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Martineau’s Primer on Laissez-Faire Economics

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Source: Harriet Martineau, Illustrations of Political Economy (3rd ed) in 9 vols. (London: Charles Fox, 1832).

Harriet Martineau was a professional writer and journalist who popularized free market ideas among the English working class in the first half of the 19th century. Her approach was to write short moral "tales" illustrating some aspect of economic thought, such as the importance of saving or the international division of labor. Just to make sure her message was clear, at the end of most of the tales she appended a "Summary" of the key ideas she was trying to get across to her audience. We have gathered here all of her summaries which taken together constitute a sort of primer on popular laisser-faire political economy. Martineau herself gathered her thoughts together in a more formal manner in the concluding volume 9 in The Moral of Many Fables. The table of contents below link to the Summaries contained in this file. The link provided in the "Source" is to the original book in the Library:

Source: Vol. 1 "Life in the Wilds"

Summary of Principles illustrated in the first Volume.

Wealth consists of such commodities as are useful,—that is, necessary or agreeable to mankind.

Wealth is to be obtained by the employment of labour on materials furnished by nature.

As the materials of nature appear to be inexhaustible, and as the supply of labour is continually progressive, no other limits can be assigned to the operations of labour than those of human intelligence? And where are the limits of human intelligence?

Productive labour being a beneficial power, whatever stimulates and directs this power is beneficial also.

Many kinds of unproductive labour do this. Many kinds of unproductive labour are therefore beneficial.

All labour for which there is a fair demand is equally respectable.

Labour being a beneficial power, all economy of that labour must be beneficial.

Labour is economized,

I. By Division of Labour;-—in three ways.

1. Men do best what they are accustomed to do.

2. Men do the most quickly work which they stick to.

3. It is a saving of time to have several parts of a work going on at once.

Labour is economized,

II. By the use of machinery, which

1. Eases man's labour.

2. Shortens man's labour; and thus, by doing his work, sets him at liberty for other work.

Labour should be protected by securing its natural liberty: that is,—

1. By showing no partiality.

2. By removing the effects of former partiality.


Source: Vol. 1 "Hill and the Valley"

Summary of Principles illustrated in this Volume.

Capital is something produced with a view to employment in further production.

Labour is the origin, and

Saving is the support, of Capital.

Capital consists of

  • 1. Implements of labour.
  • 2. Material, simple or compound, on which labour is employed.
  • 3. Subsistence of labourers.

Of these three parts, the first constitutes Fixed Capital: the second and third, Reproducible Capital.

Since Capital is derived from Labour, whatever economizes Labour assists the growth of Capital.

Machinery economizes Labour, and therefore assists the growth of Capital.

The growth of Capital increases the demand for Labour.

Machinery, by assisting the growth of Capital, therefore increases the demand for Labour.

In other words, Productive Industry is proportioned to Capital, whether that Capital be fixed or reproducible.

The interests of the two classes of producers, Labourers and Capitalists, are therefore the same; the prosperity of both depending on the accumulation of Capital.



Source: Vol. 1 "Brooke and Brooke Farm"

Summary of Principles illustrated in this Volume.

We have not advanced to any new principles of the science of Political Economy in the present volume. We have only exemplified some of the principles laid down in our last volume by illustrations of certain truths respecting a few particular modes of accumulating and applying Capital. These truths may be arranged as follows:

Production being the great end in the employment of Labour and Capital, that application of both which secures the largest production is the best.

Large capitals well managed, produce in a larger proportion than small.

In its application to land, for instance, a large capital employs new powers of production, —as in the cultivation of wastes;

.... enables its owner to wait for ample but distant returns,—as in planting;

.... facilitates the division of labour;

............the succession of crops, or division of time;

............reproduction, by economizing the investment of fixed capital;

............the economy of convertible husbandry;

............the improvement of soils by manuring, irrigation, &c.;

............the improvement of implements of husbandry;

............the improvement of breeds of live stock.

Large capitals also provide

for the prevention of famine, by furnishing a variety of food; and for the regular supply of the market, by enabling capitalists to wait for their returns.

Large capitals are therefore preferable to an equal aggregate amount of small capitals, for two reasons; viz.

they occasion a large production in proportion; and they promote, by means peculiar to themselves, the general safety and convenience.

Capitals may, however, be too large. They are so when they become disproportioned to the managing power.

The interest of capitalists best determines the extent of capital; and any interference of the law is therefore unnecessary.

The interference of the law is injurious; as may be seen by the tendency of the law of Succession in France to divide properties too far, and of the law of Primogeniture in England to consolidate them too extensively.

The increase of agricultural capital provides a fund for the employment of manufacturing and commercial, as well as agricultural, labour.

The interests of the manufacturing and agricultural classes are therefore not opposed to each other, but closely allied.



Source: Vol. 2 "Demerara"


This volume, like the last, enlarges on principles already laid down. It treats of the respective values of different kinds of labour, and of a particular mode of investing capital. The truths illustrated may be arranged as follows.

Property is held by conventional, not natural right.

As the agreement to hold man in property never took place between the parties concerned, i. e., is not conventional, Man has no right to hold Man in property.

Law, i. e., the sanctioned agreement of the parties concerned, secures property.

Where the parties are not agreed, therefore, law does not secure property.

Where one of the parties under the law is held as property by another party, the law injures the one or the other as often as they are opposed. Moreover, its very protection injures the protected party,— as when a rebellious slave is hanged.

Human labour is more valuable than brute labour, only because actuated by reason; for human strength is inferior to brute strength.

The origin of labour, human and brute, is the Will.

The Reason of slaves is not subjected to exercise. nor their will to more than a few weak motives.

The labour of slaves is therefore less valuable than that of brutes, inasmuch as their strength is inferior; and less valuable than that of free labourers, inasmuch as their Reason and Will are feeble and alienated.

Free and slave labour are equally owned by the capitalist.

Where the labourer is not held as capital, the capitalist pays for labour only.

Where the labourer is held as capital, the capitalist not only pays a much higher price for an equal quantity of labour, but also for waste, negligence, and theft, on the part of the labourer.

Capital is thus sunk, which ought to be reproduced.

As the supply of slave-labour does not rise and fall with the wants of the capitalist, like that of free labour, he employs his occasional surplus on works which could be better done by brute labour or machinery.

By rejecting brute labour, he refuses facilities for convertible husbandry, and for improving the labour of his slaves by giving them animal food.

By rejecting machinery, he declines the most direct and complete method of saving labour.

Thus, again, capital is sunk which ought to be reproduced.

In order to make up for this loss of capital to slave owners, bounties and prohibitions are granted in their behalf by government; the waste committed by certain capitalists abroad, being thus paid for out of the earnings of those at home.

Sugar being the production especially protected, every thing is sacrificed by planters to the growth of sugar. the land is exhausted by perpetual cropping, the least possible portion of it is tilled for food, the slaves are worn out by overwork, and their numbers decrease in proportion to the scantiness of their food, and the oppressiveness of their toil.

When the soil is so far exhausted as to place its owner out of reach of the sugar-bounties, more food is raised, less toil is inflicted, and the slave population increases.

Legislative protection, therefore, not only taxes the people at home, but promotes ruin, misery, and death, in the protected colonies.

A free trade in sugar would banish slavery altogether, since competition must induce an economy of labour and capital; i.e., a substitution of free for slave labour.

Let us see, then, what is the responsibility of the legislature in this matter.

The slave system inflicts an incalculable amount of human suffering, for the sake of making a wholesale waste of labour and capital.

Since the slave system is only supported by legislative protection, the legislature is responsible for the misery caused by direct infliction, and for the injury indirectly occasioned by the waste of labour and capital.



Source: Vol. 2 "Ella of Garveloch"

Summary of Principles illustrated in this Volume.

The total Rent paid by a farmer includes real Rent, and much besides; viz. the profits of the capital laid out by the land-owner upon the estate.

Real Rent is that which is paid to the landowner for the use of the original, indestructible powers of the soil.

Land has these powers in different degrees.

The most fertile being all appropriated, and more produce wanted, the next best soil is brought into cultivation; then land of the third degree, and so on, till all is tilled that will repay tillage.

An unequal produce being yielded by these different lands, the surplus return of all above the lowest goes to the land-owner in the form of Rent.

The same thing happens when repeated applications of capital are made to the same land for the sake of increasing its productiveness. The produce which remains over the return to the least productive application of capital, goes to the land-owner in the form of Rent.

Rent, therefore, consists of that part of the return made therefore, to the more productive portions of capital, by which it exceeds the return made to the least productive portion.

New lands are not tilled, and capital is not employed for a less return, unless the produce will pay the cost of production.

A rise of prices, therefore, creates, and is not created by, Rent.

When more capital is employed in agriculture, new land is tilled, a further outlay is made on land already tilled; and thus also Rent arises from increase of capital.

When capital is withdrawn from agriculture, inferior, i. e. the most expensive soils, are let out of cultivation; and thus Rent falls.

A rise of Rent is, therefore, a symptom, and not a cause, of wealth.

The tendency of Rent is, therefore, to rise for ever in an improving country.—But there are counteracting causes.

Art increases production beyond the usual returns to capital laid out: prices fall in proportion to the abundance of the supply, and Rent declines.

Improved facilities for bringing produce to market, by increasing the supply, cause prices to fall and Rent to decline.



Source: Vol. 2 "Weal and Woe in Garveloch"

Summary of Principles illustrated in this volume.

The increase of population is necessarily limited by the means of subsistence.

Since successive portions of capital yield a less and less return, and the human species produce at a constantly accelerated rate there is a perpetual tendency in population to press upon the means of subsistence.

The ultimate checks by which population is kept down to the level of the means of subsistence are vice and misery.

Since the ends of life are virtue and happiness, these checks ought to be superseded by the milder methods which exist within man's reach.

These evils may be delayed by promoting the increase of capital, and superseded by restraining the increase of population.

Towards the one object, a part of society may do a little; towards the other, all may do much.

By rendering property secure expenditure frugal, and production easy, society may promote the growth of capital.

By bringing no more children into the world than there is a subsistence provided for, society may preserve itself from the miseries of want. In other words, the timely use of the mild preventive check may avert the horrors of any positive check.

The preventive check becomes more, and the positive checks less powerful, as society advances.

The positive checks, having performed their office in stimulating the human faculties and originating social institutions, must he wholly superseded by the preventive check before society can attain its ultimate aim—the greatest happiness of the greatest number.



Source: Vol. 3 "Manchester Strike"

Summary of Principles illustrated in this Volume.

Commodities, being produced by capital and labour, are the joint property of the capitalist and labourer.

The capitalist pays in advance to the labourers their share of the commodity, and thus becomes its sole owner,

The portion thus paid is Wages.

Real Wages are the articles of use and consumption that the labourer receives in return for his labour.

Nominal Wages are the portion he receives of these things reckoned in money.

The fund from which wages are paid in any country consists of the articles required for the use and consumption of labourers which that country contains.

The proportion of this fund received by individuals must mainly depend on the number among whom the fund is divided.

The rate of wages in any country depends, therefore, not on the wealth which that country contains, but on the proportion between its capital and its population.

As population has a tendency to increase faster than capital, wages can be prevented from falling to the lowest point only by adjusting the proportion of population to capital.

The lowest point to which wages can be permanently reduced is that which affords a bare subsistence to the labourer.

The highest point to which wages can be permanently raised is that which leaves to the capitalist just profit enough to make it worth his while to invest his capital.

The variations of the rate of wages between these extreme points depending mainly on the supply of labour offered to the capitalist, the rate of wages is mainly determined by the sellers, not the buyers of labour.

Combinations of labourers against capitalists (whatever other effects they may have) cannot secure a permanent rise of wages unless the supply of labour falls short of the demand;—in which case, strikes are usually unnecessary.

Nothing can permanently affect the rate of wages which does not affect the proportion of population to capital.

Legislative interference does not affect this proportion, and is therefore useless.

Strikes affect it only by wasting capital, and are therefore worse than useless.

Combinations may avail or not, according to the reasonableness of their objects.

Whether reasonable or not, combinations are not subjects for legislative interference; the law having no cognizance of their causes.

Disturbance of the peace being otherwise provided against, combinations are wisely therefore now left unregarded by the law.

The condition of labourers may be best improved,—

1st. By inventions and discoveries which create capital.

2d. By husbanding instead of wasting capital: —for instance by making savings instead of supporting strikes.

3d. By adjusting the proportion of population to capital.



Source: Vol. 3 "Cousin Marshall"

Summary of Principles illustrated in this Volume.

In a society composed of a natural gradation of ranks, some must be poor; i. e. have nothing more than the means of present subsistence.

Any suspension of these means of subsistence, whether through disaster, sickness, or decrepitude, converts the poor into the indigent.

Since indigence occasions misery, and disposes to vice, the welfare of society requires the greatest possible reduction of the number of the indigent.

Charity, public and private, or an arbitrary distribution of the subsistence-fund, private, has hitherto failed to effect this object; the proportion of the indigent to the rest of the population having increased from age to age.

This is not surprising, since an arbitrary distribution of the subsistence-fund, besides rendering consumption unproductive, and encouraging a multiplication of consumers, does not meet the difficulty arising from a disproportion of numbers to the means of subsistence.

The small unproductive consumption occasioned by the relief of sudden accidents and rare infirmities is necessary, and may be justifiably provided for by charity, since such charity does not tend to the increase of numbers; but, with this exception, all arbitrary distribution of the necessaries of life is injurious to society, whether in the form of private almsgiving, public charitable institutions, or a legal pauper-system.

The tendency of all such modes of distribution having been found to be to encourage improvidence with all its attendant evils,—to injure the good while relieving the bad,—to extinguish the spirit of independence on one side,—and of charity on the other,—to encourage peculation, tyranny, and fraud,—and to increase perpetually the evil they are meant to remedy,—but one plea is now commonly urged in favour of a legal provision for the indigent.

This plea is that every individual born into a state has a right to subsistence from the state.

This plea, in its general application, is grounded on a false analogy between a state and its members, and a parent and his family.

A parent has a considerable influence over the subsistence-fund of his family, and an absolute control over the numbers to be supported by that fund; whereas the rulers of a state, from Whom a legal provision emanates, have little influence over its subsistence-fund, and no control whatever over the number of its members.

If the plea of right to subsistence be grounded on the faults of national institutions, the right ought rather to be superseded by the rectification of those institutions, than admitted at the cost of perpetuating an institution more hurtful than all the others combined.

What, then, must be done to lessen the number of the indigent, now so frightfully increasing?

The subsistence-fund must be employed productively, and capital and labour be allowed to take their natural course; i. e. the pauper system must, by some means or other, be extinguished.

The number of consumers must be proportioned to the subsistence-fund. To this end, all encouragements to the increase of population should be withdrawn, and every sanction given to the preventive check; i. e. charity must be directed to the enlightenment of the mind, instead of to the relief of bodily wants.

If not adopted speedily, all measures will be too late to prevent the universal prevalence of poverty in this kingdom, the legal provision for the indigent now operating the extinction of our national resources at a perpetually increasing rate.



Source: Vol. 3 "Ireland"

Summary of Principles illustrated in this Volume.

Whatever affects the security of property, or intercepts the due reward of labour, impairs the subsistence-fund by discouraging industry and forethought.

Partnership tenantcies affect the security of property by rendering one tenant answerable for the obligations of all his partners, while he has no control over the management of their portions.

A gradation of landlords on one estate has the same effect, by rendering one tenant liable to the claims of more than one landlord.

The levying of fines on a whole district for an illegal practice going on in one part of it, has the same effect, by rendering the honest man liable for the malpractices of the knave.

The imposition of a church establishment on those who already support another church, intercepts the due reward of labour, by taking from the labourer a portion of his earnings for an object from which he derives no benefit.

The practice of letting land to the highest bidder, without regard to former service or to the merits of the applicants, intercepts the due reward of the labourer, by decreeing his gains to expire with his lease.

All these practices having prevailed in Ireland, her subsistence-fund is proportionably impaired, though the reduction is somewhat more than compensated by the natural growth of capital.

While capital has been growing much more slowly than it ought, population has been increasing much more rapidly than the circumstances of the country have warranted: the consequences of which are, extensive and appalling indigence, and a wide spread of the moral evils which attend it.

An immediate palliation of this indigence would be the result of introducing a legal pauper-system into Ireland; but it would be at the expense of an incalculable permanent increase of the evil.

To levy a poor-rate on the country at large would be impolitic, since it would only increase the primary grievance of an insufficiency of capital, by causing a further unproductive consumption of it.

To throw the burden of a pauper system on absentees would be especially unjust, since they bear precisely the same relation to the wealth of their country as its resident capitalists.

In the case of Ireland, as in all analogous cases, permanent relief can be effected only by adjusting the proportions of capital and population: and this must be attempted by means suited to her peculiar circumstances.

The growth of capital should be aided by improvements in agricultural and domestic economy, and by the removal of political grievances; from which would follow a union in place of an opposition of interests.

Population should be reduced within due limits,

In the present emergency, by well-conducted schemes of emigration; and

Permanently, by educating the people till they shall have become qualified for the guardianship of their own interests.



Source: Vol. 4 "Homes Abroad"

Summary of Principles illustrated in this Volume.

Two kinds of colonization have been adopted by the British Empire;—Colonization for the reduction of our home-population,—or Voluntary Emigration;—and Penal Colonization.

The term Colonization is by some applied to a third process, which they wish to see introduced into this country; viz.—Home Colonization.

The objects of Voluntary Emigration, directed by the state, are threefold.

1st. To improve the condition of those who emigrate, by placing them where they may obtain subsistence at less cost than at home.

2d. To improve the condition of those who remain, by increasing the ratio of capital to population.

3d. To improve the condition of the colonized region.

To fulfil the 1st of these objects, the colony must be so located as to insure health and abundance to its members; and it must be so organized as to secure tile due co-operation of labour and capital.

To fulfil the 2d object, the removal of each individual must be less costly than his maintenance at home would be; and the selection must be made with a view to lessening the amount of human productiveness at home.

To fulfil the 3d object, the colonists must be selected with a view to their productiveness, both as regards capital and population; which includes a moral fitness to compose an orderly society.

It follows from all these considerations that a new settlement should be composed of young, healthy, and moral persons; that all should not be labourers, nor all capitalists; and that there should be a sufficient concentration of their numbers on the new lands to insure a facility of exchanges.

Home colonies may afford a temporary relief to a redundant population, and also increase the productiveness of the lands which they appropriate; but this is done by alienating capital from its natural channels; and with the certainty of ultimately injuring society by increasing the redundancy of population over capital.

Home colonization then, though less injurious than the unproductive distribution of the Charityfund, is inferior to foreign colonization, inasmuch as the one yields temporary benefit to a few at the expense of ultimate injury to many; and the other produces permanent benefit to all.

The objects of Penal Colonization are,

1st. The security of society by the removal of the offender.

2d. The security of society by the effect of his example.

3d. The reformation of the offender.

There has hitherto been an entire failure of all these objects. And no wonder; since,

1st. The offender is only transferred from one portion of society to another: and besides, frequently returns to his old haunts.

2d. His punishment, as far as it is punishment, takes place at too great a distance to be conspicuous as a warning; and in as far as his lot does not involve punishment, the effect of his example is precisely the reverse of what is desired.

3d. Our convict arrangements tend to the further corruption of the offender, by letting him experience a great improvement in his condition as a direct consequence of his crimes.

The junction of penal with voluntary emigration tends equally to disappoint the purposes of the one, and to extinguish the benefits of the other; since convict labourers find themselves in a state of privilege, in a region where their labour procures them large rewards; and new settlers find their community deeply injured by the vice and disease consequent on the introduction of a convict population.



Source: Vol. 4 "For Each and For All"

Summary of Principles illustrated in this volume,

The produce of labour and capital, after rent has been paid, is divided between the labourer and the capitalist, under the names of Wages and Profits.

Where there are two shares, each determines the other, provided they press equally upon one another.

The increase of the supply of labour, claiming reward, makes the pressure in the present case unequal, and renders wages the regulator of profits.

The restriction of the supply of food causes the fall of both profits and wages.

The increased expense of raising food enhances its price: labour, both agricultural and manufacturing, becomes dearer, (without advantage to the labourer:) this rise of wages causes profits to fall; and this fall brings after it a reduction of the labourer's share, or a fall of wages.

The fall of profits and wages is thus referrible to the same cause which raises rent;-—to an inequality in the fertility of soils.

It is supposed by some that these tendencies to the fall of wages and profits may be counteracted by abolishing the distinctions of shares, and casting the whole produce of land, capital, and labour, into a common stock. But this is a fallacy.

For, whatever may be the saving effected by an extensive partnership, such partnership does not affect the natural laws by which population increases faster than capital. The diminution of the returns to capital must occasion poverty to a multiplying society, whether those returns are appropriated by individuals under the competitive system, or equally distributed among the members of a co-operative community.

The same checks to the deterioration of the resources of society are necessary under each system.

These are, (in addition to the agricultural improvements continually taking place,)—

  • 1. The due limitation of the member of consumers.
  • 2. The lightening of the public burdens, which at present abstract a large proportion of profits and wages.
  • 3. A liberal commercial system which shall obviate the necessity of bringing poor soils into cultivation.



Source: Vol. 4 "French Wines and Politics"

Summary of Principles illustrated in this Volume.

There are two kinds of Value: value in use, and value in exchange.

Articles of the greatest value in use may have none in exchange; as they may be enjoyed without labour; and it is labour which confers Exchangeable Value.

This is not the less true for capital as well as labour being employed in production; for capital is hoarded labour.

When equal quantities of any two articles require an equal amount of labour to produce them, they exchange exactly against one another. If one requires more labour than the other, a smaller quantity of the one exchanges against a larger quantity of the other.

If it were otherwise, no one would bestow a larger quantity of labour for a less return; and the article requiring the most labour would cease to be produced.

Exchangeable value, therefore, naturally depends on cost of production.

Naturally, but not universally; for there are influences which cause temporary variations in exchangeable value.

These are, whatever circumstances affect demand and supply.

But these can act only temporarily; because the demand of any procurable article creates supply; and the factitious value conferred by scarcity soon has an end.

When this end has arrived, cost of production again determines exchangeable value.

Its doing so may, therefore, stand as a general rule.

Though labour, immediate and hoarded, is the regulator, it is not the measure of exchangeable value: for the sufficient reason, that labour itself is perpetually varying in quality and quantity, from there being no fixed proportion between immediate and hoarded labour.

Since labour, the primary regulator, cannot serve as a measure of exchangeable value, none of the products of labour can serve as such a measure.

There is, therefore, no measure of exchangeable value.

Such a measure is not needed; as a due regulation of the supply of labour, and the allowance of free scope to the principle of competition ensure sufficient stability of exchangeable value for all practical purposes.

In these requisites are included security of property, and freedom of exchange, to which political tranquillity and legislative impartiality are essential.

Price is the exponent of exchangeable value.

Natural or necessary price, — regulated by cost of production,—includes the wages of the labourer, and the profits of the capitalist.

Market price varies from natural price with variations of demand and supply, and in proportion to the oppressiveness of public burdens and commercial restrictions.

The more nearly and permanently market prices approach natural prices, the more prosperous is the state of commerce; and the two most essential requisites to this prosperity are social tranquillity and legislative impartiality.



Source: Vol. 5 "The Charmed Sea"

SUMMARY. Of the Principles illustrated in this Volume.

In exchanging commodities for one another directly, i. e. in the way of barter, much time is lost, and trouble incurred before the respective wants of the exchanging parties can be supplied. This trouble and waste may be avoided by the adoption of a medium of exchange; that is, a commodity generally agreed upon, which, in order to effect an exchange between two other commodities, is first received in exchange for the one, and then given in exchange for the other.

This commodity is money. The great requisites in a medium of exchange are, that it should be—

... what all sellers are willing to receive;

... capable of division into convenient portions; portable, from including great value to small bulk;

... indestructible, and little liable to fluctuations of value.

Gold and silver unite these requisites in an unequalled degree, and have also the desirable quality of beauty. Gold and silver have there-tore formed the principal medium of exchange hitherto adopted: usually prepared, by an appointed authority, in the form most suitable for the purposes of exchange, in order to avoid the inconvenience of ascertaining; tlie value of the medium on every occasion of purchase.

Where the supply of money is left unrestricted, its exchangeable value will he ultimately determined, like that of all other commodities, by the cost of production.

Where the supply is restricted, its exchangeable value depends on the proportion of the demand to the supply.

In the former case, it retains its character of a commodity, serving as a standard of value in preference to other commodities only in virtue of its superior natural requisites to that object.

“In the latter case, it ceases to be a commodity, and becomes a mere ticket of transference, or arbitrary sign of value: and then, the natural requisites above described become of comparatively little importance.

The quality by which money passes from hand to hand with little injury enables it to compensate inequalities of supply by the slackened or accelerated speed of its circulation.

The rate of circulation serves as an index of the state of supply; and therefore tends, where no restriction exists, to an adjustment of the supply to the demand.

Where restriction exists, the rate of circulation indicates the degree of derangement introduced among the elements of exchangeable value, but Las no permanent influence in its rectification.



Source: Vol. 5 "Berkeley the Banker"

SUMMARY. Of Principles illustrated in this and the preceding Volume.

In proportion as the processes of exchange become extensive and complicated, all practicable economy of time, trouble and expense, in the use of a circulating medium, becomes desirable.

Such economy is accomplished by making acknowledgments of debt circulate in the place of the actual payment: that is, substituting credit, as represented by bank-paper, for gold money.

The adoption of paper money saves time by making the largest sums as easily payable as the smallest.

It saves trouble by being more easily transferable than metal money.

It saves expense by its production being less costly than that of metal money, and by its setting free a quantity of gold to be used in other articles of production.

A further advantage of paper money is, that its destruction causes no diminution of real wealth, like the destruction of gold and silver coin; the one being only a representative of value,—the other also a commodity.

The remaining requisites of a medium of exchange, viz.—that it should be what all sellers are willing to receive, and little liable to fluctuations of value,—are not inherent in paper as they are in metallic money.

But they may be obtained by rendering paper money convertible into metallic money, by limiting in other ways the quantity issued, and by guarding against forgery.

Great evils, in the midst of many advantages, have arisen out of the use of paper money, from the neglect of measures of security, or from the adoption of such as have proved false. Issues of inconvertible paper money have been allowed to a large extent, unguarded by any restriction as to the quantity issued.

As the issuing of paper money is a profitable business, the issue naturally became excessive when the check ot convertibility was removed, while banking credit was not backed by sufficient security.

The immediate consequences of a superabundance of money, are a rise of prices, an alteration in the conditions of contracts, and a consequent injury to commercial credit.

Its ulterior consequences are, a still stronger shock to commercial credit, the extensive ruin of individuals, and: an excessive contraction of the currency, yet more injurious than its excessive expansion.

These evils arise from buyers and sellers bearing an unequal relation to the quantity of money in the market.

If all sold as much as they bought, and no more, and if the prices of all commodities rose and fell in exact proportion, all exchangers would be affected alike by the increase or diminution of the supply of Money. But this is an impossible case; and therefore any action on the currency involves injury to some, while it affords advantage to others.

A sudden or excessive contraction of the currency produces some effects exactly the reverse of the effect of a sudden or excessive expansion. It lowers prices, and vitiates contracts, to the loss of the opposite contracting party.

But the infliction of reverse evils does not compensate for the former infliction. A second action on the currency, though unavoidably following the first, is not a reparation, but a new misfortune.

Because, the parties who are now enriched are seldom the same that were impoverished by a former change; and vice versâ: while all suffer from the injury to commercial credit which follows upon every arbitrary change.

All the evils which have arisen from acting arbitrarily upon the currency, prove that no such arbitrary action can repair past injuries, while it must inevitably produce further mischief.

They do not prove that liability to fluctuation is an inherent quality of paper money, and that a metallic currency is therefore the best circulating medium.

They do prove that commercial prosperity depends on the natural laws of demand and supply being allowed to work freely in relation to the circulating medium.

The means of securing their full operation remain to be decided upon and tried.



Source: Vol. 6 "Messrs. Vanderput and Snoek"

Summary of Principles illustrated in this Volume.

Nations exchange commodities, as individuals do, for mutual accommodation; each imparting of its superfluity to obtain that in which it is deficient.

The imparting is therefore only a means of obtaining. Exportation is the means of obtaining importation,—the end for which the traffic is instituted.

The importation of money into a country where money is deficient is desirable on the same principle which renders desirable the supply of any deficient commodity.

The importation of money into a country where money is not deficient is no more desirable than it is to create an excess of any other commodity.

That money is the commodity most generally bought and sold is no reason for its being a more desirable article of importation than commodities which are as much wanted in the country which imports it.

That money is the commodity most generally bought and sold is a reason for its being the commodity fixed upon for measuring the relative amounts of other articles of national interchange.

Money bearing different denominations in the different trading countries, a computation of the relative values of these denominations was made in the infancy of commerce, and the result expressed in terms which are retained through all changes in the value of these denominations.

The term by which in each country the original equal proportion was expressed is adopted as the fixed point of measurement called the par of exchange; and any variation in the relative amount of the total money debts of trading nations is called a variation from par.

This variation is of two kinds, nominal and real.

The nominal variation from par is caused! y an alteration in the value of the currency of any country, which, of course, destroys the relative proportion of its denominations to the denominations of the currency of other countries. But it does not affect the amount of commodities exchanged.

The real variation from par takes place when any two countries import respectively more money and less of other commodities, or less money and more of other commodities.

This kind of variation is sure to correct itself, since the country which receives the larger proportion of money will return it for other commodities when it becomes a superfluity; and the country which receives the smaller proportion of money will gladly import more as it becomes deficient.

The real variation from par can never therefore exceed a certain limit.

This limit is determined by the cost of substituting for each other metal money and one of its representatives,—viz., that species of paper currency which is called Bills of Exchange.

When this representative becomes scarce in proportion to commodities, and thereby mounts up to a higher value than the represented metal money, with the cost of transmission added; metal money is transmitted as a substitute for Bills of Exchange, and the course of Exchange is reversed and restored to par.

Even the range of variation above described is much contracted by the operations of dealers in bills of exchange, who equalize their value by transmitting those of all countries from places where they are abundant to places where they are scarce.

A self-balancing power being thus inherent in the entire system of commercial exchange, all apprehensions about the results of its unimpeded operation are absurd.



Source: Vol. 6 "The Loom and the Lugger"

Summary of Principles illustrated in this and the preceding Volume.

The countries of the world differ in their facilities for producing the comforts and luxuries of life.

The inhabitants of the world agree in wanting or desiring all the comforts and luxuries which the world produces.

These wants and desires can be in no degree gratified but by means of mutual exchanges. They can be fully satisfied only by means of absolutely universal and free exchanges.

By universal and free exchange,—that is, by each person being permitted to exchange what he wants least for what he wants most,—an absolutely perfect system of economy of resources is established, the whole world being included in the arrangement.

The present want of agreement in the whole world to adopt this system does not invalidate its principle when applied to a single nation. It must ever be the interest of a nation to exchange what it wants little at home for what it wants more from abroad. If denied what it wants most, it will be wise to take what is next best; and so on, as long as anything is left which is produced better abroad than at home.

In the above case, the blame of the deprivation rests with the prohibiting power; but the suffering affects both the trading nations,—the one being prevented getting what it wants most—the other being prevented parting with what it wants least.

As the general interest of each nation requires that there should be perfect liberty in the exchange of commodities, any restriction on such liberty, for the sake of benefiting any particular class or classes, is a sacrifice of a larger interest to a smaller,—that is, a sin in government.

This sin is committed when,—

First,—Any protection is granted powerful enough to tempt to evasion, producing disloyalty, fraud, and jealousy: when,

Secondly,—Capital is unproductively consumed in the maintenance of an apparatus of restriction: when,

Thirdly,—Capital is unproductively bestowed in enabling those who produce at home dearer than foreigners to sell abroad as cheap as foreigners,—that is, in bounties, on exportation: and when,

Fourthly,—Capital is diverted from its natural course to be employed in producing at home that which is expensive and inferior, instead of in preparing that which will purchase the same article cheap and superior abroad,—that is, when restrictions are imposed on importation.

But though the general interest is sacrificed, no particular interest is permanently benefited, by special protections, since

Restrictive regulations in favour of the few are violated, when such violation is the interest of the many; and

Every diminution of the consumer's fund causes a loss of custom to the producer. Again.

The absence of competition and deprivation of custom combine to make his article inferior and dear; which inferiority and dearness cause his trade still further to decline.

Such are the evils which attend the protection of a class of producers who cannot compete with foreign producers of the same article.

If home producers can compete with foreign producers, they need no protection, as, cœleris paribus, buying at hand is preferable to buying at a distance.

Free competition cannot fail to benefit all parties:—

Consumers, by securing the greatest practicable improvement and cheapness of the article;

Producers, by the consequent perpetual extension of demand;—and

Society at large, by determining capital to its natural channels.



Source: Vol. 7 "Sowers not Reapers"

Summary of Principles illustrated in this Volume.

As exchangeable value is ultimately determined by the cost of production, and as there is an incessant tendency to an increase in the cost of producing food, (inferior soils being taken into cultivation as population increases,) there is a perpetual tendency in the exchangeable value of food to rise, however this tendency may be temporarily checked by accidents of seasons, and by improvements in agricultural arts.

As wages rise (without advantage to the labourer) in consequence of a rise in the value of food, capitalists must either sell their productions dearer than is necessary where food is cheaper, or submit to a diminution of their profits.

Under the first alternative, the capitalist is incapacitated for competition with the capitalist of countries where food is cheaper: under the second, the capital of the country tends, through perpetual diminution, to extinction.

Such is the case of a thickly-peopled country depending for food wholly on its own resources.

There are many countries in the world where these tendencies have not yet shown themselves; where there is so much ferthe land, that the cost of producing food does not yet increase; and where corn superabounds, or would do so, if there was inducement to grow it.

Such inducement exists in the liberty to exchange the corn with which a thinly-peopled country may abound, for the productions in which it is deficient, and with which a populous country may abound. While, by this exchange, the first country obtains more corn in return for its other productions, and the second more of other productions in return for its corn, than could be extracted at home, both are benefited. The capital of the thickly-peopled country will perpetually grow; the thinly-peopled country will become populous; and the only necessary limit of the prosperity of and all the will be the limit to the fertility of the world.

But the waste of capital caused by raising corn dear and in limited quantity at home, when it might be purchased cheap and in unlimited quantity abroad, is not the only evil attending a restriction of any country to its own resources of food; a further waste of capital and infliction of hardship are occasioned by other consequences of such restriction.

As the demand for bread varies little within any one season, or few seasons, while the supply is perpetually varying, the exchangeable value of corn fluctuates more than that of any article whose return to the cost of production is more calculable.

Its necessity to existence causes a panic to arise on the smallest deficiency of supply, enhancing its price in undue proportion; and as the demand cannot materially increase on the immediate occasion of a surplus, and as corn is a perishable article, the price falls in an undue proportion.

These excessive fluctuations, alternately wasting the resources of the consumers and the producers of corn. are avoided where there is liberty to the one class to buy abroad in deficient seasons, and to the other to sell abroad ill times of superabundance.

It is not enough that such purchase and sale are permitted by special legislation when occasion arises, as there can be no certainty of obtaining a sufficient supply, on reasonable terms, in answer to a capricious and urgent demand.

Permanently importing countries are thus more regularly and cheaply supplied than those which occasionally import and occasionally export; but these last are, if their corn exchanges be left free, immeasurably more prosperous than one which is placed at the mercy of man and circumstance by a system of alternate restriction and freedom.

By a regular importation of corn, the proper check is provided against capital being wasted on inferior soils; and this capital is directed towards manufactures, which bring in a larger return of food from abroad than could have been yielded by those inferior soils. Labour is at the same time directed into the most profitable channels. Any degree of restriction on this natural direction of labour and capital is ultimately injurious to every class of the community,—to land owners, farming and manufacturing capitalists, and labourers.

Labourers suffer by whatever makes the prime necessary of life dear and uncertain in its supply, and by whatever impairs the resources of their employers.

Manufacturing capitalists suffer by whatever tends needlessly to cheek the reciprocal growth of capital and population, to raise wages, and disable them for competition abroad.

Farming capitalists suffer by whatever exposes their fortunes to unnecessary vicissitude, and tempts them to an application of capital which can be rendered profitable only by the maintenance of a system which injures their customers.

Landowners suffer by whatever renders their revenues fluctuating, and impairs the prosperity of their tenants, and of the society at large on which the security of their property depends.

As it is the interest of all classes that the supply of food should be regular and cheap, and as regularity and cheapness are best secured by a free trade in corn, it is the interest of all classes that there should be a free trade in corn.



Source: Vol. 7 "Cinnamon and Pearls"

Summary of Principles illustrated in this Volume.

Colonies are advantageous to the mother-country as affording places of settlement for her emigrating members, and opening markets where her merchants will always have the preference over those of other countries, from identity of language and usages.

Colonies are not advantageous to the mother-country as the basis of a peculiar trade.

The term ‘colony trade’ involves the idea of monopoly; since, in a free trade, a colony bears the same relation as any other party to the mother-country.

Such monopoly is disadvantageous to the mother-country, whether possessed by the government, as a trading party, by an exclusive company, or by all the merchants of the mother-country.

It is disadvantageous as impairing the resources of the dependency, which are a part of the resources of the empire, and the very material of the trade which is the object of desire.

If a colony is forbidden to buy of any but the mother-country, it must do without some articles which it desires, or pay dear for them;—it loses the opportunity of an advantageous exchange, or makes a disadvantageous one. Thus the resources of the colony are wasted.

If a colony is forbidden to sell its own produce to any but the mother-country, either the prohibition is not needed, or the colony receives less in exchange from the mother-country than if might obtain elsewhere. Thus, again, the resources of the colony are wasted.

If a colony is forbidden either to buy of or sell to any but the mother-country, the resources of the colony are wasted according to both the above methods, and the colony is condemned to remain a poor customer and an expensive dependency.

In proportion, therefore, as trade with colonies is distinguished from trade with other places, by restriction on buyers at home, or on sellers in the colonies, that trade (involving the apparatus of restriction) becomes an occasion of loss instead of gain to the empire.



Source: Vol. 7 "A Tale of the Tyne"

Summary of Principles illustrated in this Volume.

The duty of government being to render secure the property of its subjects, and their industry being their most undeniable property, all interference of government with the direction and the rewards of industry is a violation of its duty towards its subjects.

Such interference takes place when some are countenanced by legislation in engrossing labours and rewards which would otherwise be open to all;—as in the case of privileged trading corporations;

When arbitrary means of preparation are dictated as a condition of the exercise of industry, and the enjoyment of its fruits, as in the case of the apprenticeship law;—

When labourers are compelled to a species of labour which they would not have chosen,—as in the ease of the impressment of seamen.

The same duty of securing the free exercise of industry requires that companies should be privileged to carry on works of public utility which are not within the reach of individual enterprize, as in the case of roads, canals, bridges, &c., and also,

That the fruits of rare ingenuity and enterprize should be secured to the individual,—according to the design of our patent law.

In the first mentioned instances of interference, the three great evils arise of

The restraint of fair competition in some cases;

The arbitrary increase of competition in other cases;

The obstruction of the circulation of labour and capital from employment to employment, and from place to place.

In the last mentioned instances of protection, none of these evils take place.



Source: Vol. 8 "Briery Creek"

Summary of Principles illustrated in this volume.

Consumption is of two kinds, productive and unproductive.

The object of the one is the restoration, with increase, in some new form, of that which is consumed. The object of the other is the enjoyment of some good through the sacrifice of that which is consumed.

That which is consumed productively is capital, reappearing for future use. That which is consumed unproductively ceases to be capital, or any thing else. It is wholly lost.

Such loss is desirable or the contrary in proportion as the happiness resulting from the sacrifice exceeds or falls short of the happiness belonging to the continued possession of the consumable commodity.

The total of what is produced is called the gross produce.

That which remains, after replacing the capital consumed, is called the net produce.

While a man produces only that which he himself consumes, there is no demand and supply.

If a man produces more of one thing than he consumes, it is for the sake of obtaining something which another man produces, over and above what he consumes.

Each brings the two requisites of a demand; viz., the wish for a supply, and a commodity wherewith to obtain it.

This commodity, which is the instrument of demand, is, at the same time, the instrument of supply.

Though the respective commodities of no two producers may be exactly suitable to their respective wishes, or equivalent in amount, yet, as every man's instrument of demand and supply is identical, the aggregate demand of society must be precisely equal to its supply.

In other words, a general glut is impossible.

A partial glut is an evil which induces its own remedy; and the more quickly, the greater the evil; since, the aggregate demand and supply being always equal, a superabundance of one commodity testifies to the deficiency of another; and, all exchangers being anxious to exchange the deficient article for that which is superabundant, the production of the former will be quickened, and that of the latter slackened.

A new creation of capital, employed in the production of the deficient commodity, may thus remedy a glut.

A new creation of capital is always a benefit to society, by constituting a new demand.

It follows that all unproductive consumption of capital is an injury to society, by contracting the demand. In other words, an expenditure which avoidably exceeds the revenue is a social crime.

All interference which perplexes the calculations of producers, and thus causes the danger of a glut, is also a social crime.



Source: Vol. 8 "The Three Ages"

Summary of Principles illustrated in this volume.

It is necessary to the security and advancement of a community that there should be an expenditure of a portion of its wealth for purposes of defence, of public order, and of social improvement.

As public expenditure, though necessary, is unproductive, it must be limited. And, as the means of such expenditure are furnished by the people for defined objects, its limit is easily ascertained.

That expenditure alone which is necessary to defence, public order, and social improvement, is justifiable.

Such a direction of the public expenditure can be secured only by the public functionaries who expend being made fully responsible to the party in whose behalf they expend.

For want of this responsibility, the public expenditure of an early age,—determined to pageantry, war, and favouritism,—was excessive, and perpetrated by the few in defiance of the many.

For want of a due degree of this responsibility, the public expenditure of an after age,—determined to luxury, war, and patronage,— was excessive, and perpetrated by the few in fear of the many, by deceiving and defrauding them.

For want of a due degree of this responsibility, the public expenditure of the present age, —determined chiefly to the sustaining of burdens imposed by a preceding age,—perpetuates many abuses: and, though much ameliorated by the less unequal distribution of power, the public expenditure is yet as far from being regulated to the greatest advantage of the many, as the many are from exacting due responsibility and service from the few.

When this service and responsibility shall be duly exacted, there will be—

Necessary offices only, whose duties will be clearly defined, fully accounted for, and liberally rewarded:

Little patronage, and that little at the disposal of the people:

No pomp,—at the expense of those who can barely obtain support: but

Liberal provisions for the advancement of national industry and intelligence.



Source: Vol. 9 "The Farrers of Budge-row"

Summary of Principles illustrated in this Volume.

All the members of a society who derive protection from its government owe a certain proportion of the pro-duce of their labour or capital to the support of that government,— that is, are justly liable to be taxed.

The proportion contributed should be determined by the degree of protection enjoyed,—of protection to property,— for all are personally protected.

In other words, a just taxatiou must leave all the members of society in precisely the same relation in which it found them.

This equality of contribution is the first principle of a just taxation.

Such equably can be secured only by a method of direct taxation.

Taxes on commodities are, from their very nature, un-equal, as they leave it in the choice of the rich man how much he shall contribute to the support of the state; while the man whose whole income must be spent in the purchase of commodities has no such choice. This in-equality is aggravated by the necessity, in order to make these taxes productive, of imposing them on necessaries more than on luxuries.

Taxes on commodities are further injurious by entailing great expense for the prevention of smugghng, and a needless cost of collection.

They could not have been long tolerated but for their quality of affording a convenient method of tax-paying, and for the ignorance of the bulk of the people of their injurious operation.

The method of direct taxatlon which best secures equality is the imposition of a tax on income or on property

There is so much difficulty in ascertaining to the general satisfaction the relative values of incomes held on different teaures, and the necessary inquisition is so odious, that if a tax on the source of incomes can be proved equally equitable, it is preferable, inasmuch as it narrows the province of inquisition.

There is no reason to suppose that an equitable graduation of a tax on invested capital is impracticable; and as it would equally affect all incomes derived from this investment (that is, all incomes whatsoever), its operation must be singularly impartial, if the true principle of graduation be once attained.

A graduated property tax is free from all the evils be. longing to taxes on commodities; while it has not their single recommendation—of favouring the subordinate convenience of the tax-payer.

This last consideration will, however, become of less importance in proportion as the great body of tax-payers advances towards that enlightened agreement which is essential to the establishment of a just system of taxation.

The grossest violation of every just principle of taxation is the practice of burdening posterity by contracting permanent loans, of which the nation is to pay the interest.

The next grossest violation of justice is the transmitting such an inherited debt unlessened to posterity, especially as every improvement in the arts of life furnishes the means of throwing off a portion of the national burdens.

The same rule of morals which requires state-economy on behalf of the present generation, requires, on behalf of future generations, that no effort should be spared to liquidate the National Debt.


Last modified April 10, 2014