The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface.
• Advertisement.
• Letters, &c.
• Letter I.
• Letter II.
• Letter III.
• Letter IV.
• Letter V.
• Advertisement.
• Catechism of Political Economy; Or, Familiar Conversations On the Manner In Which Wealth Is Produced, Distributed, and Consumed.
• Chapter the First.: On the Composition of Wealth and the Use of Money.
• Chapter II.: On the Utility and Value of Products.
• Chapter III.: On Production.
• Chapter IV.: On the Operations Common to All the Species of Industry.
• Chapter V.: On Capital and Land.
• Chapter VI.: On the Formation of Capital.
• Chapter VII.: On the Manner In Which the Value of Products Is Established, and of the Charges of Production.
• Chapter VIII.: On the Profits of Industry, Capital, and Land; That Is, Income.
• Chapter IX.: On Wages, Interest, and Rent.
• Chapter X.: On Incomes Founded On Immaterial Products.
• Chapter XI.: On Consumption In General.
• Chapter XII.: On Private Consumption.
• Chapter XIII.: On Public Consumption.
• Chapter XIV.: On Public Property and Taxes.
• Chapter XV.: On Public Loans.
• Chapter XVI.: On Property, and the Nature of Riches.
• Chapter XVII.: On the Real and Nominal Price.
• Chapter XVIII.: On Money.
• Chapter XIX.: On Signs Representing Money.
• Chapter XX.: On Markets.
• Chapter XXI.: On Regulations Or Restraints of Industry.
• Chapter XXII.: On Importations, Duties, and Prohibitions.
• Chapter XXIII.: On Exportation.
• Chapter XXIV.: On Population.
• Chapter XXV.: On Colonies.
• Erratum.

LETTER V.

Sir,

On reading your Principles of Political Economy, the first object which excited my attention, was that great malady which at present afflicts mankind, and which prevents their living upon their productions. Although in the order of things, a discussion on the nature of riches ought to precede it, to assist the mind in comprehending all the phenomena which relate to their formation and distribution; I did not think it necessary to give it precedence, because it appeared more especially to interest those only who cultivate political economy as a science, and without any view to practical application. However, I cannot lay down my pen without giving you my opinion on this point. You authorize me to do this by the noble frankness with which you invite discussions which may enlighten the public. “It is extremely desirable,” you say (p. 4), “that those who are considered by the public the most competent judges, should agree on the principal propositions.” We cannot therefore make them too plain.

You object to the definition which Lord Lauderdale gives of riches when he says that they are all that man desires as being useful or agreeable to him, as too vague; and I think you have great reason. I look for that which you think ought to be substituted for it; and I find that you give the name of riches to all the material objects which are necessary, useful, or agreeable to man (p. 28). The only difference which I observe between these two definitions consists in the word material which you add to that of Lord Lauderdale; and I confess this word appears to me any thing but the truth.

You must be aware of my reasons. The great discovery of political economy, that which will ever render it invaluable, is the having shewn that every thing is convertible into riches. Man has learnt from thence how he must conduct himself to possess the happy means of satisfying his desires. But, as I have already had occasion to observe, it is beyond the power of man, to add a single atom to the mass of matter of which the world is composed. If he then creates riches, riches are not material: there is no middle point. Man can only, by means of his capital and his lands, change the combinations of matter, and thus make it useful to him; but utility is an immaterial quality.

This is not all, Sir. I fear that your definition does not comprise the essential quality of riches. Permit me to explain.

Adam Smith, as well as every body else, has remarked that a glass of water, which may be a very desirable thing when one is dry, is not riches. It is, however, a material object, it is necessary, useful, and agreeable to man. It possesses all the conditions of your definition: but yet it is not riches. It is not that however which is the subject of our investigation and the matter of your book. What does it require to become so?—to have value.

There are then things which are natural riches, which are most precious to man; but are not such riches as political economy can interfere with. Can they be increased? Can they be consumed? No: they are regulated by other laws than those of political economy. A glass of water is subject to the laws of natural philosophy; the attachment of our friends and our reputation in the world are governed by the moral law; but are not within the compass of political economy. Which then are the riches within the jurisdiction of that science?—Those which are susceptible of creation and destruction, of more and of less; and what, I again ask, is this more, this less, but value?

You are yourself, Sir, compelled to admit this in many places. You say (p. 340), “It appears then that the wealth of a country depends partly upon the quantity of produce obtained by its labour” (it depends entirely upon it), “and partly upon such an adaptation of it to the wants and power of the exerting population as is calculated to give it value.” And in the following page you are still more positive. After having advanced further into the discussion, you confess that “it is obvious that, in the actual state of things, the value of commodities - - - - may be said to be the sole cause of the existence of wealth.” How then has it happened that a condition so essential as value has been left out of your definition?

But this is not sufficient. The nature of riches will be very imperfectly known to us if we are not able to fix some precise meaning to this word value. In order to be possessed of great wealth will it be enough that we estimate at a high rate the goods we possess? If I build a house, with which I am delighted, and which I choose to estimate at ten thousand pounds, does this house make me really worth ten thousand pounds? We receive a present from one who is dear to us; it is inestimable in our eyes; does it follow that it has made us immensely rich? You cannot think so. In order to constitute riches, the value must be recognised, not by the possessor merely, but by other persons. But what more irrefragable proof that its value is recognised can be given than that other persons are ready to give for it a certain quantity of other things which are valuable. Notwithstanding the value of ten thousand pounds which I set upon my house, yet if I cannot find any body who will give me more than five thousand pounds for it, I cannot say that it is worth ten thousand pounds: it is really worth no more than five thousand pounds; it will produce me no greater amount than five thousand pounds, or whatever value may be had for that sum.

Adam Smith also (b. i. c.4) immediately after having observed that there are two kinds of value, and having, very improperly in my opinion, called one of them value in use, and the other value in exchange, abandons entirely the former, and is solely occupied throughout his work with exchangeable value. This is what you have done yourself, Sir;* what Mr. Ricardo has done; what I have done; what all of us have done; for the plain reason, that there is no other value in political economy; that that alone is subject to fixed laws; that that alone can be created, distributed, and destroyed, according to rules which are invariable, and which are capable of becoming an object of scientific inquiry. It is a necessary consequence, the price of every thing being its exchangeable value estimated in money, that there is no other price in political economy than market price: that that which Smith calls the natural price, is no more natural than any other; it is the cost of production; it is the market price of productive services.

I will not deny, Sir, that you have, in Mr. Ricardo, a powerful and respectable ally. He is against you in the subject of markets, and fights on your side in the question of value; but notwithstanding my connexion with him, and the reciprocal esteem we bear for each other, I have not hesitated to combat his arguments:† the first object of both of us, and of you too, Sir, I am sure, is the love of truth, and the happiness of mankind.

These are Mr. Ricardo’s words: (2d edit. c. 20) “Value differs essentially from riches; for value does not depend on the abundance (of things necessary or agreeable) but on the difficulty or facility of their production. The labour of a million of men in manufactories will always produce the same value, but not the same riches. By the invention of machinery, by improvement in skill, by a better division of labour, or by the discovery of new markets, where more advantageous exchanges may be made, a million of men may produce double or treble the amount of riches, of necessaries, conveniences, and amusements, in one state of society, that they could produce in another; but they will not on that account add any thing to value.” (c. 20. 2d. edit.)

This argument, founded on facts which are not contested, appears to accord perfectly with the opinions you maintain. The question whether these facts confirm or destroy that doctrine of value which teaches that riches are composed of the value of the things we possess, applying the word value to those values only which are recognized and exchangeable. What is there, in fact, but value, but that quality capable of appreciation, capable of being more or less, which exists in the things we possess? It is the quality which enables us to obtain, in exchange for the things we have, those of which we are in want. This value is so much the greater, as the thing we have will procure a greater quantity of the thing we want. Thus if I desire to exchange a horse which I possess, for corn that I want; that is to say, if I desire to sell my horse to buy corn, if my horse is worth sixty pounds, I have twice as much value to convert into corn as if my horse was only worth thirty pounds: I should have twice as many bushels of corn, and this portion of my property will be twice as great. And as the same reasoning may be applied generally to all that I possess, it follows that our riches must be measured by the value of the things we possess. This is a consequence that none can reasonably dispute.

You cannot deny, says Mr. Ricardo to me, that we are the more rich, the more agreeable and necessary things we have to consume, whatever may otherwise be their value. I do not deny it: but have we not more things to consume when we have the power of acquiring them in greater quantity? To have in one’s hands the power of purchasing a greater quantity of useful things, a greater quantity of utility, extending this expression to whatever is necessary and agreeable, is to possess more riches. But this proposition does not contradict whatever there is of truth in the definition of riches given by Mr. Ricardo and yourself. You say that riches consists in the quantity of necessary and agreeable things we possess. I say so too; but these words, quantity of things necessary and agreeable, have a very vague and arbitrary meaning, unfit to enter into a perfect definition: I render them precise and clear by the idea of their exchangeable value. The condition of utility then is the being equal to another utility, which men are willing to give in exchange for that which you possess. It becomes then an equation. We can compare one with another by means of a third. A sack of corn is equal in value to a piece of stuff, when each of them can be exchanged for the same number of shillings. This then serves as a basis for all comparisons; what enables us to measure an increase, or a diminution; in a word, this is the foundation of a science. Political economy is nothing without it: it is this consideration alone which has taken it out of the dominion of fancy; it is so essential that you have been compelled to do homage to it yourself without intending it; and that there is not one of your arguments in which it is not either expressed or understood. If it had not been so, you would have caused the science to retrograde, instead of enriching it with new truths.

While your definition, and that of Mr. Ricardo, is wanting in precision, it is also wanting in extent: it does not embrace the whole of what constitutes our riches. What! are our riches limited to objects which are material, necessary, and agreeable? What then do you think of our talents? Do they not belong to the productive powers? Do we not draw revenues from them? Revenues more or less large, in the same manner as we draw a greater revenue from an acre of good land than from an acre of heath? I know some admirable artists who have no other income than what they derive from their talents, and who yet live in opulence. According to you, they ought to be no richer than a dauber of signs.

It is impossible for you to deny, that whatever has an exchangeable value makes part of our wealth. It is composed entirely of the productive powers which we possess; our lands, our capitals, and our personal faculties. Of these, land is alienable, but not consumable—capital is both alienable and consumable; while talents, though incapable of alienation, are consumable; they perish with those who possess them. From these funds, all the revenues upon which society subsists are derived; and (what may appear paradoxical, although it is perfectly true) all these revenues are immaterial; for they are derived from an immaterial quality—utility. The different kinds of utility are derived from our productive powers, and are comparable with each other by their value, which I have no need here to denominate exchangeable, because I can not recognize any value in political economy which is not exchangeable.

As to the difficulty raised by Mr. Ricardo, that by improved processes a million of people might produce twice or thrice as much riches, without producing more values, it vanishes when we consider, as we ought, production as an exchange in which the productive services of labour, land, and capital is given, in order to obtain the production. It is by means of these services that we obtain all the productions which exists in the world; and this, by the bye, is what gives value to productions; for after having acquired them by dint of labour or expense, we do not part from them for nothing. Now, since our first riches are the productive powers we possess, and our first revenues are the productive services which emanate from them, we are so much the richer; our productive services have so much the greater value, as they may be able to obtain in the exchange called production, a greater quantity of useful things. And as a greater quantity of useful things, and their greater cheapness, are expressions perfectly synonymous, the producers are richer when productions are more abundant, and less dear. I say the producers generally, because competition compels them to give their productions for what they have cost;* so that when the producers of corn or stuffs have succeeded, with the same quantity of productive services, to produce twice the quantity of corn or stuff, all other producers will be able to purchase double the quantity of corn or stuff with the same quantity of productive services, or, which is the same thing, with the productions which result from them.

This, Sir, is the well-founded doctrine, without which I consider it impossible to explain the very great difficulties of political economy, and particularly how it is that a nation can become richer while its productions diminish in value, although riches consist in value. You see that I do not fear to lay down my pretended paradoxes in their simplest form. I strip them completely naked, and submit them to the candour of Mr. Ricardo and yourself, and to the good sense of the public. I shall however hold myself at liberty to explain them if they are misunderstood, and to defend them with perseverance if they are unjustly attacked.

the end.

J. M’Creery, Tooks-Court, Chancery-Lane, London.

ADVERTISEMENT.

This Work does not pretend to furnish the means of becoming rich: it professes only to point them out. Wealth cannot be produced from nothing, but a clock may be made with wheels; and, as men may be taught to make a clock, so they may be taught to make what is called Riches.

Many men have the materials within their reach who do not suspect it; and as for those who have them not, is it useless even to them to know where they are to be found, and how they may be employed?

Some men may be better able than others to profit by the perusal of this little Work; but I venture to assert, that there is no person who may not derive from it some advantage.

It has been asked, why I did not publish this Catechism, as being more elementary, before my “Traité d’Economie Politique.” The reason is evident. If I had not previously proved in a work of detail, by numerous examples and strict reasoning, that Political Economy, in the present state of the science, is only the exposition of what is passing every day; and that all the facts are so intimately connected together, that it has become easy to refer to their causes, and to deduce from them satisfactory results, every thing must have been taken upon my credit; and I am far from pretending to so much deference.

An elementary work is necessarily somewhat dogmatical. But when truths are not promulgated under the sanction of an acknowledged authority, it is not only necessary to be in the right, but to prove that one is so. And how could these proofs have been established in so small a compass, and at the same time have been rendered intelligible to the uninformed?

This task is however no longer requisite, as the proofs of every thing, which might appear to be mere assertion, are to be found in a more extensive work, which has been adopted by foreigners as well as the French, and strengthened by the approbation of men, the most versed, in Europe, in the practice as well as the theory of Values.

Those who possess the most elevated minds have generally most goodness of heart. They will feel what a happy influence the true principles of Political Economy, better understood, are capable of exerting on the lot of mankind; and perhaps they will judge, that my efforts to spread them are not unworthy of their sanction.

J. B. SAY.

CATECHISM OF POLITICAL ECONOMY;

OR, FAMILIAR CONVERSATIONS ON THE MANNER IN WHICH WEALTH IS PRODUCED, DISTRIBUTED, AND CONSUMED.

[* ]“It is obviously therefore the value of commodities, or” (that is to say) “the sacrifice of labour, and of other articles which people are willing to make in order to obtain them” in exchange, &c. p. 341.

[† ]In notes which I have added to the French translation of Mr. Ricardo’s Principles of Political Economy.

[* ]It is always to be remembered that the profits of the manufacturer are considered as part of the cost, or charges of production.—Tr.