The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface.
• Conversation I.: Introduction.
• Conversation II.: Introduction — Continued.
• Conversation III.: On Property.
• Conversation IV.: On Property— Continued.
• Conversation V.: On the Division of Labour.
• Conversation VI.: On Capital.
• Conversation VII.: On Capital — Continued.
• Conversation VIII.: On Wages and Population.
• Conversation IX.: On Wages and Population. Continued.
• Conversation X.: On the Condition of the Poor.
• Conversation XI.: On Revenue.
• Conversation XII.: On Revenue Derived From Property In Land.
• Conversation XIII.: On Revenue Derived From the Cultivation of Land.
• Conversation XIV.: On the Revenue of Those Who Do Not Employ Their Capital Themselves.
• Conversation XV.: On Value and Price.
• Conversation XVI.: On Money.
• Conversation XVII.: Subject of Money Continued.
• Conversation XVIII.: On Commerce.
• Conversation XIX.: On Foreign Trade.
• Conversation XX.: Continuation of Foreign Trade.
• Conversation XXI.: Subject of Foreign Trade Continued.
• Conversation XXII.: On Expenditure.

CONVERSATION II.

INTRODUCTION — continued.

caroline.

I have been thinking a great deal of political economy since yesterday, my dear Mrs. B., but I fear not to much purpose: at least I am no farther advanced than to the discovery of a great confusion of ideas which prevails in my mind on the subject. This science seems to comprehend every thing, and yet I own, that I am still at a loss to understand what it is. Cannot you give me a short explanation of it, that I may have some clear ideas to begin with?

mrs. b.

I once heard a lady ask a philosopher to tell her in a few words what is meant by political economy. Madam, replied he, you understand perfectly what is meant by household economy, you need only extend your idea of the economy of a family to that of a whole people — of a nation, and you will have some comprehension of the nature of political economy.

caroline.

Considering that he was limited to a few words, do you not think that he acquitted himself extremely well? But as I have a little more patience than this lady, I hope you will indulge me with a more detailed explanation of this universal science.

mrs. b.

Political economy treats of the formation, the distribution, and the consumption of wealth; it teaches us the causes which promote or prevent its increase, and their influence on the happiness or misery of society.

In a country of savages, you find a small number of inhabitants spread over a vast tract of land. Depending on the precarious subsistence afforded by fishing and hunting, they are subject to frequent dearths and famines, by which great numbers are destroyed; they rear but few children, for want cuts them off in their early years; the aged and infirm are often put to death rather from motives of humanity than of cruelty; for the hunter’s life requiring a great extent of country, and long and perilous excursions in quest of food, they would be wholly incapable of following the young and robust, and would die of hunger, or become a prey to wild beasts.

If these savages apply themselves to pasturage, their means of subsistence are brought within narrower limits, requiring only that degree of wandering necessary to provide fresh food for their cattle. Their flocks ensuring them a more easy subsistence, their families begin to increase; they lose in a great measure their ferocity, and a considerable improvement takes place in their character.

By degrees the art of tillage is discovered, a small tract of ground becomes capable of feeding a greater relative number of people; the necessity of wandering in search of food is superseded; families begin to settle in fixed habitations, and the arts of social life are introduced and cultivated.

In the savage state, scarcely any form of government is established; the people seem to be under no control but that of their military chiefs in time of war.

The possession of flocks and herds in the pastoral state introduces property, and laws are necessary for its security; the elders and leaders of these wandering tribes therefore begin to establish laws, to violate which is to commit a crime, and to incur a punishment. This is the origin of social order; and when in the third state the people settle in fixed habitations, the laws gradually assume the more regular form of a monarchical or republican government. Every thing now wears a new aspect; industry flourishes, the arts are invented, the use of the metals is discovered; labour is subdivided, every one applies himself more particularly to a distinct employment, in which he becomes skilful. Thus, by slow degrees, this people of savages, whose origin was so rude and miserable, become a civilised people, who occupy a highly cultivated country, intersected by fine roads, leading to wealthy and populous cities, and carrying on an extensive trade both at home and with other countries.

caroline.

This is a very pleasing outline of the history of the rise and progress of civilisation: but I should like to see it a little more filled up.

mrs. b.

The subject you will find hereafter sufficiently developed; for the whole business of political economy is to study the causes which have thus cooperated to enrich and civilise a nation. This science is, therefore, essentially founded upon history, — not the history of sovereigns, of wars, and of intrigues; but the history of the arts, of trade, of discoveries, and of civilisation. We see some countries, like America, increase rapidly in wealth and prosperity, whilst others, like Egypt and Syria, are impoverished, depopulated, and falling to decay: when the causes which produce these various effects are well understood, some judgment may be formed of the measures which governments have adopted to contribute to the welfare of their people; whether such or such a branch of commerce should be encouraged in preference to others; whether it be proper to prohibit this or that kind of merchandise; whether any peculiar encouragement should be given to agriculture; whether it be right to establish by law the price of provisions or the price of labour, or whether they should be left without control; and so on.

You see, therefore, that political economy consists of two parts, — theory and practice; the science and the art. The science comprehends a knowledge of the facts which we have enumerated: the art relates more particularly to legislation, and consists in doing whatever is requisite to contribute to the increase of national wealth, and avoiding whatever would be prejudicial to it. Mistakes in theory lead to errors in practice. When we enter into details we shall have occasion to observe that governments, misled by false ideas of political economy, have frequently arrested the natural progress of wealth when it was in their power to have accelerated it.

caroline.

But since the world was originally a rude wilderness, and yet has arrived at the improved state of civilisation in which we now find it, the errors of governments cannot have been very prejudicial.

mrs. b.

The natural causes which tend to develop the wealth and prosperity of nations are more powerful than the faults of administration, which operate in a contrary direction. But it is nevertheless true that these errors are productive of a great deal of mischief; that they check industry and retard the progress of improvement. Under bad governments particular classes of people are favoured, others discouraged and oppressed: prosperity is thus unequally shared, and riches unfairly distributed. You look very grave, Caroline; do you already begin to grow tired of the subject?

caroline.

Oh no; I think thus far I have understood you: but before we proceed you must allow me to mention an objection which, I confess, distresses me; if it is well founded I shall be quite at variance with the maxims of political economy, and that science will no longer retain any interest for me. I find that you are constantly talking of wealth; of the causes which produce it; of the means of augmenting it. To be rich, very rich, richer than other people, seems to be the great aim of political economy. Whilst religion and morality teach us that we should moderate the thirst of gain, that inordinate love of wealth is the source of all crimes. Besides that, it is very evident that the richest people are not always the happiest. Now, if wealth does not conduce to the happiness of individuals, how can it constitute that of nations? A poor but virtuous people is surely happier than a rich and vicious one. What remarkable examples do we not see of this in history. We are taught to admire the Greek republics, who despised the pomp and luxury of wealth. And then the Romans; during the early part of their history they were poor and virtuous, but the acquisition of wealth depraved their character, and rendered them the slaves of tyrants. Now political economy appears to me to induce the love of riches, and to consider it as the only end to be attained by government.

mrs. b.

This is a most alarming attack upon political economy! When, however, you understand it better, you will find that your censure is unfounded. At present you must take my word for it, as I cannot show you the benefits arising from just principles of political economy before you are acquainted with the principles themselves; but I can assure you that they all tend to promote the happiness of nations, and the purest morality. I do not pretend to deny that wealth, like almost every other human good, is liable to abuse; and the Greeks and Romans may, perhaps, in a great measure, owe their degradation to the ill use which they made of their ill-gotten wealth; for it should be observed, that their riches were obtained by rapine and plunder, and that they did not arise from the gradual and natural growth of industry, in which case alone they spread happiness around, creating new desires by offering new gratifications. But history acquaints us more with the sovereign than with the people. In order to be able to form a just estimate of the morals and manners of a country, we must avail ourselves also of the information of travellers, and we shall generally find, that the poorer and ruder societies of mankind are proportionally miserable in their condition, ferocious in their manners, and vicious in their morals.

That wealth is not sufficient to constitute the happiness of a people, I most readily admit; it is but one among a number of causes which conduce to it. Social happiness is the result of a pure religion, good morals, a wise government, and a general diffusion of knowledge. Without such advantages, wealth can never be enjoyed. But these are subjects upon which we can touch only incidentally. They constitute the science of general politics, and our attention is to be particularly directed to political economy, which is but a branch of it, and treats especially of the means of promoting social happiness so far as relates to the acquisition, possession, and use of the objects which constitute national wealth. Political economy tends to moderate all unjustifiable ambition, by showing that the surest means of increasing national prosperity are peace, security, and justice; that jealousy between nations is as prejudicial as between individuals; that each finds its advantage in reciprocal benefits; and that far from growing rich at each other’s expense, they mutually assist each other by a liberal system of commerce. Political economy is particularly inimical to the envious, jealous, and malignant passions; and if ever peace and moderation should flourish in the world, it is to enlightened views of this science that we should be indebted for the miracle.

But, my dear Caroline, I suspect that there is some error in your idea of riches. What do you call riches?

caroline.

To be rich is to have a great income; to be able to spend a great deal more than other people.

mrs. b.

You speak of the riches of individuals; of comparative wealth. A rich man in one class of society might be poor in another. But this is not the definition that I asked for — what do you understand by riches in general — in what does wealth consist?

caroline.

Oh, I suppose, you mean money? — I should say wealth consists in gold and silver.

mrs. b.

Consider what would be the situation of a country which possessed no other wealth than money. Do you recollect in what estimation Robinson Crusoe held his bag of gold, when he was wrecked upon a desert island?

caroline.

True: but in an island which is not desert, money will purchase whatever you want.

mrs. b.

Then I should say that the things which we are desrious to procure with money, such as land, houses, furniture, clothes, food, &c. constitute riches, as well as the money by which they are obtained.

caroline.

Certainly: these are clearly the things which constitute real wealth; for unless we could procure the necessaries of life with gold and silver, they would be of no more use to us than lead or iron.

mrs. b.

We may therefore say that wealth comprehends every article of utility, convenience, or luxury. This includes every object of our wishes which can become an article of commerce; such as landed estates, houses, the products of agriculture, those of manufactures, provisions, domestic animals, in a word, whatever can contribute to the welfare and enjoyment of man.

caroline.

Why should you confine your definition of wealth to things that can become articles of commerce?

mrs. b.

Because there are many countries where the earth spontaneously produces things which can neither be consumed nor sold; and however valuable such things would be to us, could we obtain them, they cannot, under those circumstances, be considered as wealth. The herds of wild cattle, for instance, which feed on the rich pastures called the Pampas, in South America, are of this description. Many of those extensive tracts of land are uninhabited, and the cattle that range at large over them are of no value. Parties of hunters occasionally make incursions, and destroy some of them for their hides and fat, whilst the flesh, which we should esteem most valuable, is either left to putrefy on the ground, or is used as fuel to melt the fat for the purposes of tallow, which being transported to places where it can be sold and consumed, it acquires value and becomes wealth.

In other parts of America the grass of rich pastures is burnt on the ground, there being no cattle to consume it.

caroline.

This may be the case in wild and uncultivated countries; but in those which are civilised, any land yielding unsaleable produce would be converted by the proprietor to some other use.

mrs. b.

I have heard that the fruit of many of the vineyards in France was not gathered a few years ago, the grapes being so much reduced in value in consequence of a decree prohibiting the exportation of French wines, that the price at which they could be sold would not pay the expense of gathering them. In England, also, when all kinds of colonial produce were excluded from the continent of Europe, coffee is said to have been thrown into the sea, because it would not pay the charges on being landed. You see, therefore, that the effects of war, or other circumstances, may for a time, in any country, destroy the value of commodities.

caroline.

How very much you have already extended my conception of the meaning of wealth! And yet I can perceive that all these ideas were floating confusedly in my mind before. In speaking of wealth we ought not to confine ourselves to the consideration of the relative wealth of individuals, but extend our views to whatever constitutes riches in general, without any reference to the inequality of the division.

All this is perfectly clear: no one can be really ignorant of it; it requires only reflection; and yet at first I was quite at a loss to explain the nature of wealth.

mrs. b.

The confusion has arisen from the common practice of estimating riches by money, instead of observing that wealth consists in such commodities as are useful or agreeable to mankind, of which gold and silver constitute but a very small portion.