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6: How Trade Increases the Mass of Wealth - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship [1776]

Edition used:

Commerce and Government Considered in their Mutual Relationship, translated by Shelagh Eltis, with an Introduction to His Life and Contribution to Economics by Shelagh Eltis and Walter Eltis (Indianapolis: Liberty Fund, 2008).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


6

How Trade Increases the Mass of Wealth

We have seen that trade, which consists in the exchange of one article for another, is carried on chiefly by merchants, traders and dealers. Let us now try to understand the utility which society draws from all these men who have set up as agents between producers and consumers; and to that end, let us look at the source of wealth and the course it follows.

Wealth consists in an abundance of things which have a value, or, which comes to the same, in an abundance of things that are useful because we need them, or finally, which is again the same, in an abundance of things which are used for our food, for our clothing, for our housing, for our comforts, for our pleasures, for our enjoyment, in a word for our use.

Now, it is the earth alone which produces all these things. It is therefore the sole source of all wealth.

Naturally prolific, it produces by itself and without any work on our part. Savages, for instance, live off the fecundity of lands which they do not cultivate. But they need for their consumption a vast extent of land. Each savage can consume the product of a hundred arpents. Then again it is hard to imagine that he will always find plenty in that space.

It is that the earth, left to its own natural fecundity, produces everything indiscriminately. It is especially fecund in things which are useless to us and of which we can make no use.

If we make ourselves masters of her fecundity, and obstruct certain products to encourage other products, the land will become fertile. Because if we call land which produces plentifully and all at hazard fecund, we call land which produces plenty and to our wishes fertile.

It is only by observation and work that we will succeed in curtailing certain products and enabling other products to grow. We must discover how the land produces, if we want to multiply exclusively things for our use and eradicate all the rest.

The collection of observations to this end makes the theory of a science called agriculture, or cultivation of the fields; and the work of the settler who daily follows these observations constitutes the practice of this science. I shall call this practice cultivation.

The settler thus multiplies things which are for our use, which have a value, and the abundance of which makes what we call wealth. It is he who digs the ground, who opens the spring, who makes it spurt forth; it is to him that we owe abundance.

What then do we owe to merchants? If, as everyone supposes, one always exchanges a product of a uniform value against another product of the same value, one multiplies the exchanges in vain; it is clear that afterwards, as before, there will always be the same accumulation of values or of wealth.

But it is false that in exchanges one gives equal value for equal value. On the contrary, each of the contracting parties always gives a lesser value for a greater value. People would recognise that fact if they thought precisely, and you can already understand it from what I have said.

A woman whom I know, having bought a piece of land, counted out the money to pay for it, and said: “However, I am very happy to have a plot of land for that.” There was very true reasoning in that artlessness. One can see that she attached little value to the money which she kept in her strongbox, and that, in consequence, she was giving a lesser value for a greater one. From another standpoint, the man who was selling the land was in the same position and he was saying: “I have sold it well.” In fact he had sold it for thirty or thirty-five deniers. Thus he too reckoned on having given less for more. There is the position of all those who make exchanges.

Indeed, if one always exchanged equal value for equal value, there would be no gain to be made for either of the contracting parties. Now, both of them make a gain, or ought to make one. Why? The fact is that with things only having value in relation to our needs, what is greater for one person is less for another, and vice versa. [Passage added here in 1798 is printed at the end of the chapter.]

The error into which people fall on this subject comes [above all: 1798] from the way one talks of things which are traded, as though they had an absolute value; and that as a result people reckon that it is a matter of justice, that those who make exchanges give each other equal value for equal value. Far from noting that two contracting parties give each other less for more, people think, without much reflection, that that cannot be; and it seems that for one person always to give less, the other would have to be stupid enough always to give more, which one cannot suppose.

It is not the things necessary for our consumption that we are considered to put on sale: it is our surplus, as I have noted several times. We want to give up something which is useless to us to get ourselves something which we need: we want to give less for more.

The surplus of the settlers: there you have what supplies all the basis for commerce. The surplus is wealth, so long as they can find an outlet for it; because they procure for themselves something that has value for them, and they hand over something which has value for others.

If they were unable to make exchanges, their surplus would stay with them, and it would have no value for them. Indeed, surplus grain, which I store in my barns without being able to exchange it, no more represents wealth to me than the grain which I have not yet pulled from the ground. So I will sow less next year, and I shall be none the poorer for having a smaller crop.

Now merchants are the channels of communication through which the surplus runs. From places where it has no value it passes into places where it gains value, and wherever it settles it becomes wealth.

The merchant therefore in a way makes something out of nothing. He does not till, but he brings about tillage. He induces the settler to draw an ever greater surplus from the land and he always makes new wealth from it. Through the meeting of the settler and the trader abundance spreads all the further, as consumption grows in proportion to the products, and reciprocally products increase with consumption.

A spring which disappears into rocks and sand is not wealth for me; but it becomes such, if I build an aqueduct to draw it to my meadows. This spring represents the surplus products for which we are indebted to the settlers, and the aqueduct represents the merchants.

[Additional passage from 1798 edition referred to on page 120

The advantage is reciprocal, and there you have no doubt what made them say that they gave each other equal value for equal value. But they have lacked consistency: since, precisely from the fact that the advantage is reciprocal, they should have concluded that each gives less for more.

People have said, you are confusing the value of things with the motive that leads to their exchange. Probably, and with reason, indeed value is the sole motive which can persuade me to act. What other could I have?

Value depends, they add, on the particular estimation each person makes of goods and consequently it will for ever vary. So it varies: is there anything which has an invariable value? I say therefore that in individual exchanges value is the particular estimation each person makes of goods; and I add that it is the general estimation that society itself makes of them, if we consider it in the markets where all end up agreeing on a measure to settle the respective value of goods, that is, the value they are given when they are considered against other goods.

But we must not confuse, as people are always doing, this measure of value with value itself. Properly speaking it is only the price which has been regulated in the markets by the rivalry of the sellers and buyers. For example, there will be general agreement that a barrel of wine is worth a muid of corn, which means that the one is the price of the other. So, if I want a muid of corn I must give a barrel of wine, and you will conclude, with reason, that it is not my particular judgement that fixes the price of corn; but it is none the less true that it fixes its value, and it alone fixes it. Because, once more, in such an exchange it is for me alone to judge the value the corn has for me; it only has one following my own estimation; and, although the market price sets the law for me, it is clear that I only give a barrel for a muid because I judge that the muid is worth more to me than the barrel. I should never end if I wanted to reply to all the objections of certain writers who, because one does not follow them, seem to want, from pique, not to understand what one is saying to them.]