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Title: Principles of Political Economy, Vol. 1

Author: Wilhelm Roscher

Contributor: L. Wolowski

Translator: John J. Lalor

Release date: January 4, 2009 [eBook #27698]

Language: English

Other information and formats: www.gutenberg.org/ebooks/27698

*** START OF THE PROJECT GUTENBERG EBOOK PRINCIPLES OF
POLITICAL ECONOMY, VOL. 1 ***

Principles Of Political Economy
By

William Roscher,
Professor of Political Economy at the University of Leipzig,

Corresponding Member of the Institute of France,

Privy Counsellor To His Majesty,

The King Of Saxony.

From the Thirteenth (1877) German Edition.

With Additional Chapters Furnished By The Author,

For This First English And American Edition,

On Paper Money, International Trade,

And The Protective System;

And A Preliminary Essay

On The Historical Method In Political Economy

(From the French)

By

L. Wolowski

The Whole Translated By

John J. Lalor, A. M.

Vol. I.

New York:

Henry Holt & Co.

1878

Contents

Translator's Preface.
Author's Preface. (1st Edition.)
From The Author's Prefaces. (2d to 11th Edition.)

Preliminary Essay.
Introduction.
Chapter I. Fundamental Ideas.
Section I. Goods—Wants.
Section II. Goods.—Economic Goods.
Section III. Goods.—The Three Classes Of Goods.
Section IV. Of Value.—Value In Use.
Section V. Value.—Value In Exchange.
Section VI. Value.—Alleged Contradiction Between Value In Use
And Value In Exchange.
Section VII. Resources Or Means (Vermögen).
Section VIII. Valuation Of Resources.
Section IX. Wealth.
Section X. Wealth.—Signs Of National Wealth.
Section XI. Of Economy (Husbandry).
Section XII. Economy.—Grades Of Economy.
Section XIII. Political Economy.—The Economic Organism.
Section XIV. Origin Of A Nation's Economy.
Section XV. Diseases Of The Social Organism.
Chapter II. Position Of Political Economy In The Circle Of Related
Sciences.
Section XVI. Political Or National Economy.
Section XVII. Sciences Relating To National Life.—The Science
Of Public Economy.—The Science Of Finance.
Section XVIII. Sciences Relating To National Life.—Statistics.
Section XIX. Private Economy—Cameralistic Science.
Section XX. Private Economy. (Continued.)
Section XXI. What Political Economy Treats Of.
Chapter III. The Methods Of Political Economy.
Section XXII. Former Methods.
Section XXIII. The Idealistic Method.
Section XXIV. The Idealistic Method. (Continued.)
Section XXV. The Idealistic Method. (Continued.)
Section XXVI. The Historical Method—The Anatomy And
Physiology Of Public Economy.
Section XXVII. Advantages Of The Historical Or Physiological
Method.

Section XXVIII. Advantages Of The Historical Method.
(Continued.)
Section XXIX. The Practical Character Of The Historical Method
In Political Economy.
Book I. The Production Of Goods.
Chapter I. Factors Of Production.
Section XXX. Meaning Of Production.
Section XXXI. The Factors Of Production.—External Nature.
Section XXXII. External Nature.—The Sea.—Climate.
Section XXXIII. External Nature.—Gifts Of Nature With Value
In Exchange.
Section XXXIV. External Nature. (Continued.)
Section XXXV. External Nature.—Elements Of Agricultural
Productiveness.
Section XXXVI. External Nature.—Further Divisions Of Nature's
Gifts.
Section XXXVII. External Nature.—The Geographical Character
Of A Country.
Section XXXVIII. Of Labor.—Divisions Of Labor.
Section XXXIX. Labor.—Taste For Labor.—Piece-Wages.
Section XL. Labor.—Labor-Power Of Individuals.
Section XLI. Labor.—Effect Of The Esteem In Which It Is Held.
Section XLII. Of Capital.—The Classes Of Goods Of Which A
Nation's Capital Is Made Up.
Section XLIII. Capital.—Productive Capital.
Section XLIV. Capital.—Fixed Capital, And Circulating Capital.
Section XLV. Capital.—How It Originates.
Chapter II. Co-Operation Of The Factors.
Section XLVI. The Productive Coöperation Of The Three Factors.
Section XLVII. Productive Co-Operation Of The Three Factors.
The Three Great Periods Of A Nation's Economy.
Section XLVIII. Critical History Of The Idea Of Productiveness.
Section XLIX. Critical History Of The Idea Of Productiveness.—
The Doctrine Of The Physiocrates.
Section L. The Same Subject Continued.
Section LI. The Same Subject Continued.
Section LII. Idea Of Productiveness.

Section LIII. The Same Subject Continued.
Section LIV. Importance Of A Due Proportion In The Different
Branches Of Productiveness.
Section LV. The Degree Of Productiveness.
Chapter III. The Organization Of Labor.
Section LVI. Development Of The Division Of Labor.
Section LVII. Development Of The Division Of Labor.—Its
Extent At Different Periods.
Section LVIII. Advantages Of The Division Of Labor.
Section LIX. Conditions Of The Division Of Labor.
Section LX. Influence Of The Extent Of The Market On The
Division Of Labor.
Section LXI. The Division Of Labor—Means Of Increasing It.
Section LXII. The Reverse, Or Dark Side Of The Division Of
Labor.
Section LXIII. Dark Side Of The Division Of Labor.—Its Gain
And Loss.
Section LXIV. The Co-Operation Of Labor.
Section LXV. The Principle Of Stability, Or Of The Continuity Of
Work.
Section LXVI. Advantage Of Large Enterprises.
Chapter IV. Freedom And Slavery.
Section LXVII. The Origin Of Slavery.
Section LXVIII. The Same Subject Continued.
Section LXIX. Origin Of Slavery.—Want Of Freedom.
Section LXX. Emancipation.
Section LXXI. Disadvantages Of Slavery.
Section LXXII. Effect Of An Advance In Civilization On Slavery.
Section LXXIII. The Same Subject Continued.
Section LXXIV. The Same Subject Continued.
Section LXXV. The Same Subject Continued.
Section LXXVI. (Appendix To Chapter IV.) The Domestic
Servant System.
Chapter V. Community Of Goods And Private Property. Capital—
Property.
Section LXXVII. Capital.—Importance Of Private Property.
Section LXXVIII. Socialism And Communism.

Section LXXIX. Socialism And Communism. (Continued.)
Section LXXX. Socialism And Communism. (Continued.)
Section LXXXI. Community Of Goods.
Section LXXXII. The Organization Of Labor.
Section LXXXIII. The Organization Of Labor. (Continued.)
Section LXXXIV. The Organization Of Labor. (Continued.)
Section LXXXV. The Right Of Inheritance.
Section LXXXVI. Economic Utility Of The Right Of Inheritance.
Section LXXXVII. Landed Property.
Section LXXXVIII. Landed Property. (Continued.)
Chapter VI. Credit.
Section LXXXIX. Credit In General.
Section XC. Credit—Effects Of Credit.
Section XCI. Debtor Laws.
Section XCII. History Of Credit Laws.
Section XCIII. Means Of Promoting Credit.
Section XCIV. Letters Of Respite (Specialmoratorien).
Book II. The Circulation Of Goods.
Chapter I. Circulation In General.
Section XCV. Meaning Of The Circulation Of Goods.
Section XCVI. Rapidity Of Circulation.
Section XCVII. Freedom Of Competition.
Section XCVIII. How Goods Are Paid For.—The Rent For
Goods.
Section XCIX. Freedom Of Competition And International Trade.
Chapter II. Prices
Section C. Prices In General.
Section CI. Effect Of The Struggle Of Opposing Interests On
Price.
Section CII. Demand.
Section CIII. Demand.—Indispensable Goods.
Section CIV. Influence Of Purchaser's Solvability On Prices.
Section CV. Supply.
Section CVI. The Cost Of Production.
Section CVII. Equilibrium Of Prices.
Section CVIII. Effect Of A Rise Of Price Much Above Cost.
Section CIX. Effect Of A Decline Of Price Below Cost.

Chapter CX. Different Cost Of Production Of The Same Goods.
Section CXI. Different Cost Of Production Of The Same Goods.
(Continued.)
Section CXII. Exceptions.
Section CXIII. Exceptions. (Continued.)
Section CXIV. Prices Fixed By Government.
Section CXV. Influence Of Growing Civilization On Prices.
Chapter III. Money In General.
Section CXVI. Instrument Of Exchange. Measure Of Value.
Barter.
Section CXVII. Effect Of The Introduction Of Money.
Section CXVIII. The Different Kinds Of Money.
Section CXIX. The Metals As Money.
Section CXX. Money—The Precious Metals.
Section CXXI. Value In Use And Value In Exchange Of Money.
Section CXXII. Value In Exchange Of Money.
Section CXXIII. The Quantity Of Money A Nation Needs.
Section CXXIV. The Quantity Of Money A Nation Needs.
(Continued.)
Section CXXV. Uniformity Of The Value In Exchange Of The
Precious Metals.
Section CXXVI. Uniformity Of The Value In Exchange Of The
Precious Metals. (Continued.)
Chapter IV. History Of Prices.
Section CXXVII. Measure Of Prices,—Constant Measure.
Section CXXVIII. Value In Exchange Estimated In Labor.
Section CXXIX. The Precious Metals The Best Measure Of
Prices.
Section CXXX. History Of The Prices Of The Chief Wants Of
Life.
Section CXXXI. History Of The Prices Of The Chief Wants Of
Life. (Continued.)
Section CXXXII. History Of The Prices Of The Chief Wants Of
Life. (Continued.)
Section CXXXIII. History Of The Prices Of The Chief Wants Of
Life. (Continued.)

Section CXXXIV. History Of The Prices Of The Chief Wants Of
Life. (Continued.)
Section CXXXV. History Of The Values Of The Precious Metals.
—In Antiquity And In The Middle Ages.
Section CXXXVI. Effect On The Discovery Of American Mines
Etc. On The Value Of The Precious Metals.
Section CXXXVII. Revolution In Prices At The Beginning Of
Modern History.
Section CXXXVIII. Revolution In Prices.—Influence Of The
Non-Monetary Use Of Gold And Silver.
Section CXXXIX. History Of Prices.—Californian And
Australian Discoveries.
Section CXL. Revolution In Prices.—Its Influence On The
National Resources.
Section CXLI. Effect Of An Enhancement Of The Price Of The
Precious Metals.
Section CXLII. The Price Of Gold As Compared With That Of
Silver.
Section CXLIII. The Price Of Gold As Compared With That Of
Silver. (Continued.)
Appendix I. Paper Money.
Section I. Paper Money And Money-Paper.
Section II. Advantages And Disadvantages Of Paper Money.
Section III. Kinds Of Redemption.
Section IV. Compulsory Circulation.
Section V. Resumption Of Specie Payments.
Section VI. Paper Money—A Curse Or A Blessing?
Footnotes

[pg iii]

Dedication.

TO

WILLIAM H. GAYLORD, Esq.,

COUNSELLOR AT LAW,

OF CLEVELAND, OHIO,

TO WHOSE BROTHERLY CARE IT IS LARGELY DUE THAT I LIVED
TO
TRANSLATE THEM,

THESE VOLUMES

ARE AFFECTIONATELY INSCRIBED.

[pg v]

Translator's Preface.

Our literature is rich enough in works on the principles of Political
Economy. So far as the translator is informed, however, it possesses none in
which the science is treated in accordance with the historical method. We
may therefore venture to express the hope that this translation will fill a
place hitherto unoccupied in the literatures of England and America, and fill
it all the more efficiently and acceptably, as Professor Roscher is the
founder and still the leader of the historical school of Political Economy.
Were this the only recommendation of our undertaking, it would not be a
useless one. But a glance at Professor Roscher's book will convince even
the most hasty reader that its pages fascinate by their interest and are rich in
treasures of erudition which should not remain inaccessible to the English
student from being locked up in a foreign tongue.

The present translation has received, throughout, the revision of the author,
and should any imperfections remain in the rendering of his thought into
English, the blame is certainly not his, for his revision has been most
minute.

The three appendices have been supplied by Professor Roscher expressly
for this edition. As they are intended to form a part of the work on the
Political Economy of Industry and Commerce, on which he is now engaged,
he authorizes [pg vi] their publication in English, only by the publishers of
this edition of his principles; and only for the purpose of being added to the
present translation. He desires especially that their appearance in their

present shape should not in any way interfere with any of his rights in his
forthcoming volume, and that they should not be translated into any
language nor translated back into German.

The essay of Mr. Wolowski, on the historical method in Political Economy
constitutes no part of Professor Roscher's book, and neither he nor its
author, but only the translator, is responsible for its appearance here. In it
the reader will find a short sketch of the life of Professor Roscher, brought
down to the date at which the essay was written. The translator has little to
add to that sketch, all the information he possesses in addition to what it
contains being embraced in the following lines from a letter received by
him from the author in answer to a request that he would supply the
biographical data not to be found in Wolowski's essay: “You might perhaps
say ... that I have repeatedly declined calls to the Universities of Munich,
Vienna and Berlin, but that I have never regretted remaining in Leipzig.”

The acknowledgments of the translator are due, in the first place, to the
eminent author himself, for the revision of the plate-proof of the entire
work, and then to Professor William F. Allen, of the University of
Wisconsin, for his interest in the progress of the enterprise, and for many
valuable suggestions; also to Professor W. G. Sumner, of Yale College, for
some excellent hints as to the best translation of certain words in the
Appendix on Paper Money.

[pg vii]

Author's Preface. (1st Edition.)

My System der Volkswirthschaft shall, Deo volente, be completed in four
parts. The second shall contain the national economy of agriculture and the
related branches of natural production; the third, the national economy of
industry and commerce; the fourth, of the economy of the state and of the
commune (Gemeindehaushalt). While the entire work shall constitute one
systematic whole, each part shall have its own appropriate title, constitute
an independent treatise, and be sold separately.

Of the peculiar method which I have followed in this work, and which will
produce still better fruits in the succeeding volumes, I have given a
sufficient explanation in §§ 26 ff., and all I desire now is to say a few words
on the relation the notes bear to the text. The careful reader will soon be
convinced that of the many citations in this work, not one has been made
from a vain desire of the display of erudition. Part of them serves as the
necessary proof of surprising facts adduced, but which are little known.
Another part of them is intended to incite the reader to the study of certain
questions nearly related to those treated in the text, but which are still
different from them. The object of the greater number is to supply
information concerning the history of economic principles. As far as the
sources at my command permitted, I have endeavored to point out the first
germs, the chief stages of development, the contrasts, and, finally, what has
been thus far attained in economic science. This sometimes required some
little victory over self, inasmuch as I was conscious of having [pg viii]
independently discovered certain facts, when I afterwards found that some
old and long-forgotten writer had made similar observations. Thus, this
work may serve both as a handbook and as a history of the literature of
Political Economy. Students of the science know how little has thus far
been done by writers in this direction. And hence I shall be very grateful to
those who labor in the same field, if they will, either by writing to me
personally, or through the medium of the press, inform me when I have
erred in ascribing a truth, or a scientifically important error, to its earliest
author.

I have already said in the title that this work is intended not for the learned
only, but for all educated men, for men of a serious turn of mind, who
desire truth and science for their own sake. Like that ancient historian,
whom I honor above all others as my teacher, I desire that my work should
be useful to those, ὅσοι βουλήσοντοι τῶν τε γενομένων τὸ σαφὲς σκοπεῖν
καὶ τῶν μελλόντων ποτὲ αὖθις κατὰ τὸ ἀνθρώπειον τοιούτων καὶ
παραπλησίων ἔσεσθαι. (Thucydides I, 22.)

University of Leipzig,

End of May, 1854.

[pg ix]

From The Author's Prefaces. (2d to 11th
Edition.)

The preface to the second edition is dated October, 1856; that to the third,
April, 1858; that to the fourth, April, 1861; that to the fifth, November,
1863; that to the sixth, November, 1865; that to the seventh, November,
1868; that to the eighth, August, 1869; that to the ninth, March, 1871; that
to the tenth, May, 1873; that to the eleventh (unaltered), December, 1873.
Each successive edition, nearly, has been announced as an improved and

enlarged one; and the tenth edition contains one hundred and fifty-six pages
more than the first, although in places, a large number of abbreviations had
been made from previous editions. There are many things in some of the
previous editions which criticism induced me, long since, to change. I have
considered it my duty to the public, who gave my work so warm and
friendly a reception, to take into consideration, in each successive edition,
not only my own new investigations, but those also of all others with which
I became acquainted, and, whenever possible, to correct statistical
illustrations from the latest sources. I have especially, in each following
edition, enriched a number of paragraphs with here and there historical,
ethnographic and statistical features. Plutarch is certainly right, spite of the
fact that pedants may abuse him for it, when he says, that trifling acts, a
word and even a jest, are often more important, as characterizing the life of
a people or an age, than great battles which cost the lives of tens of
thousands of men.

I have changed the titles “Ricardo's Law of Rent,” and “The Malthusian
Law of the Increase of Population,” which [pg x] I formerly used, for
others. But I would not be misunderstood here. I hold it to be a duty of
reverence in the learned—as it has long been practiced in the case of the
natural sciences—in the sciences of the human mind to call the natural
laws, methods etc., in acquainting us with which, some one particular
investigator has won very distinguished merit, by the name of that
investigator. In the case of the law of rent, the application of this rule would
as unquestionably entitle Ricardo to this honor as it would Malthus in that
of the increase of population, spite of the fact that Ricardo may not have
succeeded in finding the best possible form of the abstraction, and although
Malthus even, in a one-sided reaction against a former still greater one-
sidedness, was not always able to steer clear of positive and negative errors.
Recent science has endeavored, and successfully, to examine the facts
which contradict the Ricardoan and Malthusian formulations of the laws in
question, and to extend the formulas accordingly. I have myself contributed
hereto to the extent of my ability. But, in the interval, it is not hard to
comprehend that, while this process of elucidation is going on, most
scholars, those especially possessed more of a dogmatic than of a historical
turn of mind, should estimate these two leaders more in accordance with
their few defects than with the great merits of their discoveries. If,

therefore, I now drop the title “Malthusian law,” it is to guard hasty readers
from the illusion that §§ 242 seq. teach what the great crowd understand by
Malthusianism; when they might, perhaps, omit that portion entirely. For
my own part, I have no doubt that, when the process of elucidation above
referred to shall have been thoroughly finished, the future will accord both
to Ricardo and Malthus their full meed of honor as political economists and
discoverers of the first rank.1

[pg 001]

Preliminary Essay.

Preliminary Essay On The Application Of The Historical Method To The
Study Of Political Economy,

By M. Wolowski,

Member Of The Institute Of France.

“Nunquam bene percipiemus usu necessarium nisi et noverimus jus illud usu
non necessarium. Nexum est et colligatum alterum alteri. Nulli sunt servi
nobis, cur quæstiones de servis vexamus? Digna imperito vox.”—Cuj., vii, in
2
titul. Dig. De Justitia et Jure.

3
“Homo sum, humani nihil a me alienum puto.”—Terence.

4
“Ista præpotens, ac gloriosa philosophia.”—Cicero, De Or., I, 43.

I.

It is no foolish desire to make a vain display of citations, that induces us, at
the beginning of this essay, intended to point out the results of the
application of a new method to the study of Political Economy, to invoke
the authority of a poet and moralist, of a jurisconsult and of a philosopher.
The writer finds in the words just quoted the loftiest expression of the
thought [pg 002] which dictates these lines, viz.: that the impartial
researches of history, a profound feeling of man's moral and material wants,
and the light of philosophy, should govern in the teaching of a science, the
object of which is to show us how those things which are intended to satisfy
our wants are produced and distributed among the several classes or
individuals of a nation; how they are exchanged one against another, and
how they are consumed.

The nineteenth century affords us something more than the admirable
spectacle of the rapid and fertile development of mechanical power and
natural forces. This is but one of the aspects, we might even say but one of
the results, of the general progress of the human mind. The renovation of
moral and intellectual studies has served as a starting point for the
application to facts of the conquests of thought. Science has preceded art.

In the foremost rank of the studies just referred to is philosophy, which
initiates us into the knowledge of human nature, the basis of right, and
which translates its legitimate aspirations into a language which we can
understand; history, that prophetess of the truth, as one of the ancients
called it, which places before us the faithful picture of times past, not by
simply putting together a skeleton of facts, but by following the living
progress of events and the organic development of institutions. Such, at
least, has been the work of those noble minds who have consecrated their
energies to the resuscitation of ages past, in their true shape, and such is the
service for which we are indebted to them for the successful

accomplishment of the reformation of historical studies, which they
attempted with such rare devotion and such marvelous sagacity.

This renovation of history has exerted the most fertile influence in the
region of philosophy, in that of law, and we believe that it will prove no less
useful in that of Political Economy. It has served to put us on our guard
against being easily misled by a priori notions.

[pg 003]
By exhibiting to us the results of the life and of the experience of centuries,
by teaching us by what steps the human mind has risen to its present
eminence, and what the education given it in the past has been, it has
enabled us to ascend from phenomena to the principles which preside over
them; from facts to the law; and it has substituted for arbitrary assumptions
and purely ideal systems, the slow but progressive work of the genius of
nations. Not that it turns a deaf ear to the exalted lessons of philosophy, nor
that it denies the eternal relations resulting from the nature of things. Far
from it. On the contrary, it supplies a solid basis to intellectual
investigations, and, so to speak, an answer for all the moral sciences, to this
saying of Rœderer: “Politics is a field which has been traversed thus far
only in a balloon; it is time to put foot on solid ground.”

Neither does history, as thus understood, confine itself to mere description;
it also assumes the office of judge. While it pulls down much that passion
and inaccuracy have reared, and thus restores respect for the past, it does
not turn that past into a fetish. It looks it boldly in the face and questions it,
instead of prostrating itself before it and worshipping it with downcast eyes.
Thus, by plainly showing us the many bonds which tie us to it, it escapes at
once both the rashness of impatience and the wearisomeness of routine.

The impartiality it inculcates is not indifference; and there is no danger that
the justice it metes out to past ages shall degenerate into a vain scepticism
or a convenient optimism.

The study of history, thus understood, has another advantage; it accustoms
us to those patient and disinterested investigations, to those lengthy labors,
the positive result of which at first escapes us for a time, only to burst on
our eyes, with so much more brilliancy, when rigorous research has

succeeded in discovering it. It frees us from the deadly constraint of
immediate utility.

There is nothing more fatal to science than the feverish impatience for
results which obtains only too much in our own [pg 004] days, and which
induces people to run after him who is in the greatest hurry, and which leads
to hasty conclusions.

“Research undertaken from a disinterested love of science,” says the
learned Hugo, one of the masters of the historical school of law in
Germany,5 “that research which at first promises no other advantage but
truth and the culture of the mind, is precisely that which brings us the
richest rewards. Would we not be behind, in all the sciences, if we had
clung only to those principles, the utility of which in practice was already
known? Do we not, to-day, from many a discovery, reap advantages of
which its author never dreamed?”

Doubtless this tendency, unless restrained by other demands, is not exempt
from danger. We may be carried away by the attraction peculiar to these
noble studies, withdraw into antiquity and fall into a species of historical
mysticism which ends in the affirmation, that whatever has been is true,
absolutely, and which, instead of confining itself to the explanation of
transitory phenomena, invests them with all the dignity of principles. We
shall endeavor to avoid the peril pointed out by Mallebranche. “Learned
men study rather to acquire a chimerical greatness in the imagination of
other men, than to acquire greater breadth and strength of mind themselves.
They make their heads a kind of store-room, into which they gather, without
order or discrimination, everything which has a look of erudition,—I mean
to say everything which may seem rare or extraordinary and excite the
wonder of other people. They glory in getting together, in this
archæological museum, antiques with nothing that is rich or solid about
them, and the price of which depends on nothing but fancy, chance or
passion.”

A display of erudition may obscure the truth, and bury it under its weight,
instead of bringing it out into relief. By concentrating the mind on the
material vestiges of the past, it may withdraw it from the intellectual
movement of the present, and give us a race of scholars, of great merit,

doubtless, [pg 005] but who move about like strangers among their
contemporaries.

Without a sense for the practical, and without ideas of an elevated nature, a
person may, indeed, be a man of erudition—he cannot be a historian. As the
proverb says, the forest cannot be seen, for the trees. That this noble study
may bear its best and most useful fruit; that is, that it should preserve us
against ambitious formulas and destructive chimeras, we must pursue
another way.

“The world,” says Montaigne, “is incapable of curing itself. It is so
impatient of what burthens it, that it thinks only of how it shall rid itself of
it, without inquiring at what price. A thousand examples show us that it
cures itself ordinarily at its own cost. The getting rid of the present evil is
not cure, unless there be a general amendment of condition. Good does not
immediately succeed evil. One evil, and a worse, may follow another, like
Cæsar's assassins, who brought the republic to such a pass, that they had
reason to repent the meddling with it.” Such, too frequently, is the lot of
those who, abandoning themselves to their imagination, and without
consulting the past, mix together promises of liberty and the despotism of
Utopias which they would impose on nations under pretext of enfranchising
them. Despising the work of the ages, they think they can build upon a soil
shaken by destruction and crumbled, until it may be likened to moving
sand.

Contempt for the past is associated with a passion for reform. Men think of
destroying that which should only be transformed. They condemn
everything that has been, unconditionally, and launch out towards a new
future. The suffering which has been gone through irritates and troubles the
mind. The work of pulling down is so easy, it is supposed that the work of
building up is equally so. Hence systems rise, as if the world were to begin
anew. The pride of liberty and of human action becomes the principle of
science; and, like all new principles, it pretends to exclusive and absolute
dominion. Rationalism governs; abstract philosophy [pg 006] ignores the
traditions and the requirements of the life of nations; and finds now in it, as
in geometry, nothing but principles and deductions. The memory of recent
oppression causes us to act as Tarquin did, and to level down the higher

classes instead of elevating the inferior. Liberty and equality then govern by
their negative side, instead of exercising the positive and beneficent
influence they should have, to develop all forces to their utmost, to ennoble
the mind, to give more elasticity to the soul and greater vigor to thought, to
give birth to those varied forms and to that moral energy, which should
bring us nearer to final equality in the bosom of God.6

We forget that no one is born free, and that every one ought to endeavor to
become so,

Feindlich ist des Mannes Streben
Mit zermalmender Gewalt
Geht der Wilde durch des Leben
Ohne Rast und Aufenthalt,

—Schiller.

and make himself worthy of liberty, by the exercise of manly virtue!
Because the form has been changed, we believe that we have changed
human nature.

It is easy to understand, why, where these ideas prevail, the study of the past
should be neglected and despised. Efforts are made to avoid it. Why, it is
asked, revive memories of oppression and misery? The old world is
wrecked. It is annihilated. Peace to its ashes! Or else, after it has been
destroyed, it is sought for again; and, under pretext of eradicating the evils
existing in it, an attack is made on the eternal basis on which human society
rests, on the laws not made by man, and which it is not given to man to
change. The world becomes one vast laboratory, in which the rashest
experiments are multiplied in number, in which mankind is but clay in the
hands of the potter which every pretended “thinker” may mould at will, by
giving him the false appearances of independence and of an emancipated
being.

[pg 007]
And, indeed, if the will of man be all-powerful, if states are to be
distinguished from one another only by their boundaries, if everything may

be changed like the scenery in a play by a flourish of the magic wand of a
system, if man may arbitrarily make the right, if nations can be put through
evolutions like a regiment of troops; what a field would the world present
for attempts at the realization of the wildest dreams, and what a temptation
would be offered to take possession, by main force, of the government of
human affairs, to destroy the rights of property and the rights of capital, to
gratify ardent longings without trouble, and provide the much coveted
means of enjoyment. The Titans have tried to scale the heavens, and have
fallen into the most degrading materialism. Purely speculative dogmatism
sinks into materialism.

All is changed, both men and things. Yet we hear the same old style of
declamation. There are those who wish to plough up the soil which the
harrow of the revolution went over yesterday; and they believe they are
marching in the way of progress. They do not see that they have mistaken
their age, and that the bold attempts of the past have now come to possess a
directly opposite meaning. Without stopping to inquire to what side the new
world inclines, they repeat the same words, and swear in verba magistri,
and go the road of destruction, believing themselves to be creating the
world anew!

Nothing is more natural than that these excesses should produce other
excesses, in a contrary direction. Moved by hatred or fear of revolutionary
absolutism, nations seek an asylum in governmental absolutism, or they
retrograde towards the middle ages, and consider the mutual bond of
protection and dependence of that period as the ideal and the realization of
true liberty. History is no longer the organic development of social life, and
man, like a soldier that thoughtlessly and capriciously has gone beyond his
place of supplies, is obliged to retrace his steps. The reaction is clearly
defined. The past is opposed to the present, not as a [pg 008] lesson to be
turned to advantage, but as a model which must be hastily accepted; and
men become revolutionary in a backward direction.

However, history, rigorously studied, knows neither these complaisances
nor these weaknesses. It does not descend to the apotheosis of a past which
cannot return again. The real historical spirit consists in rightly discerning
what belongs to each epoch. Its object is, by no means, to call back the dead

to life, but to explain why and how they lived. In harmony with a healthy
philosophy, it assigns a limit to the vagaries of arbitrary will, beyond which
the latter cannot go. It unceasingly calls us back, from the heights of
abstraction, to positive facts and things.

In the creation of systems, only one thing was wont to be forgotten, men,
who were treated, in them, like so many ciphers; for intellectual despotism
has this in common with all despotic authority. History teaches us that we
can reach nothing great or lasting, but by addressing ourselves to the soul. If
the soul decays, there can be no longer great thoughts or great actions.
Society lives by the spirit which inhabits it. It may, for an instant, submit to
the empire of force, but, in the long run, it hearkens only to the voice of
justice. It was thus that the greatest revolution which history records, that of
Christianity, was accomplished. It addressed itself only to the soul; but by
changing the hearts of men, it transformed society entirely.

The violent struggle between an imperious dogmatism and an unintelligent
and mistaken attempt at a retrogressive movement is resolved into a higher
view, which permits the union of conservatism and progress. Violent
attempts and rash endeavors made, threatened to bring contempt on the
noblest teachings of philosophy, and to make them repulsive to man; and,
on the other hand, a blind respect for the institutions consecrated by history
threatened to stifle all examination and all freedom of judgment.

But a healthier doctrine has permitted us to understand, that [pg 009] we are
continuing the work of preceding generations; that we are developing the
germs which they successively sowed; that we are perfecting that which
they had only sketched, and that we are letting drop that which has no
support in the social condition of man. Every thing is connected; each thing
is linked to every other; nothing is repeated. The hopes of sudden and total
renovation, based on absolute formulas, vanish before the touch of this solid
study. This shows us how firm and unshaken are those reforms which have
begun by taking hold of the minds of men, the precise spirit of which had
penetrated into the souls of whole nations before they had manifested
themselves in facts.

Law and Economy constitute a part of the life of nations in the same way
that language and customs do. The power of history in no way contradicts

the supremacy of reason.

II.

These two tendencies, the rationalistic and the historical, are everywhere
found face to face. They carry on an eternal warfare, which is renewed in
every age, under new names and new forms. Accomplished facts and
renovating thought divide the world between them. They at one time
moderate its speed, and at others, spur it on its way. But these two forces,
instead of compromising the destinies of humanity by their opposing action,
maintain and balance them, as the contrary impulses given by the hand of
the Great Architect has peopled the universe with worlds which gravitate in
space.

Victor Cousin, a very competent authority on the subject, has said that the
history of philosophy is the torch of philosophy itself. The remarkable
works which have enriched it in this direction are well known. History, on
its side, is enlightened by philosophy. Thus, it teaches us not to despise
facts, but at the same time not to be slaves to precedent. It does equal justice
to the incredulous and to the fanatic, to too supple practitioners and to
intractable theorizers.

[pg 010]
We may doubtless say with Henri Klimrath, who, in connection with a few
others, had undertaken the work of the restoration of historical study in its
application to French law, that there is an absolute, true, beautiful, good and
just, the ratio recta summi Jovis,7 the supreme reason founded in the nature
of things.8 The eternal truths taught by philosophy constitute the higher law,
a law which dates not from the day on which it was reduced to writing, but
from the day of its birth; and it was born with the divine intelligence itself.
“Qui non tum denique incipit lex esse, cum scripta est, sed tum cum orta
est. Orta autem simul est cum mente divina.”9 And Troplong rightly adds:
“There are rules anterior to all positive laws. I cannot grant that the action
of conscience and the idea of right are the work of the legislator. It is not

law that made the family, property, liberty, equality, the idea of good and
evil. It may, indeed, give organization to all these things, but in doing so, it
is only working on the foundation which nature has laid, and it is perfect in
proportion as it comes nearer to the eternal, immutable laws which the
Creator has engraved on our hearts. What changes is not the eternal law, the
revelation of which comes to man incessantly and by a necessary action, but
the form in which humanity clothes it, the institutions which man builds on
its immutable foundation.”10

We therefore believe in the law of nature, and regret that our opinion is not
shared by Mr. Roscher, at least that he does not explicitly enough express
his faith in it, nor apply it broadly enough in the beautiful work which we
are happy to render accessible to the French public.11 We believe in it in its
[pg 011] philosophical sense, and not simply in the juridical sense attached
to it by Ulpian. “Let us not,” observes Portalis, “confound the physical
order of nature, common to all animated beings, with the natural law which
is peculiar to man. We call natural law, the principles which govern man
considered as a moral being, that is, as an intelligent and free being,
intended to live in the society of other beings, intelligent and free like
himself.”12 Ulpian's famous tripartite division, of natural law, the law of
nations, and the civil law, is proof, from the meaning he attaches to them,
either of a misunderstanding or of the imperfect idea which the Stoics had
conceived of the essence of natural law. In vain Cujas exhausted all the
resources of his noble intellect to explain it.13

[pg 012]
It is necessary to draw a distinction between physical law and the law
(droit) of intelligent beings. Doubtless the existence of men as well as that
of animals is limited by time. They both live and die; but the soul escapes
the necessities of material nature.

The moment there is question of right, intelligence governs, reason comes
into play, and the science of right and wrong is appealed to as a guide.
Hence the natural law of the human species is not the physical law which
all creatures obey.

It was necessary for us to insist upon these principles. It was necessary for
us to show that there is a law independent of positive and local law, a law

which is not the expression of an arbitrary will, but an emanation from the
nature of things.14

Hence come the features in common which we meet with everywhere, and
the variable forms which develop law in harmony with the special
conditions of each civil society.

We must descend into the very depths of human nature to discover these
eternal and permanent laws; and if the mere effort of the mind should not
reach them directly, they might be discovered in the phenomena of the life
of nations. History affords us the counter-proof and confirmation of the
philosophical doctrine.

The development of society does not afford a mathematical expression of
these higher truths. It gives them a form which is unceasingly modified in
the written law. The person who discovers in them nothing but an absolute
rule, looks upon the changes as evidences of caprice and error. He alone
understands the revolutions of things who knows their cause and the
necessity which produces them.

[pg 013]
Solon was right when he gave the Athenians not the most perfect laws, but
the best which they could bear.

It is not in the attempts contemporary with the infancy of society, or nearly
so, that we are to look for the complete realization of the precepts of the
natural law; for principles obey the rule laid down by Aristotle. “The nature
of each thing is precisely that which constitutes its end; and when each
being has attained its entire development, we say that that is its own proper
nature.”15

The ideas of natural law are purified in proportion as society grows
enlightened and free; but the truth appears only successively in the phases it
passes through. It allows us to grasp one aspect of itself after another, but
does not surrender itself entirely, at any one moment, to the investigations
of the historian or the jurisconsult.

History and philosophy interpenetrate and complement one another.

III.

The two schools, that of philosophy and that of history have met in our day,
in the field of law. Who is there that does not remember the great and noble
contest carried on, about the beginning of this century, between two
descendants of Frenchmen who had sought a refuge in Germany, and who
united in their own persons, and in so marvelous a manner, the different
aptitudes of the country they owed their origin to, and of the land that gave
them birth,—between Thibaut and Savigny?

It would be difficult to find a scientific question of a higher character,
debated by champions more worthy to throw light upon it.

The Code Napoléon had appeared. It had, to use Rossi's happy expression,
transferred into law the social revolution [pg 014] produced by the
destruction of privilege. It was the practical formula expressive of the
conquests which had been made.

The philosophy of the eighteenth century had previously inspired the
Prussian Code. And yet, it was on the question of codification that this
memorable controversy was carried on. The two principal combatants,
while manfully battling, the one against the other, continued to hold each
other in high esteem, and the profound study of law was developed in the
midst of the melée.

We cannot delay long on this subject, nor analyze the arguments advanced
by Thibaut16 and Savigny.17 What interests us at present is not so much the
question debated, as the intellectual movement to which it gave birth.
Savigny sustained the ancient law, Thibaut attacked it. Numerous and
distinguished jurisconsults ranged themselves on the one side and the other.
A new school grew up which, with the most brilliant success, made law
throw light on history and history on law.

The application of the historical method to the study of law was productive
of the most happy results.

Without acknowledging it to themselves, the chiefs of the contending
parties were each obeying a political impulse. Savigny was by his birth and
his tastes carried into the camp of conservatism; Thibaut, led by his
convictions, into the liberal ranks. Nevertheless, the natural elevation of
their genius preserved them from all exaggeration. The glorious defender of
tradition preserved a liberal spirit, and the ardent advocate of reform desired
no upheaval.

In what more nearly concerns the question with which we are now
occupied, Savigny—while he maintained that law was something
contingent, human, national; and while he brought out into relief the
practical and exalted character of its successive developments which
introduced reform and guarded [pg 015] against revolution—developments
which, not confiding in the letter of the written law, unceasingly feed the
living and created law, that law called in the energetic language of a great
jurisconsult, a law écrit es coeurs des citoyens—is far from denying the
importance of a high and healthy philosophy which directs man in the
uninterrupted labor to which he is called, in the sphere of jurisprudence.

Men can no more renounce law than language, the forms of which last they
have gradually modified in order to better translate their thoughts into
words. The legislator's task is the successive elaboration of obligatory
provisions. He will sometimes oppose and sometimes second the natural
progress of law; but, in doing so, it will ever be necessary for him to ascend
to the nature of things, and grasp their relations, if he would not go astray in
practice, or lose himself among the successive and partial changes to which
the illustrious Berlin professor would confine the legitimate ambition of
legislative power. To go beyond this, in an age like ours, seemed to him to
be a work of destruction. However, far from denying the influence of
thought, and therefore of philosophy, acting within its sphere, Savigny
invokes its fertile aid.

Thibaut, on the other hand, with more confidence in the powers of the spirit
of modern times, did not believe a good codification to be impossible. His
starting point had been a cry for national independence. He well knew how

much veneration was due those institutions which were the slow and
progressive work of national genius, and what was the power they
possessed. He wished, therefore, to reform, not to abolish them. He well
understood that the greatness of the Code Napoléon itself, and the respect
which it inspired were due to the fact that its roots ran deep into the soil of
the past, even while the modern idea it contained shone like a bright light in
the world of things. Hence, without contesting the value of history, he
refused to acknowledge its right to exclusive reign.18

[pg 016]
The life and activity prevailing in the study of law, and the brilliant
successes that study has recently achieved, are due, in great part, to the
illustrious representatives of the historical school. We may add, here, that
the French historical school, which has so worthily inherited the spirit of
Montesquieu, has not achieved less in this direction than the older German
school. It has reconciled the opposing but not mutually hostile, [pg 017]
tendencies of Savigny and Thibaut. It has conscientiously scrutinized facts
to show their concatenation, and to allow their meaning and bearing to be
clearly grasped. A French jurisconsult, who is at the same time our highest
authority in the natural law, opened the way by his excellent essays on the
necessity of reforming the historical studies applicable to law; on the
influence of the legists on French civilization19 etc.; and by his prefaces,
equal in value to whole works, on hypothecation, sales, loans, partnership,
charter-parties etc. He may truly be said to have renewed the ancient and
prolific alliance of history and law.

Instead of pursuing a pure abstraction, this historical school has confined
itself to the knowledge of the life of man and the evolution of society. It has
applied to law, with what success is well known, the principle which has
regenerated the social sciences, philosophy, letters, history, Political
Economy,—sciences which are, so to speak, different provinces of one
intellectual empire, which interpenetrate one another without being
confounded one with another, between which no jealous barrier should be
raised, and between which reciprocity of exchange should be encouraged by
the suppression of factitious duties, which have existed only too long.

[pg 018]

IV.

We need not dwell any longer on the character of the historical method as
applied to law, nor on the services it has already rendered. On this point,
there can be no two opinions. And, if any one wonders that we should speak
of it at all, in a work on Political Economy, we can only say to him, that we
have done so to call his attention to an instructive precedent, and for the
further reason that the same method is peculiarly well adapted to the study
of Political Economy. Its advantages are the same here, its tendencies the
same, and the same motives exist to induce us to use it here. In describing
the successive phases of the question in the case of law, we have performed
an important part of the task we had imposed upon ourselves, of vindicating
the employment of the historical method, in the sphere of Political
Economy.

The study of history is the best and most powerful antidote against social
romances and ideal fancies. François Beaudouin was right when he said:
“Cæca sine historia jurisprudentia;” and we are very sure that, without
history as an element in it, Political Economy runs a great risk of walking
blindfold.

The human mind has need of being able to know where it is at any moment,
surrounded, as it is, by so many roads, running in so many different
directions. It ought to account to itself for its progress, its deviations from
the right path, and for its mistakes.20 History alone can throw any light on
questions which are not simply intellectual curiosities, but which, rather, are
most deeply concerned with the vital interests of society. It confirms the
noble teachings of philosophy, by showing how our life is made up of one
unchanging tissue of relations, and how man, even if he may vary their
colors, and change their design, cannot renew their texture.

It teaches us to admire nothing, and to despise nothing, beyond [pg 019]
measure. It enlightens us concerning questions of a very complicated
nature. Witnessing the evolutions of humanity, following the development
of social facts and theories, we better discern principles, and grow wary in
relation to the alchemists of thought, who imagine that society may be made
to undergo a transformation between the rising and the setting of the sun.

As there is a natural law, so, too, there are certain principles of Political
Economy which emanate from philosophy, and may be reduced to one
supreme principle; that of liberty and responsibility. The domain of Political
Economy is the labor of generations. But we reject with all our strength, the
materialistic doctrine which, inexplicably confusing matters, endeavors to
assimilate ideas so distinct as intelligence and things; and which would
descend so low as to employ the dynamometer to measure the creative force
of man and its results, and which sees only figures where there is a living
soul.

Man is an intelligent being, served by organs,21 by personal organs, with
which the Creator has endowed him, by giving him a body provided with
marvellous aptitudes, by external organs which he finds in nature subjected
to his power. Man was created in the image of God, say the Scriptures, and
these words contain a deep meaning. He alone, of all terrestrial beings,
possesses a spark of divine intelligence. He alone has been called to pursue
the magnificent work of creation, by giving a new face to a world to which
he cannot add so much as an atom.

Labor is nothing but the action of spirit on itself and on matter.22 Hence its
dignity and grandeur. Hence, also, the difficulties in the way of economic
studies; since, to consider them only as concerned with questions of
material production, is to forget that the products of industry are made for
man, not man for industrial products; to ignore the close relationship [pg
020] between their fruitful investigations and the whole circle of the moral
sciences; to debase them and to mutilate them.

From the moment that science concerns itself with man only, and the action
of the mind; from the moment that its end becomes not simply material
enjoyment, but moral elevation, the questions it discusses become indeed
more complex, but the answer, when found, is more prolific in results.

Wealth, then, is treated only as one of the forces of civilization. Other
interests than purely material ones occupy the first place. This matter-of-
fact philosophy which, according to Bacon's precept, seeks to improve the
conditions of life, bears in mind, that the most fruitful source of material
development lies in intellectual development. It humbly recognizes that it is
not the first-born of the family, and draws new strength from this avowal.
From the moment that it is the mind which produces and which governs the
world, intellectual and moral perfection become the cause and effect of
material progress. “But seek ye first the kingdom of God and his
righteousness, and all these things shall be added unto you.”

The increase of production, then, appears an instrument of elevation in the
moral order.23 It is energy of soul, intelligence and manly virtue which
constitute the chief source of the wealth of nations; which create it, develop
it, and preserve it. Wealth increases, declines, and disappears with the
increase, decline and disappearance of these noble attributes of the soul.

Labor is the child of thought. Nothing happens in the external world which
was not first conceived in the mind. The hand is the servant of the intellect;
and its work is successful, beautiful or useful in proportion to the activity
and development of the intellect, and in proportion as the just, the beautiful
and the good exert their power over it.

Production is, therefore, not a material, but a spiritual, work. How, then, can
acts and their morality be separated? How not understand that the market of
labor has its own distinct [pg 021] laws, and that education, even from a
material stand-point, becomes the highest interest and the most important
duty of society, since on it depends the efficiency of labor?

From the time that, after a long series of years, the doctrine of Christianity
had permeated the law of the civilized world; from the time that the
teaching of Paul, that all men are children of one Father, took form and
body, and that the principle of the equality of all men before their Maker,
was supplemented by the doctrine and by the practice of that equality
before the laws, the thinking masses have endeavored to discover the
wherefore of their actions, and the why of their sufferings. They have called
the past to account, and inquired why they have obtained so limited a share.

The people, therefore, think; and it is, therefore, a matter of importance that
they should think aright. It is of importance, that they should be guarded
against fallacious Utopian promises. Henceforth, there is no security for the
stability of the world but in the contentment of minds. There is no rest for
mankind, unless men will understand the conditions of their destiny; unless,
instead of running,

“Toujours insatiable et jamais assouvis,”

after the intoxicating cup of material enjoyment—for wants not governed
by the intellect and the heart are infinite in number, and the gratification of
one gives birth to another—they submit to the law of sacrifice, and give
play to the noblest faculty with which the Creator has endowed us, moral
empire over self.

We shall meet on this road, hard of ascent, not only peace of soul, but
goods, more real and more numerous, than those with which the
allurements of error would dazzle our eyes. The greatest obstacles to be
overcome are not material ones, but moral difficulties. As Franklin says, in
substance, he that tells you you can succeed, in any way but by labor and
economy, is a quack.

But labor is more productive in proportion as it is more intelligent, [pg 022]
as hand and mind keep pace with each other, as good moral habits generate
order and voluntary discipline.

Economy is sacrifice, binding the present to the future, widening the
horizon of thought, inspiring foresight, lengthening the lever of human
activity, by providing it with new instruments.

Life ceases to be a worry about how the body shall be sustained, and the
material world becomes the shadow of the spiritual. The former is made to
serve the latter, and man's free effort lifts him into a higher region of
thought, and into a larger field of action. The more mind there is put into a
piece of work, says Channing, the more it is worth.

We, men of to-day, are lookers-on at a marvelous spectacle. Steam furrows
the earth. Industry has taken an immense start. Mechanical force bends the
most rebellious materials. Chemistry, physics and the natural sciences are
discovering a new world. But whence all this? What is the principle of this
new life? We answer: intellectual and moral progress. Mind has grown; the
soul has been expanded. God has permitted man to be free, and furnished
him with the means to be so.

Thus man, as Mignet has said, becomes that mighty creature to whom God
has given the earth for the vast theater of his action, the universe as the
inexhaustible object of his knowledge, the forces of nature for the growing
service of his wants, by allowing him, by ever increasing information, to
obtain an ever increasing amount of well-being.

Man is free.—1789 put in action the sublime precept of the gospel. He
holds his destiny in his own hands. But the rights which he enjoys impose
new duties on him. If equality be the sentiment which predominates in our
day, we should take care not to confound it with the leveling of
Communism. Nor is it externally to us, but within ourselves, that it should
be developed, by intellectual and moral culture.

History preserves the student from being led astray by a too servile
adherence to any system. It exposes the folly of the [pg 023] “social
contract,” and of the idyllic dreams of the advantages of savage life. It
shows that nature, instead of being prodigal of her treasures, distributes
them with a niggardly hand, and that it is necessary to conquer her by labor,
intelligence and patience before we can control her.

It shows us human liberty growing stronger every day, thanks to moral and
intellectual progress, supported by the two powerful props of property, the
complement of man, the material reflection of his spiritual power; and
capital, the fruit of abstinence, the symbol of moral power and the result of
enlightened activity.

History walks with a firm step, because it feels secure in a knowledge of the
laws of human nature, and in its experience of the successive manifestations
of social life. Instead of the vagueness of ideal conceptions, it allows us to
grasp and to appreciate what is real in life. It does not confine itself to the

study of man. It makes us acquainted with men, whose wants extend and are
ennobled in proportion to the perfection of their faculties. The feelings and
the intellect are simultaneously developed in man. The savage is the most
egotistical of men.

Hence, we believe that Political Economy cannot dispense with the services
of morals and philosophy, of history and law; for these are branches of one
common trunk, through all of which the self-same sap circulates.

V.

The isolation of the theory of Political Economy is peculiar to our own day.
In more remote times, we find this study confounded with the other moral
sciences, of which it was an integral part. When the genius of Adam Smith
gave it a distinct character, he did not desire to separate it from those
branches of knowledge without which it could only remain a bleached plant
from the absence of the sunlight of ethics.

[pg 024]
We must renounce the singular idea,24 that thousands of years could pass
away without leaving any trace of what enlightened men had thought and
elaborated in the matter of Political Economy, among so many nations, and
that people should never have thought of cultivating this rich intellectual
domain, while in every other direction, it is easy for us to ascend by a road
already cleared up to the most remote antiquity.

It has already been acknowledged, that the classic domain, fertilized by
intellectual culture on a large scale and on a small one, was exceedingly
rich in valuable indications, although they do not present themselves under
the distinct form, which later affected the different branches of public life.

As to the pretended primitive simplicity of the middle ages, which it is
claimed, prevailed during that period, a species of economic vegetation,
those who maintain it forget the long series of communistic theories which,
at near intervals, found expression in many a bloody struggle, and whose
repression required the combined efforts of Church and State.

Doubtless, it is not in their modern forms that the elements of politico-
economical science are to be found, in the past. But when we succeed in
reuniting the scattered and broken parts; when we have made our way into
the customs, decrees, ordinances, capitularies, laws and regulations of those

times; when, so to speak, we come, unaware, upon the life of nations, in the
most ingenuous and confidential documents which reflect it most faithfully
because most simply, we may well be astonished at the results obtained.
Where we expected, perhaps, to find only erudition, we reap a rich harvest
of lessons which are all the more valuable for being disinterested.

Legislative and administrative acts frequently develop real economic
doctrines. It is easy to discover in them the onward course of a theory which
plunges directly into practical applications.

What results might we not expect from these efforts, if the [pg 025] genius
of investigation and of divination, which has so elevated historical studies
in our day, should have an observing and penetrating eye in this direction!
How limited was the field on which Guérard erected the scientific
monument which he has left us in his Polyptique d'Irminon; and how
precious are the lessons he leaves us, since we have here to do, not with the
history of professed doctrines or unlooked-for events, but with the historical
development of economic society which shows us the living march of
principles.

VI.

Political Economy is not, as we have just said, a new science. It has been a
distinct science only a short time. Until the eighteenth century, it was
confounded with philosophy, morals, politics, law and history. But it does
not follow, that, because it has grown so in importance, as to deserve a
place of its own, its intimate relationship with the noble studies which had
until then absorbed it should cease. There is another consequence also to be
deduced from this. From the moment that Political Economy ceases to be
considered a new science, it finds a long series of ancestors behind it, since
it is compelled to investigate a past to which so many bonds unite it. This
duty may increase its difficulties, but, at the same time, it singularly adds to
the attractions of a study which, instead of presenting us only with the arid
deductions of dogmatism, comes to us with all the freshness and all the
color of life.

We may allow those who make Political Economy simply a piece of
arithmetic to ignore these retrospective studies and their importance; for
mathematics has little to do with history. But it is otherwise with the life of
nations. These would discover whence they come, in order to learn whither
they are tending.

They are not obeying a vain interest of curiosity, as J. B. Say supposed,
when, in sketching a short history of the progress [pg 026] of Political
Economy, he said: “However, every kind of history has a right to gratify
curiosity.” It is a thing to be regretted, that this eminent thinker could thus
ignore one of the essential elements of the science to which he rendered
such great and unquestioned services. A sense for the historical was wanting
in him. “The history of a science,” he writes,25 “is not like the narration of
things that have happened. What would it profit us to make a collection of
absurd opinions, of decried doctrines which deserved to be decried? It
would be at once useless and fastidious to thus exhume them in case we

perfectly knew the public economy of social bodies. It can be of little
concern to us to learn what our predecessors have dreamed about this
subject, and to describe the long series of mistakes in practice which have
retarded man's progress in the research after truth. Error is a thing to be
forgotten, not learned.” As if that which was once to be found in time is not
to-day to be found in space; as if there ever was an institution that did not
have its raison d' etre and had not constituted a resting place in the search
after a higher truth or of a more intelligent and salutary application of an
old one! There are a great many actual systems and a great many present
facts which can be understood only by the help of history; and how
frequently would not an acquaintance with history serve to keep us from
taking for marvelous inventions the antiquated machinery of other ages,
whose only advantage and only merit are that they have remained unknown.
How much of the pretended daring of innovators has been old trumpery
which the wisdom of the times had cast off as rubbish. Besides, as Bacon
has said: “Verumtamen sæpe necessarium est, quod non est optimum.”

[pg 027]

VII.

It is not the result of mere chance that the greatest economists have been
both historians and philosophers. We need only mention Adam Smith,
Turgot, Malthus, Sismondi, Droz, Rossi and Léon Faucher. It is too
frequently forgotten that the father of modern Political Economy, Adam
Smith, looked upon the science as only one part of the course of moral
philosophy which he taught at Glasgow, and which embraced four
divisions:

1. Universal theology.—The existence and attributes of God; principles or
faculties of the human mind, the basis of religion.

2. Ethics.—Theory of the moral sentiments.

3. Moral principles relating to justice.—In this, as we learn from one of
Adam Smith's pupils in a sketch preserved by David Stewart, he followed a
plan which seems to have been suggested to him by Montesquieu. He
endeavored to trace the successive advances of jurisprudence from the most
barbarous times to the most polished. He carefully showed how the arts
which minister to subsistence, and to the accumulation of property, act on
laws and governments, and are productive of advances and changes in them
analogous to those they experience themselves.

In the first part of his course, as we learn from the same authority, he
examined the various political regulations not founded on the principle of
justice but in expediency, the object of which is to increase the wealth, the
power and the prosperity of the state. From this point of view, he considered
the political institutions relating to commerce, finance, the ecclesiastical
and military establishments. His lectures on the different subjects constitute
the substance of the work he afterwards published on the wealth of nations.
A pupil of Hutcheson, Adam Smith always applied the experimental

method, “which, instead of losing itself in magnificent and hazardous [pg
028] speculations, attaches itself to certain and universal facts discovered to
us by our own consciousness, by language, literature, history and society.”26
Before taking the professorship of philosophy, Adam Smith had taught
belleslettres and rhetoric in Edinburgh, in 1748. He had written a work on
the origin and formation of languages; and it was because he had
profoundly studied the moral sciences that it was given to him to inaugurate
a new science and to become a great economist. Mr. Cousin has laid great
stress on Adam Smith's taste and talent for history. “Whatever the subject he
treats, he turns his eyes backward over the road traversed before himself,
and he illuminates every object on his path by the aid of the torch which
reflection has placed in his hand. Thus, in Political Economy, his principles
not only prepare the future but renew the past, and discover the reason,
heretofore unknown, of ancient facts which history had gathered together
without understanding them. It is not saying enough to remark that Adam
Smith possessed a great variety of historical information; we must add that
he possessed the real historical spirit.” Thanks to this eminent faculty of his,
the Glasgow philosopher acquired great influence over minds. In 1810,
when the French empire had reached the zenith of its greatness, Marwitz
wrote: “There is a monarch as powerful as Napoleon: Adam Smith.” We
need not recall Turgot's historical researches.

Malthus' chief title to distinction, his work on Population, is as much a
historical work as a politico-economical one; and it is not sufficiently
known that he was professor of history and Political Economy in the
college of the East India Company at Aylesbury.

We need say no more on this subject. The works of the other writers whom
we have mentioned are too well known to permit any one to think that they
excluded history and moral science from the study of Political Economy.
Hence [pg 029] the school which has risen up in Germany,27 and which is
endeavoring to do for Political Economy what Savigny, Eichhorn, Schrader,
Mommsen, Rudorff, and so many other illustrious scholars have done for
jurisprudence, cannot be rightly accused of rashness. It has done nothing
but unfurl the noble banner borne by the most venerated masters of the
science.

VIII.

At the head of this school stands William Roscher, professor of Political
Economy at the University of Leipzig, whose excellent work, The
Principles of Political Economy, in which he follows the historical method,
we have just translated. William Roscher is (1857) scarcely forty years of
age. He was born at Hanover, October 21, 1817. His laborious and simple
life is that of a worthy representative of the science. “You ask me,” he wrote
us recently, “to give you some information concerning the incidents of my
life. I have, thank God, but very little to tell you. Lives whose history it is
interesting to relate are seldom happy lives.” He confined himself to giving
us a few dates which are, so to say, the landmarks of a career full of
usefulness. Roscher, from 1835 to 1839, studied jurisprudence and
philology at the universities of Göttingen and Berlin. The learned teachers
who exercised [pg 030] the greatest influence on his intellectual
development were the historians Gervinus and Ranke, the philologist K. O.
Müller and the Germanist Albrecht. It is easy to see that he went to a good
school, and that he profited by it. He was made doctor in 1838; admitted in
1840 as Privat-docent at Göttingen; appointed in 1843 professor
extraordinary at the same university, and called in 1844 to fill the chair of
titular professor at Erlangen. Since 1848 he has acted in the same capacity
in the University of Leipzig, where he was for six years member of the Poor
Board, where he teaches also in the agricultural college. His fame has
grown rapidly. Many of the German universities have emulated one another
for the honor of possessing him, but he has not been willing to leave
Leipzig. His first remarkable work was his doctor's thesis: De historicæ
doctrinæ apud sophistas majores vestigiis, written in 1838. In 1842, he
published his excellent work, which has since become classical: “The Life,
Labors and age of Thucydides.”28 From that time, important works, all
bearing the stamp of varied and profound scientific acquirements, and of an
erudition remarkable for sagacity and elegance, have followed one another
without interruption. In 1843, he treated the question of luxury29 with a

master hand, and laid the foundation of his great work—only the first part
of which has thus far appeared—at the same time tracing on a large scale
the programme of a course of Political Economy according to the historical
method.30 In 1844, he published his historical study on Socialism and
Communism,31 and in 1845 and 1846, his ideas on the politics and the
statistics of systems of agriculture. He is, besides, author of an excellent
work on the [pg 031] corn-trade;32 of a remarkable book on the colonial
system;33 of a sketch on the three forms of the state;34 of a memoir on the
relations between Political Economy and classical antiquity;35 of a work of
the greatest interest, on the history of economic doctrines in England in the
sixteenth and seventeenth centuries—a work full of the most curious
researches;36 of a book on the economic principle of forest economy,37 and
lastly, of the great work, the first part of which we have translated, under
the title of The Principles of Political Economy, and which is to be
completed by the successive publication of three other volumes, on the
Political Economy of Agriculture, and the related branches of primitive
production, the Political Economy of Industry and Commerce, and one on
the Political Economy of the State and the Commune. This work, when
completed, will be a real cyclopedia of the science.38

Side by side with William Roscher, we must mention a [pg 032] young
economist, Knies, formerly professor at the University of Marburg, but
whom political persecution compelled to accept a secondary position at the
gymnasium of Schaffhausen, for a time, and who fills, to-day, in the
University of Freiburg, in Breisgau, a position more worthy of his great
talent. We hope, in a work which we intend to publish, on Political
Economy in Germany, to make the public acquainted with the works of this
writer. They deserve to attract the most serious attention. We know of few
works which equal his Political Economy, written on the historical
method.39 We shall also have something to say of another economist,
formerly professor at Marburg, a victim, also, of the power of the elector of
Hesse, Hildebrand, now professor at the University of Zurich. His National-
Œkonomie40 is a book replete with interest, and we have nowhere met with
a better criticism of Proudhon's system, than in its pages. If the new school
had produced but these three men, it would still have left its impress on the
history of the science.

Other works, no less important, will claim our attention in the book to
which we have already devoted many years of labor. If we carry out our
intention, we shall review the works of a great many scholars, of great
merit, whose names only are, unfortunately, known outside of Germany.
The works of Rau, of Hermann, of Robert Mohl, of Hannsen, Helferich,
Schütz, Kosegarten, Wirth etc., are a rich mine, from which we hope to
draw much valuable information. Nor shall we neglect the original
productions of J. Moser, the Franklin of Germany, nor the quaint, but
sometimes striking, ideas of Adam Müller. Lastly, our learned friend,
Professor Stein of Vienna, will afford us an opportunity to show forth the
merit of important and extensive works, animated by the philosophic spirit.
For the present, we must confine ourselves to a view of the application of
the historical method to Political Economy.

[pg 033]
There is a rather widespread prejudice existing against this order of works,
a souvenir of the struggle carried on formerly, between Thibaut and
Savigny, which inclines people to suppose that the historical school leans
towards the political doctrines of the past, and that it is hostile to the liberal
spirit of modern times. Nothing can be farther from the truth. The names of
Roscher, Knies and Hildebrand are sufficient to remove this prejudice.
Their works, inspired by an enlightened love for progress, do not allow of
such a misconstruction. The historical point of view does not consist in the
worship of the past, any more than in the depreciation of the present. It does
not view the succession of phenomena as a fluctuation of events without
unity or purpose. On the contrary, the historical method harmonizes
wonderfully well with the wants of genuine progress. The changes
accomplished bear testimony to the free and creative power of man, acting
within the limit permitted to it by the degrees of intelligence reached, of the
development of morals, and of individual liberty. The philosophy of
Political Economy, which is the result of this calm teaching, free from the
passions of party—for science acknowledges no adherence to party—is like
that of law, opposed to the, more or less, ingenious or rash dreams, which
build the world over again in thought. In showing how, at all times,
humanity has understood and applied the principles which govern the
production of wealth, it may say, with the Roman jurisconsult: “Justitiam
namque colimus ... æquum ab iniquo separantes ... veram nisi fallor

philosophiam, non simulatam affectantes.” “The human mind,” says Rossi,
“endeavoring to attain to a knowledge of itself, estimating its strength,
taking a method, and applying it with a consciousness of its mode of
procedure to the knowledge of all things; such is philosophy. Without it,
there is no science in any branch of human knowledge.” Thus do we rise,
with the aid of a critical mind, by careful investigation and great sagacity, to
the truths founded on observations made.

[pg 034]

IX.

There is another method, which, starting out from principles, evident of
themselves, develops science by way of conclusions drawn, after the
manner of the geometricians. The apparent severity and simplicity of this
method are very seductive, and very dangerous, when we have to deal not
with figures, but with men; when the varied, complex and delicate
exigencies which accumulate when human nature comes into play do not
exactly square with the formula; and, when instead of dealing with
abstractions, we have to tackle realities. One of our venerated teachers, the
illustrious Rossi, thought he might remove the difficulty by drawing a
distinction between pure Political Economy and applied Political Economy.
It is not without a certain amount of hesitation that we dare differ with so
high an authority; but confess we must, this distinction is far from satisfying
us. The doubt it has left in our mind has been the principal cause which has
inclined us to the historical method. “Rational Political Economy,” says
Rossi, “is the science which investigates the nature, the causes and the
movement of wealth, by basing itself on the general and constant facts of
human nature, and of the external world. In applied Political Economy, the
science is taken as the mean. Account is taken of external facts. Nationality,
time and place play an important part.”

Let us for a moment accept these definitions; what is the consequence? That
there are two sciences, the one of which, purely speculative, has more to do
with philosophy than with the permanent conflicts which agitate the world;
the other of which could not alone furnish us with rules in practice, nor with
a formulary for the measures to be taken in a given case, since such a
pretension would be both vain and ridiculous, but which would inform the
practical judgment of men charged with the solution of the numberless
difficult and complicated questions which come up every day. If pure
science refuses to interfere in the affairs of this world; if, as the learned [pg
035] originator of the doctrine we are just now considering gives us to

understand, it would compromise the solution of questions by the
intoxication of logic, and the ambition of perfect system; if, consequently, it
is to be worshipped like a motionless and inactive divinity, how could this
platonic satisfaction suffice us? Would not the opponents of economic
doctrines be disposed to acknowledge all the principles, provided the
consequences to be drawn from them were left to themselves; and would
they not come to us, bristling with arguments drawn from the circumstances
of nationality, time and space, to refute the possibility of applying pure
science?

On ne vaincra jamais les Romains que dans Rome.

This, therefore, is the ground we must explore. We must develop applied
Political Economy which takes cognizance of external circumstances. To do
this, no one will question that the best and most decisive of methods is the
historical, which concerns itself with time, space and nationality, and which
leads to proper reformation where reformation is wanted.

Moreover, principles will be no less firmly established by historical
induction than by dogmatic deduction, and, moreover, science will be
inseparable from art. We are not of those who deny principles, or who
challenge them. What we desire is, that they should not be worshiped as
fetiches, but that they should enter into the very life-blood of nations.

Further: the abstract deductions of pure science do not leave us without
disquietude, since they treat man much more like a material than like a
moral force. Under the vigorous procedure of speculative mathematics, man
becomes a constant quantity for all times and all countries, whereas he is, in
reality, a variable quantity. All the elements put in play are ideal entities, the
reverse of which we find in poetry, where

Tout prend un corps, une ame, un esprit, un visage!

and where everything loses the character of life, and is transformed into
inanimate units. Man is something different from [pg 036] the sum of the

services he may be made to render, and from the sum of enjoyments which
may be procured for him. We must not run the risk of lowering him to the
level of a living tool; and from the moment that we are required to take his
moral destiny into account, what becomes of abstract calculation?

X.

We have been wrong, says Rossi, in reproaching Quesnay for his famous
laissez faire, laissez passer, which is pure science. We, also, are of opinion
that the reproach was ill founded, for it proceeded from a wrong conception
of the principle itself. But it seems to us that, far from condemning this
doctrine in its serious application, the historical method may serve to
explain and to justify it. Employing less of rigidity and dryness in form, it
reaches consequences more in harmony with social life. But it is not to be
imagined that we do not meet in this way with many ancient and glorious
precedents. The great principles of industrial liberty, as well as those of
commercial liberty, originated in France. Forbonnais was right when he
said: “We may congratulate ourselves on being able to find, in our old
books and ancient ordinances, wherewith to vindicate for ourselves the right
to that light which we generally supposed to have been revealed to the
English and Dutch before us.” The further Forbonnais carried his researches
into our annals, the greater the number of traces of opposition to the
prejudices in favor of exclusion and monopoly, so long made principles of
administrative policy, did he find.41

The famous axiom, laissez faire, and laissez passer, the subversive
tendencies of which people affect to condemn, was not invented by
Quesnay. He only gave a scientific bearing to what was the inspiration of a
merchant called Legendre. The latter, consulted by Colbert on the best
means of protecting [pg 037] commerce, dropped these words which have
since become so celebrated.

We must not lose sight of their real meaning, nor misunderstand the
intention which dictated them. What Quesnay said was this: “Let everything
alone which is injurious, neither to good morals, nor to liberty, nor to
property, nor to personal security. Allow everything to be sold which has
been produced without crime.” And he added: “Only freedom judges aright;

only competition never sells too dear, and always pays a reasonable and
legitimate price.” Far from being the absence of rule, liberty is the rule
itself. To laisser faire the good is to prevent evil.42

There is need of institutions to complete the exercise of the independence
acquired by labor, and of laws to regulate that exercise. The laisser faire
and laisser passer of economists is, in no way, like the absolute formula,
which some have denounced and others sought to utilize, as relieving
authority of all care and all intervention.

To understand this maxim aright, we must go back to the oppressive regime
of ancient society. Quesnay's formula was, first of all, a protest against the
restraints which hampered the free development of labor. But it did not tend
to abrogate the office of legislator, nor to deprive society or the individual
of the support of the public power which watches over the fulfillment of our
destiny.

It may have seemed convenient to find in the gravity of a politico-
economical principle, an excuse for the sweets of legislative and
administrative far niente, but it is generally conceded that the role of
authority has grown, rather than diminished, under the regime of the liberty
of labor. The task is, in our days, a hard one, both for individuals and
nations; for liberty dispenses its favors only to the masculine virtues of a
laborious and an enlightened people.

Liberty is not license. It refuses to bend under the yoke, [pg 038] but it
submits to rule. The mission of authority is not to constrain, but to counsel;
not to command, but to help accomplish; not to absorb individual activity,
but to develop it. It does not pretend to raise a convenient indifference on
the part of government, nor the indolent withdrawal of all protective
influence to the dignity of a principle. To say, on the other hand, that the
laisser faire and laisser passer of the economists means: Let robbery alone;
let fraud alone etc., is to amuse one's self playing upon words, and to argue
in a manner unworthy of any serious answer. Under pretext of painting a
picture of economic doctrine, we are given its caricature. Such has never
been the system, to the elaboration of which the purest hearts and noblest
intellects have devoted themselves. A negation does not constitute the
science of Political Economy.

It is very convenient to inclose humanity within a circle of action, drawn
with rigorous precision, and to govern movements seen in advance. But
such artificial conceptions mutilate the activity of man. To guarantee man
all liberty, and prevent its abuse—such are the data of the problem. The
work is a great and difficult one. Far from yielding in point of elevation to
ideal systems, it is superior to them in extent and variety of combinations.
Those who ignore its bearing, yield, it may be, to a certain indolence of
intellect. Restrained within its natural limits, the famous laisser faire and
laisser passer of the Physiocrates deserves even to-day our respect and our
confidence. It ought to be preserved in the grateful memory of men, side by
side with the maxim which Quesnay succeeded in having printed at
Versailles, by the hand of Louis XV himself: “Pauvres paysans, pauvre
royaume; pauvre royaume, pauvre souverain.”43

[pg 039]

XI.

To return to the question of method. Rossi made use of an ingenious
example to explain his thought:44 “Are,” he inquires, “these deductions [of
pure science] perfectly legitimate; are these consequences always true? It is
incontestably true that a projectile, discharged at a certain angle, will
describe a certain curve; this is a mathematical truth. It is equally true, that
the resistance offered to the projectile by the medium through which it
moves modifies the speculative result in practice, to some extent; this is a
truth of observation. Is the mathematical deduction false? By no means; but
it supposes a vacuum. I hasten to acknowledge it. Speculative economy also
neglects certain facts and leaves certain resistances out of account.” Now,
from the moment that we have to deal with human interests, it is not
possible to suppose a vacuum, to neglect the most vulgar facts, and the most
common instances of resistance, nor to lose one's self in abstraction. The
correctives of applied Political Economy either may not wipe out this
original sin, or else they run great danger of covering up the principles
themselves. In ballistics, again, we may measure the resistance which the
medium in which we are obliged to operate, makes the force of impulsion
and the target both obey the same law, and yield to the same process of
calculation. But is it thus when you touch upon man's innermost and most
sensitive part? Is there not danger that the hypotheses may be deceitful, and
that you may be accused of toiling in a vacuum? We well know the solid
reason that may be opposed to sarcasm of this nature; but is it expedient to
lay one's self open to it?

Moreover, the consequences are not great enough to warrant us to expose
ourselves to the danger. The principles of pure science are very small in
number. They might even, be easily reduced to one, of which M. Cousin has
been the eloquent [pg 040] interpreter—human liberty. This liberty has no
need of Political Economy to shine with the luster of evidence; nothing can
prevail against it. We can prove that it is as fecund as it is respectable; but if

the science of wealth should endeavor to demonstrate the contrary, the
primordial bases of society, liberty, property and the family would not be
less sacred nor less necessary, for they are the right of humanity. They could
not be put aside, even under pretext of any mechanism which would claim
to produce more.45 These sovereign principles of economy flow from the
moral law, and they have no reason to dread the power of facts, for the
prosperity of nations depends on the respect with which they are surrounded
and the guarantees by which they are protected.

We have spoken of the moral law; and, indeed, in our opinion, it is
impossible to banish it from the domain of public economy. Any other point
of view seems to us too narrow. And when we see eminent men go astray in
the pursuit of an ideal which fails to take the human soul into account, and
which finds nothing but equations where there are feelings and ideas, we
cannot help thinking that they are unfaithful to the thought of the founder of
the science, Adam Smith. Man is not simply a piece of machinery. He does
not blindly submit to external impulse. Rather is he himself, the greatest of
impulses. But to govern things, he must first learn to conquer himself.
Personal interest is the powerful motive which he obeys. Man does not live
alone, in a state of isolation, in the world. Væ soli! He lives in society and
profits by the relations which he forms with other beings, intelligent like
himself, and for whom he has a natural feeling of sympathy.

The good that comes to them yields satisfaction to him, and the evil that
befalls them falls on him likewise. He cannot turn back entirely upon his
own personality. Besides his own interest, he feels and shares another
interest—the interest of all. Personal interest is perfectly legitimate. The
love of self cannot [pg 041] be condemned. The Savior himself has
enjoined us to love our neighbor as ourselves. To love him more than
ourselves is a very high and beautiful virtue. It is the self-abnegation which
inspired Christian heroes. But heroism is rare, and cannot be imposed, nor
taken, as a rule. Personal interest is a powerful stimulant, and the superior
harmony of social relations makes it contribute to the general good.

What must be condemned is a fatal deviation of this sentiment which
destroys its effect and narrows its actions. What we need to prevent is the
degeneration of personal interest into an egotism which parches, instead of

fertilizing, and which compromises the future by the exclusive search after
present advantage; for egotism is short-sighted. On the other hand, the
broader and more generous feeling which inclines us to sympathize with
our fellow beings in their sorrows, and to unite our destiny to theirs; that is,
the feeling of the general interest, has a limit too.

It would be falsified if it absorbed the individual; if it destroyed the most
powerful motive-force by drying up the abundant source of activity; if it
attacked moral energy by enervating responsibility; if it extended the circle
of results obtained to such an extent that scarcely any one should feel the
rebound.

The evil produced by egotism, that sad travesty of personal interest, appears
under a form quite as formidable when the general interest takes the form of
communism. The coöperation of personal interest and of the general interest
is always necessary, both for individual profit and social advantage. There
is as much danger in annihilating the individual as in exalting him. History
furnishes us with memorable examples of this. It does not allow us to go
astray in the narrow ways of a peevish and jealous personality, nor to lose
ourselves in the vague labyrinth of a chimerical and false communism. The
latter would destroy what constitutes the power and dignity of man. It
would wipe out the most prominent features of his noble nature, by
destroying the support of energy and activity and the food of moral force.

[pg 042]

XII.

But, we are told, Political Economy is only the science of selfishness; Adam
Smith is the prophet of individualism; grow rich per fas et nefas is its
ultimate teaching. Such a judgment is evidence of much levity and little
enlightenment. How could the man who conceived the study of human
interests on so large a scale, the philosopher who acknowledged Hutcheson
as his master and gave his ideas a still more expansive character, be the
apostle of egotism; and how can the science which he founded be its
gospel? There is here an error of fact and a defect of appreciation.
Hutcheson had based moral philosophy on the feeling which, according to
him, engendered all the other virtues, on benevolence, which is
disinterested, busied with the welfare of others, with the public weal and the
general interest. Adam Smith went further, and sought to base it on a still
more energetic feeling, on sympathy.

The first sentence of his Theory of the Moral Sentiments, which is a full
resumé of his theory, is as follows: “How selfish soever man may be
supposed, there are evidently some principles in his nature which interest
him in the fortune of others, and render their happiness necessary to him,
though he derives nothing from it, except the pleasure of seeing it.” And
this is no empty declaration on his part. It is the thought which of all in his
book is nearest to his heart; and hence he energetically assails those
philosophers who look upon self-love and the refinements of self-love as
the universal cause of all our sentiments, and seek to explain sympathy by
self-love.

La Rochefoucauld, Mandeville and Helvetius never met with a more
determined or energetic adversary. Nowhere have the sweet and amiable
virtues, such as ingenuous condescension, indulgent humanity, and the
respectable and severe virtues, such as disinterestedness and self-control
which subject our movements to the requirements of the dignity of our [pg

043] nature, been better understood or interpreted. Adam Smith is the
philosopher of sympathy.46 His theory triumphs over the cowardly and
shameful egotism which concentrates the moral life of the individual in
himself, and separates it from the life of the human race of the outré
stoicism which refuses the aid of sentiment to reason.47 According to him,
the law of private morals is sympathy; the law of natural jurisprudence,
justice; the law of the production of wealth, free labor. But while he
defended this principle with energy, he did not become guilty of a real
recantation by worshiping the idol he had just overthrown. He would have
been culpable of the strangest of all contradictions if he had made the vice
which he had just lacerated the very pivot of another part of his teaching.

We regret that this essay, which has already very much exceeded the limits
we assigned it in the beginning, will not permit us to reproduce here Knies'
beautiful demonstration, in which he so learnedly and eloquently vindicates
Adam Smith from this strange imputation, thereby placing Political
Economy on its true basis, the basis of morals, by removing in a decisive
way, all pretext of error and all means of subterfuge. This part is one of the
best features in his most excellent work on “Political Economy, from the
historical Point of View.” We shall return to this matter.

XIII.

What is there that political economists have not been charged with? They
have been accused, above all, of a cold heartedness and cruelty, and the
sentence passed on them has been resumed in these words: “Political
Economy has no bowels!” Indeed, the representative of the science, who
has been most attacked and who has been held up as a picture of impassible
insensibility; on whom have been heaped the most bloody outrages, [pg
044] is Malthus. Let us hear him. He tells us in his work on Political
Economy, that if a country had no other means to grow rich, except by
seeking for success in the struggle with other countries, at the cost of a
reduction of the wages of labor, he would unhesitatingly say: Away with
such riches; that it is much to be desired that the working classes should be
well remunerated, and this for a reason much more important than all the
considerations relating to wealth; that is, the happiness of the great mass of
society. And he goes on to say, that he knows nothing more detestable than
the idea of knowingly condemning the laboring classes to cover themselves
with rags, to lodge in wretched huts, to enable us to sell a few more stuffs
and calicoes to foreign countries. Certain it is, that no defender, however
determined, of the laboring classes, has said anything stronger or more
deeply felt. The reason is, that nothing was more foreign to Malthus' ideas
than the systematic rigidity of mathematical theories of wealth; that, a
minister of the Gospel, he had meditated on its high precepts. His whole
doctrine is based on the moral idea. “He was profoundly convinced that
there are principles in Political Economy which are true only in as far as
they are restricted within certain limits. He saw the principal difficulty of
the science in the frequent combination of complicated causes, in the action
and reaction of causes on one another, and in the necessity of setting limits
or making exceptions to a great number of important propositions.” Here
we are ever brought back to the undulating ground of living science, instead
of having to follow the rectilineal way traced out by the dead letter. We are
always driven back, whatever may be pretended to the contrary, to the

realities of which history alone possesses the secret. The idea of wealth
cannot absorb everything when there is question of judging and
enlightening men. To do this, it is necessary to know the various phases of
social housekeeping, what nations have thought of economic interests [pg
045] which have never ceased to interest them greatly, what they have
attempted and what they have attained.

Hence, we must turn over the leaves of the book of the past, and study its
economic aspect, as we have studied its political and literary aspect. We
must follow living nations through their divers periods of development, and
fathom the causes of the destruction of those that are dead. When we are
dealing with the comparative study of the economic destinies of nations,
our investigations are limited to a small number of individual nations—a
further reason not to omit any, and above all, to scrutinize, as an anatomist
would with his scalpel, the principle of life of those which are no more. We
may, by accounting to ourselves for the immense variety of phenomena
which are brought to light by the application of principles to facts, and in
which nothing is absolute or permanent, in which, on the contrary,
everything is relative and successive, acquire that sureness of touch and
correctness of vision which are among the most valuable conquests of
science.

It would be a mistake to suppose that theory simplifies practical solutions.
Far from providing us with a sort of formulary, it teaches us to put our
finger on a number of difficulties. It brings to the surface the many aspects
and fertile and varied considerations, the examination of which is the
mission of the real statesman and legislator. In this way, the action of
thought and the power of the moral idea are revealed with most éclat. Man
ceases to be an inert element, and manifests himself as a sensible being, and
the sublime thought of Pascal: “Humanity is like one man who lives and
learns always,” is verified by the result. The wish to violently abdicate the
past, it would be vain and rash to attempt to realize. The lessons it transmits
to us are as instructive as the picture it unrolls before our eyes is attractive.
We have no longer but to see and hear, to be cured of the most generous
impatience with what is, and to retreat from the most perilous attempts.

[pg 046]

XIV.

The unvarying testimony of ages affirms the continued and gradual
amelioration of man by individual energy and moral thought.48 Want and
suffering have urged him forward. Foresight, labor, sacrifice and virtue
have in part redeemed him. No right has been lessened or usurped, and
every step in civilization has been a step in the way of freedom. Instead of
making the latter responsible for a material and moral wretchedness which
it is called upon to cure, we may prove, that, in proportion as real liberty
and legal guarantees increase, evil diminishes.

We do not desire to yield to a convenient optimism, and deny the sufferings
which weigh only too heavily on the world. We are far from having reached
the end assigned to our efforts; but let not the hope we entertain of further
progress blind us to that which has already been accomplished. This latter
shows us that we are on the right road, and that we have not done unwisely
in giving free rein to the human faculties. Sudden changes are made only in
theaters. In the real world, the march of progress is slow and laborious. It
may be accelerated by a happy hit; but it would be vain to try to hurry it.

Man still suffers. No one desires to deny the evil, but only to estimate its
extent. Yet it cannot be gainsaid that its fatal empire is narrowing instead of
enlarging. Especially is it the progress accomplished in the higher regions
of intellect and of the feelings which here exerts its beneficent influence.
On our moral greatness depends our material power. The elevation or
debasement of character, the energy or debility of the will—such is the first
source of good or evil. The world, a Chalmers rightly says, is so constituted
that we should be materially happy if we were morally good.

Industrial progress helps, we have said, towards moral perfection. It is not
the source of that perfection, but its instrument; [pg 047] for ignorance and
misery, its habitual attendants, are poor advisers. Political Economy shows

how the goods of this world are multiplied. It shows how modest comfort
may become more and more general, and thus an impetus be given to all
noble virtues without awakening a blind passion for riches. It teaches
moderation instead of exciting covetousness, nor does it come in conflict
with the sublime words of Saint Augustine: “The family of men, living by
faith, use the goods of the earth as strangers here, not to be captivated by
them or turned away by them from the goal to which they tend, which is
God, but to find in them a support which, far from aggravating, lightens the
burthen of this perishable body which weighs down the soul.”

XV.

Looked at from below, all things diverge. Looked at from above, all things
run into one another and combine with one another. It is one of the great
merits of the historical method, that it raises the point of observation and
gives the observer the support of tradition and good sense, that master of
life; that it prevents a divorce between different branches of knowledge of
the same order, which constitute but one intellectual family, which there is
no question of confounding, and which it would be dangerous to isolate.

Aristotle, that universal genius, had discovered Political Economy, and it
was the historical method which revealed it to him. Be it added, that the
great philosopher had seen but one phase of the science, chrematistics, and
that his ideas here bear the impress of the age in which he lived. Aristotle,
however, distinguished this science from all others and from domestic
economy, which is so akin to it. Doubtless, he did not found the modern
study of Political Economy, but his powerful intellect gave him a
presentiment of it.

The honor of producing at once, Adam Smith, Quesnay and Turgot belongs
to the eighteenth century. It was in the [pg 048] course of philosophy at
Glasgow that this study found a definite place. The illustrious founder of
the science of Political Economy did not contemplate dissolving the ancient
alliance between it and the moral sciences, history, philosophy,
jurisprudence, belles-lettres—all of which he had explored and studied
profoundly. Let those whose ambition it is to walk, even at a distance, in the
footsteps of Adam Smith, not forget what was the cradle of the noble study
to which they have devoted their intellects.

L. WOLOWSKI.

[pg 051]

Introduction.

Chapter I.

Fundamental Ideas.

Section I.

Goods—Wants.

The starting point, as well as the object-point of our science is Man.49

Every man has numberless wants, physical and intellectual.5051 Wants are
either necessaries, decencies (Anstandsbedürfnisse) or luxuries. The non-
satisfaction of necessary wants causes disease or death; that of the wants of
decency endangers one's [pg 052] social position.52 The much greater
number, and the longer continuance of his wants are among the most
striking differences between man and the brute:53 wants such as clothing,
fuel,54 tools, and those resulting from his much longer period of infancy;
which last, together with other causes, has contributed so largely to make
marriage necessary and universal. While the lower animals have no wants,
but necessities, and while their aggregate-want, even in the longest series of
generations, admits of no qualitative increase, the circle of man's wants is
susceptible of indefinite extension.55 And, indeed, every advance in culture
made by man finds expression in an increase in the number and in the
keenness of his rational wants. No man who distinguishes himself in
anything, but feels spurred thereto by a peculiar want; and this want is both
the cause and the effect of the power which is peculiar to him. No one but
the poet feels the want of poetizing; no one but the philosopher, of
philosophizing. In every particular, intellectual or physical, in which the
man is in advance of the child, he experiences new wants unknown to the
child. Our education consists, for the most part, in awakening wants and
providing for their satisfaction.

[pg 053]
Goods are anything which can be used, whether directly or indirectly, for
the satisfaction of any true56 or legitimate human want,57 and whose utility,
for this purpose, is recognized. Hence, the idea goods is an essentially
relative one. Every change in man's wants, or knowledge, is accompanied
by a rapid, corresponding change, either in the limits of the circle58 of
goods, or in their relative importance. Thus, the tobacco plant has, probably,
existed thousands of years. It became goods, however, only from the time
that man recognized its use for smoking, snuffing etc., and experienced the
want of it for these purposes. In a similar way, the limestone of the
Solenhofen quarries has become goods, of considerable importance, only
since the invention of lithography; decaying bones, only since that of bone-
dust manure; caoutchouc since about 1825, and gutta-percha, only since
1844. On the other hand, charms,59 philters, and even relics, since the decay
of faith in their efficacy, have lost the quality of goods. If the aggregate
income of all mankind were, by some sudden revolution, to be equally
divided among all, diamonds, for instance, would [pg 054] greatly decline
in value, for the reason that it is dependent, in great part, on the wants
generated by vanity, or by the desire of outshining others. Beer, tobacco
etc., would rise in the scale as goods, because the circle of those to whose
wants they minister would have been very greatly extended. On the whole,
advancement in civilization has uniformly the effect, of itself, to increase
the quantity and number of goods, the wants and knowledge of men being
thereby increased. We should reach the ideal here, if all men experienced
only true or legitimate wants, but these completely; if they could see their
way, clearly, to the satisfaction of them, and find the means of satisfying
them with just the amount of effort most conducive to their physico-
intellectual development.60

Section II.

Goods.—Economic Goods.

By economy (Wirthschaft=husbandry or housekeeping), we mean the
systematized activity of man, to satisfy his need (Bedarf=requisite) of
external goods.61 This treatise is concerned only with economic goods (ends
or means of economy).62 The greater the advance of civilization or human
culture, [pg 055] the less apt are men to pursue the satisfaction of their
wants, isolated from their fellows, or, in other words, to carry on their
economies or husbandries apart from one another. The more numerous the
wants of men, and the more different in kind their faculties are, the more
natural does exchange63 become. Since all goods derive their character as
goods from the fact that they are destined to satisfy human wants, the very
possibility of exchange must greatly increase the possibility of things to
become goods. Think of the machinist, whose products are used only by the
astronomer, while the latter is never in a way to manufacture them for
himself. (Hufeland.) Commerce is the series of combinations, created by the
interchange of services: “a living net of relations, which wants and services
are ever weaving and unweaving.” (Hermann.) As a rule, with an advance
in civilization, there is an increase in the number of goods, which become
economic goods, and in the number of economic goods which become
commercial goods (objects or means promotive of commerce).64 But this is
to be considered a real advancement only to the extent that that which is
obtained is superior to that which was possessed before, in consequence of
the specialization of callings or the greater division of labor (§ 48 ff.).
When a little street Arab exacts money from a stranger for pointing out the
way, we rightly censure him; but no one would find [pg 056] it improper if
he should first fit himself to play the part of a guide, and then live by his
calling.65

Section III.

Goods.—The Three Classes Of Goods.

All economic goods are divided into three classes:

A. Persons or personal services. It is entirely repugnant to the feeling of
humanity to regard a man's person in its entirety as an instrument intended
to satisfy the wants of another.66 [pg 057] Yet this happens wherever slavery
exists; in its coarsest form, in cannibalism. Among civilized nations, we can
speak, under this head, only of individual services or capabilities of
persons; or, indeed, of the aggregate of the services rendered by them
during a time determined at pleasure, or a short time.67

B. Things, both moveable and immovable.68

C. Relations to persons or things which may frequently be estimated just as
accurately as material goods. (The res incorporales [pg 058] of the Roman
law.) I need only mention what is called good-will, which freely, and to the
advantage of customers themselves, but still with a limited amount of
certainty, attaches to certain localities, and for which tavern-keepers,
sometimes, as in theaters, dépôts and clubs, pay so enormous a rent.69 When
a newspaper is sold, the purchaser frequently buys nothing but the existing
relations between his colaborers, subscribers etc. No small part of the value
of a good business firm consists in the confidence with which it inspires all
who deal with it, thus sparing them a world of care and trouble.70 A general
may be of incalculable value to an army which he has himself helped
organize. In another, or in the service of a country not his own, he might be
entirely valueless, incapable of accomplishing anything.71 With the progress
of civilization, as man becomes more social, the number of valuable
relations increases, while that of legalized monopolies is wont to decrease.
(Schäffle.)72

[pg 059]

Section IV.

Of Value.—Value In Use.

The economic value of goods is the importance they possess for the
purposes of man, considered as engaged in economy (housekeeping,
husbandry.73)

Looked at from the point of view of the person who wishes to employ them
in his use directly, doubtless the oldest point of view, value appears first as
value in use; and here, according to the difference of subjective purposes it
is intended to subserve, we may speak of production value or enjoyment-
value; and of this last, in turn, as utilization-value, or consumption-value.
The value in use of goods, is greater in proportion as the number of wants
they are calculated to satisfy are more general and more urgent, and in
proportion as they are gratified by them more fully, surely, durably, easily
and pleasantly.74 Hence, it is seldom possible to find an accurate
mathematical expression of the relation which exists between the value in
use of different goods.75 Thus, it is possible to estimate the [pg 060]
nutritive power of different kinds of goods, the value of wheat or of hay for
instance, but not the goodness or quality of their taste, of the attractiveness
of their appearance, etc.

But, the more men become used to comparing the aggregate of human
wants, and the aggregate of the goods which minister to the satisfaction of
these wants, as if they were two great wholes, gradually shading each into
the other, the more does the value in use of the different kinds of goods
assume, for purposes of social rating or estimation, a fungible character.76 If
a new kind of goods be produced or discovered, which satisfies the same
wants in a more complete manner than another, the latter, although it has
suffered no change, generally loses in the value put upon it, especially if the
new goods can be produced in any desired quantity. An instance of this is
the change effected in the value of the dyers weed, woad, by the
introduction of indigo.

Things present in quantities greater than the amount necessary to supply the
want they satisfy, preserve their full value in use, to the limit of that want,
after which they are simply an element of possible future value, dependent
on an increase of the want; but they have no value for present use.77

The economic valuation of goods, however, is by no means exhausted, so
far as the isolated individual housekeeper is concerned, by the mere

establishing of its value in use. As the systematic effort of every rational
individual in [pg 061] his household management is directed towards the
obtaining, by a minimum of sacrifice of pleasure and energy, a maximum
satisfaction of his wants, even an Adam or a Crusoe is, in his economy,
compelled to estimate not only what the goods to be acquired accomplish
(value in use) but also what they will cost—cost-value. Even the most
indispensable kind of goods, for instance atmospheric air, is considered to
have no value, when it can be obtained in sufficient quantity, without any
sacrifice whatever.78

Section V.

Value.—Value In Exchange.

The value in exchange of goods, or the quality which makes them
exchangeable against other goods, is based on a combination of their value
in use with their cost-value, such as men in their intercourse with one
another will make.79 Without value in use, value in exchange80 is
unthinkable.

But there are many, and even indispensable goods which are not at all
susceptible of being exchanged; for instance, the light and heat of the sun,
the open sea etc.81 Other goods, [pg 062] although capable of being
exchanged, have no value in exchange, because they exist in
superabundance, and may be obtained by everyone, without trouble and
without reward; for instance, drinking-water in most places, ice in winter,
and wood in the primeval forest.82 Moreover, the idea of such “free goods”
is in great part relative. The water of a river may, for drinking purposes, be
“free” goods, and yet, for purposes of irrigation, have great value in
exchange. (John Stuart Mill).

But, goods, to obtain value in exchange, must, in addition to their value in
use, a value which must be recognized83 by a certain number of persons, at

least, have the capacity of becoming the exclusive property of some one
individual, and therefore of being alienated or transferred; and this
alienation or transfer must be desired because of the difficulty to become
possessed of them in any other way.84

[pg 063]

Section VI.

Value.—Alleged Contradiction Between Value In Use And Value In
Exchange.

Recent, and especially socialistic,85 writers have alluded to the great
“contradiction” between value in use and value in exchange. This
contradiction, however, vanishes when the above idea of economy, and the
two sides or aspects, which economic value presents, are kept steadily in
view. It is said, for instance, that a pound of gold has a much greater value
in exchange than a pound of iron; while the value in use of iron, is
incomparably greater than that of gold. I question [pg 064] this latter
statement. True it is, that the need of iron is much more universal and urgent
than the need of gold. On the other hand, a pound of gold yields satisfaction
to the want of that metal, much greater than is yielded by a pound of iron, to
the want of iron. We may speak of a contradiction between value in use and
value in exchange, at the farthest, only in case the existing quantity of an
article in trade, which can be done without, is not estimated
correspondingly lower than the whole existing supply of a thing which is
indispensable. But this is a case which cannot often occur. When, for
instance, wheat is very dear, as in years of scarcity, people prefer to pay a
very high price for it rather than to dispense, even in part, with its use; and
so of all the necessaries of life. As people progress in economic culture,

they become more expert in adapting the value in exchange of related
goods, not only to their cost-value, but also to their value in use.8687

The lower the state of a nation's economy, the more isolated men live from
one another, the greater is the prominence given by them to value in use, as
compared with value in exchange, a fact which makes a valuation of
resources, which shall be universally applicable, a more difficult
matter.888990

[pg 065]

Section VII.

Resources Or Means (Vermögen).

Resources, or means, in the sense in which we here use the term, are the
aggregate of economic goods owned by a physical or legal person, after
deduction is made of the person's debts, and all valuable and rightful claims
have been added.91 Hence, there are private resources, corporative
resources, municipal resources, etc., state resources, national resources and
the world's resources. In estimating the resources of a whole people, it is, of
course, necessary to make deduction of the debts due by the individual
members of the nation to their fellow countrymen.

[pg 066]

Section VIII.

Valuation Of Resources.

It has often been made a question, whether the valuation of resources
should be based on the value in use, or the value in exchange of their
constituent parts.92 The latter has, of course, no interest, except in so far as
we are concerned with the possibility of obtaining the control of part of the
resources, or means, of another, by the surrender of a part of one's own
goods. In estimating the value of private resources, which require to be
made continually an object of trade, this point is, of course, of the greatest
importance. If certain of their component elements, lands, for instance,
belonging to a fidei commissum, are incapable of entering immediately into
the market, at least the revenue they yield is measured by its value in
exchange.

It is quite otherwise, even with the resources of a whole nation. Such
resources are, evidently, much more independent, and have much less need
of being exchanged against their equals, than private resources. The foreign
commerce, of the greatest and most advanced nations, has, hitherto, been
but a small quota of their internal commerce.93 A valuation, [pg 067]
therefore, based on value in exchange, however interesting it might be to
enable us to determine how property is shared by the different classes and
persons that compose the nation, would afford but little information
concerning the absolute amount of the national wealth. This, of course,
applies in a much higher degree to the resources of the whole world.

If, now, we were to estimate the resources of an entire people, or even of the
world, by summing up the value in exchange of their several component
parts, many very important elements would be left out of the account
entirely; as for instance, harbors, navigable streams, numberless relations
which have, indeed, no value in exchange whatever, but which are of the
highest importance, because promotive of the economy of the nation. The
same may be said of made roads of every description, the politico-
economical value of which may be much greater than the value in exchange
of their stock, than their cost of production etc. The increase of the value in
exchange of any of the branches of the resources of a physical or legal
person contributes towards really enriching the nation or the world, only in

case that the increased value in exchange is based on an increased utility in
quality or quantity. Should an earthquake suddenly dry up a number of our
springs, and thus give value in exchange to the drinking water from the
remaining ones, we should, indeed, witness the introduction of a new object
into the list of exchangeable goods; the owners of springs would be able to
command a larger portion of the national resources, but at the expense of
the rest of the population; and the whole country would have become
poorer in goods by the catastrophe. Even the value in exchange of the
national resources would not be increased; for all other goods, which,
hitherto, as compared with water, had an unlimited capacity for exchange,
would lose just as much of that capacity as water had gained, as compared
with them.94 On the other hand, if a new mineral [pg 068] spring should be
discovered, the great value in use of the water of which gave it value in
exchange, the resources of the nation would be really increased, not only in
point of utility, but in exchange value; for no other goods, formerly known,
would, in consequence of the discovery, lose in their exchange power.95

Section IX.

Wealth.

The possession of large and also of potentially lasting resources;
objectively, such resources themselves, we call wealth. But it must be large
in a two-fold sense; large as compared with the rational wants of its
possessor, and large, also, as compared with the resources of other people,
especially with the resources of those in the same condition of life. To be
called rich, it is not enough “to have a sufficiency,” (the individual side); it
is necessary to have more than others.96 If all men were possessed [pg 069]
of a great deal, but all of an exactly equal amount, each would be
compelled, it may be conjectured, to be his own chimney-sweep, his own
scavenger and “boot-black.” And how could anyone, then, be properly
called wealthy? This is the social side of the idea of wealth.97 Hence, a

person, with the same resources, might be very wealthy in a provincial
town, while, in the capital, he could enjoy only moderate comfort.98

[pg 070]

Section X.

Wealth.—Signs Of National Wealth.

We should have a very imperfect idea of the wealth of a people (§ 8) if we
should estimate it at the value in exchange [pg 071] of the sum99-total of the
component parts of the national resources. By the following signs, however,
an approximative notion of the value in use of the resources of a nation may
be obtained:

A. When, even the lower classes, who compose everywhere the greatest
portion of the people, are comfortable, in a condition worthy of human
beings. Thus, C. Dupin is surprised at the great quantities of meat, butter,
cheese and tea entered on the accounts of the poor-houses in England, and
the great [pg 072] care taken to have these of the best quality.100 A good
symptom of such a state of things is a high average duration of human life,
especially when there is a relatively large number of births. (§ 246.)

B. When a considerable outlay, devoted to the satisfaction of the more
refined wants, is voluntarily made, and by those only possessed of a proper
economic sense. Thus, in England, the various mission, bible, and tract
societies had, in 1841, an aggregate income of £630,000. The expeditions in
search of Franklin cost over a million pounds sterling. The state outlay also
belongs to this category, provided, that taxes are collected and loans
obtained, without any noticeable oppression. The sum of 20,000,000
pounds sterling, voted, in 1833, by the British Parliament for the abolition
of slavery, is one of the happiest signs of the national wealth of England.101

C. A large number of valuable buildings, and permanent improvements; for
instance, roads of every description, works for purposes of irrigation and
drainage. Thus, in London, from September, 1843, to September, 1845,
there were constructed squares and streets with an aggregate length of 11.1
geographical miles. The number of newly built houses in London, between
1843 and 1847, was nearly 27,000. And so, in England and Wales there are
492 geographical miles of navigable canals, while their navigable rivers are
estimated to have a length of only 449 miles. The number of miles of
railroad, in the British Empire, in 1865, was 2,897 geographical miles, and
they cost 459 million of pounds; in 1870, it was 3,270 geographical miles,
at an aggregate cost of 650 millions sterling.

D. The frequent occurrence of heavy commercial payments, which finds
expression especially in the magnitude and costliness of the most usual
medium of exchange. Thus, all payments are made in England in paper (for
sums of at least five [pg 073] pounds sterling) or in gold coin. Silver is used
only as small change, like copper in most other countries. (Infra, § 118,
seq.)102

E. Frequent loans to foreign nations. Hence, Storch divides all countries
into borrowing or poor countries, loaning or rich countries, and independent
countries which hold a middle place between the two former.103

Section XI.

Of Economy (Husbandry).

All normal economy104 (husbandry) aims at securing a maximum of
personal advantage with a minimum of cost or outlay.105 And there are
always two intellectual incentives at the foundation of this economy. There
is, first, self-interest, the positive manifestation of which is the effort to
acquire as much of the world's goods as possible, and the negative
expression of which, the effort to lose as little of them as possible—

acquisitiveness—saving. Self-interest, losing its moral, and assuming a
guilty, character, degenerates into egotism; acquisitiveness, into
covetousness; and the disposition to save, into avarice—the solipsismus of
Kant. The incentive to ameliorate one's condition is common to all men, no
matter how varied [pg 074] the form or different the intensity of its
manifestation. It guides us all from the cradle to the grave. It may be
restricted within certain limits, but never entirely extinguished. It is, in the
domain of economy, what the instinct of self-preservation is to our physical
existence, a powerful principle of creation, preservation and of renewed life
(I. Thessal., 4, 11, seq.).106 Then there is the incentive of the demand of
God's voice within us, the voice of conscience, whether we call it, in
philosophic outline “the adumbration of the ideas of equity, right,
benevolence, of perfection and inner freedom,” or, framing our lives in
accordance with them, the striving after the Kingdom of God.107 It matters
not, how much the image of God may have been disfigured in most men,
there is no one in whom the longing for it has so far disappeared as to leave
no trace behind. This puts bounds to our self-interest, and [pg 075]
transmutes it into an earthly means to enable us to approximate to an eternal
ideal.

As, in the structure of the world, the apparently opposing tendencies of the
centrifugal and centripetal forces produce the harmony of the spheres, so, in
the social life of man, self-interest and conscience produce in him the
feeling for the common good.108 This sentiment of the common interest is
the foundation on which rise in successive gradation, the life of the family,
of the community, of the nation and of humanity, the last of which should
be coincident with the life of the Church. It, alone, can realize the kingdom
of heaven on earth. Through this sentiment alone can religion be made
active and moral. Only through it, can self-interest be made really sure and
always to the purpose. Even the most calculating mind must acknowledge,
that numberless institutions, relations etc., are useful and even necessary to
many individuals, which can be established or maintained only from a sense
of the general welfare, for the reason that no one individual could make the
sacrifice required to establish or maintain them. And so, since commerce
has wrought the interests of all men into one great piece of net-work, the
best means of obtaining wherewith to satisfy our own wants is to help
others satisfy theirs. Self-interest causes every one to choose the course in

life in which he shall meet with the least competition and the most abundant
patronage; in other words, that which answers to the most pressing and least
satisfied want of the community. As a rule, the physician who cures the
greatest number of patients with the greatest skill, and the manufacturer
who produces the best goods cheapest, will grow to be the richest. It is,
moreover, easy to see that, according as the circle of common interests
grows smaller, it approximates to self-interest; and [pg 076] to “the
Kingdom of God”109 as it grows larger. And yet, all these circles
respectively condition one another. Cosmopolitanism or church-zeal,
without love of country; patriotism, without fidelity to the community in
which one lives, or love of one's family, are more than suspicious. The
reverse is also true. This is a chief connecting link between the great
apparent opposites.110111

[pg 077]

Section XII.

Economy.—Grades Of Economy.

Thanks to this feeling for the common weal, the eternal and destructive war
—the bellum omnium contra omnes—which an unscrupulous self-interest
would not fail to generate among men engaged in the isolated prosecution
of their own economic interests, ceases in the higher, well-ordered
organization112 of society. On it are based the various forms of economy in
common: family-economy, corporation or association-economy, [pg 078]
municipal economy, and national economy.113 And these forms of economy
in common are so essentially the condition and complement of individual
economy, that the latter, without them, could either not be maintained at all,
or, at least, only in the very lowest stage of civilization.

Although the higher science of Political Economy has, nearly always, been
conceived114 as treating of the aggregate national activity of a people, there
have been many, recently, who consider Political Economy as no real
whole, but only as a mere abstraction. This is true, especially of many
unconditional free-trade theorizers, partly from a repugnance toward the
governmental guardianship of private businesses or economy. It is true,
also, of certain philosophers who consider the idea, “the people,” as merely
nominal.115 There are, however, [pg 079] two things necessary to warrant us
to call a thing made up of a number of parts, one real whole: the parts and
the whole must have a reciprocal action upon one another, and the whole, as
such, must have a demonstrable action of its own. (Drobisch.) In this sense,
“the people” is, unquestionably, a [pg 080] reality, and not alone the
individuals who constitute the “people.” Besides, it is truly said that all
husbandry or economy supposes a will (“systematized activity” etc., supra,
§ 2). Such a will is ascribed to individuals, to legal persons, to the state, but
not, however, to “the people,” as a whole. But this will need not be an
entirely conscious one, as is plain from the case of the less gifted and less
cultured individuals engaged in household economy. The systemization in
the public economy of a people finds its clearest expression in economic
laws, and in the institutions of the state. But it finds expression, also,
without the intervention of the state, in the laws established by use, and by
the opinions of jurists or courts, in community of speech, of customs and
tastes etc.: things which have an important economic meaning, which
depend on the common nature of the land, of race and history, and which
influence the state, at least as much as they are influenced by it.116117

The most that can be said, at present, so far as an economy of mankind, or a
world-economy, is concerned, is, that it may be shown that important
preparations have been made for it. We are approaching more nearly to it by
the ways of the more and more cosmopolitan character of science, the
increasing international coöperation of labor, the improvement in the means
of transportation, growing emigration, the greater love of peace, and the
greater toleration of nations etc.

[pg 081]

Section XIII.

Political Economy.—The Economic Organism.

The idea conveyed by the word organism, is doubtless, one of the most
obscure of all ideas; and I am so far from desiring to explain118 by that idea,
the meaning of public or national economy, that I would only use the word
organism as the shortest and most familiar expression of a number of
problems, which it is the purpose of the following investigation to solve.

There are two points, especially, of importance here. In the motion of any
machine, it is possible to distinguish with the utmost accuracy, between the
cause and the effect of the motion: the blowing of the wind, for instance, is
simply and purely, the cause of the friction of the mill-stones in a wind-mill,
and is not in the least influenced or conditioned by the latter. But, in the
public economy of every people, patient thought soon shows the observer,
that the most important simultaneous events or phenomena mutually
condition one another. Thus, a flourishing state of agriculture is impossible
without flourishing industries; but, conversely, the prosperity of the latter
supposes the prosperity of the former, as a condition precedent. It is as in
the human body. The motions of respiration are produced by the action of
the spinal cord; and the spinal cord, in turn, continues to work only through
the blood, that is, [pg 082] by the help of respiration. In all cases like this,
we are forced, when accounting for phenomena, to move about in a circle,
unless we admit the existence of an organic life, of which every individual
fact is only the manifestation.119120

It is, also, undeniable, that human insight into the operation and utility of a
machine must always precede the existence of the machine itself. This
human insight is parent to the plan, and the plan, in turn, is parent to the
machine. The very reverse of this is true in the case of organisms, those
“divine machines” as Leibnitz called them. Men had digested food and
reproduced their kind, thousands of years before physiologists had attained
to a true theory of digestion or reproduction. I do not, indeed, by any
means, pretend, that the public economy of nations is governed by natural

necessity, in the same degree, as for instance, the human body. We shall
find, however, that the minute arbitrary variations usual here and there in
the course of its development, generally compensate for one another, in
accordance with the law of large numbers. Here, too, we find harmonies,
frequently of wonderful beauty, which existed long before any one dreamt
of them; innumerable [pg 083] natural laws,121 whose operation does not
depend on their recognition by individuals, and, over which, only he can
obtain power who has learned to obey them. (Bacon)122123124 But [pg 084] it
should never be lost sight of, that the natural laws governing the public
economy of a people, like those of the human mind, are distinguished in
one very essential point from those of the material world. They have to do
with free rational beings, who, because they are thus free and rational, are
responsible to God and their conscience, and constitute in their aggregate a
species capable of progress.

Section XIV.

Origin Of A Nation's Economy.

The public economy of a people has its origin simultaneously with the
people. It is neither the invention of man nor the revelation of God. It is the
natural product of the faculties and propensities which make man man.125
Just as it may be shown, that the family which lives isolated from all others,
contains, in itself, the germs of all political organization,126 so may it be
demonstrated, that every independent household management contains the
germs of all politico-economical activity. The public economy of a nation
grows with the nation. With the nation, it blooms and ripens. Its season of
blossoming and of maturity is the period of its greatest strength, and, at the
same time, of the most perfect development [pg 085] of all its more
important organs.127 In respect to it, the economic endeavors of any epoch
may be said to be represented by two great parties, the one progressive, the
other, conservative. The former would hasten the period of the nation's
richest and most varied development, the latter postpone its departure as

long as possible; and hence it comes, that a people's economic decline is
sometimes taken for progress, by the former class, and their progress for
decline, by the latter. As a rule, the union and equilibrium of these parties
are wont to be the greatest at the period of maturity, because, then,
intelligence and the spirit of sacrifice for the common good are most
general.128

Finally, the public economy of a nation declines with the people. (Infra, §
263 ff.)

Section XV.

Diseases Of The Social Organism.

If the public economy of a people be an organism, we must expect to find
that the perturbations, which affect it, present some analogies to the
diseases of the body physical. We may, therefore, hope to learn much that
may be of use in [pg 086] practice, from the tried methods of medicine.129 In
the diseases of the body economic, it is necessary to distinguish accurately,
between the nature of the disease and its external symptoms, although it
may be necessary to combat the latter directly, and not merely with a view
to alleviation. Following the example of the physician, we should
particularly direct our attention to the curative method which nature itself
would pursue, were art not to intervene. “The curative power of nature is no
peculiar power; it is the result of a series of happy adjustments, by means of
which the morbid perturbation itself sets in motion the springs which may
either destroy the evil or paralyze its action. It is, in fact, nothing but the
original power which formed the body and preserves its life in contact with
the external causes of perturbation and the internal disorder provoked by
these causes.” (Ruete.)

[pg 087]

Chapter II.

Position Of Political Economy In The Circle Of
Related Sciences.

Section XVI.

Political Or National Economy.

By the science of national,130 or Political Economy, we understand the
science which has to do with the laws of the development of the economy
of a nation, or with its economic national life. (Philosophy of the history of
Political Economy, [pg 088] according to von Mangoldt.) Like all the
political sciences, or sciences of national life, it is concerned, on the one
hand, with the consideration of the individual man, and on the other, it
extends its investigations to the whole of human kind.131

National life, like all life, is a whole, the various phenomena of which are
most intimately connected with one another. Hence it is, that to understand
one side of it scientifically, it is necessary to know all its sides. But,
especially, is it necessary to fix one's attention on the following seven:
language, religion, art, science, law, the state and economy.132 Without
language, all higher mental activity is unthinkable; without religion, all else
would lose its firmest foundation and highest aim. Through art, alone, do all
these sides attain to beauty; through science, alone, to clearness. Law arises,
the moment conflicts of will become inevitable and an adjustment is
desired. The state has to do with them, in so far as they have any external
force or validity. Indeed, there is no human relation, not even the highest
and the sweetest, but has its economic interests. It is, therefore, natural, that
each of the sciences which relate to these various regions of human life
should, in part, presuppose all others, and, in part, serve as a basis for
them.133

[pg 089]
But in the midst of this universal relationship, it is easy to see that law, the
state and economy constitute a family, as it were apart and more closely
connected. (The social sciences, in the narrower sense of the expression.)

They are confined almost exclusively to what Schleiermacher has called
“effective action” (wirksame Handeln), while art and science belong almost
entirely to the “action of representation” (darstellenden Handeln); and
religion and language combine both kinds. Law, the state, and economy too,
have their roots so deep in the physical and intellectual imperfection of
man, that we can scarcely imagine their continuance beyond his life on
earth (Gospel of Matthew, 22, 30). But within these limits, their several
provinces and the subjects with which they are concerned are almost
coincident. They only consider these from different points of view: the
science of politics from that of sovereignty; the science of Political
Economy from that of the satisfaction of the requirement of external goods
by the people; the science of law from that of the prevention or the
peaceable adjustment of conflicts of will. As every economic act,
consciously or unconsciously, supposes forms of law, so, by far the greater
number of the laws relating to rights, and the greater number of judgments
in the matter of rights, contain an economic element. In numberless cases,
the science of law gives us only the external how; the deeper why is
revealed to us by the science of Political Economy.134135 And, as to the state,
who, for instance, can appreciate [pg 090] the political significance of a
nobility, without understanding the economic character of rent, and of the
possession of large landed estates? Who can politically appreciate the
inferior classes of society, unless initiated into a knowledge of the laws that
govern wages and population? It were much easier to cultivate psychology
without physiology! “The state is society protected by force” (Herbart).
There are two bases to all material power:136 wealth and warlike ability
(χρήματα—ναυτικά, according to Thucydides); and how much the latter has
need of the former is well expressed by the familiar saying of
Montecuccoli: “Money is not only the first, but the second and third
condition of war.”137

Frederick the Great calls finance the pulse of the state, and Richelieu, the
point of support which Archimedes was in search of, to move the world. In

all modern nations, the history of the debates on the raising of revenue and
of the passing of budgets is, at the same time, the history of parliamentary
life; and most great revolutions, the Reformation of the sixteenth century
not excepted, if not caused have been promoted, by financial
embarrassment.

[pg 091]

Section XVII.

Sciences Relating To National Life.—The Science Of Public
Economy.—The Science Of Finance.

If, by the public economy of a nation, we understand economic legislation
and the governmental guidance or direction of the economy of private
persons,138 the science of public economy becomes, so far as its form is
concerned, a branch of political science, while as to its matter, its subject is
almost coincident with that of Political Economy. Hence it is, that so many
writers use the terms public economy, or the economy of the state
(Staatswirthschaft), and National Economy (Volkswirthschaft), as
synonymous.139 The hypothesis, in accordance with which, this science
should discard all consideration of the state, or should refuse to presuppose
its formation,140 would lead us into an ideal region, difficult to define,
probably entirely impossible, and inaccessible to experience.

Just as clear, is the close connection between politics and Political
Economy, in the case of the science of finance, or of the science of
governmental house-keeping, otherwise the administration of public affairs.
The latter, evidently, so far as its end is concerned, belongs to politics, but
so far as the means to that end are concerned, to National Economy. As the
physiologist cannot understand the action of the human body, without

understanding that of the head; so we would not be able to grasp the organic
whole of national economy, if we were to leave the state, the greatest
economy of all, the [pg 092] one which uninterruptedly and irresistibly acts
on all others, out of consideration.141

By the term police, we mean the state power whose office it is, without
mediation, to prevent all disturbances of external order among the people.142
It may extend its action into all the domains of national life mentioned
above, whenever external order is there threatened, or calls for protection;
but its action is important especially in the domains of law and economy.
The science of the police power, therefore, of all those doctrines resulting
from investigation into national life, takes up only one phase of each of
them; and the phases of doctrine thus taken up, it combines into a whole,
for practical ends. Its relation to those sciences is like that of surgery to the
medical sciences, or like the science of legal procedure to the science of
law.

[pg 093]

Section XVIII.

Sciences Relating To National Life.—Statistics.

Statistics we call the picture or representation of social life at given periods
of time, and especially at the present time, drawn on a scale in accordance
with the laws of development discovered by means of the theoretical
sciences above named; as it were, a section through the stream. (Schlözer
calls them: history standing still.)143 Statistics, as thus defined, are as far
removed from saying too much as from saying too little. To give a complete
tableau of their object, statistics should, of course, take in the life of a
people, in all its aspects. But they should look upon such facts only as their
own property, the meaning of which they are able to understand; that is,

such only as can be ranged under known laws of development.
Unintelligible facts are collected only in the hope of penetrating into their
meaning in the future, by comparing them with one another. In the
meantime, they are to the statistician only what unfinished experiments are
to the investigator of nature.

The view is daily gaining ground, that statistics should be occupied—
without, however, confining themselves to them—with present facts, with
“facts affecting society and the state, which are susceptible of being
expressed in figures.”144 The more deceptive the immediate observation of
an individual, isolated fact is, in cases where a great number of
simultaneous [pg 094] or scattered individual isolated facts of national life
should be observed, the more important it is to discover proper numerical
relations, by noting all the like acts or experiences of men, the time and
place in question, and the relation of the aggregate of these phenomena, to
the sum-total of the population, or to the sum-total of corresponding
phenomena in other places. When this is done, and the facts are completely
enumerated and correctly recorded, there is no danger of subjective error.
And this species of “political and social measuring,” as Hildebrand calls it,
may be applied, not only to quantities, but to all qualities accessible to the
observation of the senses; since the individual or isolated qualities of the
things enumerated, may be again made objects of enumeration. Without
doubt, this mode of numerical procedure is the most perfect for all those
divisions of statistics in which it can be followed; and hence, it should be
our endeavor to make the numerical side of statistics as comprehensive as
possible. But, one side of a science is not a science itself. As there is no
natural science proper called microscopy, embracing all the observations
made by means of the microscope, so care should be taken not to deduce
the principle of a science from the chief instrument it employs. There will
always be many and important facts in national life which can not be
subjected to numerical calculation, although they may be established with
the usual amount of historical certainty. Were statistics to be limited, in the
manner mentioned above, they would remain a collection of fragments, and
instead of being a science, properly so-called, become a method.145

Besides, it is evident, that, of statistics in general, economic [pg 095]
statistics constitute a chief part, and precisely the part most accessible to

numerical treatment. As these economic statistics need to be always
directed by the light of Political Economy, they also furnish it with rich
materials for the continuation of its structure, and for the strengthening of
such foundations as it already has. They, are, moreover, the indispensable
condition of the application of economic theorems to practice.

Section XIX.

Private Economy—Cameralistic Science.

The meaning of the term cameralistic science (Cameralwissenschaft) can be
explained only by the history of the cameralistic system.146 From the end of
the middle ages, we find, in most German countries, an institution called the
Council (Kammer) whose province it was to administer the public domain,
and to watch over regal rights. At first, a mere governmental commission, it
was not long before it developed into an independent board. This change
had taken place in Burgundy as early as the year 1409. It was in that
country that the emperor Maximilian became acquainted with the
institution; and by the erection of the aulic councils at Innspruck and Vienna
(1498 and 1501), he gave the principal impulse to the imitation of it in
Germany. As, at that time, the division of labor was very little developed,
and personal and collegial authority all the more developed in consequence,
it is easy to [pg 096] conceive that a great part of all the new and rapidly
increasing business of police administration was confided to these councils.
They were charged especially with what is known to-day as economic
police (Wirthschaftspolizei) and an important part of the administration of
justice, in its lower departments, was turned over to their subordinates. The
most eminent men who wrote, in the seventeenth century, on cameralistic
matters, laid great stress on the point, that it was the duty of the aulic
councils to entertain not only fiscal questions, but that it was within their
province also, to determine questions of economic police.147 The interest of
absolute princes must have greatly favored these cameralistic institutions,

for they were in their hands docile tools, which escaped the annoying
intervention of the states of their realms.

By degrees, the knowledge necessary to these council officials, and which
found no place in the lectures on law, were formed into a special body of
doctrine. After such men as Morhof and Thomasius had prepared the way,148
Frederick William I., himself a clever cameralist, and author of the masterly
financial system of Prussia, took the important step of founding, at Halle
and Frankfurt on the Oder, special chairs of economy and cameralistic
science; which, considering the time, were very ably filled by Gasser and
Dithmar. (1727.) [pg 097] There was thus formed in the German
universities a distinct school of cameralists, which, through Jung, Rössig
and Schmalz, reached to the nineteenth century. The term cameralistic
science, the creature of chance, was used, it must be said, with very various
limits to its meaning.149

However, Political Economy in Germany developed out of the science of
law and the cameralistic sciences, while in England and Italy it had its
origin chiefly in the study of questions of finance and foreign commerce.

Section XX.

Private Economy. (Continued.)

If we abstract from cameralistic science as it was understood in the last
century, what it has in common with all economy,150 and therefore with
public economy, next that which belongs to the aggregate of governmental
economy, there remains only a number of rules, such as those which govern
the principal branches of private business, and which indicate how they are
to be carried on with the greatest advantage to those who engage in them.
Such are forest and rural economy, mining science, technology, including
architecture, and all that concerns founderies, and commercial science. Now
that the expression cameralistic science is altogether obsolete, the aggregate

[pg 098] of these might be designated by the name private economy.
Obviously, we should have here, neither a simple nor pure science, but only
a compilation of natural-philosophical and economic lemmas. Thus, in
agriculture, for instance, a knowledge of the different kinds of soil, of the
tillage of land, of the different plants and animals etc., belongs to the
domain of natural science; while all that relates to the cost of production,
the employment of capital, the wages of labor, the exchange of products, net
product and the price of land, are purely politico-economical. The political
economists also require a knowledge of the natural side of the cameralistic
sciences. Such a knowledge is indispensable to every detailed and living
theory, and especially to the application of economic science to practice.
The great difference lies in this, that the cameralist interests himself in the
production of material goods for their own sake, while the political
economist regards them only in their relations to national life.151

It would seem, moreover, that political economists, especially [pg 099] in
Germany, have attached too much importance to putting formal bounds to
their special science. Why not rather follow the example of the students of
nature who care little whether this or that discovery belongs to physics or
chemistry, to astronomy or mathematics, provided, only, very many and
important discoveries are made?152

Section XXI.

What Political Economy Treats Of.

Political Economy treats chiefly of the material interests of nations. It
inquires how the various wants of the people of a country, especially those
of food, clothing, fuel, shelter, of the sexual instinct etc., may be satisfied;
how the satisfaction of these wants influences the aggregate national life,
and how in turn, they are influenced by the national life. (Gospel of Matth.,
4, 4.) This alone suffices to enable us to estimate the importance of the
science. The relation of virtue to wealth is likened by Bacon to that of an

army to its baggage. In Xenophon's opinion, wealth is really useful only to
him who knows how to make a good use of it. From an economic point of
view, the happiest man is he who has accumulated most, honorably, and
used it best.153 That, even in a material sense, the intellect of a people is
their most important element, is evident from the example of the Chinese,
who were so long acquainted with printing, powder, and the mariner's
compass, without, by their means, attaining to intelligent public opinion,
forming a good army, or coming to an understanding of the art of
navigation, to any great extent.

The undervaluing of economic matters, for which ages of inferior
cultivation, our own middle ages for instance, are now [pg 100] praised and
now blamed, was really a rare exception even during these ages.154 Other
kinds of acquisition and enjoyment then occupied the foreground; but there
never was a time, when gain and enjoyment in general were not favorite
objects of pursuit, and held in high esteem. The physical wants of
uncultured men cry out much louder than intellectual ones. (§ 2, 14.)155 On
the other hand, in over-cultivated ages, when decay begins, an over-
estimation of material things is wont to become general.156 The mere
servants of mammon, whether as political economists or as private
individuals, may see their depravity faithfully reflected in communism as in
a mirror. We should not overlook the fact that it is with whole nations [pg
101] as with the individual man who amasses his own fortune. He reaches
the culminating point of his wealth generally after he has passed the prime
of life. The most flourishing period of a nation's existence is wont just to
precede its decay, and to introduce it.157 Hence, here nothing could be more
untrue, as Macchiavelli has remarked, than the general opinion that money
is the sinew of war.158

[pg 102]

Chapter III.

The Methods Of Political Economy.

Section XXII.

Former Methods.

The methods159 which would apply to any science of national life, principles
borrowed from any other science, are now generally looked upon as
obsolete. This is true, especially, of the theological method which prevailed,
almost exclusively during the middle ages,160 and of the juridical method of
the seventeenth century.

It would be much more in harmony with the intellectual tendencies of the
time, to adopt a mathematical mode of treatment in Political Economy,
involving, as such a mode of treatment does, not the matter of the science,
but only a formal [pg 103] principle. That which is general in Political
Economy has, it must be acknowledged, much that is analogous to the
mathematical sciences. Like the latter, it swarms with abstractions.161 Just as
there are, strictly speaking, no mathematical lines or points in nature, and
no mathematical lever, there is nowhere such a thing as production or rent,
entirely pure and simple. The mathematical laws of motion operate in a
hypothetical vacuum, and, where applied, are subjected to important
modifications, in consequence of atmospheric resistance. Something similar
is true of most of the laws of our science; as, for instance, those in
accordance with which the price of commodities is fixed by the buyer and
seller. It also, always supposes the parties to the contract to be guided only
by a sense of their own best interest, and not to be influenced by secondary
considerations. It is not, therefore, to be wondered at, that many authors
have endeavored to clothe the laws of Political Economy in algebraic
formulæ.162 And, indeed, wherever magnitudes [pg 104] and the relations of

magnitudes to one another are treated of, it must be possible to subject them
to calculation. Herbart has shown that this is so in the case of psychology;163
and all the sciences which treat of national life, especially our own, are
psychological.164 But the advantages of the mathematical mode of
expression diminish as the facts to which it is applied become more
complicated. This is true even in the ordinary psychology of the individual.
How much more, therefore, in the portraying of national life! Here the
algebraic formulæ would soon become so complicated, as to make all
further progress in the operation next to impossible.165 Their employment,
especially in a science whose sphere it is, at present, to increase the number
of the facts observed, to make them the object of exhaustive investigation,
and vary the combinations into which they may be made to enter, is a matter
of great difficulty, if not entirely impossible.166 For, most assuredly, as our
science has to do with men, it must take them and treat them as they
actually are, moved at once by very different and non-economic motives,
belonging to an entirely definite people, state, age etc. The abstraction
according to which [pg 105] all men are by nature the same, different only
in consequence of a difference of education, position in life etc., all equally
well equipped, skillful and free in the matter of economic production and
consumption, is one which, as Ricardo and von Thünen have shown, must
pass as an indispensable stage in the preparatory labors of political
economists. It would be especially well, when an economic fact is produced
by the cooperation of many different factors, for the investigator to mentally
isolate the factor of which, for the time being, he wishes to examine the
peculiar nature. All other factors should, for a time, be considered as not
operating, and as unchangeable, and then the question asked, What would
be the effect of a change in the factor to be examined, whether the change
be occasioned by enlarging or diminishing it? But it never should be lost
sight of, that such a one is only an abstraction after all, for which, not only
in the transition to practice, but even in finished theory, we must turn to the
infinite variety of real life.167

There are two important inquiries in all sciences whose subject matter is
national or social life: 1. What is? (What has been? How did it become so?
etc.) 2. What should be? The greater number of political economists have
confounded these questions one with the other, but not all to the same
extent.168

[pg 106]
When a careful distinction is made between them, the contrast between the
(realistic) physiological or historical, and the idealistic methods is brought
out.169

Section XXIII.

The Idealistic Method.

Any one who has read a goodly number of idealistic works treating of
public economy (the state, law etc.) cannot have failed to be struck by the
enormous differences, and even contradictions, as to what theorizers have
considered desirable and [pg 107] necessary. There is scarcely an important
point which the highest authorities may not be cited for or against. We must
not close our eyes to this fact. “The giddiness that comes from
contemplating the depths of knowledge is the beginning of philosophy, as
the god Thaumas was, according to the fable, the father of Iris.” (Plato.) In
a precisely similar manner, the student of public economy (politics, the
philosophy of law etc.) must familiarize himself with the variations that
have taken place in what men, at different periods of history, have required
of the state and public economy, until he is lost in wonder at the
contemplation.

Section XXIII.

The Idealistic Method. (Continued.)

It is impossible to fail to notice at once that those ideal descriptions which
have enjoyed great fame and exerted great influence, depart very little from

the real conditions of the public economy (of the state, law etc.)
surrounding their authors.170 This is not mere chance. The power of great
theorizers, as, indeed, of all great men, lies, as a rule, in this, that they
satisfy the want of their own time to an unusual extent; and it is the peculiar
task of theorizers to give expression to this want with scientific clearness,
and to justify it with scientific depth. But the real wants of a people will, in
the long run, be satisfied in life,171 so far as this is possible to the moral
imperfection [pg 108] of man. We should at least be on our guard when we
hear it said that whole nations have been forced into an “unnatural” course
by priests, tyrants and cavilers. For, to leave human freedom and divine
Providence out of consideration entirely, how is such a thing possible? The
supposed tyrants are generally part and parcel of the people themselves; all
their resources are derived from the people. They must have been new
Archimedeses standing outside of their own world. (Compare, however,
infra, § 263.)

It is true, that if the result of the growth of generations be to gradually
produce a different people, these different men may require different
institutions. Then a struggle arises between the old and those of the younger
generation; the former wish to retain what has been tested by time, the latter
to seek for the satisfaction of their new wants by new means. As the sea
always oscillates between the flowing and ebbing of the tides, so the life of
nations, between periods of repose and of crisis: periods of repose, when
existing forms answer to the real substance of things, and of crisis, when the
changed substance or contents seeks to build up a new form for itself. Such
crises are called reforms when they are effected in a peaceful way, and in
accordance with positive law. When accomplished in violation of law, they
are called revolutions.172

That every revolution, it matters not how great the need of the change
produced by it, is as such an enormous evil, a serious, [pg 109] and
sometimes, fatal disease of the body politic, is self-evident. The injury to
morals which the spectacle of victorious wrong almost always produces can
be healed, as a rule, only in the following generation. Where law has been
once trampled on, the “right of the stronger” will prevail; and the stronger
is, to some extent, the most unscrupulous and reckless in the choice of the
means to be employed. Hence, the well-known fact, that in revolutionary

times the worst so frequently remain the victors. The counter-revolution
which is wont to follow on the heels of revolution, and with a
corresponding violence, is a compensation only to the most shortsighted. It
allows the disease, the familiarizing of the people with the infringement of
law, to continue, until the hitherto sound parts are attacked. Hence, a people
should, if they would have it go well with them, in the changes in the form
of things which they make, take as their model Time, whose reforms are the
surest and most irresistible, but, at the same time, as Bacon says, so gradual
that they cannot be seen or observed at any one moment. It is true, that, as
all that is great is difficult, so also is the carrying out of uninterrupted
reform. Its carrying out, indeed, supposes two things: a constitution so
wisely planned as to keep the doors open both to the disappearing
institutions of the past and to the coming institutions of the future; and,
among all classes of the people, a moral control of themselves, so absolute
that, no matter what the inconvenience, or how great the sacrifice, legal
ways shall alone be used. In this manner, two of the greatest and apparently
most contradictory wants of every legal or moral person, the want of
uninterrupted continuity and that of free development, may be satisfied.

[pg 110]

Section XXV.

The Idealistic Method. (Continued.)

It is doubtless true that all economic laws, and all economic institutions are
made for the people, not the people for such laws and institutions. Their
mutability is, therefore, by no means such an evil as mankind should
endeavor to remove, but is wholesome and laudable, so far as it runs
parallel with the transformation of the people, and the changes which their
wants have undergone.173 Hence, there is no reason why the most various
ideal systems should contradict one another. Any one of them may be right,

but, of course, only for one people and one age. In this case, the only error
would be, if they should claim to be universally applicable. There can no
more be an economic ideal adapted to the various wants of every people,
than a garment which should fit every individual. The leading-strings of
children and the staff of age would be great annoyances to the man.
“Reason becomes nonsense and beneficence a torment.” Hence, whoever
would elaborate the ideal of the best public economy—and the greater
number of political economists have really wished to do this—should, if he
would be perfectly true, and at the same time practical, place in juxta
position as many different ideals as there are different types of people.174 He
would, moreover, have to revise his work every few years; for, in
proportion as a people change, and new wants originate, the economic ideal
suitable to them must change also. But it is impossible to accomplish this
on so large a scale. Besides, to appreciate the present thus instantaneously,
and to perfectly feel the pulse [pg 111] of time thus uninterruptedly,
requires a species of talent different from what even the most distinguished
scientists are wont to possess; talents of an entirely practical nature, such as
become a great minister of the interior or of finance. And it is an
acknowledged fact, that even the cleverest of such practicioners, as the
younger Pitt said of himself, generally feel their way instinctively, and do
not see it with the clearness necessary to indicate it to others.

Section XXVI.

The Historical Method—The Anatomy And Physiology Of Public
Economy.

We refuse entirely to lend ourselves in theory to the construction of such
ideal systems. Our aim is simply to describe man's economic nature and
economic wants, to investigate the laws and the character of the institutions
which are adapted to the satisfaction of these wants, and the greater or less
amount of success by which they have been attended.175 Our task is,

therefore, so to speak, the anatomy and physiology of social or national
economy!

These are matters to be found within the domain of reality, susceptible of
demonstration or refutation by the ordinary operations of science; entirely
true or entirely false, and, therefore, in the former case, not liable to become
obsolete. We proceed after the manner of the investigator of nature. We, too,
have our dissecting knife and microscope, and we have an advantage over
the student of nature in this, that the self-observation of the body is
exceedingly limited, while that of mind is almost unlimited. There are other
respects, however, in which he has the advantage over us. When he wishes
to [pg 112] study a given species, he may make a hundred or a thousand
experiments, and use a hundred or a thousand individuals for his purpose.
Hence, he can easily control each separate observation, and distinguish the
exception from the rule. But, how many nations are there which we can
make use of for purposes of comparison? Their very fewness makes it all
the more imperative to compare them all. Doubtless, comparison cannot
supply the place of observation; but observation may be thus rendered more
thorough, many-sided, and richer in the number of its points of view.
Interested alike in the differences and resemblances, we must first form our
rules from the latter, consider the former as the exceptions, and then
endeavor to explain them. (Infra, § 266).

Section XXVII.

Advantages Of The Historical Or Physiological Method.

The thorough application of this method will do away with a great number
of controversies on important questions.176 Men are as far removed from
being devils as from being angels. We meet with few who are only guided
by ideal motives, but with few, also, who hearken only to the voice of
egotism, and care for nothing but themselves. It may, therefore, be assumed,
that any view current on certain tangible interests which concern man very

nearly, and which has been shared by great parties and even by whole
peoples for generations, is not based only on ignorance or a perverse love of
wrong. The error consists more frequently in applying measures wholesome
and even absolutely necessary under certain circumstances, to
circumstances entirely different. And here, a thorough insight into the
conditions of the measure suffices to compose the differences between the
two parties. Once the natural laws of Political Economy are sufficiently
known and recognized, [pg 113] all that is needed, in any given instance, is
more exact and reliable statistics of the fact involved, to reconcile all party
controversies on questions of the politics of public economy, so far, at least,
as these controversies arise from a difference of opinion. It may be that
science may never attain to this, in consequence of the new problems which
are ever arising and demanding a solution. It may be, too, that in the greater
number of party controversies, the opposed purposes of the parties play a
more important part even than the opposed views. Be this as it may, it is
necessary, especially in an age as deeply agitated as our own, when every
good citizen is in duty bound to ally himself to party, that every honest
party-man should seek to secure, amid the ocean of ephemeral opinions, a
firm island of scientific truth, as universally recognized as truth as are the
principles of mathematical physics by physicians of the most various
schools.

Section XXVIII.

Advantages Of The Historical Method. (Continued.)

Another characteristic feature of the historical method is that it does away
with the feeling of self-sufficiency, and the braggadocio which cause most
men to ridicule what they do not understand, and the higher to look down
with contempt on lower civilizations. Whoever is acquainted with the laws
of the development of the plant, cannot fail to see in the seed the germ of its
growth, and in its flower, the herald of decay. If there were inhabitants of
the moon, and one of them should visit our earth, and find children and

grown people side by side, while ignorant of the laws of human
development, would he not look upon the most beautiful child as a mere
monster, with an enormous head, with arms and legs of stunted growth,
useless genitals, and destitute of reason? The folly of such a judgment
would be obvious to every one; and yet we meet with thousands like it on
the state and the public economy of [pg 114] nations when in lower stages
of civilization, and this, even among the most distinguished writers.177

We may, indeed, make a critical comparison of different forms, each of
which answers perfectly to its object or contents; but such a comparison can
possess historical objectivity, only when it is based on a correct view of the
peculiar course of development followed by the people in question.

The forms of the period of maturity may be considered the most perfect;
earlier forms as the immature, and the later as those of the age of decline.178
But it is a matter of the greatest difficulty, accurately to determine the
culminating point of a people's civilization. The old man believes, as a rule,
that the times are growing worse, because he is no longer in a way to utilize
them; the young man, as a rule, that they are growing better, because he
hopes to turn them to account. It is, however, always a purely empirical
question; and in the solution of it, the observer's eye may acquire a singular
acuteness by the comparative study of as many nations as possible,
especially of those which have already passed away.179

Could anyone contemplate the history of mankind as a a whole, of which
the histories of individual nations are but the parts, the successive steps in
the evolution of humanity would of course afford him a similar objective
rule for all these [pg 115] points in which whole peoples permanently differ
from one another.180

Section XXIX.

The Practical Character Of The Historical Method In Political
Economy.

Before I close, I must refer to a possible objection which may be made to
historical or physiological Political Economy: that it may indeed be taught,
but that it cannot be a practical science. If it be assumed that those
principles only are practical, which may be applied immediately by every
reader, in practice, this work must disclaim all pretensions to that title. I
doubt very much if, in this sense, there is a single science susceptible of a
practical exposition.181 Genuine practitioners, who know life with its
thousands of relations by experience, will be the first to grant that such a
collection of prescriptions, when the question is the knowledge and
guidance of men, would be misleading and dangerous in proportion as such
prescriptions were positive and apodictic, that is non-practical and
doctrinarian.

Our endeavor has been, not to write a practical book, but to train our
readers to be practical. To this end, we have sought to describe the laws of
nature which man cannot control, but, at most, only utilize. We call the
attention of the reader to the different points of view, from which every
economic fact must be observed, to do justice to every claim. We would like
to accustom the reader, when he is examining the [pg 116] most
insignificant politico-economical fact, never to lose sight of the whole, not
only of public economy but of national life. We are very strongly of the
opinion, that only he can form a correct judgment and defend his views
against all objections, on such questions as to where, how and when certain
liens and charges, monopolies, privileges, services etc., should be
abolished, who fully understands why they were once imposed or
introduced. Especially, do we not desire to impress a certain number of
rules of action on those who have confided themselves to our guidance,
after having first demonstrated their excellence. Our highest ambition is to
put our readers in a way to discover such rules of direction for themselves,
after they have conscientiously weighed all the facts, untrammeled by any
earthly authority whatever.182183

[pg 119]

Book I.

The Production Of Goods.

Chapter I.

Factors Of Production.

Section XXX.

Meaning Of Production.

To create new matter is more than it is given to man to do. Hence, by the
term production, in its widest sense, we mean simply the bringing forth of
new goods—the discovery of new utilities, the change or transformation of
already existing goods into new utilities,184 the creation of means for the
satisfaction of human wants, out of the aggregate of matter originally
present in the world. (Producere!) We confine ourselves, however, in this to
economic goods, as defined in § 2. In a secondary and more limited sense,
production is an increase of resources, in so far as the goods produced
satisfy a greater human want, than those employed in the production
itself.185186187

[pg 120]
It would, however, be an error to suppose, that the creation of certain
utilities for the producer himself, or for others, constitutes the only end of
economic production. The more perfect economic production becomes, the
greater grows the pleasure the producer feels in his products, which
pleasure is at once the effect and the cause of his success. Hence,
production is to a great extent its own end. That this is so in the case of
artists is well known. “If you want only progeny from her, a mortal can
beget them as well. Let him who rejoices in the goddess, not seek in her the
woman,” says Schiller. There is not a really clever workman but has
something artistic in his mode of production. And even the meanest
productive activity, provided it is neither over-driven nor misdirected, must

of itself exert a good influence on the physical and moral development or
preservation of the producer. An idle brain is the devil's workshop.188

Section XXXI.

The Factors Of Production.—External Nature.189

The division of natural forces which formerly obtained, into organic,
chemical and mechanical, is of no great importance in Political Economy.
The tendency is more and more to resolve organic forces partly into
chemical and partly into mechanical. Between mechanical and chemical
forces, again, the boundary is not fixed, heat being always capable of
producing motion, and motion always of producing heat. Hence, it is all the
more important for us to find a division of the economic gifts (matter,
forces190 and relations) of external nature, into such [pg 121] as are capable
of acquiring exchange value, and such as are not. (See § 5.)

A. Those gifts of nature which, because they cannot be appropriated by any
one, or which at least are inexhaustible as compared with the wants of man,
and therefore never have a direct value in exchange, belong either to the
class of free goods, in the fullest sense of the word, as, for instance, sunlight
and the atmosphere (supra, § 5);191 or they constitute, by reason of their
peculiar and intransmissible connection with the whole country, an essential
element of the national resources.

Section XXXII.

External Nature.—The Sea.—Climate.

To the last category belongs, for instance, the sea, the only natural boundary
of a country, which from a military point of view, constitutes a protection to
it, without, at the same time, disturbing peaceful traffic. (Riedel.) Here, also
belong ocean currents, especially when uniformly supported by regular
winds,192 the ebb and flow of the tides, which constitute [pg 122] a piece of
commercial machinery of the very greatest importance, particularly when
they affect the waters of rivers to a great distance.193 In this age, when the
love of travel is so great and so universal, what prices are paid in many
places by strangers for the beauty of a landscape, to its owner.

Special mention should be here made of climate, and of its heat or moisture.
The lines called isothermal, that is, lines of equal annual heat, are, therefore,
of greatest importance to public economy, because the “zones of
production” depend mainly on them.194 However, we are concerned here,
not only [pg 123] with the average temperature of the whole year, but
especially with the distribution of heat among the several parts of the day
and the different seasons of the year, and the maximum summer heat and
winter cold (the isothermal and iso-cheimenal lines). Coast lands are wont
to have a milder winter and a cooler summer than continental ones with an
equal average yearly heat. This produces a great difference in vegetation,
because there are a great many plants which can endure the winter's cold
very well, but require a hot summer; and vice versa.195 Were it not for this
fact, in connection with the winter-sleep of plants, a large portion of the
north would be entirely uninhabitable. Besides, the temperature of a place
does not depend exclusively on its latitude, or on its height [pg 124] above
the sea-level.196 The humidity of the climate is, as a rule, great in proportion
to the quantity of water in its neighborhood, and to the height of its
temperature; although, for instance, in Europe, the number of rainy days
increases, the further we advance towards the north.197 Although the
distance of a place from the equator and its height above the level of the sea
have, in many respects, a similar effect (vertical, horizontal isothermal lines
and zones of production), mountainous regions are uniformly distinguished
by a greater degree of humidity, which makes them better adapted for
pasturage and forest-culture. But the flora of a locality, being the resultant
of all its conditions, affords us a much better criterion of the value of the
climate for economic purposes, than the most accurate thermometric
observations. Other things being equal, the productive force of nature

operates, doubtless, with most energy, in warm climates. The more remote a
country is from the equator, the more is its fertility confined to its lowest
parts.198 Greater heat will, as a rule, ripen the same product sooner, and thus
permit the same land to be used several times in the same year.199 Each
individual [pg 125] harvest, as a rule, is more abundant,200 and the products
better in many respects. The fruit, for instance, and wine, contain more
sugar,201 and oleaginous plants contain more oil. Lastly, since nature in
warm countries is so much more generous, it may be utilized by man with
less regard for consequences. There is less need of extensive woods, of
large winter supplies, especially for animals;202 fewer buildings are
demanded, and there is also less demand for human and brute labor, since
the work of plowing, sowing etc., extends over a greater portion of the
year.203 It is true, on the other hand, that also the [pg 126] destructive force
of nature is greater in warmer than in colder countries. (§ 209.)204

Section XXXIII.

External Nature.—Gifts Of Nature With Value In Exchange.

B. Those gifts of external nature which may become objects of private
property, and at the same time possess sufficient relative scarcity to give
them value in exchange, are either movable, and exhaustible in a given
place, or firmly connected with the land. The first category embraces, for
instance, such wild animals and plants as serve some useful purpose,
minerals, above all, fossil combustible matter205—the [pg 127] “black
diamonds,” coal, of which, with its canals, Franklin said that it had made
England what it is. The economical effect of their moveable character is
best seen, when the use made of an ordinary stratum of coal is compared
with that of a protracted subterranean fire in a coal mine.206 The latter can
be directly useful only to those in its immediate vicinity. Every lower layer
of the burning coal would be less useful. An increase of its actual power by
accumulation in time or place is scarcely possible. In all these respects, the
movable coal is incomparably better adapted to the satisfaction of man's

wants. It may be said that the capacity of heat for drying, distilling, melting
and hardening purposes, of imparting rapid motion to heavy objects by the
production of confined steam, is, at least, a thousand times as great when a
thousand bushels of coal are consumed as when one is consumed. In most
cases even the concentration of a large quantity of coal will increase, the
result not only absolutely, but relatively.207208

[pg 128]

Section XXXIV.

External Nature. (Continued.)

The materials, forces and relations or conditions of external nature,
immovably connected with parts of the land, even when in themselves
exhaustless, either allow only of a definite amount of economic utilization,
as, for instance, the mechanical force of a given waterfall, which can drive
only a definite number of mills of a definite size;209 or their increased
utilization is accompanied by difficulties which increase with still greater
rapidity. This last is the case, especially in the employment of land for
agricultural purposes. It is, according to Senior, one of the four fundamental
axioms of Political Economy, that additional labor, spent on a given
quantity of land, produces, as a rule, a relatively smaller yield; assuming, of
course, that the art of agriculture remains the same. It is not possible to [pg
129] determine either generally, or in particular cases, the precise point at
which agriculture should stop, to prevent relatively smaller returns from
increased expenditure of labor and capital. Improvements in the art of
agriculture may remove it a great distance. But, that there is such a point
admits of no doubt. No one will believe that an acre of land can be made to
produce a quantity of the means of subsistence sufficient to support all
Europe, no matter what the amount of seed used, or of manure etc.
employed.210 This is most apparent in forest-economy, where the absolute

increase of the so-called wood-capital becomes, after a certain time, smaller
from year to year.211

[pg 130]

Section XXXV.

External Nature.—Elements Of Agricultural Productiveness.

In treating of the agricultural productiveness of a piece of land, it is
necessary to distinguish three things,—its bearing-capacity, its capacity for
cultivation, and its direct capacity to afford food to plants.212 Plants grow by
drawing a part of the elements which enter into their composition from the
atmosphere, and a part from the earth through the agencies of sunlight and
of water. While the air, the sun's heat, and in most parts of the world, water,
are free and inexhaustible goods, the earth's supply of food for plants must
be considered as analogous, so far as its exhaustibility and capacity to be
appropriated are concerned, to the beds of coal and of ore etc. which occur
in mining districts. This is certainly true, with a few important differences,
however, as for instance, that, as a rule, it is impossible, except through the
cultivation of plants, to obtain from the earth the stores of plant food which
it contains;213 and that it is possible to husbandry to replace the portion of
these stores taken from the earth by the harvest, through the agency of
manures.214

Incomparably more important in the economic valuation of a piece of land
is its capacity for cultivation, because this depends [pg 131] much less on
the good or bad quality of the husbandman's art. I mean here the so-called
physical constitution of the vegetable soil; its water-holding power, its
consistency (light or heavy soil) on which the difficulty of working it
depends; its ability to dry, in a shorter or longer time, and its accompanying
diminution in volume; its ability to draw moisture from the atmosphere and

to absorb the various kinds of gases; its heat-absorbing and heat-containing
power (hot, warm and cold soils).215 Much depends here on the depth of the
vegetable soil and on the constitution of the sub-soil, which, for instance,
when it is very permeable, improves a very moist soil, but in the form of
meadow iron-ore (Wiesenerz), works great injury. The vertical form of the
land is also a very important element in estimating the natural fertility of the
soil. In mountainous districts, the quantity of land which can be used (and
with what labor!) is wont to be relatively smaller than in low lands. Hence it
is, that the former become too small for their inhabitants; who, therefore,
swarm over the plains lying before them either as settlers or conquerors.216
In the eastern hemisphere, the northern slopes [pg 132] of mountain regions
are most unfavorably situated, although the southern slopes are frequently
subjected to more trying and more sudden variations of thawing and
freezing weather.217

But all these more special qualities of the soil must be distinguished from
their general basis, the bearing or carrying capacity which land possesses as
a mere superficies, and which the most naked rock (Malta!), and the bed of
a flowing stream (the floating gardens of China!) possess to some extent,
since there is a possibility of establishing a plant-feeding surface on them.
This bearing capacity, which in most instances is given only by nature, and
which can be added to only to a very limited extent and at great outlay, is
wont, when the population is very dense, to acquire considerable exchange
value in the vicinity.218219

[pg 133]

Section XXXVI.

External Nature.—Further Divisions Of Nature's Gifts.

The gifts of nature, we further divide into those which can be directly
enjoyed and those which are of use only indirectly, by facilitating
production. (Natural means of enjoyment,—means of acquisition.)220 An
extreme superfluity of the former is as disastrous to civilization as a too
great scarcity of them. How simple the economy of a tropical country! A
banana field will support twenty-five times as many men as a wheat field
(K. Ritter); and with infinitely less labor; for all that is needed is to cut the
stems with their ripened fruit, to loosen the earth a little and very
superficially, when new stems shoot up.221 At the base of the mountains of
Mexico, a father needs labor only two days in the week to support his
family. Hence, nothing so much excites the wonder of the traveler there as
the diminutiveness of the cultivated ground surrounding each Indian hut.222
But in these earthly paradises, [pg 134] where, as Byron said, even bread is
gathered like fruit, the powers of man slumber as certainly as they grow
torpid in polar deserts.223 The sentence: “In the sweat of thy brow shalt thou
eat bread,” has been a blessing to mankind. Athens was not only the literary
and political, but also the economic capital of Greece; and yet Attica was
one of the most sterile countries in the world.224 Unfortunate Messina, on
the other hand, was the most fertile province of Greece. In modern times,
no countries of equal extent have produced as many great captains,
statesmen, savants and artists as Holland, whose securest portions are as
unfertile as those which are fertile are threatened by the sea. On the other
hand, how lately and imperfectly has the so-called black-earth of southern
Russia fallen under the influence of civilization!225

[pg 135]

Section XXXVII.

External Nature.—The Geographical Character Of A Country.

The geographical character of a country is, as a rule,226 most intimately
connected, not only with its flora and fauna, but also with the character of
its people. One of the crowning glories of the progress of modern science is,
that it has recognized anew the power of this wonderful organism, and that
it has made geography an explanatory medium between nature and history.
The conditions most favorable to the development of civilization are found
in a well developed country which slopes gradually through a series of
intermediate terraces from a mountain summit to a plain; especially when
they are connected with one another by a good system of streams; since
here the opposite peculiarities of the populations of the highlands and coast-
lands227 tend to produce a nationality both one and varied. Where the
transitions are too abrupt, as for instance, in New Holland, they easily
impede inter-communication; and, still more, where the several parts of the
country are of very great extent; as, for example, the desert of North Africa,
the plateau of South Africa or that of Central Asia. Europe is favored above
all other parts of the world by the happy combination of mountain and
plain.228 We might pursue the parallel existing between the soil and the
character of a people into the minutest details, and discover, even in the [pg
136] difference between Spanish, French, German and Hungarian wines, a
reflection of the different characters of the people.229

But whence is this? Can it be that dead nature has thus irresistibly affected
the living mind? We do not need to give a materialistic answer to the
question.230 Almost every people has migrated at some period of its
existence. Urged on by their peculiar tastes and tendencies, they settled in
the places most in harmony with their character. A higher hand was over
them; one which, we should unreservedly trust, placed them in such
external circumstances as were most favorable to the development of all
their faculties.

But the influences of man on nature are no less notable than those of nature
upon man. The greater number of domestic animals and plants which
Europe possesses to-day, it has been obliged to introduce from other parts
of the globe.231 In the interior of Gaul, the vine rarely ripened, at the time of
Christ.232 On the other hand, Mesopotamia, formerly one of the gardens [pg
137] of the world, is now covered with dried-up canals, filled a little below
the surface with heaps of brick and broken vases, the remains and other

vestiges of a once dense population. Its former rich alluvial soil, now
almost calcined, produces at present scarcely anything except a few saline
plants, mimosas etc.233 The higher the civilization of a people, the less does
it depend on the nature of the country.

Section XXXVIII.

Of Labor.—Divisions Of Labor.

Man's capacity for most economic labor is so closely connected with the
exquisite articulation of the human hand, that Buffon could say without
exaggeration that reason and the hand made man man.234 But it is true of
economic labor, as of all other labor, that it is more efficient in proportion
as mind predominates over matter.

The best division of economic labor is the following:235

A. Discoveries and inventions.236

B. Occupation of the spontaneous gifts of nature, as, for instance, [pg 138]
of wild plants, wild animals, and of minerals.237 Where this is the only kind
of economic labor, man is necessarily dependent on nature in a high degree.

C. The production of raw materials; that is, a direction given to nature in
order to the production of raw materials, by stock-raising, agriculture,
forest-culture etc., but not by mining.

D. The transformation (Verarbeitung) of raw material by means of
manufactories, factories, the trades etc.

E. The distribution of stores of goods among those who are to use them
directly, whether from people to people or from place to place (wholesale),
or among the individuals of the same place (retail).238 To this class also
belong leasing, renting, loaning, etc.

F. Services, in the more limited sense of the term, which embraces personal
as well as incorporeal goods; as, for instance, the labors of the doctor,
teacher; virtuoso, of the statesman, judge, and of preachers, whose office it
is, by way of eminence, to produce and preserve the immaterial wealth,
known as the State and the Church.239

The order followed in the above classification is that in which the different
classes of labor are wont to be historically developed.

[pg 139]

Section XXXIX.

Labor.—Taste For Labor.—Piece-Wages.

Man's taste for labor is conditioned especially by the extent to which, and
the security with which, he may hope to enjoy the fruit of his labor himself.
Hence it is that, as a rule, the slave (§ 71, ff.) and socager work least
willingly, the day laborer with less industry than the piece-worker,240 who is
at the same time more satisfied with himself, and gives most satisfaction to
his master,241 since he acquires more both for himself and for his master.
The superiority of piece-paid labor is [pg 140] greater in proportion as the
workman calculates his own advantage. It is, therefore, smallest in the case
of ingenuous uneducated workmen, and in that of the really
conscientious.242 The fear of seeing one's condition grow worse, through
want of industry, exerts an influence precisely similar to the hope of
improving it. In both respects, free competition (§ 97) must be considered
one of the principal means of furthering the taste for labor.243

Among the causes which have contributed to make England the first
country in the world, viewed from a politico-economical stand-point,
English writers on Political Economy have pointed out as one of the

principal, the prevalence there of piece-wages.244 Payment by the piece
should, of course, be [pg 141] practiced, only in cases in which the work
may be broken up into a series of isolated tasks, and is completed by such a
series. Hence, it is not applicable where a great many different things are
required of the same workman; nor in relations in which continuity, as, for
instance, of the inclination or disposition of the workman is the chief
thing.245 The further the division of labor is carried in our day, the greater
the part money plays in our social economy, and the more lasting relations
are dissolved, the more general becomes piece-work, which, with all its
material advantages, has, speaking morally, its dark side. (Atomism!)246 In a
great many branches [pg 142] of manufactures it has been relinquished
because the excellence of his work suffered from the workman's haste, and
because he could not be properly controlled.247 It is rather the quantity than
the quality of work which increases with piece-work, and where the quality
of the work is what is desired, this system has not the same field. And
where it obtains, as, for instance, in the case of ordinary type-setters, resort
is had to payment by the day for compositors engaged on mathematical
treatises, fac-similes, inscriptions etc. On the side of the workman, it is
generally only the idle and awkward who oppose piece-work on principle.
It is a subject of regret that the best and most industrious workmen are
carried away by it to an extent detrimental to their health.248 However, many
[pg 143] of the deficiencies of the piece-wage principle may be removed by
agreements made with whole groups of workmen; provided, always, that
the groups are not too large to prevent the mutual knowledge and
surveillance of their members.249 The quantity of work is greatest, its quality
best, and the material250 employed used most sparingly, when the workman
works on his own account, or has a share in the profits. This last is proper
only in those branches of the business the success of which depends on the
quality of the work. To compel the workman to share in the profits alone
will not do, because he is generally too poor to run any risk or to do long
without his earnings. The system of paying “commissions,” therefore, is to
be recommended all the more strongly, since it is a combination of fixed
wages with a share in the profits. This system is very prevalent in North
America, where a great deal has to be confided to the workmen. It is
practiced, also, in the whale fisheries, and on the Greek ships in the Levant
engaged in coasting, where much more depends on the care of the sailors
than on the ability of the captain.251 It presupposes [pg 144] good workmen,

equal almost to their master in education,252 for instance, in the case of
overseers of labor; since every better inducement to the taste for labor
which is not only juster but more complicative, is not only a condition but
also the effect of higher culture. But if the economy of a people is ripe for
share-wages, and masters begin to introduce them in earnest in individual
cases, the work produced will be improved to such a degree that it can not
be long before all others will be necessitated to follow them.253

If, however, workmen are to enjoy the fruit of their industry, it is necessary,
first of all, that public order should be secure. Even the most industrious
become discouraged where despotism or anarchy prevails. On the other
hand, even the greatest security is no sufficient incentive to a nation of
fatalists.254

[pg 145]

Section XL.

Labor.—Labor-Power Of Individuals.

The average labor-power of individuals varies very much in different
nations.255 The reason of this is, in part, doubtless a difference in natural
endowments. Thus, for instance, no people surpass the English and Anglo-
American in energy, none the German in intelligence in work or the French
in taste. Where we can assume that the same meaning is attached to the
expression, “military capacity,” by the different recruiting bureaus,
important conclusions as to the physical labor-power of different localities
may be drawn from the ratio existing between [pg 146] the number of those
fit for military service and those who are legally liable to military duty.256

But these conclusions are greatly modified by the state of civilization and
that of society. Where the laboring classes are despised and paid in a

manner unworthy of human beings, the badness of their work will be in
keeping with the estimation in which it is held. The reverse of this, also, is
usually true under different circumstances. (§ 173.) Thus, it has been
noticed in France, that native workmen, provided with as substantial food as
English workmen, are scarcely inferior to the the latter in the technic value
of their labor.257 A Mecklenburg day laborer eats almost twice as much as a
Thuringian workman, but then he accomplishes almost twice as much.
Hence, employers gain in the long run by paying their workmen well. As
civilization advances, the same number of workmen become, not only more
industrious and more capable, but the same quantity and quality of labor
becomes, as a rule, cheaper.258

[pg 147]
The moral culture of a people exerts the greatest influence here. In every
private undertaking, a great part of the expense attending it, and in every
state, a great part of the expense of its police system, and of its system of
administering justice, is occasioned only by the dishonesty of men. If all
this expense could be dispensed with, and full confidence placed in
individuals, it would be possible to devote much more time and energy to
positively useful labor.259 In estimating the labor-power of different nations
or different periods of time, the division of population according to age is
also of importance. As a rule, the labor-power of males is greatest from the
age of twenty-five to the age of forty-five. The more numerous, therefore,
the class of the population between these ages is, the more favorably, other
things being equal, is it situated as regards labor.260261 But, as a rule, the
relative number of full-grown people is greatest in highly civilized nations.
(§ 248.)262

[pg 148]

Section XLI.

Labor.—Effect Of The Esteem In Which It Is Held.

As civilization advances, labor becomes more honorable. All barbarous
nations despise it as slavish. Pigrum et iners videtur sudore adquirere quod
possis sanguine parare: has been the motto of all medieval times. In
heathen Iceland, the owner of a piece of land might be deprived of it by an
adversary who could overpower him in single combat. This mode of
acquisition was considered more honorable than purchase. It was Thor's
own form of investiture. The ideas of the Romans on rightful acquisition
may be inferred from the word mancipium (manu capere).263 Pure
Christianity, on the other hand, preached the honorableness of labor from
the first (Thess. 4, 11; II. Thess. 3, 8 seq.; Eph. 4, 28). And so in the time of
the Reformation,264 when Christendom was returning to its primitive purity.

In keeping with this is the fact, that the most cultivated [pg 149] nations,
and the same may be said of individuals, value time most highly. “Time is
money.” (Benjamin Franklin.) An English proverb calls time the stuff of
which life is made.265 While in negro nations, individuals do not even know
their own age; while in Russia, there are very few clocks to strike the hours,
even in the towers of churches, in England, a watch is considered an
indispensable article of apparel, even for very young people and for some of
the lower orders of society.266 Railroads operate in this respect as a kind of
national clock. The introduction of machinery and the more minute division
of labor, make punctuality a necessity. While South Americans and West
Indians are frightfully careless in their every movement, a carelessness
which betrays itself even in their drawling speech,267 the life of a New
Englander has been compared to the rush of a locomotive. In the markets of
Central Asia, nothing strikes the European with so much surprise as the
little value put upon time by the merchants of India and Bucharia, who are
fully satisfied when, after endless waiting, they succeed in obtaining a
somewhat higher price for their wares.268

[pg 150]

Section XLII.

Of Capital.—The Classes Of Goods Of Which A Nation's Capital Is
Made Up.

Capital269 we call every product laid by for purposes of further production.
(§ 220).270

[pg 151]
Hence, the capital of a nation consists especially of the following classes of
goods:

[pg 152]
A. Soil-improvements, for instance, drainage and irrigation works, dikes,
hedges etc., which are, indeed, sometimes so far part of the land itself that it
is difficult to distinguish them from it.271 To this class belong all permanent
plantations.

B. Buildings, which embrace workshops and storehouses as well as
dwellings; also artificial roads of all kinds.

C. Tools, machines and utensils of every description;272 the latter especially
for personal service, and for the preservation and transportation of other
goods. A machine is distinguished from a tool in that the moving power of
the former is not communicated to it immediately by the human body,
which only directs it; while the latter serves as a species of equipment, or as
a better substitute for some member of man's body.273 To be of advantage,
these three kinds of capital must save more labor or fatigue than it has cost
to produce them. Tools are, however, older than machines. The aborigines
of Australia used only a lance and a club in hunting; the somewhat more
civilized American Indians, the bow and arrow; Europeans use firearms: in
all of which a gradual progress is observable. Of the blind forces which
communicate motion to machines, water was the first used, then the wind,
and last of all, steam.274

[pg 153]
D. Useful and laboring animals, in so far as they are raised, fed and
developed by human care.

E. Materials for transformation (Verwandlungsstoffe): either the principal
material which constitutes the essential substance of a new product, the
yarn of the weaver for instance, the raw wool, silk or cotton of the spinner;
or the secondary material which, indeed, enters into the work, but only for
purposes of ornamentation, as gold-leaf, lac, colors etc.

F. Auxiliary substances, which are consumed in production, but do not
constitute a visible part of the raw product,275 as coal in a smithy, powder in
the chase or in mining, muriatic acid, in the preparation of gelatin, chlorine
in bleaching etc.

G. Means of subsistence for the producers, which are advanced to them
until production is complete.

H. Commercial stock, which the merchant keeps always on hand to meet the
wants of his customers.

I. Money as the principal tool in every trade that is made.

K. There is also what may be called incorporeal capital (quasi-capital
according to Schmitthenner), which is as much the result of production as
any other capital, and is used in production, [pg 154] but which, for the
most part, is not exhausted by use. There are species of this kind of capital
which may be transferred, as for instance, the good will of a well-
established firm. Others are as inseparably connected with human capacity
for labor as soil-improvements with a piece of land; e.g., the greater
dexterity acquired by a workman through scientific study, or the greater
confidence he has acquired by long trial.276 The state itself is the most
important incorporeal capital of every nation, since it is clearly
indispensable, at least indirectly, to economic production.277

The greater portion of the national capital is in a state of constant
transformation. It is being continually destroyed and reproduced. But from
the stand-point of private economy, as well as from that of the whole
people, we say that capital is preserved, increased or diminished according
as its value is preserved, increased or diminished.278 Pretium succedit in
locum roi et res in locum pretii. “The greater part in value of the wealth
now existing in England, has been produced by human hands within the last

twelve months. A very small proportion indeed of that large aggregate was
in existence ten years ago; of the present productive capital of the country,
scarcely any part except farm-houses and a few ships and machines; [pg
155] and even these would not, in most cases, have survived so long, if
fresh labor had not been employed within that period in putting them into
repair.... Capital is kept in existence from age to age like population, not by
preservation, but by reproduction.” (J. S. Mill.)

Section XLIII.

Capital.—Productive Capital.

Capital, according to the employment that can be given it, may be divided
into such as affects the production of material goods, and such as affects
personal goods or useful relations. The former, under the name of
productive capital, is, in recent politico-economical literature, usually
opposed to capital in use.279 Evidently any one of the two kinds of capital
mentioned above, may be used for both purposes.280 Indeed, the two classes
are, in many respects, coincident. Thus, a livery-stable carriage or a
circulating library is productive capital to its proprietor, and capital in use281
(Gebrauchskapital) to the nation [pg 156] in general; although the
circulating library from which an Arkwright obtains technic information, or
the livery-stable vehicle which carries a Borsig to his counting-room, has
certainly been used in the production of material goods. Almost all capital
in use may be converted into productive capital, and hence, the former
might be called quiescent capital, and the latter working capital.282 One of
the principal differences between productive capital and capital in use is,
that the former, even when most judiciously employed, does not so
immediately replace itself, as the latter, by its returns.283 On the other hand,
the real dividing line between capital in use, and objects consumed which
are not capital, is, and it is in complete harmony with our definition of
capital, that the latter are subject not only to a more speedy destruction and

one which is always contemplated, while in the case of the former, its
destruction is only the unintended reverse-side of its use.

Among a highly civilized people, a great amount of capital in use, as
compared with the productive capital of the country, may be considered a
sure sign of great wealth. When this is the case, the people, without losing
the desire of further acquisition, think that they have enough to richly enjoy
the present. I need only call to mind the munificence displayed by the
middle classes in England, in their silver plate and other domestic utensils.
But the people of Russia, and Mexico also, can make no mean display of
silverware.284 Here luxury [pg 157] is only a symptom of the disinclination
or inability of the inhabitants of the country to use their capital in the
production of wealth. How much richer would Spain be to-day, if it had
employed the idle capital spent in the ornamentation of its churches in
constructing roads and canals!285 Most nations in a low state of civilization
suffer from the absence of legal guarantees. Each one is compelled to turn
his property into a shape in which it can be most easily transferred from one
place to another and hidden. This is the principal reason why [pg 158] the
Orientals possess, relatively speaking, so many precious stones and so
much of the precious metals. The same cause accounts for the simplicity of
their dwellings.286 On the other hand, productive capital is to be found in the
greatest proportion among civilized nations which are making very rapid
strides towards wealth, the people of the United States, for instance.

Section XLIV.

Capital.—Fixed Capital, And Circulating Capital.

Capital, according as it is employed, is divided into fixed capital and
circulating capital. Fixed capital may be used many times in production by
its owner; circulating capital only once. The value of the latter kind of
capital passes wholly into the value of the new product. In the case of the
former kind of capital, only the value of its use passes into the new product.

(Hermann.) Hence, the farmer's beasts of burthen belong to his fixed
capital; their food, and his cattle intended for the slaughter, to his
circulating capital. In a manufactory of machines, a boiler intended for sale
is circulating capital; while a similar one, held in reserve for the machines
used in production, is fixed capital. Ricardo attributes a somewhat different
meaning to these two terms: he calls fixed capital that which is slowly
consumed, and circulating, [pg 159] that which disappears rapidly.287 Fixed
capital is, indeed, produced and preserved by circulating capital; but it is,
for the most part, transformed again into circulating capital.288 Besides, it is
only by means of the latter, that the former can be productively
employed.289 The relative importance of fixed and circulating capital to a
country depends upon whether the country is an advanced or only an
advancing one. A people with very much and very fixed capital are indeed
very rich; but run the risk of offering many vulnerable points to an
aggressive enemy, and of thus turning the easily jeopardized mammon into
an idol. To make a passing sacrifice of the country that the people and the
state may be saved, as did the Scythians against Darius, the Athenians
against Xerxes, and the Russians against Napoleon, becomes difficult, in
proportion as the nation has become richer in fixed capital.290 But, as [pg
160] the destination of the latter is changed with much greater difficulty
than that of circulating capital, highly cultivated nations would find it very
hard to satisfy new wants, if they could not always appropriate the results of
additional savings to the production of new fixed capital.

Section XLV.

Capital.—How It Originates.

Capital is mainly the result of saving which withdraws new products from
the immediate enjoyment-consumption of their possessor, and preserves
them, or at least their value, to serve as the basis of a lasting use.291 As
capital represents the solidarity of the economic past, present and future, it,
as a rule, reaches back into the past and forward into the future, through a

period of time longer in proportion as its amount and efficiency are
greater.292 Those producers, too, whose products perish rapidly may, also,
effect savings by exchanging their products [pg 161] and capitalizing their
counter-value. Thus, the actor, whose playing leaves after it nothing but a
memory, may use the wheat received by him from a farmer who came to
listen to him, in the employment of an iron-worker, and invest the product
permanently in a railroad. The transformation may be effected by means of
money, bonds etc., but it is none the less real on that account. Order,
foresight and self-restraint are the intellectual conditions precedent of
saving and capital. The childish and hail-fellow-well-met disposition which
cares only for the present is inimical to it. True, the desire of saving can be
developed only where there are legal guarantees to ownership;293 guarantees
which are both the conditions precedent and the effect of all economic
civilization.294 The Indians, Esquimaux etc., had to be taught for the first
time by the missionaries and merchants—and it was with the greatest
difficulty it was done—to save their booty, and spare the natural sources of
their acquisition. Originally, they were, in the heat and excitement of their
wild hunting and fishing, wont to destroy on the spot what they could not
enjoy in the moment.295 In the lowest stages of civilization, the first saving
of capital of any importance is effected frequently through robbery or in the
way of slavery.296 In both cases, it is the stronger who compel the weaker to
consume less than they produce. See infra, [pg 162] § 68. Where
civilization is at its highest, the inclination to save, as a rule, is very
marked.297 It begins to decline where a people are themselves declining in
civilization, and especially where legal guarantees have lost their force.

But capital may be increased even without personal sacrifice; as for
instance, by mere occupation, as of certain goods, not hitherto recognized
as such. Thus, also, by the establishment of valuable relations, the
advantages of which either become the common good of all; or which,
because at the exclusive command of one individual, obtain value in
exchange. The progress of civilization itself may increase the value of
existing capital. Thus, for instance, a house, considered as capital, may
double in value if a frequented street be opened in its neighborhood. To this
category belong all improvements in the arts which enable existing capital
to achieve more than it could before. The invention of the compass
increased the value of the capital employed in the merchant marine to an

extent that cannot be calculated.298 The increase of capital effected by
saving soon finds a limit unless such limit is widened by the progress of
civilization.299300

[pg 163]

Chapter II.

Co-Operation Of The Factors.

Section XLVI.

The Productive Coöperation Of The Three Factors.

All economic production generally demands the coöperation of the three
factors: external nature, labor and capital. But with the political economist,
labor is the principal thing; and not merely because all capital presupposes
labor, nor because every combination of the three factors is an act of labor;
[pg 164] but, in general, because “the human mind's idea of means and ends
makes all goods goods for the first time.” (Hufeland.)

Leaving the free forces of nature, surrounded by which we live and work,
out of consideration, and also the fact that all raw material is due to nature,
land is the indispensable foundation of all economy. But how little can
unassisted nature do to satisfy human wants! How much less to produce
goods possessed of value in exchange! A virgin forest, for instance, sold in
its natural state, has, indeed, value in exchange, but only because it is taken
into account that it can be cleared, and that there are means of
transportation already existing.301 The greater part of the forces of nature are
latent to nomads and nations of hunters. When labor develops, they are set
free to assist it.302 It is very seldom that any thing can be produced without
capital. Even the poorest gatherer of wild berries needs a basket and must
be clothed.303 Were there no capital, every individual would have to begin at
the very beginning every moment. Life would be possible only in a tropical
climate. No man, since the days of Adam, has been able to labor, except on
the condition that a considerable advance of capital had been made upon
him. There is not a nail in all England, says Senior, which cannot directly or

indirectly [pg 165] directly be traced back to savings made before the
Norman conquest.304

Section XLVII.

Productive Co-Operation Of The Three Factors. The Three Great
Periods Of A Nation's Economy.

The relation of the three factors to one another is necessarily very different
in different branches of production. For instance, in the case of cattle-
raising on a prairie, labor does very little, land almost everything. Hence an
extensive, thinly populated country is best adapted to this species of
production. But where land is scarce, as in wealthy and populous cities,
human activity should be directed into those branches of industry which
need capital and labor, as manufactures and the trades. (§ 198.)305

Looked at from this point of view, the history of the development of the
public economy of every people may be divided into three great periods. In
the earliest period, nature is the element that predominates everywhere. The
woods, waters and meadows afford food almost spontaneously to a scanty
population. This is the Saturnian or golden age of which the sagas tell.
Wealth, properly speaking, does not exist here, and those who do not
possess a piece of land run the risk of becoming completely dependent on,
or even the slave of a land owner. In the second period, that through which
all modern nations have passed since the later part of the middle ages, the
element, labor, acquires an ever increasing importance. Labor favors the
origin and development of cities as well as exclusive rights, the rights of
boroughs and guilds by means of which labor is, so to speak, capitalized. A
[pg 166] middle class is formed intermediate between the serfs and the
owners of the soil. In the third period, capital, if we may so speak, gives
tone to everything. The value of land is vastly increased by the expenditure
of capital on it, and in manufactures, machine labor preponderates over the
labor of the human hand.306 The national wealth undergoes a daily increase;

and it is the “capitalism” which first gives an independent existence to the
economic activity of man; just in the same way that law is, as it were,
emancipated from land-ownership, from the church and the family only in
the constitutional state (Rechtsstaat).307 But, during this period, the middle
class with its moderate ease and solid culture may decrease in numbers, and
colossal wealth be confronted with the most abject misery.308 Although
these three periods may be shown to exist in the history of all highly
civilized countries, the nations of antiquity, relatively speaking, never
advanced far beyond the second, even in their palmiest days. A great part of
that which is accomplished among us by means of capital and of machines,
the Greeks and Romans performed by the labor of slaves. Leaving
Christianity out of the question, nearly all the minor differences between the
public economy of the ancients and that of the moderns may be reduced to
this fundamental distinction.309310

[pg 167]

Section XLVIII.

Critical History Of The Idea Of Productiveness.

In this chapter, the dogma-historical (dogmengeschichtliche) part is of the
utmost importance, because it treats of the connection [pg 168] between the
deepest fundamental notions and the principal branches of practical life. It
is clear that every political economist must construct his exposition of
productiveness on his prior notions of goods and value. We must, therefore,
draw a distinction between expositions which are logical but altogether too
narrow, and wholly erroneous ones.311

[pg 169]
Thus, the Mercantile System admits every mode of applying the three
factors of production, but considers them really productive only in so far as

they increase the quantity of the precious metals possessed by the nation,
either through the agency of mining at home, or by means of foreign trade.
This view stands and falls with the altogether too limited idea of national
wealth before mentioned (§ 9), which this system advocated.312 The
majority of the followers of the Mercantile System ascribe more power to
industry to attract gold and silver from foreign parts, than to agriculture,
and to the finer kinds of industry than to the coarser; to active and direct
trade, more than to passive and indirect trade.

[pg 170]

Section XLIX.

Critical History Of The Idea Of Productiveness.—The Doctrine Of
The Physiocrates.

The doctrine of the Physiocrates is to be explained in part by a very natural
reaction from the narrow-heartedness of the Mercantile System, and at the
same time, by a presentiment, misunderstood, of the true theory of rent. (§
150 ff.). Of the six classes of labor mentioned above (§ 38), those only are
called productive which increase the quantity of raw material useful for
human ends. All the other classes, it matters not how useful, are called
sterile, salaried, because they draw their income only from the
superabundance of land-owners and the workers of the soil. Tradesmen, in
the narrower sense of the term, produce only a change in the form of the
material, the higher value of which depends on the quantity of other
material consumed for the purposes of the tradesman's labor. If any of this
material is saved, the value of their products sinks, although to the
advantage of the economy of the whole nation. In any case, industry could
create no wealth, but only make existing wealth more lasting. It might, so to

speak, accumulate the value of the quantity of food consumed during the
building of a house in the house itself.313

[pg 171]
But if tradesmen really earned, in the value of their products, only what
they had consumed during their labor, it would be difficult for them to find
employers to provide them with capital. Everyone will acknowledge, that a
Thorwaldsen and an ordinary stone-cutter, with the same block of marble,
the same implements, the same food, would necessarily, after the same
time, turn out exceedingly different values.314 And, even in the case that
industry should add to the raw material only precisely the same amount of
value as had been consumed by the workmen, can it be said that the work
ceases to be productive simply because it is consumed by the workmen
themselves? If that were so, agriculture even, would, in most countries with
a low civilization, be unproductive.315

Commerce, according to the theory of the Physiocrates, only transfers
already existing wealth from one hand to another. What the merchants gain
by it is at the cost of the nation. Hence, it is desirable that this loss should
be as [pg 172] small as possible. Hence sterility!316 But, the more important
branches of business, especially wholesale trade, are connected with a
transportation of goods (Verri), either from one place or from one period of
time, into another. Here the genuine merchant speculates essentially on the
difference of the values in use which are afterwards greater than before.317
The ice shipped yearly from Boston to tropical lands met a much more
urgent and wide-spread want there than it would if it had remained at home.
And thus the storage of grain in large quantities after a bountiful harvest
withdraws, indeed, an object of enjoyment from the consumption of the
people; but its sale, after a bad harvest, undoubtedly increases their
enjoyment in a much greater degree than it was before diminished. Besides,
the condition of both parties to the contract is usually improved in all
normal trade. (Condillac.)318 No one parts with exchangeable goods unless
they are of less use to him than the ones he receives in return.319 And so, the
value in use of a nation's resources is really increased by commerce. To the
other attributes of goods it adds one of the principal conditions of all use,
accessibility (Kudler), with which it either newly endows them, or which it
increases in degree. To this end, the merchant makes use of tools, just as the

manufacturer [pg 173] does. What spinning-wheels, looms and workshops
are to the latter, ships, warehouses, cranes etc., are to the former. If
production be not complete until the thing produced is made fit for its last
end, consumption, commerce may be looked upon as the last link in the
chain of productive labor. It, at the same time, constitutes a series of
intermediate links; as without it no division of labor is possible, and without
a division of labor, no higher economic productiveness.320 How commerce
may increase the value in exchange of goods, and without in any way
injuring the purchaser, needs no further illustration.321

Section L.

The Same Subject Continued.

Even Adam Smith called services, in the narrower sense of the term (§ 3),
the grave and important ones of the statesman, clergyman and physician, as
well as the “frivolous” ones of the opera singer, ballet-dancer and buffoon,
unproductive. The labor of none of these can be fixed or incorporated in any
[pg 174] particular object.322323 But how strange it is that the labor of a
violin-maker is called productive, while that of the violin-player is called
unproductive; although the product of the former has no other object than to
be played on by the latter? (Garnier.) Is it not strange that the hog-raiser
should be called productive, and the educator of man unproductive (List);
the apothecary, who prepares a salve which alleviates for the moment,
productive, the physician, unproductive, spite of the fact that his
prescription in relation to diet, or his surgical operation, may radically cure
the severest disease?

If the productiveness of an employment of the factors of production be
made to depend on whether it is attended by a material result, no one will
deny that the labor of the plowman, for instance, is productive; and no one,
of Adam Smith's school, at least, that that of the clerk, who orders the raw
material for the owner of the manufactory, is. They have participated

indirectly in the production. But, has not the servant of the state, who
protects the property of its citizens, or the physician, who preserves the
health of the producer, an equally mediate but indispensable share in it? The
field-guard who keeps the crows away, every one calls productive; why,
not, then, the soldier, who keeps away a far worse [pg 175] enemy from the
whole land? (McCulloch.) But the entire division of business into two
branches, the one directly, and the other indirectly productive, can be
defended only as respects certain kinds of goods. (Schmitthenner.) The labor
of the judge, for instance, is only indirectly productive in the manufacture
of shoes, inasmuch as he guarantees the payment of the shoemaker's
account. On the other hand, the shoemaker contributes only very indirectly
to the general security which the law affords, by protecting the judge's
foot.324

Nor can any effectual inferiority of service be claimed, simply because the
productive power of one branch of business is, measured by the duration of
its results, greater than another.325 What is more perishable than a loaf of
bread bought for dinner? What more imperishable than the monumentum
ære perennius of a Horace? The labor expended on persons and on relations
(Verhältnissen) is, both as to the extent [pg 176] and duration of its results,
much less capable of being estimated than any other; but its capacity of
accumulation and its power of propagation are greater than any other. It is
in the domain of the “immaterial,” that man is most “creative.” (Lueder.)326
Finally, neither should the greater indispensableness of the more material
branches of business be too generally asserted. Agriculture produces grain
which is indispensable, and tobacco which is not; industry, cloth, as well as
lace; commerce draws from the same part of the world rhubarb and edible
bird's-nests; and so, to services belong the indispensable ones of the
educator and judge, as well as those of the rope-dancer and bear-leader,
which can be dispensed with.327 Indeed, the dividing line between material
and intellectual production cannot, by any means, be closely drawn.328

Section LI.

The Same Subject Continued.

The greater number of recent writers329 have, therefore, come to be of the
opinion that every useful business which ministers [pg 177] to the whole
people's requirement of external goods possesses economic
productiveness.330 But it makes a great difference to science, whether a view
is considered true because no one has suggested a doubt of its correctness,
or because all doubts as to its truth have been triumphantly removed.

[pg 178]

Section LII.

Idea Of Productiveness.

It should never be lost sight of, that the public economy of a people should
be considered an organism, which, when its growth is healthy, always
develops more varied organs, but always in a due proportion, which are not
only carried by the body, but also in turn serve to carry it. The aggregate of
the wants of the entire public economy etc., is satisfied by the aggregate
activity of the people. Every individual who employs his lands, labor or
capital for the whole, receives his share of the aggregate produce, whether
he contributed or not to the creation of the kind of produce in which he is
paid. Thus, in a pin-manufactory, the workman who is occupied solely in
making the heads of pins is not paid in pins or pin-heads, but in a part of the
aggregate result of the manufacture, in money. Every department of
business, therefore, for the achievements of which there is a rational
demand, and which are remunerated in proportion to their deserts, has
labored productively. It is unproductive only when no one will need what it
has brought forth, or when no one will pay for it; but, in this case, what is

true of the writer without readers—that he is unproductive—and of the
singer without hearers, is equally true of the peasant whose corn rots in his
granary, because he can find no sale for it.331

[pg 179]

Section LIII.

The Same Subject Continued.

In this matter, again, there is an important difference to be observed
between private or individual economy and economy in its widest sense, in
the sense of a world-economy. The productiveness of labor is estimated in
the case of the former, according to the value in exchange of its result; in
the case of the latter, according to its value in use. There is a great number
of employments which are very remunerative to private individuals, but
which are entirely unproductive, and even injurious, so far as mankind is
concerned; for the reason that they take from others as much as, or even
more than they procure to those engaged in them. Here belong, besides
formal crimes against property, games of chance,332 usurious speculations (§
113) and measures taken to entice customers away from other competitors.
Again, scientific experiments, means of communication etc., may be
entirely unproductive in the individual economy of the undertaker, and yet
be of more profit to mankind in general, than they have [pg 180] cost the
former.333 In this respect the nation's economy holds a middle place between
individual economy and the world's economy.334 Strictly speaking, only
those employments should be called productive which increase the world's
resources. Hence, the work of government should be called so, only in so
far as its expenses are covered by the taxes paid willingly by the more
reasonable portion of the citizens; and also only in so far as its work is
really necessary to the attainment of its end.335 The productiveness of an
employment supposes, also, that it is not carried on at the cost of other

employments which it is more difficult to do without. In a healthy nation we
may, in this matter, rely, to a certain extent, on the judgment of public
opinion, which knows how to appreciate, at their just value, professional
gamblers, pettifoggers and the luxury of soldiers. The greater, freer and
more cultivated a nation is, the more probable is it that the productiveness
of private economy is also national-economical productiveness, and that
national-economical productiveness is world-economical productiveness.336

Section LIV.

Importance Of A Due Proportion In The Different Branches Of
Productiveness.

Much always depends on the due proportion of the different branches of
productiveness to one another. Thus, Spain, for instance, has remained poor
under the most advantageous [pg 181] circumstances in the world,337
because it allowed a disproportionate preponderance of personal services.
The character of the Spanish people has always given them a leaning
towards aristocratic pride and economic idleness. Tradesmen, in that
country, sought, as a rule, to amass merely enough to enable them to live on
the interest of their capital; after which they, by way of preference, removed
it into some other province, where they might be considered as among the
nobility; or they withdrew into a monastery. Even in 1781, the Madrid
Academy thought it incumbent on it to propose a prize for the best essay in
support of the thesis: “The useful trades in no way detract from personal
honor.”338 During the century in which the country was in its greatest glory,
the whole people were bent on being to all Europe what nobles, officers and
officials are to a single nation. “Whoever wishes to make his fortune,” said
Cervantes, “let him seek the church, the sea (i.e., go as an adventurer to
America) or the king's palace.” Under Philip III., there were in Spain nine
hundred and eighty-eight nunneries, and thirty-two thousand mendicant
friars. The number of monasteries trebled between 1574 and 1624, and the
number of monks increased in a yet greater ratio. A great many of its

manufactories, much of its commerce, and not a few of its most important
farms were controlled by foreigners, especially by Italians. There were, it
seems, in 1610, one hundred and sixty thousand foreign tradesmen living in
Castile. In 1787, there were still 188,625 priests, monks, nuns, etc.; 280,092
servants; 480,589 nobles; 964,571 day laborers; 987,187 peasants; 310,739
mechanics and manufacturers; [pg 182] 34,339 merchants.339 As a
counterpart to this, the United States had, in 1840, about 77.5 per cent. of its
population engaged in agriculture, 16.8 in manufactures and mining, 4.2 in
shipping and commerce, 1.3 in the learned professions.340

[pg 183]
We might be tempted, in view of this contrast, to return once more to the
unproductiveness of personal services. It is not, however, the direction
given to the forces of production, but the squandering of them, that is
injurious. When the Magyar, through mere vanity, drives a yoke of from
four to six horses where two are enough; or when, as in 1831, Irish
agriculture employed 1,131,715 workmen to produce a value of thirty-six
million pounds sterling, while that of Great Britain341 produced one hundred
and fifty millions a year, and employed only 1,055,982 workmen, these
causes are as sure to impoverish the country, as the waste of the Spaniards
in supporting such an army of clergy and servants. Of course, the
temptation to waste wealth on parks is greater than to waste it in vegetable
gardens! The probability that a man will ruin himself by keeping too many
servants is greater than that he [pg 184] will do the same by employing too
many operatives.342 And all the more, as there are many and especially
important services which regulate their own remuneration: thus, as a rule,
those of the statesman, those of the military in times of war, and those of
the priest in the age of superstition.343

Section LV.

The Degree Of Productiveness.

Concerning the degree of productiveness, it may be remarked that that
application of the factors of production is most productive, which, with the
least expenditure of means, satisfies the greatest want in the economy of a
people. Here, there is a continual change, corresponding precisely to the
change in wants and faculties. After a bad harvest, for instance, the labor
which procures grain from foreign countries or the supplies of former years,
is most productive; and, after an earthquake which has destroyed a large
city, the labor of the builder. Agriculture is, as a rule, the more productive
[pg 185] labor of undeveloped nations, and industry of highly developed
nations.344345

[pg 186]

Chapter III.

The Organization Of Labor.

Section LVI.

Development Of The Division Of Labor.

The larger a tree grows to be, the more boughs and branches does it put
forth. The more perfect any species of animal is, the more does it stand in
need of a special organ for each special purpose. And thus the division of
labor has developed and kept pace with the development of human society.
While Crusoe was obliged to provide for all his wants by his own labor, we
find that in the wildest Indian family the male is employed in war, the
chase, in fishing, in the manufacture of arms and boats, and in the
transportation of the latter during long marches; the female, on the other
hand, in the preparation of food, in the hewing of wood, the curing of skins,
the sewing of clothes, in the building and preservation of the wig-wam, the
care of children, and the carriage of baggage when on the march.346 These
occupations, at first entirely domestic, [pg 187] became, by degrees,
separate industries, which are constantly subject to further subdivision.347

Section LVII.

Development Of The Division Of Labor.—Its Extent At Different
Periods.

In the middle age of a people, the division of labor is not carried to any
great extent. The courtiers of King Frotho III. advised him to marry, “since
otherwise his majesty's ragged linen would never be mended.” Saint
Dunstan, although he occupied a high position in politics and in the Church,
was an excellent blacksmith, bell-founder and designer of ladies' robes.
Chriemhild in the Nibelungenlied was an industrious and skillful milliner.
In the corresponding period of Grecian and Roman history, we find
Penelope and Lucretia at the loom, Nausicaa, a laundress, the daughter of
the king of the Lestrigons, fetching water from the spring, Odysseus, a
carpenter, a queen of Macedonia as a cook, and finally the distaff of
Tanaquil.348 In the highlands of Scotland, in 1797, there were a great many
peasants all of whose clothing was home-made, with the exception of their
caps; nothing coming from abroad except the tailor, his needles and iron
tools generally. But the peasant himself was the weaver, fuller, dyer, tanner,
shoemaker etc. of his own family:349 every man jack of all trades.350

[pg 188]
In present England, on the other hand, the manufacture of watches is
divided into one hundred and two branches which have to be specially
learned; only the so-called “watch-finisher” carries on other branches
besides. In Wolverhampton, it may happen that a man, employed in the
manufacture of keys, may not be able to make a whole key after an
apprenticeship of ten years, for the reason that during all that time he may
have been engaged only in filing.351 In English agriculture there are,
according to German notions, very few complete wholes. A well-marked
distinction exists there between the cultivators of corn and breeders of
cattle; and the latter are again divided into breeders of young cattle, into
fatteners of cattle etc. Its industries are, in large part, separated into
provinces. Thus, linen manufactures are confined almost exclusively to
Leeds and Dundee, woolen manufactures, to Leeds,352 cotton manufactures,
to Manchester, [pg 189] and Glasgow, pottery to Stafford, coarse iron to
South Wales, hardwares to Birmingham, cutlery to Sheffield. And so in the
different quarters of the city. Thus, in large towns, the banks, stores, offices
etc., are found in one portion, with scarcely any intervening dwelling
houses.

On the division of labor depends all differences of estate and class, and all
human culture. It cannot be claimed that a division of labor does not exist
among animals;353 but those animals among which something analogous to
a division of labor among men exists, are raised far above all others by their
human-like economy and the relative importance of their achievements.354

Section LVIII.

Advantages Of The Division Of Labor.

The advantages of all suitable division of labor, consequent upon the natural
differences of human faculties and dispositions, are the following:

[pg 190]
A. The greater skill of the workman. Even physically, many capacities are,
by an indefinite number of repetitions of the same operation, enhanced to an
extraordinary degree; which, however, renders the performance of other
operations more difficult. Thus, the man who has developed his muscles
and hardened his hands working in a smithy, renders himself incapable of
becoming a violin-player or an operating oculist.355 Here belongs especially
the possibility of turning every kind of labor-power to greatest account.
Even children356 and old men may be made, in this way, to play a part in the
production of goods. It becomes practicable, too, to relieve men endowed
with superior faculties from common labor, and allow them to devote
themselves exclusively to the development of the peculiar powers with
which nature has gifted them.357

B. A great saving of time and trouble. The simpler the operation performed
by a single workman, the more easily is it learned; the smaller is the price
paid or apprenticeship, which depends on this, at least, that beginners
perform poorer work and are paid more poorly. “The shortest way to the [pg
191] end is most easily found when the end itself is near, and can be kept
continually in view.” (J. B. Say.) Where the same workman combines

different operations, a great deal of time is lost in changing tools etc.
Besides, it always takes some time for a workman to get rightly under way
of his work. The person who changes thus frequently becomes more easily
indolent. Lastly, there is a great number of operations which demand the
same aggregate amount of effort, no matter what the number of objects on
which they are performed. It is thus, for instance, with shepherds, mail-
carriers etc.358 The post carries a thousand letters with almost as much ease
as one; and the entire life of a wholesale dealer would scarcely suffice to
carry all the letters which he mails in a single day, to their place of
destination. During the middle ages, every man was obliged to watch over
his own personal safety and the maintenance of his own rights; while in
1850, in Great Britain, twenty-one million people are protected in their
persons and property, in an infinitely more effectual manner, and at less
cost, by fifteen thousand soldiers, and by a much smaller number of
policemen, whose place it is to preserve public order. (Senior.) Something
similar takes place among merchants, and it may be admitted as correct in
principle, that every new intermediary, freely recognized by both sides in
commerce,359 makes labor better or less expensive.

C. As the land of a country is, in a sense, the natural extension of the
national body, the international division of labor affords an indirect means,
but frequently an indispensable one, of procuring the products of foreign
countries and climates.360 If the English people wished to obtain themselves,
and without having recourse to any intermediary, the quantity of tea [pg
192] which they annually consume, it is possible that its whole agricultural
population would not suffice to procure it; while, at present, it is obtained
by the labor of forty-five thousand industrial workmen. (Senior.) Moreover,
the division of labor increases not only the aptitude of the workman but also
his incentive to productive labor, since it guarantees to every one the
certainty of being able, by means of exchange, to enjoy the productions of
every other person.361

Section LIX.

Conditions Of The Division Of Labor.

It is by its division, that labor, considered as a factor of production, is raised
to the highest degree of efficiency. Its results in any given industry are,
therefore, more important in proportion as the element labor predominates
in it. Hence, these results are much smaller, in agriculture, for instance, than
in the trades, or in personal services.362 The most expert sower or harvester
cannot be employed the whole year through in sowing or harvesting. Some
kind of rotation of crops, some kind of combination of tillage and stock-
raising is necessary to every agriculturist. On this depends the importance
of the technic secondary industries of agriculture, which are, in principle,
[pg 193] opposed to the division of labor. Hence, too, almost any person
engaged in a trade, no matter of what kind, supposes a greater number of
customers than a tiller of the land of the same rank.

The more labor is divided, the greater is the amount of capital necessary to
it.363 It may be even said, that all preparatory labor becomes capital in its
relation to subsequent labor. If ten isolated workmen can produce ten dozen
articles of any kind, daily, and, after the introduction of a more efficient
division of labor, fifty dozen, the employer must provide them, in the latter
case, not only with five times as much capital, but probably with fifty times
as much, as then, five hundred dozen are making continually.

Section LX.

Influence Of The Extent Of The Market On The Division Of Labor.

But it is the extent of the market especially which determines the limits of
the division of labor; for there is a direct and necessary relation between the
division of labor and the exchange of its surplus. Hence, the division of
labor may be carried farthest in the case of those products which are most
easily transported from place to place, and which, at the same time, possess

the utility that is most widely recognized. The smallness of the market may
depend upon the scantiness of the population, or upon its scattered
condition;364 upon their [pg 194] smaller ability to pay, or upon the bad
means of communication at their disposal.365 Hence it is, that in villages,
small cities, and still more on isolated farms, many branches of business are
carried on by one person, which are divided among many in larger cities;
and this is especially true in the case of businesses which have a chiefly
local demand.366 While, in small places, the barber is also frequently the
physician, in larger ones there are dentists, oculists, accoucheurs, surgeons
etc.367; and while, in the former, the tavern keeper is both dry goods
merchant and grocer, there are, in the latter, tea merchants, cigar-dealers,
dealers in mourning goods (in London childbed-linen warehouses) etc., and
hotels for all the different classes of travelers. There can be a distinct class
of porters, hack-men etc., only where commerce is very active.368 And even
in cities like Paris, where the costly industries that minister to luxury, that of
the jeweler, for instance, admit of only a limited division of labor, this effect
depends on the smallness of the market; a market, indeed, [pg 195] which
geographically may extend over the whole earth, but which, in an economic
sense, must always remain small, on account of the small number of
customers who have the ability to pay for their products. The real wonders
produced by the division of labor and the employment of machinery we
must look for in the manufacture of the cheapest and commonest
commodities.369

Section LXI.

The Division Of Labor—Means Of Increasing It.

Whoever, therefore, would increase the division of labor among the people,
must, first of all, extend their market; and this is done most efficiently by
improving the means of communication. Even in our day, it is over the
water-highroads that the heaviest articles are carried with the least
expenditure of force;370 but where civilization is not advanced, these

highroads possess still greater advantages, because of their safety,
convenience and priority. And here is the explanation of the intimate
connection of the beginnings of all civilizations with the existence, near the
scene of such beginnings, of good natural water-roads. “Even the wildest
inhabitant of the sea coast very soon obtains the idea of distance, which is
altogether wanting to the inhabitant of the primeval forest. No sooner does
he catch sight of the far-off island than his yearning after the distant
assumes a well-defined character. Bits of wood floating past him suggest to
his mind the [pg 196] best material to buoy himself up upon the water, and
a fish the best form for his craft.” (Klemm.) Hence the Mediterranean sea,
especially the eastern portion, with the various peoples and products of its
coasts, with its numerous islands, peninsulas and bays, its easy navigation,
but little influenced by the tides or by ocean currents, was the principal seat
of ancient civilization.371 The literal meaning of Attica is coast-land.
(Strabo.) The colonization of a new country is wont, where possible, to
begin on the coast, especially on islands near the coast; and to follow the
course of rivers into the interior. Even whole continents occupy, for the
most part, in the history of the world, the position assigned them by their
coast-development.372 While it is hard to determine whether, in the case of
the European continent, its limbs predominate or its trunk, Africa may be
said to be a trunk without members. Its islands, most of them insignificant
in themselves, are almost entirely cut off from it by ocean currents. This
explains why Madagascar had not, by any means, the influence on African
civilization which Crete, Sicily and Britain have had on the civilization of
Europe. Asia occupies, in this respect, about a middle position between
Europe and Africa. The trunk of that continent bears to its members about
the proportion of 670,000 to 150,000 square miles. And what is worst of all,
the middle of the whole is an almost insurmountable wall between north,
south, east and west Asia. Hence the tenacious peculiarity and isolated
development of the Chinese, Malayan, Indian and Arabic civilizations;
while the three peninsulas of southern Europe, for instance, have affected
one another so largely, and in so many different ways.373 The northern
hemisphere compared with the southern, presents [pg 197] a contrast
similar to that between Europe and Africa, or of the rich coast-groups of the
Atlantic compared with the poor ones of the Pacific.374 But it is most
especially, large, well-watered plains that are best adapted to the
construction of roads, and thus to facilitate the division of labor. And while

we find, in many countries, that the mountainous regions reached a certain
stage of development earlier than any others, because they were more easily
protected by military force, we find, too, that even here, plains, have, for the
most part, had the largest share of power and of civilization (northern Italy,
northern France, the plains of Switzerland and [pg 198] north Germany).
See § 36.375 We must not, however, fail to consider the reverse side of the
picture of the great highways of the world. The same reasons that raise them
to the dignity of lines of commerce, make them lines of war; and even the
contagion of great plagues and of the ruling vices follows, as a rule, the
avenues of trade.

Section LXII.

The Reverse, Or Dark Side Of The Division Of Labor.

There are hardships often attending the highly developed division of labor,
the dark and bright sides of which are most strikingly observable only in
large cities. However, when it is charged with adding to the natural
inequality of men, the accusation can be met only by the answer, that,
without the division of labor, we should be all equally poor and equally
coarse; for each one would be absorbed by the necessity of providing for his
lower wants, and no one would be in a way to develop his higher faculties.
Even the poorest man has more enjoyment in consequence of the division
of labor, than he could have living in a state of isolation from his fellow
men. The most wretched among us, the invalid without property of any
kind, the father of a family with more children than he can support, would
simply starve in the primeval forest.

[pg 199]
Those socialists who never tire of preaching “association,” overlook for the
most part, the great, free association which our needs, wants or tastes are
ever changing, and which is given us, as of course, by the division of
labor.376 Yet the skill produced by the division of labor is unavoidably

connected with a corresponding one-sidedness. The Russians, for instance,
are exceedingly apt, but they rarely distinguish themselves in any thing.377
Love of his avocation, or pride in it, is a thing unknown to the Russian
workman. He shirks all continuous labor.378 Experience has shown that the
Neapolitans and Italians, in general, exhibit great skill when they work
alone; but that when a great many of them work together, they become
rapidly confused. The English, on the other hand, are slow to learn anything
new, or to overcome unlooked for difficulties; but they have no equals as
workmen in organized industries.379 The difficulty experienced in seeking a
new calling, where a high division of labor obtains, arises as much from the
fact that each person here has received a more one-sided training, as from
the necessity he is under of competing from the first with only consummate
workers. Rousseau's school has laid too much stress on the tendency of
higher civilization to diminish individual independence. Quand on sait
creuser un canot, battre l'ennemi, construire une cabane, vivre de peu, faire
cent lieues dans les forêts sans autre guide que le vent et le soleil, sans
autre provision qu'un arc et des flêches; c'est [pg 200] alors qu'on est un
homme!380 We might reply that to build a steamship or a palace, and to
travel around the world are far better. (Dunoyer.) Even physically, civilized
man is superior to the savage, as might be inferred from the greater average
duration of life of the former. Of course, extremes should not be compared,
nor should we contrast the frame of a weaver or student with that of a
savage chief.381

In a similar way, the one-sidedness of the international division of labor
may be pregnant with great danger to national independence.

Section LXIII.

Dark Side Of The Division Of Labor.—Its Gain And Loss.

Where, indeed, the one-sidedness produced by the division of labor goes so
far as to cause the degeneration382 of the workman's personality, the human

loss of the nation is greater than [pg 201] the material gain purchased by it.
Thus the occupation of polishing metals or gilding, when continued for a
long time without interruption, invariably ruins the health. What must be
the aspect of the soul of a workman who, for forty years has done nothing
but watch the moment when silver has reached the degree of fusion which
precedes vaporization! who is blind to all else, but receives a good fat
salary for his services.383 Schleiermacher rightly declared all human action
which is purely mechanical, through which man becomes a living tool
(slave!) immoral. When the division of labor has reached this point,
machines should take the place of men. The morality of a profession may be
measured by the degree in which it corresponds with the universal calling
of the race.384 It is not, therefore, a piece of inconsistency but rather a
deeply felt want, when, where civilization is at its highest, so many
demands are made that the division of labor should take a retrograde path.
The practice of gymnastic exercises by the sedentary classes, universal
military duty, the participation of citizens in municipal government and in
political affairs, of laymen in the government of the church, of the wealthy
in the administration of charity; all these things are, from a materialistic
stand-point, considered a great squandering of time. It may be, that, if the
division of labor were more rigidly carried [pg 202] out, we might, by its
means, obtain more perfect results with less economic expense. But the
whole man is of more importance than the sum of his achievements and
enjoyments. (Luke, 9:25.) Wo to the nation where only jurists have a
developed sense of the right, where political judgment and cultivated
patriotism are the portion of only officials and placemen, where only the
standing army has warlike courage, and the clergy only conscious
religiousness; where parents leave all care for education to the teachers of
the various branches of learning, and where physical vigor is to be found
only among the proletarians. Hence there is nothing more ruinous than
premature one-sided education in a single trade or profession—a thing
which often happens from poverty before the foundations of the general
education becoming a human being have been laid. The higher a man's
position, the more should he, so to speak, be a representative of the whole
human race. Who, for instance, would wish to see a ruler brought up as men
are to a special branch of science or to a special profession?385386 The best
corrective for the one-sidedness [pg 203] produced by a high division of
labor consists in the extension and many-sided employment of leisure time,

both of which are made more easy by the same high civilization which
always accompanies the division of labor.387

Section LXIV.

The Co-Operation Of Labor.

The coöperation or combination388 of labor must, however, always
correspond to the division of labor. Both are but different sides of the one
idea of social labor; the separation of different kinds of labor, in so far as
they would disturb one another, and the union or combination of them so far
as they help one another.389 The vintner or grower of flax would necessarily
[pg 204] die of hunger if he could not certainly count on the grower of corn.
The workman in a pin-factory, who prepares only the heads of pins, must be
sure of his colleagues who sharpen the points, if his labor would not be
entirely in vain. The labor of the merchant is not even thinkable without that
of the different producers between whom he mediates. Where the
production of a certain article depends on the services of six different kinds
of labor, one of which, however, demands thrice the time, and another twice
the time of the rest, it is clear, that, in order that the business may be
properly carried on, so many workmen should be employed that their
number divided by 9 should leave no remainder. (Rau.) The union or
combination of different kinds of labor is most perfect when the workmen
live nearest together; when, therefore, they are not separated by great
difficulties of transportation; or in different countries, in which case, a war
might tear all to pieces.

Section LXV.

The Principle Of Stability, Or Of The Continuity Of Work.

Coöperation in time is of equal importance: the principle of the stability, or
of the continuity of labor. When a workman dies, it is necessary to be able
to calculate on a substitute. It is well known that it is much harder to begin a
business, than it is, afterwards, to improve and enlarge it; and this, the more
complicated it is. A new enterprise will take root easily, only where there
are several similar ones already in existence; a new manufacturing
establishment, for instance, where by the existence of other such
establishments, the requisite habits of the workmen, of capitalists and of the
public in general, have been previously developed. The skill of workmen is
propagated especially by observation and the personal emulation of [pg
205] the young; whence it is, that the introduction of new industries is best
made by the immigration of skilled workmen.390 Hence the baleful influence
of such interruptions, as for instance, the repeal of the edict of Nantes.
Hence too, it is, that despotism and the reign of the populace are so
unfavorable to the economy of a country, where there can be no guarantee
of a consistent observance and development of the laws. To the best
applications of the principle of the continuity of labor belong the church-
building of the middle ages, the national canals, the street and fortification
systems of modern times; all of which have been created only by the
coöperation of several generations to the same end.391 The most striking
means by which such a coöperation has been advanced in modern times is
public credit, “a draft on posterity;” yet, all saving is, in principle, the same.
The most powerful element in the coöperation in time of labor is the
economy in common of the family, although it differs in degree, according
to the different kinds of family inheritance. Where, as among the English
middle classes, it is customary to secure the business property of the family
to one child by will, and to entrust the conduct of the business, during the
life of the father, to the devisee, to provide for the other children by
insurance, by savings etc., made from the surplus of the business, there may
be old firms which remain always new, however; because they combine the
experience of age with the energy of youth, and are never broken up by a
division of the inheritance. But the [pg 206] compulsory equality of heirs,
which actually obtains in France, compels almost every new generation to
begin with a new firm. (See § 85 seq.)392

Section LXVI.

Advantage Of Large Enterprises.

On the results of the division and coöperation of labor rests the superior
advantage of all great undertakings, and they are, therefore, smaller in
agriculture than in industry. “It is harder to acquire the first thousand than
the second million.” Abstraction made of the conditions of capital and of
the market, the limit up to which the growing magnitude of an enterprise
becomes more advantageous, lies in the increasing difficulty of
superintendence. Numberless commercial improvements, such as the post-
office, railroads, telegraphs, exchange, banks etc., have operated powerfully
to extend these limits. It is frequently possible, even in small enterprises, to
secure the advantages of large enterprises, by association among those
concerned. They must, of course, possess the necessary capital. If they have
not got it, as property, they must borrow it. It is, of course, peculiarly
difficult here to preserve the necessary unity, without which the coöperation
of labor becomes the confusion of labor. The more moral and intelligent the
participants are and the simpler the business, the more extensive may it
become, and the more probable will be its success. (§ 90.)393394395

[pg 207]

Chapter IV.

Freedom And Slavery.

Section LXVII.

The Origin Of Slavery.

An institution like that of personal bondage, which, it can be shown, has
existed, among all nations of which history gives [pg 208] us information,
at one time or another, must have very general causes. Among these may be
mentioned especially subjection through war. It is not possible to calculate
how much the principle, that it was proper to reduce the man to slavery [pg
209] whom it was considered right to kill, contributed to make war less
bloody in an uncivilized age.396 A nation of hunters is almost compelled to
grant no quarter; the conqueror would be obliged either to feed his prisoner
or to put arms in his hands. It is certainly a great humanitarian advance,
when this state of things is superseded by slavery among nomadic
nations.397

In times of peace, economic dependence is the result of poverty, excessive
debt etc.398 Where there is no division of labor, the individual has no means
of supplying his wants, except by cultivating a spot of ground. But, how can
the poor wretch who has neither capital399 nor land exchange anything of
value for either? Such an advance, where there is no security in law, can be
made only on the credit of a very important pledge. But the man who is
destitute of all property can offer nothing but the productive power of
himself or of his family.400 And [pg 210] so it is with the small landed
proprietor who has lost all his capital;401 for, considering the
superabundance of land, the part which he possesses has value in exchange
only to the extent that it is joined with the certainty of being cultivated; and
here is the origin of the glebæ adscriptio. The hereditary transmission of the

relation to the children seems to be equally useful to them; or who, were
this not the case, would think of providing them with food? It also
frequently happens that poor parents prefer to sell their children to seeing
them starve.402 Hence the strange fact that most nations have the most rigid
system of slavery precisely at the time that the soil produces food most
readily. We need only cite the instance of the South Sea Islands, at the time
of their discovery. In many negro countries, where the people have not yet
learned to use animals for transportation, the lowest classes, although they
enjoy a nominal liberty, are used as beasts of burden.403

[pg 211]

Section LXVIII.

The Same Subject Continued.

In all very low stages of civilization, the greatest absence of the feeling of
wants, and the greatest indolence, are wont to prevail, and in the highest
degree. As soon as their merest necessities are provided for, men begin to
look upon labor as a disgraceful occupation, and indolence as the highest
kind of enjoyment. (§ 41, 213 ff.) Sustained and voluntary efforts, in any
number, then become possible only by the creation of new wants; but these
new wants suppose a higher civilization. Escape from this sorry circle is
then effected in the most humane manner, through the agency of foreign
teachers; inasmuch as the representatives of a more highly cultivated people
(missionaries, merchants etc.), by their own example, make the nation
acquainted with more wants, and at the same time help toward their
satisfaction.404 But, in the case of nations whose civilization is completely
isolated, or having intercourse only with others equally low, progress is the
creature of force exclusively. The barbarous isolation of families ceases
when the strongest and most powerful force the weaker into their service. It
is now that the division of labor really begins: the victor devotes himself

entirely to work of a higher order, to statesmanship, war, worship etc.; the
very doing of which is generally a pleasure in itself. The vanquished
perform the lower. The one-half of the people are forced to labor for
something beyond their own brute wants. And it is, here as elsewhere, the
first step that costs.405 (§ 45.)

[pg 212]

Section LXIX.

Origin Of Slavery.—Want Of Freedom.

It is not to be supposed that slavery, at this stage, is so oppressive even to
those who have been deprived of their freedom. The feeling of moral
degradation which slavery, abstraction even made of its abuses, awakens in
us, is unknown in a very uncivilized age.406 The child willingly obeys the
orders of strangers, and is hired out to service by his parents etc. The want
or craving for liberty keeps pace with the intellectual growth of a people.
The systematic over-working of servants or slaves, in the interest of their
masters, is scarcely thinkable in an uncultured age, when, in the absence of
commercial [pg 213] intercourse, every family consumes what it
produces.407 The only thing which the slave has to fear is an occasional
outburst of tyranny on the part of the master, a thing which is far from
unfrequent in all the relations of low civilizations. Fear restrains masters to
a certain extent; for, in those early days, how few were the institutions of
state which could protect them against the vengeance of their slaves!408409

[pg 214]

Section LXX.

Emancipation.

As states grow greater and men's manners gentler, the ranks of slavery are
less and less liable to be recruited through the agency of war.410 It then
becomes necessary to have recourse to the family to keep up their number,
which makes their condition much more endurable, and which supposes
that it has been made more endurable in other respects beforehand. Modern
states, are, as a rule, larger than the ancient were. The Germans had, long
before the time of Charlemagne, treated prisoners of war of German origin
more mildly than those of Gallic or Slavic origin.411 The condition of the
latter even improved from the time that nations began to think of making
permanent conquests. Since the Slavic wars of the tenth century, certainly
since the Lithuanian contests, it seems that prisoners of war were not
reduced to slavery.412 Chivalry, [pg 215] and allowing prisoners to go free,
on their word of honor, contributed largely to this result.

The more productive agriculture is, the more numerous the wants of land
owners, the more extensive the division of labor and commercial
intercourse become, the easier it is for a large class of the community to
obtain support for themselves and families without cultivating land of their
own. (Wages.) When exchanges through the medium of money become
customary, the chief argument for slavery disappears; and the strong, rich
and able man can, without having recourse to force, command the labor of
other men. Every further advance in economic culture must necessarily help
forward in this direction. Thus, without the plow, for instance, we should all
be really only so many glebæ adscripti. It is due especially to the ever
increasing perfection of tools, machines and operations, that the slave of
antiquity was transformed into the serf of the middle ages, and afterwards
into the day laborer of modern times.413 It is more particularly to be
remarked, that machines, since 1750, “first made the constitutional liberty
of many, instead of the feudal freedom of a few, possible.” (Schäffle.)

[pg 216]

Section LXXI.

Disadvantages Of Slavery.

Slavery promotes the division of labor only in the very beginning. The more
dependent the slave is, the worse he works. Whatever he spoils or allows to
go to waste injures only his master. Hence it is that slave-husbandry is only
one degree removed from what the Germans call Raubbau, and which
means, as nearly as we can translate it, the most thoughtless and wasteful
management possible.414 Whatever he consumes is simply so much gain to
himself. Industry and skill are injurious to him, because, if remarkable for
these qualities, his master exacts more work from him and is more adverse
to setting him at liberty. Instead of the numberless incentives of the free
workman: care for the future, for his family, honor and comfort, the slave is
generally moved by one—the fear of ill-treatment, and to this he gradually
becomes insensible.415 The division of labor demanded by manufactures,
and which is to be found for the most part only where each person is at
liberty to choose his own avocation, is scarcely supposable where slavery,
in the strict sense of the word, prevails. The same is true of the spirit of
invention and improvement.416 And even where the milder glebæ [pg 217]
adscriptio obtains, the division of labor is much hindered. Hence,
competent judges all agree on the badness of slave labor;417 which, as for
instance in the United States, was used only where the slaves were crowded
together in large numbers and could therefore be easily superintended. And
not only are the slaves themselves indolent, but their masters as well; more
particularly in slave countries where all labor is considered disgraceful.
What must be the national husbandry of a people, one half of whom refuse
to do anything that is right and proper, through malice, and the other half
through pride! As soon as, on account of increased population and
consequent increased consumption, this enormous waste of force can be
endured no longer, free workmen become more profitable, not only to

themselves and to the whole community, but to the greater number of the
individuals who compose it.418 On the Bernstoff estates the quantity of rye
harvested before [pg 218] and after emancipation was as 3:8-⅓; of barley-
corn as 4:9-⅓; of oat-grain as 2-⅔:8.419

The owners of serfs, especially, are apt to be very wasteful of their labor,
because they imagine that they obtain it gratis. Tucker has made a curious
calculation tending to show that when civilization reaches a certain point,
the master's self-interest leads to emancipation. In Russia, where there are
seventy-five persons to the English square mile, it seemed to him that
serfdom was still a good economic speculation. In western Europe, where
there were one hundred and ten persons to the square mile, freedom, in all
relations of master and servant, he considered more advantageous to all
parties. Emancipation began in England in the fourteenth century, when that
country had a population of forty to the square mile, and was completed in
the seventeenth, when the population was ninety-two to the square mile.420
Tucker concludes, that the turning point comes, when the population is
relatively to the number of square miles as 66:1.421 Such a calculation
cannot, of course, be universally true. The free workman can usually
command a much larger portion of the sum total of economic profits [pg
219] than can the slave or serf, who must be satisfied with the minimum
necessary to support life.422 Hence, free labor is more profitable to masters
only when production in general is so much enhanced thereby that a greater
quantity of goods falls to their share also. But this will always be the case
where workmen are capable of development.423

Section LXXII.

Effect Of An Advance In Civilization On Slavery.

At the same time, the same degree of servitude becomes more and more
oppressive to the bondman as civilization advances. The greater his
intellectual progress, the more does he feel the want of liberty, and the more

keenly he experiences the degradation of his condition. The development of
luxury digs a gulf between master and servant which grows wider every
day. (§ 227 ff.) As commerce extends, it becomes more profitable for the
master to exact excessive work from his slave. In the West Indies, it was a
problem which every slaveholder solved for himself, whether, by
immoderately increased production, which cost the lives of many slaves,
the gain in sugar was greater than the loss occasioned by the [pg 220]
consequent death of the negroes.424 When, with the advance of civilization,
the state guarantees to all more certain protection of their rights than they
enjoyed in a less advanced stage of social improvement, the last check on
masters, the fear of the vengeance of their slaves, is removed.425
Demoralization naturally increases in the same proportion; and that of the
master as well as that of his servants.426

Section LXXIII.

The Same Subject Continued.

This explains why it is that, in all countries, the power of the state, in a
period of transition towards a higher civilization, has endeavored to render
slavery milder. Great credit is due the Church in this regard. It soon
extinguished slavery entirely in Scandinavia,427 and in portions of Europe it
abolished at least the sale of prisoners to foreign countries.428 The [pg 221]
Concilium Agatheuse, in the year 506, decreed that serfs should not be
killed by their masters at pleasure,429 but that they should be brought before
a tribunal of justice. (The manorial tribunals of more recent times.)
Moreover, the numberless holidays of the church operated greatly in favor
of the bondmen. Pope Alexander III. recommended their gradual
emancipation.430 One of the principal steps in the way of progress was made
when they could no longer be sold singly, but only with the village or on the
estate to which they belonged.431 The feudal aristocracy improved the
condition of the bondmen by reducing a great number of freemen to their
level.432 This [pg 222] could not be effected without a real amelioration of

slavery; and, later, when the feudal aristocracy declined, the older serfs
were, with those who had been formerly free, raised from their abject
condition. The sense of chivalry would not permit a lord to be served by a
bondman. The old adage “the serf lives to serve and serves to live,” by
degrees, lost its force. Serfs were required to perform certain tasks on the
lands of their master and to pay him a certain quantity of the produce of
their own. Heriots (mortuarium), which became usual from the 8th century
(J. Grimm), may be considered evidence that even bondmen were permitted
to acquire and hold property in their own right. Thus was one of the chief
disadvantages of slavery, in an economic sense, removed.433 It may be
affirmed, as characteristic of the aristocracy of feudal times, that they
treated those, who like the serfs were entirely at their mercy, with much
more consideration than those who were free, and, although dependent on
them, had certain rights guaranteed by contract. The absolute monarchy
found in [pg 223] nearly all nations, at the opening of modern times, was
forced by its struggle with the mediæval aristocracy to favor the
emancipation of the serfs and of the lower classes. Even in Russia, Iwan III.
(1462-1505) seems to have restored to the peasantry the right of migration,
of which they had been deprived by the invasion of the Mongols, nor did
they lose it again until the great troubles at the beginning of the seventeenth
century, which gave the ruling power to the nobility.434

Where civilization has reached its highest development, the irresistible
power of public opinion, governed by the ideas of the universal brotherhood
of man and of democratic equality, causes the abolition of all irredeemable
and of all hereditary relations of servitude.435436437

[pg 224]

Section LXXIV.

The Same Subject Continued.

It cannot be doubted, that an entirely direct leap from complete servitude to
complete freedom may be attended by many [pg 225] evils. No man is
“born free,”438 but only with a faculty for freedom; but this faculty must be
developed. The knowledge and respect for law, and the self-control, which
are the conditions and limits of freedom, are never acquired without labor,
seldom without the making of grave mistakes, and never except through the
practice of them. As a rule, both parties, masters as well as servants, would
like to get rid immediately of all the inconveniences of the former condition
and yet continue to enjoy its advantages. The servant, for instance, will now
yield no more the specific obedience of former times, but demands still
specific mildness from the land-owner, or loaner of capital, his former
master. It is inevitable that there should be complaints on both sides.439 But
in the higher stages of economic culture, the relation of paternal protection
and childlike [pg 226] obedience between the different classes of the
people, which, even in medieval times, never obtained in all its purity, is
certainly unrecallable. Hence it is, that all hope of a better condition of
things is based only on this, that the lower classes may as soon as possible
attain to true independence.440

Section LXXV.

The Same Subject Continued.

Even in antiquity, the principal nations of the world could not keep the
humanizing influence of civilization from making itself felt on their slaves.
And if they did not go so far as to bring about the total abolition of slavery,
it is unhesitatingly to be attributed to their religious inferiority.441 In Athens,
during the Peloponnesian war, it was almost impossible to distinguish the
slaves from the poorer freemen by their looks or dress. Their treatment was
mild in proportion as desertion was easier by reason of the smallness of the
state or the frequency of war. It was forbidden to beat them; and only a
court of justice could punish them with death.442 Emancipation, in
individual cases, was very frequent, and the names of Agoratos and of the

law-reviser Nicomachos show how great a part an emancipated slave might
play in the nation.443 [pg 227] The helot system of the Lacedemonians
preserved much longer a great deal more of medieval barbarism; but even
here, we may infer from the frequent uprisings and emancipations of the
helots, from their services in war etc., that their lot was made less hard than
it had been.444

Among the Romans, with whom war and conquest were so long
considered445 the principal means of acquisition, slavery was relatively very
hard.446 But, later, there came to be several different grades of slavery (servi
ordinarii and mediastini etc.); and in slavery, every gradation denotes some
amelioration of condition.447 The slave obtained the right to possess
resources of his own (peculium).448 In addition to this, [pg 228]
emancipation became much more frequent in the later republic; so much so,
that Augustus considered it necessary to pass laws taxing frivolous
emancipation. (L. Aelia Sentia and Furia.)449 Where men like Terence,
Roscius, Tiro, Phædrus and the father of Horace rose from the condition of
slavery, the treatment of slaves cannot have been entirely brutalizing.450
Under the emperors who oppressed the free citizens, legislation was
directed more than ever towards the protection of the slaves.451 Instead of
permanent slavery, a condition of things was introduced and became more
general every day, one in which the bondman might contract a legal
marriage, have property of his own, and in which he was protected against
an arbitrary increase of the quota he had to pay his master, whether in
money or produce, although he still remained bound to the land. This class
was formed not only of the originarii, or those born into it, but also of a
large number of impoverished freemen, barbarian prisoners of war etc.452453

[pg 229]

Section LXXVI. (Appendix To Chapter IV.)

The Domestic Servant System.

In most countries the servant system developed itself gradually out of
serfdom, or of some condition of tutelage analogous thereto. This is seen
most clearly in the long continuance of forced service, by which the
subjects of the lord of the fee were compelled to allow their children to
remain in the court of the lord as servants, either without any remuneration
whatever, or for very low wages fixed by long continued custom.454 Here,
also, belongs the right of correction, so generally accorded to masters in
former times. In the higher stages of civilization, the whole relation is wont
to be resolved more and more into freedom of competition; and this process
is wont to take place earliest and most strikingly in the cities. Where vast
numbers of men are brought together, demand and supply [pg 230] of
services meet most easily. The nearer in the course of this development the
servant system approaches to piece-wages and day-wages, the shorter does
the customary (presumptive) duration of the contract last,455 the more
voluntary is the period of leave-taking by both parties;456 the more does the
entire relation tend to be limited to single acts of service agreed upon in
advance (§ 39), and the more frequently do both parties endeavor to supply
the place of the domestic servants by workmen who receive wages and live
outside of the family.457 The extreme of this direction at present is the
servant-institutes in cities, the more movable and more democratic
character of which finds expression in this, that they have extended the use
of personal services to a lower circle of consumers than could previously
have thought of employing them. In English [pg 231] agriculture this
transition was completed mainly in the third decade of this century. The
change was unquestionably favorable to the improvement of the art of
agriculture, but it was frequently damaging to the social relation existing
between the rich and the poor in the country.458 In Germany, the sale of the
public domains, conscription and Landwehr duty have operated in this
direction.459 Hence it is, for instance, that in Prussia, the servants, in 1816,
were 15.18 per cent. of the entire male population over 14 years of age, and
17.84 per cent. of the entire female population over 14 years of age. In
1861, on the other hand, there were only 11.88 and 12.93 per cent.,
respectively, while the number of day laborers and workmen, in the same
time, increased from 16.29 per cent. males, and 10.87 per cent. females, to
20.95 and 16.65 per cent., respectively.460 In most civilized countries, the
grade of society [pg 232] from which servants are recruited grows lower

and lower as the spirit of independence extends to the deeper strata of
humanity.461

The servant class may continue a long time yet to be a school of
development for those of the lower classes, who, ripe in body, are not
intellectually independent; just as the duty of bearing arms has been a
school of improvement for all male youth. Life-long servants are as seldom
to be desired as life-long soldiers.

In most places, the long transition period from complete bondage to free
competition was governed by a police system of wardship, which was very
unfavorable to the servant class. Such especially was the provision that all
young people of the lower classes, who could not expressly show that they
were employed under the paternal roof or at some trade, should be
compelled to seek some outside or inland work;462 such also was the strict
prohibition of “usurious” wage-claims, and the “decoying” of servants from
their masters.463 Besides, a [pg 233] great many provisions relating to
servants, and based on views belonging to an older economic condition,
were intended to throw obstacles in the way of farm hands and country
servants464 becoming servants in towns; and, on the other hand, to facilitate
the speedy abandonment of service in all cases in which the servant desired
to marry.465 All these preferences in favor of one class of contractors, and at
the cost of another, are radically opposed to the modern political spirit. The
laws relating to servants are wont, in our day, to have but one object, the
prevention, by registration with the police, of fraud and breach of contract,
and of all strife and litigation by the legally formulating of the conditions
which are very frequently tacitly understood.

The ideal of the relation of master and servant is attained when it is
considered by both as a part of the life of a Christian family.466 Hence,
benevolence on the one side and devotedness on the other, fidelity on both
sides, disinterested care for the present and future interests each of the other
tanquam sua; and especially for each other's eternal future. Whether this
state of mutual feeling is best furthered by the patriarchal system, by a
police system, or by free competition, it is scarcely possible to say. It may,
however, be affirmed that it depends upon a mutual and continued denial of
self not easy to attain. [pg 234] Where it really prevails, all the advantages

of the piece-work system are obtained in a worthy and organic manner, and
without its atomistic drawbacks.467

[pg 235]

Chapter V.

Community Of Goods And Private Property. Capital
—Property.

Section LXXVII.

Capital.—Importance Of Private Property.

As human labor can attain its full development, only on the supposition that
personal freedom is allowed to develop to its full economic importance and
dimensions, so capital can develop its full productive power only on the
supposition of the existence of the freedom of personal property. Who
would save anything, that is, give up present enjoyment, if he were not
certain of future enjoyment?468 The legitimacy of private property has, since
the time of Locke,469 been based, by the greater number of political
economists, on the right inherent in every workman, either to consume or to
save the product of his labor. But it should not be forgotten here that, at
least in the higher stages of the economy of a nation, scarcely any work or
saving is possible without the coöperation of society. And society must be
conceived not only as the sum-total of the now living individuals that
compose it, but in its entire [pg 236] past, present and future, and also as
being led and borne onward by eternal ideas and wants.470

[pg 237]

Section LXXVIII.

Socialism And Communism.

In opposition to this, the idea of a community of goods has found favor,
especially in times when the four following conditions met:471

A. A well-defined, confrontation of rich and-poor. So long as there is a
middle class of considerable numbers between them, the two extremes are
kept, by its moral force, from coming into collision. There is no greater
preservative against envy of the superior classes and contempt for the
inferior, than the gradual and unbroken fading of one class of society into
another. Sperate miseri, cavete felices! In such a state of social organization,
we find the utmost and freshest productive activity at every round of the
great ladder. Those at the bottom are straining every nerve to rise, and those
higher up, [pg 238] not to fall below. But where the rich and the poor are
separated by an abyss which there is no hope of ever crossing, how pride on
the one side and envy on the other rage! and especially in the foci of
industry, the great cities, where the deepest misery is found side by side
with the most brazen-faced luxury, and where the wretched themselves
conscious of their numbers, mutually excite their own bad passions. It
cannot, unfortunately, be denied, that when a nation has attained the acme
of its development, we find a multitude of tendencies prevailing to make the
rich richer and the poor, at least relatively poorer, and thus to diminish the
numbers of the middle class from both sides; unless, indeed, remedial
influences are brought to bear and to operate in a contrary direction.472

B. A high degree of the division of labor, by which, on the one hand, the
mutual dependence of man on man grows ever greater, but by which, at the
same time, the eye of the uncultured man becomes less and less able to
perceive the connection existing between merit and reward, or service and
remuneration. Let us betake ourselves in imagination to Crusoe's island.
There, when one man, after the labor of many months, has hollowed out a
tree into a canoe, with no tools but an animal's tooth, it does not occur to
another who, in the meantime was, it may be, sleeping on his bear-skin, to
contest the right of the former to the fruit of his labor. How different this
from the condition of things where civilization is advanced, as it is in our
day; where the banker, by a single stroke of his pen, seems to earn a

thousand times more than a day-laborer in a week; where, in the case of
those who loan money on interest, their debtors too frequently forget how
laborious was the process of acquiring the loaned capital by the possessors,
or their predecessors in ownership. More especially, we have, in times of
“over-population,” whole masses [pg 239] of honest men asking not alms,
but only work, an opportunity to earn their bread, and yet on the verge of
starvation.473

C. A violent shaking or perplexing of public opinion in its relation to the
feeling of Right, by revolutions, especially when they follow rapidly one on
the heels of another, and take opposite directions. On such occasions, both
parties have generally prostituted themselves for the sake of the favor of the
masses; and the latter have become conscious of the changes which the
force of their arms may effect. In this way, it is impossible that until order is
again entirely established, the reins of power should not be slackened in
many ways at the demands of the multitude. In this way, too, they are
stirred up to the making of pretentious claims which it is afterwards very
difficult to silence. In every long and far-reaching revolution, whether
undertaken in the interest of the crown, the nobility or the middle classes,
we find, side by side with the seed it intended to sow, the tares of
communism sprout up.

D. Pretensions of the lower classes in consequence of a democratic
constitution. Communism is the logically not inconsistent exaggeration of
the principle of equality. Men who always hear themselves designated as
“the sovereign people,” and their welfare as the supreme law of the state,
are more apt than others to feel more keenly the distance which separates
their own misery from the superabundance of others. And, indeed, to what
an extent our physical wants are determined by our intellectual mould! The
Greenlander feels comfortable in his mud hut, with his oil-jug. An
Englishman in the same condition would despair.474475

[pg 240]

Section LXXIX.

Socialism And Communism. (Continued.)

What has just been said will serve to explain why, in the following four
periods of the world's history, socialistic and communistic ideas have been
most widespread: among the ancients at the time of the decline of Greece,476
and in that of the degeneration of the Roman Republic;477 among the
moderns [pg 241] in the age of the Reformation,478 and again, in our own
day.479

Section LXXX.

Socialism And Communism. (Continued.)

We thus see, that the attempts made by socialism and communism are, by
no means, phenomena unheard of in the past, [pg 242] and peculiar to
modern times, as the blind adherents and opponents of them would have us
believe. They are rather diseases [pg 243] of the body social, which have
affected every highly civilized nation at certain periods of its existence. If
the [pg 244] body be too weak to react healthily and curatively (§ 84), the
evil is very apt to lead to the decline of all true freedom and [pg 245] order.
The communist, viewing all other things, especially the organization of the
state, only as instruments to supply his material and absolute wants,
considers the liberal either as a fool who is ever pursuing the phantoms of
the brain, or as a knave who covers his own selfishness under the mask of
the public welfare.480 Hence the adherents of communism are satisfied with
any form of government which seems to offer them most, and this a ruthless
despotism can do, at least, for the moment. And, although they are ever
ready for any revolution in the form of government, and easily to be won
over to it, they are most readily captivated by a despotic revolution. On the

other hand, when communism seriously threatens all that constitutes the
wealth of a people, the owners of that wealth are compelled to fly to any
refuge which holds out the promise to protect them from it, although by
seeking that same refuge they may destroy their own political freedom.481
The Achean league, which under the leadership of Aratos, the “enemy of
tyrants,” had come into existence, promising so much hope, beheld itself
later, and mainly through fear of the contagious effects of Spartan socialism
under Cleomenes, compelled [pg 246] to unite with the Macedonians, that
is, to give themselves up entirely. (§ 204).

Section LXXXI.

Community Of Goods.

We now, for the present, turn our gaze from the frightful revolution,
destructive of all civilization, which would necessarily precede the
establishment of a community of goods,482 and inquire what would be the
consequences. Among angels (“gods and sons of gods” of Plato) and mere
animals, a community of goods might, perhaps, exist without producing
injury. And so, too, it might exist among men bound one to the other by the
bonds of the truest love. The life of every model family is accompanied by
a species of community of goods.483 But in more extensive social
organizations, this love is never found except as an element of the most
exalted religious enthusiasm, which, as a rule, is of very short duration; of
which the Acts of the Apostles (II, 44 ff, 32 ff, V, I, II) affords us the best
known and most beautiful example.484

[pg 247]
Where this love does not exist, each participant in the community of goods
will, as a rule, seek to do the least and enjoy the most possible.485 In a
society of one hundred thousand [pg 248] members, each individual would
be interested in the results of its aggregate frugality only indirectly, and
only to the extent of a one-hundred thousandth part of the whole; that is,

practically, not at all.486 Individual selfishness would expend itself entirely
on the division of what the whole community produced. It would,
consequently, and almost always be detrimental to the whole, and to the
other individuals of the society; whereas, at present, it does so only in
exceptional cases. When Louis Blanc, as Mably had before him,
recommended that the point d' honneur should take the place of the interêt
personnel, as a spur to production, and a check on consumption, and cited
the army as an illustration of its workings, he forgot, among other things,
the thirty cases in which the [pg 249] code militaire pronounces sentence of
death on the violators of its provisions. And, as a matter of fact, the Münster
Anabaptists could not help punishing with death every transgression of their
communistic precepts.487 If, in a community in which the principles of
communism were rigorously carried out, all the burthens and enjoyments of
life were equal, and equally divided according to the ideas of the crowd,
men like Thaer, Arkwright, and others of their class, who now provide
bread for hundreds of thousands from their studies and laboratories, would
then be able, at most, with a rake and shovel, to provide food for three or
four. The division of labor, with its infinite amount of productive force,
would, for the most part, cease. Nor would the consequence be that the
humbler classes would be freed from work of a coarse, mechanical,
unintellectual and severe nature; but that the higher classes would be
dragged down to engage in it likewise. And what an increase there would be
in the number of consumers at the same time! Every man would, with a
light heart, follow the most imperious of human impulses if the whole
community were to educate his children. But we have seen that a
community of goods is desired most urgently in times of over-population.
Hence, here it would make the evil greater yet, by increasing consumption
and diminishing production.

Where there are now one thousand wealthy persons, and one hundred
thousand proletarians, there would be, after one generation, no one wealthy
and two hundred thousand proletarians. Misery and want would be
universal.488 For the purpose [pg 250] of giving the crowd a very
agreeable,489 but rather short-lived period of pleasure, a period simply of
transition, almost all that constitutes the wealth of a nation, all the higher
goods of life, would have to be cast to the waves, and henceforth all men
would have to content themselves with the gratifications afforded by

potatoes, brandy and the pleasures of the most sensual of appetites. And
then, the equal education of all, demanded by the communists, would have
no result but this, that no one would acquire a higher scientific training.490
But, after all, there lurks concealed in communism much more of envy than
is generally supposed.

[pg 251]

Section LXXXII.

The Organization Of Labor.

Most theoretical adherents of the doctrine of a community of goods,
feeling491 more or less the weight of the above objections, have
supplemented it with the idea of an organization of labor492 or the
centralized superintendence of all production and consumption, either by
the government already existing, or by one to be created anew. Such a
government would be, of course, a despotism such as the world has scarcely
yet seen, a Cæsaro-Papacy, usurping both the place and power of Father of
the universal Family.493 But the evils mentioned above would be entailed
none the less. Every incentive which now [pg 252] moves man to industry
or frugality would disappear, and nothing remain but universal
philanthrophy; or, if you will, but patriotism, virtues which are not wanting
even now. Even guardianship of the government newly created would be
carried on in a very loose manner; for it would be exercised without any
feeling of personal interest, even in the most favorable case supposable. It is
well known and easily understood, that state industries are never engaged
in, in the long run, with the same zeal, nor crowned with the same success,
as competing private industries. It is well known, too, how intimate the
connection is between the political freedom of a people and their economic
production; that, for instance, England's greater wealth, as compared with
that of Turkey, depends, most largely, on the freedom that obtains in the

former country and the servitude that prevails in the latter.494 And we may
inquire just here, what the result would be, if the despotism of government
should go ten times farther that it has ever gone in Turkey, when, moreover,
the despot who led the state, was not an individual with his few officials,
but the whole crowd, with its million eyes and million hands. It would,
practically, be to give every producer an escort of a policeman and a
revenue agent, as if he were a prisoner.

And where would be the gain? A division of wealth which would seem
unjust to many would exist now as well as before, because the idle and the
unskillful would receive the same reward as the most industrious and
skillful.495 The opposition of one class of society to another, so much
complained [pg 253] of, would continue. The only difference would be, that
whereas, it now comes from the weak, it would then come from the
strong.496 Compulsory association is certainly more prolific in strife and
crime than is a state of society in which everybody manages his own affairs.

A journey on foot, in company with others, is allowed, on all hands, to be a
very good test of friendship. But, a community of goods would, in the
strictest sense of the word, be a journey on foot through the whole of life
with numberless “friends.” Here, every one would believe himself entitled
to possess whatever pleased him. And, who would decide; since so many
communists preach the dissolution and extinction of all government, and
the reign of anarchy? Besides, there can be no doubt, that the difference of
human talents and human wants, would soon, spite of every law, lead to a
difference in property again. Hence, that first revolution would have to be
repeated from time to time—a real Sisyphus labor! No sooner have the bees
produced anything, than the drones come, and divide anew!

Section LXXXIII.

The Organization Of Labor. (Continued.)

Experience, however, teaches us, that, in all the lower stages of civilization,
a community of goods exists to a greater or lesser extent.497 The institution
of private property has been more fully evolved out of this condition of
things, only in proportion as well-being and culture have been developed as
cause and effect of such well-being. Thus, among most nations of hunters
and fishermen, the idea of private property was unknown [pg 254] when
these nations were first discovered. This is, indeed, very natural. Their chief
spring of production flows as if of itself, apparently inexhaustible; and the
hunter can hardly think of such a thing as saving any of his booty.498 And,
among nomadic nations, the land is a great meadow held in common; and
the industry of plunder is considered, as it is in all inferior stages of
civilization, especially honorable.499 The conquistadores of Peru found there
something very like a community of goods, under the despotic guardianship
of the state, viz.: a yearly division of all lands among the people, in
proportion to their rank; the cultivation of these lands in common, under the
superintendence of the state, and to the sound of music. But, at the stage of
civilization that Peru was then in, land is about the only resource possessed.
The results were the usual ones. A country like Peru, with [pg 255] only one
city, no beasts of burthen, no plows, no trades and no commerce, cannot
possibly be rich.500 That the constitution of Lycurgus established a sort of
community of goods among the Spartans, is well known. I need only recall
the public education, the meals in common, the authorization of stealing,501
the prohibition of trade, of the precious metals and fine furniture, the equal
division of property and the inalienable character of the land502 etc. With
such laws, Sparta could neither be, nor desire to become, wealthy. Of all
Greek states of any historical importance, it preserved longest the economic
peculiarities belonging to a low stage of civilization. Among most modern
nations, the fundamental idea of their land laws, which had their origin in
the middle ages, is, that each family is only the usufructuary, and that the
community is the sovereign proprietor of the soil. This community of
landed possession finds expression, among other things, in the vast extent
of communal woods and pasturages, in the varied intersecting of parcels of
land one by the other, which, indeed, change proprietors from time to time,
and in the common [pg 256] working of the land, carried as far as possible
etc.503 In all medieval times,504 not only the individual is considered an
owner of the land, but, over and above him, the family. At the same time,
we are wont to find existing an amount of mortmain property in the hands

of corporations, monastery lands, crown lands and domains of very great
importance.505 All these institutions have declined in number and shown a
disposition to disappear, in proportion as national husbandry or economy
has grown more productive.

Section LXXXIV.

The Organization Of Labor. (Continued.)

To this tendency we find, indeed, another, and a no less powerful one,
opposed. Everywhere as civilization advances, the sphere of action of the
state grows larger, and the ends it serves more numerous.

In its origin, government was established to preserve only the external
security of its subjects. By degrees, it comes to look after their internal legal
security, by enforcing internal peace, prohibiting revenge for bloodshed etc.
It next extends its care to the well-being, the culture, and even to the
comfort of the people. But the claims of the state must grow in the same
proportion as the service it renders. While Lowe, in 1822, estimated the
yearly net income of the British people at [pg 257] £251,000,000; the
government expenses,506 in 1813 and 1814, averaged £106,000,000, and
these sums were voluntarily devoted to public purposes by parliament. And
so, between 1685 and 1841, the population of England more than trebled its
numbers, But, in the same period of time, the outlay of the state increased
forty fold. (Macaulay.) Simultaneously with this development of things, it
becomes more and more usual by the exercise of the power of eminent
domain and others like it, to sacrifice private rights, acquired by the very
best of titles, to the preponderating common good. We may allude, further,
to the duty, universally imposed in modern times, of performing military
service, to the national systems of public instruction in so many countries;
to the large number of societies, joint-stock companies, popular holidays;
but particularly to the associations for insurance of every description. And
so it may, indeed, be claimed that we have come nearer to a community of

goods than could have been dreamed of a hundred years ago.507 And yet,
these are, for the most part, institutions in which we find reflected the
peculiar strength and solidity of our age. Whoever wishes to compare the
power of one people with that of another, must take into account not only
the elements which constitute their intellectual and physical force, but
especially their inclination to permit these elements to coöperate for public
purposes.508

[pg 258]
We may now inquire: At what point does this increasing community cease
to be a gain? This is as easily determined generally, as it is difficult to say
what the limit to it is in particular instances. Progress in the direction of a
community of interests of this nature is beneficial, only so long but
certainly as long as it corresponds with the feeling entertained by the
community, that they have interests in common. Hence it is, that such a
noble kind of communism reigns in art and literature, one which causes the
stronger to willingly labor for the weaker, and with the greatest success.509
And so, too, the christian care of the poor, even were it carried to the height
of the Gospel counsels (Luke, 3:11), would be no direct obstacle in the way
of the development of a nation's public economy, provided it were given,
and accepted, only as christian benevolence. Every approximation towards
a community of goods should be effected by the love of the rich for the
poor, not by the hatred of the poor for the rich. If all men were true
Christians, a community of goods might exist without danger. But then,
also, the institution of private property would have no dark side to it. Every
employer would give his workmen the highest wages possible, and demand
in return only the smallest possible sacrifice.510511

[pg 259]

Section LXXXV.

The Right Of Inheritance.

The right of inheritance to resources has its origin in a combination of the
idea of the family with the idea of property. And, indeed, this combination
of ideas is a very natural one. The larger portion of mankind consider the
pleasures of the family as the highest attainable, and endeavor, whenever
their economic means make it at all possible, to secure them. At the same
time, the selfishness of most men is not confined to their own persons, but
extends also to their posterity. Hence it is that bed and board, eonnubium
and commercium, have, from time immemorial, been considered correlative
ideas; and, to all the more logical socialists, a community of wives (or
celibacy)512 is as dear as a community of goods.513 (§ 245.) And in practice,
the greater number of nations of hunters, who, according to our
conceptions, have no knowledge of a real family and no knowledge of
property, have a custom of burying with the dead the things they used, to
kill their cattle etc., or to deprive minor children of their inheritance.514

[pg 260]

Section LXXXVI.

Economic Utility Of The Right Of Inheritance.

The certainty, that the material welfare of their children depends, in great
part, on their industry and frugality, is one of the most powerful incentives
to good, in the case of most men. And this is the basis of the economic
utility of the family right of inheritance.515 There is scarcely any other
institution which opposes over-population with such efficiency, for the
reason, that the obstacle placed in its way here is placed very directly, at the
point where it can make itself felt most, viz.: in the life of the family itself.
The weaker the family feeling, the less does the abolition of the right of
inheritance interfere with the economic interests of a nation. Hence, for
instance, it is, that taxes imposed upon legacies, bequests, testamentary gifts
etc., are less objectionable in proportion as they affect only those in the

more remote degrees of relationship in which inheritance is something
merely accidental. While, when a nation is yet in the intermediate stages of
civilization, the family right of inheritance seems to be very strong,
especially as regards landed property, a consequence of the fact, that a
superior kind of title to such property is recognized to exist in the family; at
a period, when individualism becomes more developed, the liberty of
devise by will is wont to prevail more and more.516 Then the right of
inheritance becomes, [pg 261] so to speak, a more elevated species of
personal property, a prolongation of the same beyond the grave. Should
testamentary freedom be too much hampered, selfishness would manifest
itself in a way much more detrimental to economic interests, viz.: in the
consumption of wealth, during the lifetime of its owner. Every man would
be but a life annuitant of his own property.

But, at the same time, in periods of moral decline, complete freedom may
degenerate so as to produce evils equally great. The wealthy Bœotians, in
the later days of Hellenic history, were wont to form themselves into
dissolute drinking companies; and not only the childless, but even fathers of
families made over their property to these companies, limiting their
offspring to a portion which it was made their duty to let them have. It was
so in Rome, also, in Cicero's time, when every acquaintance of standing
took it very ill if not remembered in the will of the testator, and where
Octavian, for instance, in the last twenty years of his reign, received about
70,000,000 thalers through legacies left him by his “friends.”517 Here, [pg
262] the repeal of the law making it obligatory on testators to leave a
certain proportion of their wealth to their children would remove the last
safe-guard of their material welfare.518

Section LXXXVII.

Landed Property.

As land, in its uncultivated state, has neither been produced by man, nor can
be entirely consumed by him, the above demonstration of the necessity of
private property cannot without [pg 263] any more ado, be extended to
land.519 Hence, individual property in land is everywhere much more recent
than individual property in capital.520

But a certain expenditure of capital and labor is necessary that land may be
used productively, and, in most instances, this employment of capital and
labor is of long duration, irrevocable in the very nature of things, and one
the fruits of which can be reaped only after some time has elapsed. Now,
this cooperation of capital and labor is such, that no one would undertake to
employ them in the cultivation of the land, had he not the strongest
assurance of possessing it. Hence, agriculture in its most rudimentary stage
supposes ownership of the land, at least from the time that it is “tickled with
the hoe,” until it “smiles with the harvest;” or, to express it more accurately,
all the time intervening between the work of the plow and the labor of the
sickle. The more, afterwards, population and civilization increase, the more
products must be wrung from the soil. But this can be accomplished only by
means of its more intensive cultivation (higher farming), by lavishing a
greater amount of capital and labor on it, and, as a rule, by extending the
circle of agricultural operations by means of combinations more and more
artificial. Hence, the progress of civilization demands an ever increasing
fixity, and a more pronounced shaping of landed property (the specification
of jurists), in the interests of all who share in this progress, and even of
those who own no landed property themselves. Were there no property in
land, every one would find it more [pg 264] difficult and laborious to
gratify his want of agricultural products;521 and the products themselves
would be of an inferior kind.

Thus, for instance, in Camargo, the lackmus was formerly prepared from
plants to be had “free” in the woods. It was then, however, much dearer
than it is now that the plants are artificially raised on landed property.522 It is
otherwise with the fisheries. The appropriation of rivers or seas would not
tend to increase the abundance of their products, and hence this
appropriation is, on the whole, rare.523

Section LXXXVIII.

Landed Property. (Continued.)

Whenever this admixture of capital and labor with land has taken place to
no great extent, private property in land is not found developed in any
degree. Thus, there are even now many half-civilized countries in which the
land is forfeited because not tilled for many years, and where it may be
occupied by the first person who will cultivate it.524 In Europe, common [pg
265] possession of forests and pasture lands asserted itself much longer than
that of arable land, because, in the case of the former, labor and capital play
a much less important part in the management of them. And yet, even in the
case of arable land etc., and, in the highest stages of civilization, the
property-quality is yet less developed than the property-quality of capital.
How seldom do we find fidei commissa of capital, or capital juridically tied
up. We find that the law of all ancient nations drew a marked distinction
between moveable and immoveable property, and that the power of
disposing of the former by sale, pledge, in dowry, partition etc., was a much
freer one. And even now, the police power which may be exercised over
moveable property is much more restricted than that over houses and
land.525 The justice of the exclusive right of possession to what one has
earned and saved is obvious to every one. On the other hand, the
appropriation of “original and indestructible natural forces” has its basis not
so much in justice as in the general good; and the state has always
considered itself entitled to attach to the “monopoly of land,” which it
accorded to the first possessor, all kinds of limitations and conditions in the
interest of the common good, [pg 266] and sometimes to consider private
property in land in the light of a semi-public function.526 I may instance the
feudal principles of the latter portion of the middle ages, which are so far
removed from our ideas of private property in land; and yet, of which many
echoes are heard, even in our day, and are not without their influence in
practice. Thus, further, for instance, even in England, the greater number of
the poor-rates, of taxes for the support of the established church, the
maintenance of public highways etc., are heaped upon the rent of land.
Many socialists have proposed to make the state the sole proprietor of the

soil,527 sometimes adding the condition, that the previous private owners
should be compensated in capital, when it would be at least supposable that
private capital might be enticed to cultivate it, if long and sure leases of it
were made. This would be a “good” demesne-husbandry, extending over the
entire country. We need only glance at those kingdoms in which something
analogous is to be found, [pg 267] especially the despotisms of the east,528
to divine that such a system does not suffice to insure the real
productiveness of a nation's economy.529

[pg 268]

Chapter VI.

Credit.

Section LXXXIX.

Credit In General.

Credit530 is the power of disposition over the goods of another,531 voluntarily
granted in consideration of the mere promise of the counter-value.532 As
Franklin says: A good pay is master of another man's purse. Hence, it is
evident that whoever would obtain credit must be believed to possess the
ability as well as the intention to fulfill his promise. Where [pg 269] this
belief is based simply on the opinion entertained of the person of the debtor,
we speak of personal credit,533 in contradistinction especially to the credit
based on bailment, pledge, hypothecation etc. The longer the time between
the making of the promise and the period fixed for its fulfillment, the less
certain is the latter, where the security is simply the person of the debtor. It
is chiefly in very uncivilized nations and also in nations in their
decrepitude, and during periods of anarchy, and in despotisms, that personal
security stands higher than any other. The same is true, though for other
reasons, in very energetic civilized nations, where the people put a high
estimate on the element of labor in their economy, among whose members
legal security is, indeed, found, but where the peculiar sensitiveness of
speculation would be too much hampered by the more sluggish nature of
other credits; as, for instance, in North America, and even in ancient Rome.
Civilized nations that have reached the stationary economic state, on this
account much prefer the greater security and the absence of care which
accompany non-personal credit.534 In estimating the ability of the debtor to
meet his promise, we must take into account, especially, the disposable
character of his resources; otherwise it would be impossible to understand
[pg 270] why the merchant may so frequently obtain a loan on his stock

equal to its whole value, while the owner of land can place it as security
only to the extent of half its value.

Credit, on the whole, grows in importance with an advance in civilization,
and this is true especially of credit intended for productive purposes. This is
a consequence of the greater division of labor which causes unfinished
products to be put on the market more and more frequently,—products
which come to have a value only after some time, but which, when that
time has elapsed, have present value. And, indeed, as the world advances
and civilization grows, it becomes much easier to forecast the future with
certainty. The future, also, then becomes more a source of solicitude, and
fixed capital, as a consequence, plays a part which grows daily more
important. The limit to the development of credit is this: it is safe only when
the debtor invests his borrowed goods in the production of, to say the least,
their equivalent. This is why the personality of the state, clothed with
immortality and with a formally boundless power of taxation, is so often
seduced into engaging in transactions of credit which are never self-
discharged.535 The social diseases of panics and of extravagant enterprises
stand in the same relation to credit that unbelief and superstition do to true
religion.536 (Schäffle.)

Section XC.

Credit—Effects Of Credit.

As regards the effects of credit, we may remark, that it is as powerless
directly to produce new capital as is the division of labor to produce new
workmen. To every credit of the [pg 271] creditor corresponds a debit of the
debtor. As Turgot said: Tout credit est un emprunt.537538539 But, on the other
hand, credit [pg 272] facilitates the transmission of the elements of
production, especially of capital, from one hand to another.540 When,
therefore, the debtor employs the capital that he has borrowed, more
productively than the creditor would have done, the whole country is a

gainer; as it is a loser, on the contrary, when a person engaged in industry
advances to the idler, the frugal man to the spendthrift, the solid man to the
wild speculator. In declining nations, where every new development hastens
decay, the latter alternative may be the prevailing one; and, especially here,
may the usurious giving of credit by the shrewd to the simple lead to
ruinous debtor-slavery. Among a vigorous and energetic people, the former
is apt to govern, as it is only by the productive employment of the loans
made that they are permanently enabled to pay interest. Here credit is an
invaluable means, not only of putting idle capital in motion, and of making
active capital still more active, but especially of concentrating capital, by
which it may gain as much in productive power as labor does by the
coöperation of labor. This is effected, very frequently, by means of joint-
stock companies, the principle of which recommends them especially in
enterprises where stationary capital is required rather than circulating
capital, and where capital generally plays a greater part than labor; and
where this labor can be subjected to provisions which may be accurately
laid down beforehand; as, for instance, in the case of docks, insurance
companies, banks,541 [pg 273] etc. Banks, then, become real reservoirs of
capital, provided they are properly and judiciously established and
managed; real reservoirs which receive in one place the capital which is
superfluous elsewhere, in order to supply some other place with that which
is necessary to it. The more confidence increases, the more are even the
smallest driblets of capital awakened from their slumbers, and made active
and productive. It is only by means of credit that the help of foreign capital
can be obtained for home production. Indeed, credit, considered as an
exchange of probable future goods against actually existing goods, is one of
the principal functions of the temporal solidarity of the economy of nations.
(Schäffle.) Without credit, there would be very little place for speculation
proper.

We may see how the possibility of giving and receiving credit promotes
wealth, by contemplating the poorer classes, whose poverty, both as cause
and effect, is very closely related to the absence of credit. And here we have
a suggestion of the reverse to the bright side of the picture of credit,
analogous to that mentioned in § 62 of the coöperation of labor, viz.: that it
tends to intensify inequality among men. The man who is distinguished by
the amount of his wealth, or by his position is naturally known to a much

wider circle than others are. From which it follows, that he may, by the way
of credit, increase his power, already so much greater in the economic
world, by a much larger multiplier.542 Hence, it need not [pg 274] surprise
us, that the great obtain credit from those in a lower position, at least as
frequently as they give them credit in turn.

On the side of the creditor, the possibility of making loans is a powerful
incentive to frugality. Were there no credit, those who were not in a
condition to employ their capital productively would make savings only
within very narrow limits.543

Section XCI.

Debtor Laws.

Private credit is always conditioned, and in a great many ways, by the
situation of the whole nation's business; in other [pg 275] words, by their
politico-economical situation. It is especially in the higher stages of
civilization, that one bankrupt may easily drag numberless others down
with him; and where the laws are bad or powerless, not even the wealthiest
man can predicate his own solvency for any length of time in advance. One
of the most important conditions of credit is the certainty that, if the debtor's
good will to meet his obligations should fail, it shall be supplied by the
compulsory process of the courts. Hence, the importance of a judicial
procedure, at once impartial, enlightened, prompt and cheap.544 The more
vigorous the laws relating to debt are in preventing dishonesty on the part of
the debtor, the more advantageous are they to honorable and honest debtors.
Adam Smith has rightly said, that in countries in which creditors are not
completely protected by the courts, the honorable man who borrows money
is in the same condition as the notoriously dishonest man or the spendthrift,
in better governed countries. He finds it more difficult to borrow and is
obliged to pay a higher rate of interest.545 Rigorous debtor laws, on the other
hand, diminish in [pg 276] the whole nation the amount of “bad debts,” that

is, a not insignificant portion of the cost of production. They, at the same
time, promote, as far as it is in the power of laws to do it, national honor
and the mutual confidence of man in man. The excellence of their debtor
laws, in their most flourishing period, was one of the principal elements
which contributed to make Athens and Rome of such importance in the
history of the world.546

Section XCII.

History Of Credit Laws.

In the history of laws relating to credit, we may distinguish, in a great many
countries, three stages of development.

A. The laws, in the first stage, are very severe. In the Germanic middle age
the insolvent was disgraced. He became the slave of his creditor (zu Hand
und Halfter), who might imprison him, fetter him (stöcken und blöcken),
and probably kill him. A Norwegian law allowed the creditor, when his
debtor would not work and his friends would not ransom him, to take him
before the court, and “to lop off from his body what part he will, above or
below.”547 To judge of [pg 277] these provisions correctly, it is necessary to
bear in mind the many ways in which family resources were at this time
bound and tied up, and not forget “the power of defiance in these iron
natures.”548 (Niebuhr.)

B. The canon law introduced milder principles. Gregory the Great had
already prohibited the holding on to the body of the debtor.549 On this
account, during the latter portion of the middle ages, it was customary to
stipulate by contract that the provisions of the ancient law should govern in
this matter, to submit to imprisonment etc.550 The influence of the Roman
law made it gradually more usual, in the case of insolvent debtors, to
demand no more from them than the assignment of their property for the
benefit of their creditors. This, however, led to numerous frauds; and these

became more frequent in proportion as the laws governing the property of
parties while the marriage relation existed between them, and as executions
against landed property etc. were defective.

C. Hence, in more highly civilized times, there has been a return to the
severity of earlier ages. Persons engaged in commerce, especially those
whose capital is so volatile, and to whom time is a thing so precious, can
scarcely dispense willingly with personal imprisonment for debt. Hence,
legislation on bills of exchange, sanctioned especially by imprisonment of
the person, plays a very important part in the commercial cities of the
seventeenth century, as it did, naturally, much earlier in Italy and the
Netherlands.551 Modern laws in [pg 278] many cases punish the bankrupt
whenever an examination of his books, kept after approved methods, does
not demonstrate his innocence.552 The great facility of fraudulent
bankruptcy, where commerce has attained a high degree of development
and complication; the absence of honor shown in engaging in speculation
for one's own gain with a stranger's capital, and without the real owner's
knowledge; the comparatively small number of blameless and
irreproachable bankruptcies,553 certainly justify these provisions.554555

[pg 279]

Section XCIII.

Means Of Promoting Credit.

One of the most efficient means of promoting credit consists in legislation
intended to dry up the source of bad debts, by placing obstacles in the way
of reckless or usurious credits [pg 280] for objects of luxury or pleasure, to
bad customers.556 But the application of these laws should be clear and
simple as to their matter, and require no inquiries, relating to the person,
impracticable for a business man to make.557 Thus, for instance, a short

period of limitation established by statute in the matter of advances made
for ordinary money-claims is a beneficial restraint, as well on the creditor as
on the debtor, since it prevents the accumulation of a multitude of small
debts which almost imperceptibly but at the same time irresistibly
overpower the debtor under their weight.558 Another [pg 281] efficient
means is associations of business men to circulate lists of bad debtors, and
to prosecute their own demands in common.559 On the other hand,
experience has shown that imprisonment for debt, as a means of enforcing a
creditor's claim, where the amount of the debt is very small and such as
only very poor debtors are apt to incur, is of little service. It is even
injurious, because a great many sellers would rely on that means of
compelling payment in the future instead of demanding it immediately, as
they should do in the interest both of themselves and of their customers. As
a rule, it is only rich creditors who can resort to it with success, a class who
compel payment through this means by wringing it from the debtor's
relations more frequently than from the debtor himself. The working out of
debts in correctional institutions seems, for the same reasons, to fail of its
object, since even well governed institutions scarcely cover their current
expenses from the income derived from this source.560 The inequitable
character of imprisonment for debt lies in this, that it punishes the
unfortunate debtor as severely as it does the malicious one. It must be
clearly distinguished from the imprisonment recognized by the courts as a
punishment for reckless or fraudulent bankruptcy.561 We must pass a
judgment [pg 282] similar to that on the imprisonment of the person of the
debtor on the seizure of his wages not yet due, so far, at least, as an amount
absolutely necessary to save himself and family from want, is not excepted.
The prohibition of such seizure, beyond this, would amount to a declaration
that all workmen without capital, even the best, should be considered
unworthy of credit.562 We may also include in this category such laws as
except from execution the necessary tools of a tradesman, since to deprive
him of them would be to prevent [pg 283] his employing even his labor to
satisfy563 his creditors' claims.

Section XCIV.

Letters Of Respite (Specialmoratorien).

Special letters of respite (Specialmoratorien) are a suspension of the laws
relating to debt, made in favor of an individual. (Quinquennalia.) They
were intended to protect not only the debtor, but also the aggregate of
creditors against the short-sighted severity of one of their number. They
were wont to be given especially when the debtor showed that immediate
execution would not only have the effect of ruining himself, but of sending
his creditors away empty handed; while, if time were given him, he would
be able to satisfy every one.564 But the granting of such letters has, in recent
times, been prohibited565 in nearly all countries as arbitrary, and [pg 284] as
a species of cabinet-justice. Nor should the granting of them be compared
with the pardoning power. In the case of a pardon, the offended State
forgives. In this case it sacrifices the unquestionable right of one party to
the very doubtful advantage of another. Where such letters are granted in
great numbers, credit cannot fail to suffer. “Quinquinnellen gehören in die
Hollen!”

Yet in troublous times, when a great many debtors are insolvent at the same
time, the question of modifying the laws relating to debt, temporarily, has
been mooted. It has been urged on such occasions, that it would be a matter
of enormous difficulty to treat, lege artis, thousands as bankrupts at once;
that thousands of businesses would have to be closed, their stocks cast upon
the market at mock prices, and their employees thrown out of employment.
But, if certain privileges were to be accorded to all who should declare
themselves unable to meet their obligations before a certain day, it would be
known, at least, that the others were in a solid condition; and this would
have the effect to strengthen the credit which had been before universally
shaken. We must, however, leaving all cases of abuse out of the question,
remember, that a really unrightful favor, granted to the debtor, may possibly
entail the ruin of his creditor. Besides, the uncertainty of the law would
have a much worse effect on credit than uncertainty as to the personal status
of individuals.566 Where, as is the case generally in inferior stages of
civilization, debtors and creditors form two distinct classes, the question of
right is not, indeed, changed, but there is a solid basis afforded for the
political admeasurement of opposing interests. In another [pg 285] work I

have shown how, after great wars, land owners, who became involved in
debt, have been protected against capitalists. (See Roscher,
Nationalökonomik des Ackerbaues, § 137, ff.)567568

[pg 287]

Book II.

The Circulation Of Goods.

[pg 289]

Chapter I.

Circulation In General.

Section XCV.

Meaning Of The Circulation Of Goods.

The more highly developed the division of labor is, the more frequent and
necessary do exchanges become. While the hermit engaged in production
thinks only of his own wants, and the mere housekeeper of the wants of his
household, the man who is part of a nation and who plays a part in its
general economy, must bear in mind the MARKET in which goods of one
kind are exchanged against goods of other kinds. The greater, more various
and more changeable the conditions of this market are, the greater are the
intellectual faculties demanded to engage in it successfully, and to the
advantage of everybody concerned in it.569 Goods intended to be exchanged
[pg 290] are called commodities. By the circulation of commodities is
meant their going over from one owner to another.570 Among the principal
causes of circulation, we may mention the difference in the nature and
civilization of countries and peoples, the distinction between city and
country, the division of people into classes etc.571 The rapidity of circulation
depends, on the one hand, on the quantity of commodities, and on the other,
on the degree to which the division of labor has been carried. In both
respects it is, therefore, an important indication of the wealth of the nation,
and of the world.

Different commodities have very different degrees of capacity for
circulation (Circulationsfähigkeit), that is, of certainty of finding
purchasers, and of facility of seeking purchasers. The smaller, compared
with its value, the volume and weight of a commodity are; the longer and
more conveniently it can be stored away; the more invariable and well-

known are its value in use and value in exchange: the more readily does it
go from one place to another, the more easily is it transmitted from one
period of time to another and from the possession of one person into the
possession of another. Thus, for instance, the precious metals circulate more
rapidly than industrial products; [pg 291] these in turn more than raw
material,572 and immovable property circulates least rapidly of all. An
improvement in the means of transportation naturally increases the capacity
of circulation of the entire wealth of a people, and especially of those
commodities which were not before transferable as well as of those of
which the cost of transportation constituted a peculiarly large component
part of the price.573 The greater the capacity for circulation of any kind of
goods, the greater is the power of control of its owner in the world of trade.
If we compare two men, each of whom possesses a million of dollars, but
one of whom has that million in money and the other in land, we shall find
that the former is able, for present purposes, such as loaning to the state in
case of need, aiding a conspiracy etc., to command resources much more
readily and effectively than the latter. Under the ordinary circumstances of a
nation's economy, we find that the owner of money is very seldom in want
of bread, fuel or clothing, whereas very many owners of other property may
be in want of money.574 True, resources which may, so to speak, take the
offensive most energetically, offer less resistance to unforeseen misfortune.
The possessor of such resources is in a condition to lose his all on the turn
of a single die. As civilization advances, the circulating capacity of a
nation's wealth increases.575

[pg 292]

Section XCVI.

Rapidity Of Circulation.

With an advance in a people's public economy, we find an increased
rapidity of circulation connected, both as cause and effect. Every
improvement, every thing which shortens the process of production, must
facilitate and accelerate the circulation of commodities. And so, the
perfecting of the means of transport of commodities, of the media of
exchange and of credit, an increase in the number of middlemen who make
it their business to purchase in order to sell again. On the other hand, the
more rapid the circulation of wealth, the more can it promote production.
The more rapidly, for instance, the manufacturer of cloth exchanges his
wares for money, the more rapidly may he employ the money in the
purchase of new tools and the hiring of new labor; and the sooner may he
appear in the market with new cloth. It is here precisely as it is in
agriculture, which is more productive where the seed returns several times
in a year (several crops576) to the hand of [pg 293] the peasant than it is
where this happens only once. The nearer the members of the commercial
organism are to one another, the more rapid is circulation wont to be.
Hence, it is more rapid in industry than in agriculture; in retail trade than in
wholesale; in large cities than in the country; among a dense population
than among a sparse population.

The regularity of circulation increases with economic culture. Its
concentration at large terminal points, its interruption by bad seasons of the
year, belong to the lower stages of the political economy of a people;
although bad harvests, floods, wars, revolutions etc. may, at any time, lead
to a sluggishness or to an arrest of circulation.

Section XCVII.

Freedom Of Competition.

But it is especially the freedom of circulation that increases with an advance
in civilization, and this advance, like the two preceding, first affects the
home or inland circulation. Freedom of competition, the freedom of

commerce and industry, technical expressions used to designate freedom in
general in the domain of a nation's economy, is the natural conclusion
drawn from the principles of individual independence and of private
property. Hence its development is as slow as the development of these, and
attains its full growth only in highly cultivated nations, their colonies and
dependencies. In very low stages of economic development, the circulation
of goods is hampered by the absence of legal security; later, by privileges
accorded to a great number of families, corporate bodies, municipalities,
classes, etc., and later yet by the mighty guardianship which the state
exercises by its power of legislation and even of education.577 Each one of
these epochs constitutes [pg 294] the end of the preceding one, and is
milder than it was. Finally comes the period of complete freedom, when
every man is permitted to manage his own affairs even with injury to
himself, provided the injury is confined to himself.

The later times of the Roman Empire are the best illustration of how, with
the decline of the conditions which must precede freedom of competition,
that freedom itself decays.578

Freedom of competition unchains all economic forces, good and bad.
Hence, when the former preponderate, it hastens the time of a people's
grandeur, as it does their decline where the latter gain the upper hand.579 We
may say of economic freedom what may be said of all other freedom, that
the removal of external constraint can be justified and produces the greater
good of the greater number only where a stern empire over self takes its
place. Without this it would not prevent or avoid idleness, usury or over-
population. Freedom must not be simply negative. It must be positive. If on
account of the immaturity or over-maturity of a people, there be no sturdy
middle class among them, unlimited competition may become what Bazard
calls a general sauve-qui-peut (let the devil take the hindmost); what
Fourier designates as a morcellement industriel, and a fraude commerciale;
what M. Chevalier denominated “a battle-field on which the little are
devoured by the [pg 295] big;” and in such case, as Bodz-Reymond says,
the word competition, meaning simply that each one is permitted to run in
whatever direction he may see a door open to him, is but another and a new
expression for vagabondizing. But here the evil does not lie in too great
competition, but in this, that on one side there is too little competition.580

The opposing principle of competition is always monopoly, that is, as John
Stuart Mill says, the taxation of industry in the interest of indolence and
even rapacity; and protection against competition is synonymous with a
dispensation from the necessity to be as industrious and clever as other
people.

A protection of this nature, sufficiently effective to attain its end, would not
fail to arrest the efforts of those who had accomplished something, and even
to turn them backward. That freedom of competition is a species of
declaration of war,581 among men considered as producers, is certain; but, at
the same time, it makes all men considered as consumers members of one
society, in which all the members are equally interested, a fact too much
overlooked by socialists.582 It is the means especially by which the greatest
and ever increasing portion of the forces of nature are raised to the character
of the free and common property of the human race.583 “Man is not the
favorite of nature in the sense that nature has done everything for him, but
in the sense that it has endowed him with the ability to do everything for
himself. The right of freedom of competition may, therefore, be considered
both [pg 296] the protection and the image of this provision of nature.”
(Zachariä.)584

The person, therefore, who claims or asserts an exception from the rule of
free competition, has to prove his position in every individual case, since
the burthen of proof is on him. But the duty of interference on the part of
the state is positively pointed out where any interest common to the whole
people is not in a condition to assert itself; and negatively, when the custom
which hitherto had prevented an undoubted abuse has grown too weak to
continue to perform that service. In both regards I would call attention to
the protection of factory children against the concurrent selfishness of their
parents and masters.585586 Supra, § 39.

[pg 297]

Section XCVIII.

How Goods Are Paid For.—The Rent For Goods.

Payment for goods (§ 1 ff.) of any kind can be made only in other
goods.587588 Hence, the greater, more varied, and the better [pg 298] adapted
to satisfy wants, production is, the more readily does any product find a
remunerative market; more readily in England, for instance, in spite, or
rather, because of, the great competition there, than in Greenland or
Madagascar. From this it follows that, as a rule, a person is in a better
condition to purchase more goods in proportion as he has produced more
himself. According to official accounts, the average value of a harvest of
wheat and potatoes in Prussia was formerly 332,500,000 thalers. In the year
1850, however, it was only 262,000,000 thalers. As a matter of course, the
country people in that year could not purchase from the cities as much as in
ordinary years, by a difference of 70,000,000 thalers. This illustrates how
every class of people, who live by finding a free market for their products,
are interested in the prosperity of all other classes. As Bastiat says: “All
legitimate interests are harmonious.” The more flourishing a city, the better
off are the towns around it, which furnish it with provisions; and the richer
these towns, the more flourishing is the industry of the city which ministers
to their wants.589 It is important that this fact should be borne steadily in
mind, especially in times of advanced civilization, when the feeling that we
all have interests in common, is too apt to grow dormant. Nothing can better
serve to awaken it again when it has become so. A nation, says Louis Blanc,
in which one portion of the people is oppressed by another, is like a man
[pg 299] wounded in the leg. The healthy limb is prevented by the sick one
from performing its functions.590

Section XCIX.

Freedom Of Competition And International Trade.

Does the same rule apply to the commercial intercourse of nations? Where
the feeling that all mankind constitute one vast family is stronger than that
of their political and religious diversity; where the sense of right and the
love of peace have extinguished every dangerous spark of ambition for
empire and all warlike jealousy; where, especially, their economic interests
are rightly understood on both sides, a real conflict between the interests of
two nations must always be a phenomenon of rare occurrence, and an
exception to the general rule, which should not be admitted until it has been
clearly demonstrated to exist.591 Highly cultivated nations generally [pg
300] look upon the first steps in the civilization of a foreign people with a
more favorable eye than they do on the subsequent progress which brings
such nations nearer to themselves.592 Yet the realization of the above
mentioned conditions on all sides is something so improbable, unpatriotic
“philanthropy” something so suspicious,593 the greater number of mankind
[pg 301] so incapable of development except under the limitations of
nationality, that I should observe the total disappearance of national
jealousies only with solicitude. Nothing so much contributed to the
Macedonian and Roman conquests as the cosmopolitanism of the later
Greek philosophers.594

As all commerce is based on the mutual dependence of the contracting
parties, we need not be surprised to find international commerce so
dependent. But this dependence need not, by any means, be equally great on
both sides. Rather is the individual or the nation which stands in most
urgent need of foreign goods or products the most dependent. Hence, it
seems that, in the commercial intercourse between an agricultural and an
industrial people, in which the former furnish food and the raw material of
manufactures, and the latter manufactured articles, the latter are the more
dependent. In case of war, for instance, it is much easier to dispense for a
long time with manufactured articles than with most articles of food.595
However, this condition of things is very much modified, for the better, by
all those circumstances on which the dominant active commerce of a nation
depends. It is, for instance, much easier for the English, on account of their
greater familiarity with, and knowledge of the laws and nature of
commerce, on account of their business connections, their capital, credit
and means of transportation, but more particularly on account of the greater
capacity of circulation of their national resources, to find a new market in

the stead of one that has been closed to them, than it is for the Russians with
their much more immoveable system of public economy.596 It [pg 302] is
true, however, that an effective blockade, which excluded both of these
nations from all the markets of the world, would be much more injurious to
England than to Russia.

[pg 303]

Chapter II.

Prices.

Section C.

Prices In General.

The price of a commodity is its value in exchange expressed in the quantum
of some other definite commodity, against which it is exchanged or to be
exchanged. Hence, it is possible for any commodity to have as many
different prices as there are other kinds of commodities with which it may
be compared.597 But whenever price is spoken of, we think only of a
comparison of the commodity whose value is to be estimated, with the
commodity which, at that time and place, is most current and has the
greatest capacity for circulation. (Money.)598 When two commodities have
changed their price-relation to each other, it is not possible, from the simple
fact of such change of relation, to determine on which side the change has
taken place. If we find that a commodity A stands to all other commodities,
C, D, E etc., in the same relation as to price as [pg 304] before, while
commodity B, compared with the same, has changed its place in the scale of
prices, we may infer that B, and not A, has left its former position.599

The words costly and dear, as contradistinguished from common and cheap,
both indicate a high price. We, however, call a commodity costly whose
price, compared with that of other similar commodities, is high. On the
other hand, we call a commodity dear when we compare it with itself, and
with its own average price in other places and at other times.600

In individual cases, the price of a commodity is determined most usually,
and at the same time most superficially, by custom; people ask and pay for a
commodity what others have asked and paid for it. If we go deeper and

inquire what originated this customary price and may continually change it,
we come to the struggle of interests between buyers and sellers. And if
science would analyze the ultimate elements of the incentives to this
struggle and the forces engaged in it, it is necessary that it should keep in
view the entire economy of the nation, and even all national life.

Section CI.

Effect Of The Struggle Of Opposing Interests On Price.

No where in the public economy of a people are the workings of self-
interest so apparent as in the determination of prices. When the price of a
commodity is once fixed by the conflict of opposing interests,601 the self-
seeking of every individual dictates that he should thereby gain as much as
possible [pg 305] of the goods of others, and lose as little as possible of his
own. In this struggle, the victory is generally to the stronger, and the price is
higher or lower, according to the superiority of the buyer or seller.602 But
who, in such case, is the stronger? Political or physical superiority can turn
the balance one way or another only in very barbarous times, and especially
in times when legal security is small.603 As a rule, it is the party in whom the
desire of holding on to his own commodities is strongest, and who is least
moved by the want of the wares of others. As in every conflict, confidence
in self, sometimes even unbounded confidence in self, is an important
element of success. A party to a contract of sale or barter, who considers his
immediate position decidedly stronger than that of the other party, will
scarcely depart from his demands. Hence it is, that in exchange, one party
so frequently holds back until the other has expressed his terms.604 How
different is the [pg 306] price of the same pieces of land which a new
railroad enterprise is compelled to pay and the prices it would get for them,
from the adjoining owners, in case of the dissolution of the company.

But the struggle to raise prices or to lower them, which is always going on,
undergoes modifications of every description among all really commercial

nations, partly through the influence of the public conscience, which brands
as inhuman and blameworthy the spoilation of the opposing party by acts
which the laws do not reach. And this consideration by the public
conscience is all the more severe in proportion as real competition in the
article sold is wanting.605 But the chief modification in this struggle is
produced by the fact, that where civilization has advanced farthest, every
commodity is offered for sale by a great many and wanted by a great
many.606 As soon as several seek the same object, there naturally results a
rivalry among them, which induces each to attain the desired end, even by
the making of greater sacrifices than others. [pg 307] The greater the supply
of a commodity is, as compared with the demand for it, the lower is its
price; the greater the demand as compared with the supply, the higher it is.
And, indeed, there is question here, not only of the mass of things supplied
or demanded, but also of the intensity of the supply and demand.607

If the exchange-force of both contractants be equal, or, in other words, if
both, with equal knowledge, are interested in the completion of the
exchange, there results from this attitude of the parties toward each other,
what is called an equitable, or average price, in which both meet with their
deserts. Here each is a gainer, since each has parted with the commodity
which was less necessary to him, and received in exchange the commodity
which was more necessary to him. Looked at, however, from the stand-
point, not simply of a nation's but of the world's economy, the value given
and the value received are equal.608609

[pg 308]
As a rule, the price-relation of two commodities is determined by this
relation of demand and supply,—by the desire to possess and the difficulty
of obtaining them. We must, therefore, examine on what deeper relations
supply and demand themselves depend.610 In the case of the purchaser, the
[pg 309] value in use of the commodity and his own ability to pay
constitute the maximum limit of its price, which price may, however, be
modified by the cost of producing it611 elsewhere or at another time. In the
case of the seller, the cost of production is the minimum limit, which may,
however, be extended by the cost of procuring the commodity by the
purchaser at another time or place.612

Section CII.

Demand.

The purchaser in his demand is wont to consider principally the value in use
of a commodity, according as it, in a higher or lower degree, ministers to a
necessary want, to a decency or to a luxury. The difference of opinion as to
which of these categories any given want belongs depends not only on the
nature of the country and the customs of its people, but, for the most part,
also, on the prejudices of class and on personal individuality.613 A
reasonable man will employ only the [pg 310] surplus of the first class in
the satisfaction of wants of the second, and again only the surplus of the
second in the satisfaction of wants of the third.614

If the value in use of a commodity rises or falls, and surrounding
circumstances remain unchanged, its price also rises or falls.615616

[pg 311]

Section CIII.

Demand.—Indispensable Goods.

When the supply of articles of luxury diminishes, the price of them, it is
true, rises. But as now there is a number of purchasers no longer able to pay
for them, the demand for them also decreases, and their price, as a
consequence, rises in a less degree than might be inferred from the amount
and condition of the supply merely. And so, on the other hand, an increase
of the supply which lowers the price is wont, in the case of pleasures

capable of a wide extension, such as are ministered to by fine roots,
vegetables, etc., to produce an increase of the demand, and this operates to
arrest the falling price.

It is quite otherwise, in the case of indispensable goods, as for instance,
wheat. When there is a want of such an article, men prefer to dispense with
all other articles, to some extent, rather than to practice frugality in bread;
and all the more, as bread is not so much used as consumed rapidly, while
clothes and metallic articles last a long time. And even after an over-
abundant harvest, leaving voluntary waste out of the question, consumption
is increased by a finer separating of the flour, an increase in the amount of
corn fed to cattle, and the distillation of spirits. Hence, demand and supply
by no means run in parallel lines at every moment; and indispensable
articles tend to greater perturbations in price than those which can be
dispensed with.617618 The price of grain, especially, varies in a ratio [pg 312]
very different from the inverse ratio of the amount of the harvest;619
although a formula therefor expressed in figures, like that of Gregory King,
can never be applicable universally.620 Farmers must everywhere and always
withhold a certain amount of their harvest for seed, for home use etc., from
the market. Only absolute necessity can induce them to draw on the
quantity thus laid by. But the ratio of this part to the whole is very different
in different countries.621 In the higher stages of civilization, where payment
in money has taken the place of payment in produce, and all other kinds of
payment, and where the cultivator of the ground pays the wages of his [pg
313] laborers almost exclusively in money, so that they, like all others,
purchase what bread they require in the market; a given deficit in the
harvest must be spread over a much larger market supply; and prices,
therefore, remain much less affected than in the lower stages of
civilization.622 And so, it is clear that a like bad harvest must affect prices
very differently, if there be a large importation or exportation of the means
of subsistence, and if several bad harvests, or several harvests yielding more
than the average have preceded.

In another respect yet, the price of indispensable commodities is very
sensitive, because here the mere fear of a future want of them has a far
deeper and wider influence, than has the fear of want of articles of luxury.
No matter how good the wheat crop may have been, if the weather

afterwards interferes with its harvesting, the price of wheat, in countries in
which the spirit of speculation is on the alert, will certainly rise, because the
prospect of the future crop then becomes somewhat doubtful.623

Section CIV.

Influence Of Purchaser's Solvability On Prices.

The purchaser, besides the value in use of the goods he desires to buy,
considers his own solvability (Zahlungsfähigkeit = ability to pay). It is only
solvent demand which can influence prices.624 For instance, among a people
made up almost entirely [pg 314] of proletarians, there will be a great many
cases of starvation and death after a bad harvest, but the price of corn will
undergo only a slight increase.625 But where the greater number of
inhabitants own property, and where the wealthy come to the help of the
poorer classes by means of poor-rates and acts of benevolence, it is scarcely
possible to assign limits to the increase of the price of corn. By a necessary
connection, when indispensable articles grow dear, the demand for articles
that can be dispensed with generally decreases, and vice versa.626 Every
merchant, engaged in an extensive business, is interested in knowing in
advance the results of the corn crop. The higher the price of a commodity
rises, the narrower, of course, grows the circle of those who can pay for
it.627628

[pg 315]

Section CV.

Supply.

In the case of isolated chance exchanges, the seller, too, takes into
consideration, first of all, value in use, and compares the satisfaction which
the commodity to be parted with and that to be received are able to afford. It
is true that in making this estimate, he is subject in the highest degree to
error and deception.629 In the well ordered trade of a nation whose economy
is highly developed, the seller, who had this very trade in view in his
production, is wont to consider almost exclusively the value in exchange of
his commodity.

Section CVI.

The Cost Of Production.

As no one is willing to lose anything, every seller will consider what his
goods have cost him, and the cost of producing or procuring them as the
minimum price to be asked for them.630 At the same time, the idea covered
by the expression [pg 316] cost of production, although it always embraces
whatever disappears from the resources of the producer to enter into
production, varies very much according as it is considered from the point of
view of the individual's, the nation's or the world's economy.

An individual who pays taxes to his government, and who has rented land
and employed labor and capital to engage in production, must indeed,
besides the capital he has used in such production, call all his outlay in
interest, wages, rent, and taxes, by the name of cost of production;631 since,
unless they all come back to him in the price of the commodity, the entire
enterprise can only injure him.632 He will, of course, add an equitable profit
to remunerate him for his enterprise, since without such profit, he would not
be able to live or produce; or else, he would be compelled to consume his
capital. The moment the current rates of taxation, interest, wages and rent
change in a country, the cost of production is also changed in the case of the
individual engaged in production, however unaltered the technic process
may remain.633 But taking the [pg 317] nation, or all mankind into

consideration, we must not lose sight of the fact that these three great
sources of income, as well as taxation, are not, rightly speaking, sources
from which income flows, but rather channels through which the aggregate
income of the nation or the world is distributed among individuals.634 Hence
the wages of labor, for instance, which afford the means of living to the
greater part of the population, cannot possibly be looked upon simply as a
factor in economic production. The people considered in their entirety have
the soil gratis. All saving made from rent, interest on capital, or wages, is
nothing but a change of the proportion in which the results of production
were distributed hitherto among coöperators in production. Such a change
may be either advantageous or the reverse; but it is not a diminution of the
amount of sacrifice which the people in general must make for purposes of
production. Hence, in a politico-economical sense, to the cost of
production, belongs only the capital necessarily expended in production,
and which has disappeared as a part of the nation's resources, abstraction
made of the personal sacrifices in behalf of production.635 The value of the
circulating capital which in the process is entirely used up, must, [pg 318]
of course, be entirely restored in the price, that of the fixed capital used
only to the extent that it has been used.636

The risk, which the producer runs until the commodity produced is actually
consumed must also be borne in mind.637 There are things which are a real
risk in small enterprises that by the intervention of an insurance company,
or where the enterprises are large and insure themselves, become a more or
less variable portion of the cost of production. The price of the product, in
the latter instance, rises, by this means, very regularly. In the former case,
the rise depends partly on the feeling of the people whether their pleasure in
gain is greater than their grief over a corresponding loss.638

Those enterprises which necessarily produce different products at the same
time deserve special consideration.639 Here we may speak of “united costs
of production,” and all that is needed is that the aggregate of these costs
should be covered by the aggregate price of both products. This complicates
to a certain extent the calculations which the seller must make to determine
his minimum demand for each product. To ascertain this, he must subtract
from the united costs of production the amount of value which he expects
with certainty for the other product.640

[pg 319]

Section CVII.

Equilibrium Of Prices.

Goods whose cost of reproduction,641 that is, the highest necessary cost of
reproduction is the same, have uniformly the same value in exchange.
Every deviation from this level immediately sets forces in motion which
endeavor to restore the level, just as the water of the sea seeks its level,
notwithstanding the mountains and abysses which the winds bring forth
from its bosom.642643

[pg 320]

Section CVIII.

Effect Of A Rise Of Price Much Above Cost.

If the market price rises high above the cost of production, producers make
a profit greater than the average profit made in the country. This induces
them, by the appropriation of new land and the employment of new labor
and capital, to increase their business. Other parties also engage in this
profitable department of trade. This competition not only makes the means
of production dearer, but must eventually, by increasing the demand, reduce
the price of the product to the ordinary level of profit, that is to an
equilibrium with other commodities.644 Hence, in the beginning, every
diminution of [pg 321] the cost of production645 turns to the advantage of

the producer; but afterwards and permanently to that of the consumers: an
economic law exceedingly beneficent in its operations, and not unlike the
action of positive legislation in the matter of patents. There is no greater
stimulus to the making of improvements than the certainty of reward to the
person who first introduces one. The moment, however, that the
improvement is imitated by all producers, the advantage gained by it
becomes the common good of the whole nation.646 These are, as J. B. Say
says, conquests made over the gratuitous productive force of nature. As a
consequence, the value in use of a people's resources increases; generally,
also, their value in exchange, in so far as the production of the now cheaper
goods increases in a degree greater than their cost of production has
diminished.647

As to the alternative so frequently discussed, whether it is preferable to
make a large percentage of profit on the sale of a small quantity of goods, or
a small percentage on a large quantity, we find that, in the lower stages of
civilization, the [pg 322] former is preferred, and the latter in the higher.648
And, indeed, the latter is not only more humane, but, in the long run, it is
more profitable to the person who adopts it as his rule in business. In the
case of commodities, he now runs but little risk from a change of fashion,
because the fashions of the masses change much less rapidly than those of
the upper circles of society. In the case of indispensable goods, on the other
hand, he may now calculate with more certainty on the increase of
population, and, therefore, on a future market for his wares. Competition,
which in former times, devoted all its efforts to bringing about the
exclusion, by law, of all rivals, is now engaged, principally, in devising
means of surpassing them by superiority of workmanship, and in thus
increasing the power of the real sources of a nation's wealth.

[pg 323]

Section CIX.

Effect Of A Decline Of Price Below Cost.

If the market price sinks below the cost of production, the producer
naturally suffers a loss, and diminishes his stock as soon as possible. That
whole establishments engaged in industry should forsake a branch of it
which is suffering from depression and enter a flourishing one, must ever
remain a rare exception.649 But the discouraged manufacturer may delay
renewing his stock on hand,650 replacing his machinery by new machinery;
he may dismiss some of his workmen and diminish the number of days
during which the others shall work. Moreover, most industries are operated
by means of borrowed capital, capital which must therefore, be returned to
the lender. Under certain circumstances, however, the industry may be
continued for some time, even at a real loss,651 so long as the loss of interest
etc., which would follow the entire suspension of the work, exceeds the loss
produced by the lowering [pg 324] of price, but hardly any longer. If the
supply of the commodity the price of which has fallen has been diminished,
the subsequent result depends on the causes which, in the first place,
brought about the fall in price. If the diminution in price was caused solely
by a too great supply, when this superabundant supply is gotten rid of, the
price will rise again.652 If it were produced by a decrease in the value in use
of the commodity, the diminution of the supply can restore the former state
of things only in so far as at least a part of the purchasers ascribe to the
commodity the same value in use as before.653 Lastly, if the lowering of the
price came from a decrease in the number of buyers, or from a decrease in
their ability to purchase, the former price will be restored when production
has been adapted to a correspondingly smaller circle of consumers.654 This
last is true especially when the price, without having suffered any absolute
change, has become relatively too low, on account of an increase in the cost
of production.655

[pg 325]

Chapter CX.

Different Cost Of Production Of The Same Goods.

Most goods are produced at the same time, but under different
circumstances, at a very different cost. In order to estimate the influence of
this fact upon price, we must distinguish between those commodities the
cheapest manner of the production of which may be extended at pleasure,
and those in the production of which it is necessary, in order to satisfy the
aggregate want of them, to call in the dearest mode of production to aid the
cheapest.

In the former instance, the price of commodities is naturally regulated by
the least cost of production. The person who is unable to sustain this
competition permanently, would do a great deal better to abandon the
industry altogether; for it is not in his power to raise the price by
diminishing the supply; more powerful rivals would then only need to
correspondingly increase theirs.656

If the same law were applicable, in the latter case, producers [pg 326]
placed in a less favorable situation would be compelled to immediately
abandon the market. The market, in consequence, would no longer be able
to provide for the aggregate need; and the price of the commodity would
continue to rise until the producers who had been driven from the market
returned to it again. Hence, here, price in the long run is determined by the
cost of the production of the commodity, produced under the least
advantageous conditions, while such production is necessary in order to
satisfy the aggregate need. The person engaged in production under more
advantageous conditions receives in the same price of the goods, which are
cheaper to him, an excess of profit; one which is greater in proportion as his
situation, vis-a-vis of production, is superior to that of his less favored
competitors.657658

[pg 327]

Section CXI.

Different Cost Of Production Of The Same Goods. (Continued.)

Hence the price of a commodity and the ratio between its supply and
demand mutually condition each other. On the height of the price depends,
in great part, how many purchasers shall resolve to make an effectual
demand; but, at the same time, to what amount of cost of production, sellers
shall extend their supply.659 We can speak of an equilibrium between supply
and demand only when the former corresponds with the wish of those who
are ready to make good the full cost of production. (Malthus.) It has been
asked, indeed, whether it were more natural and better that demand should
precede supply or supply demand.660 But the inquiry is an illogical one,
when expressed in so general a manner, since supply and [pg 328] demand
are only two sides of the same transaction. But, we may say that in the case
of indispensable goods, the want of them (demand) is always felt sooner
than the excess of them (supply), and that in the case of goods which may
be dispensed with, including, originally, money, the reverse is true. Besides,
a person engaging in the production of any kind of goods, can, as a rule,
only seldom directly investigate the relation between supply and demand.
Generally, he can do no more than compare the market price of the
commodity with the cost at which he can produce it. Many mistakes are
inevitable here; but the making of them is the necessary sacrifice which
must be endured to purchase the more than counterbalancing advantages of
free competition.661

Section CXII.

Exceptions.

The rule that goods which have the same cost of production have also equal
value in exchange, is applicable only to the extent that it is possible to
transfer the factors of production at will from one branch of production to
another. Where this really free competition does not exist, the price depends
entirely on the quantity of the supply, compared with the solvability or
capacity to pay of the purchaser; and hence, it may sometimes rise far
above the cost of production (monopoly-price), and sometimes sink far
below it (forced price, or under-price).662 Such hindrances to competition
depend, in part, [pg 329] upon natural causes. Thus, in the case of the works
of art of a deceased artist, which cannot be increased in number;663 or in that
of living celebrities who cannot extend their mental activity in the same
degree that their reputation has grown. So, also, in the case of precious
stones, which are sometimes found free, and therefore cost nothing, but
which, at the same time, have a high price.664 Many valuable agricultural
products are, together with their production, limited to a definite and
sometimes very small district.665 It is to be regarded as a modification of
such natural monopolies when substitutes for a kind of goods which
diminish, at least in part, the demand for them, are found, at a cheaper
price; for instance, ordinary table-wines in the stead of fine wines. The rule
applies much more strictly to those goods which, on account of their greater
quantity, can replace inferior ones,666 than it does to those where this is not
possible.

[pg 330]
The principal cause of forced or under-prices (Schleuderpreise) is the
facility with which the product deteriorates, and must, therefore, find a
quick sale, especially when its storage or transportation is attended by
further difficulties.667 But, very durable commodities are also subject to
under-prices, and especially those which last longest, because the supply of
them can be diminished only very slowly. Thus, for instance, houses, in a
declining city. Distress-prices are found most usually in the case of such
commodities as are produced without any intention to produce them, as for
instance, rags and excrementitious substances. The more the mere forces of
nature preponderate in production, the less can the supply be increased or
decreased at pleasure, the more frequently, as a consequence, do we find
monopoly-prices and under-prices. (Compare § 131 ff.) Thus the production
of wheat is invariably connected with the order of the seasons. Between

seed-time and harvest, there are a number of months which neither capital
nor skill can shorten to any extent. The cultivation of land, to be very much
greater and more lasting, supposes so many conditions precedent, increase
of live stock, buildings etc., that it can be attained only after a series of
years. Hence it happens that wheat, much more than manufactured
products, is subject to oppressively high prices and oppressively low ones,
during a long period of time. No matter what the influence of the forces
operating in the opposite direction may be, the [pg 331] price of wheat
depends most largely on the result of the last crop.668

Section CXIII.

Exceptions. (Continued.)

Other impediments in the way of freedom of competition have their origin
in social conditions. The rule governing prices applies only where the
vendor and purchaser are equally ready to exchange. But in every case in
which the producer carries on his business, not for the sake of free gain, but
simply to obtain a means of livelihood, it may be subject to many important
exceptions.669 The richer a seller is, the longer can he wait for a favorable
opportunity to sell. Thus, for instance, wheat is somewhat lower in price at
times when payments are universally made than at other seasons of the year,
because a great many country people are then compelled to sell. Where the
country population are universally needy, it sinks after a harvest to an
unusually low figure, and in spring rises again very high.

Sometimes price is affected by the agreements of the purchaser or seller, but
most readily by those of middlemen between [pg 332] consumer and
producer.670 Customs peculiar to whole classes may exert the same
influence, and such customs are especially powerful in the lower stages of
business and industrial development. They, even at the present time, take
the place, frequently, of freedom of competition in retail business, in the
book business, and in the determination of lawyers' and doctors' fees, as

well as in the distribution of a nation's income among the three great
branches of its general economy,671 deciding, instead of competition, how
much shall go to each. Wherever there are guilds, communities, castes etc.
with legal privileges; wherever there are difficulties placed in the way of
exportation and importation; wherever preëmption rights or monopolies,672
in the strict sense of the word, exist, the leveling ebb and flow of the
elements of production may be still more seriously interfered with.
Legislation673 of this sort injures the non-privileged portion of the
population more than it helps the privileged portion. (See § 97.)674

The word usury, so arbitrarily used in every-day language, should be
admitted in science only to designate a famine-price, fraudulently and
intentionally caused or intensified.

[pg 333]

Section CXIV.

Prices Fixed By Government.

No power can, of course, fix the price of a commodity in the long run,
which cannot at the same time fix the relation of supply and demand.
Hence, set prices fixed by governmental authority can be made to play a
part in practice only in so far as they do not establish a price in opposition
to the real state of things, only to the extent that they give undoubted
expression to it in a manner in harmony with natural conditions. With this
restriction, set or fixed prices may, in the absence of real competition,
which can always best determine prices, be useful to both parties; otherwise
one party would at one time, and the other at another, profit by an unjust
advantage; but it would not be long before both would suffer from the
perturbation caused thereby in all commercial transactions. How pleasant it
is for a traveler in Switzerland, or even in Italy, to find set prices established

there.675 Especially where competition is prevented by state privileges, the
establishment of set prices by the state for the protection of the public may
be necessary.676 It is more difficult to fix a [pg 334] set price for a
commodity in proportion to its complexity and to its variableness in quality;
and where there are different grades of quality of the same commodity, and
the transition from one grade to another is almost imperceptible, such price
is easily evaded.677 In the case of every enterprise carried on [pg 335] by
many in common, where no competition is possible, it is necessary to
supply the defect by means similar to the establishment of fixed prices; as
in the case of government, by fees for governmental services, and the
coöperation of a chamber of deputies in the imposition of taxes and the
determination of official salaries etc.678

Section CXV.

Influence Of Growing Civilization On Prices.

On the whole, prices become more and more regular as national-economic
civilization advances. Progress in civilization tends to bring the parties
engaged in the struggle for prices that is buyers and sellers, nearer to one
another, in so far as it uniformly decreases the cost of production, and
increases the purchaser's ability to pay.679 (See § 101.) The more universal
division of labor makes commercial intercourse more necessary to every
one, at the same time that it makes it more of a habit to him; and hence
exchange ceases more and more to be a matter of caprice or chance. The
better means of transportation and communication render it easier, in every
way, for supply and demand to meet. With the advance of general
enlightenment and education, an acquaintance with commodities also
becomes more general, and every purchaser is on a better way to be able to
estimate the cost of production which the seller has to bear. Hence,
fraudulent prices and prices founded [pg 336] in error become less frequent;
and all this is helped forward by the greater accuracy of weights and
measures. The increase of population makes competition more active in all

branches of trade, while at the same time, with the greater freedom of
circulation, a number of causes which previously operated to produce very
high prices in one place and very low ones in another are removed.680 But
especially, the growth of a distinct class of merchants leads to a uniformity
in price. This class are incited by their own interest to purchase at low
prices and sell at high prices. Thus, their competition in the former case
raises prices, and lowers them in the latter.681 In all lower stages of
civilization, the custom of making offers and beating down in price plays a
great part, while where culture is higher, the system of fixed prices (but not
by government) gains ground continually. Here Turgot's principle is
applicable, viz.: that the current price of an article is tacitly understood
when one asks a merchant the price of his wares.682

[pg 337]
This proposition is true in the case of individuals, as well as of classes and
of whole nations.683 It is plain, that under a system of fixed prices we can
more certainly discover what the equitable price is, than in the heat of
higgling which besides consumes a great deal of precious time. Lastly, one
of the principal requisites of a well developed scale of prices is national
honor, and this, doubtless, increases in the higher stages of civilization, not
only because of the greater moral culture which [pg 338] then prevails, but
also and especially because that which constitutes a people's real and best
interests is better understood.684 Among declining nations, many of these
developments take a retrogressive road. The very great distinction between
rich and poor, between educated and uneducated, again produces great
fluctuations in price. A proletarian people who have sunk so low as to live
on potatoes will suffer much more from variations in price and of the means
of subsistence than a people who live on wheat; for the reason that it is so
difficult to export or to preserve685 potatoes. Nor can it be doubted, that the
greatest possible constancy of prices is the most beneficial condition that
the general economy of a people can be in. Where prices change while the
cost of production remains the [pg 339] same, one person can only gain
what the other has lost. But such unmerited gains and undeserved losses
have an invariable tendency to destroy the deepest roots of a people's
economic activity; and intentional speculation based upon such change
usually assumes an immoral character. (Stock-jobbing.)686 Even if Macleod
be right, that an increase or decrease in prices is to be regarded as a warning

of excess, the former of excess of consumption, the latter of production, no
one will doubt that it is the interest of every organism to confine pain within
the smallest possible limits, even if its consequences are so beneficial to the
preservation of the whole body.

[pg 340]

Chapter III.

Money In General.

Section CXVI.

Instrument Of Exchange. Measure Of Value. Barter.

Wherever the division of labor is very highly developed, the continuance of
barter, or the direct exchange of one object of consumption for another,
presents difficulties well nigh insurmountable. How difficult it would be
always to find the person who could supply us with precisely what we
wanted, and at the same time have need of what we had a surplus of.687 But
how much less frequently would it happen that one's [pg 341] want and
another's surplus would correspond exactly the one to the other in quantity;
that, for instance, the manufacturer of nails, desirous of exchanging his
nails for a cow, should meet a cattle-dealer who should want exactly as
many nails as a cow is worth! Here there is one chief difficulty in the way,
viz.: that there are so many commodities which cannot be divided without
causing a diminution or even a destruction of their value; and that others
cannot be stored away in any quantity without becoming a very heavy
burthen to their owner. How useful it would therefore be, if there was one
commodity which should be acceptable to every person, at all times,
especially if in addition to this, it possessed the qualities of durability,
capacity for transportation and for being stored up and preserved. Any
person who possessed a proper supply of this one commodity would then be
certain of being able to obtain all other exchangeable commodities through
its instrumentality; and every seller would be satisfied to exchange what he
had to dispose of against this “universal commodity.” If two values are
equal to a third, they are equal to each other. It is, therefore, a simple matter
to use this most current of all commodities, with which all others are most
frequently compared, as a measure of the relative values of all other

exchangeable commodities. There is need of such a measure, and it is
analogous to the want experienced by the mathematician who has a column
of fractions to sum up, and who does it by first reducing them all to a
common denominator. (Storch.)688 A person entrusted with the duty of
assessing [pg 342] the values of two hundred different articles would be
obliged, if he had no such measure to use, to burthen his memory with at
least 19,900689 different ratios. With it, he need carry only 199 in his head.

Such a commodity, universally in favor, and which, on that account, is
employed as an intermediary in the effecting of exchanges of the most
varied nature, in the measuring of all exchange-values and as a value-carrier
(Werthträger) in time690691 and space, we call money. (Merce universale:
Berri; produit préféré: Ganilh; marchandise intermédiare; Bastiat.)692

[pg 343]
The more enlightened portions of every business community gradually
come to require payment in the commodity [pg 344] which has for the time
being the greatest circulating capacity. If to this be added the sanction of the
government, and if the [pg 345] government itself recognizes this same
“universal commodity” as the means of payment of all debts, or as “legal
tender” [pg 346] (puissance libératoire), where no other is expressly agreed
upon, the “universal commodity” in question then becomes money in the
fullest sense of the idea conveyed by the word.693

[pg 347]

Section CXVII.

Effect Of The Introduction Of Money.

By the introduction of money, most exchanges are divided into two halves:
purchase and sale.694 We may also say with Schlözer, that by its means,

exchange, for the first time, becomes a sale, and obscure value in exchange,
clear and definite price. (Permatio vicina emtioni). Were there no money,
the party to an exchange, occupying the most advantageous economic
position, would possess a much greater superiority over the other than he
does now. Many a bread-buyer, especially, would be half starved before he
could agree with the seller on the quantity of bread to be received in
exchange for the commodity he had to dispose of. The producer of the
means of subsistence would here possess an extreme advantage, since the
urgent necessity of the exchange for the one party, and the power of the
other to postpone it, would make the determination of the price an entirely
arbitrary matter.695 Hence, the development of money as the instrument of
trade, keeps pace with the development of individual liberty. Payment of
wages in money makes the workman more responsible for his husbandry
etc., but at the same time, freer, than payment in produce. Now, also, a
higher division of labor becomes possible; for the easier it is to obtain
everything else for money, the easier it is for each person to devote himself
exclusively to one branch of business.696 Without money, too, only ready
[pg 348] commodities could be exchanged one against another. Only when
money has become the instrument of trade, is it possible to separate the net
from the gross returns, and, therefore, to manage income properly.
(Schäffle). Now, also, it becomes for the first time really remunerative to
produce more than one needs for his own use, and to save. Without money,
the owner of any one kind of capital, who could not employ it himself,
would be obliged, if he desired to loan it, to find not only a person who was
in need of capital, but one who needed the very kind of capital he had. For
instance, the person who had one horse too many, would be obliged to look
for another who was in need of one etc. And how difficult a task it would be
to determine the amount of interest, if it had to be paid in produce or kind,
and even to make a return in produce or kind of capital which had been
presumably used. (Storch). Moveable property or resources can attain
importance only after the introduction of good money, since, previous to
such introduction, it was by reason of its great variety,697 and of its
perishable nature, immensely inferior to landed property. Hence it is, that
money, in a nation's economy, is what the blood is in the life of the animal.
It is, so to speak, the common reservoir in which all food is first dissolved,
and by which, at a later stage, the elements of nutrition and preservation are
distributed to the several organs.698 There is, indeed, no machine which has

[pg 349] saved as much labor as money. (Lauderdale). It is true that the
shadows which wealth is wont to cast, extravagance, avarice and inequality
of every kind, may readily grow longer and darker in consequence of the
introduction of money.699 But may not the knife which, in the hands of the
surgeon, does so much for life, become an instrument of danger in the
hands of a child? The invention of money has been rightly compared to the
invention of writing with letters.700 We may, however, call the introduction
of money as the universal medium of exchange (money-economy),701 in
which goods intended for use are exchanged against money702—instead of
barter (barter economy), which is a system of public economy (Schäffle), in
an, as yet, very little developed form, man being there less sociable [pg
350] with his fellow men—one of the greatest and most beneficent
advances ever made by the race.703

[pg 351]

Section CXVIII.

The Different Kinds Of Money.

Very different kinds of commodities have, according to circumstances, been
used as money; but uniformly only such as possess a universally recognized
economic value.704 On the whole, people in a low stage of civilization are
wont to employ, mainly, only ordinary commodities, such as are calculated
to satisfy a vulgar and urgent want, as an instrument of exchange. As they
advance in civilization, they, at each step, choose a more and more costly
object, for this purpose,705 and one which ministers to the more elevated
wants.

[pg 352]
A. Races of hunters, at least in non-tropical countries, usually use skins as
money; that is the almost exclusive product of their labor, one which can be

preserved for a long period of time, which constitutes their principal article
of clothing and their principal export in the more highly developed
regions.706

B. Nomadic races and the lower agricultural races,707 pass, by a natural
gradation, to the use of cattle as money; which supposes rich pasturages at
the disposal of all. If it were otherwise, there would be a great many to
whom payments [pg 353] of this kind had been made, who would not know
what to do with the cattle given them, on account of the charges for their
maintenance.708

[pg 354]

Section CXIX.

The Metals As Money.

C. That metals were used for the purpose of money much later than the
commodities above mentioned, and the precious metals in turn later than
the non-precious metals, cannot by any means be shown to be universally
true. Rather is gold in some countries to be obtained by the exercise of so
little skill, and both gold and silver satisfy a want709 so live and general, and
one so early felt, that they are to be met with as an instrument of exchange
in very early times.710 In the case of isolated races, much depends on the
nature of the metals with which the geologic constitution of the country has
furnished them.711 In general, however, the above law is found to prevail
here. The higher the development of a people becomes, [pg 355] the more
frequent is the occurrence of large payments; and to effect these, the more
costly a metal is, the better, of course, it is adapted to effect such payments.
Besides, only rich nations are able to possess the costly metals in a quantity
absolutely great.712 Among the Jews, gold as money, dates only from the
time of David.713 King Pheidon, of Argos, it is said, introduced silver money

into Greece, about the middle of the eighth century before Christ. Gold
came into use at a much later period.714 The Romans struck silver money,
for the first time, in 209 before Christ, and, in 207, the first gold coins.715
Among modern nations, Venice (1285) and Florence seem to have been the
first to have coined gold in any quantity.716 Henry III. of England (ob.
1272), was the first to coin gold, but with so little success, that for a long
time after, Edward III. (ob. 1377) was regarded as the first English monarch
who had coined gold.717 How little a barbarous people are in a condition to
make use of very costly material as money, is [pg 356] proved by the
account which Tacitus gives of the ancient Germans, who preferred silver to
gold in trade.718 England presents us with an instance of the other extreme.
Since 1816, silver, in that country, has been used only as a species of
change, and the circulation of gold governs in almost all commercial
transactions.719

D. The local usage of some countries has raised many other commodities to
the dignity of instruments of exchange, especially where the population are
poor and the metals which might be used as money have not existed in
sufficient quantities or in the requisite proportion. But people have always
limited themselves in the material of their money to such commodities as
are universally acceptable, as uniform as may be, and current as articles of
export or import.720

[pg 357]

Section CXX.

Money—The Precious Metals.

That the precious metals are uniformly preferred in highly [pg 358]
cultivated nations721 as the instrument of exchange, depends on the

greatness and uniformity of their value in exchange, but especially on their
durability and pliancy as to form.

This value in exchange is great, because their beauty, which consists in their
luster and their sonorous ring,722 gives them great value in use; and because,
at the same time, their rarity in nature makes the supply of them relatively
small,723 and not susceptible of increase at pleasure.724 As they contain so
large [pg 359] a value in so small a volume, they are adapted to
transportation from one place to another, with but little difficulty—a matter
of the greatest importance in an instrument of exchange.725 Hence, it is
much easier to keep the demand for them and the supply of them at a level
all over the world, than it is the demand and supply of most other
commodities. And this all the more as there are not different kinds of gold
and silver, but only different qualities of their fineness.726 It also contributes
to the uniformity of their value in exchange, that they minister mainly only
to wants of luxury. The most indispensable commodities are subject to the
greatest variations [pg 360] in price (see § 103), whereas, in the case of the
precious metals, the diversity of uses to which they may be turned
contributes greatly to render their value, as instruments of exchange, more
equable. If the supply of them be small, gold and silver vessels are less in
demand; a part of the old ones are melted down, and vice versa.

In durability, the precious metals surpass almost all other commodities.
They are not at all affected by air or water, and they can be corroded only
by very few fluids. Fire may, indeed, change their form, but scarcely in any
degree the value of the material of gold, and that of silver very little, and
then only when it is subjected to a very powerful blast or draught of air.727728
Hence, while by laying them by, they suffer virtually nothing at all (a most
valuable article is an article to deposit savings in), their wear and tear from
use may be very much decreased by an admixture with other metals in the
proper proportion.729 This durability contributes largely to keep the price of
the precious metals more uniform. By the time that the wheat crop is rightly
harvested, the great bulk of the previously stored wheat is, as a rule,
consumed; and, therefore, the supply of wheat depends almost entirely on
[pg 361] the yield of the last crop. On the other hand, it is probable that
there is many a piece of money, the raw material of which was dug from
Thracian gold mines in the time of King Philip or from the silver mines of

Spain during the reign of Hannibal, in circulation to-day. Compared with
the immeasurable stores of gold and silver which have gone on
accumulating for thousands of years, the new yield of them, in any one
year, is lost like a drop in a bucket. Hence, only when the yield of the mines
has continued for a very long time, or when it is exceedingly great or
remarkably small, can the price of their products change to any great
extent.730 Even during the revolution in prices, between 1492 and 1560, the
yearly decline in their prices was only one-half of one per cent. per annum.

Their great pliability of form has, too, very important advantages for our
purpose: first, that they can be divided very accurately into very small parts,
and that the volume of every part corresponds exactly to the value of the
part;731 and secondly, that they take an impression at very little cost, an
impression which is an authoritative and trustworthy expression of their
weight and quality, thus saving the commercial public the perilous trouble
of weighing and testing them every time they are used.732733734 This duty the
state, as a rule, assumes. [pg 362] (Coinage.) When its authority, however,
is not recognized, as is generally the case in international trade, gold and
silver bars are even now used, and have, therefore, to be weighed and
tested.735736

[pg 363]

Section CXXI.

Value In Use And Value In Exchange Of Money.

The original value in use of the precious metals, to satisfy certain wants of
luxury in the most aesthetic and the most substantial manner, continues still;
but with the advance of civilization, the employment of gold and silver for
this purpose has fallen farther and farther behind the more recent
employment of these metals as the best material for money. And since now

the services rendered by money may be divided into two classes: storing up
or preservation, and the transmission (division, concentration) of values,737
the former always plays a greater part in the earlier states of the
development of trade by money; and the latter plays the larger part in the
later stages of the same development. We may best compare money to the
other machines or instruments of commerce.738

The person who, in times when there is a dearth of goods, and especially of
capital, complains of a want of money, commits the same error as if he
ascribed a scarcity or absence of grain, when it exists, to a too small number
of wagons to carry it, or to the narrowness of country highways. The
inference may, indeed, be sometimes well-founded, but certainly only by
way of exception; and yet it is generally the first which politico-economical
[pg 364] quacks think of in practice.739 Like all tools or instruments, money
constitutes a part of an individual's or a nation's, or of the world's capital.
Considered from the point of view of private business or economy, money
is circulating capital, but from the point of view of the world's economy, it
is fixed capital.740

[pg 365]

Section CXXII.

Value In Exchange Of Money.

The value in exchange of money is said to be high when all other
commodities estimated in money are cheap; and low in the opposite case.
We have here to do with the application of the most general of all laws of
price; therefore, with the demand and supply of money. The demand for it
depends on the wants and the means of payment of its purchasers.
Therefore, if a country has little trade, it will, on this account, need only
few instruments of trade, that is, of little money to effect exchanges. If it be

poor in other goods, it will get little money in exchange. In the former
respect, there is a beneficent principle of equalization or compensation
which decreases the price-variations of money, no matter of what kind, in
the necessity, when the number of business transactions remains the same
and money becomes cheaper, to use more of it, and less when it becomes
dearer.741 The supply of money is, in the long run, dependent chiefly on the
cost of production. But since the cost of production in different mines is
very different, the value in exchange of the precious metals is determined
by the cost of producing them from the poorest mines which must be
worked in order to supply the aggregate want of them. (See § 110.)742 The
more unfavorable the conditions [pg 366] of their production are, the
greater is the quantity of commodities which must be given for a pound of
gold, silver etc.; that producers may not be deterred from the prosecution of
their work. The extremes of the value in exchange of money are dependent
on the use for which it is intended. That value cannot rise higher than to the
point at which single pieces of money become inconvenient on account of
their smallness, nor sink lower than the point at which a similar
inconvenience is produced by their too great size. In both instances, it
would become necessary to have recourse to other instruments of exchange.

Section CXXIII.

The Quantity Of Money A Nation Needs.

How great the amount of money needed in the entire economy of any state
is, cannot be always rightly determined, either by the amount of the national
resources, or by the number of the population.743 It is a very easy thing to
refute the opinion, that the aggregate amount of cash money in a [pg 367]
country constitutes an equivalent of the aggregate amount of all other
commodities to be found there at any time, in such a way that the two pans
of this great scales (Locke) hang always in a state of equilibrium, and that
an increase of the amount of money, the amount of all other commodities
remaining the same, must be productive of an exactly corresponding

decrease in the value of each piece of money.744 Think [pg 368] only of the
great many commodities which are obtained and consumed without any
exchange whatever! Rather does the amount of money necessary to keep
the value in exchange of the money employed in a people's public economy
unaltered,745 depend on the cooperation of the following conditions:

A. The number and extent of such commercial transactions as are effected
by means of money;746 a relation which, evidently, increases (see § 56, ff.)
with every advance in the division of labor. Hence the transition from
serfdom and socage service to free labor, from domestic-servant labor to
day-labor and piece-work, from feudal military service to that of paid and
standing armies, from land-privileges and allowances in produce, such as
fire-bote etc., to the payment of officials in money, from dues in produce to
taxes in money, and regular lease-hold interests, from requisitions to loans
of money; in a word, from the barter-economy (Naturalwirthschaft) of the
middle ages to the trade by means of money in the higher stages of
civilization, that is, from the “feudal” to the “commercial” system must, of
itself, increase the money-need (Geldbedarf) of a people.

B. The rapidity of the circulation of money; because, in most commercial
transactions, one dollar which circulates ten times a year really performs the
same service as ten dollars which go from hand to hand once in a year; just
as the economic use of a ship employed in the transportation of
commodities does not depend on its commodiousness alone but on its
rapidity also.747 The economic use of money does [pg 369] not depend on its
amount simply. Says Sismondi: “The amount of the medium of circulation
in a state must be equal to the sum of the payments made in it in a given
time, divided by the sum of the times the former has, on an average,
changed owners within that time.”748 Under given economic circumstances,
the rapidity of the medium of circulation is, taken all in all, not by any
means an arbitrary matter. It will happen very seldom that one man will
purchase or consume a commodity in order that another may not want
money.749 Were the greater number of money-earners (and in nations with a
healthy economic life this number is always made up of men noted for the
good management of their own affairs) inclined to pay out the money which
they had taken in, rapidly, a very active production would prevail
everywhere; and this, in turn, supposes general commercial freedom and

great legal security. The less these conditions are developed, the more
difficult it becomes, not only to lay out the money received to-day
productively to-morrow, but the more imperatively does a proper foresight
demand, that a reserve-fund should be maintained for times of necessity.
(See § 43.)750 Even in the same age and among the same people, money
moves most slowly under the influences of troublesome and critical epochs;
for the dangers of war and sedition, of impending burdensome taxation,
commercial gluts and numerous cases of bankruptcy uniformly operate to
make the possessors of money hold anxiously to their present supply.751

In less civilized countries, the same condition of things leads [pg 370] the
people even to bury their money-treasures. In large cities, the circulation of
money is generally more rapid than in the country districts; in a thickly
populated than in a thinly populated country; and in trade than in
agriculture.752 Every improvement in the means of intercommunication
tends to facilitate it. The rich man possesses, as a rule, less money,
relatively speaking, than the poorer man. Hence, a more equable division of
a nation's resources among the people would increase the amount of money
needed.753 While the concentration, as to time, of circulation into few great
terms of payment is calculated of itself to cause a large sum of money to
remain idle in the interval,754 its concentration in space in large commercial
cities must dispense with the necessity of a great number of instruments of
exchange. In England, it is customary for every man in comfortable
circumstances, as soon as he receives any money, to deposit with a banker,
and to make all his payments by means of checks upon the latter. Cash
money is now employed by Londoners only in payment of [pg 371] wages,
and in trade between retail dealers and consumers. The banker is there the
common cashier of a great number of private individuals, and is in a
condition to make their payments for them with a much smaller amount of
money, especially when they are to be made by one of his depositors to
another.755 This “union of money-chests” (Kassenvereinigung) has been
effected also on a larger scale; inasmuch as bankers, in greater or smaller
numbers, are wont to have one bank as a center; and the country banks, in
turn, to be in constant relation with the great moneyed institutions of
London, subject to a species of general superintendence by the Bank of
England. These great monetary institutions have, so to speak, a common
rendezvous at the Clearing-House, where the greater part of their payments

are made by a mere off-setting of debits and credits;756 and this bank is, as it
were, the cashier-in-chief of the nation, and in possession of almost the
entire cash stores of the English people.757

[pg 372]
C. The quantity and rapidity of circulation of the representatives of money.
These, in so far as they are worthy of the name here given them, depend on
the credit of those who issue them; that is, on the certainty that they shall, at
the time fixed, be redeemed in money. To this category belong the paper
money of the state which bears no interest, and the treasury-notes of the
state which do bear interest, bank notes, bills of exchange, promissory
notes, book-credits of private persons, sometimes even certificates of the
storage of goods in public stores. It is estimated, that, at the present time,
nine-tenths of all the payments made in Great Britain are effected without
the aid of money, or even of bank-notes.758 The capacity of a person to make
purchases does not depend simply on the [pg 373] amount of money he
possesses, but on his credit likewise. The person who buys on credit,
contributes as much to raise the price of commodities as the person who
buys for cash; with this exception, however, that when the former
eventually fails to redeem his promise to pay, the price raised by him
quickly falls again.759 And, indeed, all the various forms of credit,
mentioned above, agree essentially in this, however they may differ from
one another in costliness and rapidity of circulation.

Section CXXIV.

The Quantity Of Money A Nation Needs. (Continued.)

Of the three conditions above mentioned, it is evident that the first operates
on the amount of money needed, in a direction opposite to that of the other
two. The usual course of development is this: among an advancing people,
the number of money transactions increases at first; later, when education
has become general, and the people have grown habituated to the giving

and receiving of credit, the circulation of money is accelerated, and an
increase of the substitutes for money effected. Hence, it is perfectly natural
that the money-need of a people whose public economy is only half
developed, should, in proportion to the number of inhabitants, be greater,
not only than that of a people whose economy is wholly undeveloped, but
also, than that of a people whose public economy has been carried to the
highest point of perfection.760761

[pg 374]

Section CXXV.

Uniformity Of The Value In Exchange Of The Precious Metals.

The peculiar properties of the precious metals described above (§ 120),
explains satisfactorily enough, why, at the same [pg 375] time, but in
different countries, they have more nearly the same value in exchange than
any other commodity whatever. Like a fluid in tubes which communicate
with one another, the precious metals seek the one same level of value the
whole world over.762 Only, it must not be supposed that every absolute or
relative increase of the amount of money in a country must produce
immediately a corresponding diminution of the value of money; and in
addition to this cause an exportation of money.763 If the number of trade-
transactions increases in the same proportion as the amount of money, the
value of money remains entirely unaffected.764 The same thing occurs when
the increased influx of money, instead of overflowing the channels of
circulation, only swells the volume in the [pg 376] ready-money reservoirs.
By means of these stores of ready money, very large payments may be
made by one nation to another, without changing the circulation, or,
therefore, the value of money, in the slightest degree, on either side.765 If,
indeed, such payments should continue for a long time to flow in the same

direction, they would certainly influence the circulation, and then produce a
current in the opposite direction.

However, it may happen, that the value of money in different countries may
be permanently different, when there are lasting difficulties in the way of
the leveling influence of the incoming or outgoing current of money. Thus,
the precious metals maintain a high value in those countries especially
which can obtain them only by giving commodities difficult of
transportation for them. If, for instance, an Englishman, anxious to take
advantage of the high value of money in Poland, [pg 377] should cause
Polish articles, such as wheat, wood, wool etc., to be imported into
England, they would reach their destination very much increased in price,
because of the great cost of transportation. Whether Poland or England
would have to bear this cost depends on the relations of supply and demand.
Certain it is, however, that the migration of money is hereby rendered
exceedingly difficult, forbidden even within the limits of certain value-
differences, especially where the means of communication are universally
bad. And so, the smaller the number of countries which minister to the want
of commodities of precious-metal districts, the more must other nations
obtain the money they need only at second and third hand; by means of
which, naturally, money itself is made dearer each time. Now, it is, as a rule,
nations in a low stage of civilization, that engage in the exportation of raw
material, and they are the worst adapted to engaging directly in the carrying
on of trade. When, therefore, they do not possess gold or silver mines
themselves, money-value is, as a rule, highest with them; especially as the
absence of legal security and protection, which generally obtains there,
makes the value in use of the precious metals one of great urgency to
them.766767

Direct legislative or governmental provisions may operate in the same
direction; as, for instance, the Japanese embargo laws which, not long since,
limited all foreign trade to two [pg 378] foreign nations.768 I intend to treat
of the influence of taxation on the value of money, in a future work to be
written by me, on the Political Economy of the State.

Section CXXVI.

Uniformity Of The Value In Exchange Of The Precious Metals.
(Continued.)

Most nations can satisfy their want of the precious metals, only through the
medium of foreign trade. Hence they very naturally look upon the cost of
production of the articles of export by the exchange of which they obtain
the precious metals either directly or indirectly, as the cost of production of
these metals themselves. But, the rule that all commodities of equal cost of
production have equal value in exchange is applicable only within the limits
of the same economic territory (§ 107), for it is frequently physically
impossible, and still more frequently rendered difficult, by laws, customs
and states of mind to transfer factors of production from one country to
another simply on account of the more advantageous market they would
there find. Thus, for instance, when England exchanges its cotton and
woolen goods, and steel instruments for Mexican silver, the cost of
production of the two equivalents may be very different, and the one party
in this trade may permanently make a larger profit than the other.769
According to § 101, that party will be most favored in whom the desire of
holding to his own commodities is farthest from being [pg 379] out-
weighed by his desire to obtain the other. But, at bottom, silver is no very
indispensable article. Especially in highly civilized commercial
communities, it is easiest to obtain substitutes for it, while the principal
articles of English export are, for the most part, objects with which to
satisfy wants rather urgent in their nature, very general, and of rapid
growth; and which, besides, are not, to any extent, difficult of
transportation. It is not a matter of surprise, therefore, that English
commodities, in silver countries, are generally sold above the mean price
between the English cost of production and the Mexican, for instance, or
the cost of procuring them elsewhere; and that silver, on the other hand, is
sold in England, under the same. But this lowers the price of the precious
metals of the latter country in general. Hence a change in the channels of
international trade, which in most countries is the only source of gold and
silver, may make the price of the precious metals dearer in one place and
cheaper in another, even when the conditions of the production of mines
remain entirely unaltered.770 In an isolated country, any [pg 380] amount of
gold and silver whatever would, finally, as soon as the people had grown

accustomed to it, suffice for all the wants of circulation. But, in commerce
with the rest of the world, the greater quantity and greater cheapness of the
precious metals, that is of those commodities which are most current and
are possessed of the greatest amount of economic energy, must, without fail,
be of the greatest advantage to a country; and this irrespective of the fact
that they are under certain circumstances the symptom of an especially
highly developed public economy. If we suppose two nations, A and B,
equal in every other point, but that A has twice as much money as B, and
that prices are twice as high there as in B; yet, with the same effort or
sacrifice, A could levy twice as many taxes as B. In case of a war between
them, A might pay in ready money for the necessities of an army which had
invaded B, with one-fourth the sacrifice which B would have to make to
support its army in A, if we reverse the case, and suppose that B had
invaded A.771

[pg 381]

Chapter IV.

History Of Prices.

Section CXXVII.

Measure Of Prices,—Constant Measure.

If we had a measure of prices with the same universality of application and
the same unchangeableness as the measure of length, which is determined
by astronomical calculation, we should be able, not only to clearly
understand all the data relating to value, that is to say, a not unimportant
portion of historical science, but we should, moreover, have a practical
means to condition and fix even perpetual annuities, in such a way, that they
would always afford the same economic and purchasing power to the
person receiving them. No wonder, therefore, that political economists since
Petty's time have zealously labored to find a constant measure of prices.772
If by this we understand a species of goods such that it should always
maintain equal exchange-power, as compared with all other commodities,
[pg 382] the idea of a “constant” measure of prices is unthinkable. We
would have to suppose here, that not a single kind of goods varied in its
price; since, otherwise, at least as compared with those that varied in price,
the measure of prices would itself be variable.773 But we may, indeed,
search for a kind of goods such that its inherent elements and the elements
peculiar to it, so far as it is itself concerned, and which go to determine
price, should exert the same uniform influence at all times. If there be such
a kind of goods, and its value in exchange as compared with other kinds of
goods were to vary, we should be certain, at least, that the cause of the
change was not in it, but in them; that it had not grown dearer or cheaper,
but that they had grown cheaper or dearer. Such a kind of goods would have
these two characteristics: A. A given amount of it would, under all
circumstances, have the same value in use for the same number of persons.

B. It would require, under all circumstances, the same cost to produce it,
and therefore the supply might always keep pace exactly with the number
of those who demanded it.774 In this way the supply and demand of this kind
of goods, abstraction made of the quantity of counter-values, would
preserve forever the same invariable relation.

Section CXXVIII.

Value In Exchange Estimated In Labor.

Adam Smith is of opinion that different kinds of goods, no matter how far
removed from one another they may be in [pg 383] time or space, have
equal value in exchange, when an equal quantum of human labor may be
purchased by their means. He adopts, because of the great differences in
work, the average work of the common manual laborer. One work-day, and
the sacrifice of “rest, freedom and happiness” therewith connected, are,
under all circumstances, attended with the same inconvenience (value). If at
one time this day's labor will exchange for more, and at another for less, of
any kind of goods, it is only because the price of the latter has fallen or
risen.775

But we may ask whether the same sacrifice of liberty is as great a hardship
to a Russian as to a Bedouin; or whether the sacrifice of an equal amount of
rest is as hard for the New Englander as it is for a Turk, or as difficult to
endure on a hot day in July as in the cold of winter. Besides, we have [pg
384] here to do primarily only with value in exchange; and that value in the
case of day-laborers' work is subject to very great fluctuations.

The elements on which the demand and supply of labor depend are not, in
themselves, invariable, nor do their variations usually compensate for one
another. In progressive nations, the value in use of day-laborers' work
increases as well as the capacity of their employers to pay them; but, at the
same time, as a rule, and at least relatively speaking, the supply of labor

diminishes on account of the increase in the cost of production of workmen.
Precisely the reverse of this happens in nations in their decline, and in over-
populated nations. The workman is subjected to the necessity of accepting
distress-prices for his work, and especially of accepting them for a long
space of time.776 How often it happens that, if only transitorily, when wages
are declining, work improves, and vice versa.777

Ricardo's school employs, as the measure of the price of various kinds of
goods, the quantity of work by which the goods themselves are produced.778
It is evident that the same [pg 385] amount of common labor produces very
different results, according as it is well or badly conducted. Hence Ricardo
must have used the word labor in the sense of labor ideally adapted to its
end. But in this way it would be impossible to reduce all the different kinds
of labor to a common denominator.779 Nor could the peculiar effects of
capitalization, or the influence of the natural or artificial limitations of
competition be estimated in terms of such a measure. (See §§ 47, 107,
189.)780

Section CXXIX.

The Precious Metals The Best Measure Of Prices.

It is no more possible to find a constant measure of prices than it is to
square the circle. (J. B. Say.) If the two magnitudes to be compared are
separated from each other in space but not in time, the precious metals
constitute not only the best measure of their prices, but also a very good
one. But the precious metals are subject to very sensible and accidental
variations in price in long periods of time. If, therefore, we would compare
sums of money belonging to different times with one another, we must first
construct a price-current list of all the more important articles of commerce
for the time in question, and in the quantities they are needed in every [pg
386] day life. We would next have to calculate the average of these mean
prices, and thus to determine the relative value of the amounts to be

estimated.781 The person who should limit his comparison to a few species
of commodities, says von Mangoldt, would lose in exactness what he
gained in comprehensibility.

In every such list, the wages of a day would occupy a very important place.
The desire of exerting an influence over the lives and actions of other men,
and the desire of relatively greater social distinction as compared with the
social distinction of others, is very general; and there is scarcely any better
evidence that it has been attained than the possession of the power of
controlling a large number of days' work. The man who can keep one
thousand day laborers is certainly, in a politico-economical [pg 387] sense,
an important personage. Besides, the height of day-wages has the most
direct influence on the price of many other commodities.782

No less important is the price of wheat, or rather of the principal article of
food of the people, for the time being, with which the price of inland raw
material—in so far as it can be produced from the same soil alternately with
wheat—and, in the long run, also the wages of labor, are so essentially
connected.783 The same indispensable necessity of wheat which causes its
price to fluctuate so largely from year to year, and from month to month,
promotes the uniformity of its average price,784 when many years are taken
into the account.785786 [pg 388] (Malthus.) If, by reason of great progress
made in the art of agriculture, the cost of the production of wheat should
fall to one-half of what it was, a large increase of population would
certainly not be delayed long. And so, on the other hand, there would be a
decrease of population if, by the destruction of artificial means of irrigation,
or other steps in the direction of a retrogressive civilization, the cost of the
production of wheat were to be permanently increased.

But even the average price of wheat, during a long series of years, is not
entirely invariable. The increasing consumption compels the nation, as a
whole, to provide for its requirement of wheat from less fertile sources,
which increases its price generally. It is true that the progress of the science
of agriculture and of the corn-trade counteract this tendency, retard the
advance of the price of wheat, and may, for a time, produce an opposite
tendency. It is true, also, that the people are induced by their most general
and vital interests to take advantage of this possibility. But spite of the

frequency of exceptions to it, the rule remains.787 If, therefore, we wished to
so fix a perpetual annuity that it should always be worth [pg 389] as much
money as a certain quantity of wheat had cost, on an average, during the
three preceding decades, the thing-value of this annuity would, on the
whole, rise with an advance in civilization.788 To obtain something that
would remain the same, it would be necessary to combine wheat with at
least one chief commodity, the intrinsic basis of the price of which had a
development independent of the price of grain; but the whole to be made
payable in money. The precious metals are, in many respects, so
diametrically opposed in properties to wheat, in their dispensableness,
transportable character and durability, for instance, that these two classes of
commodities are best adapted to act as counter-balances to each other.789

Section CXXX.

History Of The Prices Of The Chief Wants Of Life.

The higher civilization advances, the dearer all those commodities in the
production of which the factor nature with [pg 390] value in exchange
predominates are apt to become; and the cheaper, on the other hand, all
those in which labor and capital play the principal productive part.790 This is
accounted for, not only by the almost unlimited capacity of labor and capital
to be increased, while the natural forces which have value in exchange are
susceptible of increase to so small an extent; but also, and especially,
because new additions of labor and capital are wont to cause relatively
smaller results in the production of raw material, and relatively larger ones
in industry and commerce. (§ 33, ff).791

Hence, from the relations the prices of the different classes of commodities
bear to one another, we may draw important conclusions as to the degree of
civilization which a country has attained. The above law also affords an
explanation of the fact, that a young nation, which has made no great strides
in the way of development, and in which, of course, the production of raw

material preponderates, draw their commercial and manufactured
necessaries, by way of preference, from [pg 391] precisely the most highly
civilized foreign nations. The latter are in a condition, and accustomed, to
give the largest quantity and the best quality of manufactured articles for a
required quantity of raw material; and, of course, vice versa. Hence, in this
intercourse of nations, the most urgent want, and the completest and easiest
possibility of satisfying it, meet.792 Only very highly civilized mother-
countries can hold fast to colonial possessions in our day.

Section CXXXI.

History Of The Prices Of The Chief Wants Of Life. (Continued.)

A. In the case of a great many raw materials, we repeatedly find the
following to be the course of development. In the lower stages of
civilization, they grow of themselves, and in such quantities that a small
amount of labor, and that only the labor of occupation, more than suffices to
satisfy the small demand for them. Here, naturally enough, the price of raw
materials is very low. After this, it rises with every advance made in
civilization, for two reasons: first, because the demand becomes greater and
greater; and then, because the naturally free sources of production, called
into requisition by other wants, now flow less and less abundantly.793 This
rise in price continues until the point is reached at which it becomes
customary, instead of the mere occupation of the free gifts of nature, to
bring forth the commodities in question by the more [pg 392] laborious
process of production proper. From this time forward, the usual seeking of
prices for a level requires that our commodity should, like all others which
suppose an equal sacrifice of the means of production, claim an equal value
in exchange. If from any peculiar causes, the production of this commodity
is not at all possible, or if it is capable of no great extension, its price, which
would under the circumstances, be limited only by the purchasing power of
the buyer, might attain the utmost extreme reached in prices under the spur
of vanity or of the mere love of the commodity itself. The latter is true

especially in the case of venison;794 the former, in the case of the tame
cattle,795 fresh-water fish,796 and wood.797798

[pg 393]

Section CXXXII.

History Of The Prices Of The Chief Wants Of Life. (Continued.)

B. The rise in prices is observed earliest in that class of goods in question
which by reason of their small volume and [pg 394] their comparatively
great value, and by reason of the greater capacity to be kept in a state of
preservation for a longer time, are best adapted to seeking a more favorable
market. This applies particularly to the skins, fleece, hair, feathers, [pg 395]
teeth, horns, etc., of animals, in which, in the breeding of stock, etc. people
in a low stage of civilization are much more apt to speculate than in their
meat. Here it is considered, and rightly so, to be much more profitable to
raise many animals which are badly cared for, than a few, that are well
cared for; for the care bestowed on animals has, as a rule, much more
influence on the body itself than on their covering.799 In fisheries, [pg 396]
caviar, sturgeon-bladders, oil and whalebone;800 and in forest-culture, [pg
397] pitch, tar, potash and, to some extent, building material etc., play the
same part.801

Conversely, the price of those portions which are most difficult of
transportation, by reason of their volume or of the difficulty of preserving
them, rises latest. To this category belongs milk, the production of which in
a fresh state can be made an object of economic speculation, only where
civilization is at its very highest, and especially in the vicinity of large
cities.802 It is indeed possible by its transformation into butter or cheese to
preserve milk and make it capable of [pg 398] transportation. But to carry
on such a business for the purposes of trade, a care and a cleanliness are

needed which are national characteristics only of a highly civilized people
(§ 229), and the preparation of a superior quality of cheese, which is always
a very long process, is conditioned by the employment of capital long in
advance of a return, and which no poor nation is in a condition to make.803
Cows are primarily milk-producing animals.804 Hence their price, as a rule,
rises later than that of oxen, but, in the higher stages of civilization, it rises
much more surprisingly. Something analogous is true of those products
which result from what remains after the production of other goods or
commodities. As long as this alone supplies the demand, the cost of
production of the former commodity is almost nothing, and hence its price
is very low. For this reason hogs are relatively cheap in two very different
periods of a people's national economy, in a very low stage of civilization
where forests are plentiful and they are fattened on acorns and the nuts of
the beech, and also when they may be considered as a collateral product of
some great industry, such as distilleries and dairy-farming; and when raised
by a numerous, especially a rural population of small means and laborers, in
order to turn to advantage, in the former instance, the remains of
production, and in the latter of consumption.805 Where neither of these two
reasons obtains, [pg 399] the price of hogs is wont to increase largely with
an advance in civilization.806807808 (See Roscher, Nationalökonomik des
Ackerbaues, §§ 177 ff.)

[pg 400]

Section CXXXIII.

History Of The Prices Of The Chief Wants Of Life. (Continued.)

C. Those raw materials which, from the very first, have been obtained by
the means of production properly so called, maintain a much greater
uniformity in price. In the lower stages of civilization, they are never found
permanently in excess; and as the economy of a people advances, the

growing dearth of natural forces may be more or less counterbalanced [pg
401] by the greater cheapness of capital and labor. This is true, especially of
wheat. (See § 129, and Roscher, Nationalökonomik des Ackerbaues, p.
43.)809

D. In the case also of those raw materials which are objects of occupation,
and never of real production, as, for instance, minerals, a progressive public
economy, by altering the different elements of price in an opposite
direction, may leave their price on the whole unchanged. Here, indeed, the
discovery of new and especially of rich natural stores may exert an
incalculable influence; but such “accidents” underlie the laws of human
development only to the extent that those ages which are intellectually most
active are those also which are most industrious and fortunate in the
discovery of their natural resources.810

[pg 402]

Section CXXXIV.

History Of The Prices Of The Chief Wants Of Life. (Continued.)

E. The products of industry become cheaper and cheaper as economic
culture advances; whereas, for instance, in England, towards the end of the
middle ages, a single shirt was considered of importance enough to be made
not unfrequently an object of testamentary bequest.811 And, indeed, the price
of industrial products sinks lower the more important the part played in
their production by capital and the division of labor is as compared with the
part played by the raw material.812 [pg 403] On this account, in recent times,
fine cloths have grown, relatively speaking, much cheaper than coarse
ones.813 Lead, which during the middle ages in England was much cheaper
than iron, because of the difficulty of mining the latter, has become much
dearer in our days.814 Conversely, where raw material plays the most

important part in manufactures, the price of the manufactured article may
increase with an advance in civilization. Hence, articles made of wood are
procured at the cheapest rates in mountainous countries, where the division
of labor is not carried very far, but where the raw material is cheap.815

[pg 404]
F. But the price of commodities decreases, especially in the higher stages of
civilization, to the extent that it is dependent on commerce.816 Here capital
and human labor almost exclusively are effective, and the modern
improvements of communication, legal security and competition are
especially striking.817

G. Since personal services are, as a rule, performed and received only by
individuals, the principle in accordance with which labor in general
becomes cheaper in the higher stages of civilization, does not apply to them
to any great extent.818 Yet we may claim that advancing civilization has
pretty universally a twofold influence on the price paid for personal
services. In the first place, freedom of competition, with the more accurate
and equitable determination of price which it produces (in contradistinction
to servitude, privilege and custom) always tends [pg 405] to obtain the
upper hand; and further, by the growing combination of labor and of use (§§
56, ff. 207), a better and better and more clearly defined gradation between
ordinary services and those of a higher order is effected. When the latter
cannot be increased at pleasure, the price paid for them may, as the wealth
of consumers increases, become, from motives of vanity or of custom
(Gebrauchsgründen), almost unlimited. The dancing maid, to whom Herod
(Mark, 6, 23) promised even the half of his kingdom, is both in a politico-
economical and in a moral sense a warning example to over-refined
nations.819

Section CXXXV.

History Of The Values Of The Precious Metals.—In Antiquity And
In The Middle Ages.