Principles of Political Economy

Principles of Political Economy

Preliminary Remarks.

Writers on Political Economy profess to teach, or to investigate, the nature of Wealth, and the laws of its production and distribution; including, directly or remotely, the operation of all the causes by which the condition of mankind, or of any society of human beings, in respect to this universal object of human desire, is made prosperous or the reverse.

It will be noticed that political economy does not include ethics, legislation, or the science of government. The results of political economy are offered to the statesman, who reaches a conclusion after weighing them in connection with moral and political considerations. Political Economy is distinct from Sociology; although it is common to include in the former everything which concerns social life. Some writers distinguish between the pure, or abstract science, and the applied art, and we can speak of a science of political economy only in the sense of a body of abstract laws or formulas. This, however, does not make political economy less practical than physics, for, after a principle is ascertained, its operation is to be observed in the same way that we study the force of gravitation in a falling stone, even when retarded by opposing forces. An economic force, or tendency, can be likewise distinctly observed, although other influences, working at the same time, prevent the expected effect from following its cause. It is, in short, the aim of political economy to investigate the laws which govern the phenomena of material wealth. (Cf. Cossa, “Guide,” chap. iii.)

While the [Mercantile] system prevailed, it was assumed, either expressly or tacitly, in the whole policy of nations, that wealth consisted solely of money; or of the precious metals, which, when not already in the state of money, are capable of being directly converted into it. According to the doctrines then prevalent, whatever tended to heap up money or bullion in a country added to its wealth.

More correctly the Mercantilists (in the sixteenth and seventeenth centuries) held that where money was most plentiful, there would be found the greatest abundance of the necessaries of life.100

Whatever sent the precious metals out of a country impoverished it. If a country possessed no gold or silver mines, the only industry by which it could be enriched was foreign trade, being the only one which could bring in money. Any branch of trade which was supposed to send out more money than it brought in, however ample and valuable might be the returns in another shape, was looked upon as a losing trade. Exportation of goods was favored and encouraged (even by means extremely onerous to the real resources of the country), because, the exported goods being stipulated to be paid for in money, it was hoped that the returns would actually be made in gold and silver. Importation of anything, other than the precious metals, was regarded as a loss to the nation of the whole price of the things imported; unless they were brought in to be re-exported at a profit, or unless, being the materials or instruments of some industry practiced in the country itself, they gave the power of producing exportable articles at smaller cost, and thereby effecting a larger exportation. The commerce of the world was looked upon as a struggle among nations, which could draw to itself the largest share of the gold and silver in existence; and in this competition no nation could gain anything, except by making others lose as much, or, at the least, preventing them from gaining it.

The Mercantile Theory could not fail to be seen in its true character when men began, even in an imperfect manner, to explore into the foundations of things. Money, as money, satisfies no want; its worth to any one consists in its being a convenient shape in which to receive his incomings of all sorts, which incomings he afterwards, at the times which suit him best, converts into the forms in which they can be useful to him. The difference between a country with money, and a country altogether without it, would be only one of convenience; a saving of time and trouble, like grinding by water instead of by hand, or (to use Adam Smith's illustration) like the benefit derived from roads; and to mistake money for wealth is the same sort of error as to mistake the highway, which may be the easiest way of getting to your house or lands, for the house and lands themselves.

Book I. Production.

§ 1. The Requisites of Production are Two: Labor, and Appropriate Natural Objects.

There is a third requisite of production, capital (see page 58). Since the limitation to only two requisites applies solely to a primitive condition of existence, so soon as the element of time enters into production, then a store of capital becomes necessary; that is, so soon as production requires such a term that during the operation the laborer can not at the same time provide himself with subsistence, then capital is a requisite of production. This takes place also under any general division of labor in a community. When one man is making a pin-head, he must be supplied with food by some person until the pins are finished and exchanged.

Labor is either bodily or mental; or, to express the distinction more comprehensively, either muscular or nervous; and it is necessary to include in the idea, not solely the exertion itself, but all feelings of a disagreeable kind, all bodily inconvenience or mental annoyance, connected with the employment of one's thoughts, or muscles, or both, in a particular occupation.

The word “sacrifice” conveys a just idea of what the laborer undergoes, and it corresponds to the abstinence of the capitalist.

Of the other requisite—appropriate natural objects—it is to be remarked that some objects exist or grow up spontaneously, of a kind suited to the supply of human wants. There are caves and hollow trees capable of affording shelter; fruits, roots, wild honey, and other natural products, on which human life can be supported; but even here a considerable quantity of labor is generally required, not for the purpose of creating, but of finding and appropriating them.

Of natural powers, some are unlimited, others limited in quantity. By an unlimited quantity is of course not meant literally, but practically unlimited: a quantity beyond the use which can in any, or at least in present circumstances, be made of it. Land is, in some newly settled countries, practically unlimited in quantity: there is more than can be used by the existing population of the country, or by any accession likely to be made to it for generations to come. But, even there, land favorably situated with regard to markets, or means of carriage, is generally limited in quantity: there is not so much of it as persons would gladly occupy and cultivate, or otherwise turn to use. In all old countries, land capable of cultivation, land at least of any tolerable fertility, must be ranked among agents limited in quantity. Coal, metallic ores, and other useful substances found in the earth, are still more limited than land.

For the present I shall only remark that, so long as the quantity of a natural agent is practically unlimited, it can not, unless susceptible of artificial monopoly, bear any value in the market, since no one will give anything for what can be obtained gratis. But as soon as a limitation becomes practically operative—as soon as there is not so much of the thing to be had as would be appropriated and used if it could be obtained for asking—the ownership or use of the natural agent acquires an exchangeable value.

Rich lands in our Western Territories a few years ago could be had practically for the asking; but now, since railways and an increase of population have brought them nearer to the markets, they have acquired a distinct exchange value. The value of a commodity (it may be anticipated) is the quantity of other things for which it can be exchanged.

When more water-power is wanted in a particular district than there are falls of water to supply it, persons will give an equivalent for the use of a fall of water. When there is more land wanted for cultivation than a place possesses, or than it possesses of a certain quality and certain advantages of situation, land of that quality and situation may be sold for a price, or let for an annual rent.