; the inference,
accordingly, is easy and invincible, that governmental restrictions on Sales,
or prohibitions of them, must lessen the satisfactions and retard the progress
of mankind.
Organizing strictly all the matter of my book along these two lines of
Personality and Reciprocity, notwithstanding much in it that was crude and
more that was redundant and something that was ill-reasoned and unsound,
the book made on account of this original mode of treatment an immediate
impression upon the public, particularly upon teachers and pupils; new
streaks of light could not but be cast from these new points of view, upon
such topics especially as Land and Money and Foreign Trade; and nothing
is likely ever to rob the author of the satisfaction, which he is willing to
share with the public, of having contributed something of importance both
in substance and in feature to the permanent up-building of that Science,
which comes closer, it may be, to the homes and happiness and progress of
the People, than any other science. And let it be said in passing, that there is
one consideration well-fitted to stimulate and to reward each patient and
competent scientific inquirer, no matter what that science may be in which
he labors, namely, this: Any just generalization, made and fortified

inductively, is put thereby beyond hazard of essential change for all time;
for this best of reasons, that God has constructed the World and Men on
everlasting lines of Order.
As successive editions of this first book were called for, and as its many
defects were brought out into the light through teaching my own classes
from it year after year, occasion was taken to revise it and amend it and in
large parts to rewrite it again and again; until, in 1883, and for the
eighteenth edition, it was recast from bottom up for wholly new plates, and
a riper title was ventured upon,—"Political Economy,"—instead of the
original more tentative "Elements." Since then have been weeded out the
slight typographical and other minute errors, and the book stands now in its
ultimate shape.
My excellent publishers, who have always been keenly and wisely alive to
my interests as an author, suggested several times after the success of the
first book was reasonably assured, that a second and smaller one should be
written out, with an especial eye to the needs of high schools and academies
and colleges for a text-book within moderate limits, yet soundly based and
covering in full outline the whole subject. This is the origin of the
"Introduction to Political Economy," first published in 1877, twelve years
after the other. Its success as a text-book and as a book of reading for young
people has already justified, and will doubtless continue to justify in the
future, the forethought of its promoters. It has found a place in many
popular libraries, and in courses of prescribed reading. Twice it has been
carefully corrected and somewhat enlarged, and is now in its final form. In
the preface to the later editions of the "Introduction" may be found the
following sentence, which expresses a feeling not likely to undergo any
change in the time to come:—"I have long been, and am still, ambitious that
these books of mine may become the horn-books of my countrymen in the
study of this fascinating Science."
Why, then, should I have undertaken of my own motion a new and third
book on Political Economy, and attempted to mark the completion of the
third cycle of a dozen years each of teaching it, by offering to the public the
present volume? One reason is implied in the title, "Principles of Political
Economy." There are three extended historical chapters in the earlier book,
occupying more than one-quarter of its entire space, which were indeed

novel, which cost me wide research and very great labor, and which have
also proven useful and largely illustrative of almost every phase of
Economics; but I wanted to leave behind me one book of about the same
size as that, devoted exclusively to the Principles of the Science, and using
History only incidentally to illustrate in passing each topic as it came under
review. For a college text-book as this is designed to become, and for a
book of reading and reference for technical purposes, it seems better that all
the space should be taken up by purely scientific discussion and illustration.
This does not mean, however, that great pains have not been taken in every
part to make this book also easily intelligible, and as readable and
interesting as such careful discussions can be made.
A second reason is, to provide for myself a fresh text-book to teach from.
My mind has become quite too thoroughly familiarized with the other, even
down to the very words, by so long a course of instructing from it, for the
best results in the class-room. Accordingly, a new plan of construction has
been adopted. Instead of the fourteen chapters there, there are but seven
chapters here. Not a page nor a paragraph as such has been copied from
either of the preceding books. Single sentences, and sometimes several of
them together, when they exactly fitted the purposes of the new context,
have been incorporated here and there, in what is throughout both in form
and style a new book, neither an enlargement nor an abridgment nor a
recasting of any other. I anticipate great pleasure in the years immediately
to come from the handling with my classes, who have always been of much
assistance to me from the first in studying Political Economy, a fresh book
written expressly for them and for others like-circumstanced; in which
every principle is drawn from the facts of every-day life by way of
induction, and also stands in vital touch with such facts (past or present) by
way of illustration.
The third and only other reason needful to be mentioned here is, that in
recent years the legislation of my country in the matter of cheap Money and
of artificial restrictions on Trade has run so directly counter to sound
Economics in their very core, that I felt it a debt due to my countrymen to
use once more the best and ripest results of my life-long studies, in the most
cogent and persuasive way possible within strictly scientific limits, to help
them see and act for themselves in the way of escape from false counsels
and impoverishing statutes. Wantonly and enormously heavy lies the hand

of the national Government upon the masses of the people at present. But
the People are sovereign, and not their transient agents in the government;
and the signs are now cheering indeed, that they have not forgotten their
native word of command, nor that government is instituted for the sole
benefit of the governed and governing people, nor that the greatest good of
the greatest number is the true aim and guide of Legislation. I am grateful
for the proofs that appear on every hand, that former labors in these
directions and under these motives have proven themselves to have been
both opportune and effective; and I am sanguine almost to certainty, that
this reiterated effort undertaken for the sake of my fellow-citizens as a
whole, will slowly bear abundant fruit also, as towards their liberty of
action as individuals, and in their harmonious co-operation together as
entire classes to the end of popular comforts and universal progress.
A. L. PERRY.
Williams College,
November 25, 1890.

TABLE OF CONTENTS
PAGE

CHAPTER I.
Value 1
CHAPTER II.
Material Commodities 80
CHAPTER III.
Personal Services 181
CHAPTER IV.
Commercial Credits 271
CHAPTER V.
Money 361

CHAPTER VI.
Foreign Trade 451
CHAPTER VII.
Taxation 540

INDEX 587

PRINCIPLES OF POLITICAL ECONOMY.

CHAPTER I.
VALUE.

The first question that confronts the beginner in this science, and the one
also that controls the whole scope of his inquiries to the very end, is: What
is the precise subject of Political Economy? Within what exact field do its
investigations lie? There is indeed a short and broad and full answer at hand
to this fundamental and comprehensive question; and yet it is every way
better for all concerned to reach this answer by a route somewhat delayed
and circuitous, just as it is better in ascending a mountain summit for the
sake of a strong and complete view to circle up leisurely on foot or on
horseback, rather than to dash straight up to the top by a cog-wheel railway
and take all of a sudden what might prove to be a less impressive or a more
confusing view.
The preliminary questions are: What sort of facts has Political Economy to
deal with, to inquire into, to classify, to make a science of? Are these facts
easily separable in the mind and in reality from other kinds of facts perhaps
liable to be confounded with them? Are they facts of vast importance to the
welfare of mankind? And are the activities of men everywhere greatly and
increasingly occupied with just those things, with which this science has
exclusively to do? Let us see if we cannot come little by little by a route of
our own to clear and true answers for all these questions.
If one should take his stand for an hour upon London Bridge, perhaps the
busiest bit of street in the world, and cast his eyes around intelligently to see
what he can see, and begin also to classify the things coming under his
vision, what might he report to himself and to others? Below the bridge in
what is called the "Pool," which was dredged out for that very purpose by
the ancient Romans, there lie at anchor or move coming and going many
merchant-ships of all nations, carrying out and bringing in to an immense
amount in the whole aggregate tangible articles of all kinds to and from the
remote as well as the near nations of the earth. All this movement of visible
goods, home and foreign, is in the interest and under the impulse of Buying

and Selling. The foreign goods come in simply to buy, that is, to pay for, the
domestic goods taken away; and these latter go out in effect even if not in
appearance to buy, that is, to pay for, the foreign goods coming in. At the
same hour the bridge itself is covered with land-vehicles of every sort
moving in both directions, loaded with salable articles of every description;
artisans of every name are coming and going; merchants of many
nationalities step within the field of view; and porters and servants and
errand-boys are running to and fro, all in some direct relation to the sale or
purchase of those visible and tangible things called in Political Economy
Commodities. Moreover, vast warehouses built in the sole interest of trade
on both sides the river above and below the bridge, built to receive and to
store for a time till their ultimate consumers are found, some of these
thousand things bought and sold among men, lift their roofs towards heaven
in plain sight. Doubtless some few persons, like our observer himself, may
be on the spot for pleasure or instruction, but for the most part, all that he
can see, the persons, the things, the buildings, even the bridge itself, are
where they are in the interest of Sales of some sort, mostly of Commodities.
What is thus true of a single point in London is true in a degree of every
other part of London, of every part of Paris and of Berlin, and in its measure
of every other city and village and hamlet in the whole world. Wherever
there is a street there is some exchange of commodities upon it, and
wherever there is a market there are buyers and sellers of commodities.
If the curiosity of our supposed observer be whetted by what he saw on
London Bridge, and if the natural impulse to generalize from particulars be
deepened in his mind, he may perhaps on his return to America take an
opportunity to see what he can see and learn what he can learn within and
around one of the mammoth cotton mills in Lowell or Fall River or Cohoes.
Should he take his stand for this purpose at one of these points, say Lowell,
he will be struck at once by some of the differences between what he saw
on the bridge and what he now sees in the mill. He will indeed see as before
some commodities brought in and carried out, such as the raw cotton and
new machinery and the finished product ready for sale, but in general no
other commodities than the cotton in its various stages of manufacture, and
those like the machinery and means of transportation directly connected
with transforming the cotton into cloth and taking it to market.

But he sees a host of persons both within and without the mill, all busy here
and there, and all evidently bound to the establishment by a strong unseen
tie of some sort; he sees varying degrees of authority and subordination in
these persons from the Treasurer, the apparent head of the manufactory,
down to the teamsters in the yard and the common laborers within and
without; he will not find the owners of the property present in any capacity,
for they are scattered capitalists of Boston and elsewhere, who have
combined through an act of incorporation their distinct capitals into a
"Company" for manufacturing cotton; besides their Treasurer present,
whose act is their act and whose contracts their contracts, he will see an
Agent also who acts under the Treasurer and directly upon the Overseers
and their assistants in the spinning and weaving and coloring and finishing
rooms, and under these Operatives of every grade as skilled and unskilled;
and lastly he will observe, that the direct representatives of the owners and
all other persons present from highest to lowest are conspiring with a will
towards the common end of getting the cotton cloth all made and marketed.
What is it that binds all these persons together? A little tarrying in the
Treasurer's office will answer this question for our observer and for us. He
will find it to be the second kind of Buying and Selling. At stated times the
Treasurer pays the salary of the Agent, and his own. He pays the wages of
the Overseers and the wages of all the Operatives and Laborers,—men and
women and children. Here he finds a buying and selling on a great scale not
of material commodities as before, but of personal services of all the
various kinds. Every man and woman and child connected with the factory
and doing its work sells an intangible personal service to the "Company"
and takes his pay therefor, which last is a simple buying on the part of the
unseen employers. Here, then, in this mill is a single specimen of this
buying and selling of personal services, which is going on to an immense
extent and in every possible direction in each civilized country of the world,
and everywhere to an immensely increased volume year by year.
Clergymen and lawyers and physicians and teachers and legislators and
judges and musicians and actors and artisans of every name and laborers of
every grade sell their intangible services to Society, and take their pay back
at the market-rate. The aggregate value of all these services sold in every
advanced country is probably greater than the aggregate value of the
tangible commodities sold there. At any rate, both classes alike,

commodities and services, are bought and sold under substantially the same
economic principles.
The inductive appetite in intelligent persons, that is to say, their desire to
classify facts and to generalize from particulars, almost always grows by
what it feeds on; and our supposed observer will scarcely rest contented
until he has taken up at least one more stand-point, from which to observe
men's Buying and Selling. Suppose now he enter for this purpose on any
business-day morning the New York Clearing-House. He will see about 125
persons present, nearly one half of these bank clerks sitting behind desks,
and the other half standing before these desks or moving in cue from one to
the next. The room is perfectly still. Not a word is spoken. The Manager of
the Clearing with his assistant sits or stands on a raised platform at one end
of the room, and gives the signal to begin the Exchange. No commodities of
any name or nature are within the field of view. The manager indeed and his
assistant and two clerks of the establishment who sit near him are in receipt
of salaries for their personal services, and all the other clerks present
receive wages for their services from their respective banks, but the
exchange about to commence is no sale of personal services any more than
it is a sale of tangible commodities. It is however a striking instance of the
buying and selling of some valuables of the third and final class of valuable
things.
At a given signal from the manager the (say) 60 bank messengers, each
standing in front of the desk of his own bank and each having in hand
before him 59 small parcels of papers, the parcels arranged in the same
definite order as the desks around the room, step forward to the next desk
and deliver each his parcel to the clerk sitting behind it, and so on till the
circuit of the room is made. It takes but ten minutes. Each parcel is made up
of cheques or credit-claims, the property of the bank that brings it and the
debts of the bank to which it is delivered. Accordingly each bank of the
circle receives through its sitting clerk its own debits to all the rest of the
banks, and delivers to all through its standing messenger its own credits as
off-set. In other words, each bank buys of the rest what it owes to each with
what each owes to it. It is at bottom a mutual buying and selling of debts.
There is of course a daily balance on one side or the other between every
two of these banks, which must be settled in money, because it would never
happen in practice that each should owe the other precisely the same sum

on any one day; but substantially and almost exclusively the exchange at
the Clearing-House is a simple trade in credit-claims. Each bank pays its
debts by credits. A merchant is a dealer in commodities, a laborer is a dealer
in services, and a banker is a dealer in credits. Each of the three is a buyer
and seller alike, and the difference is only in the kind of valuables specially
dealt in by each. In all cases alike, however, there is no buying without
selling and no selling without buying; because, when one buys he must
always pay for what he buys and that is selling, and when one sells he must
always take his pay for what he sells and that is buying. This is just as true
when one credit is bought or sold against a commodity or a service, and
when two or more credits are bought and sold as against each other, as it is
when two commodities or two services are exchanged one for the other.
But the Clearing-House is not by any means the only place where credits or
debts (they are the same thing) are bought and sold. Every bank is such a
place. Every broker's office is such a place. Every place is an establishment
of the same kind where commercial rights, that is, claims to be realized in
future time and for which a consideration is paid, are offered for sale and
sold. The amount of transactions in Credits in every commercial country
undoubtedly surpasses the amount in Commodities or that in Services.
Now our supposed observer and classifier, having noted on London Bridge
the sale of material commodities, and in the Lowell Mill the sale of
personal services, and within the New York Clearing-House the sale of
credit-claims, has seen in substance everything that ever was or ever will be
exhibited in the world of trade. He may rest. There is no other class of
salable things than these three. Keen eyes and minds skilled in induction
have been busy for two millenniums and a half more or less to find another
class of things bought and sold among men, and have not yet found it or
any trace of it. This work has been perfectly and scientifically done. The
generalization is completed for all time.
The genus, then, with which Political Economy deals from beginning to
end, has been discovered, can be described, and is easily and completely
separable for its own purposes of science from all other kinds and classes
and genera of things, namely, Salable things or (what means precisely the
same) Valuable things or (what is exactly equivalent) Exchangeable things.
In other words, the sole and single class of things, with which the Science

of Political Economy has to do, is Valuables, whose origin and nature and
extent and importance it is the purpose of the present chapter to unfold. We
have fully seen already that this Genus, Valuables, is sub-divided into three
species, and three only, namely, Commodities, Services, Credits. A little
table here may help at once the eye and the mind:—
ECONOMICS.

The Genus Valuables
{ Commodities
The Species { Services
{ Credits

If only these three species of things are ever bought and sold, then it
certainly follows that only six kinds of commercial exchanges are possible
to be found in the world, namely these:—

1. A commodity for a commodity.
2. A commodity for a personal service.
3. A commodity for a credit-claim.
4. A personal service for another service.
5. A personal service for a credit-claim.
6. One credit-claim for another.

Though the kinds of possible exchanges are thus very few, the exchanges
themselves in one or other of these six forms and in all of them are
innumerable on every business day in every civilized country of the globe.
And this point is to be particularly noted, that while buying and selling in
these forms has been going on everywhere since the dawn of authentic
History, it has gone on all the while in ever-increasing volume, it is
increasing now more rapidly and variously than ever, and moreover all
signs foretell that it will play a larger and still larger part in the affairs of
men and nations as this old world gains in age and unity.
Damascus is one of the very oldest cities of the world, and its very name
means a "seat of trade." We are told in the Scriptures, that Abraham about
2000 years before Christ went up out of Egypt "very rich in cattle, in silver,
and in gold," and the only possible way he could have acquired these

possessions was by buying and selling. He afterwards purchased the cave
and the field in Hebron for a family burial-place, and "weighed unto Ephron
the silver which he had named in the audience of the sons of Heth, four
hundred shekels of silver, current money with the merchant." We may
notice here, that there were then "merchants" as a class, that silver by
weight passed as "money" from hand to hand, and that in the lack of written
deeds to land, as we have them, sales were "made sure" before the faces of
living men, who would tell the truth and pass on the word. Abraham indeed
seems to have given the pitch for the song of trade sung by his descendants,
the Jews, from that day to this; for Jacob, his grandson, was a skilled
trafficker, not to say a secret trickster, in his bargains; and wherever in the
Old World or the New the Jews have been, there have been in fact and in
fame busy buyers and sellers.
But the Jews have had no special privileges in the realm of trade; on the
contrary, they have always been under special disabilities both legal and
social. Even in England, the most liberal country in Europe, they were
exiled for long periods, maltreated at all points of contact with other people,
more or less put under the ban of the Common and the Statute law, often
outrageously taxed on their goods and persons, and studiously kept out of
the paths of highest public employment even down to a time within the
memory of living men.[1] Yet so natural is the impulse to trade, so
universally diffused, so imperative also if progress is in any direction to be
attained, that the English and all other peoples were as glad to borrow
money, that is, buy the use of it, of the persecuted Jews, as the latter were to
get money by buying and selling other things, and then to loan it, that is,
sell the use of it, under the best securities (never very good) for its return
with interest, that they could obtain. Happily, the mutual gains that always
wait on the Exchanges even when their conditions are curtailed, of course
attended the mutilated exchanges between Jews and Christians: otherwise,
they would not continue to take place.
Christianity, however, as the perfected Judaism, gradually brought in the
better conditions, the higher impulses, and the more certain rewards, of
Trade, all which, we may be sure, were designed in the divine Plan of the
world. What is called the Progress of Civilization has been marked and
conditioned at every step by an extension of the opportunities, a greater
facility in the use of the means, a more eager searching for proper

expedients, and a higher certainty in the securing of the returns, of mutual
exchanges among men. There have been indeed, and there still are, vast
obstacles lying across the pathway of this Progress in the unawakened
desires and reluctant industry and short-sighted selfishness of individuals,
as well as in the ignorant prejudices and mistaken legislation of nations; but
all the while Christianity has been indirectly tugging away at these
obstacles, and Civilization has been able to rejoice over the partial or
complete removal of some of them; while also Christianity directly works
out in human character those chief qualities, on which the highest success
of commercial intercourse among men will always depend, namely,
Foresight, Diligence, Integrity, and mutual Trust; so that, what we call
Civilization is to a large extent only the result of a better development of
these human qualities in domestic and foreign commerce.
Contrary to a common conception in the premises, the sacred books of both
Jews and Christians display no bias at all against buying and selling, but
rather extol such action as praiseworthy, and also those qualities of mind
and habits of life that lead up to it and tend too to increase its amount, and
they constantly illustrate by means of language derived from traffic the
higher truths and more spiritual life, which are the main object of these
inspired writers. It is indeed true that the chosen people of God were
forbidden to take Usury of each other, though they were permitted to take it
freely of strangers, and that they were forbidden to buy horses and other
products out of Egypt, for fear they would be religiously corrupted by such
commercial intercourse with idolaters; but there is nothing of this sort in the
law of Moses that cannot be easily explained from the grand purpose to
found an agricultural commonwealth for religious ends, in which
commonwealth no family could permanently alienate its land, and in which
it was a great object to preserve the independence and equality of the tribes
and families. Throughout the Old Testament there is no word or precept that
implies that trade in itself is not helpful and wholesome; there were sharp
and effective provisions for the recovery of debts; there were any number of
exhortations to diligence in business, such as, "In the morning sow thy seed,
and at evening withhold not thy hand"; King Solomon himself made a
gigantic exchange in preparation for the temple with King Hiram of Tyre,
by which the cedars of Lebanon were to be paid for by the grain and oil of
the agricultural kingdom; chapter xxvii of the prophet Ezekiel is a graphic

description of the commerce of the ancient world as it centered in the
market of Tyre, a description carried out into detail both as to the nations
that frequented that market and as to the products that were exchanged in it,
—"silver, iron, tin, lead, persons of men, vessels of brass, horses, horsemen,
mules, horns of ivory, ebony-wood, carbuncles, purple work, fine linen,
corals, rubies, wheat, pastry, syrup, oil, balm, wine of Helbon, white wool,
thread, wrought iron, cassia, sweet reed, cloth, lambs, rams, goats, precious
spices, precious stones, splendid apparel, mantles of blue, embroidered
work, chests of damask, and gold"; and chapter xxxi of Proverbs describes
the model housewife in terms like these,—

"The heart of her husband trusteth in her,
And he is in no want of gain.
She seeketh wool and flax,
And worketh willingly with her hands.
She is like the merchants' ships;
She bringeth her food from afar.
She riseth while it is yet night,
And giveth food to her family,
And a task to her maidens.
She layeth a plan for a field and buyeth it;
With the fruit of her hands she planteth a vineyard.
She perceiveth how pleasant is her gain,
And her lamp is not extinguished in the night.
She putteth forth her hands to the distaff,
And her hands take hold of the spindle.
She maketh for herself coverlets;
Her clothing is of fine linen and purple.
She maketh linen garments and selleth them,
And delivereth girdles to the merchants."

Still more explicit and instructive are the words and spirit of the New
Testament. There cannot be the least doubt that the whole influence of
Christianity is favorable to the freest commercial exchanges at home and
abroad, because these depend largely on mutual confidence between man
and man, of which confidence Christianity is the greatest promoter. It may
be conceded at once that our Lord "overthrew the tables of the money-

changers and the seats of them that sold doves" within the sacred precincts
of the temple, but this, not because it is wrong to change money or sell
doves, but because that was not the place for such merchandising; so He
himself explained his own action in the sequel; provincial worshippers
coming up to Jerusalem must needs have their coins changed into the
money of the Capital, and must needs buy somewhere the animal victims
for sacrifice; but the whip of small cords had significance only as to the
place, and not at all as to the propriety, of such trading.
One of our Lord's parables, the parable of the Talents, sets forth in several
striking lights the privilege and duty and reward of diligent trading. "Then
he that had received the five talents went and traded with the same, and
made them other five talents." And when this servant came to the reckoning,
and brought as the result of his free and busy traffic "five talents more," the
prompt and hearty approval of his lord—"well done, thou good and faithful
servant"—becomes the testimony of the New Testament to the merit and the
profit and the benefit of a vigorous buying and selling. For this servant
could not have been authoritatively pronounced good and faithful if the
results of his action commended had been in any way prejudicial to others.
The truth is, as we shall abundantly see by and by with the reasons of it,
that any man who buys and sells under the free and natural conditions of
trade, benefits the man he trades with just as much as he benefits himself.
But the parable has a still stronger word in favor of exchanges. There was
another servant also entrusted with capital by his lord at the same time,
when the latter was about to travel "into a far country." We are expressly
told that distribution was made "to every man according to his several
ability," and thus this servant was only entrusted with a single talent, the
size of the capital given to him being in just proportion to the size of the
man,—the smallest share falling of course to the smallest man. But he had
the same opportunity as the two others. The world was open to him. Capital
was in demand, if not in those parts then in some other, to which, like his
lord, he might straightway take his journey. But when his time of reckoning
came, and he had nothing to show for the use of his capital, he upbraided
his lord as a hard man for expecting any increase, and brought out his bare
talent wrapped in a napkin, saying, "I was afraid, and I went and hid thy
talent in the earth." His wise lord at once denounced this servant as "wicked
and slothful," insisted that his money ought to have been "put to the

exchangers," and said finally in a just anger "cast ye the unprofitable
servant into outer darkness."
It is moreover in incidental passages of the Scriptures, in which the methods
of business are commended to the searchers after higher things, that we see
their high estimate of those methods and gains. "Buy the truth, and sell it
not; buy wisdom and understanding" (Prov. xxiii, 23). "Buying up for
yourselves opportunities" (Col. iv, 5). "I counsel thee to buy of me gold
refined by fire, that thou mayest be rich; and white garments, that thou
mayest be clothed; and eye-salve to anoint thine eyes, that thou mayest see"
(Rev. iii, 18). "But rather let him labor, working with his hands at that
which is good, that he may have to give to him that is in need" (Eph. iv, 28).
"But if any one provideth not for his own, and especially for those of his
own house, he hath denied the faith, and is worse than an unbeliever" (1
Tim. v, 8).
Now, the universal test and proof of any truth is its harmony with some
other truths. Does an alleged truth fall in with and fill out well some other
demonstrated and accepted proposition, or a number of such other
propositions? If so, then that truth is proved. Human reason can no further
go. The mind rests with relish and content in a new acquisition. To apply
this to the case in hand,—if men were designed of their Maker to buy and
sell to their own mutual benefit and advancement, if mankind have always
been buying and selling as towards that end and with that obvious result,
and if the Future promises to increase and reduplicate the buying and
selling of the Present in every direction without end, and all in the interest
of a broad civilization and a true and lasting progress; and if, in harmony
with these truths, the written revelation of God in every part of it assumes
that buying and selling in its inmost substance and essential forms be good
and righteous and progressive, and suitable in all its ends and methods to
illustrate and enforce ends and methods in the higher kingdom of spiritual
and eternal Life;—then these coördinate truths will logically and certainly
follow, (1) that Trade is natural and essential and beneficial to mankind; (2)
that it constitutes in an important sense a realm of human thought and
action by itself, separate from the neighboring realm of Giving, and equally
from the hostile realm of Stealing; and (3) that a careful analysis of what
buying and selling in its own peculiar nature is, a thorough ascertainment
and a consequent clear statement of its fundamental laws, and a faithful

exposure of what in individual selfishness and in subtle or open Legislation
makes against these laws, must be of large consequence to the welfare of
mankind.
Accordingly, let us now attempt such Analysis and Ascertainment and
Exposure. This is precisely the task that lies before us in this book—just
this, and nothing more. The term, "Political Economy," has long been and is
still an elastic title over the zealous work of many men in many lands; but
in the hands of the present writer during a life now no longer short, the term
has always had a definite meaning, the work has covered an easily
circumscribed field, and so the present undertaking concerns only Buying
and Selling and what is essentially involved in that. This gives scope and
verge enough for the studies of a life-time. This has the advantage of a
complete sphere of its own. Terms may thus be made as definite as the
nature of language will ever allow; definitions will thus cover things of one
kind only; and generalizations, although they may be delicate and difficult,
will deal with no incongruous and obstinate material.
1. The grandfather of the writer, an illiterate but long-headed farmer, was
able to give good points to his three college-bred sons, by insisting that they
look "into the natur on't." What, then, are the ultimate elements of Buying
and Selling? What are the invariable conditions that precede, accompany,
and follow, any and every act of Trade? Of course we are investigating now
and throughout this treatise the deliberative acts of reasonably intelligent
human beings, in one great department of their common foresight and
rational action. We have consequently nothing to do here with Fraud or
Theft or Mania or Gift. Acts put forth under the impulse of these are direct
opposites of, or at best antagonistic to, acts of Trade. They tend to kill trade,
and therefore they are no part of trade. These, then, and such as these, aside,
we will now analyze a single Act of Exchange at one time and place,—
which will serve in substance for all acts of exchange in all times and
places, and just find out for ourselves what are the Fundamentals and
Essentials of that matter, with which alone we have to do in this science of
Political Economy.
Incidental reference was had a little way back to an Exchange once made
between King Solomon of Jerusalem and King Hiram of Tyre. Let that be
our typical instance. (a) There were two persons, Solomon and Hiram.

Those two, and no more, stood face to face, as it were, to make a
commercial bargain. They made it, and it was afterwards executed. The
execution indeed concerned a great many persons on both sides, and
occupied a long period of time; but the bargain itself, the trade, the
exchange, the covenant, concerned only two persons, and occupied but a
moment of time. It made no difference with the bargain as such, with the
binding nature of it, with the terms of it, with the mutual gains of it, that
each person represented a host of others, subordinates and subjects, who
would have to coöperate in the carrying of it out, because each king had the
right to speak for his subjects as well as for himself, for commercial
purposes each was an agent as well as a monarch, the word of each
concluded the consent and the action of others as well as his own. Nor did it
make any, the least, difference with this exchange or the advantages of it,
that each party to it belonged to, was even the head of, independent and
sometimes hostile Peoples. Commerce is one thing, and nationality a totally
different thing. The present point is, in the words of the old proverb,—"It
takes two to make a bargain." And it takes only two to make a bargain.
When corporations and even nations speak in trade, they speak, and speak
finally, through one accredited agent. We reach, then, as the first bit of our
analysis of Trade, the fact, that there are always two parties to it, "the party
of the first part and the party of the second part."
(b) There were two desires, Solomon's desire for cedar-timbers to build the
temple with, and Hiram's desire for wheat and oil with which to support the
people of his sterile kingdom. "So Hiram gave Solomon cedar-trees and fir-
trees according to all his desire: and Solomon gave Hiram twenty thousand
measures of wheat for food to his household, and twenty measures of pure
oil." The desire of each party was personal and peculiar, known at first only
to himself, but upon occasion became directed towards something in the
possession of the other, and each at length became aware of the desire of the
other, and also of his own ability to satisfy the want of the other. If Solomon
could have satisfied his desire for timber by his own or his subjects' efforts
directly, this trade would never have taken place; if Hiram or his subjects
could have gotten the wheat and oil directly out of their narrow and sandy
strips of sea-coast, this trade would not have taken place; and so there must
be in every case of trade not only two desires each springing from a
separate person, but also each person must have in his possession

something fitted to gratify the desire of the other person, and each be
willing to yield that something into the possession of the other for the sake
of receiving from him that which will satisfy his own desire, and so both
desires be satisfied indirectly.
Here is the deep and perennial source of exchanges. Men's desires are so
many and various, and so constantly becoming more numerous and
miscellaneous, and so extremely few of his own wants can ever be met by
any one man directly, that the foundation of exchanges, and of a perpetually
increasing volume of exchanges, is laid in the deep places of human hearts,
namely, in Desires ever welling up to the surface and demanding their
satisfaction through an easy and natural interaction with the ever swelling
Desires of other men. Here too is a firm foundation (a chief foundation) of
human Society. Reciprocal wants, which can only be met through
exchanges, draw men together locally and bind them together socially, in
hamlets and towns and cities and States and Nations, and also knit ties
scarcely less strong and beneficent between the separate and remotest
nationalities of the earth. It is certain that an inland commercial route
connected the East of Asia with the West of Europe centuries before Christ,
and that a traffic was maintained on the frontier of China between the Sina
and the Scythians, in the manner still followed by the Chinese and the
Russians at Kiachta. The Sina had an independent position in Western
China as early as the eighth century before Christ, and five centuries later
established their sway under the dynasty of Tsin (whence our word "China")
over the whole of the empire. The prophet Isaiah exclaims (xlix, 12),
"Behold! these shall come from far; and behold! these from the North and
from the West; and these from the land of Sinim." The second bit of our
analysis leads to Desires as an essential and fundamental element in every
commercial transaction.
(c) There were two efforts, those of the Tyrians as represented by King
Hiram and those of the Israelites as represented by King Solomon. It was no
holiday task that was implied in the proposition of Solomon to the party of
the other part,—"Send me now cedar-trees, fir-trees, and algum-trees out of
Lebanon; for I know that thy servants are skilful to cut timber in Lebanon;
even to prepare me timber in abundance, for the house which I am about to
build shall be wonderfully great." On the other hand, the efforts insolved on
the part of the people of Israel in paying for these timbers, and for their

transportation by sea from Lebanon to Joppa, were equally gigantic.
Solomon's offer in return for the proposed service of the Tyrian king was in
these words,—"And behold, I will give to thy servants, the hewers that cut
timber, twenty thousand measures of beaten wheat, and twenty thousand
measures of barley, and twenty thousand baths of wine, and twenty
thousand baths of oil."
The reason why two efforts are always an element in every act of traffic,
however small or however large the transaction may be, is the obvious
reason, that the things rendered in exchange, whether they be Commodities,
Services, or Credits, invariably cost efforts of some kind to get them ready
to sell and to sell them, and no person can have a just claim to render them
in exchange, who has not either put forth these efforts himself or become
proprietor in some way of the result of such efforts. Efforts accordingly are
central in all trade. Every trade in its inmost nature is and must be either an
exchange of two Efforts directly, as when one of two farmers personally
helps his neighbor in haying for the sake of securing that neighbor's
personal help in his own harvesting, or an exchange of two things each of
which is the result of previous Efforts of somebody, as when a man gives a
silver dollar for a bushel of wheat. The third bit of the present analysis
brings us to Efforts, perhaps the most important factor in the whole list.
(d) There were also two reciprocal estimates, the estimate of King Hiram of
all the efforts requisite to cut and hew and float the timber, as compared
with the aggregate of efforts needed to obtain the necessary wheat and
barley and wine and oil in any other possible way; and the estimate of King
Solomon of all the labors required to grow and market these agricultural
products, as compared with what would otherwise be involved in getting
the much-wished-for timbers. Such estimates invariably precede every
rational exchange of products. It is not in human nature to render a greater
effort or the result of it, when a lesser effort or the result of it will as well
procure the satisfaction of a desire. Efforts are naturally irksome. No more
of them will ever be put forth than is necessary to meet the want that calls
them forth. No man in his senses will ever put more labor on anything, with
which to buy something else, than is necessary to get that something else by
direct effort or through some other exchange. Here we are on ground as
solid as the very substance of truth can make it. The Jews of Solomon's time
were too shrewd and sparing of irksome labor to devote themselves for

years to the toils of the field and of the vat to get by traffic the materials for
their temple, if they could have gotten those materials by a less expenditure
of toil in any other way. Those Phœnicians of Tyre and Sidon, the born
merchants of the East, the founders of commercial Carthage in the West, if
they could have extorted from the reluctant sands of their coast the cereals
and the vines and olives requisite for their own support with only so much
of exertion as was needed to get that to market with which to buy them,
would never have taken the indirect in preference to the direct method.
They took the indirect, because it was the easier, and therefore the better.
It may, accordingly, be laid down as a maxim, that men never buy and sell
to satisfy their wants but when that is the easiest and best way to satisfy
them. It saves effort. It saves time. It saves trouble. It divides labor. It
induces skill. It propels progress. But in order to determine which may be
the easier way, requires constant estimates on the part of each party to a
possible trade. Shall I shave myself or go to the barber? Before I decide, I
estimate the direct effort in the light of the effort to get that with which to
pay the barber for his service. If I trade with him, it is because I deem it
easier, cheaper in effort, more convenient in time. Trade means comparisons
in every case—comparisons by both parties—and in the more recondite and
complicated cases, elaborate comparisons and often comprehensive
calculations involving future time.
Now these estimates inseparable from exchanges, and these calculations
which are a factor in all the far-reaching exchanges, are mental activities.
They quicken and strengthen the minds of men. Trade is usually, if not
always, the initial step in the mental development of individuals and
nations. Desires stir early in the minds of all children; efforts more or less
earnest are the speedy outcome of natural desires; direct efforts, however, to
satisfy these soon reach their limits; it is now but a step over to simple
exchanges, by which the desires are met indirectly; exchanges once
commenced tend to multiply in all directions, and the estimates that must
precede and accompany these are mental states,—the more of them, the
greater the mental development, the higher the education; consequently,
commerce domestic and foreign is a grand agency in civilization, a constant
and broadening impulse towards progress in all its forms; and Christianity,
as we have already seen, is friendly to commerce in its every breath. Those,
therefore, who talk and preach about Trade as tending to materialism, do

not know what they are talking about. Because Commodities are material
things, and because a portion of the trade of the world concerns itself with
commodities, these shallow thinkers jump to the conclusion that trade is
materialistic. It is just the reverse. Let us hear no more from Professor
Pulpit or Platform that buying and selling is antagonistic to men's higher
intellectual and spiritual culture, because the present careful analysis has
brought us indubitably to mental Estimates and prolonged comparisons,
which are activities of Mind, as the fourth and a leading factor among the
radical elements of Sale.
(e) There were two renderings, King Hiram's rendering at Joppa the desired
cedars from the mountains of Lebanon, and King Solomon's rendering in
return at Tyre the food products grown in his fertile country. These
renderings were visible to all men. Unlike the desires and the estimates,
which were subjective and invisible; the actual exchange of the products,
the culmination of the previous efforts, the stipulated renderings by and to
each party, were outward and objective—"known and read of all men." This
is the reason why public attention is always strongly drawn to this particular
link of the chain of events which we are now unlocking and taking apart,
while other links of the series, that are just as essential, almost wholly
escape observation. The ports and the markets are apt to be noisy and
conspicuous, when the desires and the estimates and the satisfactions,
without which in their place there would be no market-places, work in
silence, and leave no records except the indirect one of the renderings
themselves.
It is of great moment to note here, that each of the two parties to an
exchange always has an advantage over the other, either absolute or
relative, in the rendering his own product, whatever it may be, as compared
with his present ability to get directly or through any other exchange the
product he receives in return. Take the example in hand. Cedars and sandal-
wood were natural to Mount Lebanon; there were no other workmen in
those regions of country that could "skill to hew timber like unto the
Sidonians"; the Mediterranean afforded a level and free and easy highway
from its northern coast to the Judean seaport at Joppa; and all these natural
and acquired facilities put King Hiram into a posture of advantage in the
rendering of timber, not only over the Jews, but also over all the other
peoples in the basin of the midland sea. Still this advantage, great as it was,

could only be made a real and palpable gain to themselves, the proprietors
of the timber, by means of some exchange with somebody else, by which
some wants of their own greater than their present want of timber, could be
supplied by means of the timber. They had more of that commodity, and
more skill to fashion and transport it, than their present and immediately
prospective needs could make use of; and the only way in which they could
practically avail themselves of their advantages, was, to sell their surplus
timber and buy with it something that they needed more. Otherwise their
very advantage perished with them. God has scattered such a diversity of
blessings and capacities and opportunities over the earth on purpose, that,
through traffic, on which his special benediction rests, the good of each part
and people may become the portion of other parts and peoples.
So, on the other hand, of the southern neighbors of the Tyrians. There the
earth brought forth by handfuls. There was an abundance of corn in the
land, even to the tops of the mountains. Its fruit did indeed shake like
Lebanon. But there were no cedars there, no fir-trees, no sandal-woods.
How short-sighted, then, and futile, would it have been for the Jews, to try
to hang on in their own behoof to all the natural advantages that God had
given to them, and to say, We will not part with the direct results of any of
them, we will build treasure-cities as they did in Egypt, we will store up all
the fruits of these fat years against the possible coming of some famine
years in the time to come. That is anything in ordinary times but the divine
plan. It is anything but the letter and spirit of the divine injunction: "Him
that keepeth back corn the people curse; but blessing shall be upon the
head of him that selleth it" (Prov. xii, 26). Had they talked and acted thus,
no temple could then have been built in Jerusalem, and the people of that
generation would have lost the moral and religious impulse and uplifting of
their service and sacrifice. Their grain would have become worthless from
its very abundance, and would have decayed on their hands. They would
have missed a great gain for themselves, and would have snatched away
from their neighbors to the northward a providential opportunity for an
equal gain.
The general truth must not be lost sight of here, even in passing, that all
trade whatsoever is based upon a Diversity of relative Advantage as
between the parties exchanging products. If, for example, the Hills of Judah
and the Mountains of Israel had been covered with timber suitable for

building the temple, and the coasts of Tyre and Sidon and the foot-hills of
Lebanon had been fertile stretches of arable land, this particular trade would
never have been thought of and could never have been realized. There
would have been no gain in it for either party, and unless there be a valid
gain for both parties at least in prospect, no trade will ever spring into
being, because there would be no motive, no impulse, no reason, in it.
Unless the Jews could get the timber easier by raising grain to pay for it,
and the Tyrians get the oil and wheat and barley easier by cutting and
floating timber to pay for them,—no trade; but the greater easiness to each
actually came about, because each had an Advantage both natural and
acquired over the other in his own rendering, and the mutual gain of the
trade was wholly owing to that circumstance. So far as that matter went, the
Tyrians had no cause to envy their neighbors the superior soil of the south,
for they reaped indirectly but effectively a part of those harvests for
themselves; and the Jews had no reason to be jealous of their northern
neighbors on account of the noble forests crowning their mountains,
because through trade they secured easily to themselves a share of that vast
natural advantage. Diversity of Advantage both natural and acquired is the
sole ground of Trade both domestic and foreign; and consequently by
means of trade the peculiar advantages of each are fully shared in by all.
It is perhaps less obvious but surely equally true, that the greater the relative
diversity of advantage as between two exchangers, the more profitable does
the exchange become to each. If the Vale of Sharon had been twice as fertile
as it was, and the cedars of Lebanon twice as large and lofty as they were,
the easier and better would Israel have gotten its timber, and the more
secure and abundant would have become the food of Tyre and Sidon; and,
therefore, the more unreasonable, or rather the more absurd and wicked,
would have been any envy or jealousy of either of the superior advantages
at any point or points of the other. So universally. By the divine Purpose as
expressed in the constitution of Nature, in the structure of Man, and in the
laws of Society, Trade in good measure and degree imparts to each the
bounties of all, arms each with the power of all, and impels each by the
progress of all.
One other important matter is closely connected with these two Renderings,
which is the fifth bit in succession of our present analysis, namely this, that
traffic renderings always make necessary new and better routes of travel

and transportation. It is mainly for this reason, that persons and things have
to be carried to distances less or greater in order to consummate these
Renderings of home and foreign commerce, that roads by land and routes
by sea have been sought for and found, made and made shorter, improved
as to method and facilitated as to force, from the dawn of History until the
present hour. It was to get the goods of India, and so find a market for the
goods of Europe, that the earliest land routes between the two were tried
and maintained. The ground-thought of Columbus, meditated on for years,
was to discover a new commercial way to India; Magellan with the same
intent sailed westward through the Straits that wear his name, and so
circumnavigated the globe; repeated searches mainly with the mercantile
view, never long intermitted, have attempted ever since the North-West or
the North-East passage to India; Vasco da Gama in 1497 boldly
accomplished the East passage, and thus changed for all the Continents the
channels of trade; the West now trades with all the East through the Suez
Canal, dug for that express purpose; and the words, "Panama" and
"Nicaragua" are upon everybody's lips, simply because through Central
America is the shortest and safest route for men and goods to and from all
the Oceans.
Quite recently Dr. W. Heyd has announced through the Berlin Geographical
Society the discovery of two commercial routes from India to the West not
hitherto described. Trebizond (on the Black Sea) and Tana (at the mouth of
the Don) were the chief distributing points. Through Tana passed westward
the pepper and ginger and nutmeg and cloves; and the price of spices is said
to have doubled in Italy, when the Italians were for a time shut out of Tana
in 1343. The chief overland route from India to Tana ran through Cabul to
Khiva by the Oxus, and then by land through Astrakhan. The other route to
Trebizond passed through Persia, and came out by Tabriz to the Black Sea.
It may perhaps be pardoned, if a far homelier, more modern, and even local,
illustration be given of the present point, that trade makes roads. The
western wall of Williamstown is the mountain range of the Taconics, whose
general height is about 2000 feet above tide water at Albany. Within the
limits of this town are four natural depressions or passes over this range,
which is also the watershed between the Hoosac River on the east and the
Little Hoosac on the west. About the beginning of this century, the
population was quite sparse in both these valleys, while the impulse to

travel and traffic over the barrier was sufficient to build (wholly at local
expense) wagon roads over each of the four passes, one of which soon after
became a turnpike between Northampton and Albany; and another was built
mainly to accommodate the medical practice on the west side of the
mountain of Dr. Samuel Porter—a Williamstown surgeon of local
eminence. So soon as railroads were constructed to run down these parallel
valleys (railroads themselves are perhaps the best illustration of the point in
hand), the mountain roads were relatively deserted, and only two of them
are now open to transient travel.[2]
Lastly, (f) There were two satisfactions, the satisfaction of the southern king
in actually obtaining the excellent timbers, without which the cherished
national temple could not have gone up; and the satisfaction by the northern
king in the easy receiving of the abundant food products for the daily
maintenance of his court and kingdom. The simple story of these
commercial transactions between Jew and Tyrian indicates clearly enough,
what might have been anticipated and what always happens in such
circumstances, not only a mutual satisfaction at the completion of each
specific exchange, but also a general relation of contentment and peace in
consequence of advantageous commercial intercourse. "And Hiram, king of
Tyre, sent his servants unto Solomon; for he had heard, that they had
anointed him king in the room of his father; because Hiram was ever a
lover of David. And it came to pass, when Hiram heard the words of
Solomon, that he rejoiced greatly, and said, Blessed be the Lord this day,
which hath given unto David a wise son over this great people; and there
was peace between Hiram and Solomon; and they two made a league
together."
It is plain to reason and to all experience, that mutual Satisfactions are the
ultimate thing in exchanges. Our present analysis can go no further, for the
reason, that we have now reached in Satisfactions the end, for the sake of
which all the previous processes have been gone through with. Persons do
not engage in buying and selling for the mere pleasure of it, but always for
the sake of some satisfactions derivable to both parties from the issue of it.
Ordinary self-inspection and foresight and industry being presupposed, the
issue of exchanges is just what was expected by the two persons, the
satisfaction of each follows as a matter of course, and stimulates to new
exchanges in ever-widening circles.

Since the desires of all men, which the efforts of other men can satisfy
through exchange, are indefinite in number and unlimited in degree, there is
no end of human Satisfactions to be reached along this road of reciprocal
trade; and since the very object of all trade and the actual result of all trade
(the exceptions are infinitesimal) is to multiply and reduplicate continually
mutual Satisfactions among men; we can see right here what a loss and
wrong it is, what a wanton destruction of possible human happiness it is,
what a bar to progress among men in comforts and powers it is, for nations
to impede and to prohibit commerce by legislation! As we shall see more
fully in a later chapter, Governments can have no moral or constitutional
right to restrict the trade of their people, except in the sole interest of
revenue or health or morals.
Such is the constitution of the universe, that a really good thing is usually
cognate with and inseparable from a good many other good things. Buying
and selling, as we have now clearly seen, springs right out of the nature of
men in the circumstances in which they are providentially placed on the
earth, and ends in the satisfaction of innumerable wants common to all men.
This makes trade a thoroughly good thing in itself; and consequently it is
intimately associated with many other good things. The scriptural instance,
that we have been examining, gives a neat illustration of this: "and there
was peace between Hiram and Solomon; and they two made a league
together." The mutually profitable exchange of commodities led to a feeling
of amity between the two neighboring kings; the feeling of amity led to a
treaty of Peace between the two adjacent nations; and the "league" so
ratified not only kept out war from their borders, but also permitted the
unhindered continuance of profitable exchanges between them.
So it is always. Peace waits on Commerce. Good-will among the nations is
strengthened by the ties of interest and profit among their citizens. The
mercantile classes as such are always averse to war, because war is the
natural enemy of exchanges. Thus traffic leads to peace and tends to
maintain it, and peace preludes increased prosperity, and commercial
prosperity under freedom is wholly friendly to mental and moral progress,
and Christianity walks before and all along this line of individual and
national blessing. The commercial treaty of 1860 between France and
England has tended powerfully, perhaps more powerfully than any other

single cause, to keep those formerly inter-belligerent nationalities in peace
and amity ever since.
We will now put into a little table the final results of the present analysis of
Buying and Selling. The ultimate elements seem to be these:

1. Two Persons. 4. Two Estimates.
2. Two Desires. 5. Two Renderings.
3. Two Efforts. 6. Two Satisfactions.

The thoughtful reader will note in this table the fact, that three of these
elements are objective, that is, outward and visible; and the other three are
subjective, that is, inward and invisible. Persons, Efforts, Renderings, are
seen and known of all men; Desires, Estimates, Satisfactions, can be
directly known only to the persons who feel and make them. This is a
peculiarity of Political Economy, that has been far too little observed even
when it has been observed at all. Objective and subjective elements in it
meet and mingle in each transaction. Indeed, they alternate, as is shown in
the table above: first a Seen, and then an Unseen, Element throughout. It is
this commingling of outward and inward, visible and invisible, that makes
all the difficulty and gives all the fascination in Political Economy.
Whatever carries us into the steady though billowy play of universal human
nature is at once difficult and fascinating.
Quite contrary, however, to a common impression, the certainty both of
action and prediction in all the other Sciences as well as in Economics lies
rather in the unseen elements than in those that are seen. Take for an
example the calculation of an eclipse: it is not so much from what is visible
in the heavens and on the earth that the astronomer infers and predicts to the
instant the shadow of one orb thrown upon another, as it is from the wholly
hidden but ever-enduring forces of gravitation constantly relating these orbs
one to the other. So it is of the Sciences generally; progress is made in them
and certainties are reached in connection with them, "while we look not at
the things which are seen, but at the things which are not seen; for the
things which are seen are but for a time; but the things which are not seen
are everlasting." Invisible Desires and Satisfactions felt in connection with
Exchanges are among the most constant elements of human nature; they, as
it were, give birth to the relatively more transient (though visible) data of

Efforts and Renderings; while inferences and conclusions and even
predictions may be securely drawn from all of these, giving a solid ground
for Political Economy to stand on,—almost as solid as the ground of the
chief Physical Sciences.
2. We will next examine the inmost nature and the outward manifestations
of Value. "Value" is by much the most important word in the Science of
Economics; and we must, therefore, comprehend it thoroughly, root and
branch. Nearly all the writers in English have used in place of this the word
"Wealth" and those in other languages some equivalent and equally
concrete word; but the present writer fully satisfied himself some twenty-
five years ago, that it is impossible to use that word to any advantage in
economical discussions, owing to its inherent ambiguities and concrete
associations in the minds of men. He utterly discarded the word at that time,
and has found not the least occasion to pick it up again since, and believes
now that his substitution of the word "Value" in place of it will ultimately
be seen to have been his greatest contribution to that Science, to which he
devoted his life.
Even professed and excellent logicians, like John Stuart Mill, found the
word "Wealth" an insoluble element in the science of Economics; he
commenced his great work by writing, that it was not really needful to
define the word which nevertheless he laid at the foundation of his
discussions, that "every one has a notion sufficiently correct for common
purposes of what is meant by Wealth"; he goes on, however, to give at least
a half-dozen definitions of the word, no two of which are at all consistent
with each other, only one of which embodies a clear and scientific
conception, and even to this one he himself does by no means coherently
adhere throughout his treatise. No wonder, that this great man died
thoroughly dissatisfied with his own work in Economics, and wishing for
longer life in which to recast and improve it! No wonder, too, that the
crowd of writers both English and American, many of them able and
thoughtful and otherwise logical, who have been content to continue to use
this irreducible and utterly unscientific word at the bottom, have made a
mess of it!
In dropping the word, "Wealth," accordingly, Political Economy has
dropped a clog, and its movements are now relatively free and certain; and

it is all the more incumbent on the Science for that very reason to define the
good word that it substitutes for a bad one with absolute clearness, to
explain it through and through until it become quite transparent, and then
always to use it in its defined and economical sense, and none other, even
though the same word be properly enough used in other senses in common
speech and in other than scientific relations. Exactly that is what we are
now going to attempt to do in a simple and consecutive order.
(a) Perhaps it will help us to find out precisely what Value is by seeing as
clearly as possible at the outset what it is not. It is not easy, and never can
be made so, to teach and to learn distinctly what Value is in its ultimate
nature and constant changes. Here is the one unavoidable difficulty that lies
at the very threshold of Political Economy; and this difficulty, which is not
found as in the case of "Wealth" in the meaning of the word but in the
complex character of that which the word describes, once overmastered,
and one walks thereafter with ease and pleasure throughout the economic
domain. It would be wrong and cruel to deny that just here is one hard place
in the road for teacher and pupils to get over. It arises wholly from the
nature of the subject, as we shall soon see, and not at all from the
insufficiency of the word, Value. We have already seen fully, that Buying
and Selling in each and every transaction is complex and relative, involving
twelve elements every time; that Desires and Estimates and Renderings are
especially relative,—each party to a trade desires something in possession
of the other, estimates that something relatively to something in his own
possession, and finally renders to the other his own something for the sake
of receiving the other's something. Now everybody is used to all this and
practically understands it perfectly, but it is complicated and reciprocal
nevertheless, and Value, which is the single birth of the two Renderings,
though perfectly intelligible to him that takes pains, is not a thing to be
seized once for all at a passing trot.
Value, then, is not a quality of single things, belonging to them as if by
nature, as hardness is a quality of a rock or gravity is an attribute of gold;
because all physical qualities in physical things, all that which makes or
helps to make anything such as it is, may be learned by a study of the things
themselves by themselves; a careful examination and analysis of the
mechanical and chemical properties of any physical thing will discover all
its distinguishing characteristics, all that makes it that particular thing in

distinction from all other things; but it is plain already, that the Value of
anything (if it have value) cannot be found out by studying that particular
thing by itself alone; the questioning of the senses however minute, the test
of the laboratory however delicate, can never determine how much anything
is worth, because that always implies a comparison between two things, or
more strictly a comparison between two Renderings in exchange. Value is
not an attribute of single things: not even if the things be physical and
tangible.
Now two other kinds of things are bought and sold besides physical and
tangible things, namely, personal services and commercial credits; and it is
very plain, that Value cannot be a quality of any one personal service
rendered, as looked at by itself, such as the service of a physician towards a
fever patient, because the service in and of itself might be the same whether
rendered to his own child or the child of one of his patrons, while in the
former case there would be no value, and in the latter there would be; and
so too the very name "commercial credit" implies an exchange of two
Renderings, out of which Value always emerges, and not at all an attribute
of one credit considered by itself. Value is no more a characteristic of single
intangible services and claims than it is of single intangible commodities
rendered.
And what makes all this still more certain is, that Value even in physical
things, and perhaps still more in services and claims, is all the while
changing under demand and supply, now rising and then falling, while the
physical properties of things, that make them what they are, are fixed and
unchangeable. A gold eagle, for example, has certain primary qualities as
gold, without which it would not be gold; it is hard and heavy and colored:
gold is gold the world over and in all ages: Value is not one of these primary
qualities, nor even a secondary quality, nor any quality at all, of gold as
such; because circumstances are readily conceived and have often occurred,
in which gold has no Value even in exchange; for instance, among a crew
abandoned at sea, a bag of gold belonging to one of the sailors might not
buy even a biscuit belonging to another; all the natural qualities of the gold
are present,—it is still yellow and weighty and solid,—but its Value has
escaped altogether. Gold is always 19 times heavier than water: specific
gravity is a quality and is constant in all physical things: Value is not a
quality in this sense at all, inasmuch as it is something that is constantly

changing, rising or falling, and not infrequently disappearing altogether,
leaving no sign.
Ignorance of this vastly important truth has pecuniarily ruined thousands
upon thousands of the people of this country during the last 20 years. They
have gone into the mining of metals, gold and silver and copper, sometimes
as individuals and more often as companies gathering in the driblets of
investors, under the notion that if they could only get these metals out of the
ground their Value would be just as secure and fixed as their physical
qualities. They found out their mistake in bitterness of spirit. For example,
the Value of an ounce of silver has gone down and down and down as the
quantity of silver excavated has increased under zealous digging, in
accordance with the universal and pitiless law of Supply and Demand. So of
copper. And both these great monetary interests went to Congress and
secured the passage of laws designed to lift artificially the Values that were
sinking naturally under increased Supply, the silver men by a law requiring
the United States to buy and mint at least $2,000,000 in silver each month
whether the silver dollars were needed or not, and the copper men by a law
imposing a tariff-tax on foreign copper that has actually lifted the price two
cents a pound on the average of the whole 20 years above the average price
of copper in the markets of the world.
Take another illustration of disappearing Values, this time in lands, long
supposed to be the most stable in value of all human possessions. Whole
tiers of farms in the writer's native town in New Hampshire, and for that
matter all over New England as well, that in his boyhood supported large
families, and when sold usually brought a fair price, are now abandoned of
their owners as wholly or comparatively worthless, and are allowed to grow
up into forest again, without a sign of present human habitation upon them.
Value is something that needs to be studied carefully, if it is to be fully
understood.
(b) Perhaps the origin of the word, "Value," will throw some light upon its
nature and changes. Etymology can never be safely despised in scientific
discussions, although words are perpetually changing their meaning in the
mouths of men. No science can afford to build upon the transient meaning
of a word; and yet it is clearly possible so to use words as to reach and
describe ultimate and unchanging facts in science; and some knowledge of

the original meaning of words is always a help in getting at those
definitions and analyses of facts that are permanent in science. Let us hold
fast to the cheering truth exemplified on all sides of every science, that a
just analysis and exact description of ultimate facts in any department of
knowledge are for all time, in spite of the transient meaning of current
words.
The present word is derived from the Latin Valere, to pass for, to be worth.
There is a strong hint of a comparison in the original meaning of the word,
and the current use of it both in Latin and English develops the hint into a
certainty. In common language, when the Value of anything is asked for, the
answer always comes in the terms of something else. If the question be,
How much is it worth? the answer is, So many dollars or cents. Now the
cents or dollars are very different things from those whose value is thus
inquired after; and so we see again from another point of view that Value is
a relative matter, since it clearly implies a comparison between two distinct
things; and, if so, it is clearly enough not a quality of any one thing, and of
course it would be useless to try to ascertain the Value of anything by a
study of that thing alone. Etymology thus easily brings us up to our present
vital question, and will assist us to solve it completely.
(c) What is Value? Plainly it is the result of a comparison instituted between
two things, using the word, "things," here in its broadest sense. But who
institutes the comparison? And who is competent to announce the result of
it in Value? A comparison is required in order to ascertain the length of a
stick of timber in feet and inches, and a carpenter's square is the instrument
by which the comparison is made, and it makes no difference in the result
whose the square is or whose the stick of timber is, since the square and the
stick have in common the physical quality of length, and a simple
comparison of square with stick determines the length of the latter, and one
man in this case may determine the result by himself alone, and it is not
needful that he be the owner of either of the things compared.
But it is a different kind of comparison from this that issues in Value. Let us
suppose an exchange of a bushel of wheat for a mason's trowel: there is no
common physical quality, as length, between the wheat and the trowel; and
it is evident, that no one man can measure in any form one of these two
commodities by means of the other. It is a peculiar kind of comparison that

is involved in any and every trade; and the first peculiarity of it is, as we
have already seen in another connection, that it always requires "two
persons" to make it; and each of the two persons must always be the virtual
owner of one of the two things exchanged. A thief may indeed go through
the motions of selling a stolen horse, but as he is not the owner of the horse
there can be no sale, and the actual owner may take his horse wherever he
finds it even in the hands of an innocent third party. In other words, there
must ever be "two efforts" also, two legitimate efforts giving a valid claim
of ownership to each of the two parties in the exchange.
And there is a second distinctive peculiarity in that comparison that ends in
Value, namely, the two things to be exchanged are not compared directly
with each other at all, as square and stick are compared, but in the light of
the "two desires" with which we are already familiar, and in that of the "two
estimates" resulting therefrom. The owner of the wheat desires a trowel, and
the owner of the trowel desires a bushel of wheat; the former estimates the
effort it has already cost him to procure the wheat in a sort of comparison
with the effort that it would otherwise cost him to procure the trowel, and
he does not trade unless the trowel seem more and better to him than does
the wheat; the latter estimates the effort it has cost him to procure the trowel
in a sort of comparison with the effort it would cost him to procure
otherwise the wheat that he wants, and he does not trade unless the wheat
then and there seem more desirable than the trowel, which he already has;
and these two relative estimates of the two owners must coincide, that is,
the owner of the wheat must think more of the trowel than of the wheat, and
the owner of the trowel must think more of the wheat than of the trowel,
before these two parties can ever trade. So of all traffic whatsoever.
Now the third and last distinctive peculiarity of that kind of comparison out
of which Value emerges is this,—an action is necessary in order to
complete the comparison. Desires and estimates may have been never so
busy, but no Value can ever be born until an outward action takes place in
the "two renderings" of our former analysis. Then first we come out upon
plain and solid ground. We leave the play of the subjective elements, which
yet are essential in the premises, and touch firmly objective realities. The
trowel-maker passes over his tool in the sight of men to the wheat-grower in
firm possession and ownership, and takes in return for it from him the
grain, which the latter passes over to the former for the sake of receiving

the trowel. The two "satisfactions" follow as a matter of course, and that
whole transaction as a commercial exchange and as the sole subject of
Political Economy is ended.
But where is the "Value," of which we have been in search? The answer is
easy and certain and unevadible. The Value is in the Renderings, and
nowhere else. The value of the trowel is the wheat, that is actually given in
exchange for it; and the value of the wheat is equally the trowel, for the
sake of getting which the wheat was rendered. What was the Value of King
Hiram's cedar-timbers? The oil and wheat actually returned in pay for them.
What was the Value of the oil and wheat sent northward by King Solomon?
The timbers rendered in direct exchange for the same. This is not merely the
only possible answer to the question, What is Value? but it is also a
perfectly complete and satisfactory answer. Common language here
corresponds exactly with scientific language. "How much did the horse
cost?" "One hundred dollars." The dollars have nothing whatever in
common with the horse, except that they express his Value at the time; the
horse has nothing in common with the dollars, except that it expresses the
Value of the dollars at the time. It is just as exact to say, it means precisely
the same thing to say, the dollars are worth the horse, as to say, the horse is
worth the dollars.
In general terms, the Value of anything is something else received in return
for it, when each owner renders the one for the sake of getting the other.
This is the whole of it, so far as any specific valuable thing is concerned.
We shall indeed need after a little, and shall have no trouble in finding, an
abstract and universal definition of "Value," as an abstract and scientific
term perfectly circumscribing the field of Economics. Here and now we are
dealing with the simpler concrete question, What is the value of any
specific valuable thing? The unvarying answer is, Some other specific
valuable thing already exchanged for the first! There may be expected
value, estimated value, but actual value there is none, until a real exchange
has settled how much the value is. The value of anything is something else
already exchanged for it. Value is not simply a relation subsisting between
two things, the result of a careful comparison between them, but rather an
actual fact established in connection with them. The universal formula of
Value is quid pro quo, in which formula quid stands for one of the valuables

and quo for the other, and pro unfolds the motive of each owner for the
reciprocal receiving and rendering.
Here a caution is needful. Because nobody can tell what the value of
anything is until something else has been put over against it in order to get
it and actually received therefor, and because the only possible way to
express the value of either is in the terms of the other,—the trowel is worth
the wheat and the wheat is worth the trowel,—one must not therefore jump
to the conclusion that the value of either is settled for all time or even for
any future time. It is only settled for this time. In Economics as in
Christianity, Now is the accepted time. There is nothing fixed in Values, and
never can be from the nature of the case, because Desires are personal to
individuals, and Efforts fluctuate with times and persons, and Estimates that
wait on these vary from necessity, and the Renderings of to-day may not be
the chosen renderings of other persons in the same articles to-morrow.
Value is not a quality at all, still less is it a permanent quality, of anything; it
is a relation established between two things when these are in the hands of
two given persons; but now when these are in the hands of two different
persons, whose views are pretty sure to differ from the former, and a new
relation is sought to be established between these in the old way of
Estimates, is it strange that a new balance is struck, and Value is expressed
in quite different terms?
One of the chief charms of Political Economy is the open secret, that it
deals not with rigidities and inflexible qualities and mathematical quantities
and the unchanging laws of matter, but with the billowy play of desires and
estimates and purposes and satisfactions, all of which are mental states, and
all of which are subject in the general to ascertainable laws, though laws of
a quite different kind from those of Mechanics. Values come and they go.
Within certain limits and under certain conditions they may be anticipated
and even predicted, but never with the precision of an eclipse or the result
of a known chemical combination. There is a useful and fascinating Science
of Value, as we shall see indubitably by and by in the present chapter; but it
is a science that deals primarily with persons and only secondarily with
things, with mind and not with matter, with the general undulations of the
sea and not with the crests of the waves. And all this is so, because Values
are relative, because the announcements in the market-place to-day may
stand listed differently to-morrow and very differently next year, and

because old values may disappear altogether and many new ones come in,
all in accordance with the incessant changes in the wants and labors and
fashions and projects of men.
We are now in a good place to see once for all the sharp distinction there is
between Utility and Value. These two are often confounded to the deep
detriment of our Science; and no clear thinking is possible in Economics
without drawing this line sharp, and then holding it fast; for the hazard of
this confusion is all the greater, because Utility is always connected with
Value, although it is a totally different thing from Value. We will see. Utility
is the simple capacity of anything to gratify the desire of anybody. This is at
once the etymological as well as the popular signification of the word. It is
derived from the Latin utor, to make use of, a word that is often conjoined
in Latin with fruor, to enjoy; so much so, that the two verbs are often put
together, utor et fruor, and also often without the conjunctive, utor fruor.
Utility, then, is a quality of innumerable things. Anything that is good for
anything, anything useful, anything that has the power to still the desires of
any person, has Utility. But multitudes of things that have this capacity to
gratify human desires are never bought and sold, and therefore can have no
Value, since nobody will give anything for them. The air we breathe, the
water we refresh ourselves with from spring or brook, the light of the sun
and moon and stars, the fragrance of the flowers, the mountain prospect that
delights the eye,—all these, and thousands more, possess the highest utility,
but no value whatsoever. They are free. They are the bounty of God. They
are never bought and sold. They are a vast class of things by themselves,
with which Political Economy as such has nothing to do.
Nevertheless the element of Utility comes into every case of Value, because
the element of Desire comes into every case of Value, and whatever merely
satisfies the Desire of any person is Utility, whether that capacity be the
direct gift of God or whether the Efforts of men have been employed to
bring it about. It is just here that we see the precise function of our "two
efforts" in each case of Value, in distinction from mere Utility in all cases:
much of utility is absolutely free, no effort of men having been put forth to
secure it, for example, the fragrance of the wild rose; much more of utility
is the commingled bounty of Nature and the gratuitous effort of men, for
example, the fragrance of the domestic rose brought by the householder
himself into his own yard for the gratification of his own family; while by

much the most of utility is commingled free gift of God and the
compensated efforts of men, for example, the fragrance of the bank of roses
cultivated and cared for by the hired gardener. It is important for our
purposes to discriminate carefully the three kinds of Utility: (1) what is
wholly disconnected from the efforts of men, and comes freely from the
hand of God; (2) what is mingled with the unpaid efforts of men, so that the
satisfaction of the desire comes partly from Nature and partly from
unbought effort; and (3) the compound utility that is partly free gift and
partly the result of compensated labor. The last is the only kind of Utility
that stands in any connection with Value.
And even this is very different from Value. Utility in all three of its forms—
now free, now onerous, now partly bought—is always a quality of one thing
by itself, going straight to the satisfaction of some desire, and there an end.
It is simplicity itself compared with Value, which is always a resultant of
several things, and is specifically a relation of mutual purchase established
between two "renderings," each of which expresses the value of the other,
in each of which is embodied an "effort" made by each of the two "persons"
rendering, and each of which excites a "desire" and an "estimate" before
being passed over in ownership to another, and a "satisfaction" afterwards.
The utility in every valuable rendering comes partly from free Nature and
partly from compensated effort, but it is remarkable, that a principle, with
which we are to become very familiar later on, namely, Competition,
eliminates for the most part from all influence upon Value that portion of
the Utility that is the free gift of God. The great Father never takes pay for
anything, and never authorizes anybody to take pay in his behalf; and,
moreover, has arranged things so, that it is exceedingly difficult for any
person to extort anything from another person on the strength of anything
that God has made, and man has not improved. Take, for example, ten
horses of any general grade, brought into the same market by their ten
owners for sale. These men did not make these horses, but they have cared
for and trained them, or at least have become proprietors by purchase or
otherwise of the results of such care and training. The Utility in each horse
is compound, consisting partly of what God has done for him and partly of
what man has done for him,—the two parts inextricably interwoven,—and
all ten are offered now for sale. Each of the owners would indeed be glad to
get something for his horse on the ground of what God has done to make

him sound and strong and fleet, in addition to a fair compensation for what
he (and his predecessors) has done in raising and breaking him; but the
cupidity of all is likely to be thwarted by the ultimate willingness of some
to sell their horses for a price covering the element of human "efforts"
involved, and the action of these tends to fix a general rate for the whole
ten, and thus the gratuitous element is eliminated from influence on Value.
Even if the ten owners should combine for a higher price, there are
doubtless a plenty of horses of that general grade elsewhere, some of whose
owners are content to get back an equivalent for their own and others'
"efforts" expended on their horses; and so the action of these tends to fix the
general price for horses of that kind for that time and place at a point not
above a fair estimate of the onerous human elements involved; thus
throwing out by the action of competition all effect of natural Utility upon
the Value of horses then and there. So of all other products of that kind.
It is true, that in certain unique cases, in which competition has little or no
play, because there is only one or a very few owners of such unique
products, one cannot certainly say that free Utility may not influence the
Value to lift it above the gauge of human efforts involved; but such cases
are rare, and relatively unimportant; and the tendency is immensely strong,
under the natural and beneficial condition of things, for Values to graduate
themselves through the reciprocal estimates and renderings of commerce,
down to the actual and onerous contribution of men to that Utility that
underlies Value.
Thus we are brought again and again from differing points of view to the
"two renderings" as central and determinative in Value, and also more
specifically to the "two efforts" of persons rather than any free contribution
of Nature as constituting that portion of the compound Utility, whose
function it is to gratify the "two desires" that precede the realization of
Value,—that portion of the utility in any rendering that must be
compensated for by the other rendering. Now in order to reach in a moment
more our final definition of "Value," a definition, it is believed, that will
cover all the cases and take the life out of endless disputes, we need a
scientific term to carry easily and exactly the meaning of any economic
rendering. Let that word be Service. We must have it in its generalized
meaning, to cover the renderings of all the three kinds, in distinction from
the term "personal services," which we have already used and shall continue

to use to designate one class only of things exchanged, in contradistinction
to "commodities" and to "credits," the other two classes.
Value is the relation of mutual purchase established between two
services by their exchange.

We offer this definition of "Value" to our readers in much confidence, that
they will find it exact and adequate and altogether trustworthy. No one of
them, however, is precluded from attempts to improve it in breadth and
brevity and beauty; and all are invited to pick logical flaws in it, whether of
ambiguity or superfluity or deficiency. Many minds and many hands in
many lands have left their impress on parts of this definition, for example,
Aristotle in Greece and Bastiat in France and Macleod in Great Britain; the
present writer thinks, that he has bettered the definition of Bastiat, namely,
"Value is the relation of two services exchanged," by precisely defining the
relation as one of mutual purchase; and he is sure, that he has improved the
definition of Macleod, namely, "The value of any economic quantity is any
other economic quantity for which it can be exchanged," by making his
definition at once more abstract and more general and more definite, and
also by escaping the slight implication in the word, "quantity," that only
material things are exchanged in economics.
The immense importance of securing first a clear and correct Definition of
"Value," which is the foundation-word and the circumference-word of
Political Economy, and then of using that term and all other scientific terms
in the Science in their defined senses only, will certainly be appreciated by
those who have wandered in the wide wilderness of the discussions on the
undefinable word, "Wealth," and especially by those who have reflected
most upon the vast and illimitable significance of economic Exchanges on
the welfare of mankind. Associate Justice Miller of the Supreme Court of
the United States, not an Economist in the technical sense, referred in 1888,
in words that are worth remembering, to "the philosophical maxim of
modern times, that of all the agencies of civilization and progress of the
human race commerce is the most efficient." In August of that year John
Sherman of Ohio, a man far enough from being a technical Economist, said
in the Senate of the United States, that "it is almost a crime against
civilization" to maintain commercial barriers between Canada and the
United States.

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

(a) Since Value in general is the relation of mutual purchase between two
Services, and consequently the specific value of either can only be
expressed by the other,—one Valuable being always measured by the
Valuable exchanged against it,—it follows as a matter of course that such a
thing as a general Rise or Fall of Valuables is an impossibility. The rise of
one valuable involves of necessity a fall in the other, as the fall of one
implies the rise of the other. If the articles exchanged be bushels of wheat
and dollars of silver, and if a bushel buys a dollar to-day, then wheat is
worth a dollar a bushel; but if wheat rises next week, so that a dollar will
not buy a full bushel, that is precisely the same thing as saying, that the
dollar has fallen in its purchasing-power as compared with the wheat. Such
specific changes in the purchasing-power of one Valuable over another are
incessant throughout the commercial world, and a merchant's sagacity
consists in anticipating these so far as possible and in availing himself of
them alertly and prudently; but each one of us must needs see clearly and
hold firmly in mind, that each fall in the purchasing-power of a Valuable
means a corresponding rise of power in the other Valuable,—if the first
buys more of the second than before, then the second must buy less than
before of the first; and, consequently, a general rise of Valuables is a
contradiction in terms, and so of course is a general fall of Valuables.
This brings us to Price. Price is Value reckoned in money; and this is the
only difference in the meaning of the two terms. When one valuable is sold
against another, even when one of the two is money, each is the Value of the
other: Value is the general and universal term in Economics. When any
other valuable is sold against money, the amount of money it buys is called
its Price: Price is a specific and restricted term in Economics. Since we
shall study Money thoroughly in a later chapter, and there explain the origin
and extent of its functions throughout, it is only in order to remark here, that
it is for convenience' sake, that is, to make easy the comparison of valuables
one with another, that Value in commerce is commonly reduced to Price.
Money becomes a sort of measure, by means of which to compare all other
valuables with each other. In order to ascertain the Price of a Valuable, it
only needs to be sold once against money; but in order to ascertain the
Value of a Valuable, it would need to be sold once against all other
valuables whatsoever. This last is clearly impracticable; and so Value for

practical purposes is reduced to Price. The General is made Particular for
convenience. Hence we have "Prices current," but never Values current.
Now it will be plain to all, how there may easily be and often is a general
rise or fall of Prices while a rise or fall of Values is impossible. Price is a
relative word as much as Value is, but it does not relate to so many things.
Price is specific, and Value universal. Both equally involve buying and
selling, but one sale of a single valuable against money leads to Price, while
ten thousand sales of the same valuable against other than money would not
conduct to complete Value. That would require a sale of this valuable
against all other valuables in the world, and a complete statement of the
comparative results.
General, or at least universal, changes of Prices in rise or fall in any given
country are due to general and great changes in the Money current there.
Subordinate changes in other valuables, money being supposed to remain
uniform, will of course vary their Prices; but it is impossible that such
changes should affect equally or even generally all the various and
numberless valuables of a whole country; while some are coming easier,
others are coming harder, while some are more desired than formerly others
are less desired, and this will bring in of course altered prices, some higher
and some lower; but a general rise of all prices, or a general fall in the
same, can only come about by great changes of some kind in the circulating
medium, that is, the money, of the country. For example, in the United
States, between 1862 and 1878 inclusive, a government paper promise,
called greenbacks, was the current money of the country; owing to its
excessive issue, and to some doubt in the minds of the people whether the
paper would ever be redeemed in gold, it soon became depreciated as
compared with gold, the premium on which over the paper money varied at
different times from 1 to 185 per centum; as all other valuables were then
sold against greenback money, which had declined, their prices naturally
rose in some sort of proportion as the medium fell; general values remained
much as before, but general prices were much enhanced; and when, after
the resumption of specie payments in January, 1879, gold became again the
standard medium, general prices declined in full accordance with the same
universal principle reversed.

(b) Prices, as we have now seen, are only a subordinate form of Values: the
universal law that regulates all the variations of them both, within certain
fixed limits to be examined shortly, is called the Law of Supply and
Demand. This is perhaps the most comprehensive and beautiful law in
Political Economy. We shall look at it now only in outline: the filling in will
be the pastime and profit of all that is to come.
"Demand" is a technical term in Economics, and accordingly needs to be
defined, and then always used in its defined sense. So is "Supply." Demand
is the "desire" of a "person" for something in the hands of another person,
coupled with the possession of something else capable of buying that
something. Mere desire has no function in Political Economy: hungry and
penniless children passing by the stalls of a great market, have no influence
on the prices or values of the viands, on which they cast their eager glances:
only desires accompanied by "efforts" competent to excite the desires and
to pay for the efforts of another are a Demand. Supply is the same thing as
Demand looked at from the other side. Supply is the correlative of Demand.
The Supplyer is a person, who has in his possession something desired by
the Demander, and who in turn desires something in the hands of the
Demander, when both are willing to exchange their "renderings." There is
no economical difference in the position of the Demander and the Supplyer.
Each is equally a Demand and a Supply with reference to the other. It is the
old and ever-recurring case of Value, the propositions being here stated in
their most universal terms.
For simplicity's sake, however, and for convenience, without altering the
substance of the definitions a particle, the valuables when looked at as a
Demand are practically reduced in all markets to their equivalent in Money,
so that Money offered or ready to be offered against any other exchangeable
thing constitutes what is called in commercial language a Demand; and this
is sufficiently accurate as well as current, although it must always be
remembered that each valuable in any market in reality constitutes a
Demand for another, and is equally a Supply in reference to that other.
Supply is any exchangeable thing offered for sale against any other
exchangeable thing. For example, corn in any market is at bottom a
Demand and a Supply at once for every valuable offered in that market at
that time, say, ploughs for one thing; but in the talk of the market, the
presence of corn there, or its being ready to be immediately brought there

and offered in exchange for money, constitutes what is called a Supply of
corn; money offered, or ready to be offered, in exchange for corn,
constitutes what is called a Demand.
On this account Money seems to play a much more important part in trade
than it actually does play; the corn is sold in the terms of money, that is, for
dollars and cents as denominations of Value; convenience dictates such a
reduction of general Value to this particular form of it, because this is found
to make easier the ultimate exchange; but there is not one chance in a
hundred, as trade runs nowadays in the larger markets, that this seller of
corn will take his pay for it in actual money whether metallic or paper;
money is never an ultimate product, but only an intermediate one; this seller
of corn wants perhaps a plough or some other farming implement, and ten
to one he will take for his corn a bill or order in some form on the seller of
ploughs, and it will be corn for a plough, each becoming a Demand and a
Supply for the other, though money or rather its denominations has acted as
an agent in bringing about the final trade; the details of all this in manner
and result will be as plain as day when we come to study "Money" and
"Credits" in following chapters; while the essential point to be noted here is,
that all Valuables are a Demand and Supply as towards one another. In other
words, the world over, A market for products is products in market.
What, then, is Market-Value returned in the terms of Money? And what is
the universal Law of it?
Market-value is the present rate of exchange between dollars and cents and
any other valuable, that can be fairly graded in a class made up of valuables
similar to itself; and the law of market-value is the equation of Supply and
Demand, that is, the current rate is adjusted when money enough is offered
to take off within the usual times the valuables on hand and offered for sale.
If Demand for any reason become quickened, and the Supply be not
increased, there is competition among buyers for the stock in market, and
the market-rate rises or tends to rise. If, on the other hand, Demand become
sluggish, the Supply remaining the same, there is a like competition among
the sellers to dispose of their stock, and market-value sinks or tends to sink.
So far it is the simple action on Value of the element of one "desire"
expressing itself through a money-demand, the elements of "desire" and of

"efforts" expressing themselves through Supply being supposed to remain
stable, and the pulsations in the market-rate follow accordingly.
How far can this simple action go? Demand increasing, Supply remaining
as before, market-rate rises: how far can it rise from this cause? Here we
must remember that Demand not only acts upon Value, but also Value reacts
upon Demand. As Value rises, the number of those whose means or
inclinations enable them to purchase at the new rate is constantly
diminished: there are ten persons who may wish an article at one dollar, of
whom not over four will wish it at two dollars, and perhaps only one at
three dollars. Every rise in market-rate then, under the impulse of enlarged
Demand, tends to cut off a part of that Demand, that is, to lessen the number
of those who will purchase at the increased price; and the rate consequently
can only rise to that point, whatever it be, where an equalization takes place
between the Supply and Demand, between the quantity of flour, for
example, offered at the enhanced rate, and the quantity of money in the
hands of those willing to exchange it for flour at the higher rate.
Just so in the reverse way, when Demand is slackened, Supply continuing
as before, the market-rate is sure to decline; but declining rates tend
strongly in turn to increase the demand by bringing the article within the
range of a larger number of purchasers; Society is like a pyramid, each
lower stratum is broader than the one above; and so the decline of rates
under a weaker Demand is arrested by a stronger Demand coming from a
wider circle of buyers, and a new market-rate is determined at the point of
equalization between the new Demand and the old Supply. Thus every rise
or fall of Demand tends to check itself, and will check itself in all the great
classes of valuables, even without any variations in the Supply; everything
oscillates under the variations of Demand; while the point of stable
equilibrium, if we may use the expression of anything so unstable as
Market-value, is always the equation of Supply and Demand.
But all considerable variations of market-rate are commonly checked at an
earlier point than the one just indicated by variations in the Supply. A
sharper Demand carries up the market-rate, and a higher market-rate
commonly acts upon Supply to enlarge it, and an increased Supply too
checks the rise of market-rate. Per contra, a slacker Demand lowers
market-rates, and lowered rates often lessen the Supply by the action of

holders and speculators,—holders withdrawing their stock for a better
market, and speculators buying now when the article is cheap to store away
until it shall be dearer. Thus rise of market-rate from Demand growing
stronger is checked doubly; first, by curtailing the number of would-be
buyers, and second, by enlarging the Supply: the fall of market-rate from
Demand growing weaker is checked doubly; first, by increasing the number
of consumers of a now cheaper article, and second, by a diminution of
Supply by the action of holders and speculators. This double and
harmonious working of the law of the Equalization of Demand and Supply
is one of the most comprehensive and beautiful laws in Political Economy.
Besides this, we must note the effect on Value of conditions in Supply only,
Demand being supposed to continue steady. There are three classes of
valuables in respect to the law of their Supply. (1) When the Supply is
scant, and cannot be increased at all, as is the case with choice antiques and
certain gems and paintings by the old masters, their value may rise to any
point under the action of Demand, there is and can be in such cases no
market-rate, and the individual value will be struck at the point of
equalization of the demand then existing with the supply there offered. For
instance, the French Government paid, in 1852, 615,300 francs for a
painting by Murillo, which had belonged to Marshal Soult. The genuine
Murillos are comparatively few, and their number cannot be increased, and
their merit causes a strong "desire" to possess them, and their value rises in
connection with the limitation of Supply to a point beyond which no one
purchaser can be found. When this painting was offered in Paris for sale,
many "persons" of course were anxious to buy it, there was but one
painting, there could be but one purchaser, value rose under the influence of
a sharp Demand, the rise could not be checked by any duplication of the
Supply, and the equation was complete and the value for that sale
determined when one party distanced all other competitors and offered a
sum greater than any one else would give. The same principle controls all
sales of this sort, and is practically the principle of the Auction, whose very
name indicates its nature in this regard, that Demand becomes restricted to
one party, and that the highest bidder.
(2) When the Supply, instead of being absolutely limited, can only be
increased with difficulty or after the lapse of time, similar but less extreme
results will be observed. Let us suppose, that pianos are selling in some

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

(c) It only remains in this branch of the general discussion on Value, to
indicate the Limits, within which all oscillations of Value are contained.
These extreme limits are specially to be found in the element of Value
which we have called "Efforts." We have clearly seen already, that "efforts"
(or Labor) are not, as has been often asserted, the cause of Value, but only
one of several constituent causes; if Labor be asserted to be the sole cause
of Value, the inquiry becomes instantly pertinent, what is the cause of the
value of Labor; yet we know, that "efforts" always stand in preconnection
with value, and, the mutual "desires" being presupposed, there must always
be Limitations of Value lying partly in the efforts made by the person
serving and partly in the efforts saved to the person served. In every
valuable transaction, each of the parties is reciprocally serving and served,
and it is clear, that the two would not exchange "renderings" unless the
service which each renders to the other is less onerous than the "efforts"
which each would have to make if each served himself directly. For
example, it takes a certain effort for me to bring water from the spring for
the use of my family; I am willing to pay a neighbor for bringing it for me,
but I should not be willing to make a greater effort for him in return than the
effort is to bring it myself; neither should I be willing to make an effort for
him in return which I regarded just as onerous as the bringing the water
myself; and unless there is some service which he will accept less onerous
to me than that, I shall continue to bring the water. On the other hand, he
will surely not render the service to me of bringing the water, unless it be
less onerous to him to do so than the doing that for himself which I am
ready to do for him.
This principle, applicable to all exchanges whatsoever, draws on the one
side the outermost line, beyond which Value never can pass. It may be
asserted with confidence, that no person will ever knowingly make a greater
effort to satisfy a desire through exchange, than the effort needful to satisfy
it without an exchange. Therefore, it follows, that all exchanges lessen
onerous efforts among men relatively to the satisfaction of their desires, and
tend to lessen these more and more as exchanges multiply in number and
variety, otherwise the exchanges would not take place.
Moreover, within this outermost Limit of Value, which is made by the
comparative onerousness of the respective "efforts," there is a second
limitation of a similar kind to be found specially in the element which we

have called "estimates." The estimate of each exchanger is based at once on
his own effort about to be rendered and on his desire for the return service
offered: the element of effort in the case of both being considered for the
time as fixed, Value will vary according to the varying desire of each for the
return service of the other, affecting of course the "estimate" of each, and
furnishing also a secondary Limit of Value. To pursue the same illustration,
suppose I regard the effort required to bring the water myself as 10; that
there are several persons, who would be glad to do that service for me at a
return service which I consider as 8; that there are two persons, who are
willing to do it for something which I estimate at 6; and that there is only
one person, who will do it for a return service which I regard as 5. It is
evident, that the extreme limits of that service to me are 10 and 5. Higher
than 10 it cannot go, lower than 5 it cannot sink. But why have I before me
three possible classes of renderers? Because the persons in each class, while
estimating their own efforts alike in the proposed rendering to me, have
varying "desires" as towards a possible rendering from me to them, and
consequently put differing "estimates" upon the possible transactions. The
man who will bring the water for 5 has for some reason (no matter what) a
stronger desire for the return than anybody else, and I should of course
employ him so long as he would serve me on those terms; if he decline the
exchange, I fall back on one of the two persons in the class above him, and
Value rises now from 5 to 6, and will be steadier there than it was before; if
each of these in turn should give out, I should fall back upon the larger class
ready to serve me at 8, and Value would be very steady at that rate, because
there are numerous competitors; and by no possibility could it rise above
10. Between 10 and 5 the value may fluctuate, but it cannot overpass these
Limits in either direction under existing circumstances.
Therefore we may conclude, that the maximum Value of any Service in
exchange will be struck at the point where the recipient will prefer to serve
himself, or go without the satisfaction, rather than make the exchange; and
the minimum Value of any Service in exchange is struck at the point below
which the recipient cannot get himself served even by him who most highly
estimates the return service offered.
(4) We come now to the last and most important Inquiry in this initial
chapter, namely this, Can there be, and is there, a strict Science of Buying

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

All of the Sciences without exception have been developed into their
present position in just this manner; and they fall easily into three great
classes, namely, the Exact, the Physical, and the Moral Sciences. The
ground of this triple classification is partly the distinct subject-matter in the
three classes of Sciences, and partly the distinctive prominence of one or
more of the logical processes of construction in each.
Thus, the class of the Exact Sciences consists only of the formal Logic, and
pure Mathematics. These two are distinct from all other sciences, because
their logical method of procedure is wholly Deductive. Deduction is the
process of the mind, by which we pass from a general truth to a particular
case under it, that is to say, from more to less inclusive propositions. Stuart
Mill argues at much length in his book on Logic, that even the axioms of
pure Mathematics are originally gained by Induction, while others claim
that the truth of these axioms is perceived intuitively, but no matter how this
point is decided, the construction process of the Pure Mathematics is from
the General to the Particular. So it is also with the Aristotelian logic, whose
Major Premise, whether only supposed to be true or intuitively perceived or
inductively proved is always General in its terms. This is the form of
Aristotle's Syllogism:—All sinners deserve to be punished; John is a sinner;
and therefore, John deserves punishment.
Physical Sciences are those concerned with the classifications and laws of
action belonging to material substances. There are a great circle of these, of
which Astronomy, Botany, and Chemistry, may serve as examples. They
have been mostly developed since the time, and in accordance with the
methods, of Lord Bacon; who, in strong reaction against the Deductive
logic of Aristotle, exalted Induction or the mode of generalizing from
particulars, as the true way of building up Sciences; and, as the subject-
matter of each of the physical sciences is well open to observation and
experiment, to Induction and Deduction, and to corrective verifications,
both inductive and deductive, the new method proved remarkably pregnant
and successful. Each of these sciences has a distinct Class of objects or
phenomena to which its attention is directed; the class is circumscribed by
the scientific Conception and Definition; its devotees as a rule are skilled in
using the Baconian tools; and consequently, its conclusions receive the
confidence and control the action of men. All of the Physical Sciences are

constantly enlarging "the body of exact definitions and sound principles"
connected with their several classes "of facts or phenomena."
Moral Sciences are those concerned with the classifications and laws of
action belonging to beings having Thoughts and Desires and Will. The most
developed of these sciences at present are Metaphysics, Ethics, and
Economics. Each of these is concerned with a single class of phenomena,
which may be exactly conceived of and defined, and is open to the logical
processes by which alone Sciences can be built up. But Induction cannot
march up with quite so sure a stride, nor Deduction descend with so large
degrees of certainty, in relation to persons endowed with free-will, as in
relation to physical substances held firm in the grip of unvaried law. Still,
the doubt always attaches far more to the actions of an individual than to
the actions of the masses of men. It is much easier to know human nature in
general, than one man in particular, because many Inductions guided by
observation and History make it almost certain how masses of men will act
under a given set of conditions, while any one may act in a contrary way.
Deduction, accordingly, cannot hold quite the same place in the Moral
Sciences so far as individuals are concerned, as it holds in the Physical and
Exact Sciences; but this lack is perhaps more than made up by other
advantages. Experience in the moral sciences corresponds to Experiments in
the physical sciences. Then there is the great advantage of Introspection;
since each man has within himself the means of interpreting and testing the
inductions of Metaphysics, Ethics, and Economics. Then also there is the
great resource of Feigned Cases, which, provided only they be cases
possible to occur, open up to Reasoning a new means of proving and
correcting. Besides these, which it enjoys in common with them,
Economics, as we shall soon see, possesses one other great advantage over
and above the rest of the Moral Sciences.
Since, then, Political Economy deals primarily with Persons, and only quite
secondarily with Things, it is, under the definition and on every ground, a
"moral science"; yet it must not be confounded in the least with what is
sometimes called the science of Morals, or Ethics. There is one word that
marks and circumscribes the field of Ethics, and that word is Ought; there is
one word also that marks and circumscribes the field of Economics, and
that word is Value. Now, the idea of obligation, on which ethical science is
founded, and the idea of gainful exchange, on which economical science is

founded, are totally distinct ideas. The imperatives of ethical obligation rest
upon the consciences of men, and Duty is to be done at all hazards; guilt is
incurred if it be neglected; while pecuniary gains and losses, however large,
do not, or at least ought not, weigh a feather against an intuition of Right
and Wrong. Economics, on the other hand, does not aspire to place its feet
upon this lofty ethical ground; no man is ever under any moral obligation to
make a trade; he properly makes it or not, according to his present sense of
its gainfulness to himself; and so economic science finds a solid and
adequate footing upon the expedient and the useful. Ethics appeals only to
an enlightened conscience, and certain conduct is approved because it is
Right, and for no other reason; Economics appeals only to an enlightened
self-interest, and exchanges are made because they are mutually
Advantageous, and for no other reason; each of the two Sciences, therefore,
has a basis and sphere of its own, and the grounds of the two are not only
independent, but also incommensurable.
We will now apply seriatim to Political Economy the four fundamental
conditions belonging to all recognized Sciences, and so determine for
ourselves whether it be not a strict science, and thus worthy in its leading
propositions of all acceptation.
(a) Every science must have to begin with a definite Class of facts, which
lie in an easily circumscribable field, and which are not likely to be
confounded with other facts of a differing nature. Economy has such a class
of facts, that lie in such a field, and that cut themselves off by sharp lines
from all other things. Valuables is its class of things. It has nothing to do
with any other class of things. Its field is Value, or Sales, or Exchanges.
This field is perfectly definite. Sales are never confounded with gifts, and
are never confounded with thefts. They have a distinctive character of their
own. They have always been in the world, will always be in the world in
ever-multiplying volume, and no one ever mistakes their main features for
anything else. Anything whatsoever that is salable, or is about to be made
so, comes within the view of Economics, and scientifically it cares for
nothing else. While it finds its field definite, it also finds it broad. It has no
wish to encroach on other sciences, nor will it tolerate any encroachments
on its own. Before anything is sold, or is being made ready to sell, it cares
nothing what other science employs itself upon that thing; after the thing is
sold, Economy loses its interest in it, and other sciences may take it up if

they choose. Valuableness is the one quality that constitutes the Class of
things with which the Science is conversant, and it claims complete
jurisdiction over all things just so far forth as they have this one quality, and
no farther. Now there is in the actual world such a Class of things; its
exterior boundaries have been exactly ascertained by a long series of
Inductions and Deductions, tentative, corrective, and confirmatory; and
accordingly, Political Economy has now in full possession the first grand
condition of a Science.
(b) This great class of facts, thus reached by logical Generalization and
grasped and held by a mental Conception and fixed by an adequate verbal
Definition, is remarkably open to all the logical processes of reasoning, by
which alone sciences are constructed, and thus possesses in full measure the
second grand condition of the Sciences. Not one logical resource is denied
to the economists: all the tools of the scientific workshop are at their hands.
Let us now catalogue these in their order.
(1) Induction. This is the logical and universal process, by which the mind
naturally passes up from a certain number of observed cases, in which a
certain quality appears, to a Generalization, which is a conception of the
mind followed by a statement in words to the effect, that all possible cases
of that kind will exhibit the quality already observed in the few cases. It has
as its basis a confidence in the resemblances and uniformities of Nature; it
proceeds upon the axiom that Nature throughout is consistent with herself;
and this confidence has been ten thousand times justified in the issue, when
it is found that Nature preordained the Sciences by causing grand analogies
to run through each department of her works, including man and his works.
The structure of the human mind corresponds with these objective
resemblances; it seizes upon them, and delights in them, and naturally and
joyfully infers and concludes that what has been observed of a part may be
safely affirmed of the whole of that kind; accordingly, the world over, when
certain things are found to be true in a considerable number of cases, the
mind leaps over space and time to a whole class, and frames for itself a
general rule or principle, which binds all the cases into one bundle, and
thereafter confidently affirms what is known to be true of some to be
probably true of all. This is inductive Generalization; and the strength and
the joy of it is well expressed by Descartes: "I have thought that I could

take as a just generalization that which I very clearly and vividly conceived
to be true."
Experience in Economics corresponds to Experiment in the Physical
Sciences, and furnishes to Induction all the fuel it can ask for to feed its
logical furnace and to forge the chains that bind the Cases to the Classes.
Personal experience in buying and selling, local experience in buying and
selling, and national experience in buying and selling, with all that belongs
to these, the records of which are full to overflowing, afford to the inductive
inquirer in Economics an inexhaustible supply of material. Instances
abound. Particulars may be gathered up one by one on every hand and
linked into the inductive chain. If any doubt be felt about the strength of any
one of these chains, another one may at once be linked in terms drawn from
another field of Experience with a view to test the strength of the first. Most
fortunate from this point of view is the United States, because here there are
States with substantive powers of control over most matters of trade within
their borders, as well as a Nation with sovereign powers of control over
some points of trade within the country as a whole. This feature has given
birth to commercial experiments as well as commercial experience of all
kinds; and Induction rejoices in all these abundant materials for
generalization thus furnished free of cost to Science, though unfortunately
not free of cost to the People.
(2) Deduction. This is a logical process exactly the reverse of the first, in
that it descends from a generalized statement reached by the inductive
process to some particular, or subordinate class of particulars, ostensibly
covered by the general maxim. Induction examines a number of particulars,
and then makes a leap, it may be a long leap, over all intervening
particulars, to its Generalization clamping them. The main use of Deduction
is to make sure of any one of these overleaped particulars, which may come
into importance, and thus confirm the generalization, or correct it. It is not
strictly true, what is often alleged against deductive reasoning, that there is
nothing new in its result, that the Induction had already passed through that
particular in rising to its Generalization, and therefore to descend to any
particular link to examine that, is something useless. The exact truth is, that
it is useless to examine again deductively the very particulars that were
carefully studied inductively, but on the other hand there is always much
actually untraversed territory between these already examined particulars

and the inductive generalization, and Deduction is often very useful in
carrying us down to questionable points in this territory. Even Lord Bacon,
who scorned the syllogism, admits this: "Axioms duly and orderly formed
from particulars easily discover the way to new particulars, and thus render
sciences active."
We will illustrate this by a reference to Franklin's famous induction to prove
the identity of lightning with electricity. Only one experiment, and that a
very rude one, was needful in this case; although usually many experiments,
or the careful observation of many particulars, are necessary in inductions;
but the generalization having been gained, Deduction had a chance to try its
hand; it had long been observed that electricity could be conducted from
point to point, and if electricity and lightning be identical, then lightning
can be so conducted; therefore, deduced Franklin, a pointed iron rod
elevated above buildings will harmlessly conduct lightning from the clouds
into the ground. Deduction gave mankind the lightning-rod, and so made
one point of science "active," as Bacon phrased it; and it is noticeable, that
Turgot's felicitous epigram turns on the deductive rather than the inductive
side of Franklin's experiment: Eripuit cœlo fulmen sceptrumque tyrannis.
Let us catch up another illustration from the science of Botany, to show
how Deduction may strengthen and sharpen an inductive result. The
botanists say, that apple-tree blossoms are always five-petaled, because
blossoms from a large number of apple-trees in various localities have been
observed to have just five petals to the blossom; so far, they affirm
inductively, and indeed securely; but they have also reached by means of
another induction a much broader law of plant-life, namely, that outside-
growers, when they have petaled flowers at all, always have them five-fold;
now apple-trees are outside-growers; and therefore, deductively also, and
conclusively beyond shadow of question, apple-tree blossoms are five-
petaled.
Political Economy is just as open to Deduction as it is to Induction, and the
two continually are reaching each other the hands of economical reasoning,
not always indeed pursuing each a separate and distinct path to the end, as
in the botanical instance just adduced; because in practice the two processes
mingle constantly, and neither is carried out in full and due form, since
premises used by the mind are often dropped in the statement, and

shortened forms of expression take the place of long-drawn-out formulas.
But all good reasoning in Economics, as in all other sciences, is analyzable
into one or other of these two processes, both based alike on the
uniformities of Nature and the structure of the human mind.
Deduction has not quite the same scope and certainty in Economics as in
the Physical Sciences, because any one may act contrary to the vastly
probable action of many individuals; still, it is a safe and potent process in
economics, since it may descend securely from the larger masses to the
smaller, even though perchance the individual escape, because of the
simplicity and universality and certainty of the impulses that lead men to
exchange. John Bascom gives the reason well, why both Induction and
Deduction have so firm a grasp upon this science: "Between one dollar and
two dollars a man has no choice, he must take the greater; between one day
and two days of labor he must take the less; between the present and the
future he must take the present. This is not a sphere of caprice, nor scarcely
even of liberty; the actions themselves present no alternative, and, if an
alternative giving an opportunity for choice does arise, it arises from some
partial or individual impulse, from some one of those transitory and foreign
influences, which, while rippling the surface, neither belong to nor affect
the current of the stream."
(3) Introspection. Everybody buys and sells, and almost everybody watches
the action of his own mind enough to see what are his motives in buying
and selling, and soon comes to know also that the other party has
corresponding motives. Even the child knows perfectly, that it takes two to
make a bargain, that each party renders something to the other, that each is
glad to part with something for the sake of receiving something from the
other, and that this higher esteem put by each on what is taken from the
other makes for each the gain of the trade. A very little introspection tells
anybody, that were this higher esteem wanting in the minds of either of the
two, the trade would not take place at all. Everybody within the pale of
compos mentis knows, that, were his own desire for the rendering of
another to increase, he himself would offer more of his own rendering
rather than forego the trade; and he rightly infers, that what is true of
himself is true of all other men; and so, every seller rightly tries to display
his wares in such a way as to increase the desire of buyers for them;
knowing full well from his own experience in buying that, other things

being equal, they will be willing to render him more for them in
consequence.
The phrase above, "rightly infers," is based upon the truth, that all men are
remarkably alike in certain great departments of action; and that, in no
department are they so nearly alike as in this of buying and selling.
Introspection, therefore, an easy self-knowledge open to all persons alike,
and a personal experience in these matters that everybody gains, give most
trustworthy answers to Inductive inquiry along these lines. Trade is natural
and gainful, as any person can see, who stops to ask himself why he has
made, or is about to make, a given trade; and if natural and gainful to him,
equally so for precisely the same reasons to the party of the other part;
hence no law or encouragement is needed to induce any persons to enter
upon traffic; and any law, or artificial obstacle, that hinders any two persons
from trading, who would otherwise trade, not only interferes with an
inalienable right that belongs to both, but also destroys an inevitable gain
that would otherwise accrue to both. Political economy is very fortunate,
accordingly, in being able to make its appeal to the common sense of all
men, giving sound starting-points through self-knowledge possessed by all
men, guiding to safe steps by means of Induction all who like to generalize
and prove, and especially breaking up current fallacies by asking the potent
question, "How would you like it yourself?"
(4) Feigned Cases. There are two kinds of these, namely, those which might
be realized in actual fact, and those which never can be so realized. The
acute mind of the Greeks marked in their flexible language a decided
difference between the class of suppositions that might possibly become
facts, and another class of suppositions impossible to become facts, by
developing a distinct form of expression for each. This distinction must
always be borne in mind by those who use or note in economical
discussions the expedient of Feigned Cases. Reasoning is always legitimate
and often pregnant from suppositions, whenever these are such as might
readily become facts of experience, because in that case the argument
proceeds upon recognized and inductive resemblances; but otherwise, no
inference at all can be drawn from them, because it is an universal truth in
Nature and in Logic, ex nihilo nihil fit, out of nothing nothing can come. In
plausible suppositions impossible to become facts is a nest of logical
fallacies, that need to be watched. A good illustration may be found in the

Monetary Conference at Paris in 1881. Delegates were there from all the
nations of Europe, from the United States, and even the distant India. Some
of these in their eagerness for a factitious ratio of value between gold and
silver forgot the important distinction now in hand, and argued of the good
results to flow from the realization of a supposition, which in fact never
could be realized. Mr. Evarts voiced the French and American delegates in
this declaration: "Any ratio now or of late in use by any commercial nation,
if adopted by an important group of states, could be maintained; but the
adoption of a ratio of 15½ silver to 1 of gold would accomplish the
principal object with less disturbance in the monetary systems to be affected
by it than any other ratio." The fallacy in this passage is in the words,
"could be maintained," which are a supposition, and what is much worse, a
supposition contrary to fact, from which all arguing is nugatory. Why it is
contrary to fact will be seen at length in the following chapter on Money.
On the other hand, a supposition that may clearly become a fact is a
substantive thing, and logical inferences may be drawn from it, just as
geometrical inferences may be drawn from a supposed circle: the circle on
the page is not a perfect circle—no such circle was ever drawn—but
suppose it perfect, as it might possibly be, and argument becomes at once
valid. Let us take another Monetary Conference at Paris in 1867 as an
illustration: its judgment as voiced by Mr. Ruggles of New York was taken
with logical propriety, when the great benefits of an international coinage of
gold alone were argued and announced, because, while that was then a mere
conjectural project, it was possible any day by mutual agreement among the
nations to become a reality. An international coinage of gold is a simple
question of equivalence of weights in the coins of different countries: an
equivalence of values as between gold and silver coins for any great length
of time is neither simple nor possible.
(5) Results measurable in numbers. The four preceding logical processes of
proof and construction Political Economy is glad to share with the other
Moral Sciences, but this fifth and last one it has to itself alone, and this is its
chief scientific advantage over them, and is consequently the main reason
why it is already more advanced and more symmetrically developed than
any of them. In common with them it has important subjective elements,
such as Desires, Estimates, and Satisfactions; in marked advantage over
them it has also objective elements, that can be weighed and measured and

even hardened into statistics. Economics has an ever ready objective test,
which mere mental and ethical and other moral processes never can have
from their very nature. The result of each and of all economic transactions
may be measured by money, and put down in a ledger, and published to the
world in the form of statistics. An economic blunder, whether in legislation
or in private action, pretty soon proves itself to be such by the lessened
gains of somebody, and these losses can be stated arithmetically; and
similarly, an economic improvement evidences itself at once by increased
gains coming to somebody; while it may take years and years to work out
the results of an ethical mistake, and even then their amount can only be
guessed at.
Theories in metaphysics can only be tested by the Reason of men, and
reasonable men without apparent bias of motive take opposite views of
Sensations and Intuitions and Volitions; while theories in economics, which
can be even better tested by the Reason, have an additional and almost
immediate and constantly recurring test through men's pockets and the
tables of the Census. The people indeed sometimes deceive themselves, and
are also too often deceived by others, in these matters of buying and selling;
but it is none the less of the utmost consequence to this Science, that all the
results of good and bad practice in Economics work themselves at last into
a definite shape, into facts and figures that cannot lie. It is not, as in Ethics
and Metaphysics, that tendencies and potencies only are ascertained, but
everything speedily drifts into results measurable in numbers, which stand
out like landmarks against the sky. It is just for this reason, as both the
schools of the Roman lawyers admitted, namely, that we have in all cases
the Return-Service as the outward expression and measure of the Desire and
Effort of him who renders the service, and because it makes no difference
which of two services exchanged be regarded as the return-service, that our
Science is reared on the firm ground of objective realities, notwithstanding
the strong subjective elements that have a constant part in it.
(c) The third condition of a recognized Science is, that the logical processes
appropriate to its class of facts have been already carefully applied to them
and a certain number of "exact definitions and sound principles" have been
already "educed from and applied to" them. We do not hesitate a moment to
claim, that this condition also is fairly and fully met by Political Economy,
and that this is a "Science" under the definition from every point of view,

and particularly from this third point of view; and a few examples will now
be given as a specimen merely of the logical work already achieved in
Economics. First, Induction more or less busy for two thousand years has
given at last an exact and acceptable definition of the Science, and
impliedly an exact description of the class of facts with which it is
conversant, namely, the Science of Sales, or what is exactly equivalent, the
Science of Value; and Deduction at all points along this slow road has
helped to correct and to broaden successive imperfect inductions, which an
inquisitive and tentative and cautious spirit—the mainspring of
Constructive Science—has instituted from time to time.
Second, precisely the same processes often repeated have ascertained
beyond question, that there are only three classes of Valuables and the exact
differences between them, and that, consequently, only six cases of Value
are possible to happen.
Third, so many nations at different times in all ages have lowered the
standard of their Money under a misapprehension of its nature and in a vain
hope of profit, and a general scale of rising prices following each attempt of
this kind having been several times observed and no instance to the
contrary, Economists came by Induction to assert the proposition, that
falling Moneys cause rising Prices; the proposition stood secure on
inductive grounds alone; but so soon as a perfect definition of Money,
namely, a Measure of Services, had at last been reached both inductively
and deductively, it became at once a safe Deduction from the definition, that
rising Prices must succeed a falling Measure. Thus assurance became
doubly sure.
Fourth, Introspection gives each buyer and seller such firm possession of
his own motive in buying and selling, that he naturally and inductively
concludes on the ground that men are substantially alike, that the motive is
similar in the party of the other part; each further step of experience in
traffic assures him of this beyond a doubt,—each wants to get and does get
something from the other of more consequence to him than what he gives;
every attempted deviation from rectitude in trade so far forth throws the
trader out from opportunity to trade; opportunity to trade is nothing in the
world but a market; a market is nothing in the world but men with products
in their hands, desiring to buy other products with these; the more men

anywhere with the more products in their hands of all sorts to buy with, the
better market everywhere for other men (the more the better) with other
products of all kinds to buy with; all the appropriate logical processes in
action and reaction, all the commercial experience of all men everywhere,
and all the true statistics of traffic ever gathered, do but assure the inductive
assent to one of the best and broadest of all the Generalizations in
Economics, namely this: A market for products is products in market.
(d) Are the definitions and principles already logically educed from and
applied to the great class of Valuables orderly arranged in "a body"? This is
the only inquiry that remains, in order to determine whether Political
Economy is already a "Science" in the strictest sense of that term. It is
admitted, that a jumble of even just definitions and principles do not
constitute a science, but only these when placed in a just order and
interdependence. A "body" implies an organic arrangement of parts. It has
been well said of the human body, that all its parts are reciprocally means
and ends; the same may be said of every living organic body, whether
vegetable or animal; and the same may be said in the way of analogy of
every developed and recognized Science. All the definitions and
propositions and illustrations in any science should be so arranged, as to
show the mutual relations and reciprocal dependence of all the parts, and as
to display the whole in harmony and symmetry.
It is as certain as anything in the future can be in science, that new
principles will be discovered in Economics as Time and Inquiry go on, and
that these will find their place little by little in a fuller and more rounded
"body" than is at present possible; while it is also as certain as anything in
the future of science can be, that the Outline of economics is already
perfectly drawn, that the great class of Valuables will never be enlarged nor
be better described, that the category of Commodities, Services, Credits, is
completed for all time, and that the analysis of each act of trade into two
Desires and two Efforts and two Estimates and two Renderings and two
Satisfactions will never yield additional elements. Political Economy is
already a body of exact definitions and sound principles educed from and
applied to a single class of facts. This body will indeed be enlarged by a
future and finer scientific construction, the arrangement and
interdependence of its parts will be better exhibited, the form and filling up
of the Science within the outline already determined is sure to become more

compact, more robust, and more beautiful, as the decades and centuries go
by; while, as in the human body throughout all the changes of its growth
and mature life, that future body of economic science in all its stages
towards perfection will be but the continuation and fuller development of
the present "body" of Political Economy.

CHAPTER II.
MATERIAL COMMODITIES.

Valuables fall naturally and exactly into three classes, Commodities,
Services, and Credits. The reasons are obvious at first glance, why articles
falling in the first class occupied the thoughts and the efforts of men almost
exclusively for the first thousand years of recorded history. Commodities
appealed to the senses of men: they are visible, tangible, weighable. Some
form of personal slavery existed everywhere, and largely withdrew attention
from personal services bought and sold; and there was not apparently
sufficient personal confidence between man and man in the earlier ages to
allow much development of credits, whose ground is personal trust and
whose sphere is future time. Commodities, on the other hand, fitted by the
efforts of some men to satisfy the immediate wants of other men, all ready
for delivery, to be exchanged against other commodities similarly fitted and
at hand, took the field apparently in the earliest ages of recorded Time,
gradually became very large in volume, opened new routes of travel and
transportation, and served to connect in a rough and ready way neighboring
tribes and even neighboring nations.
Commodities are the class of Valuables comprising material things, organic
and inorganic, fitted by human efforts to satisfy human desires. Cattle were
probably among the first things to become valuable, that is, salable; and it is
certain, that they became very early in many quarters of the world a sort of
Money or standard of comparison among other things exchangeable, and
indeed they continue to be such in some quarters to this day. Near the
middle of the sixth book of the Iliad occur these lines:—

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

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

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

The earliest detailed record of a commercial transaction in commodities, is
the purchase by Abraham of the field and cave in Hebron, more than 2000
years before Christ. It is narrated at length in Genesis xxiii. Long before this
purchase, however, it is said of Abraham that he "went up out of Egypt very
rich in cattle, in silver, and in gold." This formal sale to him in Hebron of
the field and cave of Machpelah is in all its parts instructive to us, and full
of signs of the drift of those times. It was "in the audience of the sons of
Heth, before all that went in at the gate of his city, that the field and the
cave were made sure unto him for a possession. And Abraham weighed unto
Ephron the silver which he had named in the audience of the sons of Heth,
four hundred shekels of silver, current money with the merchant." In the
lack of written and recorded deeds to land-parcels, as we have them now,

the sale of them was "made sure" before the faces of living men, who would
tell the truth and pass on the word. The market-place in those days was "at
the gate of the city," where the judges also used to hold their courts, the
place most frequented of all, and sales were made "before all that went in"
thither; "in the audience of the sons of Heth" was the silver weighed out,
and the field made sure in exchange. Then there were "merchants" as a
class; silver passed by weight rather than by tale, although it had already
passed beyond a mere commodity and had become money, "current money
with the merchant"; and even at this day the Bank of England takes in and
pays out gold and silver by balance rather than by count, though they be in
coined money: it is the more accurate method.
The author of the book of Job, believed to be of great antiquity, and
certainly true to nature and to fact in its essential parts, knew very well the
modes in which the ancient mines were wrought, and the worth of the
commodities extracted:—

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

And his eye seeth every precious thing;
He bindeth up the streams, that they trickle not,
And bringeth hidden things to light."
The prophet Ezekiel, who wrote in the sixth century before Christ,
incidentally described in his chapter xxvii the commerce in commodities,
that then centered in the city of Tyre on the eastern Mediterranean. "All the
ships of the sea with their mariners were in thee to traffic in thy
merchandise: many islands were at hand to thee for trade: with silver, iron,
tin, and lead, they traded in thy fairs: they brought thee for payment horns
of ivory and ebony-wood." Among the commodities besides these
exchanged in that market, are mentioned by the prophet horses and mules
and lambs and rams and goats, wine of Helbon and white wool, fine linen
and embroidered work, and riding cloths and mantles of blue and chests of
damask and thread, wheat and pastry and syrup and oil and balm, precious
spices and cassia and sweet reed, and gold and carbuncles and corals and
rubies. These old Phœnicians of Tyre colonized Carthage, and thus bore a
vast trade in commodities to the West, going overland into the heart of
Africa for dates and salt and gold-dust and slaves, and by sea through the
Pillars of Hercules northward to the British Isles for the sake of the trade in
tin.
The amount of transactions in commodities, the first class of Valuables, has
been constantly increasing, under natural impulses which we shall have
shortly to describe, from the dawn of authentic History down to the present
moment; and figures are baffled in expressing to our minds the sum of these
transactions even in a single country, still more their aggregate in the
commercial world. The foreign trade of every country is almost exclusively
in commodities, and is only a small fraction of its domestic trade in the
same; and so, when we remember that the foreign trade of the United
States, for example, under a commercial system designed and adapted to
curtail such trade, amounted in 1889 to about $1,600,000,000, and the
foreign trade by Great Britain the same year to about 4,000,000,000, we
gain a glimpse, we touch as it were the hem of the garment, of the gigantic
traffic of the world in commodities alone.
The Production of Commodities is the getting them ready to sell and the
selling them.

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

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

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

Natural Agents include not only "Nature's sun and showers," but also all the
forces and fertilities and materials of free Nature, that men may and do
avail themselves of in preparing commodities to exchange with the
commodities of other men. Of higher rank in Production than these natural
agencies are the Efforts of men in molding them so as to answer other men's
Desires, of which efforts the "toiling hands" of the poet are a symbol. They
include also the inventive brains and eloquent tongues and the skilful
manipulations of every name. The poet's "ship" is an instance of capital,
which is always a result of previous toil reserved to help on some future
sales. These three elements, Nature, Labor, Capital, conspire in all
production of commodities. Nature comes first with her free forces and
materials; and then present toil aided by the results of past toil in the form
of capital does all the rest in getting commodities ready to sell and selling
them. Let us now note each of these three a little more closely.
(a) Natural Agents. The most important point about these is, that they are
the free gifts of God, and continue so throughout the complications and
transformations wrought on them and through them by Labor and Capital,
until the material commodity of whatever kind is finally sold, and so passes
out of the purview of our Science. Many of the gifts of God, like the air we
breathe and the light in which we recreate ourselves and the water of
refreshment drunk from spring or brook, do not connect themselves in any
way with commodities bought and sold, and nobody ever thinks of them as

salable at all; but it has seemed and still seems to many, as if the natural
fertility in a land-parcel, the water-fall along the course of river or stream,
the timber-growth which the hand of man planted not, the deposit of gold or
coal in the bowels of the earth, and other such-like cases in which natural
gifts do connect themselves with human services and then are sold, lifted
the Value of the things sold above the point to which the mere human
efforts, whether past or present, would raise it. In point of fact, this seeming
is not a reality, as will fully appear in the sequel. God is a Giver, and never
a Seller; and he has arranged it so in his great world of gifts, that, however
much shrewd men may try to monopolize these gifts and then dole them out
to other men for pay, they are always practically thwarted in the attempt.
God himself never takes pay for anything, and has never authorized
anybody to take pay in his behalf; and when this role of Seller of free gifts,
which have cost him nothing and which he has not improved, is taken up by
any one, he is shortly crowded off the stage in shame by other actors true to
Nature.
This is the place for a grand induction. When we study in detail the free
gifts of God to this world and its inhabitants, we find they come and keep
coming in great classes. This is one of the uniformities of Nature, on whose
solid ground men tread and stride in safe inductive reasoning. Can a farmer
get pay in the price of his grain for the original fertility of his field, which
neither he nor his fathers nor his neighbors have bettered or made more
available? Doubtless he would be glad to do so, doubtless he would do so,
were it not for the primary fact, that such fertilities as his are in a class of
fields, that other men in more or less proximity to him raise grain on other
fields, whose original fertility is equal to that in his field; and some of these
other men in common competition with the rest as sellers will be willing to
part with their grain for a price which will be a fair equivalent for the
onerous human services rendered in getting their grain ready to sell and
selling it; and the free action of these men as sellers will tend to fix a
general market-rate for grain then and there, at which rate all must sell
whether they will or nill; and where now is the effect on price of God's free
gift? It is still free.
Here is a fine water-fall on the bounding river, the banks are low at this
point, just the place for mill and factory, the weight of God's free water will
turn the wheels, a hamlet will grow up around them—perhaps a city,—can

the riparian owner charge a fancy price for site of dam and mill? He might
under some circumstances; but the same river doubtless, above, below,
rolling over similar geological strata, leaps and falls at other points also;
there are other owners of mill-privileges within hail; besides, there are other
streams and tributaries in the region round about; and water has a knack of
dropping to the lower levels. God's gifts are broad in classes; competition
naturally has free play; natural agents are an essential factor in
commodities; so and more so are human efforts; but Values tend perpetually
and powerfully under natural competition between men as sellers to
proportion themselves to the onerous human efforts involved, and to
eliminate completely from all influence on themselves the broad and
bountiful gifts of Providence.
What has been observed to be true in respect to two or three or more of the
classes of God's free gifts to men, or in men, may almost certainly be
inferred to be true of all such classes. Therefore, inductively, such free gifts
have no effect on Values to lift them, their influence being eliminated by
human competition. Of course, if there be unique cases of remarkable gifts,
falling in no class, subject consequently to no competition, one cannot say
confidently that the free element in conjunction with the onerous element
may not make the return-service greater than it would be otherwise. It may,
or it may not, make it greater. There is no living principle at work in such
cases, that makes it certain, that the return-service will not be greater. Still,
unique cases, if they exist, are of little or no consequence in Economics.
They are most remarkably few, at all events. Where come in the solitary
gifts, that may later be connected with Valuables, on the round earth as God
fashioned it? Gold, silver, diamonds, copper, coal, tin, amber, spice-shrubs,
chinchona-trees, and all such things, have been scattered too widely and
liberally for individuals to monopolize them, or even combinations of men
unless they be assisted by law. Where even are the unique cases of God-
given talent or genius in men themselves, such as may become connected
with Valuables of the second class? Daniel Webster had his competitors in
the Court-room and in the Senate, Ben Jonson did not let Shakspeare have it
all his own way on the stage, and even "Milton's starry splendor" did not
make Paradise Lost sell well.
We must just note here in passing the supreme importance in an economical
point of view of untrammelled competition in the sale of commodities. It is

the divinely-appointed means, and the only possible means, of preventing
wide-spread injustice through Monopoly. Nothing else in the world can be
made effective to estop men from robbing their fellow-men through
exchanges artificially restricted; from charging more in the market for their
wares than a just compensation for their own efforts; from enriching
themselves by impoverishing their neighbors; from worsening the quality of
their wares offered for sale; and from relying upon the artificial restrictions
put on their competitors, rather than on their own skill and enterprise and
the goodness of their goods, for a market. The Common Law of England
holds monopolies to be illegal, and the reasons given (11 Coke, 84) are,
first, because the price of the commodity will be raised; second, because the
quality of the commodity will not be so good and merchantable as it was
before; and third, because they are apt to throw many working people out of
employment. It is nothing less than a crime against Civilization, than a sin
against the clear ordinance of God, than an artificial obstruction to
individual and national Progress, to put up bars and barriers by law for the
purpose of cutting off competition, whether domestic or foreign, either by
putting disabilities in the path of any or through monopoly tariff-taxes, in
the buying and selling of useful commodities anywhere.
(b) Human Efforts. Every way unlike the free forces and materials of
Nature, indispensable as these are in the production of commodities, is the
second requisite in such productions, namely, the onerous efforts of men.
Persons are very different from things, from powers, from lifeless materials.
Persons act from motives only. Minds lie back of bodily exertions,
impelling and guiding them. Such efforts as are needful to mold materials
into commodities are only put forth in view of, and for the sake of, a
remunerative return; and only rational beings, acting under motives whose
goal is in the future, capable of foresight and of adapting means to ends, can
put forth such efforts. No degree of training can make even the most
intelligent animals capable in any degree of that kind of exertion, which we
call Labor; and there is no improvement whatever in the methods of
animals in reaching their instinctive ends,—the beaver builds his dam and
the bee gathers and deposits the honey exactly as bees and beavers did ages
ago.
In the strictest sense, accordingly, there is no such thing as physical labor,
because the mental must coöperate with the physical even in the lowest

forms of human exertion; and in the same sense there can be no such thing
as exclusively mental labor, for the bodily powers conspire more or less in
the highest intellectual efforts that are ever sold. Nevertheless, both the
phrases, physical labor and mental labor, are convenient and not harmful,
whenever on the one side the bodily powers seem to be predominant in the
effort, and on the other the intellectual.
It is now to be noticed, that all that men can do, when they labor physically,
is to move something. When a man works with his hands or his feet or his
whole body, all that he does or can do, is to begin a series of motions or
resistances to motion, for this good reason, human muscles in their very
structure are capable only of starting motion and stopping motion. All the
marvellous results of physical effort in all the world have flowed from so
simple a matter as the contraction and expansion of muscle; and the world
of materials is so cunningly constructed, that, when these are moved into
right position by human hands, or by some form of capital itself the result
of previous human handling, the free powers of Nature do all the rest, and
valuable commodities are the good outcome. For one example, when the
woodman fells a tree for sale, he brings a series of motions (labor) to bear
upon the trunk, by means of his sharp axe (capital), and then the power of
gravitation (nature) seizes the tree and brings it crashing to the earth. For a
second illustration, wool and cotton have by nature a certain tenacity of
fibre, and what is more to the point, a certain kinkiness of fibre easily
interlinking one with another indefinitely in length; men move these
separate fibres in certain relations to each other by an instrument (capital)
called a spindle, and the result is thread; then other men move these threads
into relations with each other by means of an implement (capital) called a
shuttle, and the outcome is a web of cloth; lastly, the tailor moves his shears
through the cloth, and then his needles, and the issue is a coat, a
commodity, the valuable for which all these processes were gone through
with, and by the sale of which all the onerous factors therein are
compensated.
Now, since human muscles are soon wearied in action, and since motion is
the only thing required of men in the production of commodities, they
naturally look around for outside help in this matter; and the first help they
lighted on for moving things was the domestic animals, the ox and ass and
horse, doubtless domesticated in the very beginnings of society; and as

these can be used in so many different places, and for such a variety of
purposes, and are so cheaply reared, they are exceedingly useful as a motive
power, and will probably never be superseded as such. Inanimate auxiliaries
in moving things into right position for the production of commodities, such
as the water-wheel and wind-mill, were undoubtedly brought into use much
later; and much later still, steam and electricity and other more subtle and
recondite natural agents. All of these helps, whether animate or inanimate,
do but cause simple motions of the same kind as those caused by the human
hand. The most ponderous engine merely reduplicates that which the arm of
a child is capable of; while in point of delicacy and firmness of touch,
perhaps no machinery can subdivide and apply this motion so skilfully as
the human fingers can. It is said that some of the lace made wholly by hand
is finer and more delicate than any yet woven by machinery, although the
introduction of machinery into lace-making has cheapened lace products in
general to a small fraction of their former cost.
What we commonly call "Power," then, by whatever instrumentality
furnished, is simple auxiliary motion, additional to that of physical human
Labor. Commodities are produced in unlimited quantity and variety by such
labor, assisted by the free forces of nature applied by means of animals and
implements, which are capital. But such labor is irksome as well as
wearisome, and is never expended except in view of a reward, which is
secured only from the sale of the finished commodity.
(c) Reserved Capital. We must examine the nature of Capital with care, and
follow its varied forms without confusion, because it is the only other factor
besides labor in the production of commodities, that has to be paid for out
of their sale.
Simplest cases are always the best in economical discussions. Let us take
for illustration a recently observed case from the gold hills of North
Carolina. All the methods are strongly primitive, but all the elements of
production are present. A negro woman is the laborer, the bits of gold
scattered in the soil are the free gift of nature, a bored log to divert the water
from the mountain stream, and a tin pan in which to gather and wash the
sand and gravel, are two crude forms of capital; free gravitation also brings
the water through the log, and free gravity carries down the particles of gold
to the bottom of the washing-pan, and many other agencies of free nature

coöperate in this very simple case of production; and besides the log and the
pan, there are doubtless some other forms of capital, at least the whittled
plug to stop at need the flow of water through the log. The chief factor in
these processes of production is still the laborer, the motions of her hands in
stirring the sand and picking out the precious bits at the bottom of the pan
are the chief motions, the labor is both physical and mental,—no animal
could be trained to adopt means to ends like this negro woman.
It is her capital that now engages our attention. Any Valuable outside of man
himself reserved to assist in the production of further valuables is Capital.
The idea of growth and increase inheres in the very word, which is derived
from the Latin noun, caput, a head, a source, and gives intimation in its
etymology of its scientific meaning. The word, caput, is often used in
classical Latin for a sum of money put out at interest, and its derivative,
capitale, is also used in the same sense, at least in mediæval Latin; and
from this form of the word have come into English not only Capital, but
also by corruption Cattle and Chattels. Flocks and herds were at one time
the principal riches of our Saxon ancestors, and also the principal means of
increasing their riches, and in process of time the same root-word came to
be spelled differently as applied to animate or inanimate things of value;
while the notion implied in the Latin caput, and in the English source, came
along in all three of these words; and hence the careful definition of Capital
above given.
It makes no difference whether the colored woman bored her own log by
means of an item of capital already existing, namely, an auger, or hired
another person to bore it for her, or bought the log already perforated, it is
an article of Capital, a valuable kept to increase future valuables; she might
doubtless sell it for something to a new-comer wishing to operate other
sand in the neighborhood, but she keeps it to help herself gather more gold
for ultimate sale, she practises what we call in Economics abstinence and
must have her reward for this in the form of profits from the ultimate sale of
her commodity, gold, as well as a reward for her labor in the form of wages
from the same source. As one person furnishes both the labor and capital in
this case, there is no actual division of the gross return into wages and
profits, as there always must be when separate parties furnish the two
essential factors, both of which must be remunerated by the sale of the
commodity. What is thus true of the log, is equally true of the tin-pan, and

even of the plug also, if it be capable of repeated use and cost something of
labor and the help of a previous item of capital, namely, the jack-knife. Our
negro woman of the South is a small capitalist as well as a rude laborer, and
practises abstinence as well as puts forth exertion, and consequently is
entitled to receive profits as well as wages in the return she gets for her
gold-dust when she sells it.
We are now beginning to see what the nature of Capital is, and what the
motives are for employing it. In the production of commodities Capital is
always something that makes easier to the producers the getting ready to
sell and the selling of future commodities. The capital always spares more
or less of onerous and irksome human exertion. It always mediates between
some free force of Nature and some otherwise more onerous effort of men.
The sole motive to employ capital in any one or in all of its multitudinous
forms from the simplest to the most complex is to throw off upon the ever-
willing shoulders of Nature some part of the irksome effort that would
otherwise come to the easily-wearied muscles of men. Nature is "good," to
use a commercial term, for all she can be made to carry of men's work,
through implements devised and machinery contrived to apply, to
commodities in every stage of their transformation and transportation till
the last, the ever-present potencies of this physical world. These potencies
cost nothing. The implements and machinery cost much in present labor and
previously created capital. The ultimate sale of commodities must make
return for all the forms of capital employed in their production, in the shape
of Profits, the reward of abstinence; and for all the forms of direct labor
employed in their production, in the shape of Wages, the reward of personal
effort.
The beaver gnaws down the tree with his teeth from generation to
generation in precisely the same manner; but man is a being more nobly
endowed than the beaver, and no sooner had he occasion to fell trees, than
something of the nature of an axe suggested itself to his ingenuity. It is true,
that his earliest attempts at axe-making were probably of the rudest sort, but
just as soon as anything was devised, whether of flint or shell or metal, that
rendered easier the felling of a tree, Capital made a beginning along that
line of obstacles. Our chief interest in studying the implements of the
successive so-called Ages of Stone and Bronze and Iron, is to witness the
increasing degrees of ingenuity displayed by those pre-historic men. Among

the more gifted races, progress in this direction was perhaps more rapid
than we are wont to think it was, since Tubal-Cain, the first artificer of
record, is said to have "hammered all kinds of implements out of copper and
iron" (Gen. iv, 22). Lucretius, writing in the century before the Christian
era, put down the following lines in vigorous Latin, as translated by Mason
Good:—

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

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

It is already plain, that the class, Capital, is a smaller and a peculiar sub-
class under the great class, Valuables; nothing can become Capital until it
first become a Valuable, and then be capitalized by a distinct act or
intention on the part of the owner to reserve it in his own hands as an aid in
further production, or transfer it to other hands to be so used, he meanwhile
receiving profits as the reward of his abstinence; only a transferable
valuable, accordingly, can become Capital in any case, that is to say, it must
be either a Commodity or a Credit, since personal services, though they
may be sold, cannot be put over into the hands of another to be used in
production, and therefore cannot become Capital in any case; and the chief
peculiarity of this sub-class, Capital, is, unlike the three great classes of
Valuables, each of which is utterly distinct from the other two, so that a
Commodity can never become a Credit or a personal Service either of the
others, that Capital as a class has extremely flexible limits, and
consequently certain Commodities and Credits may easily enough be
Capital to-day, and fall back to-morrow into their respective classes of mere
Valuables and the next day come out from the class Non-Capital into the
class Capital again. The same commodities and credits may be capital at
one time, and non-capital at another, though they must be valuable all the
time, or cease to be commodities and credits. When it is said that a young
man's talents and skill are his "capital," the word of course is used in a
metaphorical sense, and the meaning is, that skill and talents are like capital
in some respects. Popular language is not scientific.
Cicero wrote long ago: "Optimum et in privatis familiis et in republica
vectigal est parsimonia." Abstinence is the best means of revenue as well in
private families as in the State. The source of Capital in a distinct act of will
saving or sparing from present use (parsimonia) a valuable commodity or
credit, and the quick nature of Capital as adding to itself (vectigal) in
profits, are both brought out in this Latin maxim, which is rather an
expression of an old and ingrained Roman sentiment than anything original
with Cicero. It is the very nature as well as the very name of "Capital" to
increase itself by rapid increments. It is as well the Stream as the Source.
For example, any sum of money soon doubles itself when put out at
compound interest, because the original sum increases day and night until it
be repaid. It is of the essence of every form of Capital to make growth,
because its sole purpose as such is to become an aid to future and further

production. A trowel in the hands of a mason, which is capital, pays for
itself every day he works with it, and perhaps every hour of the day, in the
increased production wrought by means of it. The wheel, which free water
turns, though a costly implement, repays that cost a hundred fold in the
additional bushels of wheat turned into flour through its aid as capital. So of
all implements. So of all machinery. So of all means of transportation:
ships, canals, railroads.
There was a strange prejudice in ancient and mediæval times against this
natural increase of capital out of its own bowels, as it were, owing probably
to this dictum of Aristotle: "For usury is most reasonably detested, as the
increase of our fortune arises from the money itself, and not by employing it
for the purpose for which it was intended." In 1360, a French bishop, Nicole
Oresme, repeats the error of Aristotle under the same rhetorical image: "It is
monstrous and contrary to Nature that a barren stock should give birth, that
a thing sterile in its whole being should fructify and be multiplied from
itself, and such a thing is money." Even Shakspeare catches up the old
figure: "Is your gold and silver ewes and rams?" Shylock answers: "I
cannot tell; I make it breed as fast." In the light of the three requisites of
Production, in the light of the purpose and wisdom of God in arranging the
active forces of this world, the prejudice in question disappears, and
intelligence rejoices in the ever-increasing use of Capital as the handmaid
of Labor, in the quick and sure reward of him who practises abstinence, in
the production of commodities constantly made easier and cheaper in all
directions, in a scale of comforts for the masses of men assuredly rising, in
a divinely appointed force lifting like Christianity itself upon the otherwise
sagging condition of mankind.
Capital assumes but two economical forms, namely, Circulating Capital and
Fixed Capital. Circulating Capital is all those capitalized products, whether
commodities or credits, the returns for the sale or use of which are derived
at once and once for all. All circulating capital will be found in one or other
of the following sub-forms: (1) raw materials; (2) wages paid out in view of
an ultimate profit; (3) completed products on hand for sale; and (4) products
bought and held for the sake of resale. The crucial test of circulating capital
is the question, Are the returns to be secured by the single use or single
transfer of that particular product? Tools, for example, in the hands of him
who has manufactured them for sale is circulating capital. Fixed Capital is

all those capitalized products, which are purchased or held with a view of
deriving an income from their delayed and repeated use. All fixed capital
will probably be found in one or other of the sub-forms following: (1) tools
and machinery in use; (2) buildings used for productive purposes; (3)
permanent improvements in land parcels; (4) investments in aid of
locomotion and transportation; (5) products rented or retained for that
purpose; and (6) the national money considered as a whole.
2. We will next look at the essential Conditions of the production of
Commodities. These are also three, as are the Requisites, namely,
Association, Invention, Freedom. More or less will men make and sell to
one another commodities in any state of society, in which there is permitted
any considerable degree of association of men with men locally or
commercially, in which is encouraged in any way the universal spirit of
invention or the desire to get hard things done easier, and in which some
degree of liberty of action and security of property and equality of
privileges is guaranteed; but it is very plain, that the production of
commodities will increase in all directions and become the greatest in that
age and country when and where are allowed the closest ties of human
association both in place and in commerce, the freest scope and largest
rewards of inventive genius, and the highest possible degree of liberty and
security and equality of rights. Let us illustrate from a state of things in the
southern half of the United States during the first half of the nineteenth
century. For the most part the land owners lived on isolated plantations
widely separate from one another, these plantations were cultivated by
gangs of slaves, a system that tends to bring all manual labor into contempt,
the poor whites scattered in hamlets felt themselves above the slaves and
beneath the masters, intercourse between the three classes was little,
opportunity to better essentially their condition was denied to all three alike,
there were but few cities sprinkled over the vast territory and these
relatively small, the only commodity produced on a large scale was raw
cotton, the simple device for ginning this had been invented in the decade
preceding by a college boy from Connecticut, the agricultural implements
were of the rudest kind, even the coarse shoes for the slaves were bought at
the North;—in short, the degree of association and invention and freedom
was each so low, that the production of commodities was exceedingly

small, even as compared with what that production became in one quarter
of a century after the abolition of slavery.
(a) Association. If we may continue for purpose of illustration our
childhood trust in the story of De Foe, Robinson Crusoe came to lead a very
tolerable life upon his desolate island by means of his own industry directed
so as to satisfy his own wants by his own efforts. He did everything for
himself, and had no opportunity to buy anything or sell anything. The whole
course of such an isolated life could never develop the idea of Value, would
require no such word as Commodities or suggest their production, and such
a man while solitary upon his island could not possess Property in the true
sense of that word. Association is the first main condition of Production,
because of the natural obstacles interposed between the isolated man and
the supply of his various wants. If any one man try to surmount a
considerable number of these natural obstacles, he must miserably fail,
because his powers are not adequate to the task; and hence it follows, that,
in a state of isolation, men's wants exceed their powers; but now let the
same man devote himself to overcome a single class of obstacles, for
instance, those in the way of procuring suitable clothing, and his powers are
adequate to this, he soon acquires skill in it, he learns to avail himself of the
free help of Nature and the facilitating processes of art, he is able to realize
large products along his line, and is now ready to offer his surplus in
exchange with other men, who meanwhile have been giving themselves
each to another class of obstacles, have concentrated efforts and skill upon
them, have succeeded by the help of Nature and art in surmounting them,
and are now ready to offer their surplus commodities in exchange for
others; and, the exchanges beginning to be made in all directions, men find
that they thus obtain vastly greater satisfactions for their various desires
than they could possibly get by direct efforts: so that we may even say, that,
in a state of society through association, men's powers tend to overtake their
wants.
Without association with his fellow-men, there is no creature so helpless, so
unable to reach his true end, as is man; and therefore it is, that the impulse
to association is one of the strongest of our natural impulses. Men come
together, as it were by instinct, into society; and, thus associating
themselves together, it is soon discovered, not only that there are various
desires in the different members of the community, which are now readily

met by coöperation and mutual exchange, but also that there are very
different powers in the different individuals in relation to those obstacles
which are to be surmounted. The tastes and aptitudes of different men are
very diverse. There is a great diversity in natural gifts. One man has
physical strength, another mechanical ingenuity, a third a philosophical
turn, and a fourth a bent and genius for traffic. Now, then, Nature speaks in
as loud a voice as she can utter, in favor of such a degree of association and
exchange as shall allow a free development of these varying capacities,
while they work upon the obstacles to the gratification of men's wants,
which lie appropriately opposite to them.
Men must come together either locally or commercially, must learn each
other's wants, must compare with each other powers and tastes and
opportunities, must come to have some confidence in each other, and then
they will begin by rendering mutual services back and forth to experience
the better satisfactions and the new strength that exchanges bring. Whatever
improves the character of men, and thus leads to greater confidence among
them, will enlarge their commerce, and knit closer and wider ties of
association and production. Neighborhood associations and productions
soon create a surplus to be exchanged for something else with other
neighborhoods; parts of single nations however remote from each other find
a relative diversity of advantage and an increasing profit in connecting
themselves by the ties of trade; and the separate nations learn, though late,
that they are only one great family for the grand ends of production and
progress. Even within the single nation, there is a strong tendency for
particular trades to localize themselves in one spot, as for instance, the
manufacture of skin gloves has centered itself for the United States in
Gloversville, N. Y.; and so in the great cities that are centres of distribution,
for example, the wholesale grocers of St. Paul are on one street, the dry
goods houses of Boston are in close proximity, and the booksellers of New
York are tending towards each other in place.
Now, this broad association as between persons and nations, instead of
detracting at all from the individuality and power of each, is the very thing
that brings out the individuality and intensifies the power of each; because
it is only thus that full scope is given to the exercise and development of
each peculiar power whether of the individual or the nation. Hence the
strong tendency everywhere visible in the world of commerce towards

Specialties: the old single trades and vocations and professions are
constantly breaking themselves up into parts, and each man is taking up that
for which he is naturally best fitted and has specially trained himself, and
all to the great advantage of individuality and personal power and progress.
Mr. Carey is certainly right in his principle (much insisted on in all his
books), that the degree of individuality depends on the degree of
association, each advancing hand in hand with the other; and he is as
certainly wrong in lacking confidence in the natural forces at work tending
to the highest degree of association and consequently to the highest degree
of individuality. These forces are immensely strong. Men come together as
it were by instinct, being conscious of individual feebleness; personal
interest is soon seen to follow the bent of social attraction; a just sense of
personal dignity and importance in being a substantive part in the ongoings
of society enormously strengthens the impulse to association and
individuality; the progress of each and all in achievement and elevation still
further knits the ties of union; and lastly, a strong feeling of social justice,
of what is due to others as well as to one's self,—that every man has an
inalienable right to his full opportunity and all that that implies, to buy and
sell and get gain, to life and liberty and the pursuit of happiness. When
motives and powers and potencies such as these, proven to be universal by
broad and constant inductions, fail as economical forces to secure
association and individuality, then it will be time to look around with Mr.
Carey for some inferior and factitious force.
(b) Invention. This is the second main condition in the production of
commodities; because production is processes, getting something ready to
sell and selling it; and Nature stands ever ready with her free agencies to
facilitate these processes, just so far as the inventive brain of man can
contrive to unite the two. Invention is the marriage of a gratuitous force to
an onerous process, and the fruit of that union is an easier way and
multiplied utilities. There are some in every considerable community, and
more in every community enlarged by the natural association but just now
described, who have the knack of contrivance, who find their joy in finding
a new power in Nature or some new application of an old power; were it not
for unhindered association and free exchange, the individuality of these
would be effectually repressed, and they would have to drudge for their
daily bread; but the importance of inventors is well understood in every

progressive community, and under advanced exchanges their livelihood is
guaranteed by those who hope to profit by its results while their work is
maturing; and Production rejoices and grows strong and throws out
unnumbered hands to make instant use of the new power and the easier
processes, in order to multiply commodities in number and variety.
As an illustration of all this, the reader will be interested in a brief account
of the series of Inventions made in Great Britain during the last third of the
eighteenth century, in consequence of which the Cotton Industry was
established in that country in such preëminence as has to this day baffled
the attempts of all other countries even to approximate it.
We catch our first glimpse of Cotton in the pages of Herodotus, who wrote
more than 400 years B.C. in relation to India as follows: "There are trees,
which grow wild there, the fruit whereof is a wool exceeding in beauty and
goodness that of sheep. The natives make their clothes of this tree-wool."
This passage is interesting, as showing that the first comparison of cotton
with wool exhibited their resemblance in whiteness and in kinkiness, which
latter quality enables them both to be spun into yarn; as showing also, that
the Hindoos very early both spun and wove cotton, and then made it into
clothes; and as showing lastly, the appropriateness of the original name
given to cotton in Europe, namely, "tree-wool," a name by which the
Germans still designate it (Baumwolle). If the extreme East furnishes the
first notice of cotton, the extreme West follows it next in order. When the
Spaniards discovered Central and Southern America in the first quarter of
the sixteenth century, they reported that they found the Mexicans clothed in
cotton cloth.
But wool was the staple of England. Parliament and people were jealous of
cotton, lest it might prove a rival to wool, and actually prohibited the
introduction of printed calicoes (so called from Calicut in India whence
they were exported). The taste, however, for calicoes increased in spite of
the prohibition, which was afterwards intermitted for a revenue duty on
plain cotton, which was then rudely printed on blocks in London,
Manchester, and elsewhere; but the prohibition of Parliament against
wearing printed calicoes was first repealed in 1736. Fifteen years later the
United Kingdom imported only 2,976,610 lbs. of raw cotton, and exported
only £45,986 of cotton goods; in one century the import of cotton became

500 times larger than that, and the export of cottons 1300 times larger than
that; and this prodigious result was due mainly to three or four inventions
occurring within short times of each other, by means of which the free
forces of nature took the place of the onerous efforts of men.
John Hargreaves, a poor weaver in the neighborhood of Blackburn in
Lancashire, was returning home from a long walk, in which he had been
purchasing a further supply of yarn for his own loom. Spinning at that time
only admitted of one thread spun at a time by one pair of hands, one of
which turned the wheel and thus made the single spindle rapidly revolve,
and the other hand pulled gently upon the "roving" attached to the spindle
and thus drew it out to the requisite tenuity twisted into yarn. The "carding,"
then effected by rude instruments called hand-cards, by means of which the
fibres of the cotton were disentangled and straightened and laid parallel
with each other; and the "roving," a process by which the short fleecy rolls
stripped off the hand-cards were applied to the spindle and made into thick
threads only slightly twisted, were the two preparatory operations for the
spinning. All these operations were slow and clumsy, and the consequent
expensiveness of the yarn formed a great obstacle to the establishment of
the cotton manufacture in England. The improvements made in the loom of
that period by Kay, father and son, had shortly before doubled the power of
each weaver, and the spinners could not keep up in furnishing material to
the weavers.
As Hargreaves entered his cottage from this excursion to get yarn to keep
his loom agoing, his wife, Jenny, accidentally upset the spindle, which, as
was her wont, she was diligently using. Her husband noticed that the
spindle, which was now thrown into an upright position, continued to
revolve just as when horizontal, and that the thread was still spinning in his
wife's hands. The idea immediately occurred to him, that it might be
possible to connect a considerable number of upright spindles with the
revolutions of one wheel, and thus multiply the power of each spinster. "He
contrived a frame in one part of which he placed eight rovings in a row, and
in another part a row of eight spindles. The rovings, when extended to the
spindles, passed between two horizontal bars of wood, forming a clasp
which opened and shut somewhat like a parallel ruler. When pressed
together this clasp held the threads fast; a certain portion of roving being
extended from the spindles to the wooden clasp, the clasp was closed, and

was then drawn along the horizontal frame to a considerable distance from
the spindles, by which the threads were lengthened out and reduced to the
proper tenuity; this was done with the spinner's left hand, and his right
hand at the same time turned a wheel which caused the spindles to revolve
rapidly, and thus the roving was spun into yarn. By returning the clasp to its
first situation and letting down a piercer wire the yarn was wound upon the
spindle."
The powers of Hargreaves' machine soon became known among his
ignorant neighbors, notwithstanding his strenuous efforts to keep his
admirable invention a secret, and these neighbors naturally enough
concluded that a contrivance, which enabled one spinster to do the work of
eight, would throw many people out of employment. A mob broke into his
house and destroyed his machine. Hargreaves retired in disgust to
Nottingham, where by means of the friendly assistance of one other person
he was enabled to take out a patent for his invention, which he called in
compliment to his industrious wife the "Spinning-Jenny." This invention
gave a new impulse to the cotton manufacture, but had it been
unaccompanied by other improvements, no purely cotton goods could have
been made in England; because the yarn spun by the new jenny, like that
previously spun by hand, was not fine enough nor hard enough to be used
as warp, and linen or woollen threads had consequently to be employed for
that purpose.
In the very year, however, in which John Hargreaves, the poor weaver,
migrated to Nottingham, Richard Arkwright, a poor barber's assistant, took
out a patent for his still more celebrated machine for spinning by rollers. In
one respect Arkwright was much worse off than Hargreaves: the latter had a
helpmate meet for him, the former had a wife who is said to have destroyed
the models her husband had made and to have opposed him in every step of
his career. But Arkwright was not deterred from his life pursuit by the
poverty of his circumstances or the scandalous conduct of his wife. After
many years of intense and opposed devotion to the possible application of a
simple principle he had conceived in his mind, namely, that of spinning by
means of rollers revolving at varying rates of rapidity, he succeeded in
contriving and patenting his memorable machine, which, more than any
other one invention, localized and concentrated in England the gigantic
cotton-industry of the world. Arkwright's idea and achievement was to pass

the coarse thread drawn out from the rovings over two pairs of rollers in
succession, the first of which revolving slowly fined the thread down
evenly and gradually, and then this thread was passed over a second pair of
rollers turning with a high velocity and drawing out the line into any
requisite tenuity. Thus a cotton thread was spun capable of being used as
warp. Cotton cloth as such could now be manufactured in England.
From the circumstance that the mill, at which Arkwright's machinery was
first erected, was driven by water power, the machine received the
inappropriate name of the "water-frame"; and the thread spun on these
rollers was commonly called the "water-twist." The old mode of carding the
cotton by hand now furnished the "rovings" too slowly to meet the wants of
the new spinning-jenny and the new water-frame; and these great inventions
would consequently have proven comparatively useless, had not a more
efficient and rapid process of carding the cotton superseded just at the right
time the old system of hand-carding. Lewis Paul introduced revolving
cylinders for carding the raw cotton into rovings preparatory to spinning, in
partial imitation perhaps of Arkwright's principle of spinning the rovings by
the rotatory motion of rollers. Paul's machine consisted "of a horizontal
cylinder, covered in its whole circumference with parallel rows of cards with
intervening spaces, and turned by a handle. Under the cylinder was a
concave frame, lined internally with cards exactly fitting the lower half of
the cylinder, so that when the handle was turned, the cards of the cylinder
and of the concave frame worked against each other and carded the wool.
The cardings were of course only of the length of the cylinder, but an
ingenious apparatus was attached for making them into a perpetual
carding. Each length was placed on a flat broad riband, which was
extended between two short cylinders, and which wound upon one cylinder
as it unwound from the other."
While the foregoing series of inventions placed an almost unlimited supply
of cotton yarn at the disposal of the weaver, the machinery as yet introduced
was still incapable of providing yarn fit for the finest grades of cotton cloth.
The "water-frame" indeed spun abundant twist for warps, but it could not
furnish the finest qualities of yarn, because these were too tenuous to bear
safely the pull of the rollers while they wound themselves on the bobbin.
Samuel Crompton, a young weaver living near Bolton, possessed the
ingenuity needful to remove this difficulty. He succeeded in combining in

one machine, which from its nature is happily called the "mule," the several
excellences of Hargreaves' spinning-jenny and Arkwright's water-frame.
Copying after the latter, the mule has a system of rollers to reduce the
roving; copying after the former it has spindles without bobbins to give the
twist; and the thread is stretched and spun at the same time by the spindles
after the rollers have ceased to give out the rove. "The distinguishing
feature of the mule is that the spindles, instead of being stationary, as in
both the other machines, are placed on a movable carriage which is
wheeled out to the distance of fifty-four or fifty-six inches from the roller
beam, in order to stretch and twist the thread, and wheeled in again to wind
it on the spindles. In the jenny, the clasp which held the rovings was drawn
back by the hand from the spindles; in the mule, on the contrary, the
spindles recede from the clasp, or from the roller-beam which acts as a
clasp. The rollers of the mule draw out the roving much less than those of
the water-frame, and they act like the clasp of the jenny by stopping and
holding fast the rove, after a certain quantity has been given out, whilst the
spindles continue to recede for a short distance farther, so that the draught
of the thread is in part made by the receding of the spindles. By this
arrangement, comprising the advantages both of the roller and the spindles,
the thread is stretched now gently and equably, and a much finer quality of
yarn can therefore be produced."
The ingenuity of Hargreaves, Arkwright, and Crompton had been exercised
to provide the weaver with yarn, and had now indeed provided him with
more yarn than he could use; the spinster had beaten the weaver, just as the
weaver had previously beaten the spinster; and the making of cotton cloth
seemed likely to continue sluggish, because the yarn could not be woven
any faster than a skilled workman could weave it with Kay's improved fly-
shuttle. In the summer of 1784, a Kentish clergyman named Edmund
Cartwright, being in conversation with some Manchester gentlemen, one of
whom observed that, "as soon as Arkwright's patent expired so many mills
would be erected and so much cotton spun that hands would never be found
to weave it," replied, "Arkwright must then set his wits to work to invent a
weaving-mill." Notwithstanding the unanimous opinion expressed by the
Manchester gentlemen, that such a weaving-machine was wholly
impracticable, the clergyman himself within three years had invented and
brought into successful operation the "power-loom." Subsequent inventors

improved the idea which Cartwright originated, and before 1834 there were
not less than 100,000 power-looms at work in Great Britain alone.[3]
Substantially the same machinery invented for carding and spinning and
weaving cotton was very shortly and successfully applied to the carding and
spinning and weaving of wool, because the wisdom of Nature imparted to
them both the same sort of tenacity of fibre, the same capacity in that fibre
to be spun into a thread of indefinite length by means of the little loops or
kinks easily interlocking contiguous fibres into a single thread, which two
obvious resemblances gave an identical name to the animal and vegetable
products otherwise so different from each other.
The spirit of Invention, one of the chief conditions in the production of
material commodities, thus simply illustrated along the line of a single
manufacture, may serve us for a sample of similar improvements taken and
taking place in scores upon scores of other lines of effort and production.
The principle is the same in all cases past and present and still to come,
namely this, to throw the strain from the mind and muscles of men upon the
forces and agencies of free Nature, with which the world around us is
crowded in our behalf, and which are waiting to slave in the service of
mankind without rest and without fatigue,—without money and without
price.
(c) Freedom. By far the most important of all the conditions, under which
the production of material commodities goes broadly forward, is liberty of
action on the part of the individual; because, wherever such liberty is
conceded, association and invention and all other needful conditions follow
right along by laws of natural sequence. By liberty of individual action is
meant the practical right of every man to employ his own efforts for the
satisfaction of his own wants in his own way, whether directly or through
exchange. Each man's right of individual freedom is limited of course by
every other man's right to equal freedom, which the first man is not at
liberty to infringe; and also, in certain few and limited respects, by what is
sometimes called the "general good," the judge of the application of which
must be the government under which the man lives. With these limitations,
which are few in number and never serious in degree when rightly applied,
and which limit in common all other rights whatsoever, the right of every
man to buy and sell and get gain is just as fully a right as the right of

breathing. It stands on the same impregnable ground. It is a natural and self-
evident and inalienable right, with which each man has been endowed by
his Creator, to put forth efforts for his own well-being and for those
dependent upon him, either directly or by means of efforts exchanged with
other men equally free; and he is a slave in spirit and position, who tamely
submits to have his own rights of buying and selling curtailed, or to stand
by and see the rights of his fellow-citizens similarly curtailed, unless such
act of interference and curtailment on the part of his Government be
justified by a solid proof that some other public or private rights, which are
at least as well based as his own, would be endangered by the exercise of
his own.
In what cases may a Government properly step in to regulate or prohibit the
buying and selling of its citizens? Hundreds of inductions extending
through hundreds of years have been carefully and logically conducted in
order to reach a just and comprehensive answer to this question; and in all
probability the cases have been inductively ascertained for all time, and
they are these: such buying and selling may be controlled and prohibited, as
are proven to be contrary (1) to the public Morals, (2) to the public Health,
(3) to the public Revenue. All other buying and selling may be safely
assumed to be both profitable to the parties to it, and also useful to the
Commonwealth in general; and any interference with it by public authority
is a high-handed infringement of natural rights, a blow aimed at the life and
source of property. These wrongful strokes at private rights, this restriction
on the freedom of individuals to exchange products for their own welfare, is
now mostly confined in civilized countries to the region of Taxation. Within
this region the wrongs are still frightful. Judge Cooley, in his "Principles of
Constitutional Law," states the matter as follows: "Constitutionally a tax
can have no other basis than the raising of revenue for public purposes;
and whatever governmental action has not this basis is tyrannical and
unlawful. A tax on imports, therefore, the purpose of which is not to raise a
revenue, but to discourage and indirectly prohibit some particular import
for the sake of some home manufacturer, may well be questioned as being
merely colorable, and therefore not warranted by constitutional principle."
Formerly, governments interfered almost beyond belief with the freedom of
their people in all industrial and commercial action; dictating what should
and what should not be grown and manufactured, what should and what

should not be exported and imported; decreeing by proclamation or
enacting by statute, the number of apprentices each artisan might employ,
and the years during which these must serve as such, and the conditions
under which they might then work as journeymen; the materials to be used
in woven fabrics, and even the widths and other minor features of such
fabrics, were prescribed in the foremost of the European nations; in the
reign of St. Louis of France, a "Book of Trades" was issued under royal
authority and is still extant, which organizes minutely and subjects to
cumbersome rules more than one hundred separate industries as then
practised; England was the country of the great trading "Companies," and of
all of these the same may be said as Adam Smith said of the Turkey
Company formed in 1579, namely, it was "a strict and oppressive
monopoly"; among others there were the African Company established in
1530, the Russia Company beginning its operations in 1553, the East India
Company chartered on the very last day of the seventeenth century and
going out of existence in our own time, and the Hudson's Bay Company,
chartered in 1670 and so having the sole control in trade of a region forty
times larger than all England; while the colonial system prevailing for two
centuries in all the countries of Western Europe regulated the commerce and
controlled the manufactures in the colonies with a single eye to the benefits
of the mother country, as those were conceived of under the wretched
Mercantile system.
Happily, since governments have become more enlightened than formerly,
they are perceiving for the most part that they have not the least right to
interfere in those ways or in any ways with the natural right of their people
to make and grow freely all material commodities, and to buy and sell these
freely in the best markets wherever these markets are to be found; and they
are also perceiving, that by such interference incalculable losses of property
and indefinite retardations of progress are caused to their people, as well as
weakness to themselves as governments through a more difficult gathering
of taxes and a harder maintenance of prestige and power.
The only motive to a mutual exchange of services, whether in one or in all
of their three kinds, that is to say, to a free production of commodities and
services and credits, is always and everywhere the mutual benefit of the two
parties exchanging. After all the processes have been gone through with and
the exchanges are consummated, all the parties are richer than before, that

is, they have more satisfactions, otherwise the processes and exchanges
would instantly cease. Therefore, a universally free production benefits
everybody, and harms nobody. Moreover, under a system of free
production, every man is allowed under the stimulus of self-interest to work
away at those obstacles to the gratification of human desires which he feels
himself best able to overcome, to follow the bent of his own mind, and to
avail himself of all those free helps in his peculiar work which Nature offers
to him. Under these circumstances, obstacles give way in all directions; the
amount of material products produced is vastly augmented, the number and
variety and excellence of personal services proffered are indefinitely
increased, and credits compelling the Future to pay tribute to production are
multiplied; the diversified and rapidly increasing desires of all persons in
such a community are readily met through profitable exchanges; while all
peculiar facilities natural and acquired are taken immediate advantage of,
the diversities of relative advantage in production become marked in all
directions, and a new day of industrial and commercial prosperity is
ushered in. Because under freedom all men are sure to dispose of their
industrial efforts to the best advantage, they have the strongest possible
motives to put them forth; since they can purchase with them what they will
and when they will, and where they will. Thus freedom leads to extended
association, and also to the invention of machinery and all labor-saving
appliances.
3. We are now in position to understand thoroughly the ultimate Grounds of
the production of material commodities. We have seen, that these
commodities have been multiplying in number and variety and excellence
ever since the beginnings of history, that they are everywhere multiplying
now at a rate hitherto unprecedented and undreamed of, and that improved
and improving methods of transportation by land and sea are now carrying
these back and forth to the ends of the earth. What is the principle, under
which these things have been done, are now being done, and are certain to
be done in the time to come?
The physical and moral obstacles, that Nature has interposed to the
gratification of the multitudinous and constantly increasing desires of men,
are so great in all directions, that the powers of the individual man are
utterly unable to surmount any considerable number of them; while at the
same time, the physical and moral powers, adapted under sufficient motives

to overcome these obstacles, are very diverse in the different individuals of
mankind. Not only is there a surprising diversity in original gifts, but also
the powers acquired by gradual concentration of personal effort upon one
set of obstacles become exceedingly diverse, as does moreover familiarity
in the use of the gratuitous forces of nature which lend their aid towards
overcoming these particular obstacles. As the result of one or two or all of
these, one man naturally comes to have a vast advantage over others in his
particular branch of business, whatever that may be; each of these others by
precisely the same means comes to have a legitimate advantage over the
first in his own branch of effort, whatever that may be; and if, as always
happens practically, the first has desires which the varied efforts of the
others can satisfy, and they too desires which his efforts can satisfy, nothing
more is necessary to profitable exchanges between them than this diversity
of relative advantage at different points.
It is solely because a given effort irksome in itself put forth for another
person, in view of and for the sake of a return-service from him, realizes
more of satisfaction to both parties than when put forth for one's self
directly, that commercial exchanges ever take place among men. The sole
ground of these, the principle underlying them everywhere, is Diversity of
Advantage between different Men and between different Nations in
different respects. All exchanges whatsoever depend on diversity of
relative advantage in the production of commodities or services or credits as
between the persons exchanging; and this diversity of relative advantage
exists by God's appointment primarily among individual men as such, and
only secondarily on the ground of the varied soil and climate and position
and natural gifts of different parts of the earth. Reserving these secondary
considerations, which are quite secondary in importance also, to a later
detailed discussion, it is very clear and of central consequence in our
science that a diversity of relative advantage in different things displays
itself as between the individuals of every community and country large and
small. There is no hamlet in any land in which one man has not an
advantage over his neighbors in the making of clothes, another in the
making and setting of horse-shoes, a third in the building of houses, a fourth
in the curing of diseases, and another in the keeping a school; while each of
those neighbors has undoubtedly some advantage or other over each of
these in some trade or means of livelihood. As a natural result of this

diversity any two of these villagers may profitably exchange their
respective efforts with each other, provided of course each has a desire for
the product of the other, to the manifest lessening of the effort of each
relatively to the satisfaction of each, and the more so as the relative
superiority of each to the other in his own trade is the greater.
This point will repay some pains in minute illustration. If the blacksmith
can make and set horse-shoes only a trifle better than the tailor could do this
if he tried, and the tailor can make coats only a little better than the
blacksmith could make one if he chose, there will be but a slight benefit to
each in their changing works with one another. For the sake of definiteness,
let us say, that the tailor's capacity for making coats is 6, and his capacity in
making and setting horse-shoes is 5; and also that the blacksmith's capacity
for shoeing horses is 6, and his ability in making coats is 5. Each has a
relative superiority to the other of 1 in his own trade; and if they exchange
efforts, as they probably would under these circumstances, there is only an
advantage of 2 to be divided between them.
Now let us suppose (what might easily become a fact), that the tailor by
exclusive and augmented attention to the conditions of his own craft carries
up his capacity for making coats to 15, the blacksmith's efficiency in both
the trades remaining the same as before. There will now be an increased
motive to both the artisans for exchanging products with one another, and a
larger gain to each than before as the result of such exchange. The diversity
of relative advantage as between the two has now gone up from 2 to 11. The
tailor can now make a coat much better and quicker than before; and though
the blacksmith owing to his inertness can neither make nor set horse-shoes
any better than before, still less make coats any better, he will after all by
still trading with the tailor reap a part of the benefit of the latter's increased
efficiency in making coats; the new coat is at once better and costs less than
the previous one; the tailor is still less inclined than before to leave his new
and greater advantage over the blacksmith to set himself to shoeing his own
horse; even on the old terms the blacksmith can do that 1 better than he
himself can, and rather than forego the trade he will naturally offer the
blacksmith somewhat better terms than before, or in other words will feel
impelled to share with the blacksmith a part of the proceeds and rewards of
his own now superior skill and diligence. The trade began on the sole basis
of a relative diversity of advantage as between the two mechanics, each in

his own craft; this relative diversity, without which no exchange ever takes
place between any two persons, has now gone up as between these two
from 2 units of advantage to 11 units of advantage; how will these 11 units
be divided in this case? Nobody can tell exactly how they will be divided.
Two things about it, however, are certain at least in their tendencies and
potencies. The blacksmith is sure to get some part of the extra fruit of his
neighbor's new push and spirit, while the tailor is sure to get as his own
reward by much the larger part of the whole blessed 11.
We must by no means omit to notice the logical inference from this
instance, nor fail to make the proper inductive generalization from a
sufficient number of similar instances. It is this: no man can make any
essential improvement in any of the methods of producing material
commodities, without at the same time benefiting other people as well as
himself. Under natural law, which is no respecter of persons, he can by no
possibility selfishly take to himself the entire fruits of his own growing skill
and vigor. The only way in which he can gather in at all the fruits of these is
to sell their proceeds in the open market. To broaden his own market for
now better and more abundant goods he must offer them to everybody on
somewhat better terms than formerly—and the better the terms the broader
the market—and he can well afford to do this, because the goods now cost
him less of irksome human effort. Every improvement in the production of
commodities is precisely of that complexion. The issue of every invention,
of every improved process of every kind, is, so far forth, a cheaper product.
And this public gain follows, must follow, individual enterprise at single
points, even when the great mass of exchangers remain at the old stage of
sluggishness. Whatever increases at one point even, and a fortiori at two
points, the diversity of relative advantage as between any two exchangers,
is of benefit to them both, and the greater this relative diversity becomes the
greater the benefit to both.
Now let us see how the matter stands, when tailor and blacksmith at the
same time feel and obey the impulses to a more skilled and vigorous artisan
life. Suppose the blacksmith too carries up his efficiency in his own trade to
15, just as the tailor has done, the potency of each in the trick of the other
remaining as before at 5; under these circumstances when the two come to
trade with each other, each has a relative superiority over the other of 10,
and there is an advantage of 20 points to be divided between the two; the

trade is now ten times more profitable to each than it was at the outset,
when there was only an aggregate of 2 units for the division between two
parties; and accordingly the motive to an exchange and the gain of an
exchange as between tailor and blacksmith are ten times greater than they
were before. Therefore we lay down the principle, as inductively
ascertained and as universally applicable to all exchanges, that the greater
the relative superiority at different points as between the parties
exchanging, the more beneficial and profitable do the exchanges become to
all the participators in them. If this principle be just, and we may well flatter
ourselves that it will be found to be just, it follows, that every man who has
anything to buy or sell, is directly interested in the highest success of his
fellow-exchangers, that every trade finds its own advantage in the success
of all other trades, and that all discoveries and inventions by which Nature
is made to pay tribute to art is, restrictions apart, so much clear gain to the
world at large. In the light of sound and broad principles, what David Hume
called the "Jealousy of Trade" is simply silly.
The mainspring that impels all buyers and sellers to quicken their
movements and to improve their methods and thus and otherwise to
cheapen their costs of production, is the natural press of competition.
Somebody else is offering this product, or will offer it, for less than we are
now selling it for, and we must contrive some way by shortened times or
cheaper processes or a quicker zeal not to be beaten in this market-race, is
the silent argument ever making itself felt on the mind and hand of the
producer. Such natural action always increases the general diversity of
relative advantage as among buyers and sellers.
But, on the other hand, whatever lessens or threatens to lessen this natural
and most beneficial stress of competition among producers of similar
commodities at home or abroad, necessarily lessens the motive on the part
of these producers to excellence of quality in their goods and to cheapness
of their cost, because it makes less the diversity of relative advantage as
between these producers and those producers of other commodities against
which the first exchange. The units of advantage that would otherwise be
divided between the exchangers are diminished; the motives to trade and
the rewards of trade are thus lessened to each pair of parties subject to such
diminution of competition, and consequently to the community, or nation,
or family of nations, as a whole; and accordingly this is the precise place for

us to look into the nature and effects of Monopoly, so called, and to
perceive once for all, that Monopoly is the enemy of mankind.
Monopoly is a word derived from two Greek words, which mean when
combined selling alone, that is, the privilege of selling one's commodity
free from the competition to which it is naturally subject by other sellers
than the privileged one. Monopoly is thus artificial restraint imposed on
some buyers and sellers for the supposed benefit of other buyers and sellers.
It is wholly unnatural. It is usually enjoyed under the forms of law. Its
beneficiaries commonly cajole or extort from Government by hook or by
crook the exclusive privilege of selling certain commodities in a designated
market. Their motive is purely selfish: it is simply and solely to get for
themselves a return-service artificially enhanced by selling commodities in
a legally restricted market. The effect in the first instance usually
corresponds to their expectations. The public are at their mercy so far as the
designated commodities are concerned.
The general story of monopolies is a dreary stretch of record of human
greed and wrong on the one hand, and of wide-spread poverty and suffering
and slowly-gathering resistance on the other. We will look at only two
instances at present in the long account, premising that, the motives of
greed and grab are the same in all instances, and the results of wrong and
hate on the part of those oppressed by them are the same also in all
instances. Let Macaulay (I, 40) tell us something of the first instance
selected for illustration. "But at length the Queen took upon herself to grant
patents of monopoly by scores. There was scarcely a family in the realm
which did not feel itself aggrieved by the oppression and extortion which
this abuse naturally caused. Iron, oil, vinegar, coal, saltpetre, lead, starch,
yarn, skins, leather, glass, could be bought only at exorbitant prices. The
House of Commons met in an angry mood. It was in vain that a courtly
minority blamed the Speaker for suffering the acts of the Queen's Highness
to be called in question. The language of the discontented party was high
and menacing, and was echoed by the voice of the whole nation. The coach
of the chief Minister of the Crown was surrounded by an indignant
populace, who cursed the monopolies, and exclaimed that the prerogative
should not be suffered to touch the old liberties of England. There seemed
for a moment to be some danger that the long and glorious reign of
Elisabeth would have a shameful and disastrous end. She, however, with

admirable judgment and temper, declined the contest, put herself at the
head of the reforming party, redressed the grievance, thanked the Commons
in touching and dignified language for their tender care of the general
weal, brought back to herself the hearts of the people, and left to her
successors a memorable example of the way in which it behooves a ruler to
deal with public movements which he has not the means of resisting."
Perhaps some one of my readers may suggest, that these are the words of a
Whig-Liberal, and may thus exaggerate the cause of the people as against
the monopolists. Well, then, let us hear the words of a high Tory-Loyalist,
the historian Hume (IV, 335, 350), in relation to the same monopolies. "The
active reign of Elizabeth had enabled many persons to distinguish
themselves in civil and military employments; and the Queen, who was not
able from her revenue to give them any rewards proportioned to their
services, had made use of an expedient which had been employed by her
predecessors, but which had never been carried to such an extreme as
under her administration. She granted her servants and courtiers patents
for monopolies; and those patents they sold to others, who were thereby
enabled to raise commodities to what price they pleased, and who put
invincible restraints upon all commerce, industry, and emulation in the arts.
It is astonishing to consider the number and the importance of those
commodities which were thus assigned over to patentees. Currants, salt,
iron, powder, cards, calf-skins, felts, pouldavies, ox-skin-bones, train oil,
lists of cloth, potashes, anise-seeds, vinegar, seacoals, steel, aquavitæ,
brushes, pots, bottles, saltpetre, lead, accidences, oil, calamine stone, oil of
blubber, glasses, paper, starch, tin, sulphur, new drapery, dried pilchards,
transportation of iron ordnance, of beer, of horn, of leather, importation of
Spanish wool, of Irish yarn; these are but a part of the commodities which
had been appropriated to monopolists. These monopolists were so
exorbitant in their demands, that in some places they raised the price of salt
from sixteen pence a bushel to fourteen or fifteen shillings. Such high profits
naturally begat intruders upon their commerce; and in order to secure
themselves against encroachments, the patentees were armed with high and
arbitrary powers from the Council, by which they were enabled to oppress
the people at pleasure, and to exact money from such as they thought
proper to accuse of interfering with their patent. The patentees of saltpetre,
having the power of entering into every house, and of committing what

havoc they pleased in stables, cellars, or wherever they expected saltpetre
might be gathered, commonly extorted money from those who desired to
free themselves from this damage or trouble. And while all domestic
intercourse was restrained, lest any scope should remain for industry,
almost every species of foreign commerce was confined to exclusive
Companies, who bought and sold at any price that they themselves thought
proper to offer or exact."
"The Government of England during that age, however different in other
particulars, bore in this respect some resemblance to that of Turkey at
present: the Sovereign possessed every power, except that of imposing
taxes; and in both countries, this limitation, unsupported by other
privileges, appears rather prejudicial to the people. In Turkey, it obliges the
Sultan to permit the extortion of the pashas and governors of provinces,
from whom he afterwards squeezes presents and takes forfeitures: in
England, it engaged the Queen to erect monopolies, and grant patents for
exclusive trade; an invention so pernicious, that had she gone on during a
tract of years at her own rate, England, the seat of riches, and arts, and
commerce, would have contained at present as little industry as Morocco or
the coast of Barbary."
But, some one will say, Hume and Macaulay are historians, writing long
after these events took place, and may likely have been too favorable in
their judgment to freedom of trade domestic and foreign. It is indeed true,
that both of them were firmly convinced that freedom of trade is an
inalienable right as well as an unspeakable blessing to all men everywhere.
So, then, let us go back to contemporaries. Let us hear the eye and ear
witnesses of the grievances complained of in 1601. Robert Cecil was then
prime minister of Queen Elizabeth. He and his father had had more to do in
granting the monopolies than any other persons in the realm except the
Queen. Said he from his place in the Commons on the 25th of November: "I
say, therefore, there shall be a proclamation general throughout the realm,
to notify Her Majesty's resolution in this behalf. And because you may eat
your meat more savory than you have done, every man shall have salt as
good and cheap as he can buy it or make, freely without danger of that
patent which shall be presently revoked. The same benefit shall they have
which have cold stomachs, both for aqua vitæ and aqua composita and the
like. And they that have weak stomachs, for their satisfaction, shall have

vinegar and alegar, and the like, set at liberty. Train oil shall go the same
way; oil of blubber shall march in equal rank; brushes and bottles endure
the like judgment. Those that desire to go sprucely in their ruffs, may at less
charge than accustomed obtain their wish; for the patent for starch, which
hath so much been prosecuted, shall now be repealed. The patents for calf-
skins and felts, for leather, for cards, for glass, shall also be suspended, and
left to the law."
Five days later one hundred and forty members of the House were formally
received by Elizabeth in person, the Speaker having been instructed to
convey their thanks to her majesty; and, after the Speaker's address, he with
the rest knelt down, and the Queen gave her answer as follows: "Mr.
Speaker, you give me thanks, but I doubt me, I have more cause to thank you
all, than you me: for had I not received a knowledge from you, I might have
fallen into the lap of an error, only for lack of true information. Since I was
queen, yet never did I put my pen to any grant, but that upon pretext and
semblance made unto me that it was both good and beneficial to the
subjects in general, though a private profit to some of my ancient servants
who had deserved well; but the contrary being found by experience, I am
exceeding beholding to such subjects as would move the same at first. I
have ever used to set the last judgment-day before mine eyes, and so to rule
as I shall be judged to answer before a higher judge. To whose judgment-
seat I do appeal, that never thought was cherished in my heart that tended
not to my people's good. And now if my kingly bounty hath been abused,
and my grants turned to the hurt of my people, contrary to my will and
meaning; or if any in authority under me have neglected or prevented what
I have committed to them, I hope God will not lay their culps and offences
to my charge. Though you have had, and may have, many princes more
mighty and wise, sitting in this seat, yet you never had, or shall have, any
that will be more careful and loving."[4]
These were the last words of Elizabeth to the Commons of England. She
died in a little more than a year. In a little less than a year before the death
of her successor, the famous Act of Parliament of 1624 declares, that all
monopolies, grants, letters patent for the sole buying, selling, and making of
goods and manufactures, shall be thereafter wholly null and void. Though
this Act, and many others, was violated more or less in the next reign, it
effectually secured in the long run the freedom of industry in England; and

in the opinion of excellent authorities, has done more to excite the spirit of
invention and industry, and to accelerate the progress of commerce in that
country, than any other law on the statute book.
Our second instance of Monopolies shall be drawn from the state of things
in the United States in this year of Grace, 1890. The monopolies of to-day
are secured by means of an instrument called a Tariff, which, later on in
these pages, will be fully discussed in its history, inmost nature, and
invariable effects. Here it will suffice to say, that a tariff is nothing in the
world but a combination of Taxes, which taxes the people of the country, on
which the tariff is imposed, are obliged to pay in one form or another. The
only word ever uttered by a tariff, the only word a tariff from its own nature
can utter, is, Thou shalt pay! The ostensible reason for levying these taxes is
the constitutional one of getting money into the national Treasury,—"to pay
the debts and provide for the common defence and general welfare of the
United States"; but the real purpose of laying these tariff-taxes at present is
only secondarily and remotely the ostensible and constitutional one;
because, on the authority of Professor Taussig of Harvard University, there
is not a single one of over 4000 items of taxes in this tariff, that is designed
primarily to get money into the treasury from the pockets of the people, but
every one of them is designed more or less and more rather than less to
raise the price of domestic goods to our own people artificially by keeping
out of the country by means of these taxes on them the foreign goods,
which would otherwise come into a profit. In other words, there is no purely
revenue-tax in our immense tariff at present, but every item in the enormous
list is a so-called and mis-called "protective"-tax.
By this shutting off from domestic goods the natural competition of
corresponding foreign goods by means of such tariff-taxes, a monopoly is
created at the instance and for the sole benefit of certain classes of
privileged home-producers. They can sell alone (monopoly) just so far as
other sellers are kept out by these heavy taxes. The goal of all their striving
is to get an artificially-enhanced price for their own products at the cost of
their countrymen by means of a market restricted to themselves through
obstacles excluding foreign sellers. The end proposed by these shrewd
manipulators is realized in fact. Domestic prices are lifted on so-called
"protected" goods. This is the first effect of the monopoly. It has often been
alleged, and with great vehemence by the late Horace Greely, that

competition among the domestic producers of such wares will lower their
price again to the natural point; but if this is so, what motive have the
individual producers to work so assiduously in elections and lobbyings to
get on and keep on these tariff-taxes? Again, Mr. Greely, and all others of
like association, forgets the admirable generalization of Robert Stephenson,
—"Where combination is possible, competition is impossible." Combination
among producers to keep up prices is always possible in a market restricted
by law. This has been proven on a large scale in the United States during
each of the past thirty years: combinations among coal operators to keep up
the prices of "protected" coal by restricting the annual output of their
collieries; combinations among carpet and other woollen manufacturers to
maintain high prices of their fabrics by restricting their workmen to certain
hours per day or to certain months per year; have been among the
commonest of industrial events in all this interval. Within a very few years
past there has come into almost universal vogue among these monopolists a
new kind of combination called "Trusts,"—again abusing a good word by
making it cover an abominable purpose,—which are probably illegal at
Common Law, which only become possible under monstrously unjust tariff
laws, and which work wide-spread wrong among the masses of the people.
A second effect of this monopoly (as of all monopolies) is to worsen the
quality of the goods sold in an artificially restricted market. The historian
Gibbon noticed this fact more than a century ago, and said: "The spirit of
monopolists is narrow, lazy and oppressive. Their work is more costly and
less productive than that of independent artists; and the new improvements
so eagerly grasped by the competition of freedom, are admitted by them
with slow and sullen reluctance." Alfred Lapoint, United States consul in
Peru, warned the State Department at Washington in 1883 of this poor
quality of our manufactures, which were then trying to find a South
American market. He wrote: "It is my duty to indicate that great
carelessness prevails with our manufacturers; for instance, I was called
upon to purchase in the United States a steam pump and boiler, which I
ordered from one of the most famed manufacturers, and when it arrived, not
alone was the boiler inadequate for the pump, but actually after two
months' work the upper tube sheet split in three parts, a proof of its bad
quality and construction." As men are, a natural competition among buyers
and sellers is just as needful to keep up the quality of goods as to keep

down their price. Good quality always costs more of effort and skill and
capital than bad quality: why should producers continue to furnish good
quality to a market from which a free competition in good qualities is
excluded by law? Every tendency of human nature, as well as every
relevant fact in history, attests, that poor wares at high rates invariably
attends upon tariff-monopolies. Shoddy takes the place of wool. Cheaper
crowds out better material. Skilled workmanship is displaced by unskilled.
Processes of manufacture are hastened in time, and left incomplete to the
damage of the goods in order to save capital. Monopoly is always and
everywhere the foe of excellence.
A third effect of tariff-monopoly is to prevent the sale abroad of domestic
goods to the same extent and amount as foreign wares are kept out by these
monopoly-taxes. This vital and fundamental result is almost always
overlooked. If a man or a nation refuse to buy of a proffered customer, they
cannot by any possibility sell to him; because buying and selling are
reciprocal and synchronous; because it takes two to make a bargain;
because material commodities, for the most part, ultimately, exchange
against each other; and because the only motive a foreigner ever has to
bring his goods hither, is to take in exchange for them our domestic goods
at a profit, and carry these hence. To forbid entrance to foreign goods is to
forbid exit to domestic goods. Monopoly-tariff-taxes, therefore, so far forth,
destroy the market for home products, without creating or tending to create,
any other market for them. Such taxes, accordingly, cause a dead loss all
around,—to the foreign producer who wants to buy our products with his
own, to the home producer who wants to sell his own products against
those, and even to the government also as a tax-collector, which can get no
revenue on foreign goods excluded by monopoly-taxes.
There is a final and deeper point of view, from which all such monopolies
are wholly condemnable. They lessen of necessity,—from their own nature
and inexorable operation,—the diversity of relative advantage as
between exchangers, on which diversity, as we have now seen, the whole
fact and gain of exchanges depend. Taxes on raw materials, for example,
whether actually paid on them or used to enhance the price of other
corresponding materials as in the tariff-taxes, increase the costs of all
products into which such taxed materials enter, and so restrict the market of
the home-producer by lessening his relative advantage as compared with

the relative advantage of the foreigner over him. He cannot sell so well,
perhaps cannot sell at all, his cost-enhanced products. Monopoly-taxes on
industrial processes of any kind, on the means of transportation, have
similar effects on the cost of products; and of course, similar effects in
lessening Diversity, in restricting markets, and in destroying the life of
Trade.
Before quitting this subject, it may be well for us briefly to classify
Monopolies.
(a) Patent Rights. In the great parliamentary Statute of 21 James I, which
declared the exclusive privileges to use any and to sell any merchandise to
be contrary to the ancient and fundamental laws of the realm, and all grants
and dispensations for such monopolies to be of none effect, two exceptions
had been made; the first, in favor of Patents for fourteen years to the true
and first inventors of new manufactures within the realm; and the second, in
favor of the grants by Act of Parliament to any Company for the
enlargement of foreign Trade, of which the East India Company chartered
on the last day of the last year of the sixteenth century became the most
famous and the longest-lived. Open letters or letters patent, as they were
called, giving to inventors exclusive authority to vend for a limited time any
chattel or article of commerce, of which a model could be made showing
the point and application of what was claimed to be new; and Copyrights,
which grant an exclusive property also for a limited time to authors and
discoverers of something new and useful, of which a model cannot be
made, or, as it is phrased in the Constitution of the United States, "the
exclusive right to their respective writings and discoveries"; are a part of the
results among all English-speaking peoples of the two exceptions in this
famous and beneficent Act of Parliament.
In the United States a patent lasts for 17 years, and is not reissued except by
a special act of Congress; a copyright lasts for 28 years, and may be
renewed by the author, his widow, or children, for 14 years longer. In the
constitution of the new German Empire of 1871, this protection of
intellectual property (der Schutz des geistigen Eigenthums) is expressly
included in the matters which are to be dealt with by the Reichstag or
imperial parliament.

Now while patents and copyrights are a monopoly under the definition, they
are quite distinct in their purpose and spirit from the monopolies already
described. On the whole, Society does well in trying to protect, by law,
inventors and thinkers in the sole use and benefit of their respective
products for a brief and specified time. There are large difficulties in the
way of reaching this end practically, as is proven by the endless and
expensive lawsuits in such cases, but the postulate on which it is attempted
is sound, namely, that otherwise citizens would have less motive to think
and to invent; since in that case only the public-spirited and the rich could
or would devote themselves to an important branch of the public progress.
A patent or copyright is merely a return service which Society renders for a
service received. It violates no man's right of property, as an ordinary
monopoly does, but on the other hand is a provision to protect for a time a
new right of property created by the thought and efforts of a deserving class
of men. The phrase, "intellectual property," used above in translating from
the German, is not well chosen, since we have amply learned that anything
is property that can be bought and sold, that simple rights of many kinds are
constantly on sale in the market, and consequently that patents and
copyrights are at once proper and property because they are a technical
return-service for other services ready to be rendered to the community.
(b) Revenue Rights. Once at a court ball, Napoleon the First noticed a lady
very richly dressed and wearing splendid diamonds, and on asking for her
name, ascertained that she was the wife of a tobacco manufacturer of Paris;
whereupon it occurred immediately to the quick mind of the French ruler,
that the State might just as well have those great profits as an individual;
and the sale of tobacco in all its forms became accordingly a State
monopoly in the interest of taxation, and so it has continued to this day, and
yields now about 400,000,000 francs a year. Other nations have adopted to
some small extent this mode of indirect taxation of their people. By legally
cutting off the competition of all private dealers in the taxed article, and by
preventing to the utmost of their power its being smuggled into the country,
Governments are enabled to sell the article at a price enhanced artificially
by the monopoly; but all that the people are made to pay extra under the
monopoly, saving the costs of maintaining it, goes directly into the treasury
of the State; and, so far forth, becomes an unobjectionable mode of
taxation. Under all forms of taxation, the aim should clearly be, that the

Treasury receive all that the People are made to pay, except the cost of an
economical collection.
(c) Tariff Monopolies. The United States has never undertaken, like France
and Germany, to vend directly and exclusively an article taxed by
themselves for the sole purpose of revenue; but unfortunately they have
undertaken and still maintain (1890) monopolies a thousand times more
unjust and objectionable than any such revenue-monopoly can be; they
have laid distinct tariff-taxes upon thousands of foreign articles, not with
the design of getting revenue from them, but with an avowed and realized
design of preventing revenue by means of these taxes, since they have made
the taxes so high and onerous as to be in many cases absolutely prohibitory
of the entry of the goods, and in all cases more or less prohibitory of such
entry. Revenue can only be gotten on goods that come in, while the very
intent and result of these taxes is to shut the foreign goods out on which
they are levied, so as to give certain domestic producers (who have
themselves secured this legislation) the monopoly of the home market in
these goods.
This is the very core of public wrong-doing. This is the worst form of
monopoly that ever existed in a civilized country. Queen Elizabeth's
monopolies, which so roused the ire of the Parliament of 1601, were
nothing in enormity as compared with these tariff-taxes. Civilization long
ago sloughed off such direct grants of personal privilege as were forbidden
forever by the Act of 1624, and accordingly there is no need of mentioning
these in the present classification. Tariff-taxes for other ends than pure
revenue are the worst monopolies in existence, because (1) they compel the
people to pay under ostensible taxes many times more than the Treasury
gets from them in actual revenue; (2) they are wholly deceptive in their
terms, and their operation is clothed in disguises difficult to strip off; (3)
they are always put on at the instance and under the pressure of the man (or
men) who expects thereby to raise the price of his own wares at the expense
of his countrymen; (4) they create under legal forms however
unconstitutional privileged classes in the community; (5) their first effect is
invariably to make the rich richer and the poor poorer; (6) their ultimate
effect is to impoverish the privileged classes themselves by taking away
from them the natural spur of competition and self-dependence, in
consequence of which their own goods become poor, and their zeal flags,

and they come to lean still more heavily on monopoly-supports; (7) they
destroy the market for domestic goods to precisely the same extent as they
cut off the market for foreign goods, and (8) their whole retinue of evils is
wrapped up in the great fact, that the Diversity of Relative Advantage is
thereby diminished both as among domestic producers of commodities and
as between foreign and domestic producers.
The expression, "natural monopoly," is sometimes used of those, who,
under freedom, and using to the utmost their natural gifts and acquired skill,
have distanced all local competitors, and may be said to control the market
in their own interest, furnishing the best goods at the cheapest rates. This is
in no proper sense of the term a "monopoly." Production has no complaint
to make of any such pre-eminence in excellence and opportunity. It harms
nobody and benefits everybody. Exchange rejoices over every man and
woman and child, who so puts his head and heart and hand into his own
peculiar product as to outstrip all others in that one line in point of ease and
excellence, and so be able to offer a service at once better and cheaper than
any one else can offer it then and there; and when all men and women and
children, so far as they are employed commercially, come to possess a
"natural monopoly" each in his own specialty, then Exchanges become as
profitable and progressive as possible then and there, because the ever-
blessed diversity of relative advantage has its utmost limit.
4. We come now to consider the natural Limits, if any such there be, to the
Production of material commodities. This point has been much discussed.
For example, Dr. Chalmers, a Scotch clergyman of great intelligence,
profoundly moved by the condition of the poor in Glasgow, published in
1822 an interesting but not over-sound treatise entitled "Political Economy,"
in which the proposition is maintained, that the universal market is strictly
limited, and therefore that, were it not for the unproductive consumption of
the rich and luxurious, and the equally unproductive consumption of
national wars, there would soon be a general glut of material commodities,
and consequently Production would have to cease for the lack of a vent for
its products. Pretty soon we shall be able to detect the enormous fallacy in
this proposition. On the other hand, in 1803, Jean-Baptiste Say, a very
competent French economist, in chapter xv of his well-known treatise, fully
developed this very important proposition, if true, namely, that production

may go on indefinitely in all directions without ever a fear of reaching a
general glut of products.
What is a market? What is a limited market? What is an illimitable market?
A market, as we have already seen in substance, is nothing in the world but
certain persons somewhere with return-services in their hands desirous to
part with these in order to get, that is, to buy, some other services offered in
exchange. Each set of services is equally a market in relation to the other
set. A market is always persons having something in their hands to sell.
Buyers and sellers are equally a market in relation to each other. Whenever
anybody goes forth to buy, he must of course take with him something with
which to pay for what he wants to buy, that is to say, he must become a
seller the very instant he becomes a buyer; and whenever anybody wants to
sell something, he must of course want something already in the hands of
somebody else, in which to take his pay, that is, he becomes a buyer the
moment he becomes a seller. This helps us to see perfectly what a market is.
Defined in the terms of persons, a market is two men, each glad to get the
product of the other, and to render in return his own product; defined in the
terms of things, a market for products is products in market.
Now, what can limit the universal market for material products? Clearly, it
can only be limited either in the element of Desires or in the element of
Return-Services. But the desires of all men, even of one man, which the
efforts of other men may satisfy, have never yet come to a stand-still. Who
ever heard of even one man, who was in possession of all the products of all
kinds, that he wanted? Even if there were one such man somewhere, there
are millions upon millions of other men, whose desires for products such as
the efforts of other men can furnish are unlimited in number and infinite in
degree. It is not possible, therefore, that there should be a lack of human
desires anywhere, that could put any bound to the production of
commodities or hinder in the least its ever-swelling march.
If only two things can limit the universal market, and if there never has
been and never can be any lack on the part of some men of Desires which
the efforts of other men can satisfy through exchange, can there ever be any
lack in the second element of a market, namely, in Return-services? It is not
meant to be asserted, that there are not definite limitations at any one time
or place, or in the whole world at any given period, in the capacities of men

then and there to produce material commodities, with their knowledge of
things and powers of invention; but what is meant to be asserted is this, that
wherever Production is most busy and universal in response to the desires
of some men somewhere, there will be the greatest plenty of return-
services, with which to pay for the services of these "some men
somewhere" offered in response to the desires of the first set of producers.
Therefore, no general glut of products is possible to occur. The more and
the more kinds of commodities produced anywhere, the better market that
for the more and the more kinds of commodities produced somewhere else.
The nearer Industry may seem to be about to come to the goal of a limit, the
farther off from that goal it is in reality. The aggregate of human industrial
powers has indeed a potential limit at any one moment, but the knowledge
of things and the power of invention and the means of transportation are
enlarging every moment of time; so that, that potential limit never can
become an actual limitation. Human industry will go on enlarging and
diversifying itself so long as the world shall stand.
Let us put this vastly important argument in other and briefer words: the
Desires of men which the Efforts of other men can satisfy through exchange
are unlimited in number and indefinite in degree; and therefore, mutual
industrial efforts can continue to be put forth in exchange, until these
unlimited and indefinite desires of all men are all met,—a goal which
clearly never can be reached.
This proposition demolishes at a stroke the fallacy, that pervades Dr.
Chalmers' book but just now alluded to; and, what is more to the present
point, demolishes equally fallacies current and prevalent in the United
States at this hour. What our national industries need and all they need,
what they always needed and all they ever will need, is a quick market for
their products; products in market is the only market for products; but the
United States for 30 years past has been putting vast obstacles in the shape
of formidable taxation in the way of the presence of products from abroad
in our domestic market, and consequently and inexorably the market for
domestic products has been lost in foreign countries, to the immense and
irreparable damage of domestic producers as well as to the foreign
producers themselves.

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

commodities. This has always been the most vexed question in our Science;
but it is approaching, even if it has not already reached, a satisfactory and
final solution. The present writer believes that his own studies and
researches have thrown some original and important light upon the
perplexing problem of the Value of lands and of their produce. His present
readers are surely entitled to his clearest possible presentation of all the
facts and principles of this radical question.
The French "physiocrats" of a hundred years ago, founders of the first
School in Political Economy, excellent men for the most part as well as
good economists in general, thought, that lands were property in a peculiar
and eminent sense, that they were the ultimate source of all values but their
own, and that consequently lands should bear the weight of the national
taxes. English economists, constituting with their followers in other
countries the second School in our Science, while not going to the length of
the physiocrats, still maintained that the value of lands and of the produce
of lands were distinct in important respects from all other values whatever.
In our own time and country, Henry George, though belonging for the most
part to the third economic School, is a great stickler for a single tax on lands
in lieu of all other taxes. We must, then, concentrate all the lights we can
gather on these points of dispute and difficulty.
(a) The presumption in science is always against the existence of a few
outlying cases, whenever the induction has been long and carefully
conducted by many persons, and the generalization appears on all other
grounds to be sound and comprehensive. All induction proceeds upon the
premise, that Nature is uniform in those essential resemblances that
constitute a class of things in science. Nature has so often justified
confidence in her essential resemblances even under the greatest differences
in external circumstance and apparent diversity, that the presumption
becomes immensely strong in her favor, whenever a generalization patiently
gathered from many particulars seems to cover the whole ground concerned
except a few obstinate-looking items, that have not yet been closely studied.
Two to one these items also will presently fall into their predestined place.
We have already seen abundant grounds for believing, that Values arise
from human services rendered and received: is it at all likely, considering
the nature of scientific generalization and the history of all the more
advanced sciences, that in Political Economy, lands and their produce

should be found to constitute an outlying exception to the law of all other
valuable things?
(b) There is one vital distinction to be made at the outset and held to
throughout the discussion, namely, that, between all lands as a physical
thing, which God made and gave to all men in common without any effort
of their own, and some lands now as a valuable thing, in all probability
made such through the action of human desires and human efforts brought
to bear upon what was merely physical but what has now become valuable.
The failure to distinguish between lands as such and valuable lands as such,
has always wrought confusion and mischief in the land problem. The two
things are utterly different and incommensurable. There are vast stretches of
lands on the surface of the earth, to which no value ever attached or ever
will attach. They are lands, and that is all. Political Economy has nothing to
say of them, and nothing to do with them. Because they are never bought or
sold, because they never give birth to "produce," they lie wholly outside the
field of Value. Then there are immense areas of lands now valuable, that
were once as valueless as the first class. With these Political Economy has a
great deal to do, and also with the way in which they passed from valueless
to valuable. Then there is a third class of lands, that have not yet been
studied as they ought and till recently have not been studied at all, namely,
those known to have been valuable at one time, but which have now lost
their value either wholly or in large measure. There are such lands as these
in every State of our Union, and in every civilized country beneath the sun;
and Political Economy has already learned something, and is destined to
learn much more, about the processes by which lands pass from out the first
great class into the second, and from the second into the third. Valueless,
Valuable, Unvalued,—these three words describe to the economist all the
lands of the world.
(c) If we may trust the simple record in Genesis, the whole earth was given
of God to the whole race, under the direction that they "replenish and
subdue it." All the lands were then certainly valueless, although some of
them were doubtless possessed of Utility, that is, a capacity to gratify
human desires through a direct appropriation, which is a very different thing
from Value, which last is the rendering and receiving of equivalents as
between two persons. It seems very plain, that under this word, "Subdue,"
and under the human services implied in that, came in the first idea of

ownership in land. When a family or tribe commenced the work of
subjugation upon a piece of land, when they enclosed it, settled on it, tilled
it, in any way whatever improved it by their own toil, then could first the
idea of ownership dawn upon their minds, then first began that land to be
capable of value, since now that family might reasonably say to another, If
you want this field, you must give us an equivalent for what we have
expended on it to improve it. If the transfer took place, what was it that was
sold? What was it that was paid for by the party of the second part? It could
not be the inherent quality of the soil, it could not be anything that the first
family had gratuitously entered upon, because similar free land with all its
inherent qualities lay open to occupation on every hand, and the second
family would surely say, For as much effort as you have put upon your land
to better it, we can make other free land as good as yours, consequently we
can give you no more at the most than a fair equivalent for your efforts
already expended. If the parcel were sold, therefore, the value of it must
have been determined, not by the gratuitous elements involved but the
onerous elements involved. The physical thing, land, which cost nothing,
has now become the valuable thing, land, through a series of human efforts
expended of such kind as call out human desires for the results reached, and
justify the rendering of return-services for them; and that which the buyer
pays for is never the free old but always the onerous new; new utilities, that
cost something, have been added to and intermixed with old utilities, that
cost nothing; and solely in consequence of this expenditure of efforts on the
part of some men, answering to the desires and calling out the efforts of
other men, do parcels of land pass out from the first great class into the
second great class. So far as it can be gathered from the nature of the case,
and from the known steps of past experience, this is the simple and rational
process by which valueless lands become valuable, and less valuable
become more valuable lands.
(d) This line of proof, strong in itself, is strengthened by observing how
land-parcels gradually and practically pass out from the second into the
third class of lands,—from the Valuable into the Unvalued. As it is only
human Efforts wisely bestowed upon valueless lands or in some connection
with them, that ever make these valuable, so it is, that these Efforts
intermitted for a time, or less wisely bestowed, or reckoned less in harmony
with the present and prospective desires of other men, invariably cause a

loss of value in valuable lands; and, if such neglect or unwisdom of effort
continue long enough, nothing is more certain, than that lands so treated
will lose their value altogether, nobody will give anything for them, they
will drop out from the second class into the third by the same path (only in
inverse order), by which they crept at first from valueless to valuable.
Under the writer's own observation in different parts of New England,
whole tiers of farms once valuable and productive have lost that character
either wholly or for the most part, taxes can no longer be collected from
them, nobody will really give anything for them in exchange, they are
abandoned of their former owners, they are left to lie waste or to grow up
into forest again. It follows from all this beyond a doubt, and the logical
issue is one of vast consequence to mankind, that Value is no attribute of
matter, no inherent quality of lands as such wherever situated, but it comes
and goes, it is a relation of mutual purchase between human services
rendered and received.
(e) Land-parcels becoming valuable in the way but just now indicated, and
so long as they continue valuable, that is, salable, are technically
Commodities, according to our triple division of all Valuables. They belong
in this grand division, that we are specially studying in this chapter, for the
same reason as a horse does or a steam-engine does. Men did not originally
make the land as a congeries of matter, neither do men make horses, nor do
they make the iron ore out of which most parts of the steam-engine is made;
but men do modify bits of the land as God made it, they subdue it, they
improve it in manifold ways, they make it desirable in the eyes of other
men, and thus or otherwise they come into possession of it, gain for
themselves a right to sell it, prepare it to be sold and sell it, on the same
principle as men raise and break and train horses and prepare them to be
sold and sell them, and just as men by many processes transform the iron
ore into a steam-engine and sell that. Ricardo, in his famous doctrine of
Rent, says a good deal about "the original and indestructible powers of the
soil"; but as a matter of fact, there are no such powers, since the elements
and properties that constitute land are all the time changing under chemical
and other action; and even if there were such powers, it would still be
impossible to separate what God did for the land from what men have done
in order to fit it to be sold; and what men have ever been authorized to take
pay from other men for what God did in the creation of the world? The

simple truth is, that Value is never of God's creation but only of men's
exertion. There never was any land anywhere fit for cultivation and sale
without more or less expenditure of human labor and reserved capital upon
it; and the "powers" of the land, whatever they are, instead of being
"indestructible," are in a constant process of wearing out, and require a
constant application of labor and capital to keep up their fertility. Valuable
pieces of land, accordingly, like all other commodities, derive their utility
partly from the free contribution of Nature, and partly from the onerous
contribution of men; but, on the other hand, they derive their value, whether
the value be then increasing or diminishing, wholly from human desires and
corresponding efforts.
(f) It is but a step from this impregnable position to another, namely, that
Henry George is wholly wrong in his view, that there is Value in lands as
God made them and gave them to men in common; and consequently,
wholly wrong in his doctrine, that a single tax on land values would be just
and equal to land owners, and might well be made to take the place of all
other taxes on all other persons. He says: "If we are all here by the equal
permission of the Creator, we are all here with an equal title to the
enjoyments of his bounty." What bounty? If he means the original utility
which God put into all lands in common, and which certain men have done
nothing to better, there is nobody to dispute his proposition. But he does not
mean that, because there is nothing of any significance that could come out
of that. What he means is, that it is God and not man who makes lands
valuable. He makes no distinction between Utility and Value in lands. He
lumps the two together in one, and calls the aggregate the Creator's
"bounty." He goes on to say: "There is on earth no power which can
rightfully make a grant of exclusive ownership in land." Well! Is there any
power on earth which can rightfully deny to any man or family the
proprietorship of his own exclusive efforts, nobody's else rights being
infringed thereby? Or can deny to him or them the results of such efforts,
however embodied? When valueless lands are made valuable by human
efforts expended to that end, does not the "value" belong to those who made
it? When valuable lands have been made more valuable than they were by
the efforts and foresight of their owners, the rights of others untouched,
does not the "increment" belong to those who have created it? The truth is,
if Henry George's powers of radical analysis had been at all equal to his

remarkable power of rhetorical presentation, the world would never have
been treated to his popular and imposing land-fallacies. Prudhon's "Property
is theft," and George's "Single tax on land," rest on the same basis of
socialism.
(g) All valuable land-parcels are material Commodities, made to be such by
onerous human efforts of some sort expended upon or in some connection
with the free Utilities furnished by Nature; the utilities are one thing in
origin and function, and the values are a very different thing both in origin
and function; and the present point is, that nearly all valuable lands
everywhere are Capital also, that is to say, products reserved to aid in a
further and future production. Capital is a relatively small class under the
immensely large class Values. Capital is by no means coincident with
Commodities, since vast lines of the latter are consumed with no reference
to a further production by means of their use. But capital is always either
commodities or claims, and valuable bits of land are always commodities
and nearly always capital; because all tillage and pasture lands, all forests
grown for wood and timber, and lands of all sorts rented or held for resale at
a higher price, are capital under the definition, are "products reserved as an
aid to further production." The peculiarity of all farming lands is this, they
are themselves commodities, in whose creation God's free gifts and men's
onerous labors have conspired; and they are held in reserve by their owners
as capital, for the sake of producing by their means with the help of more of
God's free gifts further valuable commodities, such as grain, and fruit and
timber. Farms in their highest reach of previous culture still need for crops
the sun and the rain. Indeed the sun is the most useful and powerful force in
the world. Oh! how it warms and lifts and quickens! Give it and the rain
and the dew but a fair chance on lands properly prepared for them, and
endless fields blossom like the rose and are white to the harvest!
Agriculture always has been and always will be the vocation of the masses
of mankind. Under a fair freedom, and a decent law, and a reasonable
industry, Agriculture is always profitable; because it is natural, that is,
designed by God for the welfare of mankind; because it lies at the basis of
all other industries,—most of the food of mankind, most of the raw material
of all manufactures, most of the subject-matter of all national and
international commerce,—come out of the farms of the world; because it
has been ordered so in the nature of things, that, under a tolerable freedom,

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

are under a different system in that respect, there was a deficit of revenue
from tariff-taxes as compared with the year before, and a decrease in both
exports and imports.
(h) If nearly all bits of valuable lands be capital, as we have just seen strong
grounds for believing, then it follows of course, that the Rent of leased
lands whether for buildings or harvests is the same in nature with the
Interest on money loaned, and is the measure of the service rendered by the
owners to the actual users of the Capital. This proposition, seen in its
radical proofs and in its logical corollaries, takes the very life out of Henry
George's land-theories, and out of the popular remedies thereto annexed.
The writer firmly believes also, that this proposition in the grounds of it and
in the inferences from it might have been used by Mr. Gladstone and his
followers with telling effect in the animated discussions of the Irish land-
question in the British Parliament during the decade 1880-90. In the debates
on the Irish Land Bill passed in 1881, the representatives of the land-owners
in Ireland held to their right to take all the rent they could extort by the help
of the law; on the other hand the representatives of the Irish rent-payers
held to their right as cultivators and maintainers to withhold rent in large
part or altogether; and Mr. Gladstone, as representative of the nation, while
insisting on the right of the owners to certain rents, insisted equally on the
right of the cultivators to certain important privileges in the soil. Our
present proposition with those that spring out of it, though it was not used
by Gladstone, as it might well have been to smooth his pathway through the
roughness of that legislation, yet justifies at one and the same time the
discontent of the Irish rent-payer, the claim of the Irish land-holder to an
assured rent of some sort, and the fundamental principle of the Irish Land
Bill of 1881. That bill gives a certain modified ownership and control to the
actual cultivators and maintainers of the soil. That is right.
The principle of land-values herewith enunciated, their uprise and increase
and frequent decay also in all land-parcels, justifies completely the
concessions to tenants in that bill; while the old and still commonly
accepted English principles of land, and the false yet famous doctrine of
Rent promulgated by Ricardo at the beginning of the century, are wholly
against Gladstone and his concessions in that bill. Let us now see whither
simple analysis and logical processes will quickly bring us in this whole
matter. Valuable land was once valueless, and always remained so, until, by

virtue of human efforts expended upon it or in some direct connection with
it, coupled with the desires of certain other men for that land or its produce,
accompanied with a readiness on the part of these men to render some
equivalent for it or its use, first imparted value to that particular patch;
moreover, it has been found in practice ten thousand times, just as one
would expect, knowing the origin of value in general, that, unless human
efforts are further and constantly expended on or in connection with that
piece, and unless desires of other men continue to turn towards it in the way
of exchange, its value will silently and inevitably escape from it; therefore,
whoever has come into possession of that valuable piece of land by
purchase or inheritance, and foregoes the use of it in favor of another as a
tenant, is morally and commercially entitled to the stipulated return for that
use, which is rent; but also, if that other, aside from the current use which is
always a wearing-out process, contributes in any way to the continuance
and increase of the value and fertility of the land, then and so far he gains
rights in the land and becomes a sort of joint owner of it, since what he has
done in the way of maintenance and improvement is inextricably mingled
with what the other owners or users have done, and is of the same nature
with that; and, therefore, the modified ownership of certain tenants
recognized in Gladstone's bill is in strict accordance with ultimate justice,
as it is also in strict accord with right, that the legal owner should continue
to receive a return in the shape of rent for all the fertility and opportunity
actually contributed by him, and no more. The discontent of the Irish
peasantry has largely come from an instinct or intelligence more unerring
than the economics of the land-owners, namely, that they are called on to
pay rent for what they themselves have contributed in addition to the rent
for what they have received. The true origin of value in land, and the only
way in which value in land is kept up, seems to have penetrated deeper into
the minds of Irish tenants than into the minds of many British statesmen.
(i) If the bulk of all valuable land-parcels be capital, as it is, then one might
expect beforehand to find a law of diminishing returns from such lands,
agricultural labor and skill remaining the same; because, all capital is tools
made such by the expenditure of human efforts on changeable material, and
then by the practice of abstinence, and tools from their very nature are
always wearing out. Increase of efforts in connection with any form of
capital unimproved by new inventions and uninvigorated by fresh skill,

though they may indeed increase the aggregate return, cannot, for the
reason just given, secure an increase proportioned to the increase of the
efforts. The English writers generally, and Mr. Ricardo in particular, justly
lay much stress on this proposition, although they have not taken lands to
be capital, and have proven the law of diminishing returns in a different
way from ours, and consequently have not set the propositions of land in
their best and most ultimate relations. Their method of proving the law,
however, is short and conclusive: If by doubling the efforts upon a piece of
land, double the produce could be secured, and by quadrupling it,
quadruple, and so on, there would be no reason why any man should ever
cultivate more than a square acre, or even a square rod. He has a strong
motive to confine his culture to a small space, just so long as the amount of
produce is in the ratio of the efforts expended, because there is less
locomotion of tools and fertilizers and crops. The fact that he extends his
culture from one acre to another, and then to distant acres, notwithstanding
the inconvenience and expense of transportation, is an irrefragable proof of
the proposition in question. Increase of agricultural efforts and expenditures
on a given space of land will secure a larger amount of produce, but as a
general law, the increased amount will not be proportioned to the increased
expenditure.
It is through this law of diminishing returns, that the Creator has secured the
gradual occupation, by men, of almost the whole earth. There is a strong
and natural tendency to leave the old acres to advance upon new, the old
countries to emigrate to new, whenever the returns begin to bear a more
unfavorable ratio to the labors bestowed. The farmer will advance from the
first to the second acre as soon as he thinks that more produce can be
obtained from it by a given amount of efforts than can be gotten by a like
expenditure of additional efforts upon the first acre, allowance being made
for the increased inconvenience; and so, cultivation has gradually extended
itself and men have become dispersed over the whole earth. Other
principles leading to dispersion have undoubtedly co-operated, but this is
the fundamental one, operative at all times, changing the course of
population, and consequently of empire.
(j) It follows from the points already made, that all permanent
improvements in agriculture retard the operation of the law of diminishing
returns. The recent introduction of the silo, for example, upon the long-used

and wearing-out farms of New England promises, if the public law would
quit throwing in obstacles, to help restore the fertility of many of them. The
discovery of new and more available fertilizers, the invention of better
agricultural implements, the light thrown by chemistry upon agriculture, the
consequent adoption of better methods of culture and rotation of crops, the
more perfect adaptation to the various soils of the kinds of produce sought
to be raised from them,—all these and similar improvements tend to
increase the ratio of produce to the labor, and to disguise the law just
established. The lands that are now under cultivation may be made, under
more skilful modes of culture to yield indefinitely more than at present, and
the vast still uncultivated lands of the world may come to render an
incalculable quantity of food to the world's population; but yet, as
improvements are naturally less continuous in this than in most other
departments of production, as invention has much less play, as there is less
opportunity for the division and co-operation of laborers, as nothing can
materially shorten the time during which the fruits of the earth must ripen,
it is certain that possible improvements will never override the law of
diminishing returns; and, consequently, that the value of agricultural
produce tends constantly to rise relatively to manufactured products
generally.
(k) The last point to be made under the general topic we are now discussing,
is, that the best tenure of lands in the interest of the production of material
commodities is the fee simple in the hands of the actual cultivators. This is
the old Teutonic holding; but special circumstances in the British Islands
have gradually changed these small holdings once cultivated by the hands
of their free owners into large estates, the parts of which are leased out at
will or for a term of years to tenants or "farmers" as they are there called,
who, in turn, being small capitalists, as the land-owners are large capitalists,
furnish the stock and hire the laborers and thus become the actual
cultivators, and even often sublet parts of their own leased holdings to
tenants of the next degree below, who can furnish less stock and can hire
fewer laborers. The word "farmer" as used in the United States has a quite
different meaning from that it bears in Great Britain; it means here a man
cultivating his own fields with his own funds in his own way, and it means
there a man cultivating another's fields with his own funds in a way and on
terms made a matter of contract between the two; and these two modes of

culture are so distinct that they are not likely to lie alongside of each other
to any great extent for a very long time in the same country. Since her great
Revolution, and under the action of the law requiring the equal partition of
every man's landed estate among all his children, France has had for the
most part the small holding tilled by the owner's own hands, instead of the
great estates of the old régime, the average being about 14 acres to each
owner, and nearly one fourth of the entire population being proprietors of
land either in town or country; in the United States the plough is guided
almost wholly by the man who owns the soil he tills; while in Great Britain
the original peasant proprietor has almost entirely disappeared. Each system
has its advocates and arguments.
The question at bottom is, whether capital in the form of tillable land is
more effective when held in large masses and loaned out to men, who
possess small capitals in another form than land, and are willing to apply
these for a return upon that land, or when held in small masses and used as
capital by the owners themselves, who also own some capital in another
form than land and are willing to apply this to their own profit upon their
land. We hold, that the latter method is better than the former, both for the
maintenance and improvement of the land itself as capital and also for the
current production of commodities from it, because, (1) when one owns the
farm he works, from the very nature of permanent ownership he takes a
greater interest in it, perhaps he has inherited it from his fathers, perhaps he
has bought it and paid for it at the hardest, at any rate it is his own, and as
all men work from motives and the energy of the work is proportioned to
the constant press of the motives, then must the owner of the capital, whose
abstinence makes it capital, be under the strongest possible motive at once
to improve his capital and also to make the current produce from it as great
as possible, since the capital itself and all it yields is his own; moreover, (2)
ownership improves the moral character of the cultivators, it tends to make
them industrious, thrifty, frugal, independent, hopeful of the future, anxious
to give their children better privileges than they themselves had, and it
would seem as if the masses of men are educated by nothing so much, at
least by nothing more, as and than by the ownership of land, wherever such
tenure is possible and easy to the masses; and (3) the outward testimony is
abundant from many lands, that the peasant proprietor is a happier and more
virtuous man, a more productive and progressive one, than the mere tenant

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

Production in its several kinds, are the most important Commodities in the
world, and the largest also in volume of Value. What did it cost "to subdue"
the present tillable lands of this country? How much did it cost to get ready
for grazing the broad pastures? To make accessible the forests that yield the
timber? To open up the mines also and bring them into "touch" with the
population? These questions are of great consequence, not that the actual
past cost of any class of these more permanent "commodities" in the
commercial world will be any safe guide to their present value, since
cheaper and cheaper means of subduing the rugged forms of Nature are all
the while coming into play, and all things that did cost more once tend
pitilessly to fall to what similar things cost now; and since also it is never
"efforts" alone that determine the value of anything, but efforts in
conjunction with the "desires" of other men. Still, the amount of efforts
expended at any given time upon these more stable commodities to make
them productive, that is, their cost of production, is always gauged in
general by an estimate of what the "desires" for them will be when
completed; and this makes their cost of production a sort of loose measure
of their value at the time. The main reason, however, why the cost of
production of these primal commodities, namely, valuable land-patches,
whatever may be expected to be produced from them afterwards, is so
important, is, that as a general rule, the less the cost of any commodity
meeting a universal want the wider and surer is its market. The larger the
circle of the buyers of anything the more certain its sale; because, the world
over, the men of small incomes are manifold larger in number than the men
of large incomes. Society is like a pyramid: the lowest course of masonry is
the longest and widest,—has the most stones or bricks in it,—and ever
fewer towards the top.
If we reckon valuable lands as the primary commodities, then the
secondary commodities will be of two classes, namely, (1) the produce of
these valuable lands, whether animal or vegetable or mineral, such as cattle
and cereals and coal; and (2) vendible material products obtained by human
efforts from non-valuable land and sea, such as furs and fish. This division
of material commodities into primary and secondary, and the distinction
among secondary commodities according as their source is costly and
costless, has never before been drawn in Political Economy; and it is fully
believed, that the thoughtful reader and student will pretty soon perceive its

advantages in helping clear up one of the most confused and perplexing
sections of our Science, namely, that which relates to the causes and
measures of Rent. We are now to inquire into the elements of the cost of
production of each of these three classes of commodities; and we may find
ourselves surprised at the simplicity and certainty of these elements.
1. We will now look into the Cost of Production of valuable land-patches
themselves, the first and most important class of commodities. Here, as
everywhere else in Valuables, we discover certain free gifts of Nature,
without whose presence indeed the value could never come into being, but
which are not constituents of the value, because they are gratuitous, given
of God, and because the natural competition among buyers and sellers
inevitably flings out from all effect on value of the otherwise possible
action of these free and bountiful gifts, as have been already fully illustrated
in chapter first. No piece of land ever yet had one particle of Value until
human efforts of some sort had been expended on it or in some connection
with it, for two excellent reasons, first, no man would ever even think of
saying to another in reference to such a piece of land "Give me something
for it and I will pass it over to you," and second, even if he did think of such
an absurdity the other would reply "Why should I give you anything for
something to which you have not the least claim, especially as I can take for
nothing just such pieces all around here?" It must be remembered, not only
that God gave the whole earth to all mankind without distinction, but also
that his bountiful hand scattered all peculiar kinds of patches in great
number upon each of the Continents. There is a plenty of Utility
(gratuitous) in land-parcels just as God made them, but no possibility of
Value (onerous) till other hands than His have touched and benefited them.
What, then, are the onerous elements that enter into the value of land-
parcels and constitute their Cost of Production? There are only two such
elements, namely, Cost of Labor and Cost of Capital. To find out exactly
what "Labor" is, and what there is in it entitling and assuring its reward in
"Wages," will be the task and perhaps also the pleasure of the next chapter;
but it will suffice for the present discussion to say, that Labor is human
exertion put forth for the sake of a commercial return. Lands can by no
possibility be brought out of a state of nature into a state of value without
the expenditure of Labor; and the actual or estimated cost of this labor,
accordingly, is the first constituent of the Cost of Production of valuable

lands considered as Commodities. Labor, however, can not apply itself to
free lands in order to make them valuable without the co-operation of
another onerous element, namely, Capital, in some of its many forms. For
example, if forest lands are to be made tillable, the trees must first be cut
down, and this will require besides the muscular exertion of the laborer
something in the way of an axe, which is capital, the result of previous
labor reserved to assist in further production: if native prairie is to be
subdued to a valuable commodity, something of the nature of a plough must
be employed in the process, and horses or a steam engine to propel it, and a
plough and horses are capital, and still require fresh labor to make them
useful in production. But capital always costs something; and, therefore, the
cost of the Capital enters in as a second constituent into the cost of
production of Land-Commodities. But these two costs are all. We shall
search in vain for any other onerous element in the cost of producing
commodities. There are two variables only in the Cost of Production, which
itself is the sum of the two subordinate costs.
(a) And now let us analyze first the Cost of Labor in this connection, and
then second the Cost of Capital, and we shall soon reach radical and
unchangeable ground, and find in the sum of these two an aggregate Cost of
Production, and also all of the variables that can ever enter into such Cost.
It is plain to reason, that only by Labor non-valuable land-pieces ever did or
ever can become valuable. Captain John Smith understood this in 1607 at
Jamestown as well as anybody understands it now: there were 48
gentlemen, and only 12 tillers of the soil, among the 105 colonists, who
originally landed there: "nothing is to be expected hence," he wrote of the
new country, but by "labor:" new supplies of laborers, aided by a wise
allotment of land-parcels to each colonist, secured after five years of
struggle the lasting fortunes of Virginia: "men fell to building houses and
planting corn": the very streets of Jamestown were sown with tobacco; and
in fifteen years the colony numbered 5000 souls.
Now the cost of Labor is analyzable into three variables only, namely, (1)
the efficiency of the labor; (2) the rate of nominal wages paid; (3) the cost
to the employer of that valuable, in which the wages are paid. Let us see:
what an employer wants is to get things done; consequently, if an employer
hire two men to work for him at the same rate of wages, and if one be twice
as efficient a laborer as the other, the cost of the labor of the first is only one

half the cost of the labor of the second: therefore, a high rate of wages does
not mean a high cost of labor whenever and wherever the laborers are very
efficient. As a rule, it is found, that the cost of labor in reference to a given
product is the least in those countries, like the United States and Great
Britain, in which the rates of nominal wages are the highest; because, it is
found also, that a high efficiency of laborers accompanies both as a cause
and as an effect high rates of wages.
Secondly, there are striking differences in the rates of nominal wages paid
for a day's work in the same general employment in different parts of the
same country, and especially in different countries. The agricultural laborer
in the west of England, say in Wiltshire, gets about 10s. per week, while in
the north of England, say Nottinghamshire, laborers at the same general
work get about 16s. per week. Walker in his Wages-Question gathers from
the best authorities many such statements as these: "On the Grand Trunk
Railway in Canada the French-Canadian laborers received 3s. 6d. a day,
while the Englishmen received from 5s. to 6s. a day, but it was found that
the English did the greatest amount of work for the money." "In the quarry
at Bonnieres, in which Frenchmen, Irishmen, and Englishmen were
employed side by side, the Frenchmen received 3, the Irishmen 4, and the
Englishmen 6, francs a day; and at those different rates the Englishman was
found to be the most advantageous workman of the three." "The statistics of
the iron industry in France show, that on the average 42 men are employed
to do the same work in smelting pig iron as is done by 25 men on the Tees."
"In India, although the cost of daily labor ranges from 4½d. to 6d. a day,
mile for mile, the cost of railway work is about the same as in England."
Thus it is plain, that a high rate of wages does not import a high cost of
labor, but rather the reverse. A vast mass of current fallacies are disposed of
in a moment by this truth seen in its grounds. The United States have shown
in the past the highest rates of nominal wages in the world, and at the same
time have shown the lowest costs of labor to the employers, because as a
rule the laborers here have been more efficient than elsewhere. England has
the highest rates of wages and the lowest costs of labor in Europe for the
same reason. The degree of efficiency shown by different laborers is the
second variable in a cost of labor.
Thirdly, if that valuable, whether money or other, in which wages are paid,
varies in cost to the employer, then the cost of the labor paid for by that

valuable, efficiency of the laborers, and nominal rate of pay remaining the
same, will of course be varied thereby. We shall learn hereafter in the
chapter under that title, that the value of "Money" is by no means invariable
even in one country, just as we have already learned the variable nature of
all other values; and, too, wages are not always paid in money, though they
are commonly reckoned in the terms of money; and accordingly, the third
and last variable in a cost of labor is the cost to the employer of that
valuable, whatever it be, in which the wages are paid. Assuming, as we
may, that given wages are paid in money, then any country that has for any
reason a more abundant money than another may clearly pay higher rates of
nominal wages than that other without making its costs of labor any higher
than in that. The United States, for example, has usually had a very
abundant money (not always of the best kind), which of course has tended
to make higher the current prices of all commodities, and this has enabled
capitalist-employers to pay higher nominal rates of wages, without at all
enhancing relatively the costs of labor, and also without really benefiting
the laborers.
(b) We will now analyze second the Cost of Capital in this connection, as
the only other element of cost in the Cost of Production of Commodities in
general, and particularly now in the cost of making worthless land-pieces
valuable so as to be used in further production. Here too we find three
variables, no one of which can be safely neglected any more than the other
three in the reckoning that has for its object a prospective cost of
production. These are, first, the current rate per centum; second, the time
for which the capital is advanced; and third, the liability of that form of
capital to slow or rapid wearing out. For instance, under the first variable,
the rate per centum of capital, if the rate at Amsterdam be 3 and that at New
York be 7, if the cost of labor be equal in the two cities, if the time of
advance be one year, and if there be no liability of the capital to wear out;
then any commodity made at Amsterdam with an outlay of $100 may be
sold at a profit for $103, while a similar commodity made at New York with
the same outlay cannot be sold for less than $107. All other things being
equal, a low rate per centum of capital in any country gives that country an
advantage in the markets of the world for selling its commodities over other
countries offering similar commodities where the rate is higher, because its

cost of their production is less. Of course also such a country can subjugate
its wild lands and make them valuable at less cost than the other countries.
To illustrate the operation of the second variable, the time for which the
capital is advanced, let the same suppositions be continued, except that the
time of advance at New York be extended to four years. Then the
commodity may be sold at and from Amsterdam, as before, at $103, but the
corresponding commodity at and from New York for not less than $131, so
far as mere cost of production determines the prices. This point is also well
shown up in the case of wine, which, to reach its perfection, requires to be
kept a number of years, for, if it be genuine and ripe, its cost of production
has been by so much enhanced by its delay in reaching the market. If the
time of advance be long, and the rate per centum high at the same time, the
cost of capital from the two causes combined multiplies the cost of the
product; and consequently, only countries in which the rates are low can
successfully engage in enterprises requiring a large capital to be invested
for long periods before returns are realized. One million of Dutch capital at
3% a year, expecting to realize returns only after 20 years, may be
remunerated by products selling for $1,806,111; but American capital under
like circumstances, except that the rate here is 7%, must have a return of
$3,869,685, or lose by the operation.
To illustrate the action of the third and last variable, we must observe, that
all forms of capital wear out, but some forms much faster than others, and
that this makes a difference in the sinking-funds that must be reserved out
of the gross profits of the capital in order to replace the principal whole.
This difference will at once affect the cost of capital, and so of production,
and so indirectly the ultimate value of the product. Suppose there are two
commodities, which we will call A and B, produced in two different
establishments, in each of which is invested a capital of $11,000, in one of
which is used a machine that costs $1000 and is wholly worn out by one
year's use, and in the other a machine costing the same sum, which will last,
however, for ten years. Suppose further, that the rate per centum of profit be
10, and the time consumed in completing each of the two products be one
year. Now there is a marked difference in the Cost of Capital in the two
establishments, and this difference will indirectly but immediately appear in
the Value of the respective products. For, to A must be charged not only
$1100, the interest on the whole capital at the current rate, but also another

$1000, wherewith to replace the machine already worn out by a single
year's use. A, accordingly, cannot be sold without loss for less than $2100.
B, however, will cost less and can be sold for less at the usual profit.
Because, to it must be charged, as before, $1100, current rate of profit on
the capital invested, and only $100 (really less than that for an obvious
reason) to replace the durable machine after ten years' use. The capitalist,
therefore, can sell B for $1200, and make something over the current rate of
profit.
Since the cost of capital invariably resolves itself into these three variables,
every capitalist in order to become successful as such must give strict
attention to all three of these points. To any one who projects the making of
valueless into valuable land, or valuable into more valuable land, by the
expenditure of capital upon them for that purpose, it becomes a matter of
prime importance for him to inquire how long a time the whole process will
take, how much he must allow per annum for the cost of all the implements
employed, and especially how complete in action and duration are these
costly implements. The durability of machinery, whatever the name it bear
and whatsoever the work it do, is at once the most significant and the most
neglected point in the actual and prospective Production of our time and
country; and no condemnation can be too severe upon a policy of public
law, such as now prevails, whose whole tendency and actual effect is to
worsen the quality and lessen the durability of all commercial implements
whatsoever, from the needle to the locomotive. The same abominable
public policy increases the cost and decreases the durability of all
agricultural implements, like the axe and the plough, designed and adapted
to transform valueless and non-productive into valuable and food-producing
lands.
2. Now, having fully seen the elements of the cost of reducing land itself
from a natural into a valuable and productive form, what next are the
elements of the cost of production of those material commodities produced
for sale by the aid of these subdued and now productive lands?
Commodities so produced constitute the second class in the law of their
Cost of Production. And a vastly important class it is. The food of the
world, so far as that food is purchased as the product, whether animal or
vegetable, of valuable lands; the fuel of the world, so far as that fuel is
bought from owned and accessible forests and mines; the clothing of the

world, so far as the fabrics come from the cultivated cotton and flax and
wool and skins offered for sale; the shelter of the world, so far as the wood
and brick and stones and lime are drawn from valuable lands and quarries;
and the warehouses and the temples and the theatres of the world, built, as
they are, out of the products of costly and rentful lands: these all, and many
more like these, constitute a class of commodities immense in their volume,
whose cost of production has in it an element peculiar and additional to that
of the first class already analyzed, and to that of the third class also soon to
be considered.
This peculiar and additional element in the cost of production of these
things, class second of commodities, is called rent. Interminable have been
and still are, especially in the British Islands, the definitions and discussions
upon Rent: they have boxed the compass of economical nomenclature: they
have run up and down the entire gamut of possible expression on such a
theme. David Ricardo, the Anglo-Jewish Banker, formerly announced, near
the beginning of this century, that "Rent is that portion of the produce of the
earth, which is paid to the landlord for the use of the original and
indestructible powers of the soil." Two objections lie with fatal weight
against this definition and all that is involved in it: first, there are no
"indestructible powers of the soil," either "original" or acquired, since the
universal verdict of all agriculture has been and still is, that the "powers" of
all soils are continually wearing out, and need to be constantly renovated by
fertilizers and manipulations of all sorts; and second, even if there were
such "original and indestructible powers," it would be impossible to
separate them from the additional "powers" acquired by means of the
capital expended to bring that land from the state of nature to its present
state, and the landlord has had nothing to do with any "powers" of the land
except those conferred by his own labor and capital upon it, and can by no
possibility put himself into a position where he can enforce any claim of his
own for a return from any "original powers" of any land-parcel whatever.
The simple truth is, and it illumines the whole subject of agriculture and its
products, that the value of land-parcels and also the value of the transient
use of them, or Rent, hang wholly on the onerous human efforts involved in
them, and not at all on original and gratuitous utilities. Science has only to
unfold the plan of God and its actual and beneficent workings. "In the sweat
of thy face shalt thou eat bread." All that God furnishes to men in order to

get a living and in order even to get rich is Opportunity. The opportunity is
ample. The call to a partnership in Effort as between God and men is loud
and constant. The world with all its powers, free lands with all their utilities,
the change of seasons, the blessed sun and the blessed dew and rain, the
constant disintegration of rocks beneath the soil and the gradual clothing
with lichens and moss and verdure of the rocks above in preparation for a
new soil, and the wonderful chemistry of the vast laboratory of Nature, all
work night and day without fee or reward in the service of mankind. But
men themselves must not intermit their labor. All values are of their
creation and maintenance. If they cease or relax their labor upon land-
pieces so only made valuable and rentful, then will the value and the rent
begin to slip away inexorably, and no prayers and no regrets will avail to
call them back.
Now, then, since commodities of the second class in the cost of their
production must respond not only to the current cost of Labor and Capital
in bringing them to market, but also something additional in the way of
Rent to the past cost of the implement, the land-parcel, without whose
contributing agency present results could not be gained; Rent is the
Rendering for the present use of a Valuable made such by past Labor and
Capital. Land-parcels leased for agriculture; mines and the access to them
leased for the production of metals and minerals; and forests whose growth
has been permitted by the past abstinence of their owners; all properly yield
a rent; because these forms of capital, whose existence is due to past labor
and capital, are present contributors to products, whose sale must
compensate not only present labor and the use of current capital, but also
the use of these more permanent forms of capital long ago created.
A competent authority estimated in 1881, that the land-parcels of the United
Kingdom of Great Britain were worth £3,000,000,000; and there were at the
same time 6,000,000 of inhabited houses, excluding factories and business
premises and tenements renting for £20 and under. Most of these lands and
houses are rented by their owners to the actual occupiers on the just
principle explained above, inasmuch as the lease-system is the prevailing
one in that country. According to the Census of 1880, there were 4,008,907
so-called farms in the United States in that year. Most of these are held in
fee simple, and are tilled by their owners; but just so far as land-patches and
forests and mines are leased in this country, their products must provide in

their price of sale for current rents, as well as current costs of present
production. This is just as it should be, and just as it must be, if Capital is to
take this form of assisting the processes of future production.
But this form of Capital, as well as all other forms of the same, is
perpetually wearing out, that is to say, is gradually losing its power to
contribute as at first to the present and future processes of production. This
loss is in the very nature of things,—in the very nature of all Capital. The
great Father never intended that His children should cease from work. He
has ordered all things so, that they cannot cease from work, and continue to
live in any comfort and progress. Value, as we have already thoroughly
learned, is not a quality that can be put into anything to stay there: it is a
recurring relation of mutual services between man and man; and each of
these services of the three kinds involves recurring Efforts. Capital is a form
of Value; and, consequently, it cannot possibly take on a shape not subject
to the law of diminishing returns. This is deductive proof. And precisely the
same result is reached by Induction. Men have noticed and recorded the fact
at all times, and have made provision for it in their pecuniary calculations,
that tools and machinery need to be repaired and then replaced, that the
current interest on moneyed capital tends to decline from generation to
generation in all progressive countries, and also that lands and other forms
of real estate so lose their productive and rental power unless cared for in
renovation that men migrate and emigrate in consequence.
How much Rent shall the tenant pay to the landlord for the present use of
the latter's old lands? Or in other words, how much shall be added to the
going price of the product on account of the diminishing return due for the
use of the old landed capital? This is a hard question to answer: probably
the hardest question that is ever asked in practical Economics. Mr.
Gladstone wrestled with it as complicated with a larger political question in
passing the Irish Land Bill of 1881. Another honest athlete, Mr. Parnell,
wrestled with it upon the same parliamentary arena. Scores of able and
practical statesmen in Great Britain, and elsewhere, have struggled to reach
a practical answer to this question; and scores of able and theoretical
economists in all countries have striven to reach a theoretical answer to it.
Most of these answers have been inharmonious, and many of them
contradictory, with each other. The Land Bill of 1881 created a
parliamentary Commission, whose duty and authority it was, to visit the

Irish counties in person, to gain information in detail, to take sworn
testimony of all the parties concerned, and then to lift or lower rents
according to their discretion. The discontent of the Irish tenants in general
was considerably mollified by the action of this Commission; while the
debates and wrangles of the parliamentary session of 1889, and the
persistent agitations for Home Rule (an agitation at once political and
economical), show that the results of the work of that Commission were not
wholly satisfactory.
(a) It is easy enough to see why the solution of this general problem is so
extremely difficult. The new is mixed in with the old. The result of the old
labor and capital is a productive piece of land; the current labor and capital
is expended upon the same piece to make it more productive; the same sort
of thing is done now that was done then, and the results of the two are now
thoroughly intermixed; there were original free utilities in soil and growths
and deposits, but these had and have no value and can never yield rent; the
old labor and capital improved the soil by clearing and drainage and
fertilizers, and made the growths and deposits more valuable and
accessible, so that even the old onerous was more or less transformed into
the original gratuitous; and now the new onerous, the fresh cultivation and
fertilization and betterments generally, in soils and roads and buildings, are
inextricably commingled with former betterments of the same general kind
and with the original free gifts of Nature. No wonder the Commission of
1881 found difficulty in determining what was what and which was which!
No wonder that Irish tenants on long leases quarrel with their landlords
about the betterments, how much is new, how much is old! It is clear, that
when the lease is ended, the landlord ought to compensate the tenant for all
that portion of the latter's betterments, which is not already worn out; it is
equally clear, that the tenant ought to be willing to pay a fair rent for the use
of the unexpended betterments of the landlord and his predecessors; while
there is room and verge enough for endless disputes between them as to the
respective amounts of these, and consequently as to the amounts of rent and
of its remissions.
These difficulties and intricacies do not belong to the principles of the
Science of buying and selling, which are in the main clear and certain in
their action, but are incidents of determining in certain cases what that is,
which is bought and sold. Parties in interest in all kinds of buying and

selling are sometimes compelled to go to the courts in order to have the
Law decide what their respective rights are as buyers and sellers; but this is
no fault of Political Economy as a science, or of trading as an art; two men
in all cases make their own bargain, according to their own estimate of the
respective rendering and receiving of each; if the uncertainties of language,
the misconception on the part of one or both of the terms agreed upon, and
the misapprehension of some of the circumstances of the case, breed
confusion and litigation, all this cannot be justly charged to the science of
Political Economy.
Nevertheless, it is into these incidental intricacies and uncertainties, that
Henry George's now famous theory of landed rents and the taxation of
them, strikes its roots. Instead of building his structure upon firm and open
ground, so that thoughtful men can see that his basis is solid and scientific,
Mr. George dashes at once into a thicket and lays his foundations with
quickness and assurance where all is dark and doubtful, or at best where all
is rather incidental than fundamental and demonstrable, and pretty soon
displays a superstructure that appears attractive both without and within,
through whose airy halls he knows how to conduct to their delight the
credulous and discontented, and on whose walls hang plausible pictures
calculated to invite and hold the attention of the masses. Let the perfect
integrity and rhetorical ability of Mr. George be freely conceded; let it be
freely conceded also, that he teaches in his books and lectures a great deal
of vastly important industrial truth in a popular way so as to accomplish
great good, such, for example, as the imperative need of greater simplicity
in taxation, and the indisputable right of the people to their liberty in buying
and selling; yet it must at the same time be owned, that he has never yet
found out exactly what Value is in general, consequently what are the
causes of value in lands, and what are the nature and grounds of Rent.
Something more of patient and radical analysis at the outset, and of logical
and scientific unfolding afterwards, would have made Henry George one of
the chief benefactors of his age.
(b) It is also very easy to see, that the current price of produce, that is, what
is gotten in return for the sale of what is gotten out of the land-parcels, must
have a dominant influence upon what can be paid as rent for the use of the
parcels. Unless the return from the produce be sufficient to reward at
current rates the present labor and capital employed upon the parcel, the

parcel will not continue to be cultivated at all, otherwise men would act
without a motive for action, which they never do; unless, therefore, the
price of produce be more than high enough to repay current wages and
profits, there will be nothing left for Rent; and, consequently, the amount of
the rent that can continue to be paid for lands will be the difference between
the going price of what is produced from them and the current expenses of
cultivating them. Here, as everywhere else within the domain of Exchange,
Competition exerts its beneficent action. If one dealer, or ten, endeavors to
put a price upon the produce more than enough to pay current wages and
profits with a fair margin for the diminishing rate of rent, there are a plenty
of others, dealers in the same grade of produce, who will be content with a
fair return for present and past expenditure of labor and capital; and the
action of these will effectually debar the others from exorbitant rates. The
price of produce, accordingly, under free competition, is the divinely
appointed regulator of landed rents. It regulates also, though more
indirectly, the current rates of wages and profits in agriculture.
Very different from this is Ricardo's doctrine of Rent. He makes everything
turn on the Cost of Production of the Produce, which is Effort, ignoring the
ever-varying demands for the produce, which is Desire. His doctrine, too
famous and too long received for us to pass by in this connection, though
now superannuated, was for substance, this: there are some lands in every
country whose produce just repays the expenses of cultivation, and
consequently yields no margin for rent; and the cost of production on these
rentless and poorest lands under cultivation, will determine the price of the
produce; and as there can be but one price in the same market, the produce
raised on more fertile land will be sold for the same price, and this price,
besides paying the cost of cultivation, will yield a rent rising higher
according as the land is more fertile; so that the rent paid on any land is
always a measure of the excess of productiveness of that land over the least
productive land under paying cultivation; and therefore, an increased
demand for food in consequence of increased population, and the higher
price resulting, will force cultivation down upon still poorer soils, or
compel a higher culture for less remunerative returns on the old soils,
according to the law of diminishing returns, which in either case will raise
the rents on all the soils above that grade that just repays the expenses of
cultivation; so that it is the sole interest of landlords, as such, that

population should be dense and food high, their interest being directly
antagonistic to that of the other classes of the community.
(c) Finally, in this connection, it is easy enough to see, what were the
motives on the part of the landlords, and what were the results on the part of
the masses, of Great Britain, in putting on and keeping on the infamous
Corn Laws, so-called, which were repealed forever in 1846. The Corn Laws
forbade the importation of foreign cereals under heavy pecuniary penalties.
The simple purpose of the landlords then governing England was to raise
the price of their grain by shutting off Competition of foreigners by means
of these prohibitory tariff-taxes. It was Protectionism pure and simple. It
was designed to raise the price of bread to the masses of their countrymen,
and often did raise it to the point of their starvation. But we have just seen,
that the higher the price of the produce, the wider the margin for Rent for
the lands that produce it. The Corn Laws of England enriched the landlords
at the expense of all other classes and to the starvation of many of the poor.
As has been well said, this was the most successful of all the many
expedients that have been tried, "to fertilize the rich man's land by the sweat
of the poor man's brow." The words of Daniel O'Connell, spoken Sept. 28,
1843, in his parliamentary fight against the high-tariff Corn Laws, were
surfeited with truth and righteousness: "But what is the meaning of
'Protection'? It means an additional sixpence for each loaf; that is the Irish
of it. If the landlord had not the protection, the loaf would sell for a shilling,
but if he has protection, it will sell for one and sixpence. Protection is the
English for sixpence; and what is more, it is the English for an extorted
sixpence. The real meaning of 'Protection,' therefore, is robbery,—robbery
of the poor by the rich."
At the present moment and for twenty-five years past, the public laws of the
United States ostensibly relating to Taxes, have had an immense influence
upon the value and rents of the agricultural lands of the country to depress
them; because these laws have put up nearly or wholly impassable barriers
to the coming in of those foreign goods, against which the farmers would
naturally and profitably and inevitably have sold their surplus agricultural
produce; by destroying the foreign market for farm products, these laws do
in effect destroy a large part of the value of the farms of the country, and of
what would otherwise be the rentals of a part of them; the Constitution of
the country expressly forbids any taxation whatever of Exports, but these

laws have precisely the same effect on the value of farm products if they
were themselves forbidden to be exported, because those goods for which
these would be otherwise exchanged for a profit are forbidden to be
imported. A market for products is products in market. Thus these wretched
laws lower the price of farm products, and consequently the value of farms
and of their rents, and impoverish the farmers who are nearly one-half of
the entire population of the country.
While these paragraphs are being written, comes the intelligence of the
formation of the "North American Salt Company," whose purpose is in their
own language "to unify and systematize the salt interests of the United
States and Canada," and to this end "arrangements have been completed
for the purchase and control of nearly all the existing salt properties of the
North American continent." As this is a fair instance out of some thousands,
in which a tariff-tax has the designed effect to lift or lower values which
deeply concern the people, let us look at it for a moment. On the average of
the past twenty-five years the tariff-tax on salt has in general doubled the
cost of that necessary of life to the whole people of the United States. When
Canada had no such tax, American makers of it sold salt sometimes to the
Canadians 40% less than they would sell it to their own countrymen. On the
basis of this United States tariff-tax (it would never have been dreamed of
without it) this new company comes forward with a scheme of international
monopoly to control in their own interest the price of a prime necessity of
life. They propose to issue stock and bonds to the amount of $15,000,000,
with which to buy up "the existing salt properties"; and they frankly avow
in the prospectus from which we are quoting, that profits of $2,000,000 a
year on their capital are justified by the present outlook. Whence are these
immense profits to come? Out of the pockets of the masses of the American
people bound hand and foot in the meshes of a legal monopoly, which they
themselves allow themselves to be ensnared in! In a similar but more
outrageous way, are bound up at the present moment in the secret so-called
"Trusts" about forty more of the necessaries of life; each one of which,
unless it be the "Standard Oil Trust," has its footing in a so-called
"protective" tariff-tax, and would collapse instantly on the repeal of that!
It was necessary in order to complete our study of the second class of
material commodities, namely, those produced from valuable and rentful
lands, to glance in passing at the frequently disturbing effect on these, aside

from their cost of production, of sinister laws plausibly imposed upon an
unsuspicious people in the interest and at the instance of a privileged few.
3. It only remains in this chapter, devoted to the discussion of material
Commodities in their three economic classes, to conclude with a glance at
the third class, namely, those material valuables that are obtained from free
and unowned sources, such as masts cut in the wilds of America on both
oceans two and three hundred years ago, and fish caught on the Banks of
Newfoundland, and furs gathered to such profit in the north by the Hudson's
Bay Company, and salt evaporated in the tropics by a free sun from old
ocean's brine.
These, and all such things as these, have a cost of production determined
only by the cost of present labor and capital, and consequently a grade of
value determined only by present Demand and Supply, unentangled for the
most part by questions of rent and prior claim and taxation and nationality.
All these things, accordingly, are relatively cheap, except as the element of
Scarcity, and on that account of strong Desire, may sometimes come in to
enhance the value. No man can tell the time exactly when French fishermen
from the coasts of Brittany ventured over to the Banks of Newfoundland in
their frail barks for the abundant cod in those waters, and went back home
again at the close of the season freighted with plenty of a free and cheap
food for their families and countrymen; or when it was that rude men
calling themselves English followed these in their western track for the
same general purposes, to become thereby hardy seamen on deeper seas,
such as those who gained long afterwards the naval victories of Nelson; and
we have all read in the fascinating pages of Irving the ventures and
adventures of John Jacob Astor, the attraction of free furs in the Northwest
of America, the hazards and the history incident to obtaining them, and the
immense profits gained by their sale in the markets of the old world.

CHAPTER III.
PERSONAL SERVICES.

There are three kinds of things only ever bought and sold in this good world
of ours. In the preceding chapter we have conned carefully the first kind,
material commodities, in their three subdivisions of land-parcels and
products of such parcels and products of free land and sea. In the present
chapter we come to study the second kind of valuable things, personal
services, which we shall also find subdivisible into three classes. We have
treated of Commodities first, because their value in its grounds and changes
is more easily understood than that of the other two kinds, while in point of
time Services might well enough have been considered first, since it is these
that manipulate into value the originally rude forms of Nature. The main
difference between the two is this: in Commodities the attention is naturally
drawn to tangible things offered for sale, such as lands and wheat and fish;
while in Services the attention is strongly drawn to persons offering them
for sale, such as the common laborer and the skilled artisan and the
professional artist. This distinction, though obvious and useful as between
commodities and services, is not after all radical; because Economics is a
science of Persons from beginning to end; inasmuch as the services precede
and are merged in the commodities, and inasmuch as the Desires (personal)
of some men for the renderings of other men antedate and underlie all
exchanges whatsoever.
Personal Services are technically named Labor in the science of Political
Economy. This nomenclature is old and familiar, and will probably always
persist on that account, but it is not of itself of the happiest, and it gives
birth to some ambiguities and many fallacies. Let us look at these for a
moment, before we pass to the definition and discussion of what is
commonly called Labor, but what is better described by the term, Personal
Services.
Contrast will help us a little here. Commodities can always be measured by
some Standard outside of themselves: for example, land-parcels are

measured into acres and fractions thereof by a surveyor's compass and
chain; metals and cereals are weighed into centners and parts thereof by
scales of some sort; and sugar is not only weighed at the custom-house, but
tested as to other qualities by the polariscope. Now land, wheat, sugar, and
all other commodities, have an existence separate from the standards that
measure them, and whether they are bought or not they continue for a time
essentially the same. They exist per se. They were indeed brought into
existence on purpose to be sold, and if they cannot be sold, similar things
additional will not then and there be brought into the market, but these
things themselves are there separate from the seller and separate from the
buyer. Not so with personal services. They do not exist per se. They are not
separate from the seller, and they cannot come into existence without a
buyer. Skill is something the artisan cannot part with, nor can he sell the
service to which the skill gives rise till the buyer be present with the return-
service in his hands. The Laborer of any class cannot put his "service" on
exhibition, and then wait for a buyer, as the commercial drummer sells
goods by sample. The doctor, for example, must have his patient before he
can show his skill. The buying and selling of personal services, accordingly,
is more intimate and ultimate than the buying and selling of commodities: it
brings people more closely together: it depends much more on traits of
character and on acquired skill.
Right here we may see clearly the main objection to the term, "Labor," as
commonly used, and the bad fallacy to which it gives birth. "Labor" is
indeed in form and origin an abstract term as much as "service" is, with this
difference, that the word "service" radically implies the person serving and
another person served at the same instant; but the term "Labor" has long
been taking on itself in the mouths of men a concrete meaning, as if it might
be something separate from the laborers, as in the common phrase "Labor
and Capital," which has already done a world of mischief and is likely to do
a good deal more, because it seems to imply, that the two are alike in
independent self-existence, and that they stand over against each other on
equal terms for a fair bargain or for a free fight. This is not the case, as we
shall see more fully later; since capital is something separable from the
capitalist, always a commodity or a claim, always transferable, always
valuable or else it will not be "Capital." Some of the German economists,
and particularly John Conrad of Halle, have avoided this difficulty by a

clean nomenclature. They say "Labor-givers" and "Labor-takers," instead
of Laborers and Capitalists, and especially instead of "Labor and Capital,"
thus emphasizing the personal element in both terms, and also leaving
themselves free to define and use the term "Capital" as distinct from any
particular capitalist, while the term "Labor" cannot be defined and used as
distinct from any given laborer. This precise point, though probably new, is
of very considerable consequence in the true doctrine of Wages.
We are compelled by the exigencies of the English language and the still
stronger fetters of economical custom to continue to use the terms "Labor"
and "Laborers" in their technical sense, and in connection with the scientific
terms "Capital" and "Capitalist"; but we shall always use each of these
words in the same meaning, and free them as far as possible from the
fungous accretions that have fastened upon them in the course of time.
Personal effort of any kind put forth for another in view of a return-service
and for the sake of it is labor.
Laborers are persons rendering their peculiar services to other persons for
a commercial reward.
The valuable received by a laborer for his service rendered is Wages.
These definitions exclude from our circle of view all Efforts of anybody put
forth for other than commercial reasons; and they include all Efforts of
everybody, from the President to the scrub, put forth under the inducement
of a return-service or Wages. No good end seems to be reached by trying to
distinguish, as Francis Walker does in his "Wages-Question," between the
"Wages-class" and the "Salary-class," because there appears to be no
scientific or other economical difference between Wages and Salary. Each is
a return-service for another service rendered, and that is all there is to it.
The whole class of Laborers, accordingly, in any civilized and progressive
country, is immensely large and becoming constantly larger. Excluding, of
course, from this class all persons in so far as they render so-called moral
services to others, which are in their very nature free, such as those that
spring from duty and courtesy and benevolence, and these happily are also
an immense and fast-augmenting class, though our Science has nothing to
do with them directly, the number of those persons in every community and
in every rank of every community, who sell personal services of some sort

in distinction from commodities and credits, is pretty nearly as large as the
per capita population of adults and competents within that circuit. It must
be borne in mind, that the same persons whose primary business it may be
to sell commodities or credits, often sell services also in some subordinate
or incidental way; and also, that the same persons, who are dispensing on
the one hand their gifts and moral renderings freely, are frequently of the
busiest in selling on the other hand their personal services for pay. In other
words, the sellers of Services cannot be discriminated as to their persons
from other sellers, or even from downright givers; but the action itself, and
the law of it, is quite distinct in the three cases of selling, and utterly diverse
in the one case of giving.
Now, can we sub-classify within this vast class of service-sellers, so as to
help us understand better the class as a whole, and so especially as to help
us understand better the Law of Wages within the entire class? We have just
criticised Walker in a friendly spirit for attempting to draw lines of
demarcation within this wide field: can we draw any useful ones ourselves
less open to criticism than his, and such as rest back upon fair differences in
nature and form? Walker makes his distinctions turn on certain peculiarities
in the return-services: can we make ours turn better and clearer on certain
peculiarities in the services themselves? We can at least try. Hard and fast
lines cannot be drawn here, we admit. The exterior lines around
Commodities and around Services and around Credits are each sharp and
firm; and so is the deep-fixed circle that includes all three of these alike as
Valuables; but within the smaller circles the lines of needful division are
somewhat more shadowy, though we leave with confidence to competent
Economists the triple lines but just now drawn within the sphere of material
Commodities.
A rude classification among "Laborers," then, yet one useful and indeed
indispensable, may be made into (1) Common Laborers, (2) Skilled
Laborers, and (3) Professional Laborers.
Common Laborers are those, whose services may be acceptably rendered
by an ordinarily competent person after a little patient practice and
instruction, without anything corresponding to an apprenticeship as a
preliminary to their selling their service. Farm hands, teamsters, porters,
waiters, miners, 'longshoremen, railroad laborers, and many more belong to

this first class. Owing to the ease with which this class can be recruited at
any time from growing boys and emigrating foreigners and from those who
may have essayed the class above and fallen back, the Supply here is kept
constantly large relatively to the Demand for such services, and
consequently Wages are always the lowest and steadiest in this lowest class
of Laborers.
Skilled Laborers are those, who have had to pass through something
equivalent to an apprenticeship in order to be able to offer their services for
sale. These, as a class, present some considerable points of difference from
common laborers. Their numbers are fewer, for the reason, that relatively
few parents can afford to give their children the time and money needful for
them to learn a trade, or to become skilful in any art requiring prolonged
education; as a result of this lessened press of competition among
themselves, and because being intelligent and consequently mobile they are
able to insist better on their claims and distribute themselves to points
where their services are in more demand; and because they are likely to be
subject to a stronger Demand than common laborers, on account of the
close connection of their services with special accumulations of Capital; the
Wages of skilled laborers will infallibly rule higher than those of common
laborers. Artisans in general constitute this second class of laborers.
Professional Laborers are those, who have received a technical education,—
something more than an apprenticeship,—expressly to fit them to render
difficult and delicate services to their fellow-men for pay, and who possess
besides the requisite character and talents and genius to enable them to
succeed. Clergymen, physicians, lawyers, literary men, artists, actors, and
many more, render professional services loosely so-called. The obstacles at
the entrance of this path occasioned by the lack (1) of appropriate natural
gifts, or (2) of the requisite industry and character, or (3) of the means of
suitable education and training, practically exclude so many persons, that
the competition in the higher walks of professional life is not such as to
prevent a very large remuneration for services rendered. The demand for
these is often peculiarly intense, as well as the supply peculiarly limited.
When great interests of property, of reputation, of life, are at stake, it is felt
that the best men to secure these must be had at almost any price. Fees and
rewards for services of great delicacy, of great difficulty, of great danger,
are paid by individuals and corporations and nations without grudging.

Comparatively few men reach the highest points of excellence in their
respective professions, and they have in consequence a natural monopoly in
these fields of effort, and receive for their labor a very high rate of Wages.
For example, Daniel Webster often took a fee of $1000 for a single plea in
court; Paganini, a like sum for an hour's playing on a violin; and Jenny
Lind, at least as much for an evening's singing in a concert, because there
was in each case a strong demand for a peculiar service and only one person
in the world who could render that service in the circumstances to the same
perfection. But the objections which lie with such force against artificial
monopolies, cannot be urged at all against a natural monopoly; for, if the
road to excellence be open to all, and no artificial obstructions thrown in the
way of any, there is no blame but rather praise for him who distances all
competitors, and asks and receives for services of peculiar excellence a
large remuneration. Exchange rejoices in all diversities of advantage that
are the birth of freedom, but reprobates with all her force advantage that is
gained by artificial restrictions, because artificial restrictions always
infringe on somebody's right to render services for a return; and the right to
render services for a return is the fundamental conception in the Right of
Property.
Is it open for us, to gain a somewhat deeper and clearer sense of what that is
exactly that is rendered in these three classes of personal Services, before
we pass to the considerations which determine in all cases their Value? It is
plain, that what common Laborers sell for the most part, if not exclusively,
is muscular exertion of some kind, guided by the mind as trained in habit,
and aided by appropriate implements, all designed to meet the desire and so
call forth the return-service of the purchaser; it is equally plain, that skilled
Laborers with scarcely any more exceptions than before sell the same sort
of physical exertions, or motions, this time guided by mental action of a
higher grade and wider scope, and aided also by more elaborate tools
working towards the desires and consequent returns of a set of buyers more
scrupulous and exacting than the first set; and it is plain enough, that some
of the highest professional services, for instance the surgeon's, though not
by any means the mass of such services, are essentially of the same kind as
the two former, namely, muscular motions, guided by the most intimate and
exact knowledge of things, and aided too by instruments the most scientific
and expensive. In many of the professional services the physical element

sinks to a minimum, while the intellectual and moral factors come to the
front and take up the chief attention; it will be found, however, that the
physical factor is always present in some degree, as, for example, in the
counsel's plea before the court, and in the physician's visit on his patient;
and in almost all cases, if not in all, some implement or other plays its part
in the process of professional service before it ends, as Cicero used a pitch-
pipe or tuning-fork to gauge his voice in his great pleas for Roman clients.
Precisely what is rendered, then, in all cases of Personal Services in each of
their three loose kinds, is muscular motion conjoined with mental effort and
both these assisted by habit and by some form of what we call Capital. The
Services are therefore Personal in the highest sense. The Mind and Body of
the Laborer conspire to render them. The most sagacious animal can never
be trained to render one of them. They are wholly human. Nevertheless the
muscular part in the rendering—motion and resistance to motion—is just
what tools and machinery can be made to take the place of in large measure
but never in whole measure, because tools may not be taught to think. It
may seem sometimes as if machinery were about to take the place of human
hands in some classes of Production; but it will be found in the ultimate
issue, as it has been found in every stage of the process, that human hands
and human minds in action are absolutely essential at every point of the
Exchanges among men. Men are so made and Society is so organized, that
they need increasingly for their comfort and progress the personal services
of their fellow-men, and can render their own in exchange for these; and
consequently, there never can fail (under freedom) a Market for Personal
Services of the three kinds.
Having now seen as closely as possible what that is which is rendered in
personal services, let us pass to the principles which determine their
remuneration. That is, we will now inquire carefully into the Value of
personal services. We have learned already, that Demand and Supply in
their action and reaction upon each other determine in all cases the value of
Commodities for the time being; and we shall find it to be equally the
dictate of all reason, and the outcome of all experience, that Demand and
Supply decide too in all cases on the value of all Services and all Credits
then and there. Shall we look first at the considerations that issue in the
Demand for personal services, and then at those other considerations that
limit the Supply of them?

1. Demand is never the mere desire for anything, but desire coupled with
the ability to pay for it at rates satisfactory to the present holder. The
Demand for Services, therefore, is made by the prospective purchasers of
them; and the purchasers, of course, are those who desire them and are
willing to pay for them at current rates. It will be easiest and surest for us to
study the Demand for Services in each of the three classes of them in
succession.
(1) The Demand for Common Laborers has several points of difference
from that for Skilled, and from that for Professional, Laborers. It is scarcely
ever intense. It is mostly disconnected from large accumulations of Capital.
The desire is usually for immediate gratification, without any other end in
view. It is frequently for such a service, as, if a renderer may not be
conveniently and cheaply found, one is inclined to do for himself. For
instances: if the barber be not accessible and reasonable and tolerably
skilful, a man will certainly shave himself, provided he have not yet
attained the independence and the luxury of wearing a full beard; and the
ordinary housewife, if the cleanly and tractable domestic does not come
into sight, will do her own work with casual assistance. It is this important
fact, that common services among men and women in common life may in
many cases be dispensed with altogether, and in many other cases
substitutes be found for them, in connection with the other important fact,
that common laborers learn their art quickly and easily, and consequently
are present everywhere in large numbers, that makes the Wages of such
laborers uniformly low. The Demand is moderate and the Supply is large.
(2) The Demand for Skilled Laborers is steadier and stronger than for
Common, because in general the desire for these is not for immediate
gratification, but for an ultimate satisfaction to arise from the commercial
coöperation of these laborers with their employers, who are capitalists, in
connection with accumulations of capital, the end in view being the
production of commodities for sale at a profit. Here comes in a new motive
on the part of capitalists to buy the personal services of laborers. The
motive is simple and intelligible and commendable, but its nature and
operation is popularly and grossly misapprehended.
Capital is the result of Abstinence from the present use of a Valuable in
gratification, for the sake of a future increase of it through Production. But

Abstinence is always irksome in itself. It must have its prospective reward
in an increase, a profit, or it will never transform itself from a mere valuable
into a capitalized product. Now, the owner of the valuable, having
transformed it into capital from this motive, is under a commercial
necessity to hire laborers, in order by their help to make his capital yield a
profit. Capital lying idle decreases in value even, to say nothing of its
yielding no increase to itself; and the motive of the capital-owner,
accordingly, is strong and constant to buy the services of laborers, to marry
these services with his own capitalized products, and thus to produce
commodities for sale, whose value shall be greater than the present value of
the capital and the services combined. Here we reach in the minds and
motives of a large class of men an ultimate Demand for laborers, and
specially for skilled laborers, which is as true and constant to its legitimate
end of Profit as the needle is true and constant to the pole.
At this point it is very evident, that, if the fair expectation of the capitalists
be realized in a steady profit, and the larger the circle of capitalists and the
more of capitalized products to each the better for all concerned, the
Demand for laborers will become steady, and will be likely to steadily
increase, because there will then be a constant motive on the part of all
capitalists as such to put back a part or all of their yearly profits into
capitalized products, and thus the Demand for laborers will become more
intense, and the rates of Wages so far forth must be enhanced. The steady
Demand for the services of the laborers hinges upon the steady Profits of
the capitalists, and there is no antagonism between the interests of these two
classes of buyers and sellers, but rather a complete identity of interest
between them.
We are looking now solely at what constitutes the Demand for laborers of
the second class. As always, so here, there is Desire first and then a ready
Return-service. The Desire of employers of this class is for a Profit on their
capital, and the return-service for the laborers is present as a part of these
capitalized products. This part of the capital we call Wages-Portion. It is
already in hand or provided to be in hand when the wages fall due. Of
course it is expected, that the current wages will ultimately come out of the
current joint-production of the laborers upon the capitalized products set
apart for that purpose by the capitalist. But if the profits fail to the
capitalists at the end of that industrial-cycle, whether it be two months or

twenty-four, then Desire will fail or be weakened to hire laborers for the
next cycle, and the return-services or Wages-Portion with which to pay
them for another cycle will be lessened of necessity. Both elements in
Demand are curtailed by the falling-off of Profits. There is at the same
instant less desire to buy services and less ability to pay for them. It is of the
very nature of capitalized products to wear out in the process of production;
if there be not net profits at the end of the cycle for the capitalists, it shall
go hard but there will be less wages for the laborers during the next cycle.
This is not a matter of sentiment or of philanthropy, but of eternal law,
which God has ordained and the devices of men cannot frustrate. Capitalists
and laborers are joint partners in the same concern. Under industrial and
commercial freedom their interests are identical. Both are buyers and sellers
to each other at the same instant; and, as always when both parties are alike
benefited and satisfied with a trade, both will cheerfully and profitably
continue the connection. The Demand of each class for the product of the
other will continue unabated. Profits and wages reciprocally beget each
other.
But still it is not altogether true, what has sometimes been stated by
economists, that capitalists are under the same sort of pressure to buy their
services as the laborers are to sell them. Capital is a Valuable already
created by the mutual desires and efforts of two persons, and is now the
exclusive property of one of them, and has also been set apart by him
through an act of will to be thereafter an aid to some future production
under the motive of a new value to accrue thereby. The capital has now
become secondary to and separated from the person who owns it. He very
seldom understands the real nature and operation of it. He commonly
imparts to it in his imagination a more substantive and persistent existence
than it actually possesses. He is frequently more or less stuck up as towards
his neighbors and employees in consequence of his possession of it. The
very fact that he has capitalized it for future operations shows that he is
independent of it as a means of present livelihood. The personal services of
the laborers, on the other hand, stand in very different relations to them.
Their personal services may indeed be valuable, but they cannot be
capitalized. As laborers they have nothing else to sell. Unless they sell their
services now, these have no existence even, still less can they have any
value. It is only by a mischievous figure of speech, that the skill of laborers

is sometimes spoken of as their "Capital." Therefore, the laborers are under
a certain remote yet inherent disadvantage as sellers of their personal
services, when compared with the capitalists as buyers of them. This
disadvantage, however, though apparent in the nature of things, and under
certain circumstances disastrous to the laborers, may disappear practically
under another and natural state of things; and it is every way to be desired
by both classes alike that it should disappear in practice.
Whenever there is a broad and constant and profitable market for all the
commodities the capitalists and the laborers can jointly produce,—that is to
say, whenever profits are steady and remunerative and wages are high and
growing in their purchasing-power,—the Demand for skilled laborers must
always be such as puts the laborers on a footing of equality as over against
the capitalists, because under such circumstances the purchasers of services
are many and eager, two bosses will be likely to be bidding for one skilled
laborer, and then wages are always growing in dollars and each dollar
growing in effective purchasing-power.
It is of the last importance in this connection to notice, that everything in
Profits and Wages turns in the last resort upon the breadth and freedom of
Markets. It is out of the return-service received from the sale of the
commodities produced jointly by the capitalists and laborers, that both
wages and profits must ultimately be paid. There is no other possible source
of them. When the Market fails, everything fails that leads up to a market.
Particularly fails the Demand for laborers for the next industrial cycle, and
of course drops also the prospective wages for that cycle. The public folly
and universal loss of shutting off foreign markets for our own commodities
by lofty tariff-barriers, as has been conspicuously done by the United States
for thirty years past, follows of course from this radical truth; and the
Wages of laborers, instead of being lifted by tariff-taxes, as has been so
often falsely and wickedly asserted, are inevitably depressed by them,
because they effectually forbid to capitalists and laborers their best and
freely chosen markets for the sale of their joint products.
Another vastly important matter, constantly affecting the Demand for
laborers of the second class, is the Competency or otherwise of the practical
managers of the Capital invested in industrial enterprises. Capital cannot
manage itself. It is of itself wholly inert. It is always either a Commodity or

a Credit. Conscious of their inability to handle wisely their own bits of
Capital, or else taught it through a bitter experience, by far the larger
number of individual owners of it loan it to others to manage; they invest it
in some industrial corporation, in a bank or a mill or a railroad. Some one
person, or at least a small body of persons, must practically manage now all
specific accumulations of capital. It is they in their capacity of
manipulating-capitalists, who constitute in large measure the Demand for
laborers. But such managers, who are at once skilful and long-headed and
honest, do not grow upon a chance bush. They are rare. Most of them in this
country at least have been those, who started in a small way in the control
of their own earned or small-inherited properties, and rose through practice
and knowledge and conscience to the ability to handle profitably to all
concerned large masses of Capital. In the hands of such men, given a
tolerable chance by public law and private circumstances, both Profits and
Wages are sure to come in satisfactorily. They are Captains of Industry.
They are an honor to human nature. They are a blessing to the whole
community. They have no need and no will to ask to be bolstered up in their
business by unjust taxes enforced upon a whole people.
Such men sometimes have sons or protégés, who possess similar capacities
and similar integrity, and these by experience become able to carry on the
business to similar successful issues. This is happy, but it is unusual. More
commonly, in the second, and pretty certainly in the third, generation, the
line of royal succession fails. There comes in a lieutenant rather than a
captain of Industry. Likely enough he mistakes the nature of capital, and
thinks that it will go along of itself without that eternal vigilance that is the
one price of its maintenance and increase; likely enough he lacks the touch
and rule of men, and his laborers become demoralized and refractory; more
likely still he thinks he sees other operators around him getting quicker rich
by speculating in enterprises outside the legitimate business, and takes some
of his own and of what is not his own and throws it out of its proper
channels; and, as the result of one or all of these, things soon go wrong,
profits and wages fall off, poor work is done and finds slow sale, and
Demand for laborers (which is their life-blood) slackens or goes out in that
establishment. No wonder the Paper-makers in their annual gathering at
Saratoga of 1889, resolved as the main outcome of their meeting, that they
would bring up their sons (or somebody's sons) to succeed them in their

business by a thorough practical training in the paper-mill itself, beginning
early and continuing long. Industrial higher education in this or some other
form is the secondary hope of manufacturing business in the United States,
the primary hope being in a decent commercial liberty to buy their supplies
and to sell their products in the best markets wherever these are to be found.
There is one other important item that bears directly upon the Demand for
laborers of the second class, and consequently upon their Wages, namely,
the constant introduction of more and better Machinery. At first blush it
would seem, and it has often been stated so, that the use of machinery takes
just so much work from human hands, reduces by so much the Demand for
laborers, and tends to lessen by so much their wages. All this is the opposite
of the truth; but before we explain why it is the opposite of the truth, let us
attend carefully to the truth itself, as stated in 1889 by the highest living
authority on these special points, Sir Edwin Chadwick, the octogenarian
pioneer in sanitary and economic reforms. Fifty-six years ago Chadwick
joined with his colleagues of the English Factory Inspection Board in
recommending reduced hours of labor and other improvements which have
now become general in England. In a paper recently read before the
Political Economy Club, he calls attention to the greatly increased
production which follows improved machinery and shortened hours.
He says: "Spinning machines which formerly turned 8000 in a minute, now
turn 11,000; and in Lancashire not more than half the hands are now
employed to produce the same amount with new machinery as were
employed on the machinery of 1833. As an example of the extent of the
reduction of hands by these improvements, it may be mentioned that one
large family of cotton spinners in Manchester, which 40 years ago employed
11,000 hands, could not now muster one half that number. Yet the mill
population has increased, as well as the general population, the hands
discharged being absorbed in other employments. At the beginning of the
century the cost of spinning a pound of yarn was a shilling. The pound of
that same yarn is now spun for a half-penny by hands earning double wages
for their increased energetic attention and skill. It is now found, however,
that the strain of the increased responsible attention cannot be so long
sustained as the slow, semi-automatic pace by the old working of the old
mills with the long hours. Hence there is a tendency to a further voluntary
reduction of the working hours in the best mills, first to nine hours. In one

mill, in which 2000 men are employed a voluntary reduction has been
effected to about eight hours with a more equable production; and I have
heard of other examples. As showing the cost of working with inferior hands
and loose regulations, a recent report from the Manchester Chamber of
Commerce states that 20s. worth of bundled yarn may be produced at a cost
of from 2d. to 3d. per pound less in Manchester than in Bombay,
notwithstanding the hours of working are 80 hours per week, while in
Manchester they are only 50. At the present time Lancashire, with its short
hours, will meet Germany or any other country, in neutral markets, in the
world. In Germany the spinners and weavers still work 13 hours a day as
they once did in England; France has only come down to 12 hours;
whereas the English rate has long been 10 hours, and may soon be 9 or
even 8. And this reduction improves the health of the wage-workers, while
the reduced cost of production allows them higher wages; yet Germany with
its long hours and high tariff maintains a system of low pay, dear
production, high cost of distribution, and limited sales."

The accuracy of these important statements of fact is confirmed on every
hand. Committees of British spinners and weavers have repeatedly visited
the United States, and then reported to their fellows at home, that wages, all
things considered, were equal for spinners and weavers in Great Britain and
the United States, and in some cases and respects higher in the former.
Many times before his late lamented death, John Bright publicly testified
that wages in England during his parliamentary life had risen in general
50%, and in some of the manufacturing lines 100%. A few months before
these statements of Chadwick were made, Sir Richard Temple reported to
his section of the British Association, "That the average earnings per head
in the United Kingdom, taking the whole population without division into
classes, is £35, 4s., and exceeds the average of the United States, which is
£27, 4s., and of Canada, which is £26, 18s., and of the Continent, which is
£18, 1s.; while it falls below that of Australia, which is £43, 4s. per head."
According to this, the average earnings in Great Britain per head of the
population are 30% higher than in the United States, and 81% higher than
on the Continent of Europe. Truly, Britain is a prosperous and profitable
country so far as average earnings of the whole people by the year is
concerned. Sir Richard goes on in the same statistical paper to show, that

the average annual profit on British Capital is 14%, and that Capital yields
about the same rate for the United States.
Now, can we easily give the grounds on which the introduction of more and
better machinery, instead of displacing laborers, tends to lift and actually
does lift the wages of those concerned, who continue to work with their
hands and heads? We will try it.
(a) It takes the hands and heads of laborers to invent and construct and keep
in repair the machinery itself, that is often supposed to displace laborers,
and so far forth opens a vent for the more profitable employment of some of
the laborers, who before performed the cruder and more repetitive and
automatic parts of the processes, which parts alone machinery can be made
to perform.
(b) Machinery always lessens the cost of a given amount of production,
otherwise there would be no motive for its introduction. But, other things
being equal, the lessened cost of a commodity broadens the market for its
sale. The cheaper a useful commodity is offered, the more the buyers of it
the world over. The more and the better the machinery brought in, the more
and the cheaper the commodities produced and the broader and better the
markets to be supplied; and, therefore, the more and the more skilful the
hands needed to tend the machinery and to market the products.
(c) The more commodities thus created by men and machines, and the
wider the markets found for them over the earth, the more laborers are
required to extract and prepare and transport the raw materials for the now
augmenting commodities, and also to ship and distribute the finished
products. As Chadwick says, notwithstanding the strictly factory hands have
diminished one half in one place, "yet the mill population has increased, as
well as the general population, the hands discharged being absorbed in other
employments."
(d) These improvements in machinery, and the consequent refinements in
the skill of the laborers, cheapen also of course the commodities consumed
by the laborers themselves, and therefore a given rate of wages, to say
nothing of a rate sure to enlarge under these circumstances, now secures for
the laborers a higher grade of comforts.

More and better and more durable machinery, consequently, so far forth,
tends at once to enhance the rate of laborers' wages and increase the
purchasing power of the unit in which wages are paid.
To return now to the main line of discussion under the present head, we
have shown by proof positive that there is nothing either in new machinery
introduced, or in higher wages paid in connection with such machinery, or
in shortened hours made possible by these two, to lessen the Demand of
Capitalists for the personal services of Laborers; because, there is nothing
in all these, commercial and industrial freedom being presupposed, to
lessen the Profits of the Capitalists, which profits are the sole motive
actuating them as such. That high wages and short hours are rather an
advantage to Profits in connection with skilled laborers and fine machinery,
than a disadvantage when compared with long hours and low pay and poor
implements, is clearly shown by Chadwick in the passage quoted
comparing England with English Bombay, where the working hours are
60% more and the wages greatly less and the cost of the machinery very
little; "twenty shillings' worth of bundled yarn may be produced at a cost of
from 2d. to 3d. less in Manchester than in Bombay"; call it 2½d. less; that
is, it costs the Bombay spinner more than 1% per pound of yarn more to
spin it than it costs the Manchester spinner! For truth and decency's sake,
then, let us have done with the gabble in this country about the advantages
of "pauper labor" over skilled, of low wages over high, of cheap machinery
over dear!
The penetrating reader will perceive, that the root of this whole matter lies
in the breadth and quickness of the Markets, in which the commodities
produced by the laborers and capitalists may be sold against other
commodities, and against Services and Credits; if the markets of the world
are free to all to buy in and to sell in, which seemingly two things are
precisely one and the same thing, then the Demand of Capitalists for the
services of laborers to create and market salable commodities wherever
these may be wanted, can apparently never slacken on the whole; because,
the desires of men which the efforts of other men may satisfy commercially,
are indefinite in number and unlimited in degree; and, therefore, the Wages
of the skilled laborers, the commercial freedom of the nations being
presupposed, are likely to be on the whole on a steady rise throughout the
world; and the amount and excellence of the machinery on a similar rise,

since Capitalists can always under these circumstances see their Profits
looming up ahead of them,—the profits of an endlessly diversified and
marketable Production.
The chief reason at any rate, and almost the only reason in common sight,
why little England has surpassed in commercial prosperity of every sort
every other nation on the globe during the past forty years, as evidenced by
these statistics of Sir Richard Temple and other abounding proofs on sea
and land, is in the fact, that her statesmen of the last generation came to
perceive clearly, and then helped the people to see, that a market for
products is products in market; that her traditional tariff-barriers to keep
foreign goods out kept in equally domestic goods that wanted to get out for
a profit, and so down went the tariff-barriers little by little, accursed alike
by God and Englishmen, never to be set up again around the shores of the
land of Cobden and Bright and Elliott; and to-day we read, that the average
annual Earnings per head of the entire population of the United Kingdom,
men and women and children, English and Irish and Scotch, are $176, while
the annual average Profits of Capital within the three kingdoms is 14%.
(3) In the last place here, we must now look at the Demand for the personal
services of Professional laborers. These are persons, who have done
something more with reference to their life-work than serve an
apprenticeship to a trade, or acquire some mechanical skill in connection
with some kind of machinery. An Education rather than an Apprenticeship
is implied in Professional laborers. Knowledge of the bodies and of the
minds of men; acquaintance with some one section at least of the general
laws that pervade the universe; some confidence (the more the better) in
God, who created and governs the world; are all requisite to a reasonable
success on the part of Professional laborers. The Demand for their services,
and of course also the Return made to them for such services, will largely
depend on such superior knowledge and confidence acquired by such
persons, and involved in their services. Clergymen, physicians, lawyers,
statesmen, literators, actors, teachers, and scientific experts, may serve as
our chief examples of Professional laborers.
(a) "All that a man hath will he give for his life." When men fall sick, or
those fall sick who are dear to them, they send for the doctor. Scarcely any
trait of human nature is more universal than this. And the trait puts honor on

human nature, because it implies a relatively high estimate of the worth of
life in the mind of the patient, and also a relatively high confidence in a
certain class of one's fellow-men. As Society progresses, and as Christianity
deepens the sense of the worth of the individual life, and knits a stronger tie
of confidence between man and man, a change is slowly coming over the
relations between physicians and their patients; people do not wait to fall
sick before they send for the doctor, so much as they formerly did; some
individuals and families are establishing connections with a medical
adviser, who studies their constitutions and habits of life beforehand, guides
them in general sanitation, and thus both he and they are better ready for
curatives in times of illness. Gladstone has long had such an attendant, with
the best of results as he thinks, and strongly commended such action to
John Bright, but too late to save the latter from what was thought to be
premature death in consequence of imprudent and ill-advised handling of
his health. In a few cases in England and the United States an annual salary
is paid a physician for general care of the family's health, whether sickness
befall or not, instead of the more usual fees on consultation and attendance.
Dr. Munn of New York receives such an annual salary from Mr. Jay Gould.
But in whatever way medical services are paid for, the Demand for them is
constant and intense. The motive to buy them is immediate and personal,
not mediate and remote, as in the case of capitalists and laborers of the
second class.
It is to be noticed further in respect to physicians, and indeed in respect to
all professional laborers much more than in respect to other laborers, that
much knowledge has been gained by them for its own sake, out of pure love
for it, rather than for the sake of merely selling their services as laborers;
while this does not diminish in the least the commercial character of their
services, it tends to beget on the part of the buyers of them a stronger
confidence in the men who render them, so that the Demand for such
services and consequently the pay for them is enhanced by the trust reposed
in the laborers on the ground of something acquired by them for other than
selling purposes, and which indeed cannot be sold; and superior character
also, as well as superior knowledge, which is wholly moral in its basis and
not mercantile at all, affects the Demand for the services of the possessor of
it to increase it, on the ground of a naturally stronger trust in him as a
professional laborer, and at the same time tends to increase his Wages by

limiting the circle of those who can offer in competition such services on
the background of such superior knowledge and character.
(b) Lawyers do not meet such a universal Demand in the nature of things as
do physicians. Said Jonathan Smith of Lanesborough in the Massachusetts
Convention of 1788: "We have no lawyer in our town, and we do well
enough without." Still, one hundred years after that time there were about
70,000 lawyers in the United States, and Lanesborough itself had had in the
meantime at least three distinguished ones. The interests of property and of
reputation, and the constitutional rights of individuals as over against the
claims of Government, so far as these may be conserved through the agency
of lawyers, are by no means so constant and imperative as are the interests
of life and health. Yet lawyers are in legitimate request in all civilized
countries. A Latin legal maxim announces the obvious truth: It is the
interest of the Commonwealth that there should be an end of disputes and
litigations. Beyond question courts and counsel are wholesome on the
whole for the individual and for the commonwealth. But the extremely
complicated and unsatisfactory condition of American Law at present,
owing to the fact that we have a none too simple United States Law with its
three grades of courts and judges, and considerably divergent bodies of Law
in each of 42 States, and owing also to the fact that our law in general is
drawn almost at random from two pretty distinct Sources, the Common
Law of England and the Civil Law of Rome, multiplies the number of
lawyers relatively to the population out of all proportion to such ratio in
other countries, and tends to make the lawyers as a class too conservative of
old and drawn-out processes to the extent of opposing obvious betterments
and simplifications. Said David Dudley Field, President of the American
Bar Association, in August, 1889, at Chicago: "So far as I am aware, there
is no other country calling itself civilized where it takes so long to punish a
criminal, and so many years to get a final decision between man and man.
Truly we may say, that Justice passes through the land on leaden sandals.
One of our most trustworthy journalists asserts that more murderers are
hung by mobs every year than are executed in course of law. And yet we
have, it is computed, nearly 70,000 lawyers in the country. The proportion
of the legal element is, in France, 1:4762; in Germany, 1:6423; in the
United States, 1:909. Now turn from the performers to the performance. It
appears that the average length of a lawsuit varies very much in the

different States; the greatest being about 6 years, and the least 1½. Very few
States finish a litigation in this shorter period. Taking all these figures
together, is it any wonder that a cynic should say that we American lawyers
talk more and speed less than any other equal number of men known to
history?"
Mr. Field then repeated his well-known argument for Codification,
ascribing the law's delays to the chaotic condition of the law, and
maintaining that it is the first duty of a government to bring the laws to the
knowledge of the People. "You must, of course, be true to your clients and
the courts, but you must also give speedy justice to your fellow-citizens,
more speedy than you have yet given, and you must give them a chance to
know their laws."
Owing to the immense difficulties in the way of any one person mastering
the various branches of the law in this country, it is falling more and more
into specialties, and lawyers are devoting themselves to some one of its
many branches, the main division line being between "Law" and "Equity"
technically so-called; and whenever one becomes eminent along any line,
his compensation is apt to be very large owing at once to a large Demand
and to a small Supply at that point, while the average compensation of the
lawyers as a whole class is meagre enough, because there are too many of
them, and the people have become very suspicious of the law's meshes and
delays.
(c) The grounds for the unabating Demand in Christian countries for
religious teachers and preachers, let us rather say, for spiritual guides, lie
deep down in the nature of man. If there be one proposition about men more
incontestable than another, it may be this, that men are made in the image of
God, and that there is among men in general an irrepressible striving to
maintain and deepen this image. The touch between man and man and
between man and God is such at this point, that men can help each other in
this striving, and that they feel that they can help each other. This is the
chief reason why some men are constantly consecrating themselves to the
Christian ministry, and other men as constantly soliciting these to become
their pastors and teachers. Those more enlightened in divine things and
more spiritually minded offer themselves, as it were, not commercially but
morally, to the unenlightened and less advanced as guides and helpers. It is,

as it was with Wolfe and his men at the Heights of Abraham: those who got
first to the top tarried a little to help those up who came after. And the most
striking thing about it is, that the masses of men at bottom are as desirous to
be uplifted as the choicer spirits among them are desirous to help the work
forward. Ministers are still, and always will be (human nature is
unchangeable), eagerly called; chapels and churches and cathedrals are still
going up all over the earth; worship and petition and aspiration are ever
ascending on the great world's altar stairs towards heaven, guided and
inflamed by the chosen and choosing men of God,—"when priests on grand
cathedral altars praise!"[5]
It is a monstrous perversion of language to maintain, that a clergyman in
rendering such services as these is selling his religion. It is true, that he is
selling under Demand services to the appropriate rendering of which his
own personal piety contributes one large element, and thorough confidence
in him on the part of his people as a good and earnest man contributes
another large element; but the piety and the spiritual power and the worthy
example are not nourished for the sake of selling the services, but for their
own sake in personal worth and worthiness, and these things must not be
confounded with the services that are sold. Accordingly, while the
clergyman's vocation is sacred, and belongs to the sphere of religion, his
salary belongs to the sphere of exchange, and its determination, in harmony
of course with the higher impulses, is a business transaction. This
distinction ought to be better understood than it is; and both clergymen and
people need to be reminded that the spiritual things belong to one sphere,
and the temporal things to another. The amount of a minister's salary, and
the time and mode of its payment, are matters of pure business; and the
minister himself is to be blamed if he does not attend to them, and insist on
them, on business principles.
In the professions generally, and particularly in the ministerial profession,
while, if we confine our attention to those persons who both have the
requisite gifts of Nature and have been also thoroughly trained, we shall
find a high rate of compensation on the two grounds of a strong Demand
and a limited Supply, we must bear in mind too the counter-working
influences which tend to increase the competition and thus decrease the
compensation, namely, the respectability which attends them, the desire of
knowledge for its own sake which is gained in connection with them, the

instruction wholly or in part gratuitously offered to those in course of
preparation for them, and the desire to do good without regard to pecuniary
reward which actuates many who enter upon them.
(d) Physicians and lawyers and clergymen serve primarily individuals, or at
most relatively small groups of individuals, and of course look for their pay
to those whom they have served. It is different with Statesmen, the fourth
class of professional laborers that we need to look at in an economic view.
Statesmen worthy of the name serve at least a whole nation, and to the
nation as such must they turn for their pecuniary rewards. And such men
have never turned in vain to those whom they have benefited as a whole.
Bismarck is the best modern instance of a Statesman, who has received
from a grateful country immense money-measured remunerations for
immense political services rendered. The Demand for the services of
Statesmen rests in the deep consciousness of men organized politically into
a Nation, that they need, especially in trying times, a Man of the highest
natural gifts, and of the broadest attainments and of the loftiest political
integrity to plan and act for them in emergencies, as they are conscious that
they cannot plan and act for themselves organically. This does not mean,
that the one ever knows essentials better than the many: he does not. This
does not mean, that the true objective of a nation's march is ever discerned
more clearly, or rather felt after more eagerly, by one man than by the many
men concerned: it is not. Still less does it mean "a man on horseback." But
it does mean this: a Nation (as the very name implies) is made up of the
thoughts and hopes and throbbings and dim forecastings and half-formed
purposes of multitudes constituting a unit (born together for one destiny on
earth); and the true Statesman is one of themselves, sharing with them at
once the traditions of the past and the perspectives of the future; one, with
the instinct and the intellect to gather up and embody the general feeling
and the general will; one, who has gained in some way the confidence of
the masses who are willing for the time being to entrust to him the guidance
of their affairs, and to empower him to plan and act for them as their
champion and deliverer; and one, who (because he is one) can better seize
the propitious moments for declaration and negotiation and public action,
yet who never forgets that he is nothing but an agent for others, and is as
ready to lay down responsibility at the public will as to assume it at the
public will.

Washington was such a statesman, and Lincoln. Even Bismarck, under
monarchical and later imperial environment, disclaims anything substantive
and original in his own action: he did what he could not help doing: he
followed the instincts of Prussia, and his own; and became the means of
fulfilling as they gradually ripened the longings of the other German people
for unity and order. Such a statesman was Chatham in England, and Cavour
in Italy. Now, such services as these, done for a whole people, always
deserve and usually receive, though not expressly bargained for beforehand,
yet implied in the public devotion of one party and the general consensus of
the other, extraordinary honors and emoluments. This is right, even on
purely Economic principles. The services of great statesmen to their country
in great epochs and emergencies are at once a gift and a sale, they are both
patriotic and economic, there is equally a national Demand for them and a
grateful recognition of them, the Supply is always exceedingly rare and the
reward often exceedingly great; and it is to be put down to the lasting credit
of the science of Economics, that its peculiar motives and results may
mingle in and harmonize with the motives and results of the higher moral
impulses, such as those of Patriotism and Religion, as in the cases of the
Soldier and Statesman and Clergyman. There was no rational ground for the
hesitation of Garibaldi to receive from the Parliament of Italy in 1875 an
annual pension of 50,000 lire.
(e) There is a single class more of Professional laborers, loosely so-named,
which should be noted before we dismiss the subject of Demand for
laborers to pass to consider the Supply of them, namely, Literators and
Artists and Actors of the highest rank. Statesmen primarily serve the
individual nation that selects and rewards them, though their influence may
indirectly uplift other nations also; but the great Writers and Painters and
Actors, whatever may be their local habitation and name at first, soon come
to belong to the world at large and to derive their revenue from many lands,
because the highest Art is cosmopolitan in its own nature, and the best
characterization of men as such cannot but be the property of Mankind.
Shakspeare is no longer English, nor Angelo Italian, nor Mozart German,
nor even Bernhardt French. Deep as are the scars and the sea that separate
nation from nation, there is something deeper still in the innate recognition
by man of man as depicted by the great Masters in immortal lines. There is,
accordingly, a sort of Demand in the inmost soul of Humanity as such for

these living and lofty touches and delineations of itself, whencesoever they
may come. There is not indeed nor can there be, as in most other cases of
sale, a bargain made beforehand between these preordained sellers of the
rarest services and their silent yet waiting purchasers, yet there is after all
an antecedent and an assured understanding between them. They are in
touch even across the sea. The master strikes his chord, and the audience,
fit, though few and scattered, listens and applauds and makes return.
Is the principle of "International Copyright," so-called, correct? Let us look
narrowly before we pronounce. At present this good country of ours makes
itself a mocking and a by-word even to its own intelligent and art-loving
citizens by putting a tariff-tax of 30% on paintings and statuary by foreign
artists, not at all to get revenue thereby, but to "protect" domestic artists in
their inferior work by artificially lifting the price of their wares. So far is
carried this jealousy of foreign works of art, that when the artists generously
loan them for exhibition on our national occasions, they are put under bonds
not to sell them on this side without previously paying the tariff-tax, which
is graciously intermitted during the Exposition. This is Restriction. This is
Protectionism pure and simple. This is legally excluding the Better in order
to give a forced currency to the Worse. Now, domestic Copyright restricts
the sale of any book to one publisher in his interest and in that of the author.
The book now in the reader's hand is thus copyrighted. This legal
arrangement between authors and publishers and their public may be
perhaps logically defended, it may even be for the public weal on the
whole, though in many cases it doubtless raises the price of good books,
which would have been published without any such artificial
encouragement. The copyright, however, like all patent-rights also, soon
expires by limitation of time, and the public thereafter have the unrestricted
use of what is really their own.
For what is sometimes called "literary property" is not property in the strict
sense of the word. A book is not like a plough or a house. Its contents even
when most original have been but colored, as it were, and rearranged and
reinforced by the author's individual mind. Its substance always comes out
of the common stock. It cannot be the author's own, as the bushel of wheat
is the farmer's, who sowed the seed on his own land and threshed it in his
own barn and carried it to market in his own wagon. The rights of the
individual and the rights of the Community commingle more or less in

private property of every kind, at least to the extent that the latter may tax
the property if needful for the common wellbeing, as it is bound also legally
to secure it to the owner when threatened by others; it is no part of the
purpose of the present book to draw the wavering line in general between
the rights of individuals and the rights of their Government as towards
them; but the distinction between common property and copyrighted
property is plain enough to everybody, and the Law puts emphasis on the
distinction by making the one quickly terminable and the other continual.
So then, when the Government under which the author resides, has given
him a limited copyright within its own jurisdiction, it would seem as if the
individual right in the premises had been sufficiently recognized alongside
of the undoubted right of the Whole to the ultimate use of the labors of their
own citizen.
When, however, it comes to International Copyright, which is an attempt to
secure to authors of one country artificial privileges under restriction in
selling their wares in all other countries, the argument breaks down. Even
for the one country, in which the author lives and is taxable, the argument is
not very strong, and hardly binds advanced public opinion either as to the
grounds of it or even the practical benefits of it on the whole. By the
attempted extension of it to all countries, its reasonableness disappears.
Taxation cannot extend beyond the jurisdiction of the country taxing; and it
certainly seems as if a legal privilege, beyond common law privileges,
ought not by extension through the formal action of other countries to
exempt from taxation (in case it were needful) the results of the original
privilege. The purpose of International Copyright is not the blessed one as
announced to the world by James Smithson, "the increase and diffusion of
knowledge among mankind," but directly and artificially by means of legal
restrictions the "increase" of the prices of books and of other "knowledge"
to the masses of "mankind," and the "diffusion" of these extra prices as
between authors and publishers. Protectionism does not seem to be one whit
more respectable in this form than in the form of tariff-taxes on foreign
works of art.
2. We have already seen in our first chapter the proofs of the proposition,
that the Value of anything whatsoever bought and sold is determined by the
Demand for it and the Supply of it then and there present. Also we have
now seen at considerable length the main phases and grounds of the

Demand for each of the three classes of Personal services bought and sold
among men. The next topic in order is the Supply of personal services in the
various markets. Here it will not be necessary to distinguish particularly the
three classes of Services, inasmuch as the circumstances governing the
Supply in each are substantially similar.
In Economics generally we have to deal chiefly with Persons, and only
subordinately with Things; when we come to the Supply of personal
services, answering to the Demand for them on the part of other persons,
this point becomes conspicuous; and it is here, if anywhere, within the
realm of our science, that we need to devote a word to a singular doctrine,
that has been famous for nearly a century under the term of Malthusianism.
Thomas Robert Malthus, 1766-1836, was an English clergyman and
teacher, a wide traveller and keen observer of men, one who divided his
time during a long life between cure and chair and the libraries of the
Universities, published in 1798 his "Essay on the Principles of Population
as it affects the Future Improvement of Society"; in this and in subsequent
editions enlarged and enriched, he brought out with its proofs the core of his
startling pronouncement, that the human race is found to increase in
numbers in something like geometrical progression, while the means of
subsistence for them on any given area of agriculture can only increase in
something like arithmetical proportion; the United States was then doubling
its population in 25 years, and he calculated that, at this rate, the inhabitants
of any country in five centuries would increase to above a million times
their present number, which would give England in that time more than
twenty million millions of people, or more than could even get standing-
room there; for this natural tendency of the law of human fecundity to
outstrip the results of the law of returns from land, he saw no remedy except
in checks to population, which he divided into the positive and the
preventive, the first of which, such as war and famine and disease, increase
the annual number of deaths; and the second of which, such as prudence in
contracting marriage and temperance after marriage, diminish the number
of births; and Malthus and his followers, among whom the famous Thomas
Chalmers was prominent, were at great pains to inculcate upon the laboring
classes the duty of later marriages and fewer children, as an indispensable
condition of their rise in comforts, and of "the future improvement of
Society."

These discussions have attracted great attention almost to the present day,
and have been supposed to be very pertinent to the subject of wages, and
thus to be an important part of Political Economy; but when one looks more
closely, the force of that spring of population which the Creator has coiled
up in the nature of man, as contrasted with the weakness of that power by
which the earth brings forth sustenance for man, is seen to be a topic in
Physiology and not in Political Economy at all. Political Economy
presupposes the existence of Persons able and willing to make exchanges
with each other, before it even begins its inquiries and generalizations. How
they come into existence, the rate of their natural increase, and the ratio of
this increase to the increase of food, however interesting as physiological
questions, have clearly nothing to do with our Science. Each adult human
being is as much constituted by Nature to receive personal services as to
render them, in Economics each without exception receives when and
because he renders, and all alike are naturally able to become capitalists
also; economical laws present no obstacles, that we can see, to all men
becoming rich, as we use that term; the town or city in which many people
are growing rich simultaneously, is the best place in the world for other
people to go to get rich in, and not at all towns in which other people are
getting poorer; most men are unwilling, some perhaps may be unable, to
fulfil the moral conditions of growing rich; while, we may depend upon it,
the famines of the world have been caused more by the indolence and want
of foresight of individuals, and especially by the monstrous
maladministrations of Governments, than by any law of the increase of
population.
Experience too has shown, that the strong impulse in mankind towards
procreation is not too strong for the purpose intended by the Creator; that
He who is the author of the impulses is author also of natural
counterworkings of them; that, as men under moral and religious training
come more and more under the influence of reason and affection, the
preventive checks to population come silently and effectually into
operation; and that, taking the world at large, food and comforts have more
than kept pace with the stride of population, since its inhabitants as a whole
were plainly never so well fed and clothed and housed as now. The abstract
antagonism of the law of the increase of population with the law of the
increase of food, or what we prefer to call the law of diminishing returns

from Land, may be admitted, if one chooses to insist on it; but any practical
tendency of these to come into collision, as the world is and is to be, is
confidently denied. When Malthus wrote, and long afterwards, England was
under the dominance of Protectionism; the wretched Corn-laws forbidding
the importations of foreign grain, in order that the domestic growers might
sell to their countrymen at artificial prices, and thus grow the richer as
bread became the dearer, were only repealed in 1846; and the demonstrated
ability of Great Britain under free trade to draw on the fertility of the whole
world for the steadily and increasingly cheap maintenance of her people,
demonstrates the irrelevancy of Malthusianism to the Science of
Economics.
The Supply of personal services at any time or place in answer to the
Demand for them, is affected by several important circumstances, which we
shall now proceed to consider in their order.
(a) The agreeableness or disagreeableness of rendering a given set of
services will affect the Supply of laborers at that point, and help to
determine the rate of Wages paid to them; because the more agreeable
employment will attract the larger number of laborers, will experience in
consequence the press of competition, and the rate of wages then and there
will be lessened thereby. The more disagreeable employment will feel less
the pressure of numbers, and will secure, other things being equal, a higher
rate of remuneration in consequence. Among the elements which, in spite of
diversity of tastes, make any employment agreeable or disagreeable to the
laborers, are (1) the less or greater exertion of physical strength required,
(2) the healthfulness or unhealthfulness of the service, (3) its cleanliness or
dirtiness, (4) the degree of liberty or confinement in it, (5) the safety or
hazard of the employment, (6) the esteem or disrepute of it in public
opinion. To illustrate each of these in order, the stone-mason, the glass-
blower, the scavenger, the factory operative, the worker in a powder-mill,
the smuggler, will each receive a larger compensation owing to the peculiar
element of disagreeableness involved in his own personal service; and he
will be able to demand and secure the higher rate through the action of this
disagreeableness upon the Supply of such laborers. Of all these elements,
public opinion is perhaps the most operative; and if this be favorable to an
employment, and some social consideration be attached to it, and only
common qualifications be required for it, the wages in it will infallibly be

low. This is doubtless the main reason why so many young women prefer to
teach, rather than be employed in mills or shops or offices, and why the
wages of female teachers have been so remarkably low; although each of
the elements of agreeableness specified above may also contribute
something towards the same result. If a business be decidedly opposed to
public opinion, it must hold out the inducement of a large reward, or
nobody will engage in it. This explains the abnormal gains of the slave-
trade, the liquor-business, of gambling-houses, and of lotteries.
(b) The easiness or difficulty of learning to render acceptably a given set of
personal services, will have a quick and constant influence on the Supply of
these services, and of course also on the rate of the return paid for them.
The elements of this Difficulty in general are time, expense, lack of natural
gifts, want of foresight on the part of those concerned, and lack of push and
persistency on the part of the learner himself. To put a boy apprentice to a
trade, for example, requires on the part of the parents a foresight, an ability
to get on without his immediate help, and sometimes also an amount of
money for his board and clothes which all parents do not possess; many
boys too, who must acquire their skill to sell personal services when they
are young, if at all, find on trial that they do not like the trade, or have not
the requisite gifts, or fail in the appropriate patience and propulsion; and the
consequence is, that the Supply of laborers along that particular line is
lessened, and the right to demand and the ability to secure a higher rate of
wages than is accorded to common laborers accompany the small supply,
through the reduction of numbers which these obstacles at the entrance
occasion and the consequent weakness of competition. This is one principal
ground of the difference in the wages of skilled and unskilled laborers; the
other being, as we have seen, the stronger and more constant Demand for
the former, owing to the impulse imparted by Capital. All these points of
difficulty at the outset apply still more strongly in the case of professional
laborers, serving more effectually to thin out the ranks of these, and pushing
upward still higher the gauge of compensation for the successful
competitors.
(c) The constancy or inconstancy of prospective employment in a given
business, is a consideration that affects the Supply within it, and then the
wages. If the services be of such a character, that they can only be carried
on during nine months of the year, the wages of the renderers will be greater

by the day or the month than they would be, provided the services were in
order during all the twelve months. The laborer is apt to look at the
aggregate earnings of the year, and will hardly take up a trade which affords
employment but a part of the time, unless some compensation can be found
in the higher wages for that time. This is the chief reason why the wages of
the mason and house-painter, in this climate at least, are higher than those
of the blacksmith and carpenter. The coachman, also, may stand by his
horses half the day or night with no call for his services, and must have,
therefore, a proportionably higher fare from those whom he does transport.
In general, it is found that men prefer a constant rendering with a lower rate
of pay, than an inconstant one with a prospect of larger wages for the
particular jobs actually done; and because the many prefer that, those who
take up with the other are able to secure a higher relative rate of pay in their
less eligible vocation. It must be noticed, however, as counterworking this,
that some men have desire for intervals of leisure in their business, and for
opportunity to make these intervals subservient to some avocation or other
means of livelihood.
(d) The probability of success or the opposite in any line of personal
services, is a circumstance that has some influence on the rate of wages
paid in it, through the action of this probability on the numbers of those
who enter upon it. If ultimate success be doubtful, fewer persons will
naturally engage in such a business, and those who dare in it and succeed,
will probably reap a very high reward. So, also, those who take jobs by the
contract, and therein assume more or less of risk, are commonly paid at a
higher rate for their services than those who do similar work by the day. It
is true, that this is owing partly to the fact that the contractor usually puts in
his own capital more or less, and must therefore be paid profits as well as
wages, and also that the wages of superintendence are due to him in
addition to ordinary wages; still, there is a residuum of difference, which
can only be accounted for by the risk he runs of a successful issue of his
contract. The general variation in Supply and wages from this fourth cause,
would certainly be greater than it is, were it not for the overweening
confidence which men in all generations seem to have in their own good
luck. This excess of worldly faith is always seen in the rush which is made
for newly discovered mining regions. It was seen to perfection in 1889 in
the uncontrollable advance of thousands into, and their almost immediate

exit out of, the then just opened territory of Oklahoma. The facility with
which lottery tickets are sold even yet in many countries proves the
prevalence of this over-confidence. It is demonstrable beforehand on the
doctrine of Chances, that no person can rationally buy any lottery ticket at
its advertised price, because if that person should buy all the tickets
advertised he would certainly lose money, since the sum of the prizes is
always less than the sum of the prices. Otherwise the projectors of the
lottery would always lose money.
(e) The mobility or immobility of laborers as a class acts powerfully upon
the Supply of them at any one time and place, and consequently upon the
rates of wages then and there. In some countries, notably in the United
States, laborers as a class move from place to place with considerable
facility under the action of Demand for personal services. According to the
Census of 1870, 7,500,000 of the native population dwelt in other States
than those in which they were born. Many of these, doubtless, had left their
native region to obtain more fertile land, and many also to obtain more
remunerative employment as laborers. The native American, more than
most other persons, is not only willing to move from place to place in the
hope of bettering his condition, but is also willing to change his occupation
from time to time in the same hope. There is more freedom of movement
locally, and less fixedness of occupation on the part of laborers and others,
in this country than in any other industrial country. Even foreign
immigrants here,—factory operatives, miners, and other laborers,—seem to
catch after a while the spirit of the country in both these respects. There is
one considerable advantage in all this, namely, competition becomes more
uniform in all places, an unusual demand for laborers at any one point is
easily met, and wages neither rise so high nor fall so low at special points as
they otherwise would. But there are considerable disadvantages in all this
too, chiefly these, the services of laborers floating locally or changing the
kind of their labor can never become so excellent as service more steady in
place and time; and, especially, thorough apprenticeships, or whatever may
be equivalent to these, are held in too little esteem by public opinion, and
are too little requisite in order to obtain transient employment. To meet the
obvious pressure of these disadvantages, an admirable device is now being
hit on, namely, to introduce into our public schools something in the way of
"manual training" for the various trades. Public institutions also, some of

them on a great scale, as the Cooper Union in New York and a more recent
munificent foundation in Philadelphia, have been established on purpose to
train boys and girls both in eye and hand to render skilfully those artisan
services of the various kinds which will always be in demand among men,
and which have certainly deteriorated among us owing in part to the disuse
of the old apprenticeship-system.
In Europe, on the other hand, the laborers as a class are far less mobile than
here; and in Asia still less so. There is said to be no country in Europe in
which the proportion of foreigners to the native population exceeds three
per centum. In England, which is a small country, the difference in Wages
between the northern and southern counties is very remarkable. Professor
Fawcett is authority for the statement, that an ordinary agricultural laborer
in Yorkshire during the winter months earns 13 shillings a week, while a
Wiltshire or Dorsetshire laborer doing similar work during the same number
of hours earns but 9 shillings. The contrast in general between the Wages of
English agricultural laborers and those paid in mills and mines and furnaces
is still more striking. And so more or less, in respect to the Value of
Commodities: competition is yet by no means perfect in distributing these
so as to make their price uniform in the same country or even in the same
county; but the immobility of laborers for an obvious reason is much
greater than the immobility of goods. While laborers should certainly be
free to go wherever their services may be in greater Demand, the natural
reluctance of most men to leave their native haunts, enables each of the
nations to work out its freely chosen ends without wholesale interference
from abroad. If China should precipitate itself upon the United States, or
India upon England, as the mere economical impulse might indicate, it
would be disastrous to the western nations; but men are everywhere under
other influences besides the economical one, although this is strong and
distinct and pervasive; Political Economy deals with men as they are all
things considered, and with Buying and Selling as this actually takes place
over the world, or rather as it would take place if factitious economical
restraints were removed; and Providence has other great ends in view
besides commercial prosperity, vital as that is to all other progress, and
often holds one impulse in check by a stronger one.
(f) Custom, with its cognates Prejudice and Fashion, has still a good deal to
do with the Supply of laborers in certain departments of effort, and of

course with the rates of wages in them. In former times in this country and
in the older countries particularly, Custom and decree were dominant in
determining, for example, the current fees of lawyers and doctors,
competition coming in to decide how many such fees a professional laborer
should get, rather than the amount of each particular fee. The shares of the
produce going respectively to the agricultural tenant and to the landowner,
were specially under the dominion of Custom; as the mode (now decadent)
of taking farms "at the halves," once universally prevalent in New England,
sufficiently shows. In certain other matters relating to land and trade,
Custom has long been gradually hardening into express law, as, for
instance, the famous "Ulster Right" in Ireland. Prejudice, which is only
another name for Custom, has some voice still in adjusting rates of wages,
as may be seen in women's wages crowded down apparently to a point
unreasonably low as compared with the wages of men; and also in the rate
of John Chinaman's wages in those parts of the United States where he
ventures to offer his services in the teeth of public opinion and hostile
legislation. It may be spoken with general truth and satisfaction, that
competition seems now to be breaking down mere custom and prejudice in
all directions, and may perhaps in the good time coming reign supreme over
the economic field; while Fashion, which bears indeed on one side of its
shield the motto "custom," carries too on the other the bold word
"competition," and this second side is likely to be presented to the public
mostly in the future, because, they who lead the styles in any department
whatsoever will always offer their services to Society at an advantage to
themselves, that being one form of competition, and their rate of
compensation will be legitimately higher than the average rate of their
fellows, of which a good instance was the marked worldly prosperity during
the decade of the Eighties of Worth, the man-dressmaker of Paris.
(g) Legal Restrictions are another cause acting on wages, by acting directly
on the Supply of laborers. Laws inhibiting or promoting immigration; laws
appointing the fees and salaries of officials; tariff-taxes, whether prohibitory
or only restrictive; laws creating privileged classes of any kind, which is
only another designation for laws restricting the rights of the masses;
unequal modes of taxation, whether adopted in ignorance or by design; all
have a direct and powerful agency upon the distribution of laborers, upon
the supply of them at given points, and upon the rates of their wages.

Governments are coming, however, much more freely than formerly, but
never through their natural choice and drift as governments, only by the
gradual and oft-disappointed compulsion of their citizens, to leave all these
matters Economical except the wages of their own servants and those
commodities which they choose to tax, to the simple and safe action of
Supply and Demand.
(h) Voluntary Associations for that avowed purpose were a mediæval, and
have come to be again a modern, agency in adjusting the Supply of laborers
to their respective markets, and in regulating the wages of various classes of
them. The Guilds of the Middle Ages, and particularly the old guilds of
London, had a remarkable history, upon which we can not here even touch.
Their local importance is sufficiently attested by the fact, that the City Hall
of London is to this day the "Guildhall." King Edward III. humored the
civic feeling of his time by becoming himself a member of the Guild of
Armorers. "A seven years' apprenticeship formed the necessary prelude to
full membership of any trade-guild. Their regulations were of the minutest
character; the quality and value of work was rigidly prescribed, the hours of
toil fixed from daybreak to curfew, and strict provision made against
competition in labor. At each meeting of these guilds their members
gathered round the Craft-box, which contained the rules of their Society,
and stood with bared heads as it was opened. The warden and a quorum of
guild-brothers formed a court which enforced the ordinances of the guild,
inspected all work done by its members, confiscated unlawful tools or
unworthy goods; and disobedience to their orders was punished by fines, or
in the last resort by expulsion, which involved the loss of right to trade. A
common fund was raised by contributions among the members, which not
only provided for the trade objects of the guild, but sufficed to found
chantries and masses, and set up painted windows in the church of their
patron saint. Even at the present day the arms of the craft-guild may often
be seen blazoned in cathedrals, side by side with those of prelates and
kings."[6]
The Trades-Unions and Brotherhoods of the present day cannot plead the
provocations and justifications of their mediæval predecessors. It cannot be
denied, however, that they have some provocations and justifications in the
bad example set before them by the various combinations (implied or
explicit) of the Wages-payers as a class. If the Wages-payers combine, then

the Wages-takers would seem to have no resource but in combination. Both
alike are wrong in this. Both alike oppose in this the spirit of Political
Economy, which is ever the spirit of Freedom, and is ever against such
factitious associations for such purposes, because they tend to destroy the
independence of personal action on the part of both payers and takers of
wages, and tend also to bring all the workmen of any one general grade
down to one level of effort and reward.
(i) Lastly, we must note the influence of Casual Events upon wages, as
these events affect the Supply of laborers. For example, in 1348, a terrible
plague, called the Black Death, invaded England and swept away more than
one-half of its population. "Even when the first burst of panic was over, the
sudden rise of wages consequent on the enormous diminution in the supply
of free labor, though accompanied by a corresponding rise in the price of
food, rudely disturbed the course of industrial employments; harvests rotted
on the ground, and fields were left untilled, not merely from scarcity of
hands, but from the strife which now for the first time revealed itself
between Capital and Labor" (Green). The landowners of the country
districts, and the craftsmen of the towns, not understanding the law of
Wages as an invariable resultant of the Demand and Supply of laborers,
were scandalized by what seemed to them the extravagant demands of the
new labor-class. Parliament equally ignorant with the People of the natural
economic law, enacted as follows: "Every man or woman of whatsoever
condition, free or bond, able in body, and within the age of threescore
years, and not having of his own whereof he may live, nor land of his own
about the tillage of which he may occupy himself, and not serving any other,
shall be bound to serve the employer who shall require him to do so, and
shall take only the wages which were accustomed to be taken in the
neighborhood where he is bound to serve two years before the plague
began." Afterwards, the runaway laborer was ordered by Parliamentary
enactment to be branded in the forehead by a hot iron, and the harboring of
the country serfs in the towns, in which under their civic rules a serf
keeping himself a year and a day was thereafter free, was rigorously
forbidden. These acts of Parliament, and many more of the same kind, were
powerless to keep down wages to the old standard, but were powerful to
keep up ill-blood and social discontent. They prepared the way for agitators
like John Ball, for the poet-agitator Piers Ploughman, and for the great

Peasant Revolt of 1381. John Ball's famous rhyme condensed the scorn for
the nobles, the longing for just rule, and the resentment at oppression, of the
peasants of that time and of all times:—

"When Adam delved and Eve span,
Who was then the gentleman?"

A hundred years after the Black Death the wages of a common English
laborer—we have the highest authority for the statement—commanded
twice the amount of the necessaries of life which could have been obtained
for the wages paid under Edward III.
3. Having now seen fully the varied action of Supply and Demand upon the
Value of personal services in their three kinds, we come at length to the
most important general point in this chapter, namely, that in the second
class of Services, those purchased in connection with the use of Capital,
Wages are all the time enlarging relatively to Profits. We have seen
clearly already, that Cost of Labor and Cost of Capital are the only onerous
elements in the cost of Commodities; because, while Natural Agents are all
the time assisting and assisting more and more effectively in such
production, they work without weariness or decay and without fee or
reward. The reward of laborers is Wages, and the reward of capitalists is
Profits; and we are now to demonstrate, that the part of their joint products
falling to laborers as wages is all the while increasing as compared with the
remaining part falling to capitalists as profits. This truth is of the deepest
significance, and of the most cheering character; because men are more
important in the universe than things; and because the number of men who
sell their services as laborers is vastly greater than the number of men who
sell their services as capitalists.
It is another indisputable and exhilarating truth for the masses of mankind,
that the Value of each item or article of those products created by the joint
action of laborers and capitalists is ever becoming less and less as measured
by any relatively fixed standard as Money; so that, while wages as thus
measured becomes a larger and larger aggregate as compared with the
aggregate of profits, and is shared of course by a much larger number of
people, those commodities looked at as a collection of items for which the
wages of these many is usually expended for their own comforts, are

becoming all the time cheaper and cheaper to everybody, owing to the ever-
enlarging and wholly gratuitous action of natural forces.
For the sake of simplicity in the argument on this great point, we will first
look at what the facts are through recent illustrations gathered by other
parties for a wholly different purpose, and then give in detail the
economical grounds for these patent and universal facts. Take for example,
from Poor's Railroad Manual for 1889 a table showing in a graphic way the
steady reduction in freight charges per ton per mile from 1865 to 1888 of
seven representative Eastern trunk railroad lines, namely, the Pennsylvania,
Fort Wayne and Chicago, New York Central, Michigan Central, Lake Shore,
Boston and Albany, and Lake Erie and Western; and of six leading Western
roads, namely, the Illinois Central, St. Paul, Burlington and Quincy,
Chicago and Northwestern, Rock Island, and Chicago and Alton. The
following are the figures:—
Rate Charges per Ton per Mile (in Cents).

Year. Eastern. Western. Year. Eastern. Western.
1865 2.900 3.642 1877 .971 1.664
1866 2.503 3.459 1878 .898 1.476
1867 2.305 3.175 1879 .764 1.279
1868 2.132 3.151 1880 .869 1.389
1869 1.860 3.026 1881 .763 1.405
1870 1.593 2.423 1882 .756 1.364
1871 1.478 2.509 1883 .829 1.310
1872 1.504 2.324 1884 .740 1.220
1873 1.476 2.188 1885 .636 1.158
1874 1.332 2.160 1886 .711 1.111
1875 1.161 1.979 1887 .718 1.014
1876 .985 1.877 1888 .609 .934

This reduction of rates in the case of the group of Eastern roads has
amounted to 79 per centum, and in the Western group to 73 per centum, in
the twenty-four years. Not less remarkable than the extent of this decline in
freight charges per mile is its uniformity. Both groups show a wonderful

steadiness in the progress of rate reductions. Starting at quite different
points as to territorial development, they have yet travelled at a nearly equal
pace in the same direction. This shows the operation of causes at once
steady and universal. Statistics can never of themselves yield us causes; but
they guide the way to them; at any rate, they prevent any radical
misinterpretation of them. The great and overshadowing cause here of the
cheaper freights per ton, as everywhere else of cheaper rates at the junction
of efforts by capitalists and laborers, is of course the perpetual and
augmenting and ever-gratuitous assistance of natural forces at every point.
While the rates of freight per ton have decreased more than three-quarters
in less than one-quarter of a century in the case of these 13 railroads on the
whole average, the entire cost of the operation of these roads in this interval
of time has not been diminished to any appreciable extent, as also stated by
the same Manual. The main item in all the operation-expenses of railroads
is the wages paid to the laborers of all grades; and the laborers are quite as
well paid now on these 13 roads as they were in 1865, proper allowances
being made for the changed and changing standards in the national Money.
If, on a broad view, railroad employees of all grades have lost nothing as
such in their wages in this interval; and the general public, including these
laborers and also the capitalists concerned, have greatly gained, how can we
account for the immensely lessened freight-charges while the whole
operation-expenses continue substantially as before?
There is only one rational account to be given of this. And it is trustworthy.
All known facts jump with it, and nothing substantial can be urged against
it. The gains to the masses including the capitalists and the laborers have
come out of the capitalists as such. This is apparent as well as real. Cost of
Labor and Cost of Capital is the whole cost. If the whole cost of moving
one ton of freight from Boston to Chicago is ¾ less than it was ¼ of a
century ago, the cost of the labor being the same at the two points of time,
then the conclusion is inevitable, that the cost of the capital at the second
point is less than it was at the first point. With this conclusion all facts
agree. All the laborers connected with a railroad from highest to lowest
must be paid at any rate, or else the trains will certainly cease to move,
whether the stockholders receive any dividend or not on their capital
invested. The original stock—the capital that built the roads—of many if
not of most the railroads in the country, has been annihilated, a new

indebtedness in another form called bonds having taken the place of it.
Even the nominal dividends of dividend-paying roads have declined in the
interval from 10 or 8 to 5 or 4 per centum in the general, that is, 50 per
centum. It is perfectly evident on every hand, that there is something in the
nature and progress of things, that makes for wages as contrasted with
profits: wages hold on and relatively enlarge, profits decline or go out
altogether.
Fortunately we are not left to generalities here, however plain and certain
these may be. One of the 13 railroads specified above, the Illinois Central,
made a remarkable exhibit in its own annual Report of 1887, showing the
cost of its locomotive service for each year of the thirty years preceding.
This cost per mile run had fallen from 26.52 cents in 1857 to 13.93 cents in
1886. This reduction had been effected wholly on the Capital side of the
account, by inventions and improvements of all sorts in the machinery of
locomotion; while the wages of the engineers and firemen had risen in the
period from 4.51 cents to 5.52 cents per mile run. The cost of the labor had
risen both relatively and absolutely while the cost of the capital had
declined both absolutely and relatively. In 1857 the engineers and firemen
had received as wages 17% of the entire cost of the locomotive service, but
in 1886 they had received 39% of that total cost. The table is as follows: —
I. C. R. R. CO.
Performance of Locomotives. Relation of Wages to Total Cost per Mile
Run.

Total Total
Cost of wages of Cost of wages of
cost per cost per
Years. engineers and Years. engineers and
mile mile
firemen per mile run. firemen per mile run.
run. run.
Cents. Cents. Cents. Cents.
1857 Gold. 4.51 26.22 1872 Currency. 5.77 21.76
1858 3.97 19.81 1873 5.84 21.10
1859 3.81 20.78 1874 6.02 19.57

1860 3.96 20.17 1875 6.03 19.57
1861 3.84 18.92 1876 5.79 18.81
1862 3.85 17.42 1877 5.54 17.21
1863 3.93 22.28 1878 5.46 15.29

1864 5.56 33.52 1879 5.41 14.15
1865 5.65 37.44 1880 5.41 14.95
1866 5.78 32.67 1881 5.54 16.58
Currency.
1867 6.18 29.62 1882 5.09 15.82
Gold.
1868 6.11 27.57 1883 5.35 15.57
1869 5.88 25.49 1884 5.28 14.45
1870 5.95 25.15 1885 5.49 15.02
1871 5.72 21.50 1886 5.52 13.93

In 1857 the engineers and firemen received 17 201⁄1000 per cent. of total cost.
In 1865 the engineers and firemen received 15 91⁄1000 per cent. of total cost.
In 1867 the engineers and firemen received 20 865⁄1000 per cent. of total cost.
In 1886 the engineers and firemen received 39 627⁄1000 per cent. of total cost.

These illustrations from the railroads are plainly indicative of a general
truth of the utmost importance in Political Economy, namely, that all
increase of Capital and all inventions and improvements in its practical
application, while it redounds to the benefit of capitalists as a class,
redounds in a still higher degree to the benefit of laborers as a class. Let us
now attend for a moment to the convincing Proof of this truth in two phases
of such proof, and also to a cheering conclusion that follows it.
(a) As any country grows older in time and richer through abstinence, and
as the whole world thus grows older and richer, the tendency there and
everywhere towards a general decline in the rate per centum for the use of
capital becomes patent and universal. The rate of interest on money loaned,

and the rate of profits on capital used, tend all the while to go down as and
because capital accumulates. No one will dispute this as a simple fact of
history. And no economist will dispute, that this is just what we might
expect beforehand as a corollary from the admitted proposition, that, other
things being equal, an increased Supply of anything means a lessened Value
for any specific part of it. Three centuries ago in England the legal rate of
interest was 10%, while now the current rate is about 4% in that country,
and has been considerably lower than that in Holland, although in both
countries and everywhere else there are temporary interruptions and
reactions in the constant tendency now being considered. During the first
years of mining operations in California, from 8% to 15% per month with
security of real estate was paid for the use of money, which enormous rates
long ago declined to rates not much higher than those paid in the States
along the Mississippi River, and in these also the rates are all the while
approximating those current in the older Eastern States, whose own rates
too are slowly declining. But, while there is a less rate of profit or interest
on each 100 invested, there are many more hundreds capitalized;
consequently, there is an absolute gain to capitalists as a class, at once in the
aggregate amount of the capital and in the aggregate sum of the profits from
it, since no capitalist would have a motive to capitalize further under the
smaller rates of profit, unless the aggregate of profits under the new
conditions were greater than under the old condition of higher rates; and, as
much of this accumulating capital in order to become productive must now
be offered to laborers in the form of wages, we might almost pronounce
beforehand, that it would prove both an absolute and also a relative gain to
laborers as a class. And so it is.
(b) Let us take to figures. An hypothesis or supposed case, whenever it may
easily become an overt fact, may be reasoned from just as logically and
securely as the overt fact itself. Let $100,000,000, while the rate of profit is
6%, and $500,000,000, when the rate has fallen to 4%, be expended in
payment of simple wages. So far forth as that one element of cost goes, the
value of the products to be divided yearly between capitalists and laborers
will become respectively $106,000,000 and $520,000,000. In the first case,
$6,000,000 is profits and $100,000,000 is wages; in the second case,
$20,000,000 is profits and $500,000,000 is wages. Here is an absolute gain
to the capitalists, since profits have gone up from $6,000,000 to

$20,000,000, and so are more than three times as great as before. But wages
have gone up both absolutely and relatively to the rise of profits. They have
risen from $100,000,000 to $500,000,000, and are five times as great as
before. Profits have risen as in the ratio 1:3+, but wages in the ratio of 1:5.
This arithmetical example is put for the sake of illustration merely, but the
principle of it holds good in every case, in which the rate per centum goes
down in consequence of the increase of capital in business; and, therefore,
the advantages of ever-enlarging Capital are even greater to laborers as a
class than to the capitalists themselves. Most assuredly, if the capitalists
take less out of each hundred of the swelling hundreds now than before, the
laborers must take more out of each hundred than before. Profits and Wages
are reciprocally the leavings of each other, because the aggregate products
created by the joint agency of Capitalist and Laborer are wholly to be
divided between the two. There can be no other claimant even.
(c) This demonstration is extremely important in Political Economy, and
consequently in Social Life; for it proves beyond the possibility of a cavil,
the Value of personal services tends constantly to rise, not only as compared
with the Value of the material commodities which by the aid of capital they
help to create (a truth we have seen before), but also as compared with the
Value of the use of its co-partner capital itself; and therefore, that there is
inwrought into the very substance of things in this world a tendency
towards an equality of economical condition among men. God has ordered
it, and men cannot radically alter it. Self-interest is indeed the mainspring of
movement in the economic world; but the beauty of it and the wonder of it
is, that no man can labor intelligently and productively under the influence
of self-interest without at the same time benefiting the masses of men. His
fair exchanges benefit the parties of the other part as much as they benefit
himself. His very savings productively employed are poor men's livings.
Only under the blessed freedom of universal Buying and Selling, subject
only to the taxation of a good Government for public purposes purely, can
these broad benefits designed by a wise Providence be fully realized in
action; and the power of individual greed and corporate privilege and
governmental perversion to thwart the beneficent though complicated
workings of these laws of Capital and Labor towards the common weal and
universal progress of mankind is shortlived and soon punished.

4. How comes it about, then, if these laws of mutual inter-dependence
between capitalists and laborers are so well-placed and Providentially
balanced, that there always have been and are still so many
misunderstandings and ill-feelings and actual collisions between employers
and skilled laborers, whose interests are at bottom one and whose relations
ought to be so cordial? This is the last topic in our Chapter on Personal
Services. Here we must look around narrowly and tread carefully. But there
is a path. We can find it if we will. It leads through many short-comings in
men's characters and through much ignorance of plain economical truths
and past unreasoning jealousies and aggregated action on the part of both
classes, and over the needful distinctions between impulsive selfishness and
a true self-interest back to the same old laws of God laid down at once in
the constitution of things and in the constitution of men.
Labor-troubles are almost as old as Civilization. The Greek poet Euripides
in his play of the "Supplicants" both indicates facts as they were then, and
points out a future hope in which we may share, that these middle classes
by a better harmony preordained and mutually beneficial may yet "save the
State":—

"In each State
Are marked three classes: of the public good
The rich are listless, all their thoughts to more
Aspiring; they that struggle with their wants,
Short of the means of life, are clamorous, rude,
To envy much addicted, 'gainst the rich
Aiming their bitter shafts, and led away
By the false glosses of their wily leaders.
'Twixt these extremes there are who save the State,
Guardians of order, and their country's laws."

At Rome and in the Roman Empire, instead of the usual voluntary union of
capitalists and laborers for the mutual advantage of each other, the laborer
was owned by the capitalist, and the true relations between the two were
thoroughly disguised and wretchedly distorted. Business in all its branches
came to be carried on by means of slaves; the lands were tilled by slaves;
slaves became the artisans of the country; the money-lenders and bankers of
the centre scattered branch-banks in the towns under the direction of their

slaves and freedmen; the Company that leased on speculation the Customs-
Taxes from the State had their slaves and freedmen levy these taxes at each
custom-house; the contractor for buildings bought architect-slaves; and the
merchant imported his goods in ships of his own manned by his slaves or
freedmen, and then sold the same at wholesale or retail by the same means.
In this way a gigantic system of unnatural traffic was built up and extended.
In this way the very name "laborer" became tainted by the vile system of
slavery of which he was a part, and the distinction itself between capitalist
and laborer was obliterated. "Roman mercantile transactions fully kept pace
with the contemporary development of political power, and were no less
grand of their kind." "The Roman denarius followed up closely the Roman
legions." "It is very possible that, compared with the suffering of the Roman
slaves, the sum of all negro suffering is but a drop" (Mommsen).
We want now to examine critically the causes of these constantly recurring
labor-troubles, the true economical Remedies for them, and in connection
with these the futility of the remedies popularly recommended for low
Wages and the disputes between employers and employed of the second
class.
(1) There is an extremely common misapprehension on the part of both
labor-givers and labor-takers as to the real nature of the transaction between
them. Both parties forget, or rather neither party is ever fully instructed, that
it is a case of pure Buying and Selling. There is never any obligation of the
moral sort between buyers and sellers. The relation itself is purely
economical. Moral considerations indeed cover this relation from above,
just as they cover all other relations between man and man in human
Society; and any two individuals standing over against one another as buyer
and seller, also stand over against each other in higher and broader relations
as man and man; but it works confusion and mischief as between both,
whenever relations differing in their nature and operation and reward are
not separated from each other in the mind of each relator, and whenever
each does not act in the particular relation according to the nature and rules
of that relation alone. When A hires B to work in his factory, this new
relation is economical not moral; there were moral relations between the
two before this relation was knit, and will be again after this has been
broken, and indeed are while this continues; but the economical relation is
one thing, and the others a very different thing; they are so different, that

they cannot be blended in mind or motive to any advantage to either
individual or to either set of relations; and any degree of confusion as
between the relations has always wrought mischief as between the
individuals, because instead of seeing either set of relations in its own clear
light, they now see both in a commingled twilight.
What is the economical relation? This. A desires the personal service of B in
his factory purely for his pecuniary benefit, and assumes his own ability to
make all the calculations requisite for determining how much he can
(profitably to himself) offer B for his service; and B, who knows all about
his own skill, how it was acquired and how much it has cost, wants to sell
his service to A for the sake of the pecuniary return or wages. There is no
obligation resting upon either. Man to man, each in his own right. There is
no benevolence in the heart of either, so far as this matter goes.
Benevolence is now an impertinence. It is a question of honest gain in
broad daylight. Benevolence is blessed in its own sphere, but there is no call
for it here and now. If it comes in an unbidden guest, it comes in to mar and
to distort. It is an incongruity. "I never knew a Jew converted but it spoilt
him," was the word of one deeply versed in human nature and in Christian
experience. Conversion is good, and its field is broad; but the Jew as such is
incongruous with it. Good is benevolence and wide its field, but Buying and
Selling does not need it. Its own motives are independent of it, and
sufficient without it.
A clouded understanding of this vital distinction has always played its part
in Labor-troubles. Buyers and Sellers of personal services are always on a
plane of perfect equality as such exchangers, and no one can be more
independent than either of them except the hermit in his cell. Which must
look out for the interest of the other beyond the terms implied in the trade
itself? Which is the superior party? Which should take off his hat, the other
remaining covered? The truth is, and all experience and all analysis brings
us up abreast of it, that the two parties to a trade of any kind stand on a
footing of absolute equality towards each other then and there in the
economical relation about to be knit, and any conception in the mind of
either that he has the other "at his mercy" in either the good or bad sense of
that phrase, disturbs and destroys the proper conditions and balances of the
exchange in hand; and, what is more to the point, it implies that each party
has not all he can do to fulfil in the letter and in the spirit what is always

implied in the terms of a trade deliberately entered upon by two parties.
When B agrees to work for A at skilled labor in his factory for a year at $15
per week, he makes a good deal of a contract; and virtually pledges to A not
only the motions of his hands for that period of time, but also the vigorous
attention of his mind to that service and to the general interests of his
employer so far as these come under his own eye and supervision. Nor is
this all: he virtually pledges himself to B to coöperate with the least
possible friction in all plans for betterment in his division of the work, and
to cordially coalesce with all other employees for the general ends of the
business without too much of self-assertion and without too little of
courtesy to others. To fulfil this contract in all its spirit rounds up the circle
of B's economical obligations to A. He will practically have all he can do,
so far as A is concerned, and in consistency with all his various duties to
others, to make good to him at all points his simple business pledges.
Benevolence, the interests of a common citizenship, and the reciprocal ties
of religion, lie wholly outside.
A will practically have all he can do, so far as B is concerned, to fulfil in the
letter and in the spirit his economical obligations to him, without troubling
himself to see whether B is going to vote the same party ticket that he
himself votes, and without confounding either B's poverty or prosperity
with his own obligation to be polite to him at all times and to pay him
promptly his weekly stipend. So long as B renders in letter and in spirit
what he has agreed to render, and A returns in the same way what he has
promised to return, the less either thinks and talks and acts about the other
in all the other relations of life, the better hope of good success to both in
this relation. Church relations and social relations and political relations are
all of consequence in themselves; but when any of these begin to get mixed
up with labor-relations, there is soon a muss and a mess. Incongruous
things, things no way vitally connected with that, often come in to disturb
and destroy a simple matter of mutual renderings.
(a) The first practical remedy for difficulties arising under this first head, is
a clearer separation in the mind of both parties to a trade of what really
belongs to Buying and Selling from what belongs to all other departments
of activity. More common sense is needed at this point, more simple
analysis, more daylight, more personal independence, more introspection as
to motives, more power in making distinctions, and a more practical

separation of what is clear and fixed from what is complex and obscure in
human relations. Metaphysics may yet lie in cloud-land, Ethics may not yet
have drawn its outer and interior lines so strong and deep as it will,
Sociology also is a vast field of complexities, but truth to tell Economics
has no mysteries to speak of. I buy and sell for my own advantage, which
proves in the nature of things to be for the equal advantage of my compeer.
It is my business and my compeer's business and every other man's business
who buys and sells, to pick that action out in its motive and result from the
great mass of dubious actions, and to set it up in its own light, to rejoice in
it as the clearest thing in social action, to claim it as God's own plan so far
forth for our comfort and progress, and then to see to it that no preposterous
hand mixes it up with perplexities or theologies or other abominations—
muddying with a tentative pole the stream of our clear brook! In this
country at least, in its ignorance of common things and common science,
the pulpit often fulminates against the gains of exchange as "materialism,"
and mixes up buying and selling with "worldliness," and only half permits
its deluded hearers the privileges of the market, and illustrates again in
modern times such teaching as is denounced to St. Timothy,—"some
swerving turned aside to vain babbling, desiring to be teachers of the Law,
understanding neither what they say, nor whereof they affirm." "Let every
shoemaker stick to his last." Those who have looked into it with any care
have found, that Exchange in all its natural outgoings is not answerable to
these pulpit charges, nor is contrary to the letter or spirit of the biblical
precepts, but on the other hand is in full harmony with the claims of
Conscience and with all the inbreathings and aspirations of Christianity.
(b) The second practical remedy for the labor-difficulties arising from the
want of thorough understanding by both parties of the real nature of hired
renderings of the second class, is fair common honesty. More of an easily
accessible intelligence, more of penetration and separation as to social
relations in general, meets the first point; but quite as needful as this simple
intellectual process, is the still simpler moral habit of doing just what one
has agreed to do, without evasions and without diminutions. Labor
difficulties take their origin more often, perhaps, in some clouded moral
action of one of the parties, than in a clouded mental apprehension. Men are
too conscious as men of their own temptations, to be lax in their pledged
renderings and of their own shortcomings at this point, not to be suspicious

of each other as buyers and sellers, for fear the party of the other part is
about to withdraw something either in quantity or quality of what he has
promised to render; there is almost always something or other to give color
to such a suspicion, and it grows by what it feeds on; frank explanations are
not had at the outset, and a good understanding is not come to, as it
doubtless might be in nine cases out of ten; and the little cloud, at first no
bigger than a man's hand, by and by becomes black and threatening, and
bursts at last in a strike or lock-out of large proportions. An open honesty
that is such and seems such, that is not beyond the aim and reach of
common men, that is taught in scores of forms in "Poor Richard's
Almanack," and that each man ever likes to meet with and so ought ever to
put forth, is in fact a preventive of conflicts between laborers and
employers, and would if properly manifested have prevented multitudes of
such actual conflicts. Here is the main, almost the sole, point of contact
between strict Ethics and the Economics. What buyers and sellers, that is to
say, the whole practical world, needs, is not disquisitions on Morals from
Press or Pulpit, but an inner ear to hear the true click of Conscience, and the
quick and open answer in honest action.
(2) A second general cause of the Labor-troubles of the past and present has
been a strong tendency to neglect the special preparation for their peculiar
functions by both capitalists and laborers. A successful employer of laborers
year in and year out to their advantage and his own is always one who has
been trained to that function by special preparations. He is a living man
with all the limitations of living men: he has to deal with many living men
with all their imperfections: he has to deal also, and constantly, with what is
in its own nature dead, namely, Capital, always either a commodity or a
claim: to animate and invigorate these dead forms of value, to put them into
vital connection with living men who shall enhance their value, and thus to
become a leader to living men as towards swelling interests, demands
unusual native gifts and a special long-continued training. When one looks
from without upon such an establishment as this in full action, it seems
automatic, it seems as if almost anybody with a clear head could continue to
direct it; and when this "captain of industry" departs this life, perhaps his
son or some previous subordinate, without the proper gifts and at least
without the peculiar training, assumes the post of direction. For a little
everything seems to go on as before. As sure as fate, however, a friction will

soon develop here, and a misunderstanding there, there will be whisperings
among the men, some breath of suspicion will be likely to cloud the
borrowing-power, opening difficulties of any kind such as loss of credit or a
weakening of the usual markets are apt to throw a new operator more or
less off his base, and gathering labor-troubles of any sort commonly find
such a man unprepared for lack of suitable training and experience to ward
them off or to make timely concessions to the men or to minimize the evil
results when these become inevitable.
Also labor-troubles are quite as likely to arise from the want of character
and training and considerateness of the employees towards the capitalists.
The relations are reciprocal and they are also in their very nature delicate.
One poor workman however good his disposition, one unfaithful overseer
no matter how great his possible skill, may mar the current product in such
a way as to lose it the market and cost the establishment the present profit.
The strength of a chain is the strength of its weakest link. It is a matter of
immense difficulty at any time, and emphatically so at the present time to
organize a working force in factory from top to bottom so as to have it go
forward as a unit as towards the marketing of the product, without bad
workmanship at some point and unskilful supervision at another; because
the laborers as a rule have not given themselves time to learn thoroughly
their special parts, because they are not content to remain steady at one
thing and at one place, and because they do not practically recognize even if
they perceive it that their own permanent interests are exactly coincident
with the permanent interests of their employers. Just now in this country the
public Law robs the manufacturers (at their own behest) of their best
markets at home and abroad, makes it difficult or impossible for them
through wanton taxation of their raw materials to create a good quality of
goods for any market, and so multiplies frictions and failures and losses
along the whole line of production. The lack of what may be called
Apprenticeship on the part of skilled laborers, the consequent difficulty of
rising from one gradation of effort to a higher and better-paid one, the
restlessness of native laborers under such disabilities, the rapid admixture of
foreigners, the lack of coherence throughout in point of intelligence and
apparent identity of interests, together with the instability and
haphazardness of the resources and personal training of the employers as a

class, gives birth to Labor-troubles which are at the same time Capital-
troubles, to read the daily record of which makes one sick at heart.
(a) The only possible and practicable remedy for this state of things, so far
as the employers are concerned, is in a more conservative attitude of
capitalists as a class about passing over their resources to the hands of men
who have not proven their ability to handle them wisely by a full course of
training in the management of practical affairs. By a wretched policy in this
country at present Capital is prohibited from building and from buying
ships, with which to navigate the oceans; from selling domestic
manufactures in foreign markets; and also from a profitable agriculture,
which may sell its products abroad and take its pay back. Consequently
Capital, eager in its own nature to be invested to a profit somehow
somewhere, has rushed without due circumspection into the hands of
domestic operators, who have not been half fitted for their task, who have
knitted relations with laborers without being able to secure their permanent
respect or to control their services, and who have lost to their owners in
multitudes of cases the entire capital intrusted to them. If capitalists had had
during the last quarter of a century one-half of their natural and proper
chance to invest their money to a profit, there would not have been such a
reckless investment through incompetent hands in building mills and
foundries in this interval of time, and such wholesale losses in connection
with them. When capital comes to be at liberty to turn right or left
according to its own will in view of a prospective profit, factory companies
and projectors cannot draw resources from the public for their operations,
without demonstrating to the owners the trained and tried capacity of the
practical operators, who will buy the materials and hire the laborers and
market the products.
(b) The practical remedy for the inexperience and instability and
unskilfulness of laborers as tending towards labor-troubles of all kinds and
degrees, is only to be found in a want of market for such services. In a
natural and wholesome state of things, such as would exist in the United
States were it not for national laws tampering with Trade and with Money,
the questions asked an applicant for skilled work by any labor-taker would
be, "What have you learned to do? How long and for what pay do you want
to do it? What do you want to reach next, when the present job is done?"
When employment turns on good answers to such questions as these, and

when the questions themselves are put in good faith, there will be an end of
Strikes and Lockouts. Untrained and restless hands will get nothing to do in
mills and factories. Apprenticeship in its various forms will come back into
vogue, and will probably be made a part of the course in public schools.
The division and gradation of laborers will be carried out further than it
ever yet has been. Laborers will then be organized in the best sense of that
word, and to the best advantage of capitalists. The permanent Supply of
skilled laborers will be constantly adjusting itself to a permanent and
increasing Demand for them. And it requires no millennium for such a state
of things to come in. It requires nothing but an ordinary and enlightened
and beneficent selfishness on the part of capitalists to adjust itself to the
ordinary selfishness of laborers sure to become enlightened and beneficent
to the best and ever-growing interests of both parties. This is not the spoken
word of Morality, still less is it the divine word of Religion, it is only the
common programme of a common-sense Political Economy.
(3) The third and last general cause of misunderstandings and embittered
disputes as between laborers and capitalists is partly economical and partly
moral, and consequently the remedy for it is partly moral and partly
economical. The Past projects itself down into the Present partly with
blessings and partly with curses. In the old times under Slavery and
Feudalism the laborer always came forward to his task with a taint upon
him. Sometimes the taint attached to his birth, and at all times it attached to
his calling. Slavery in all its forms always makes manual labor degrading.
The courtly Cicero apologizes in a letter to his friend for his open sorrow
over the death of his favorite slave; and in several passages of his treatise
on Morals he follows his Greek teachers, Plato and Aristotle, and declaims
in a pitiful way against the noble rights of laborers. "All artisans are
engaged in a degrading profession." Again, "there can be nothing
ingenuous in a workshop." When trade and commerce are carried on on a
small scale, "they are to be regarded as disgraceful"; when on a large scale,
"they must not be greatly condemned—non admodum vituperanda!" (I, 42.)
Serfdom once existed in England, and threw its shade over free laborers
there long after itself had disappeared. A class of indented servants
pervaded all the New England Colonies, and a clause of the New England
Confederation of 1643 provided for their forced rendition from Colony to
Colony, and passed over almost verbally into the Constitution of the United

States of 1787 as applicable to the slaves of the South. In this way in all
parts of this country manual laborers came to be more or less off color, and
this has continued in a continually lessened degree till this time. When
those who work with their hands are looked down upon by those who do
not, two sets of feelings are apt to be engendered equally unfortunate to the
two classes that entertain them. The non-manual workers, the employers,
are more or less puffed up with pride and a sense of superiority (there are
beautiful exceptions) as towards their laborers, and the latter in their turn
are apt to develop alongside an unmanly servility and an apparent
deference, a sort of secret breasting up of hostility and defiance, which is
sure to manifest itself when labor troubles come on even when it has not
helped to brood these troubles into life. The parties then are not well placed
as towards each other to negotiate and to compromise and to coalesce in a
future harmony. The party of the first part is too proud to yield to their
inferiors, and the party of the second part is too bitter to be sweetened. Who
is sufficient for these things? And what is the remedy for them?
(a) So far as employers are concerned, their natural though unreasonable
and provoking arrogance may well be reduced by the economical reflection,
that the laborers are exactly as necessary to production as the capitalists are,
that the two stand on a precise level so far as the product goes, that each is
one blade of the shears and the other the other and that it takes both blades
to cut anything, that while the laborers are sellers in the open market the
capitalists are likewise sellers and that the same ultimate purchaser
furnishes the market for both sets of sellers, that as sellers they are only
equal in position, that buying and selling is a levelling as well as an
uplifting process the world over, and that as such co-equal partners in one
indivisible operation all haughtiness on one side and all undue humility on
the other is nothing but obstacle as towards the common end; and also by
the moral and social reflection, that their laborers are just such men as
themselves in motive and action, that the two are very likely to exchange
places with each other before very long, that riches are extremely liable to
take to themselves wings and fly away, that Christianity is no respecter of
persons, that humanity deems nothing human alien from itself, that morality
puts the golden rule upon the fore-front of its precepts, and that whatever
may unite any body of men in a legitimate purpose of achievement along
any line of human action multiplies the power of each individual and exalts

his standing and responsibility as such individual and thus reduplicates the
reward of his individual action.
(b) So far as the employees are concerned, in any temporary sense of
dependence or even of injustice, there is open to them the economical
reflection (and it will do them good to bring it home) that their best route to
the respect and favor and feeling of equality of their employers is through
the excellence of the service they render them and the courtesy (not
servility) with which they render it, that as every capitalist becomes such by
means of abstinence they may themselves by saving become capitalists, that
there is nothing in the nature of their work or its relations to capital to cause
them to hang down their heads, that handsome is that handsome does, that
the opportune offer of the present capital to work on gives them a chance to
exhibit their skill and to earn a living, that the capitalists are just as
dependent on them as they upon those, and that as single sellers of a
valuable personal service they daily confront on a footing of equality the
sellers of a valuable product so created; and there is open to them also the
moral and social reflection fortified by constant observation and experience,
that no matter where a man begins it is the end that crowns his work, that
life to all is a series of stepping-stones, that manly qualities are appreciated
everywhere, that character tells in the lowest position however high and low
are reckoned, that the poor gain and hold friends quite as well as the rich,
that there was a certain poor wise man that saved the city by his wisdom
and gained a lasting record in consequence, that the poor and the rich are
constantly changing places in this world, and that there is no respect of
persons with God.
We may see now what we are to think of some popular remedies constantly
recommended for low Wages. A brief discussion of what is false will give
us a stronger hold of what is true. The chapter will close with relevant
reference to three current remedies.
1. It is being dinned into the ears of the present generation, that Government
has large functions in the ongoings of business, that it ought sometimes to
interfere to better the rate of Wages, at least to designate a minimum below
which they shall not go, and that Government should hold itself ready to
undertake directly to carry on certain branches of business under certain
circumstances. This scheme goes under the high-sounding name of

Nationalism. Richard T. Ely, Professor of Political Economy in Johns
Hopkins University, is one of the most prominent representatives at present
of this school of thought. In his Introduction to Political Economy just
published (1889), he lays down this principle: "When for any class of
business it becomes necessary to abandon the principle of freedom in the
establishment of enterprises, this business should be entirely turned over to
Government, either local, state, or federal, according to the nature of the
undertaking." He begins his book by attempting to hammer in the "lesson"
that as Civilization improves, coöperation takes the place of individualism.
The golden age of individualism, he says, is among the wild tribes of
Australia. They never coöperate with each other in their economic efforts,
or in anything else. No one expects anything from his neighbor, and every
one does unto others as he thinks they would do to him. The life there is one
prolonged scene of selfishness and fear. But as civilization comes in, he
says, individualism goes out, and coöperation takes its place. The fine old
Bentham principle of laissez faire, which most English thinkers for a
century past have regarded as established forever in the nature of man and
in God's plans of providence and government, is gently tossed by Dr. Ely
into the wilds of Australian barbarism.
There are some propositions that are certainly true, and one of them is, that
no man can write like that, who ever analyzed into their elements either
Economics or Politics, who ever gained a clear conception of the sphere of
either science in its relation to the other, or who ever saw distinctly the
relations of either to the nature of Man. The sole motive in Buying and
Selling is the gain of the individual, each for and by himself. That always
was the motive, is now, and always will be. No complications of modern
business, no complexities of credit, no combinations of capitalists or
laborers, ever altered or ever can alter one particle the motives of men in
buying and selling. In a natural and progressive state of things,
Individualism, instead of going out, comes more and more into play,
through the Division of Labor and the falling of all sorts of services more
and more into specialties. To talk glibly, as Professor Ely does, about
Government taking up easily and carrying on in a better way and to better
ends branches of pure business as they are dropped or forced from the
hands of Individuals, is ignorance at once and alike of the real nature of

Government and of Business. Let us look at a few of the native
incongruities and logical fallacies of this nationalistic position.
(1) What is human Government? Is there anything substantive and
continuous in its personnel and purposes, as there is in the government of
God? Is government anything more, can it be anything more, than a
transient Committee of the citizens charged and changed to do in certain
few particulars the changing will of a Majority? Government is indeed a
necessity, as men are, to restrain the lawless, and to shape the ends of the
law-abiding; but it has to be administered, if at all, by precisely the same
kind of men as the rest are, chosen for brief periods, their duties sharply
prescribed by constitution or custom, and impeachments or other
punishments provided for them when they transgress. One President of the
United States and one Judge of its Supreme Court have already been
solemnly impeached by the sovereign people themselves.
Government, then, is an Agent, and nothing more. Even nationalists will not
contend for the divine right of kings. And the duties of every decent
government on earth are political in their character. The agents are chosen
and dismissed with a direct reference to that kind of action. Politics has a
sphere wholly distinct from Economics. The true and only end of politics is
the greatest good of the greatest number, so far as that end can be mediated
by governmental agents of the people. Individualism as such does indeed
sink out of sight under a true Politics, and the inalienable rights of one are
maintained for the sake of and in consistency with the greater rights of all.
But Economics is all individuals from beginning to end. "It takes two to
make a bargain." Only two. Each of the two has his own motive, estimates
for himself, gives and takes for himself, and enjoys alone his own gain. All
this is involved in the very idea of Property, which is derived from
proprius, and which means one's own. How illogical, then, and
incongruous, to suppose, that a set of limited human agents briefly trained
to purely political action, and liable to be turned out of office by every
change in party administration, can be competent at the same time and in
addition to perform economical functions for the people!
Notice, too, that governmental agents in all good countries are already
overburdened with their mere political duties. Work is behindhand in every
portfolio, on every court calendar, and in every legislative body, in

Christendom. How absurd it is, therefore, to talk about throwing upon
shoulders, already overburdened, additional loads of a different kind, for
which shoulders and heads are wholly unfitted!
Why not, then, inquires our nationalist innovator, organize new bureaus to
undertake in their behalf the buying and selling of the people? Ah! Who
pays the taxes needful for the support of the present political bureaus? And
who would have to pay the taxes needful for the support of the new
economical bureaus? Besides not having any substantive existence of its
own Government has not one cent of money, except what the people
voluntarily pay in taxes out of their own personal gains, in order to maintain
their own agents to do certain political things for them, which they cannot
do as well for themselves directly; and when it comes to the cold question
for the people themselves to answer, whether they will organize a new set
of hired men to do their trading for them, and pay them for doing this out of
aggregate gains certainly to be vastly diminished by the process, our
nationalistic leaders will perhaps find out that the people have common
sense, whether the said leaders have it or not.
But the damning difficulty with this governmental business association is,
after all, in the inevitable lack of motive on the part of the hired men doing
the buying and selling. It is an honor to human nature, that hired men never
have and never can have the zeal and enterprise of principals and owners to
forecast and to perform and to lay up; because it shows that man is a
rational animal, made in the image of his Maker, always acting under the
pressure of personal motives, and always estimating what is his own more
highly than what belongs to another. Business motives act in their fulness
only on the individual, whose is the effort and whose is the return. Any
policy whatever on the part of Government, which lessens the number and
the eagerness of individual operators in favor of great artificial
combinations resting in the shadow of the Law, lessens of necessity the
gains of exchanges, and the progress of the nation, because it lessens of
necessity the press of motive on the many to work and save.
Government, accordingly, is quite too far off in every respect from the
business, that is to say, from the buying and selling of the people, to
undertake any branch of it when "it becomes necessary to abandon the
principle of freedom in the establishment of enterprises." It will then be

high time to "abandon" the "enterprises" themselves. If the "principle of
freedom" cannot compass the "establishment of enterprises," is it likely that
the "principle" of secondary and irresponsible agents can do it? To show the
people how to make their bargains, how to buy and sell and save and spend,
is a function government is not fitted for, was not established to perform,
and never undertook without making a botch of it.
In the Preamble of the Constitution of the United States there is a careful
and complete and elegant enumeration of the purposes, which the body of
the instrument was designed to attain. These purposes are six. No one of
them contains even a hint of any purpose to enter upon the "establishment
of enterprises," still less of any necessity "to abandon the principle of
freedom." The last of these six purposes is phrased: "and to secure the
blessings of liberty to ourselves and our posterity." The liberty to buy
and sell freely was precisely that "liberty" of the Colonies which was most
threatened and infringed by the British Government, to vindicate that
special "liberty" was the chief cause of the American Revolution, and "to
secure the blessings" of that and other forms of similar "liberty" was the
final purpose of the Constitution of the United States.
It is true indeed that the Constitution empowers Congress, a creature of the
People, "to establish Post Offices and Post Roads"; but the purpose of this
was political, and not pecuniary; it was to bind all the States together in one
Union of intelligence and intercourse; it was to keep the outlying and
distant parts in touch with the central and seaboard; it is not in any sense a
"business" enterprise; the department of the mails is not now and never has
been, for any length of time, self-supporting; and it illustrates through and
through in its "Star route frauds" and other contracts, in its appointment and
removal of postmasters, and in the sickening dependence of primal Service
of the people on partisan and corrupting impulses, many of them inherent
evils of the much-vaunted Nationalism.
But besides all these vital and political objections to the assumption on the
part of government of any direct industrial functions whatever, there
remains two other fundamental objections, of which the first is, that our
national government has received no powers to any such end, and is
emphatically prohibited in the Constitution itself from exercising them:
—"The powers not delegated to the United States by the Constitution,

nor prohibited by it to the States, are reserved to the States respectively
or to the people."

(2) The second remaining objection is, that such proposed action of
government could have no tendency at all either to enlarge the Wages-
portion, or to increase the industrial efficiency of the laborers, or to
diminish the number of competitors at any one point of the wages-scale. As
a matter of fact, such governmental action would have precisely the
opposite effect at each of these three vital points of wages: employers
would have less motive to swell the wages-portion, laborers less motive to
improve their capacity, and more motive to congregate locally. Suppose,
that at some given point in the scale of wages, free and intelligent
competition has been had on both sides, and that the average rate of wages
as thus determined proves one dollar per day for each laborer. Suppose
further, that everybody outside the employers thinks this is quite too little,
and that government accordingly issues a decree that wages at that point
must be thereafter one dollar and a half per day. That decree can have no
tendency at all to enlarge the wages-portion of those particular employers,
because that has already been determined for the next industrial cycle by
the general productiveness of the cycle last past, and by the last division
under free competition between wages and profits; if, therefore, the decree
were carried out, as it never practically could be, the result would be that
only two-thirds of the laborers previously employed could be employed
then at all, and the remaining third would certainly be worse off than
before; and besides the Division of Labor being necessarily lessened,
production would be less profitable to the employers, and the next wages-
portion would certainly be less than the one before, and thus the outcome of
the remedy would be worse than the disease. Now let alone the artificial
interference of government, and all natural accessions to Capital at that
point, all investment of profits in an enlarged business, all saving from
expenditure for the sake of further production, tend strongly of their own
accord to enlarge the wages-portion, and thus, the number and intelligence
of the laborers continuing as before, are sure to raise the rate of wages. Or,
if there be no accessions to Capital, or other influence swelling the wages-
portion, and the number of laborers be diminished at that point, as by
migration to new fields of effort or enlistment in armies, the competition of

wages-givers for laborers will be quickened, and the rate of wages will rise.
Reversed conditions will of course give reversed results.
2. A second popular remedy for low Wages, not only proposed, but also for
a long time brought into practical action, is Labor-Unions in their various
forms and with their manifold methods of operation upon employers. It is
important to note here and to remember, that the Guilds of the mediæval
times, from which the modern Trades-Unions have borrowed something of
form and much of nomenclature, were in substance extremely different
from their modern imitators. Those were combinations of Masters with their
journeymen and apprentices and dependents in order to control the entire
manufacture and sale of a certain class of products, from the name of which
the Guild usually took its own name, as "Cloth-workers' guild,"
"Shoemakers' guild," and so on. Whittier, himself a shoemaker in his
boyhood, apostrophizes the latter guild in words which more or less
describe them all: —

"Ho! workers of the old time styled
The gentle Craft of Leather!
Young brothers of the ancient guild,
Stand forth once more together!
Call out again your long array,
In the olden merry manner!
Once more on gay St. Crispin's day,
Fling out your blazoned banner!"

These masters thus organized with their laborers were the capitalists of their time,
and in this vital matter differed from the Unions of to-day, which are made up of
laborers as such organized to confront, and if need be, to antagonize, capitalists. A
royal charter was indispensable to the legal existence of those craftsmen. It took
money for them to start their guilds, and in progress of time most of them became
very rich. "A common fund was raised by contributions among the members, which
not only provided for the trade objects of the guild; but sufficed to found chantries
and masses, and set up painted windows in the church of their patron saint. Even at
the present day the arms of the craft-guild may often be seen blazoned in cathedrals
side by side with those of prelates and kings." This radical difference between the
two must always be borne in mind in all arguments and inferences drawn over from
the mediæval "unions" to those of the present day.
Two points may be freely conceded to these labor-organizations before we pass to the
economic objections to them. In the first place, the employers set the example for the
employees in a tacit if not open combination as against the employees in their own
interest and emolument. The so-called "protective" tariff, for instance, is nothing in
the world but a strongly-linked combination of certain rich capitalists to extort from
the masses (their own laborers included) artificially lifted prices for the necessaries of
life; and the certain result of shutting out imports by tariff-taxes is the shutting in of
would-be exports, to the certain lowering of general wages in a country, because
there is a lessened demand for laborers in consequence. For a second good instance
of combinations as against employees on the part of employers, take the well-known
understanding among manufacturers of the same sort of goods in the same general
locality, that laborers discharged from one establishment shall not be hired in any of
the rest; and that if the general voice call for a "shut down," or for three-fourths time
or less, all in that line of goods shall comply. How can laborers be blamed for
organizations in their own behalf when they find themselves confronted as
individuals with an organization of employers?
Then, too, it must be acknowledged, that, had it not been for united action of some
sort on the part of the laborers, the unreasonable hours of fifty years ago in mills and
factories would probably not have been shortened to this day. Capitalists as a class

are conservative of methods, as well as of ends. The cotton and woollen
manufacturers of Berkshire County, for example, who may doubtless be taken as a
fair sample of the manufacturers of New England, stiffly refused the demands of their
work-people that the hours might be reduced from an average of 14 throughout the
year to an average of 11. When the late Civil War was going on, and the
manufacturing became extremely profitable, and the mills were more or less depleted
by enlistment, and the remaining hands felt more independent from the consequent
rise of wages, the combined demand in one mill for fewer hours was reinforced by
simultaneous demands for the same in other mills in the neighborhood (the time and
manner having been agreed upon beforehand), and visits in force by the work-people
from mill to mill completed the desired reform. The mill-owners were sullen and
indignant, and submitted of necessity. The work-men were right. The reform was
imperative. Credit must be given to them for the good they have done acting as a
body on this and other occasions.
On the other hand, all this is not business. All this is contrary to the very old, and the
very good adage, that it takes two to make a bargain. If we express this adage in the
language of our science, it will take some such form as this: When two men have
mutual services to exchange, let them come to a fair agreement as to the terms on
which they will exchange. Certainly, let each make the best terms he can, but let the
bargain always be free. If one party, who happens to have the power to do it, uses
anything like compulsion upon the other, it ceases so far forth to be a bargain at all,
and becomes a sort of robbery, of which in some cases courts will take cognizance.
Now, workmen bring a certain valuable service to the market, just such a service as
the capitalist wants, and he has to offer just such a service as they want, namely,
wages: let the two parties come to a free and fair agreement on the terms of their
exchange; let each workman by all means make the very best terms he can, insisting
to the last penny on all he can get elsewhere, for the value of his service is
determined, as other values are determined, by what it will bring: let the employer do
just the same on his side, and so let a fair bargain for the time present be struck. This
is a very good kind of striking, and the more intelligence and skill and self-respect a
workman has, the better prepared he is to strike the bargain and secure his just due by
and for himself alone; and this gives a good chance for every man who has any
peculiar gift, who may have surpassed his fellows in diligence and skill, to secure a
proportionate reward now and to go on higher in future; all this gives opportunity for
diversity of relative advantage, which, as we have seen, lies at the basis of all
exchange, which itself starts in individualism and naturally proceeds in a still higher
individualism to the end. This is the only way for a laborer of talent and diligence to
secure fully what belongs to him as a man and a workman. If he cannot get from a
given employer what he thinks he ought to get, what he thinks the service is worth in
another market, let him exercise his perfect right to quit and go elsewhere. All this is
fair and aboveboard and individual and progressive.

Everybody knows that there is a kind of striking now in vogue wholly different from
this, in that it brings a sort of compulsion into play. A fair bargain should be broken,
if at all, just as it was made, with the two parties face to face, and everybody else
aloof; and a new bargain should be made, just as the old one was, with the two
parties face to face, and everybody else aloof. But a combination among workmen to
leave an employer in the lurch, and especially a combination which forces into its
ranks by cajoling or menaces those who are unwilling to join it, as is so commonly
the case in Strikes, is not only contrary to the inmost nature of a bargain, but is also
of itself a sort of confession of the injustice of the claim. If the claim be just so far as
all the individuals are concerned, there is no occasion to extort it. If the value of the
service rendered by each be equal to the sum demanded, and especially if this can be
obtained elsewhere, which is the only gauge of the value of any service anywhere,
there is no need of conference and combination and conspiracy. Of course, this
radical argument against Strikes implies that employers of that grade have not
entered into a combination not to hire dissatisfied laborers from other establishments;
if they have, then the agreement can be turned with equal force against the employers
themselves, for they are resorting to means outside the nature of a bargain, means of
the same nature as a Strike. Let, then, each workman tell his employer the present
facts just as they are, and if this appeal prove ineffective to secure his commercial
right, let him go quickly where he can get the most for his service. That this is not
done, that means of the nature of a threat are brought to bear upon the employer, that
the justice of the claim is not relied on in a case where more than anywhere else
justice can enforce itself, that free and full explanations are not had, that no notice is
given, that great damage is expected by their action to accrue to the employer,—all
this seems to forget that the transaction between employers and employed is a case of
pure exchange, a simple bargain of one service against another service.
The above is the universal and fundamental objection to Strikes. The remedy for
economical evils, real or supposed, must ever be found in economical considerations.
The strong but foolish tendency of the times is to mix up things that are quite distinct;
to try to apply to the evils of Trade the rules of Morals, which is a useless task; to
appeal to Politics in matters of pure Bargain; and to resort to Force to cure the evils
that flow from the wholly voluntary action of individuals. This is like the doctor who
would cure bodily ailments by mental and spiritual recipes. It has all the absurdities
of the late famous "Mind-cure." The mind is indeed higher than the body, but bodily
maladies must be treated as such, or the patient will die; the imperatives of Ethics are
certainly superior to the profitables of Economics, but the latter are well able to take
care of themselves on their own ground; Religion is loftier than Morals, but it
becomes a very poor substitute for morals in the daily routine of life. Similia
similibus curantur. Economical evils can only be removed by a better Economics
better applied. Strikes are an outside and irrelevant remedy for low Wages.

A bad principle works badly in practice of course; the principle that underlies strikes
is so opposed to the fundamental nature of exchange, that we might know beforehand
that it would work badly; and as a matter of fact, it does work badly enough both
upon employers and employed, because strikes are certain to embitter the relations
between the two classes, which ought always to be cordial and free, and especially,
because strikes must work on the minds of the capitalist to lessen the Wages-Portion
for the next industrial cycle. Fortunately, we possess authentic statistics gathered
about Strikes by the Massachusetts Bureau of Statistics of Labor, and published in
detail in the Report of December, 1888. The information given is exact in relation to
five principal States, and approximate in relation to the other parts of the United
States. We will copy first the table exhibiting the Losses in six years on account of
Strikes of both Employers and Employees, and the outside assistance received by the
latter:—
Employees' Loss and Assistance and Employers' Loss in the Five Principal States on
Account of Strikes and Lock-outs for 1881-1886.

Employees' Employees' Employers'
States.
Loss. Assistance. Loss.
Strikes.
Illinois, $6,636,208 $238,452 $5,251,829
Massachusetts, 4,200,489 266,708 1,970,881
New York, 8,581,784 726,696 5,966,421
Ohio, 6,378,757 415,568 2,793,427
Pennsylvania, 12,890,346 781,338 3,897,757
Other parts of the United States, 13,127,139 895,795 10,821,238
The United States, $51,814,723 $3,324,557 $30,701,553

The large percentage of establishments represented in this table, in which the strikes
were ordered by labor-organizations, is particularly noticeable. In New York 94.26%
of the establishments had strikes which were ordered, in Illinois 83.96%, in
Massachusetts 81.91%, and in the United States 82.24%. The "walking-delegate" so-
called became the principal personage in all these strikes; he brought the orders to the
men from the "central-union" of their special organization, and became in most cases
the sole means of communication between the two. "You are the strike," exclaimed
the Lord Mayor of London the other day to Mr. Burns, the walking delegate of the
dock-laborers now on strike in that city. That the daily bread and home comforts of
tens of thousands of men depend on the secret and irresponsible decision of a little
knot of agitators, sending out their verbal and often ambiguous written orders by a
walking-delegate or two, is one of the monstrosities of Strikes often witnessed in the

United States. The laborers sometimes do not know even the causes of the strike.
There has been great want and suffering for three months past among the striking
coal-miners in the State of Illinois; and a brief editorial in the "Springfield
Republican" of Aug. 24, 1889, describes the state of things so justly, that we quote it:
—
"Ex-Congressman William L. Scott, who owns coal mines at Spring Valley, Ill., has
offered to pay 75 cents a ton for mining to the strikers who in their destitution have
been subsisting for some time on public charity. This is 2½ cents a ton more than the
miners have asked for, but it is coupled with the condition that each man must seek
work individually and not through some outside union committee. Although the men
have been reduced to a state of abject want it is said the conditions imposed will
prevent a settlement. In that case we may conclude that a few well-fed walking
delegates are acting for the men and not they for themselves. It is a strange time to
quibble over such a matter. The worst and most oppressive enemy of labor is the
parasite who lives upon its distresses."
A strike is a state of war, and like war, there are two parties to it, and it cannot be
expected that the party of the other part should not strike back. The "lock-out" is the
counter-stroke of the capitalist to the "strike" of the laborer. Lock-outs, however, are
comparatively infrequent. Capitalists, as a rule, are conservative and forbearing.
Massachusetts took the statistics of lock-outs as carefully as those of strikes, and the
following is the table:—

Employees' Employees' Employers'
States.
Loss. Assistance. Loss.
Lock-outs.
Illinois, $533,497 $5,374 $347,065
Massachusetts, 952,310 136,626 550,675
New York, 3,150,123 392,316 845,262
Ohio, 848,829 231,870 493,100
Pennsylvania, 712,956 77,038 237,735
Other parts of the United States, 1,960,002 262,814 988,424
The United States, $8,157,717 $1,106,038 $3,462,261

Like war too, strikes and lock-outs are wasteful and demoralizing to both parties.
Why should there be a resort to force to settle an industrial dispute any more than to
settle any other private dispute? Will such a resort be long tolerated by public opinion
in civilized countries? The Legislature of Massachusetts in 1886 provided for a State
Board of Arbitration for the settlement of differences between employers and

employees. The statute was crude in some respects, and the basis of it not very firmly
fixed in the nature of things, but the Bureau of Labor reports that it has been justified
by the results in its practical application during the short time of its operation. The
broad truth is, that the value of Commodities and the value of Credits is now left to
the safe action of Demand and Supply under free competition in every country in
Christendom: why should not the value of Services be left to the same safe and
inexorable action? Governments gave up long ago all idea of regulating directly or
indirectly the prices of merchandise and the prices of commercial claims of all kinds:
will they not shortly give up also all idea of regulating directly or indirectly the rates
of Wages? They will. The three kinds of things bought and sold are on an exact level
in the nature of things, so far as Government is concerned. Wages are abundantly able
to take care of themselves in the ordinary way, as goods do, and stocks and bonds;
and an enlightened Public Opinion is fast coming to see, that a man's personal service
rendered needs no more the oversight of the State in its sale than his horse, or note of
hand at interest. Strikes, and lock-outs, and all extraordinary courts or boards to settle
quarrels between a labor-giver and a labor-taker as such, since it is a case of ordinary
buying and selling, are foredoomed to pass out in the good time coming.
Towards this good end works strongly the common futility of strikes and lock-outs.
Carroll D. Wright, chief of the Bureau of Labor in Massachusetts, now the head of
the National Bureau of Labor, in his State Report for 1880, gave a succinct account
of all strikes in that State from their beginning in 1830. They were 159 in all, of
which 109 were unsuccessful, 18 apparently successful, 16 compromised, 6 partly
successful, and 10 "result unknown." In Great Britain during the year 1878, there
occurred 277 strikes, of which 256 were failures, 17 were compromised, and only 4
were successful. The following table taken from the Massachusetts Report of 1888,
gives on a broad scale the results of Strikes in the United States for six years:—
General Summary of Strikes in Five Principal States for 1881-1886.
Percentages.

Other
Parts The
New
Classifications. Illinois. Massachusetts. Ohio. Pennsylvania. of the United
York.
United States.
States.
Strikes.
Ordered by
labor 83.96 81.91 94.26 71.21 61.59 73.06 82.24
organizations,

Establishments
70.70 79.10 51.01 81.21 70.11 57.57 60.13
closed,

Causes:
Against
reduction of 5.35 6.23 2.50 20.73 22.65 8.61 7.77
wages,
For change of
hour of
- - 3.86 - - 0.05 1.61
beginning
work,
For increase
41.54 35.28 39.09 52.42 46.97 45.01 42.32
of wages,
For increase
of wages and
17.85 0.50 9.37 1.85 1.06 4.96 7.59
reduction of
hours,
For reduction
18.35 42.71 24.31 5.32 5.32 17.23 19.48
of hours,
For reduction
of hours and
against being
- - 7.32 - - 2.19 3.59
compelled to
board with
employer,
Other causes, 16.91 15.28 13.55 19.68 24.00 21.95 17.64

Results:
Succeeded, 54.16 35.28 *51.05 49.44 32.60 42.69 *46.52
Succeeded
10.33 45.93 *8.14 8.87 17.57 17.27 *13.47
partly,
Failed, 35.51 18.79 *40.65 41.69 49.83 40.04 *39.95

* In 15 establishments the results were not ascertained.
3. The third popular remedy for low Wages, which has at least the merit of being in
the line of economical considerations, as the other two are not, is "Co-operation."
The interest in this proposed remedy is much less both in Europe and in the United
States than formerly, owing to the failures that have mostly attended the attempts to
put the scheme into practice, although there have been some remarkable successes
also, particularly in England. The idea of Co-operation is this, namely, that certain

laborers within given classes combine of their own accord, (1) either to purchase
their necessaries in common and at wholesale, hence at cheaper rates because
avoiding all profits of the middlemen; or (2), more especially to engage in the joint
production of the commodities they are familiar with, the laborers furnishing the
capital also from their little hoards or borrowing it on the strength of their individual
or associated credit, managing the business themselves, all being co-partners, and of
course all sharing pro rata the entire profits of the concern.
All this is well; and in countries where laborers have been under traditional
disabilities, it may be in some cases very promotive of their self-respect, activity,
frugality, and general welfare; but any one can see that no new economic principle is
involved in the plan. As in all other production, so here, there must be (1) capital
from some source, (2) steady and skilful labor, and (3) superintendence or
management of the business. It is at the third point that schemes of co-operation have
mostly broken down. The faculty of good management is rare; the organizing and
executive ability needful to carry through any scheme of co-operation will not come
upon call; if any of the co-operators chance to possess it, the scheme may succeed,
although he who is conscious of having it will prefer to use it for his own gain in his
own way, to say nothing of the practical impossibility of any man's working with the
same spirit when the gain or loss is to be largely another's as when it is to be wholly
his own; moreover, it has been well said, "it is impossible to hire commercial genius
or the instincts of a skilful trader"; so that, while there is no trouble about the
workmen uniting the character of capitalist and laborer in their own persons, and no
doubt that they will work harder and more skilfully while sharing profits as well as
receiving wages, it is still true, that the difficulty of securing a real "captain of
industry," and thus a perfect organization and management of the whole business,
puts the scheme of co-operation out of the question as a means of raising wages, or
promoting the general welfare of laborers.
In this country, where there is nothing to hinder any laborer from becoming a
capitalist, where the savings-banks are open to the smallest gains, where nothing is
more common than for two or more workmen to organize a firm to carry on some
branch of business, where most of the present capitalists proper were formerly
laborers proper, and where the shares of most of the joint-stock companies are open
to everybody who has the means to buy them, there is only one consideration that
seems to justify any special jealousy of laborers as such towards capitalists as such;
and that is the fact, that Legislation, every now and then, sometimes on a small scale
and then on a gigantic one, now by means of corporate charters and then by other
means more indirect and effective, does confer certain extraordinary privileges upon
capitalists. So long as capitalists and laborers rest upon their natural rights and
positions, neither can get any undue advantage of the other; and just so far as each
recognizes their identity of economic interest and the consequent reciprocity of

obligation and effort, the prosperity of each will help build up the other; but, on the
other hand, so far forth as any advantages are given to capitalists by special laws,
either of State or Nation, these become necessarily unjust to laborers, and ultimately
also injurious to capitalists; and in this case, the laborers, seeing just what it is that
hurts them, ought to combine together and to strike, not capital (their best friend),
but a piece of perverted legislation (their worst enemy).

CHAPTER IV.
COMMERCIAL CREDITS.

Political Economy is the Science of Sales; and because it is the science of sales, its
definitions and principles must cover equally all cases of sales actually occurring or
possible to occur. We have seen repeatedly, that only three kinds of things are ever
bought and sold, or ever will be, and these are Commodities and Services and
Claims. The first two kinds have been fully elucidated already in the two preceding
chapters, and it belongs to the present chapter to explain and illustrate clearly the
peculiarities of the third kind of things salable. Ours is the only science that has to do
with the motives and facts and economic results of all sales as such.
The discussions of the present chapter will proceed orderly through the following
topics:—

The Nature of Credit.
The Forms of Credit.
The Advantages of Credit.
The Disadvantages of Credit.

1. Certain things are essential in every sale of anything, and of course are common to
all sales of everything, such as two persons and two desires and two estimates and
two renderings; while there are certain peculiarities in the sale of things belonging to
each of the three special classes of things salable; for example, in the sale of a
commodity there is a rendering of a tangible object that has been prepared for sale in
past time, and in the sale of a service a rendering of an intangible something wholly
in the present time; while in the sale of a credit there are likewise two peculiarities,
one of them relating to future time and the other to a special trust felt in a person by
some other person. We must now study these two peculiarities with care; and,
mastering these, we shall be master of the Nature of Credit.
a. Some sales are consummated at once, the things exchanged and the ownership in
them are mutually passed over then and there, the reciprocal satisfactions are entered
upon immediately, and there is at once an economical end.
For example, one neighbor sells another a peck of green peas and takes in pay a peck
of new potatoes, both vegetables may be cooked for dinner in the respective families
the same day, and the commercial transaction is all over. But there are other
exchanges, an immense class of them, different from these in this respect, that though

the transaction considered as a mere case of value created and measured is then and
there ended, yet considered as to the nature of that preliminary exchange which
implies and requires another future exchange to consummate it, it is not then and
there ultimately closed, but one (or both) of the parties then exchanging relies on the
good faith of some one else to fulfil in the future a pledge expressly or impliedly
made in the prior exchange. Commonly some external evidence of the pledge is
created and passed at the time, but this is not essential to the validity of the pledge
itself. For example, A buys 50 bushels of wheat of B, and B takes in pay for it A's
note of hand at six months for $75. The note is not the pledge, but it is a legal and
convenient proof of it. As a case in Value, the wheat is sold for the pledge and the
pledge is the equivalent of the wheat. Each party rendered the other then and there
satisfactory equivalents. All our definitions apply here perfectly.
Still a further and future exchange was contemplated by both parties at the time of
making this exchange, and as a silent part of it. A takes what is now his own wheat,
and B takes as an equivalent for what was his wheat a right to demand of A in six
months an equivalent for the present equivalent (the pledge) for the sake of which B
rendered the wheat. The note of hand is the evidence of this pledge, and it belongs
absolutely to B. It is his property. He may keep it till maturity and then sell it to A for
its face, or he may sell it at once to a bank for its face less the discount for six
months. Discount is the difference between the face and the present price of a note of
hand. The first peculiarity, then, of Credit is, that it always involves the element of
future time. But it involves this secondarily, and not primarily. In other words, a
present equivalent is always rendered by both parties in every commercial
transaction; but the present equivalent in the case of a credit transaction is the right to
demand something of somebody sometime in the future. This distinction is very
important, as we shall see clearly when we come to treat of Banking, though it is
generally ill-understood at present. Valuables, when they exchange at all, exchange
once for all. But there is one kind of valuables, namely, claims, which, when subject
to exchange, imply and require another and a future exchange, not necessarily
between the parties to the first exchange, but between some two parties; and not,
speaking strictly, to consummate the first exchange, because that took and gave its
own satisfactory equivalents; but, as involving both time and trust, the credit sale
must in the nature of things be followed by another sale of one of the three kinds.
We see, accordingly, that in Credit our science of Economics takes partial possession
of future time for certain purposes of its own. Exchange sets its throne and reigns
pre-eminently in present time; but its sceptre extends also over past time, so far as all
capital is concerned, and so far as all material commodities (the result of past work)
are exposed for sale in the present; and its right hand of rule goes forth also to grasp
the future, under limitations indeed both as to the stretch of time covered and as to
the character of the persons concerned, but still there is there a fair domain and a

broad domain, and a realm on the whole winning a wider and wider circuit. It is one
of the proud boasts of Political Economy as a science, as it is too one of the exalted
traits of human nature, that the lordly impulse to buy and sell does not confine itself
to what the Past offers in all its accumulated valuables, nor to what the Present
unfolds in the unlimited desires and efforts of congregated men, but reaches out also
into the Future, and makes that pay tribute more and more into the vast treasury of its
Gains. And this too is legitimate. Man is at once and all the time actor and historian
and prophet. The future is not wholly unknown. Given the one assumption, that Earth
and Men go on as heretofore, Exchange knows well enough, and better and better,
whom of the coming men to trust and for how long a time. The doctrine of averages
and of probabilities comes along to guide and to enhearten the investor. Any
thoroughly established government of to-day can borrow all the money that it wants
on its public pledge to repay the principal fifty years hence. England has borrowed
millions of pounds sterling, giving no day certain in the future for its repayment.
These funds are called "Consolidated Annuities": the interest on them is paid on a
day nominated in the bond: the principal is to be paid when the borrower chooses, or
never.
b. The other and final peculiarity of Credit is, that it always involves on the part of
one person a commercial confidence in some person as such. The term, Credit, is
derived from the Latin Credo, I believe, and the corresponding term, Debt, from
Debeo, I owe. Thus the personal element and the future element are wrapt up in the
very origin of the words. There is no credit without debt, and no debt without credit.
The very words imply a belief of one of the two parties in a commercial promise
made by the other, and also an obligation acknowledged by this party as due to the
first. There is a basis for credit in human nature. Faith in each other to a certain extent
is natural to men. Whatever enlarges the intellectual foresight, and especially the
moral character of men, opens a broader and surer field for Credits. Civilization, so-
called, and Christianity certainly, deepens and broadens the natural trust of man in
man. Despite all the instances of broken faith, and they are too many; despite the
shocks and cautions that come every now and then to every man who trusts much in
his fellow-men; experience itself justifies and rewards an ever-growing commercial
trust. It is one of the noble things in international commerce, as we shall see, that
men trust each other across the oceans, and lay millions of value upon the faith of a
single firm. As the core of the Christian religion is confidence in a Person, so the
very substance of credits is a natural and in general well-grounded faith in persons as
such.
A Credit, then, may be defined to be a Right to demand something of somebody; and
a Debt to be an Obligation to pay something to somebody. What always lies,
accordingly, between creditors and debtors, are Rights coupled with Obligations; and
these are Property, just as much as anything is and for the same reason, since they

always may be, and usually are, bought and sold by other parties as well as the
original parties. In these Rights or Claims, therefore, arises a commerce, domestic
and foreign, immense in extent and amount, and the Rights themselves take their
undisputed place on an equality with tangible Commodities and personal Services.
Having thus reached an ultimate and satisfactory definition of Credit, we must still
pursue a little further our present object, namely, to obtain a clear conception of the
nature of this great class of Valuables, by drawing two or three distinctions between
Credit-Rights and some other rights very apt to be confounded with them.
(1) The distinction between credit-rights and other rights is well rooted in the Latin
language and in the Roman law, while the corresponding English terms are quite
ambiguous and need to be used with great caution. In Latin, a true debt is called a
Mutuum, because it lies between two persons, a creditor, and a debtor, and is a credit-
right independent of the question of fact whether the debtor has now the thing
rendered to him or not, indeed whether he has anything at all to pay with or not; on
the other hand, a thing merely lent, when the very thing lent is to be returned to its
owner, who has not in the meantime parted with his property to the other, is called in
Latin a Commodatum. The English tongue has but the one word, Loan, for the two
very distinct operations: for the loan of a book, for instance, which is to be returned
after use, and which may be legally reclaimed by the owner if he chance to find it
anywhere, that is, the Latin commodatum; and for the loan of money, or other such
measurable thing, which is to be returned in kind only, and which may not legally be
reclaimed except through some action of the borrower, since the ownership of that
thing rendered has passed over to him completely, that is, the Latin mutuum. The
same ambiguity of course inheres in the corresponding English word, Borrow. The
English language is relatively poor in words expressing nice legal distinctions.
Now, as a true debt is a claim on a person and never on a thing, the Roman Law is
true to the nature of things and to the vital distinctions of our science, when it names
the right to which a mutuum gives birth as a jus in personam, that is to say, a right
against the person; while it names the legal obligation arising out of a commodatum
as a jus in re, that is to say, a right to the very thing. So strongly is this doctrine,
namely, that the security of a true debt lies against persons and not against things,
intrenched in the Roman Law, that debts or credits are even termed "nomina," names,
in that law, as when Ulpian says, "Nomina eorum qui sub conditione vel in diem
debent et emere et vendere solemus": We are accustomed to buy and sell Debts
payable on a certain day and at a certain event. The fundamental law of the present
national banks of the United States explicitly recognizes this old and good distinction
by requiring the banks to loan money on personal security only, that is to say, no
tangible things, not even real estate, may be taken as original security for any loan.