Front Page Titles (by Subject) CHAPTER 15.: The Rights of Free Exchange and Free Contract - The Principles of Ethics, vol. 2
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
CHAPTER 15.: The Rights of Free Exchange and Free Contract - Herbert Spencer, The Principles of Ethics, vol. 2 
The Principles of Ethics, introduction by Tibor R. Machan (Indianapolis: LibertyClassics, 1978). Vol. 2.
Part of: The Principles of Ethics, 2 vols.
About Liberty Fund:
The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc.
Fair use statement:
The Rights of Free Exchange and Free Contract
314. What was said at the outset of the last chapter concerning the right of gift, may be said here, with change of terms, concerning the right of exchange; for exchange may not unfitly be regarded as a mutual canceling of gifts. Probably most readers will think this a fanciful interpretation of it; but, contrariwise, it is an interpretation forced on us by inspection of the facts. For whereas barter is not universally understood among the lowest tribes, the making of presents is universally understood; and where the making of presents becomes habitual, there grows up the conception that equivalent presents should be made in return. Numerous books of travel exemplify this conception. Evidently, then, from the exchange of equivalent presents, there may readily grow up a constant practice of exchange from which the idea of presents has dropped out.
But without making the right of exchange a corollary from the right of gift, it is clear that the one like the other is included in the right of property; since ownership of a thing is incomplete if it may not be transferred in place of another thing received.
Further, the right of exchange may be asserted as a direct deduction from the law of equal freedom. For of the two who voluntarily make an exchange, neither assumes greater liberty of action than the other, and fellow men are uninterfered with–remain possessed of just as much liberty of action as before. Though completion of the exchange may shut out sundry of them from advantageous transactions, yet as their abilities to enter into such transactions depended wholly on the assent of another man, they cannot be included in their normal spheres of action. These continue what they would have been had the two persons who have bargained never existed.
Obvious as is the right of exchange, recognition of it in law has arisen but slowly; and, in most parts of the world, is still far from complete. Among the Polynesian races, exchange is variously interfered with by the chiefs: here, foreign trade being monopolized by them; there, prices fixed by them; and in other places the length of a day's work. Similarly in Africa. The right of preemption in trade is possessed by chiefs among Bechuanas and Inland Negroes; and there is no business without royal assent. In Ashanti only the king and great men can trade; and in Shoa certain choice goods can be bought only by the king. The Congo people, Dahomans, and Fulahs have commercial chiefs who regulate buying and selling. Kindred limitations existed among the Hebrews and Phoenicians, as also among the Ancient Mexicans and Central Americans. At the present time the men of some South American tribes, as the Patagonians and Mundrucus, have to obtain authority from chiefs before they can trade. Like facts, presented by the European nations, down from the time when Diocletian fixed prices and wages, need not be detailed. All it concerns us to note is that interferences with exchange have diminished as civilization has advanced. They have decreased, and in some cases have disappeared from the transactions between members of the same society; and have partially disappeared later from the transactions between members of different societies. Moreover with this, as with other rights, the interferences have become smallest where the development of the industrial type with its concomitant free institutions, has become greatest, namely. among ourselves.
It is worthy of note, however, that the changes which established almost entire freedom of trade in England, were chiefly urged on grounds of policy and not on grounds of equity. Throughout the anti-Corn Law agitation little was said about the “right” of free exchange; and at the present time such reprobation as we hear of protectionists, at home and abroad, is vented exclusively against the folly of their policy and not against its inequity. Nor need we feel any surprise at this if we remember that even still the majority of men do not admit that there should be freedom of exchange in respect of work and wages. Blinded by what appear to be their interests, artisans and others tacitly deny the rights of employer and employed to decide how much money shall be given for so much labor. In this instance the law is in advance of the average opinion: it insists that each citizen shall be at liberty to make whatever bargains he pleases for his services; while the great mass of citizens insist that each shall not be at liberty to do this.
315. Of course with the right of free exchange goes the right of free contract: a postponement, now understood, now specified, in the completion of an exchange, serving to turn the one into the other.
It is needless to do more than name contracts for services on certain terms; contracts for the uses of houses and lands; contracts for the completion of specified works; contracts for the loan of capital. These are samples of contracts which men voluntarily enter into without aggressing on any others–contracts, therefore, which they have a right to make.
In earlier times interferences with the right of exchange were of course accompanied by interferences with the right of contract. The multitudinous regulations of wages and prices, which century after century encumbered the statute books of civilized peoples, were examples. Decreasing with the decrease of coercive rule, these have, in our days, mostly disappeared. One such gradual change may be instanced as typifying all others–that which usury laws furnish. In sundry cases where but small progress towards free institutions had been made, the taking of interest for money lent was forbidden altogether; as among the Hebrews, as among ourselves in the remote past, and as among the French at the time of the greatest monarchical power. Then, as a qualification, we have the fixing of maximum rates; as in early ages by Cicero for his Roman province; as in England by Henry VIII at 10 percent, by James I at 8 percent, by Charles II at 6 percent, by Anne at 5 percent; and as in France by Louis XV at 4 percent. Finally we have removal of all restrictions, and the leaving of lenders and borrowers to make their own bargains.
While we observe that law has in this case gradually come into correspondence with equity. we may also fitly observe one exceptional case in which the two agree in forbidding a contract. I refer to the moral interdict and the legal interdict against a man's sale of himself into slavery. If we go back to the biological origin of justice, as being the maintenance of that relation between efforts and the products of efforts which is needful for the continuance of life, we see that this relation is suspended by bondage; and that, therefore, the man who agrees to enslave himself on condition of receiving some immediate benefit, traverses that ultimate principle from which social morality grows. Or if we contemplate the case from an immediately ethical point of view, it becomes manifest that since a contract, as framed in conformity with the law of equal freedom, implies that the contracting parties shall severally give what are approximately equivalents, there can be no contract, properly so-called, in which the terms are incommensurable; as they are when, for some present enhancement of his life, a man bargains away the rest of his life. So that when, instead of recognizing the sale of self as valid, law eventually interdicted it, the exception it thus made to the right of contract was an exception which equity also makes. Here, too, law harmonized itself with ethics.
316. These rights of exchange and contract have, of course, in common with other rights, to be asserted subject to the restrictions which social self-preservation in presence of external enemies necessitates. Where there is good evidence that freedom of exchange would endanger national defense, it may rightly be hindered.
This is a limitation of the right which, in stages characterized by permanent militancy. is obviously needful. Societies in chronic antagonism with other societies must be self-sufficing in their industrial arrangements. During the early feudal period in France, “on rural estates the most diverse trades were often exercised simultaneously”; and “the castles made almost all the articles used in them.” The difficulties of communication, the risk of loss of goods in transit, and the dangers arising from perpetual feuds, made it requisite that the essential commodities should be produced at home. That which held of these small social groups has held of larger social groups; and international freedom of exchange has therefore been greatly restricted. The outcry against being “dependent on foreigners,” which was common during the anti-Corn Law agitation, was not without some justification; since it is only during well-assured peace that a nation may, without risk, buy a large part of its food abroad, instead of growing it.
Beyond this qualification of the rights of exchange and contract, there remains no other having an ethical warrant. Interference with the liberty to buy and sell for other reasons than that just recognized as valid, is a trespass, by whatever agency effected. Those who have been allowed to call themselves “protectionists” should be called aggressionists; since forbidding A to buy of B, and forcing him to buy of C (usually on worse terms), is clearly a trespass on that right of free exchange which we have seen to be a corollary from the law of equal freedom.
The chief fact to be here noted, however, is that among ourselves, if not among other peoples, the ethical deduction, after being justified inductively, has gained a recognition in law; if not on moral grounds, yet on grounds of policy.