NUMBER 45.

PRICE lad.

DEFINITIONS.

POLITICAL ECONOMY is the science which teaches the manner in which nations and individuals acquire wealth. Wealth is any thing which is capable of gratifying our desires, and of procuring for us, by exchange, some other object of gratification. Some objects are capable of gratifying our desires, but are incapable of procuring for us any other objects in exchange. Such are air, the light of the sun, and, commonly, water. Others are capable, not only of gratifying our desires, but of procuring for us other objects in exchange. Such are fuel, cloth, salt, wheat, iron, money, &c. It is only articles of this latter class that are denominated wealth.

Of Value. That quality in any object which renders it capable of gratifying our desires, is called its value. Thus, the value of air consists in its power to support life; the value of water consists in its capacity to slake our thirst, and in its utility in the several purposes in the arts. The value of fuel consists in its capacity to impart to us warmth, &c.

When this value is considered simply as a capacity to gratify human desire, it is called intrinsic value. When it is considered as a capacity to procure for us something else in exchange, it is called exchangeable value.

Things which are every where abundant, and which require no aid from human labour to render them capable of gratifying our desires, have only intrinsic value. This is the case with air, the light of the sun, &c. On the other hand, things which derive their power to gratify our desires from human labour, and which are found only in particular places, have always exchangeable value.

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The reason why these latter have exchangeable value is evident. If I, by my labour, give value to something which had no value before, I have a right to the thing in which this value resides. And, inasmuch as I have bestowed my labour upon it, I will not part with it for nothing. Hence, if any one wants it, he must offer me in exchange something on which he has bestowed similar amount of labour, or else something which could not otherwise procure, without bestowing upon it an equal or a greater amount of labour. Thus, if I have spent an hour in catching a fish, I will not give it to my neighbour for nothing, or for air, or sunlight, which I can have for nothing. I will only give it for something which I could not procure with less than an hour's labour. And if he offer me something which I could procure with half an hour's labour, I shall not exchange, but shall prefer to procure for myself the article which he offers me.

And hence we see that when men exchange the products which they have procured with each other, they exchange labour for labour. Thus, when men exchange silver for gold, they give a much larger amount of silver than of gold, because it requires much more labour to

procure gold than it does to procure silver. They give a much larger amount of iron in exchange than of silver, because the labour of procuring silver is much greater than the labour of procuring iron.

And hence we see that when men exchange with each other, the exchangeable value of any thing will be, in general, as the labour which it costs to procure it. Hence the cost of any thing, or its natural price, is the labour which is necessary to produce it.

This, however, is liable to accidental and temporary fluctuation. Sometimes a much larger quantity of a given product is created than is wanted. In this case, the owner, in order to induce persons to buy, will offer it at a less price than the cost, because he had rather sell it at a loss than lose it altogether. When, in this case, the supply is too abundant, the exchangeable value will fall. On the other hand, when not enough of any given product has been created to supply the wants of the community, the buyers, rather than be deprived of it, will overbid each other, and thus will pay more than the natural price: that is, when the demand is unusually great, the exchangeable value will rise. These causes of fluctuation can, however, exist but for short periods, and the constant tendency of the exchangeable value of any thing will be towards the cost of the labour necessary to create it.

Of Production.-Production is the act by which we give to any object its particular value, or its particular capacity to gratify human desire. Man can neither create nor annihilate any thing; he can only change the form of that which is created. We cannot create iron, but we can extract it from the ore; we can then change it into steel; we can change a lump of steel into knifeblades. Each of these acts, by which a particular value is given to the iron, is called an act of production.

The substance to which any value has thus been given, is called a product.

Capital. The term capital is applied to the material before it has been changed by labour into a product; to the instruments with which this change is effected; to the means of subsistence by which the labourer is supported; and also to the product which results from the application of labour to the raw material.

Of Exchange.-Every man finds it for his interest to labour exclusively at one kind of production. Thus, we see that every man has his own trade or profession. But a man wants a great many other things besides those which he produces himself. The shoemaker produces shoes; but he cannot eat, or drink, or clothe himself, with shoes. Hence he must exchange his shoes for those articles which he needs. Every other man is in the condition of the shoemaker. And hence we see that an immense amount of exchanges must be made every day in every civilised community.

Distribution-Not only does every man work at a particular trade-it is commonly the case that a great many men must labour together in order to create a

goes through the hands of several workmen, and receives a portion of its value from every one of them. When the product has been created, every one is entitled to his share of it. The principles by which this division of the profits is made, is called by political economists distribution.

Consumption.-Every product, after it has been created, is put to some purpose. Sometimes it is used for the creation of some other product; as wheat, when it has been raised, is used for the purpose of making flour; or, again, it may be used for the simple purpose of satisfying human desire, as bread, when it is eaten, is used to appease our hunger. The destruction of values in this manner is called consumption.

The whole subject of Political Economy may therefore be comprehended under these four divisions-Production, Exchange, Distribution, Consumption.

PRODUCTION.

Production is the act by which we confer upon any object a value which it did not possess before; or it is the application of labour to capital for the creation of a product.

OF CAPITAL.

Capital is the material which is to be united with industry for the creation of a product, or the instruments which are used in the act of production, or the necessaries and conveniences by which the health of the labourer is sustained. Sometimes the labourer finds the material in its native state, as the miner finds the ore or the coal in its native bed; most commonly, however, he receives it from some one who has already conferred upon it some value, and it is his occupation to confer upon it another.

The forms of capital are as various as the different occupations of men. The material of the farmer is seed, manure, animals, &c. ; that of the manufacturer, cotton, wool, iron, leather, &c.; and that of the merchant, the various substances in which he traffics.

The instruments with which these producers labour are very various. The farmer uses ploughs, harrows, and carts; the manufacturer, saws, hammers, and spinning and weaving machines; and the merchant, ships, boats, locomotives, &c.

Besides these, all inen require for their sustenance food, clothing, shelter, and the various conveniences of life. Viewed in this light, all capital may be included under one or the other of these classes.

Changes of Capital.-Inasmuch as the labour of men is so universally employed in changing capital having one form of value to capital having another form of value, capital must be incessantly undergoing changes. It is no matter how many changes it undergoes, if its value be by every change sufficiently increased to pay for the labour which it cost to effect it.

Increase of Capital.—If a given material undergo a change by which its value is increased, then there is an increase of capital equal to the difference between its former and its present value. I say equal to the difference, because, in the creation of one value, another value is always destroyed, and we are benefited, therefore, only by the superior amount of value which we possess over that which we have consumed to produce it. Thus, the farmer consumes seed, manure, labour, sustenance, in the production of a crop. He has changed one kind of capital for another, and he is enriched by as much as his crop is of greater value than all that it cost him to produce it.

Capital which is undergoing change by which its value is increased, or which is yielding an annual income, is called productive capital. That which is lying idle, and neither producing any thing nor increasing in value, is called unproductive capital.

Money forms a small but very important part of the capital of all civilised nations. The use of money is to

other. That it forms but a small part of the capital of a country, is evident from the fact, that a very small part of the wealth of any individual consists of money. What is true of all the separate individuals of a community, must be true of the whole community collectively.

Of Fixed and Circulating Capital.-That capital from which the owner derives profit by changing its form or place, is called circulating capital; while the various instruments which he uses to produce this change, and from the use of which he derives profit, are fixed capital. Thus, the wheat and the manures of the farmer, the wool and raw cotton of the manufacturer, are their circulating capital; the ploughs, harrows, barn, and land of the one, the machinery and buildings of the other, are their fixed capital.

There is a constant tendency in a prosperous condition of society, to change circulating into fixed capital. The farmer sells his wheat, and with the produce buys more land and better tools, or erects better fences and barns. The manufacturer, with his profits of this year, enlarges his manufactory; and thus, in the progress of society, vast sums are annually invested in roads, canals, manufactories, and various means of practical improve

ment.

The beneficial result of this tendency is easily seen. Fixed capital is but slowly consumed, and hence the wealth of each generation is transmitted to the next; and, year after year, a country becomes better and better provided with the means for furnishing itself with all the conveniences of life. The superior conveniences which we enjoy in this country, over those enjoyed by the aborigines who long ago occupied it, are owing entirely to the amount of fixed capital which covers the soil. It is thus that the results of the industry of men are transmitted to their posterity, and that the men of any one age are enabled to reap advantage from the skill and good conduct of the men of all ages who have gone before them.

OF INDUSTRY.

Of the Nature, and the different Kinds of Human Industry. Industry is human exertion of any kind employed for the creation of value.

If we consider the different kinds of value which it is in the power of man to create, we shall see that human industry may be employed in three different ways. Matter may be changed in its elementary form, as it is by the farmer when he plants seed and reaps an increase; or in its aggregate form, as when a carpenter fashions a piece of furniture out of a log; or in its place, as when a sailor carries it from one country to another. The ultimate design of all human industry employed in production is to effect either one or the other of these results. They are frequently denominated agricultural, manufacturing, and commercial industry.

It is evident that every one of these kinds of labour is absolutely necessary, in order to promote the convenience and happiness of man; and also that neither one could prosper without the aid of the others. Were there no agricultural labour, every body would starve. Were there no manufacturing labour, every body would be chilled to death. Were there no labour employed in transporting commodities from place to place, no one could enjoy any convenience except what he had produced himself; that is, though, with great industry and suffering, a few persons might live, yet they would be but few, and these few would be miserably poor. Hence, we see how unwise it is for any jealousy to exist between the farmer, the mechanic, and the merchant. All are equally necessary to each one, and each one is necessary to both the others.

But some men are neither mechanics, nor farmers, nor merchants; they are students, or philosophers, or lawyers, or physicians, or clergymen. All of these men, however, are necessary to society in ways that

must be generally obvious, and are as well entitled to their rewards as any other useful class.

Of the Increase of the Productiveness of Human Industry by the means of Natural Agents.

By the productiveness of human industry, we mean the amount of product which a human being, in a given time, can create. Thus, if a farmer by one day's labour can raise one bushel of wheat, the productiveness of his labour is equal to one bushel; if he can, with the same labour, raise two bushels, the productiveness of his labour is equal to two bushels. If a cotton-spinner can spin one pound of cotton in a day, this is the amount of the productiveness of his labour; if he can spin ten pounds, this is the amount of it.

Now, it is evident that the greater the productive ness of labour, the better is it for the industrious person and for all his neighbours. Every one knows that it is better for a farmer to own rich than to own poor land, because, with a year's labour on the one, he can obtain a much larger crop than on the other. It is, moreover, better for him that his neighbours also should have rich than poor land, because the richer their land, the larger quantity of their products will they be able to give him in exchange for his products. But the only difference between rich and poor land is, that rich land renders industry more productive than poor land.

The case is the same with the other modes of industry. He who spins with his fingers, without any machine, labours very unproductively; that is, in a day he can create but a very small product. He who labours with a spinning-wheel, labours much more productively; that is, with a day's labour he can create a much larger amount of product. And he who uses a still better machine, called a spinning-jenny, labours yet more productively; that is, in a day he can create twenty or a hundred times as much product as he could with a spinning-wheel. In every case, as the productiveness of labour increases, both the labourer and the community are benefited, just as a farmer would be benefited by exchanging a poor soil for a rich one. In both cases the benefit is the same; that is, with a given amount of labour he creates a larger amount of product, he receives better wages for his labour, and at the same time, the community obtains his product at a cheaper

rate.

And hence it is that mankind have been, from the earliest ages, endeavouring to invent means by which the productiveness of human labour may be increased. And the condition of mankind is improved, from time to time, just in proportion as these endeavours have been made successfully. Every one knows how much the comforts of an industrious mechanic in this country exceed those of an uncivilised Indian. And the difference is owing to the fact, that the labour of the one is so much more productive than that of the other.

Now, there are two ways in which the productiveness of human industry may be increased: these are, first, the use of natural agents; and, secondly, division of labour.

A natural agent is, as its name imports, an agent of nature, or any quality of things which we are able to use in order to accomplish our purposes. Thus, it is of the nature of wood, when set on fire, to give off heat, and heat is the natural agent which we use for the purpose of cooking our food. It is of the nature of steam, when heated, to expand, and, when suddenly cooled, to contract; and hence steam is the natural agent by whose alternate expansion and contraction we create the force which we need to propel boats or machinery. So it is of the nature of water, when falling down from an elevation, to acquire a very considerable force; this force is the natural agent which we use to turn the wheel of a mill. So, the peculiar quality of the magnet is a natural agent. The various qualities of medicinal herbs are also natural agents, though used for a different purpose from those mentioned above.

A tool or a machine is any instrument by which we

are enabled to avail ourselves of the qualities of natural agents. Thus, an axe is an instruinent by means of which we make use of the cutting power of iron. A steam-engine is an instrument by which we make use of the expansive and contractile quality of steam.

In political economy, the principal use of natural agents is either to create or to use power or force, or, as we sometimes call it, momentum. Thus, if a man wishes to row a boat, or chop wood with an axe, he must have strength or power with which to do it. The more strength or power he has, the more work he can do. Thus, a man can do more work than a boy, because he has more strength, or power, or force, to do it with. Now, natural agents are capable of exerting this power, and, by means of machinery, we can direct the manner in which it shall be exerted.

The natural agents which we use for this purpose are of two kinds, animate and inanimate.

Animate natural agents are beasts of burden and draught, as the ox, the horse, the ass, the camel, the elephant, &c.

That these very greatly increase the productiveness of human labour is evident. Every one knows how much more land a farmer can cultivate by means of a pair of horses, than he could by his own unassisted strength, and how much more wheat a man can transport from one place to another with a waggon and horse, than he could carry on his back.

The inanimate natural agents are, as we have said, the various qualities and powers of things by which we are enabled to accomplish our purposes. The most important of these are gunpowder, wind,.falling water, and steam.

Gunpowder is used in war, in hunting, and in the blasting of rocks. For the latter purpose it is very valuable in the construction of canals, railroads, &c.

Wind is used as a stationary agent in the common windmill; and as a locomotive agent in the propelling of vessels on the water. It is cheap, and for some purposes very valuable.

Falling water is used very extensively as a stationary agent in almost all works where great power is required. Almost all our nails are made, our wheat is ground, and much of our cotton is spun and woven by water.

Steam, however, is now used the most extensively for the various purposes of the arts, as it possesses many advantages over every other agent. It is capable of exerting any degree of force, from the least to the greatest; it may be used as a stationary or a locomotive power; it may be used on land or on water, and it may be placed perfectly under human control. Its only disadvantage is its expensiveness. Steam is now used to spin the finest thread and the stoutest cable, to weave muslins and to hammer anchors, to propel the largest vessels on our rivers and on the ocean, to draw our carriages, to saw and plane our boards, and, in fact, to accomplish almost all the purposes which require either great or unremitted force.

Inanimate agents are in general preferable to animate agents, in most of the purposes for which power is required. The reason of this will be easily seen. For instance

1. They are cheaper. A steam-engine of a hundred horse power will cost less than the horses necessary to do the labour which it performs, and will cost much less to keep it at work.

2. They labour without cessation, while animals require much time for rest and refreshment.

3. They are safer. They have no passions, and hence may be governed by fixed and certain laws. A steam locomotive is neither liable to run away nor be frightened.

4. We can use them without the infliction of pain, while animals frequently, of necessity, suffer in consequence of hard labour or rapid driving.

5. They are capable of much more rapid action, hence there is a great economy of human time.

But this is not all. Men are able not only by the above means to create force, they are also able to de