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These articles first appeared in the Dictionnaire d’Économie Politique, ed. Guillaumin and Charles Coquelin (Paris: Guillaumin, 1852) and the Dictionnaire général de la Politique, ed. Maurice Block (Paris: O. Lorenz, 1873) and were translated into English and included in Lalor’s Cyclopedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (Chicago: M.B. Carey, 1899) in 3 vols.
The French political economists of the the 19th century, or “the economists” as they liked to call themselves, are less well known than the classical school which appeared in England at the same time. The French political economists differed from their English counterparts on a number of grounds: the radicalism of their support for free markets, the founding of their beliefs on doctrines of natural rights and natural law, and the intellectual debt they owed to Jean-Baptiste Say (1767-1832). Some of their leading figures were Say, Charles Comte, Charles Dunoyer, Frédéric Bastiat (1801-1850), Charles Coquelin, Joseph Garnier, Hippolyte Passy, Gustave de Molinari (1819-1912), and Léon Faucher.
Hippolyte Passy (1793-1880) was a cavalry officer in Napoleon’s army and after the restoration of the monarchy took a trip to the United States, during which he discovered the works of Adam Smith. After his return to France he wrote for several opposition papers, such as the liberal National (with Thiers and Mignet), and published a book, De l’aristocracie considérée dans ses rapports avec les progrès de la civilization (1826). Passy was elected as a deputy from 1830, serving as minister of finance in 1834, 1839-40, and 1848-49. In 1838 he became a member of the Académie des sciences morales et politiques, in which he served for some forty years and was particularly active in developing political economy. He criticized the colonization of Algeria and was an advocate of free trade. He was cofounder of the Société d’économie politique (1842) and wrote numerous articles in the Journal des économistes and several books, among which included Des systèmes de culture et de leur influence sur l’économie sociale (1848) and Des causes de l’inégalité des richesses (1848).
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John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 1 Abdication-Duty. Chapter: CLIMATE
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CLIMATE, Politico-economic Aspects of. From an economic point of view the influence exercised by the different climates deserves considerable attention. Up to the present time human industry has made constant and increasing progress only in the temperate regions; outside these regions it has remained stationary, or acquired but a feeble development. These facts prove that the same conditions of development are not met with in all temperatures, and to seek out and state the causes of the differences is by no means unimportant.
—Evidently the greater or less abundance of the natural elements of wealth does not determine the different degrees of prosperity reserved to a people; for the equinoctial countries, which certainly possess these elements in greatest abundance, are among the poorest and most backward. That a people may flourish, it is not enough for them to have within their reach abundant means of production; they must, besides, be incited to make good use of these means. In the success which they achieve everything depends principally upon their progress in intelligence, activity and wisdom in employing the fruits of their labor; and it is because local circumstances do not everywhere equally favor this progress, that it has not everywhere been equally sure and rapid.
—The temperate zones enjoy a superiority in this respect. There everything combines to recommend to the inhabitants the active and vigorous use of their productive faculties. Numerous and various wants incessantly beset them; they have to defend themselves in turn from the scorching heat of summer and the prolonged severity of winter. They require clothing suited to the most opposite atmospheric conditions, appliances for heating, houses securely closed, and built solidly enough to bear the weight of the snow and withstand inclemencies of every kind. It is only by means of labor, of ingenious inventions, and of experiments upon the most different materials, that they are enabled to resist the extreme severity of the climate; and hence the necessity for them of the mental and bodily activity, the habit of which they acquire, and which becomes the very life of their continued prosperity.
—On the other hand, everything combines to form in them habits of economy and foresight. The harvests they reap are slow to mature, and require long continued care. They must be husbanded so as to serve for the consumption of the entire year. Woe to him who would forget in the summer season the needs of the winter that is to follow, and neglect to provide for them! Now there is nothing so rouses and develops the spirit of industry; nothing so surely leads to the reproductive employment of acquired wealth, as the necessity of reckoning with the future, and including it in the combinations and preoccupations of the present.
—The climatic conditions of countries which lie within the tropics or are contiguous to them, are far from acting thus happily upon the ideas and inclinations of the population. Changes of season are almost unknown, and a perpetually serene sky spares men the greater part of the sufferings against which they have to contend in climates of a changeable temperature. A hastily constructed cabin affords all the shelter they require either against the rays of the sun, or against the storms which occur at rare intervals; the least covering serves to preserve them from the inconveniences resulting from nudity, and as soon as they have provided themselves against suffering from hunger, they can enjoy the sweets of repose.
—Nor is there anything in the nature and succession of the labors which they are obliged to perform which is calculated effectually to remove the inconveniences resulting from the simplicity of their wants. Even agriculture requires of them but very little labor. The land hardened and dried by the excessive ardor of the sun, can be worked only during the five or six weeks which follow the rainy season each year; and the long season of idleness which it forces on those who cultivate it, does not fail to nourish their inclination to indolence. Nor is this all. There is no very evident necessity to calculate for the future. As the difference between the various seasons is but a difference of temperature scarcely appreciable, they have not to prepare in one season the resources and provisions which the other will require, and their from-hand-to-mouth subsistence is easily obtained. Thus, nature has in vain lavished the means of production upon the soil on which they dwell; she has not given them the only thing which could teach them to make good use of these means, that is, numerous wants for which they would have to provide under pain of severe privation.
—The effects of a diversity of climate manifest themselves also in the more or less useful direction given to the industrial arts. In countries subject to extreme climatic differences, everything, in the habitual use of wealth, concurs to give to labor a direction useful to all. Among the expenditures of the wealthiest there are few that have not for their object the satisfaction of real wants, or the increase of the well-being acquired; and even the seeking after the improvements of which articles of luxury are susceptible, becomes the source of a number of discoveries, which, in proportion as they come into general use, add to the effective power of the labors destined to supply the wants of general consumption. It is not thus in countries where the rigors of cold are not experienced. Life is there of a sweetness which one little cares to increase. Wealth is employed chiefly to gratify a taste for ostentation and display, and the puerile enjoyments of vanity: and the industries which its expenditures encourage are lamentably sterile. The princes and grandees of the east cover themselves with pearls and diamonds, and gold glitters even on the trappings of their horses; they are surrounded by a host of servants. But their palaces, though covered with the most costly ornaments, contain scarcely any furniture, and were it not for contact with Europeans, they would still be unacquainted with the use of our carriages and the possibility of eating otherwise than with their fingers.
—It is not the absence of imperious and varied wants which checks the development of wealth in the more northern latitudes. On the contrary, man's wants are nowhere so numerous; but nowhere either are there more obstacles to oppose his efforts. Beginning with the sixty second degree, the very short summers do not allow the cereals to mature, and the races whom the thankless soil compels to live upon the fruits of the chase and fishing can not possibly attain to a high degree of prosperity and civilization. In like manner where a less severe climate begins to render cultivation possible the meagreness of the crops, and the immense amount of land that must be reserved for forests to supply fuel, hinder the population from concentrating, and their dissemination deprives them of instruction, desires and emulation, without which men lack the stimulants essential to the energetic use of their resources and faculties.
—The excessive duration of the winters is another obstacle to the progress of labor. In northern countries the earth remains for six or seven months buried under the snow, and the extreme duration of this period inevitably leads those who cultivate it to form habits of idleness, which they can with difficulty abandon when the time for labor returns. Not that they do not endeavor to make use of the time of leisure which they are forced to accept. Far from it: they employ this time in making most of the things they use. Their furniture, clothing, shoes, household utensils, implements of labor, almost everything they need is the work of their own hands. But no matter how natural or conformable to their interests such a development of domestic industry may be, it always has the ill result of keeping a great many of the arts in a sort of infancy. There is little occasion for commerce in a country in which the rural families themselves produce nearly all the objects of their consumption. In like manner the large manufactories, those which, by means of the division of labor and the employment of machinery, besides the advantage of considerably reducing the cost of production, possess the additional recommendation of collecting the information most profitable to the application of human forces, have not sufficient room for their establishment and successful operation.
—These are the causes which, in countries that are subjected to extremes of climate, have to this day prevented the progressive increase of wealth and of the industry which produces it. The privilege of conferring upon the peoples which inhabit them all the qualities which the continued success of human activity requires, seems to have been reserved for the regions which we call temperate. It is these peoples who now collect all the discoveries of science and apply them practically; it is to their efforts that we are indebted for all the improvements which contribute to make labor more fruitful; it is they alone, in fine, who forge and collect all the arms which humanity needs to extend its conquests over the material world, and force it to supply more ample means of triumphing over the misery of its original state.
—We must, however, bear in mind that things were not always thus. The plains washed by the waters of the Euphrates and the Tigris, India and Egypt, and the shores of ancient Phœnicia, witnessed the birth and earliest developments of the arts. Later on, Greece acquired a knowledge of them, and gave them a new and more brilliant flight; later, Italy and the banks of the Mediterranean became their principal home. Only during the last three centuries have the countries in which industry is now most richly rewarded begun to carry it to a degree of power and activity of which the world had had no example.
—These facts are easily explained, and, far from weakening, serve to confirm what we have said of the influence of climate. In the beginning the nations which found the least difficulty and met with the fewest obstacles in obtaining the necessaries of life were, despite their ignorance, the only ones which had the leisure which is indispensable to the progress of the human mind. Hence it was that those parts of the world where there was the greatest abundance of spontaneous productions of the soil, added to a warm temperature, became the cradle of industry and the arts. Men could there devote their entire attention to the few wants which absolutely demanded to be satisfied, and they soon found means to avoid suffering from them. But the very circumstances which in extremely warm countries most favored the first impulse to discovery, afterward became an obstacle to its advancement. As the climate added no formidable requirements to those which hunger made, as soon as a certain amount of prosperity was acquired by these nations, they no longer actively applied themselves to increase it.
—It is possible and even very probable that, without the aid of the light which came to them from the countries upon which civilization had shed its first rays, the nations which were weighed down with numerous wants would have been much slower in shaking off the overwhelming burden of their ignorance. But history clearly proves that, once in possession of the means of production discovered by other nations, they have made use of them with an activity hitherto unknown. Animated by the desire and hope of escaping from the sufferings which continued to pursue them, they brought to their work a spirit all the more inventive the more prosperity they had to achieve, and they imparted to the very arts, a knowledge of which they had just received, an impulse which rapidly increased their fecundity. Thus it is that industry multiplied and improved its appliances in proportion as it advanced from the south toward the north. If to become acclimated in the regions wherein such aggrandizement was reserved to it, industry required forces which perhaps it could not find there, it is at least certain that it met with conditions of development which had hitherto been wanting, and there extended more and more the circle of its conquests.
—May we infer from these facts that industry will eventually acquire, in the climes in which it has hitherto remained undeveloped, a degree of development to the attainment of which nothing is contributed by the climates in which it makes the most rapid advancement in our day? This would be to deceive ourselves. If it be possible that north of the line where it now shines with its greatest brilliancy, industry is to overcome many of the obstacles which have opposed its progress, it is evident that there will still remain enough others to limit its progress. As to the countries in which the simplicity of their wants retains the masses in a state of indolence opposed to their development, the influences at work there are not such as yield entirely to the action of time. Thus everything goes to prove that those nations upon whom is imposed the two-fold task of protecting themselves in turn against the inconveniences of summer and the rigors of winter, will continue to open to the rest of mankind the ways to work and to wealth, and to advance toward this goal with a most firm step.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 2 East India Co. - Nullification Chapter: GOVERNMENT.
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GOVERNMENT. This word is used to designate the aggregate of the powers to which the exercise of effective sovereignty belongs in each state. The union under one central authority of all the component elements of nations is what alone constitutes and makes them political bodies, that is to say, bodies capable of life, of volition and collective action; and there is not a single nation which would not fall into dissolution if the government called to direct it should disappear or cease to obtain the submission which it requires in order to be obeyed.
—Though all governments have in reality the same tasks to perform, they are far from existing under the same form. There are as many political institutions, as many communities in which the sovereign authority lives and acts under conditions markedly diverse, as there are states. Hence governments are divided into different species or kinds; but, as a modern writer (Dufau, la République et la Monarchie; introduction, p. 18) justly remarks, "we have still to find a correct classification of the forms of government and discuss the name proper to each."
—We are indebted to the Greeks for the most ancient classification of governments. According to their publicists there were three forms of the state and of government: monarchy, or the reign of a single man; aristocracy, or the reign of the great and wealthy; democracy, or the reign of the aggregate of free men: forms, the corruption of which produced, respectively, tyranny, oligarchy, and demagogy or ochlocracy (mob rule). Since each of these forms, whenever it prevails alone, is not slow in bringing on abuses and evils of an increasing gravity, some writers have advised a combination of them, but without being able to indicate definitely the means of effecting this combination nor the means of preserving it from all destructive change.
—The ancients were led to adopt the classification which they did, by the idea which they formed of sovereignty. Slavery, which weighed upon a part of the population by preventing them from rising to an understanding of the rights which flow from the nature of man, concealed from them the origin and the essence of this sovereignty. In their eyes sovereignty had its origin in force alone. It belonged altogether to the state, that is to say, to those who being masters in the state alone had the government of it. Outside their ranks were none but subordinates, subjects, held to obey laws framed without their co-operation. Under the empire of such ideas it was natural that distinctions between forms of government should all rest upon a single fact, the numerical proportion existing between governments and the governed.
—In modern times, owing to more exact ideas of law and sovereignty, the truth has been more nearly approached, and the definition given by Montesquieu of the nature of the three kinds of government, if it does not embrace the whole truth, embraces a great part of it. "There are," says Montesquieu, "three kinds of government: the republican, the monarchic and the despotic. The republican is that in which the people in a body, or only a part of the people, exercise sovereign power; the monarchic is that in which a single man governs, but according to fixed and established laws; while in the despotic one man, without law or rule, controls everything by his will and caprice." Since the time of Montesquieu many other classifications have been made and new names used, but the work has advanced but little, and doubt and confusion exist in men's minds, which can not but react harmfully upon the correctness of political ideas.
—The forms of government are so numerous and variable that it is very difficult indeed to consider all the differences which exist between them; in this matter, we must content ourselves with discovering the real source of the forms of government and ascertaining what is fundamental in them. The observation of facts gives the following result. In principle, sovereignty resides and can reside only in the aggregate of the individuals united into one same political body; but as it is impossible for the population to exercise this sovereignty by themselves and continually, they are forced to establish governments to which all that part of sovereignty is given which they can not reserve to themselves. On the other hand, under whatever title and to whatever extent governments are invested with sovereign power they never possess it completely. Among every people, in the absence of recognized political rights, feelings and will are met with, whose supremacy is maintained, and which impose on the action of the government impassable limits. Thus, there exists between peoples and governments at all places and times a division of the exercise of sovereignty, which, however unequal it may be, and whatever the provisions of the law concerning it, can not result in leaving either peoples or governments without some part of this exercise.
—There are many states in which the division of the exercise of sovereignty between the people and the government is a constitutional and legal reality. Such states are those in which there exist only the public powers which are subject to election, or powers whose decisions in order to become executory must have the formal consent of the governed or some portion of the governed. In other states the division of sovereignty is less perceptible, but such division, however, exists, and there never was a government which had not to take into consideration the will of the people, and never a government which could not assert its own.
—Take the most completely autocratic states: there are some in which the monarch has apparently all power over men and things. Religious beliefs, written laws, traditions of the past, nothing which subjects the intelligence, has been omitted in order to consecrate his person, sanctify his authority and free it from all restraint. What is the result? In such states the omnipotence of the master is in reality but a deceptive fiction. Before and around him are living forces which impose more or less narrow limits to his will. Neither the powerful nobles, nor the ministers of religion, nor the soldiery, nor the people, are disposed to endure everything from him. There are beliefs, interests, rules, customs, which they do not allow him to offend, and when he forgets this, insurrections, which frequently dethrone or put him to death, teach such rulers that their sovereignty has limits, and that above it there is another sovereignty which occasionally awakes, refusing to be annihilated. And so there is the case of republics, in which the magistrates, simple executors of the will of those who chose them, seem devoid of all personal initiative. The government here preserves by the force of things the real exercise of a certain part of effective sovereignty. There are matters on which citizens as a body could not deliberate without compromising secrecy; there are others which come unexpectedly and require immediate decision, and it is necessary that the government should act, even if its action should involve the future. The time, of course, will come when account must be given of the motives which impelled it, but the fact will nevertheless remain that a sovereign act was performed which in a good number of cases will infallibly react on the destiny of the state. Such is the case in all political communities. There are no states in which the exercise of sovereign power is not divided in different proportions between the people and their government, and from the inequality of these proportions arise the differences which separate the forms of government most profoundly.
—The first and most considerable distinction arising from the difference of the proportions of sovereign actions which the government holds, is that which makes the governments republican or monarchic. Wherever nations retain sovereign action in the largest measure, they remain representative, they choose the depositories of public authority themselves, and there is not a single person who does not hold the mission which he performs from the will itself of the whole or a part of the people. On the contrary, where nations do not retain so much sovereign action they are not representative, and their government exists of itself. In such a government there is a personal power elevated above all, and not emanating from the suffrages of those whom it governs. Birth invests successive titularies with this power according to an order established by the laws and declared immutable—Such are the two great constitutive forms under the one or other of which are ranged all possible governments. In fact, there is no government which is not a republic or a monarchy, that is to say, which does not emanate altogether from an election or which does not admit of hereditary royalty.
—After the fundamental distinction which divides governments into two clearly distinct categories, come all the distinctions which arise from the difference of the sums of effective power the exercise of which they possess. These distinctions are numerous and not less marked in republics than in monarchies. In fact, the different kinds of republican governments have nothing in common except the principle upon which they are based. But in everything relating to the change of persons composing the government, and the degree of independence which these persons enjoy in the administration of the state, no two have ever been exactly alike. There have been some formed of simple councils, changed several times in a year and obliged to consult their constituents before rendering the least new decision. On the other hand, we have seen cases where a chief elected for life disposed freely of employments and was able to impress on public affairs a character depending in a great degree on his personal will. And between these two extreme forms there is a large number of intermediate ones.
—In like manner, notwithstanding the hereditary character of the king, the monarchic form lends itself to numberless modifications. While there are states in which the prince possesses absolute power, there are others in which, subject to the law, he decides nothing of himself, and in which he performs no act of authority without the direct concurrence and control of the nation, represented by legislative assemblies whose members it has chosen.
—One point to be remarked is the absence of terms for classifying the different republican governments. On the contrary, numerous terms make it possible to classify different monarchic governments, and, though they have not all the desirable precision, these terms have the merit of being in harmony with the reality of facts. Thus, when it is said of these governments that they are autocratic, absolute, despotic, limited, constitutional, representative, parliamentary, words are used to which a real sense is attached, words which denote differences of form between these governments, due to the unequal apportionment of the parts of sovereignty, the exercise of which belongs to hereditary chiefs of the state.
—Certain writers, following in this the example of antiquity, divide governments into aristocratic and democratic. The greatness or smallness of the number of persons in possession of the right to share in managing the affairs of the state is never an insignificant fact. Nothing has a more active influence than this on the decisions of the ruling powers, and especially on the distribution of offices and on the advantages attached to public life. But if it is well to note the fact, it should not be forgotten that governments, so far as they are aristocratic or democratic, merely reflect the nations to which they belong; and this in reality does not affect their form in their really characteristic part, the degree of independence and the discretion reserved to the powers of which they are the assemblage.
—Besides governments which direct the different states, there are others whose authority extends over a number of states, distinct, but connected by pacts of alliance or federal union. These have no other prerogatives than those which the governments of the several states have yielded in their favor, and there may be very considerable differences between the amounts of directing authority which they wield—Whence comes the diversity of forms of government? To answer this question has been and is the object of the labors of science. The study of facts justifies the following statement: The differentiating cause of the forms of government is the difference in the situations of the states themselves. Extent, configuration, geographical position of states, the number, origin, traditions, industrial and commercial interests of the populations which they include, all vary—there is nothing similar among them, and if there are some that contain but few germs of decomposition, there are others, on the contrary, which conceal many of energetic and persistent vitality. This does not permit the governments to accomplish their tasks under the same conditions of existence and action. The less homogeneous the elements collected in the same social body, the more the powers called to maintain union demand independence and stability, and the greater the share of these they obtain.
—It would be impossible for a state to exist unless the populations which it includes retained less influence on its destiny in proportion as they themselves are incapable of agreement. In every state there is a measure of participation, either in creating the public powers or administering collective affairs which for these populations limit the power of the elements of discord to whose influence they are subject; and when this measure is exceeded, conflicts more and more productive of violence and irritation break out and lead to intestine strife. Such has been the course of affairs at all times and in all places. The degree of political sociability of populations ranged under the same central authority has decided the amount of sovereignty of which the populations have retained the regular and continuous exercise. Great where the populations owing to natural affinities form a very compact whole, this amount has always been small or nothing where the populations did not accommodate themselves to the same laws or the same administration; and to governments have fallen all that portion which they could not manage without damage to the maintenance of internal peace. This is a necessity imposed on every state under pain of anarchy and destruction.
—As to the circumstances which react on the form of governments by rendering populations more or less social, they are all those which have the sad privilege of sowing dissension and hatred in the bosom of states. Differences of origin, of language, and nationality, quarrels between established religions, rivalries between social classes, jealousies and struggles between local interests: these circumstances and many others less important, mingle and combine, strengthen or weaken each other; and their total action, by determining to what point the wishes of the governed are or are not reconcilable, determines in the last resort the mode of existence and the amount of sovereignty which each government requires to preserve the state it governs from dissolution and ruin.
—Among the circumstances which contribute to vary governmental constitutions there is one which has always attracted more attention than others: territorial extension. This circumstance Montesquieu declares to be altogether of decisive importance. "The natural peculiarity of small states is to be governed as republics, that of medium size to be subjected to a monarch, that of great empires to be governed by a despot." What is true in this regard is, that the power of the causes of discord and ruin which they contain is almost always in proportion to the size of the states. Ordinarily the greatest enclose not only states which are foreign to each other, but nations between which exist enmities, the deeper because there are among them some which arms alone have been able to force into an association which deprived them of their former independence. Generally also it is in the largest states that the antagonism of different religious beliefs, and the differences of climate and geographical situations maintain in the bosom of populations hatreds and rivalries of the most intense character; and such is frequently the unsociability of the elements entering into their composition that they would separate if the power intrusted with maintaining political unity were not fixed in the hands of an absolute sovereign. There are nations which do not possess so much sovereign action as they might exercise without peril to public peace; there are none which could retain it beyond the measure fixed by the energy of the motives of dissension, to whose influence they are subject, because in such a case the anarchy which originates on account of inefficient central authority extends its ravages gradually, and ends by bringing the state to ruin.
—Anarchy is death to all political associations. By destroying in the bosom of a state the power destined to unite all its forces under a single management, it dissolves and deprives it of the means of resisting the attacks of its neighbors. Hence the necessity of escaping the destructive effects of anarchy has at all epochs decided in every state in the world the organization of the government. Wherever a change in the personnel of the government by election lets loose storms of passion destructive in their violence, the political community has been able to preserve itself only on condition that it seek repose under the monarchic form; on the contrary, where the same change in the personnel of the government merely caused agitation without disorganization, the community retaining a more complete exercise of sovereignty, continued to live under a republican form.
—The need of union and internal security has influenced not only the division of states into monarchies and republics, but also the modifications which more or less affect political constitutions of the same sort and bearing the same name. In republics as well as in monarchies, the number and real force of the elements of trouble and division, whose force must be restrained, have influenced the partition of sovereign action between the governing and the governed; and in fact there have never been two states in which this partition was regulated in precisely similar proportions. It follows from this that political liberty can not flourish everywhere in the same degree, and that, as Montesquieu thought, there are states condemned to exist only on condition of accepting the evils produced by an entire absence of liberty. This is certainly a real misfortune for these states; but, it is proper to remark that this misfortune is, for those who suffer it, but one fruit of the iniquities in which one party among them has shared. Brute force created and maintains the empires weighed down by the despotism of the prince. One of these empires extended its conquests over territories belonging to neighboring nations; it has subdued and retains under its rule people who regret their former autonomy, and instead of fellow-citizens it finds in the vanquished enemies, almost always disposed to rend the ties of an association which they detest. This is what chiefly makes states—whose greatness rests only on a union, under the same government, of races distinct by origin, language and historical antecedents—the seat of absolutism. War exists within them, and nothing less than a continual state of siege is requisite to prevent it from breaking out. Their unity is too artificial not to succumb, if the authority which forms its only bond is not free from all control and restraint. This authority has struggles and combats to endure, and, like military command, it can admit neither limit nor division. In this way nations are punished which abuse their power; they oppress and are oppressed; the servitude which they impose on others turns against them, and they can not escape it without a decrease of the territorial greatness which they acquired unjustly.
—We have seen on what foundations governments rest, in what the differences consist which appear in their structure, and from what sources these differences really come. It remains now to show what the natural attributes of governments are, and within what limits the task devolved on them should be restricted.
—The true rule is, that governments should do only what members of the community, either singly or collectively, are unable to do of themselves, or unable to do sufficiently well, without the co-operation of public authority. But where shall we find the line of demarcation between things pertaining directly and specifically to governments and things which pertain to them only partially or not at all? After a close examination the question will not be found so simple as it might appear, and in practice it has received a variety of solutions. It is easy, nevertheless, to designate the functions which in all states belong of strict necessity to governments. They are those functions whose fulfillment is essential at all times to the maintenance of independence and national unity. Execution of the laws, negotiations or treaties with foreign countries, the levy and employment of military forces, collection and application of the product of taxes intended to provide for expenses of public utility, all these acts belong to the special domain of the governmental power; and when members of the community unite in regulating them, it is in proportion as they participate in the exercise of effective sovereignty, and form an integral and working part of the government.
—There are other parts of sovereign action, which, without being concentrated in the hands of government, demand its continual co-operation. Such is the administration of justice. There are states in which the people themselves designate the judges who administer justice for them, and, by means of juries selected from their own ranks, take part directly in the exercise of the judicial power. In this respect, combinations may be very different, and the best are always those which free the judges most from external dependence; but whatever be their spirit or character, there still remains a task which the central authority alone is fitted to accomplish with the requisite success, that of assuring the execution of the laws in accordance with the will of the legislator. If the accomplishment of this task is imperfect, laws abandoned to various interpretations would at length cease to be understood alike at all points of the national territory, and society would suffer from the uncertainty of the rules on the strict observance of which the security of person and property depend.
—Of social wants there are some the satisfaction of which demand, imperatively, the co-operation and action of the state. These are provided for by services and labors of public utility, and consequently at the common expense of all portions of the territory. There are many ways of executing these labors, and many ways also of meeting the expenses which they necessitate, and of obtaining repayment; but the care of declaring the utility of these works and of seeing that they accomplish their purpose, is incumbent on the state. Thus, in the organization of postal communication, the digging of canals, making of long roads, its intervention is necessary, and the government intervenes because it is the organ of what is most general in the interests to be conciliated and satisfied. There is no state of any extent without communities endowed with life peculiar to themselves and having special wants and interests. Communes, parishes, districts, departments, counties, provinces, under whatever denomination they may be known, these fractions of the political association have to bear the local expenses, and manage the property which belongs to them, perform all the acts required by an existence distinct from the general existence, and all have mandatories and administrations, which deliberate and act in their name; everything differs, nevertheless, according to the country in the measure of the liberty which they enjoy, in all things concerning the conduct of their affairs. While certain governments make it a point to keep them in leading strings, and allow them to move only with the permission and under the control of government functionaries whom they themselves have chosen, others do not interfere at all in their decisions, and let them act in all questions at their own risk and peril.
—If we examine the question on one side only, it seems that in their relations either with communes, or territorial fractions, having an existence of their own, governments should confine themselves to enforcing obedience to the laws of the state, and to preserving from all injurious attacks the interests placed under their care, but, on a closer inspection, we discover that affairs are not everywhere and always arranged in the same fashion. Populations are not equally advanced in all countries, or equally fitted to administer the affairs within their jurisdiction. The reason is, that the past has not been the same for all. Even in Europe there are still some nations whose escape from serfdom is too recent, and who, bent under the weight of ignorance, unless government acted, would make none of the sacrifices which the improvement of their intellectual and economic position most imperatively demands. Still, even with these populations, compulsion should be reduced to minimum proportions. The power of producing the qualities required in civil life is found only in the practice of that life. In order to know what are the collective interests, and what intimate ties exist between them and private interests, it is necessary to be occupied with them. Men who take no part in the decisions made with reference to the public good, never discover to what point this good is connected with their own, and remain indifferent to everything which passes outside of the sphere in which their domestic activity is concentrated. If you take away local liberty, political liberty will have but ill-secured foundations, and, not finding among the masses feelings and ideas to render it dear to them, will be exposed to the hazards of revolutionary crises—After having indicated what governments have to do, either alone and unaided, or in concert with one or another subdivision of the political community, it remains to show within what limits their action should be confined, and what the domain is which they can not enter without becoming more injurious than useful.
—There are liberties in every society which it is important to leave in all their natural extent. It is an indefeasible right of individuals to use their faculties and powers as they see fit, to improve their condition, to amass wealth and rise to the possession of all the advantages attached to the social state. This right has for each one no other limit than the respect due to the same right of other men, and in everything which concerns this right, the task of public power consists solely in preserving its exercise from any offensive or restrictive attack.
—Unfortunately governments have not judged in this way. Instead of contenting themselves with securing to each person the highest possible degree of safety in the employment of his means of well-being and in the enjoyment of the goods which have come to his share, they have considered it as their office to direct the activity of individuals according to their own pleasure, and to interfere in the distribution of wealth. Ranks and conditions, ownership and distribution of lands, application of capital and labor, production and exchange of products, labor, manufactures and commercial transactions—there is not one of these which has not been subjected to distinct repressive rules, and their acts have only succeeded in creating obstacles to the beneficent energy of arts and civilization.
—It is impossible to invade the common right without spreading in the midst of societies injustice and serfdom, the weight of which will inevitably arrest or retard their progress. Such has been and such always will be the effect of laws intended to create a civil and economic order different from that which should be produced by the free development of individual forces and faculties. These laws operate only on condition of taking from some to give to others, and their results are continually in opposition to the general welfare. If they tie up the land in whole or in part for the benefit of one portion of the community, they reduce among the remainder the possibility of obtaining the advantages of ownership in real property, narrow the field of their action, and weaken the mainspring of their efforts. Nothing acts so efficaciously on the energy of men as the desire to acquire land; above all, nothing inclines them so much to be careful, industrious, to accumulate savings, the use of which is required on land; but where this desire, for want of meeting all the facilities for satisfying itself, to which it has the right, remains feeble and languishing, populations lack the qualities most essential to their prosperity. Among the causes which prevent the nations of Europe from advancing with firmer and quicker step toward civilization, one of the first places must be assigned to the institutions which give to privileged classes the exclusive possession of vast portions of the soil; and if the Slavonic nations have remained behind others, it is principally because among them landed property was reserved entirely to those families of which the nobility was composed.
—In industrial affairs the interference of authority is no less injurious. At every epoch the kinds of production which are stimulated by the circumstances of the moment obtain the most ample remuneration, and on this account attract more labor and capital than others. This is the natural course of things which governments oppose, whenever, by distinguishing between the different branches of commerce and industry, they provoke the special development of some. In this case, by calling productive forces into less fruitful fields than those which they leave or would choose, they diminish their general fruitfulness, and nations do not gain from their labor all the results which they desire. To this drawback are added others of no less gravity. First, it is only by imposing on the community more or less onerous burdens, that industries are sustained which are wanting in some of the conditions of success, which they would need in order to dispense with assistance, and such combinations are changed into obstacles to the increase of wealth. In the second place, the action of power enfeebles among producers the qualities most necessary to the proper employment of their resources. Instead of counting only on profits due to the energy and dexterity of their own efforts, they leave to the state the care of securing for their work sufficient recompense, and generally they care little for profiting by innovations which demand advances of money and sacrifice.
—Let an examination be made of the results produced in practice by legislative arrangements, intended either to modify the distribution of property and wealth or to assign artificial and forced directions to the application of labor, and we shall find not one which is not an attack on liberty, whose productive activity needs to be developed in all its power, and which does not deprive members of the social body of some of the means and elements of prosperity, the use of which they have the right to retain. At present, owing to the advance of enlightenment, governments, better informed than in former periods, have commenced to see that there is a large number of facts of the economic and civil order which must be left to themselves. In the most advanced states of Europe laws which formerly reserved to particular classes the possession of the soil, or treated unequally the different methods of labor and production, have already given way to less restrictive enactments; and it is very clear that the time is approaching when the laws of justice will at last receive the respect due them.
—It is to be desired, nevertheless, that governments should no longer extend their action beyond the circle in which the interests of society require them to be confined. In everything relating to the distribution of wealth, to the application of industrial forces, and the conquests of individual activity, their task consists solely in superintending the execution of engagements, to secure for persons as well as property of every kind of which they are in legitimate possession the highest measure of safety possible. This task accomplished, they have only to follow the course taken by events. To regulate this course there are natural laws which require no assistance from man; laws, whose work is always the better and completer the more it is accomplished in freedom. To endeavor to substitute a different order for the order which is the object of these laws, is nothing less than to try to substitute for the results of supreme wisdom the results of human wisdom, which are necessarily imperfect; and such fool-hardiness meets inevitable punishment in the sufferings which it inflicts, or in those whose abolition it prevents.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 3 Oath - Zollverein Chapter: RENT
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RENT. This is the term recognized in political economy, to denote the net product of the land,i.e., that portion of the total product, which, after deducting what covers the expense of production, remains, and constitutes a surplus. This surplus naturally reverts to the owners of the soil; they gather it themselves when they work their own lands; they receive it from the hands of farmers, or metayers when they leave to others the care of making them productive; in all cases. the rent forms part of the property. We must not, however, confound it with the price paid by one who hires a farm, (called sometimes farm rent), although it is one of the elements of the latter. Every case of farm rent, every leasing price, whether payable in money or in kind, includes something additional, viz., the remuneration due the land owners for expenditures made by them at various times in the past, to facilitate labor or increase its results. The buildings for farm service or for residence, the fences, ditches and plantations which the farm embraces, have often cost considerable sums, and it is just that those who enjoy the advantages connected with their existence, should pay all or a part of the interest on the capital that had to be devoted to them. On the other hand, the conditions of the lease of lands have been discussed by the contracting parties, and may have been so determined as to favor either. Nevertheless, wherever the price for the use of the farm is payable in money, there is a constant tendency for it to include the entire rent. Rent is a net product, it is only realized when active industry has been fully remunerated, and it is not less difficult for farmers to reserve any of it for themselves, than for proprietors to induce farmers to sacrifice to them a part of the profits due to their improvements. But, whatever may be the nature of the circumstances which determine the apportionment of the rent of land between the owner and farmer, they can neither permanently effect its real amount nor alter its original character.
—Among the great facts to which the attention of economists has been drawn, few have given rise to so many controversies as the rent of lands. What it is, its origin, its proportions, its effects, its legitimacy even, everything connected with its existence, has been the object of long and patient investigations, and still harmony has not yet been established between the differing opinions. This is the more to be regretted, because, in this very question of rent are involved many other problems of deep social import, and the effects of its solution naturally extend far beyond the limits which scientific investigation has attained.
—We will here commence by pointing out the order in which the opinions on the matter of rent originated; we will note their characteristic differences; then we will take up the question in its whole extent, and, in our course, we shall find occasion to show how far each of the theories before us seems to depart from or to approach the truth, so far as the best established facts permit us to discern it.
—It was the physiocratic school who first enunciated an opinion on the nature of rent. They characterized it as the net product of the land, and in this they were not in error; but soon, attributing to it an extreme and exclusive importance, they made it the only source of public and private wealth. We know how erroneous a doctrine must be, which is based on the idea that no other labor than that on land can obtain more than the equivalent of the values it consumes, a doctrine denying productive power to employments without which most things produced from the land would themselves remain unsuited to use, and not admitting that men could realize any other riches than that which the natural fertility of the soil put at their disposal. However, in spite of this fundamental error which vitiated all their conclusions, we can not deny the physiocrates the merit of having apprehended well the character of rent and having given a pretty accurate definition of it. Among their observations on the natural increase of rent, there are also some which are both just and important. The net product, rent, in the excess which is left from the crops after the expenses of cultivation are reimbursed; it is the portion of the fruits of the earth from which the non-agricultural classes subsist; and, doubtless, in the normal and regular order of things, the greater or less amount of this excess has a strong influence on the degree of power and prosperity in reserve for nations.
—With and by the illustrious Adam Smith, began what may rightfully be called true economic science. The opinion of Smith on the subject of rent is much like that of the physiocrates. It is substantially as follows. In labor on land, nature acts conjointly with man, and rent is the product of its co-operative power. It is this co-operative power of the earth, the enjoyment of which landholders grant in consideration of a price for the lease based upon a proportional share of the sum at which it figures in the results of production.
—The opinion of Adam Smith has obtained the assent of most economists. J B. Say, Storch, Rossi and Rau adopted it, or varied little from it. Dr. Anderson, however, had previously presented a harmonious series of ideas on the subject, which were at the same time more complex and better developed. 68 But his system did not attract attention until after having been reproduced again in the writings of Malthus and Ricardo, and it is under the name of the latter that he has taken a place in economic science.
—The starting point of Ricardo is in reality the same as that of Adam Smith. What the latter calls the co-operative power of land, Ricardo calls natural fertility, or original powers; but what he has added to the fundamental notion is, an exposition of the rules which, in his opinion. govern the formation and progressive increase of rent. According to Ricardo, rent is not solely the result of a natural fertility which permits the land to return, to those who cultivate it, harvests superior to their needs; it arises from the unequal distribution of this fertility. So long as the population, having plenty of room, can work only the best lands at their disposal, there is no rent: but just as soon as, on account of their increase in numbers, the same population are compelled, in order to procure means of subsistence, to attack lands of inferior quality, rent arises and becomes the share of the proprietors of the portions of the soil that were first cultivated. And the following is his explanation. Being less fertile than the others, the lands on which the labor is expended can not return, for a like expenditure in cultivation, as great a product. The crops they yield require additional expense and labor. and as it has become impossible for society to do without its complement of supplies, it is compelled to pay for provisions whatever price is necessary to insure production on land that has just been cleared. In this inevitable movement. it is the net cost of the produce on the worst land to which recourse must be had, which fixes the general price, and consequently determines the profits of the proprietors of the land first cultivated, the realization of which secures them a rent. They sell at a higher price what they obtain without increased cost or advances, and find themselves masters of a greater surplus than they had before prices had risen. A like effect is again produced whenever the necessity of increasing the arable domain is felt. Worse lands are continually being brought under cultivation; the price of produce rises because of the increased outlay they require; and, at each advance in prices which takes place, rent is seen to arise where it did not previously exist, and to increase where it had already arisen. Such are the ideas on which the theory is based which is called by Ricardo's name. This theory affirms, or at least appears to affirm, that rent has no other source than the difference in the degree of fertility between different portions of the soil: it attributes its origin and development to no other principle than the continual rise in the market price of food, and it makes the difference between a general price current, regulated by the expenses connected with production in localities where these expenses are greatest, and the particular net cost in the other portions of the soil, the measure of the rent that each of the latter affords or is adapted to afford.
—Ricardo's theory was of course widely taken into consideration by the economic world. It gave, or seemed to give, the explanation of a certain number of facts. which, at the time when it originated, were receiving much attention from the public. Moreover, many writers accepted it fully; and it was not until our day that it found decided opponents. Attacked first in England by Prof. Jones, of Hailebury, it was afterward assailed by adversaries whose denials extended even to the principle to which Smith had given his adhesion.
—A very distinguished American economist, Mr. Carey, has denied that the natural fertility of the soil is among the causes productive of rent. In his view, rent has no other source than the expenses successively incurred in the interest of production. And among these expenses he includes, besides those of which the lands under cultivation have been the direct object, the construction of roads, canals, and any means of communication designed to facilitate transportation and to render the markets accessible to products which, if they could not have reached them, would not have been demanded of the soil. Mr. Carey, moreover, has endeavored to demonstrate that Ricardo was entirely wrong in regard to the order in which cultivation has taken place, and that it has not begun with the most fertile lands, but with those most easily cleared, or the nearest to centres of consumption. Taking Mr. Carey's opinions in their plain signification, they consist in denying to the land itself any participation in the formation of rent, in attempting to prove that all this rent represents only the remuneration for advances made to render the soil amenable to culture; in a word, that rent is and can be only a simple creation of human industry.
—Such is also the point of view from which rent was regarded by a man whose premature loss science can not too deeply deplore. M. Bastiat, dreading the consequences of any doctrine which seemed to authorize the admission that wealth could exist which was not exclusively the product of services or of human efforts, started with the same idea as Mr. Carey. According to him, rent is and can be only the interest on the capital invested in clearing the soil and preparing it for production. Only M. Bastiat recognizes that rent may occur without the proprietor having to make any sacrifice to reap the benefit of an unexpected increase: and this case he explains by remarking that there is nothing peculiar in landed property; that what creates the value of the services rendered by every employment of human industry, whatever agent it may use, is not alone the efforts made by the producer, but also the efforts spared to the consumer; and that the latter, whenever his wants increase, pays more for the service rendered him in saving him the more costly efforts he would have to make to provide for himself without such aid. It is much to be regretted that M. Bastiat did not have time to make a precise and well-arranged statement of his ideas before his death. It was in connection with the treatment of real estate that he announced them, in the clever book he published under the title of "Economic Harmonies." The special chapter that he proposed to devote to rent was scarcely outlined. and what has been preserved of it consists only of incomplete fragments, in which the author's ideas are not clearly discernible.
—Such are the principal opinions to which the existence of rent has given rise. Their antagonism is very marked. While some attribute the formation of rent to the co-operative action of nature in agricultural labor, others, denying all influence to this action. consider rent only as the remuneration for the expenses and efforts by which mankind have succeeded in transforming the earth into an instrument of production. We will review the whole subject, and attempt to ascertain the truth amid the obscurities and complications which have hitherto hindered its successful investigation.
—Origin of Rent. There are, in the first place, two things which it seems to us impossible to contest. One is, that the earth is endowed with fertility; the other, that it is not equally so in all parts. It is a fact no less evident, that this fertility does not even need the co-operation of man in order to manifest itself. In the most uncultivated condition the land never fails to be covered with vegetable growths, some of which can supply food and support animals whose flesh may be eaten; and it is the land which, by insuring to the human race at the beginning harvests already produced, has permitted it to escape the destructive effects of famine. Of course, men had to be at the trouble of gathering the fruit, pulling up the roots, and catching the game and the fish on which they subsisted; but if such efforts had alone the power of conferring value on the products which the earth of itself put within their reach, it is none the less true that where these products were more abundant or more easily obtainable, less effort was needed to appropriate them, to adapt them to use; in a word, to convert them into exchangeable wealth. Well, it is to this natural fertility of the earth, which has from the beginning put its inhabitants in the way of obtaining means of subsistence which were not wholly the fruit of their labor even, that rent owes its origin. Rent is the surplus realized over the expense of production, and wherever it was possible to those who, in any way whatever, labored to gather the fruits of the earth, to amass more of them than their personal necessities required, there was a surplus to their advantage, which was rent, and rent very evidently due to the fertility of the portion of the soil on which their industry had been employed.
—The most savage tribes have nothing to learn in this regard. They contest with each other the occupation of places where the waters most abound in fish, or where the land furnishes the most game or fruit; and this is because they well know that as long as they keep exclusive possession of it, they will derive from a given amount of effort, time and fatigue, a quantity of the means of subsistence superior to what they would obtain on less favored portions of the soil; in a word, an actual excess over the expenses of production, which would be everywhere else less amply repaid.
—We will say more. From the first, the earth must, in certain places, have conferred a rent on those who as yet knew only how to gather its spontaneous productions, as otherwise civilization could not have arisen and commenced to advance. While most of the savage tribes were exhausting themselves in efforts to find enough to prevent them from dying of starvation, others, more favored, obtained, without any more skill or effort, resources more than sufficient to supply their necessities; and the latter were not long in bettering their condition. Free to provide in advance for future consumption, it became possible for them to devote leisure to occupations other than the mere search for food. They could make weapons, the implements needed in fishing and hunting, and the means of deriving more profit from their labor; and in the end, they could amass the provisions or capital whose possession would enable them to undertake the breaking up and cultivating the land. We may safely assert, that, if Providence had not so disposed things that the earth offered in some places, to its earliest inhabitants, products which it did not take all their time and care to obtain, the savage manner of life would never have come to an end: men would to-day be still wandering naked and hungry, a prey to invincible poverty, distinguished in no respect from the animals called into existence at the same time with themselves.
—The invention of the art of agriculture did not alter the nature of the primordial fact. There had been, during previous periods, lands which had yielded to those who sought their products, more than they needed for subsistence: there were, under the new order of things, lands which yielded to those who cultivated them, more than was necessary to compensate them for their trouble and expense. Wherever, after deducting the amount of the advances they required, lands left a surplus, this surplus constituted a rent. Wherever, for example, two workmen succeeded in realizing, beyond the returns due to capital immobilized with a view to production, products in a quantity sufficient to provide for the consumption of three, the rent was equivalent to the part of the resources necessary for the subsistence of a man and to pay for his services; and this rent was the result of the fertility of the soil; for, at points less favored, the same amount of work would not have obtained a like surplus; and at certain points it would not, had it been employed, have even obtained enough to indemnify those who had made the expenditure.
—The reader will see, that, like Adam Smith, we attribute the origin of rent to the existence in the soil itself of forces or properties naturally productive. Thanks to the assistance these forces give men whenever they require it, their efforts obtain, besides the remuneration which is their due, an excess which may be so disposed of as to favor other kinds of consumption than that of agricultural laborers. Never has this aid been lacking to those who have sought it. It was this which, even before agriculture was commonly resorted to, supplied unfortunate savage tribes, in possession of good fishing and hunting districts, with means of subsistence sufficiently abundant for them not to be compelled to sacrifice all the time at their disposal in search for food: this it was, too, which, in ages more advanced, by permitting proprietors of cultivated land to harvest more products than they expended in production, gave them the power to remunerate labors other than those expended on the soil, and to call into existence manufacturing and commercial classes and give them a position of continually increasing importance in the ranks of the population.
—Before examining the systems which are not in harmony with this opinion, or which differ from it, there is one assertion in reference to which we must enter into some explanation; for if it were well founded, rent could be regarded as having no other original cause than the power of the earth co-operating with the labor devoted to obtaining its products. This assertion is, that there is no rent in countries where land is so abundant that every one is free to appropriate to himself such a portion as he likes without compensation, or for a trifle. Rossi and some other economists have freely admitted the fact, and M. Bastiat has found in it a point of support for his system. Let us see where the truth lies. It is certain, that, where land is abundant, its products have little sale value, because they have few consumers and lack a market; but does it follow, that, on the few portions where cultivation exists, those who employ it do not find in the original properties of the soil an aid eminently profitable, and do not obtain crops out of proportion to their efforts for subsistence? Suppose a country where all the people cultivated land, and where they could not sell provisions to neighbors because the latter were as well provided for as themselves: the beneficent effects resulting from the co-operative action of the soil would still be felt. In such a country, no one would try to realize a surplus which could find no purchasers: every one would only demand of the soil the means of subsistence required for his own family: but, as little labor would be necessary to obtain this, the husbandman would enjoy long periods of leisure; and leisure is always, to those who know how to employ it, a source of wealth. The time not required in cultivating land, they would employ in making articles adapted to satisfy other demands than those of hunger. They would make clothing, furniture and dwellings; and these are products whose acquisition would be due to the co-operation of the land with their efforts. A relief from incessant labor, and leisure that can be employed in reproductive occupations, are what the earth gives those who cultivate it, whenever they do not know what to do with the surplus it yields. This is, in reality, rent, under a form sufficiently characterized.
—But, let us observe, things have never occurred altogether in this manner. Wherever cultivation of the soil has become established, it has never alone attracted all persons, and it has always found consumers who did not share in its labors. So far back as we can trace in history, we find no social aggregation without magistrates, priests, soldiers and artisans, all supported from the portion of the crops which the agricultural population could spare; and this portion was no other than the excess produced by the land. It has often been affirmed that rent long was, and still is, unknown in some parts of North America. "But lately," says M. Rossi, in speaking of the ideas of the physiocrates on the net product of the land, "there was no rent or scarcely any rent in America, and yet there was a great abundance of all the necessaries of life, and the course of society was toward great prosperity and rapid development." It is true that the conditions under which the colonization of North America has been effected, differ in all respects from those which governed the formation of social bodies in the old world; but the opinion of M. Rossi is, nevertheless, incorrect. One thing which does not exist in America, or exists there only in a very few localities, is the practice of hiring farms, and the reason for it is simply this: As land there costs very little, those who wish to till it, buy the ground on which they settle; and the acquisition counts but little in the list of expenses incurred in their industry; but there is in America a town population, who buy, either for consumption or export, the surplus which the local circumstances bring into market, and the agriculturists retain, by their right as proprietors, an actual rent. It is also true that nowhere in America does the surplus bear a definite relation to the expense of production; nowhere in that country does the agricultural class, after having recovered its advances, offer the other classes as much of the means of subsistence and remunerate as well their services; and it is just this which causes such an abundance and so many elements of life and prosperity in the Union. Some writers have thought that the surplus which American cultivators have to dispose of should not be considered as the result of the natural fertility of the soil, but simply a return for the capital invested in their operations. One need but examine the matter closely to see that it is quite otherwise. It is not because the general rate of profit is very high in America, that the land there brings in a good return to those who take advantage of its fertility: it is, on the contrary, because the land cultivated, which is still wholly choice land, returns much, that the rate of profits is high. Capital goes where it brings most. In America, as everywhere else, it is not invested in manufactures or commerce, except when it will yield as much as if employed in agriculture; and it is the amount of the net income from the soil which largely repays cultivation, that secures to all investments of savings, and to every employment of human activity, the ample remuneration they receive. Assuredly, if the vast territory of America were only composed of lands of a low degree of fertility, the expense necessarily incurred to obtain subsistence from them, would be more considerable, agricultural capital would produce less, and neither the general rate of profits nor that of wages would be maintained at the height they have now attained and are continuing to keep.
—Europe does not lack countries where land is abundant, and has only a low sale value. It is incontestable that rent exists in these places; and as the facts which give it a distinguishing characteristic are of a nature to throw much light on the question, we will say a few words in regard to them. In Hungary, Russia, and many parts of the original Poland and the principalities of the Danube, the rural population, held in servitude, or but recently having ceased to be so held, are, in general, too poor and too ignorant to purchase the land and subject themselves to the risks and perils consequent upon settlement. What is the result? It is that the proprietors, like American agriculturists, cultivate and harvest on their own account. Ordinarily, they leave the laborers, as their wages, the use of a piece of land, which the latter cultivate for the support of their families, and for which they are bound to give two or three days' labor per week to the rest of the estate. This arrangement clearly shows wherein consists the rent of the proprietor. It is the result of the employment, on his land, of the time which the laborers can spare from that which gives them their own subsistence. And let it be observed, that this time can be attributed by the laborers to nothing else than the natural fertility of the soil whose cultivation furnishes them their whole living. Whenever the laborers devote to other fields than those which they are permitted to enjoy, two days' work per week, the surplus over the general expenses of production, the rent is but little inferior to two-thirds of the total product.
—Now, there are, in these same countries, some places where reside either colonists of foreign origin, or peasants in full possession of the lands they cultivate, who often have more land than they can till. This is the case in America. Does any one think that rent does not exist in such places, as well as in the rest of the country? If so, he is greatly mistaken. The part which reverts to the proprietors, in cases where the laborers give their fields two days' labor every week, the cultivators retain for themselves when they are absolute masters of the soil, and if they do not harvest it, it is because they find they can more profitably employ the time which they refrain from devoting to agriculture.
—In whatever way we look at the question, on whatever side we take hold of it, we must always end by recognizing that the earth gives rise to rent, and that, even where the conditions of society are such as to prevent all being derived from land which it might produce, there is a compensation for this in the leisure it affords that can be employed in other avocations.
—Let us come to the theory adopted by both Carey and Bastiat. They deny that the earth can add anything of its own to the results of labor. In their view, land is only an instrument, an agent, of production, which man employs, and not a single element can be found in rent which is not wholly the product of the expense incurred to render the land fertile. M. Bastiat thought, that to admit the co-operative action of the soil in the benefits connected with production, would be to recognize that wealth might exist which was not due to labor, and that the earth had the power to create such wealth. Let us look at this point. No one, surely, of any repute among economists, has maintained that anything which nature has prepared for the use of human beings, has value before having been the object of some kind of labor;69 but, positing this principle, is it the less true that the earth, if it does not furnish things which already have value, does afford those adapted to receive it, and that, whenever it furnishes these things in such abundance or so easily obtainable that the labor employed in communicating value70 to them costs less than it produces, there results an excess over the expense incurred, which is not found when the efforts of man are otherwise exerted? Here is the fundamental point of the discussion, the point of fact. To affirm that this surplus would not be realized without taking the trouble to obtain it, is to say little; for that is not contested. What should be proved is, that it would be possible without the co-operation of the earth, and that there are industries not agricultural or extractive which have also the power to produce rent.71 Now, this proof is wanting, and surely never will be given. As to the objection that it is demand, which, by assuring a value to the agricultural surplus, has alone the power to create it and to convert it into wealth, and that demand constitutes an action purely human, it has its response72 in what has just been said in reference to the assertion, that there is no rent in regions where the land, while waiting for a more complete private appropriation. has as yet little or no exchange value.
—It is in vain for one to seek to delude himself. The land alone returns more than is needed to pay wages, interest and profit on the capital required to cultivate it; and as there is no other way in which labor can be applied to obtain a like surplus, we must recognize in the existence of rent the result of a co-operative action exercised by the earth itself. It would be wrong that the fear of having to admit that there is a gift from God, new the exclusive share of a certain number of his creatures, should influence our opinions; for this gift is an evident fact; and besides, without it, it would have been utterly impossible for humanity to fulfill its destiny in this world; and, if this gift has not continued the common domain, it is because it has pleased its author that it should produce its beneficent effect only on condition of becoming an object of private appropriation. All this it would be very easy to demonstrate, were this the place to do so.
—It remains for us to make a few observations on the particular points which characterize the theory called Ricardo's. This theory fully admits the existence of productive properties in the soil, which belong to it; but it accords to it the power of creating rent only in virtue of the fact that these qualities are not equally distributed through it. This is taking one of the circumstances which concur in producing the differences in the price of rents for the cause which gives rise to them. The origin of rent, as we have said, is the power of the land to return to those who cultivate it more products than they need for their subsistence and the recovery of the amount of their advances; and wherever the lands are adapted to do that, any one who desires can obtain from them this excess that is to say, a rent. Nor is there any need, as Ricardo supposes, of a rise in prices in order for rent to begin; rent appears the moment when the gathered crops leave a part disposable, and it is realized when those who harvest, finding consumers for that part, devote more time to their work than they would have to sacrifice if they limited their efforts to gathering only for themselves. Finally, it is a very simple matter to state how far Ricardo's theory conforms to the reality. One has only to examine what would happen in a country where the lands were all of the same quality, all adopted to remunerate labor liberally, and all so situated as to enjoy the same advantages for the sale of their products. Well, in this case, see what would happen! As everywhere else, the population would obey the laws which urged them to multiply, and as everywhere else, they would rise to the level of the subsistence that agricultural labor could procure for them. There would be an increasing demand, and the cultivators, certain of a market for that portion of the harvest which they would not themselves need, would devote enough time to their labors to gather it, enough time to obtain a rent. The more the town population or industrial classes increase in number, the more would be demanded of the soil by cultivation, the wider would be the extent cultivated, and the more would rent increase. In such a country leasing of farms would appear; there would be found at the same time proprietors possessing more lands than they could themselves cultivate, or desirous of ridding themselves of the whole or some part of their burden of personal labor, and workmen disposed to take their place or to offer prices for a lease, proportioned to the amount of net income which they judged the soil capable of furnishing. The principal error of Ricardo's theory consisted in ascribing a decisive influence to the rise in the exchange value of the means of subsistence, which he thought inevitable.
—Causes which influence the Value of Rent. It is an incontestable fact that the price of rent has risen in proportion as civilization and the comforts of life have increased in human society. It is essential to state clearly the causes under the influence of which this has been effected.
—There are three causes of which account has been taken. One is the incorporation into the soil of the capital necessary to render it more and more productive; the second is the gradual extension of cultivation, over lands either less fertile or more difficult to bring under cultivation than those which had already been applied to for crops; the third is the continual improvements in the application of agricultural labor and skill. We will point out their effects. and, as far as possible, estimate the extent of each.
—As we have said, rent is the portion of the fruits of the earth obtained over the expenses of production or quantities necessary to satisfy the demands of those who work the land, and, in the savage state, the most fertile lands leave some surplus at the disposal of their masters. But as soon as a population, in stead of confining itself to gathering the spontaneous productions of the soil, undertook to direct its active forces, to the primitive profit were added other portions of the product, these latter being due to the immobilization of capital or advances made in the interest of production. Before sowing seed, it was necessary to break and clear the land, and the work, almost always long and toilsome, cost much. This done, they had to level and prepare a soil full of hollows and humps, in consequence of the extraction of the roots; and then, to execute numerous works, some of which were designed to facilitate labor, others to insure the preservation of the crops; and, by degrees, a considerable amount of capital was incorporated into the fields brought under cultivation. What is to be remarked, is, that this capital, for the most part, returned not only the amount of the interest and profits acquired by its employment, but, thanks to the impulse it gave to the co-operative power of the earth, it made to spring up, besides, a new surplus, to increase that which existed previous to its consumption. Consequently, in the present condition of rents, the latter combine three elements having a distinct origin. It would be idle, moreover, to attempt to state exactly the proportionate part of any one of these elements, or even to decide what is only a suitable return for outlays embodied in material improvements all that can be affirmed is, that what holds the least place is the primitive element and it is very easy for any one to assure himself of this if he will merely notice wherein consists that which uncultivated lands yield to the wild tribes who live on their natural products. The two others, on their natural products. The two others, on the contrary, are by far the more powerful. Clearing of land, in our day, is very costly, and certainly must have been far more so originally, because of the coarseness and imperfection of the processes and the instruments in use. On the other hand, there are farms and metairies [i.e., small farms in France let on halves to the cultivator.
—Trans.] where the value expended in constructions and buildings for use, fences, ditches, and permanent works, is equivalent to from a third to a half of that of the land cultivated. This explains why there are economists who. impressed by the great and constant sacrifices made with a view to production, will not see in rent anything but the amount of the indemnity to which these sacrifices entitle those who make them.
—The necessity for a people who are increasing in numbers, to extend cultivation over lands lying fallow, has been ranked among the causes which exert a decisive influence on the price of rent. The reader has seen. in what we have said of Ricardo's theory, what consequences that writer attributes to it. In his opinion, prices rise gradually as labor has to take up with lands less adapted to recompense its efforts it is the expense incurred where it is least remunerated, which fixes the exchange value of the means of subsistence, and hence the rise and progressive increase of rent.
—People certainly consult, in the choice of lands to bring under cultivation, the degree of productiveness which these lands present at the time; and, in the natural order of the development of labor, they only attack the poorer lands when the others have ceased to provide sufficiently for the exigencies of consumption. It is an evil that all lands are not at the same time better and of like quality. Humanity would be better off for a different distribution of the natural fertility of the soil from which it is fed: but has this evil all the effects attributed to it? Does the upward movement which it tends to give the prices of products really take place as people suppose? Are there not causes of decline at work, which on their side are sufficient to maintain such relations between the expense and the results of production, as to prevent suffering in the community? This is a question of the utmost importance, and demands a serious examination.
—We have not thus far taken sufficient account of the influence on rent and prices, of the progressive development of knowledge of agricultural affairs. Of all causes this acts most energetically and constantly, and its effects are the most decisive. Sometimes it reduces the expenses of production by a given quantity of provisions. Sometimes it increases the quantity harvested at the same outlay; and, in both cases, it raises the rent by increasing the surplus obtained after deducting expenses; and, at the same time, it arrests the rise in price while multiplying the amount of provisions destined to meet the demands of consumption.
—One single thing might take away, from progress in the art of agriculture, the power of raising the rent. This would be if the sale value of the products diminished in proportion as labor, having become more enlightened and more powerful, succeeded in deriving more produce from the lands. But, as we know, the means of subsistence have the privilege of never waiting long for a demand. As soon as they become more abundant, the population is not long in multiplying, and soon wants rise to the level of the supply. And is there not also a saving realized in the expense of cultivation, an improvement in the application of the efforts of labor, which does not increase the part of the product which remains net after expenses are deducted, and which consequently does not add to the rent of the proprietors?
—In what measure has the diminution in the expense of production due to the improved application of labor, served to raise rent, and to preserve the higher prices which the extension of cultivation to new lands tended to produce? It would be impossible to state positively; but there is no doubt that this double effect has been fully produced.
—See, in the first place, what an economy in manual labor the gradual improvement of the instruments of production has brought about. Not only good modern plowshares perform in one day twice as much work at least as the best plows of the ancients, but they break lands formerly impenetrable to the share, and they plow the others more deeply. To reaping-hooks of brass or beaten iron have succeeded scythes highly tempered, under the blade of which crops fall rapidly and without loss, which, before their invention, required a much larger number of hands. All the tools and machines which were known in the middle ages have been improved, and, thanks to new inventions, there is no country even but little advanced in agriculture, which does not contain a good number of others of quite superior efficiency.
—This is, however, but the smallest part of the improvements realized. For the productions originally demanded of the earth, similar ones, which are both more hardy and of better yield, have been gradually substituted. By the side of the vegetables then cultivated, or in their place, have come new species from the most distant parts of the globe, which have been admitted in the rotations of crops, because of the increase of product they give on a like surface. This is not all: science has not ceased to reveal new means of fertilization. Materials whose power was unknown have added to the effect of fertilizers; substances that had been left unused have been mixed with arable beds, and have communicated to them the productive qualities which were lacking; and cultivation has been more widely developed and made increasingly productive. In consequence, lands that were despised at the close of the last century, for want of knowledge how to utilize them, have, with small outlay, taken rank among the most fertile, and some, like those characterized in England as poor lands, and in France as lean and dry, are to-day considered the most easily worked, and are farmed out at the highest price. And as to the other lands, we might show some in France, which, sixty years ago, yielded scarcely ten or eleven hectolitres to a hectare (i.e., less than twelve bushels to an acre), which now yield eighteen to twenty hectolitres. This is an addition of about 140 francs (about $27); and it is important to observe that this addition has only involved an increase of less than 70 francs in expense. Also, farm rents which did not reach 35 francs have risen to 70 or 80 francs, while yielding to those who paid them larger and surer profits. Certainly this is a case where the increased power of art has done more, of itself alone, to raise rent, than all other causes combined.
—Such facts (and it would not be difficult to cite many others) attest sufficiently the effects of the successive conquests of human intelligence, and how, by gradually reducing both the toil and the outlay appropriated to production, they must have increased the net product of the land, and consequently the rent. That they have sufficed at the same time, to prevent the price of provisions from rising, and to restrain the effect of the inconveniences connected with the extension of cultivation to lands of inferior quality, is so much the more certain because there has been effected in Europe another improvement, which, by itself alone, would have permitted the population to double, without recourse being had to new portions of the soil. and without any increasing demand for grain. This improvement is in the grinding of grain. the quantity of grain, which during the sixteenth century, only yielded 100 lbs. of flour at the mill, now yields more than 190, owing to the successive improvements in the processes employed.
—It should also be remarked, that, during the middle ages, the improvements in agriculture were both slow and little marked: the agricultural classes were ignorant, and their occupations were regarded with contempt. In our day, on the contrary, they are more enlightened; and on the other side, the natural sciences have put within their reach a multitude of inventions which it has become possible for them to utilize. Moreover, for the last fifty years especially, two well-attested facts have been noticeable: one is the stability or the decline in the price of cereals in most of the advanced countries; the other is a rise in rent and the leasing price of farms with a rapidity unknown at previous periods.
—There is, however, one fact of considerable consequence, which seems irreconcilable with the statement we have just given, and which, on that account, calls for an explanation. This fact is the decline in the price of wheat in the least populous countries of Europe. Thus, wheat is worth only 10 to 11 francs a hectolitre in Hungary, and only 9 to 15 in Russia and Poland, according to the provinces. On the contrary, it has been worth, on an average, for the last ten years, 16 francs 40 centimes in Prussia, 16 fr. 60 c. in Spain, 18 fr. 74 c. in France, and a little more than 22 francs in England. Surely, these figures differ enough to attest that abundance of land permits wheat to be produced on conditions which cease to be as advantageous in proportion as the land becomes limited. Doubtless it is indeed so. A thinly scattered population are free to sow only the better portions of the soil they occupy, and to leave each of the parts which have just furnished a harvest, to rest; and it is certain, that, owing to this mode of changing the localities cultivated, wheat is obtained at less expense than if they were obliged, in order to supply the more urgent necessities, to confine their labors more persistently and continuously to the same arable fields. But it is essential to remark that western Europe has passed through ages during which this mode of culture sufficed for the exigencies of consumption, and yet everything combines to strengthen the belief that it was not then provided with food in the same abundance nor at as low a price as it now is. The following reasons support this assertion. Doubtless it would be impossible to prove exactly what was the price of wheat in France five or six centuries ago. The measures of capacity, notwithstanding the identity of name, differed enormously in their contents, not only in different provinces, but even in different parishes in the same province. In the second place, the average prices, when obtained, confounded, under the designation of wheat, cereals of all sorts: finally, the purchasing power of money was greatly in excess of what it is in our day, when the coin and paper in circulation are abundant; but it is sufficient to read, in the authentic acts which have escaped destruction, the figures relative to the price of days' work, as well as of provisions, as they were at the same times and in the same places, to recognize that the exchange value of wheat was at least equal to what it is at present. Thus, in Normandy, agricultural wages at the end of the twelfth century, were equivalent to less than six litres (about 5¼ qts.) of wheat. From that time, we see them rise by degrees to seven; and only within thirty years have they exceeded eight. We are forced to conclude, from these facts, that the real price of wheat, i.e., its exchange value, has not increased in that part of France.
—Now, this is what facts attest since it has been possible to ascertain them. Fifty years ago the current rates of cereals in France began to be quoted with all the accuracy desirable. During this long space of time the population has not ceased to increase in number and in comfort, and nevertheless the price of wheat is far from having risen. Thus, starting at 1800, the five decennial averages succeeded each other in the following order 19 fr. 87 c., 24 fr. 79 c., 18 fr. 36c., 19 fr. 4 c., 18 fr. 74 c. The particularly high average of the years 1810-20 is attributable to the wars of the empire, the invasion of 1814 and of 1815, and the scarcity of 1816 and 1817: but after 1820, prices fell below the figures previous to 1810 and 1800; and it is a matter well worth attention that never has rent, in the advanced portions of France, increased so much as since 1820, when the sale price of grain diminished or remained stationary.
—In England also, prices, within thirty years, have not ceased to decline. Inconsiderate legislation, monetary circumstances, and the effects of war, had combined to render them exorbitant; and, during the ten years from 1810 to 1820, the average per hectolitre rose to a little more than 38 francs; but from that time they declined, first to 30 francs for the decennial average, then to 25, and finally, before the reform in the corn laws, to a little less than 22; that is to say, below their figure between 1790 and 1800.
—Why is it that the price of wheat has not risen in the most populous part of Europe to-day in proportion as more land has had to be brought under cultivation, and that we find it as low in that the least populous? It is because, in past centuries, art was still in its infancy. for lack of intelligence and knowledge, as well as for lack of properly conditioned working material, the laborers could gather their harvests only by the strength of their arms, and the expenses of labor, compared with its results, were much greater than they are to-day. If, in the United States of North America, or in the regions beyond the Oder, the abundance of land has, on the contrary, its effect, it is because the people derive an advantage from it by means of implements, methods and processes, of which communities in former times learned the use only when they had already begun to press upon one another in the territory at their disposal. American agriculturists, aided by implements which were lacking to the people in the middle ages, can turn to profit their natural advantages of space. Those of the north of Europe are still too ignorant or too poor to be able to make as general use of these improved implements; but they nevertheless do use them; and to be convinced of it, one has but to observe that there exist in Poland, Hungary, and even Russia, a goodly number of large seigniorial estates, under the management of men educated in the best agricultural schools of Germany, who carry into the details of the work the most recent acquisitions of their science and arts.
—Finally, it is wrong to adopt the practice of considering the price of wheat as giving the measure of the difference in the expense of agricultural production in the various countries. What we should examine is, the general price of provisions, and not that of particular articles which do not figure equally everywhere in consumption. Wheat is cheap in the half-untilled countries of Europe; and yet it is much too dear for the poor people who harvest it. They subsist almost wholly on rye; and, while in France rye does not occupy more than a third as much arable surface as wheat, and in England not more than a fourth, in Russia, Poland and Hungary, it takes from seven- to nine-tenths as much. What is the result? In these countries, wheat, for which a small number of particularly fertile lands are reserved, is not worth, relatively to rye, as much as in more advanced countries, and the price of the common means of subsistence there is really higher than the price of wheat, considered by itself, would indicate. On the other hand, it should be observed, that, by the side of the products the extension of whose cultivation tends to increase the price, man continually manures the soil, which, at less outlay, insures him the complement of his subsistence. In France, at the time when the average harvest was 80,100,000 hectolitres of wheat, 12,260,000 hectolitres of meslin (a mixture of wheat and rye), or 30,700,000 hectolitres of rye, there were also gathered 89,580,000 hectolitres of potatoes, more than 21,000,000 hectolitres of maize, buckwheat and millet, nearly 10,000,000 hectolitres of small grain and dry vegetables, and, besides, an immense quantity of garden products. Evidently, if the price of wheat had tended to rise, there would have been found, in the increasing abundance of other means of subsistence, a supplement which would have prevented living becoming more dear.
—These considerations and these facts authorize us to affirm that there is in the natural progress of the applications of labor a power equal or superior to that of the causes which tend to augment the charges of production. It is this power which, notwithstanding the necessity of extending the clearing to lands less adapted to produce, has prevented the price of products from rising, and which, by continually increasing the proportion in which the surplus is realized, has contributed most to the rise in rent.
—It is well to pay serious attention to this point. If such had not been the present course of things, everything would be inexplicable in the least contestable results of the progressive movement of the arts and of civilization. It is a fact beyond doubt, that the more enlightened any population is, the more they increase in number and comfort, and the more the means of subsistence at their disposal become abundant and improve in quality. No fact is better attested. The day laborers of England, France, Holland and Switzerland, are not only better lodged and clothed than they were in the fifteenth and sixteenth centuries, or than those of Russia, Hungary and Poland as yet are, they are also much better fed. Their bread is now composed in part of wheat, and not alone of rye. They eat meal and vegetables; they use less coarse and more varied food. Now, how could it be thus, if it were true that the necessity of increasing the area of cultivated land had resulted in rendering production more and more difficult and expensive? Under the fatal control of the law to which Ricardo's school accord an invincible predominance, we should have seen the remuneration of the efforts of labor gradually diminish; every addition to the quantity harvested would have been obtained only by means of sacrifices comparatively greater; the agricultural class would have increased its ranks as it became necessary to require more of the land; and the time would have come when the other classes, restrained by the obligation to surrender too large a portion of the fruit of their industry, in return for their usual subsistence, would have been arrested in their development. Well, quite the contrary of all that has happened. Starting with the centuries of ignorance and poverty, those centuries when land was so plenty that only the best was cultivated, it has been the manufacturing and commercial classes which have multiplied the most in proportion, and which have at the same time amassed the most capital and wealth. Surely, nothing like it would have been possible if the continual progress in agricultural knowledge had not put the laborers in the rural districts in the way of deriving more ample resources from the soil, and of supplying the rest of the community with food without having to demand prices continually higher.
—One other erroneous supposition is, that the market price of provisions must necessarily tend to rise, in order that the area of cultivation be enlarged. The entire history of agriculture attests, on the contrary, that everything in that regard has been only the fruit of happy discoveries. Thus, it was the invention of a plow with a broad share which determined the breaking up of many aluminous and compact lands previously refractory to the efforts of labor. The employment of lime and marl in places where they were unknown, has permitted the land to be sown to wheat; and it was the discovery of the fertilizing properties of animal charcoal, pulverized bones, and a good number of other substances belonging to the various kingdoms of nature, which revealed the possibility of obtaining rich crops from ground reputed too poor to repay the efforts of continued culture. Similarly, it was the introduction of sainfoin on chalky lands that rendered them productive; and it was an idea which occurred to a sutler in the Spanish army, during the long siege of Antwerp, of attempting to adapt the barren sand of the country to the cultivation of a few fresh vegetables, by burying in it the old, cast-off clothing of the soldiers, which revealed the secret of converting this sand into a soil which now ripens the best crops of Belgium. We have one more fine example of the manner in which discoveries and inventions operate. It is drainage. Is it the high price of food which led to its application? Assuredly not; for it came to take its place among the agricultural agencies and expenditures in England, at the very time when proprietors and farmers thought they had before them only a prospect of a decline. Thus have things happened, and thus will they continue to happen. Man has been cast upon this world, endowed with a faculty for improving his condition here. He has arrived armed, so as to be able gradually to extend the success of his struggles against nature, and the earth, very far from having been given to him as ground on which he would have to expend toil with constantly increasing ingratitude, has been given to him as an agent of production, for the direct assistance of which, when it should come to grow less, it would be easy for him to supply its place advantageously by the acquisition of intelligence destined to add more and more to the results of the application of his labor.
—Some Opinions originating in Accredited Theories on the Subject of Rent. The existence of the rent of the soil, and the rise it has gradually taken, have given birth to some assertions, of which we must here say a few words. Adam Smith, after having shown that rent was a natural result of the co-operative action of the earth in agricultural labor, refrained from pushing farther the analysis of facts, and the examination of their consequences. Taking the principle as he presented it, its result, nevertheless, seemed to be, that the entire rent proceeded wholly from the presence in the soil of productive qualities, which would at all times have operated equally, and created from the beginning a wealth which some had taken possession of, without leaving anything to the others. This opinion was not long, in fact, in acquiring some consistency, and several writers, through embarrassments and ambiguities of language, which betrayed the indecision of their mind, did not fail to conclude that the existence of rent emanated from an exclusive fact of nature. and constituted a sort of monopoly, having no other claim to duration than its utility. The system of Dr Anderson, taken up, commented upon, and formulated mathematically by Ricardo, came to add new motives to those which had given currency to these assertions. In this system, rent, besides originating in an evil, had the disadvantage of increasing only in consequence of a real public misfortune It was the inevitable rise in the price of provisions which almost alone decided the progressive increase. The more the necessity of extending cultivation over lands as yet untilled contributed to change the pre-existing proportion between the expenditure and the results of production, the larger the incomes of the proprietors became, and it was, in fact, by the impoverishment of consumers that they had the privilege of increasing their wealth. Most of the English economists received these ideas admiringly, and promulgated them. To some, rent was a monopoly, which forced those who did not possess land to pay those who possessed it more for provisions than their cost; to others, it was, to use the expression of Scrope, a restriction on the usufruct of the gifts which the Creator has bestowed on men for the satisfaction of their wants. From this position to that implied in the celebrated saying, Property is robbery, is but a step; and this step was speedily taken. Now, it is for us to bring within the limits of truth, conclusions that are either extremely exaggerated or palpably false. If we had to treat here of the question of the right of property, it would be easy for us to demonstrate that this right is based no less upon justice than upon social utility, and to prove afterward, that without its application to land, all the human race, condemned to a pitiless servitude to hunger, would never, in any part of the globe. have succeeded in escaping from the miseries of a savage life; but, to keep to what especially concerns rent, there are several points which it will be sufficient to mention. The first is, that those who first began to cultivate, did not in reality receive for themselves any other rent than the raw product which it was possible to obtain from the little portion of untilled soil they had cleared, that is to say, a product so small that its withdrawal from the common domain could injure no one; the second is, that by obtaining their subsistence by cultivation, they restored to their fellow human beings infinitely more than they took from them. A family of savages require not less than four square kilometres to succeed in obtaining their support; and those who first devoted themselves to agriculture, being incapable of extending their labor over the one-hundredth part of such a space, added in reality to the resources of the community, by leaving it the product of the rest. The third is, that at the time when agriculture began, there were so many vacant lands that it was optional for each to appropriate to his own use such a part as he chose, and that, if there were families who refrained from doing so, it was because they preferred either to live by hunting. fishing and gathering fruits, or to devote themselves to some manufacturing business. Such were the circumstances which controlled the agricultural regime. Certainly, nothing in what tools place was prejudicial to the rights of any one whatever; everything, on the contrary, in the ancient memorials of human races, attests, that, far from considering as despoilers those who first taught them agriculture, they regarded them as benefactors.
—What has caused an illusion in a matter of this kind, is want of knowledge wherein rent consisted, at the time when agriculture began. Looking at the income which land secures for those who possess it, wherever civilization is advanced, people assume that it has always given such returns, and forget the labor and sacrifice it has cost a long succession of generations to make its income what it is. Certainly, if it were possible to decompose rent, and to separate its constituent elements in a rich and flourishing country, one would be surprised at the little the portion derived from the soil would count for in the whole; it would be scarcely perceptible beside what the capital expended in the interest of production, and the savings of labor due to the progress of agricultural science, have added to it. On another side, the errors propagated by the school of Ricardo have not ceased to exercise an unfortunate influence on many minds. Without doubt, the necessity of having recourse to lands less fertile than those which had been first brought under cultivation, would have enhanced the price of food, if the better application of human activity had not come in to restrain or overcome its effects; but. as we have shown, such was the course of things; and, if that necessity acted as an obstacle to the best which might have been realized, never was it a cause of diminishing the wealth already acquired.
—Everything, after all, in the part of the question which occupies us, may be reduced to a knowledge whether the existence and development of rent imposes on the consumers of the fruits of the earth sacrifices which might be spared them. Now, this would be true only in case the rate of rent exercised some influence on prices; and this case, as we know, can not occur. Admit, for example, in its whole extent, the theory which shows rent under the most unfavorable light, viz., the theory of Ricardo. Whither will you be led? To recognize that rent, arising from the necessity of extending cultivation to ground of less fertility, is only an inevitable result of the enhanced price of products whose attainment becomes more and more difficult. In this theory, it is not because rent arises and increases that prices rise; it is, on the contrary, because prices rise, that rent is created and increases. Society is obliged, under penalty of dearth, to pay a price for the necessities of life which secures the producers remuneration for the charge imposed upon them by the cultivation of the worst lands whose culture is indispensable; and hence arise benefits to the possessors of the other portions of the soil, which secure to them a rent so much the larger as their expenses of production are relatively less. Admit the doctrine contained in this article, which is in our opinion much more simple and true, and you will arrive at conclusions still more decisive. It is the peculiar fitness of the earth for production, which, by permitting it to return to those who cultivate it more products than they need in order to subsist and receive a return for their advances, which brings about rent. The more perfect labor becomes, the more is the amount of the expenses incurred in it, in proportion to the quantities harvested. reduced, and the more the excess which is converted into rent increases. If it is true that the necessity of enlarging the arable domain tends to increase the price of production, this tendency encounters, in the advantages connected with the successive improvements due to human ingenuity and skill, a counterbalancing power more than sufficient to restrain it, and this is why the consumption of provisions becomes at the same time extended and improved in all countries when the people become more advanced and enlightened Thus, rent is nothing else than the product of a gift of nature which men are permitted to turn to more and more profit, and whose increase is only an effect of the general development of prosperity. And this is so true, that if it had pleased Providence to increase the fertility of the soil a few degrees more, the price of provisions would have been less, and of rent, more. In the beginning it must have required less labor to obtain subsistence, and, after defraying expenses, there would have remained a surplus, a net product, much greater than that which is now realized under the name of rent.
—The reader will now see how little foundation there is for the charges brought and lamentations made against the existence of rent. Under whatever aspect the question is viewed, whatever theory we adopt, rent appears only as the result of circumstances which it is not in the power of man to change, and not as a portion deducted, to the exclusive advantage of some, from the resources acquired by others. Monopoly is then a very singularly chosen word when applied to the existence of rent. To be sure, the earth is limited in extent, and men can neither increase its surface nor extend to all its parts labor equally productive; but does it follow from this that there is anything in common between the appropriation of land and the concurrence of circumstances which constitutes a monopoly? All have not a lot of land, it is true; but have all a share in the possession of things which, like the earth, own their sale value and the possibility of producing a revenue, to the development of the productive capacity of human society? Land, unless iniquitous and hurtful laws immobilize it in the hands of privileged classes, is transmitted and exchanged like houses, manufactories, contracts for stated payments, or stock in any industrial enterprise. Whoever has savings at his disposal, is free to acquire a greater or less portion of it, and those who possess it are so far from deriving exclusive advantages from it, that some among them may always be found who are ready to give up what they have, for capital from which they hope for a better revenue. The possession of land or of any other sort of wealth, is so simply a matter of taste or convenience, that there are times when, even with a like product, it is not the kind of investment most sought after. To go to the essence of things, there is nothing in the assertions we have just examined, which might not apply to the inequality of fortunes even; for property in land is only one of the forms under which exists this inequality, which, born with society itself, will assuredly last as long as society.
—Besides the questions treated of in the above article, there is one which has been mentioned in the articles COST OF PRODUCTION and DEMAND AND SUPPLY: it is, whether rent constitutes a part of the cost of production. We think we can not do better than to quote the opinion so clearly stated by Mill. (Principles of Polit. Econ., book iii., chap. v.): "Rent, therefore, forms no part of the cost of production which determines the value of agricultural produce. Circumstances no doubt may be conceived in which it might do so, and very largely, too. We can imagine a country so fully peopled, and with all its cultivable soil so completely occupied, that to produce any additional quantity would require more labor than the produce would feed: and if we suppose this to be the condition of the whole world, or of a country debarred from foreign supply, then, if population continued increasing, both the land and its produce would really rise to a monopoly or scarcity price. But this state of things never can have really existed anywhere, unless possibly in some small island cut off from the rest of the world; nor is there any danger whatever that it should exist. It certainly exists in no known region at present. Monopoly, we have seen, can take effect on value only through limitation of supply. In all countries of any extent, there is more cultivable land than is yet cultivated; and, while there is any such surplus, it is the same thing, so far as that quality of land is concerned, as if there were an infinite quantity. What is practically limited in supply is only the better qualities; and even for those, so much rent can not be demanded as would bring in the competition of the lands not yet in cultivation; the rent of a piece of land must be somewhat less than the whole excess of its productiveness over that of the best land which it is not yet profitable to cultivate; that is, must be about equal to the excess above the worst land which it is profitable to cultivate. The land or the capital most unfavorably circumstanced among those actually employed, pays no rent; and that land or capital determines the cost of production which regulates the value of the whole produce. Thus, rent is, as we have already seen, no cause of value, but the price of the privilege which the inequality of the returns to different portions of agricultural produce confers on all except the least favored portion. Rent, in short, merely equalizes the profits of different farming capitals, by enabling the landlord to appropriate all extra gains occasioned by superiority of natural advantages. If all landlords were unanimously to forego their rent, they would but transfer it to the farmers, without benefiting the consumer; for the existing price of corn would still be an indispensable condition of the production of part of the existing supply, and if a part obtained that price the whole would obtain it. Rent, therefore, unless artificially increased by restrictive laws, is no burden on the consumer: it does not raise the price of corn, and is no otherwise a detriment to the public, than inasmuch as if the state had retained it, or imposed an equivalent in the shape of a land tax, it would then have been a fund applicable to general instead of private advantage."
E. J. L.
[68.]A main point in Anderson's theory was, that increased demand for food leads to increase of price, and this permits additional cost to be bestowed in bringing inferior land into cultivation. (See Macleod's Kcon. Phil., vol. ii., p. 29.) E. J. L.
[69.]Surely M. Passy can not think that Genovesi, Beccaria, Verri, the physiocrates, Hume, Condillac, Bastiat, Whateley, and all the other economists who have considered the cause of value to lie in human desire, thought there could be no demand for anything except that on which labor had been expended! How would he account for the value of undeveloped mines, quarries, etc., and what is more, for the value of labor itself!—E. J. L.
[70.]Here M. Passy falls into the error (pointed out by Storch in his Polit. Econ.) of confounding the production of articles which have value with the production of their value.—E. J. L.
[71.]The income from talents and moral qualities, being due to the "natural fertility" or "productive power" of the mind, bears so many points of resemblance to what M. Passy treats of under the title "Rent of the Soil," that some economists put it in the same category. Storch, in his Cours d'Economic Politique, devotes a chapter (chap. v., book III.) to the "Rent of Talents and Moral Qualities." [Original reads "Reat of Talents..."—Econlib Ed.]
[72.]The reader will see how far this was from being a response.—E. J. L.
Footnotes for REPUDIATION.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 3 Oath - Zollverein Chapter: UTILITY
Accessed from oll.libertyfund.org/title/971/63708 on 2009-05-08
The text is in the public domain.
UTILITY. This word has the same meaning in politico-economic language as in the usual vocabulary. What it designates, in things, persons or acts, is the power they have of rendering us some service, the service, for instance, of sparing us certain privations, inconveniences or suffering, or of procuring for us satisfactions and enjoyments. Economists, however, employ the word in the plural, when, instead of considering utility as an abstraction, made up of every distinct particularity, they look upon it as it exists in different objects with differences of nature and destination.
—The first distinction to be made between utilities is, that there are natural and artificial utilities. Natural utilities are those which supply the necessities of our existence without our having to do anything to obtain them. Such are the utilities furnished us by the air which surrounds us, by the heat and light which the rays of the sun bring to us. These utilities are the work of nature entirely. Nature makes them a gratuity to us. Artificial utilities are those which we obtain only at the price of more or less painful efforts. It is for us to learn to produce them, and we never acquire their possession and use, except for some consideration or on the performance of certain services.
—Political economy has scarcely anything to do with natural utilities. It may say that they are not all spread in the same measure over all parts of the globe; that there are no two regions in which heat, the force of the wind, water or arable land, is distributed in exactly like proportions, and that such a fact exercises a necessary influence on the modes of the activity, the facility of the development and the destiny of the populations of those regions; but here ends what political economy has to say about them. We are here in presence of a phenomenon whose essence it is not given to man to change, for it emanates from laws over which his will can not possibly have any efficient action. Everything, on the other hand, which relates to artificial utilities belongs to the domain of political economy, and challenges its investigation.
—To produce utilities is all that it is in the power of men to do. When nature placed matter at their disposal, it did not wish that they might have the power to add one single particle to it. All they can do is to change the place of, to separate, to combine and to transform the elements of matter in such a way as to cause them to acquire properties which they do not possess in their raw state. The labor of men consists only in giving the things on which it is brought to bear qualities and forms which adapt them to use; more than this, human labor can not do. Nature has reserved creative power to itself entirely; to men it has granted only the power to utilize its gifts.
—It is easy to conceive that human labor can propose to itself no end but that of producing utilities. All labor involves pain and fatigue, and no one would surrender the sweets of rest if he had not in prospect the compensation which is the reward of labor. But there is no work which can reap reward unless it produces fruits endowed with some quality. Mistakes may, indeed, be made in this respect; it may be, that, from ill-advised endeavors, the results which the men who made them promised themselves may not come; but these are mere accidents. In the normal state of things, there is no labor which has not the production of pretty manifest utilities for its object, utilities sufficiently desired by others to make the advantage of disposing of them compensate for the sacrifices necessary to the obtainment of them.
—In proportion as nations become enlightened and wealthy, they strive to produce utilities more diverse and in greater numbers. After those utilities which serve to satisfy the principal necessities of life, they create others which answer only factitious wants and tastes, which grow more and more elegant and refined. It is the eternal task of nations to seek for and endeavor to obtain all that can add to the well-being already acquired, to the satisfactions already enjoyed; and the better they accomplish this task, the higher is the degree of power and prosperity which they attain.
—Artificial utilities, those which are the fruit of man's own labor, have given rise to distinctions. At first they were divided into material utilities and immaterial utilities. The former are these utilities which man communicates to matter, which he fixes and incorporates in matter either by changing its place or form; the latter are those which do not assume a form either tangible or ponderable. These latter again have been divided into two categories. To the first of these categories belong such utilities as are incorporated in persons, and fit them to render services to themselves or to others. Utilities attached to talent, to information or knowledge, are of this kind, as are also utilities whose use is beneficent and profitable. To the second category belong those utilities which emanate from services and acts that produce no change in the productive capacity of persons or in the condition of things. Of this latter kind are the utilities which result from the labor of judges, soldiers, public functionaries physicians, lawyers, musicians and actors. These utilities may answer to very real social wants; but they have not, at least in appearance, directly reproductive effects; neither are they susceptible of accumulation or duration.
—Utility is produced under forms so diverse that it would be easy to add to the number of these classifications and to establish new subdivisions among them. But it is in view of the correlations and affinities which exist between utility and wealth that the classifications we have made have been admitted; and the ideas or notions to which they answer merit serious attention. The term utility is a generic one; and everything which, it matters not by what way or in what manner, has the power of satisfying our wants or relieving our sufferings, of contenting our desires, or contributing to our pleasure, possesses the quality characterized by the term utility. The meaning of the word wealth is a more restricted one. Although there can be no wealth whose basis is not utility, utility alone does not suffice to constitute wealth; it constitutes wealth only by allying itself in things to certain qualities of a particular order. Most assuredly natural utilities are indispensable to us; but as every one uses these utilities at pleasure, and gathers them without cost of any kind, and as they are not susceptible of private appropriation, it would be wrong to apply the term wealth to them. What constitutes wealth is exchangeability, it is the value things owe to the possibility of procuring us, by our delivering them to others, this quantity or that of other things. All economists, however, do not admit that exchangeable utility, or utility having a price, is sufficient to give things the name of wealth; they claim, that, in order that that name should properly belong to the things in which this utility is to be met with, these things should, besides, be susceptible of accumulation and duration; in other words, that they should exist under a material form. It is easy to see, that, according to the definition given to the word wealth, the number of utilities which is admitted to constitute a part of it, must increase or decrease, and that the classification adopted by some writers should not be adopted by others. Be this as it may, the question of immaterial products and unproductive labor is the one that suggests itself à propos of utilities. Of artificial utilities, there are some which are not converted into material wealth or into the means of producing material wealth; such utilities are considered by some writers as unproductive; and, in the eyes of these writers, the labor to which the utilities just referred to is due is in as much disfavor as sterile labor. Whatever the distinctions that may be established among the different kinds of utility, it is a mistake to suppose that there can be any utilities which do not contribute more or less actively to the production of all the others. All the utilities which man succeeds in realizing have the same destination, the improvement of his lot; they all assist one another, combine with one another, and mutually fecundate one another, in such a way that those least material are as much as the others essential to the formation and accumulation of wealth, and serve as much to produce it.
—Take wealth in the form under which that name can be least denied it, the form of utilities fixed and incorporated in material objects: such wealth can be produced only with the aid and concurrence of immaterial utilities. It is intellectual conceptions that the workman realizes in his action on matter; it is the knowledge he has acquired that decides the success of his work; and the more precise and extensive this knowledge is, the more fruitful are his efforts, and the more do these efforts increase the things they are intended to produce. But in what does knowledge consist if not in the acquisitions of the mind? And is it not certain that the nations which possess most knowledge are those which obtain material wealth in greatest abundance? Assuredly nothing is more indispensable to the production of material wealth than the formation and accumulation of the capital the employment of which that production necessitates. But it is to the action of utilities of the moral order that the creation of capital is due. It is love for one's family, temperance, economy, and care for the future, which determine or permit the making of savings. If these qualities were wanting, no one would lay by, in order to reap a remote advantage from them, resources whose consumption would increase the well-being of the present; and there can be no doubt that the countries in which these qualities are found are always those in which capital continually extends its conquests and increases wealth most rapidly.
—Many economists admit rightly that the knowledge, skill and constancy of artisans and workmen are as much a part of the wealth of a country as the tools, machines and instruments which they use. Doubtless these kinds of utilities contribute powerfully to the formation and increase of wealth; from the point of view of the production of material wealth, there are, however, between them and the utilities which become incorporated in persons, differences only as to the modes in which their action respectively becomes manifest. And, in fact, that labor may produce wealth, it is not sufficient that it be enlightened, active and intelligent; it is further necessary that those who perform it be certain of reaping the fruits of their endeavors. But it is to insure this very certainty that the work of judges, magistrates, and even of armies, is intended; and such is the utility which results from the performance of such work. If the laborer, the manufacturer and the merchant display all the activity of which they are capable; if they make savings in order to extend the field of their operations; if they seek for and apply to production better and better processes, it is only because they have faith in the efficacy of the services of all those who are charged with guaranteeing the security of person and property. The utility produced by the prosecution, sentencing and punishment of crimes and misdemeanors, does not vanish, as is supposed, with the acts in which it is embodied; on the contrary, it continues to subsist in the minds of all, intimidating these who might be tempted to do wrong, and demonstrating to others that neither violence nor spoliation can attack them unpunished, and that they may devote themselves to their work in security. We have seen the services rendered by the agents of authority cease to keep their habitual course; and, at that very instant, we witnessed, too, the production of wealth affected by languor and discouragement; so true is it that in the kind of utility which these services produce, is to be found the most indispensable stimulant to the success and energy of industrial labor.
—We may boldly assert, that nothing which is useful, nothing which serves to enlighten minds, to quicken the moral sense, to propagate healthy habits, or to guarantee peace and security among a people, can be without effect on the success of the efforts employed in producing material wealth. Those immaterial utilities even which seem the least productive; those even the obtaining of which, according to eminent economists, instead of making nations richer in material products, impoverish them to the amount of the sum total of material products consumed by the men employed in the service of the public, contribute their share to the formation of wealth; so true is this, that the formation or production of wealth would become impossible if the immaterial utilities above referred to were either entirely wanting or not to be found in the proportion required by the wants which they serve to satisfy.
—We have still to examine one other correlation of utility with wealth. It is certain that utility is a necessary condition to wealth. A product incapable of rendering any service whatever, unfit for any use, would find no one willing to give anything whatever for it; it would, consequently, be wanting in all exchangeable value, that is, in the quality, lacking which, it could not become wealth. This constant association of wealth and utility could not fail to attract attention; and, therefore, many writers supposed that there must exist between them relations such that the one might serve as a measure for the other. Although this error is refuted in the article VALUE, we can not pass it over in silence here. Although the utility inherent in things depends, so far as the estimate made of it is concerned, on circumstances momentarily variable, it is none the less certain, looked at from the general point of view, that it has its measure marked by the species of wants to which it relates. Thus, that utility exists in the highest degree in those things which supply the prime necessities of life, necessities which must be provided for under pain of inevitable death. It exists, in an inferior degree only, in the things which merely serve to defend us against privations and sufferings which do not jeopardize life, and in a degree still lower in those things whose use has no effect out to procure us pleasure or amusement. This gradation of utilities, based on the very nature of the evils or perils attached to the non-satisfaction of the wants which they enable us to satisfy, is simple and easy to understand. There is no one who does not recognize and assert that utility is much greater in the alimentary substances, without which we would have to suffer the deadly pangs of hunger, than in the products to which we owe enjoyments, the privation of which would be attended by neither pain nor harm.
—But if utility finds its measure in the greater or lesser absolute exigency of the wants of our nature, that measure is far from being found again in the value itself of the things we may use, and far from contributing, according to their degree of distinction, to make those things integral parts, more or less considerable, of public or private wealth. It is in vain that the bread which nourishes us and the woolens that cover us are of prime necessity to us: that does not prevent an object which, at best, is good only to relieve for a moment the ennui of the person who buys it, being paid for at a price infinitely higher. The reason of this is, that there are men rich enough to give full rein to tastes and desires which others are entirely ignorant of or can not satisfy. Those to whom it is easy to provide for the most essential wants of life, think of procuring all the enjoyments compatible with the size of their fortune. It is not enough for them to be well fed, comfortably lodged and warmly clothed; they offer incense to pleasure, and seek it in everything. They must have things which charm the eye, which afford them delicate impressions and sensations, whose possession flatters their vanity, which sometimes borrow all their attraction only from a fancy or from the caprice of a moment; and the value conferred on these objects by what those who desire them are willing to give in exchange for them, assures to them, among things considered wealth, a much greater place than they would occupy if nothing but the quantum of real utility they contain were taken into consideration.
—It is only when the products indispensable to the satisfaction of the wants of existence are lacking that the utility which they contain makes its empire felt, and becomes the dominating principle of their value. When the things which can be dispensed with without peril or injury cease to be supplied in sufficient quantity, fewer of them are bought, and the rise in the price of them has its limit in the reduction of the number of those who ask to acquire them. The same is not the case with those whose use no one can give up without running the risk of death. In times of famine men dispute the means of subsistence with one another. The rich, to procure bread, sell everything which ministers only to their pleasure. The poor despoil themselves of their furniture, their clothing and their shoes. People must then perish or assuage their hunger: each sacrifices to the first of all wants, that of self-preservation, everything which is not of a nature to satisfy that want. Such cases present themselves in besieged cities when their stores are exhausted, and in deserts when, devoured by thirst, the merchants crossing them give for a few drops of water the treasures carried by their camels. But in the normal condition of things, when all kinds of utility are to be found in their customary proportion, their particular destination or quality has no influence on the value at which they figure in exchanges or at which they are estimated in the sum total of wealth. What operates, then, across the variations in price due to the fluctuations of supply and demand, is the amount of the cost of production of each.
—These considerations suffice to show in what the correlation which exists between utility and wealth consists. If value attaches to things only on condition that they be gifted with the utility which alone has the power to render them exchangeable, the value in attaching to them by no means takes for its measure the character of that utility. It is the quantity of other things which each of them permits us to obtain that determines its value; and a precious stone, a pearl or a jewel which serves only to adorn the lady who wears it, has, with like weight and quantity, a thousand of times the value of the wheat or fuel without which we should fall victims of hunger or cold, but which costs little to produce, abounds in the markets, and sometimes has to wait for purchasers.
—To resume. Nature gratuitously gives up to men certain utilities which all enjoy equally: it imposes on them the necessity of creating the others. Their labor can produce only artificial utilities, and never has any end but to produce such utilities. The utilities which human labor obtains are of various kinds: some, becoming fixed and incorporated in matter, communicate to it the qualities which constitute wealth; the others are not realized under a material form; they attach to the persons of men, fitting them to render services to themselves or to others, or they attach to acts or services the performance of which has for effect to insure to the individuals or nations to whom they belong, satisfactions, advantages or guarantees, the absence of which would infallibly react in an injurious manner on their interests and on their well-being. It must be remarked, that, although immaterial, these utilities contribute actively to the formation as well as to the accumulation of the products which constitute material wealth; from which it follows, that, even considered solely in their relations to that wealth, the labor by means of which it is obtained has a character of productiveness not less real than the labor which acts more directly on matter itself.
—Utility is one of the constituent conditions of wealth; it is inseparable from wealth, but can not furnish a measure of wealth. The utility inherent in things is greater in proportion as the wants to which they are fitted to give satisfaction are more urgent and intense; the wealth inherent in things, on the contrary, is greater in proportion as the cost of production of the latter is greater.
John Joseph Lalor, Cyclopaedia of Political Science, Political Economy, and of the Political History of the United States by the best American and European Authors, ed. John J. Lalor (New York: Maynard, Merrill, & Co., 1899). Vol 3 Oath - Zollverein Chapter: VALUE
Accessed from oll.libertyfund.org/title/971/63711 on 2009-05-08
The text is in the public domain.
VALUE. The notion of value is one fundamental in political economy; but unfortunately there is no politico-economical idea which requires so much effort of the power of attention and so much patience to be thoroughly understood. The reason of this is, that the phenomenon to which it relates is purely relative, and consequently difficult to characterize. In order to acquire a just and precise idea of value, we must therefore enter into explanations of some length.
—The things whose possession is necessary, useful or agreeable to us, are numerous and various; and we can obtain those which we ourselves need only by parting with others of which we have the disposal. Hence exchanges, which, by determining in what quantity one thing is accepted or delivered in return for another, have the effect of establishing a relation of value among all things. Can you, for example, get one hectolitre of wine for one hectolitre of wheat? If you can, the fact that you can, assigns to these two products their relative value. They figure in the exchange as equal quantities, and the one has the same value as the other. Suppose that from some cause, however, we have to give, not one hectolitre, but 120 litres of wheat for one hectolitre of wine; this establishes a new ratio between the quantities exchanged, and the values are no longer the same. The value which the wheat possessed relatively to the wine fell just in proportion to the increase in the number of litres to be delivered in exchange for one hectolitre of wine; the value of the wine, on the contrary, increased in proportion to the diminution in the quantity of it to be furnished in order to procure one hectolitre of wheat. What one of the products has lost in value the other has gained, and this in exactly the same proportion. What we have just said of wine and wheat, is true of all possible products. They all give rise to exchanges, and each of them obtains a value founded on the quantity either of another product, or, in general, of the other products for which it can at any given moment be exchanged.
—The advance of civilization long since did away with barter. The more numerous and diverse products became, the more men realized the necessity of choosing one of them to serve as a medium of exchange; and coined money was chosen for this office, because it possesses certain qualities in a greater degree than any other. Money is one of those things which men desire because of the services which they render, and for which, when in need of them, they give a certain amount of other things. This fact, while it gives to money a certain value in each of the other products, gives also to each of these a value in money; determined by the amount which is required to procure them. Thus, the amount of money which all these products command, i.e., the price which is given for them, constitutes a common denominator of the value which they have in commercial transactions, and it is only necessary to compare their prices to know their relative value. If a hat is worth three dollars, this price, compared with that of sugar, of cloth, of a plow, or of any object whatever, shows how much of these different products can be obtained for it, and consequently what value hats acquire from the quantity either of some particular product or of other products in general which their possession confers the power of acquiring. The existence of an intermediary which assures to the values attached to the various products a term of comparison equally applicable to them all, and which renders it easy to follow the fluctuations in their values, is an immense advantage. But it is important to bear in mind that prices and values are very distinct things. (See PRICES.) Prices express only the quantity of coined money which each product is worth, and this quantity is subject to changes which have their own special causes, but which, while they modify prices, have no influence on the relation of values that exists between the products themselves. Thus we see everything in value is relative. It is the relation existing between two things exchanged, a relation which depends upon the respective quantities which each must deliver to the other in order that the exchange may be made on equal conditions, a relation of which (from the very fact that these conditions must be equal) one of the terms (wherever there is a relation, there must be at least two terms) can not be affected in any sense whatever, without the other term being affected at the same moment in a contrary sense. It is essential that this purely relative character of value be clearly understood, if we would not fall into a multitude of economic errors, so great a part does value play in the speculative part of the science. Among the many consequences which flow from the idea of the relativeness of value, there are two which we will single out, if only to throw a little more light on a subject naturally intricate and abstract: one is, that there are only values, and there is no such thing as a collective value, formed by the union of particular values, susceptible of division, degree or measure; the other is, that there can be no such thing as a general rise or fall of values. And in fact, the values in things being only the expression of the quantity of other things which can be obtained in exchange for them, it is impossible that values should increase in the one case without diminishing in the other. The moment it becomes necessary to give more wheat in order to have a given quantity of wine, we give less wine to procure a given quantity of wheat. The fall in the value of wheat produces the rise in the value of wine, and it is thus in all exchanges. There is no rise of values which does not suppose a fall, and in like manner no fall which does not suppose a rise.
—It has taken much time and reflection to free the theory of value from the complications which rendered it uncertain and obscure. In vain did the first economists examine the question; they did not succeed in presenting its solution under forms sufficiently clear and precise. It would be wrong to blame them for this. To the difficulties met with in the analysis and definition of every relation (ratio), when neither of its terms has anything fixed in it, there were added others, in the case of these first economists, caused by the very imperfection of the language they were obliged to use. In common parlance, the word value had different significations. It was used indifferently to designate, at one time, the degree of utility inherent in the use of things; at another, the power of acquisition which these things possessed with regard to other things; at another still, their money price. Hence came, in the ideas suggested by the word value, associations which prevented people from noting differences and distinctions between these ideas, without the noting of which it was impossible to reduce them all to their essential meaning.
—What economists first thought of was the necessity of attaching to the word value qualifying terms intended to characterize each of the meanings which it owed to usage. The French economists of the last century resolved to apply the term usual value (valeur usuelle) to that quality which gives things the capacity directly to satisfy the wants of those who possess them, and venal value (valeur vénale) to those qualities which give things that capacity only by means of exchange. This was the course taken by Adam Smith also. What the physiocrates called usual value, he designated as value in use, and value in exchange what they called, less correctly, venal value. The moment people introduced into science two distinct meanings for the word value, instead of reserving it, as the most eminent economists do now, to express only the ratio of quantity between things exchanged, it became necessary to make use of adjectives to determine which of the two significations they intended to give to the word, each time they used it. But even this care could not sufficiently obviate the grave inconvenience of using one and the same generic term to express qualities and circumstances which in themselves have nothing in common. Conceptions which involved the idea of value remained undecided; men's minds were confused by applying the idea of one kind of value to another, and the way was opened to confusions which seriously impaired the progress and authority of the science.
—It will be necessary to call attention to several of these confusions by reason of the place which they occupy in the writings of the older economists, and which they have retained even in the works of some of their successors. Some observations upon the most serious of these confusions will serve, on the one hand, to guard us against certain errors into which it is easy to fall, and on the other, by showing what value is not, will make it easier to perceive what it really is.
—We will mention only those which it is important to call attention to. We may consider them as follows: the confusion of value with price; the confusion of value with certain circumstances by which it is influenced; the confusion of value with wealth; and, as a consequence of this last, confusion in the search for an undiscoverable measure of value.
—It was easy, and even natural, to a certain extent, to confound values and prices, since, considering them from product to product, the ones serve to measure the others. In the ordinary course of facts we begin by exchanging the products which we have to dispose of, for their value in money, then we give the amount of money received for the other things which we wish to procure, and it is certain that the value in money of these things really corresponds to their relative value. An article that is worth two dollars in money is worth twice as much as that which is worth only one dollar, and if the exchange were made in kind, we would have to give double the quantity of one to obtain the other. But we must bear in mind that prices merely express the relation that exists between the quantities for which money, and other products, are reciprocally placed in the balance, and this relation remains subject to the empire of circumstances which may affect the disposable quantity of money. If money is abundant, it will be more freely offered for each of the products which it is used to purchase; then its value decreases, and prices rise. If money, on the contrary, becomes scarce, less of it will be given in exchange for other things in commercial transactions, its value will increase, and prices, on the contrary, will fall. Thus, unlike values, which can neither increase nor decrease simultaneously, prices, which are the simple results of the comparative value of money and all other products against which it is exchanged, undergo fluctuations peculiar to themselves, and they may all rise or fall at once. The confusion of prices and values has been the unfortunate cause of rendering nations which were not wanting in scientific worth, singularly obscure. It has led economists to conclude from prices to values, and from values to prices, to suppose them governed by the same laws, and subject to the same accidents, and to attribute to the amount of prices, an influence which it should not have Hence proceeded errors which deservedly esteemed economists have not always avoided, and of which the works of Ricardo himself afford but too many examples.
—One of the most frequent confusions, and one which, by its generality, has proved much more prejudicial to the science, is that which confounds value with some of the circumstances that concur in giving value to things. This is the immediate result of the many different acceptations given to the word value. Writers employed the expressions "value in use" and "value in exchange"; thenceforth it was natural that people should imagine that there must exist between the two kinds of value some secret affinity, some link or bond of union covered by some higher principle, common to both, and they set to work to find that principle. Adam Smith believed he discovered it in materiality and duration: Ricardo, in labor; J. B. Say, in utility; others, in rarity, etc., etc. The inevitable consequence was, that they mistook the very nature of value, and forgot its origin and character; and nevertheless, among the masters of political economy, only a few of the more recent have succeeded in completely escaping from an illusion produced by the use of an inexact and vicious terminology.
—The observations suggested by these errors are applicable to all such affinity except rarity. What is value? As we have already said, it is simply a ratio of quantity between products exchanged, and it is perfectly clear that it can not be found outside of this relation. Doubtless, when, in order to obtain a product, we consent to give others which belong to us in exchange for it, what determines us to do so is some quality in the product itself which pleases us, and which is not to be found, or which is found only in a smaller proportion, in those which we give in return for it. This is the reason for every exchange that is made: there would be no exchange if all things possessed the same qualities, and could procure for us the same enjoyments, and satisfy the same wants; and it is surprising that this simple remark did not suffice to prevent men from connecting with this or that particular quality of things the principle of their value.
—There are things which in order to answer to the wants in view of which we seek them, should possess materiality and duration; there are others which must have absorbed a great deal of labor in their making, and others again which must be susceptible of immediate consumption: we exchange them for one another because our wants and our tastes are different, and because, if to build a house, we must have materials whose duration will resist the ravages of time; we must have, in order to feed ourselves, bread and meat, which do not last, and for our recreation, theatrical representations, concerts and amusements, which produce but a passing emotion, and leave no trace except in our remembrance.
—Utility is essential to the value of things, in this general sense, that we give nothing for any of them but upon condition of finding, in their possession or in the use which we make of them, some pleasure or enjoyment; it may be well to recall, however, that the nature of the wants which they are intended to satisfy has no influence on the more or the less of value which attaches to them. We must first provide for the most imperious necessities of life, and obtain the means of satisfying them; but, this once done, each one takes into consideration other consumers, and this consideration is ampler in proportion as he can accord them more. The wants of the intellect and of the heart, love of the arts, taste for luxury, the promptings of pride or vanity—all concur in determining the esteem in which things are held; and it is not uncommon for men to pay for a flower, or ribbon, or the pleasure of hearing a violinist, for instance, a price equivalent to a considerable quantity of the products without which we would have to suffer the deadly attacks of cold or hunger.
—What gives at times an immense value to products, whose deprivation causes neither inconvenience nor physical suffering, is the price that is put upon them by those who are able to obtain them, and the sacrifices men make in order to possess them. There are men rich enough to gratify their every fancy; and, no matter what the things which their fancy craves, these things from the moment they are sought after and there is a demand for them, acquire, equally with other objects, a real value, based upon the amount of other things which men give in order to obtain them. Although there is nothing that is indifferent in the feelings and tastes which dictate the employment of wealth, from the standpoint of morality, of the future and of social progress, nothing can prevent the objects which serve to gratify frivolous and even blamable desires from having the value of the objects for which they can be exchanged.
—Among other consequences following the opinion that value should have a fundamental principle in one of the material qualities inherent in things, there is one consequence which has given rise to so many controversies, that we can not pass it over in silence here. It has been asked whether it were possible that immaterial things, acts, efforts, services, which are not realized under a tangible and durable form, could have a value; and a goodly number of writers have answered in the negative. The services of governments, of magistrates, of the clergy, of physicians, and of members of the bar; instruction given by masters, professors and artists—all these and many other similar things have been declared without real value; and this despite the fact that it was very evident that those who felt the want of these services did not hesitate to give, in order to obtain them, large quantities of things to which value was attributed because of their materiality. This erroneous opinion has now, however, but few adherents. It is recognized that nothing which men prize sufficiently to give a price for, can be devoid of value, and that those things which are called immaterial have, like all other things, a value proportioned to the quantity of each of the different things which they put those who dispose of such immaterial products in a way to procure for themselves. This error regarding immaterial services has not been confined to the question of value; we meet with it also in essays upon production, wealth and labor.
—Rarity deserves special mention. It is not, like materiality, duration, labor, or utility, a quality substantially incorporated in things, it is merely the effect of a disproportion between the quantity in demand and the quantity obtainable, and it, therefore, exercises an effectual influence on the value of the things of which it is either the ordinary or the accidental lot. What causes rarity is the impossibility of increasing a thing at the pleasure of those who wish to obtain it; hence they vie for its possession, and give in exchange for its a much larger quantity of other things than they would if it were more abundant. This it is that assures a very great value to certain products which are found in small number;-this it is also which for a moment gives an extraordinary value to the most common products, such as wine, wheat, wool, cloth, or glass, when, by some accident, the want of them is felt. But rarity, besides being at all times an evil, is, like value itself, only the effect of a relation, and can exist only on condition that it (rarity) does not become general. When bread is more scarce than usual, it acquires an increase of value, but this increase it acquires only because the products given in exchange for it lose in relation to it some of their own proper value, and lose this only because they retain their accustomed abundance. If they became rare or scarce at the same time and in the same proportion as bread, the relation between the quantities exchanged would have suffered no alteration, and their respective values would have remained the same. Rarity acts only privately, only to the extent that it is confined to certain products in opposition to others; and to elevate rarity into the dignity of the general principle of value, is to make a strange mistake; for it is evident, that if rarity extended at the same time to everything offered in exchange, its effects would disappear immediately.
—The confusions between value and wealth do not lead to consequences of so much importance. They spring from correlations which have a real existence, and it is easy to explain them. Private wealth is in proportion to the value of the things of which it is made up. Lands, houses, capital, merchandise, in a word, everything which belongs to individuals, is susceptible of exchange, and consequently possesses the value resulting from the amount of things of another kind which it can be used to obtain. In order to know, therefore, the amount of his wealth it will be sufficient for an individual to ascertain the value in money, the price, of each of the things which he possesses, and then to compare the sum of these prices with what it will enable him to procure in other things. But the correlation between private wealth and the value of the different elements of which it is made up, does not extend to real, positive and general wealth. This latter constitutes a whole, and for want of a term of comparison (because it is not exchangeable) it can not be estimated in any manner. If the things comprised in the sphere which general wealth embraces have all the value which is conferred on each one of them by its particular power of acquisition with regard to other things, the same can not be said of the mass; for this mass admits of no comparison which would permit us to assign it a value, and it would be vain to attempt to find, in the variable relations of exchange that exist between its constitutive parts, an expression which would cover them all. Hence we must have recourse to circumstances entirely foreign to the value which the elements of general wealth receive solely from the exchanges to which they give rise, if we wish to estimate the extent of the wealth of nations in general, or of a nation considered separately.
—However, it will not be without some utility to explain still more the differences which necessarily distinguish value from wealth. Wealth, taken in its aggregate, is the possession of those things by means of which men attain to the satisfaction of their wants, and the more abundant these things are, the greater wealth is. Therefore, it is by its ratio to the wants which it is destined to satisfy, that we must estimate wealth, and this ratio can not be affected by the ratios which exist between the things that constitute it. Not that wealth can increase without modifying the preexisting ratios of value. Wealth increases only to the extent that the efforts of labor, becoming more ingenious and more fruitful, produce a greater amount of some one of those things whose use is either necessary, agreeable or useful to us; from which it follows that this thing offered and delivered in exchange for others in a greater quantity than before, loses something of its relative value, and causes these other things to gain in relative value. Thus every advance in wealth has the effect of reducing the value of the products which it increases, and of raising the value of the products on which it has no effect. This is an eminently beneficial change to the people among whom it takes place; but from the point of view of value the change has no effect, because the value of each thing depends on relations one of whose terms can not increase without the others decreasing.
—It is so difficult for the mind to see in value only the effect of a ratio of exchange, that for a long time most of the economists were preoccupied with the idea of discovering some measure for it. This was a seeking for the impossible. It would have been necessary to find a value to measure value, and where could a value be found which was not itself the result of a ratio, and, because the result of a ratio, as changeable and variable as the other values to which it was sought to make it serve as a comparative measure or standard? But the search for this measure of value has been so common that we can not pass it over without remark.
—Among the things which have attracted attention as specially fitted to serve as a measure of values, coined money, human labor and wheat have been accorded the preference. But it was not given to any one of the three to act as such measure better than the others. When money was taken as the measure of values, it was indeed possible to find what was the value in money of each product at a given moment, and thus to find a comparative term applicable to all products; but it was not possible to discover in money itself a fixed value protected from the variations which are the effects of causes operating on the quantities of the products which have just come into the market to be exchanged one against the other. It was plain that gold and silver, of which money is made, like all other products, varied in value, according to their greater or less abundance in the market, and that they had a very unequal power of acquisition at different epochs, and were also subject to the empire of circumstances, which at one time rendered their extraction more costly, and at others made their consumption greater or more necessary.
—And so of human labor, in which Smith had placed the origin of value, and which he had pointed out as the one thing which afforded its most exact measure. Human labor is unquestionably an element in all production of wealth; but it in no wise follows that its value is absolute, and, that in the relation which it holds to the things against which it is exchanged, it constitutes a term fixed and constant. On the contrary, labor is more or less in demand, and is better or worse compensated at different periods; this is clearly demonstrated by the frequent fluctuations of wages.
—As to wheat, two reasons caused it to be considered that it might serve as a measure of value. One of them was the supposition that the same quantity of wheat must have served at all times to satisfy equal wants of nutrition per individual; the other was the supposition that alimentary products must have preserved, in exchanges, a fixed value, since such products have the power always to create for themselves the demand necessary to correspond to the extent of their supply. The first of these suppositions is erroneous; for wheat is far from having been at all times and in the same quantity an object of man's consumption; the second is true only within certain limits, and in what concerns not any special product, but the aggregate of all the products which minister to the wants of subsistence. Be this as it may, the value of wheat is, and always will be, a relative one, dependent upon the action of circumstances, among which we may reckon the extension and progress of agriculture, and the amount of manufactured products for which it can be exchanged, an amount which tends to increase in proportion as the labor required to produce them increases in power and skill.
—The efforts made by economists to discover a measure of value, prove how difficult it is to disentangle the idea of value itself from the complications by which it is surrounded, and with which it presents itself to the mind. Many writers, even of our own day, have not succeeded in doing so, and it would be easy to cite comparatively recent works in which tendencies to suppose in things the existence of an absolute value still subsist. We must of course make due allowance for the lack of precision in the form under which every fact of relation manifests itself to the mind; but even more allowance must be made for the imperfection of the terminology in use. So long as the word value is used in different senses, we expose ourselves to a confusion of ideas, and the wisest plan would be to take a decided stand in this matter. John Stuart Mill proposes to use the word value to express only the effect of the relation in virtue of which products are bartered one for another, in proportion of such and such a quantity of the one against such and such a quantity of other things. There is nothing more necessary in the interest of science, nor is there anything easier. We have the word price to designate the value of things in coined money; we have the terms immediate or direct utility, and other expressions to designate what is so improperly called value in use. It is easy to reserve for each thing an expression which maintains in language the distinction itself, the special sense which belongs to it.
—Let it be distinctly understood, therefore, that through the rest of this article we shall use the word value only in its real sense. It shall be used to express only the quantity either of a thing or of the things in general which a thing serves to obtain; in other words, the power of acquisition which it exercises by means of exchange.
—Upon what conditions may things be considered to possess value? On what foundations does the property which renders them exchangeable, rest? What are the circumstances which determine in what quantity one thing shall be given for another? The meaning of the word value once clearly determined, these questions become simple, and are easily solved.
—First of all, it is plain that nothing is exchangeable except upon condition, first, of possessing qualities which render it desirable, and second, of being obtainable only at the cost of some effort and pains. No one gives any of those things which every one may have without labor, and value belongs only to those things whose possession costs labor and fatigue. The man who wishes to obtain a thing compares the satisfaction which it will afford him with the sacrifices he must make to obtain it, and decides to part with such or such a quantity of other things which belong to him, in order to procure it. It matters little what motives prompt him to acquire it, whether an imperative want, a frivolous taste, or a simple caprice, the thing has the value at the moment of what he consents to give for it. The diamond for which a value equal to a thousand hectolitres of grain is offered and accepted, has as much value as these thousand hectolitres. In like manner, a hundred kilogrammes of salt are worth no more than the lesson of a dancing master, or the service of a hair dresser, if the price paid for the lesson or the service is sufficient to enable us to buy the same quantity of salt.
—The qualities which render things desirable, the impossibility of obtaining them without personal labor, or without giving in exchange for them other things which have cost personal labor: such are the conditions which confer value on things. The extent or the measure of the value of a thing depends upon the greater or less difficulty which those who covet or need it find in procuring it. It is this that makes the momentary value of a thing depend upon the relation existing between its supply and the demand for it. If a product is not to be found in sufficient quantity to supply all the demand for it, those who desire it enter into competition for its possession; they give in exchange for it more of other products, or of the money with which other products are bought, and, as a consequence, its value rises. If the contrary happens, that is, if a product enters the market in a greater abundance than there is a demand for, its value falls. Those who possess it can not keep it forever; they are obliged to dispose of it, in order to procure other things which are necessary to them, and find themselves constrained, in parting with it, to be content with a smaller quantity of the products they receive in return. Thus it is the condition of supply and demand which assigns to each thing its power of acquisition over other things. All things increase in value when the demand for them is greater than the supply of them; all diminish in value when the supply of them is greater than the demand for them; hence the variations of price to which things are subject, variations which, by expressing the differences that arise in the sums of money against which those things which experience them are exchanged, express like differences in the quantities of other things which these sums enable one to obtain.
—Besides, it must be remarked that the demand for a thing naturally extends or contracts in proportion to the modifications which its value undergoes. When there is a lack of a product it grows dearer; and as then there are many persons to be found whose desire to procure it is checked by the increase of the sacrifices which they must make to obtain it, the demand, checked by its increase in value, is restrained within the limits set by value itself. In like manner, when the price of a thing decreases, purchasers increase in number, and its value descends only to the point necessary that such a product may be found in the market in a quantity proportioned to the supply. Hence the fluctuations of value occasioned by the changes in the relation of supply and demand, have for effect the maintenance of an equality between the two terms of that relation; that is, an equilibrium between supply and demand.
—We must not, however, infer from this fact that there exists any proportionality whatever between the movements of value and the differences in quantity of the things supplied. Everything depends, in the effect produced on the value of the goods, whether by the increase or the decrease of the supply, on the nature of these goods, and on the kind of wants they are intended to satisfy. All goods are not equally necessary to life; and if there are some the demand for which is greatly curtailed because their value has risen even ever so little, there are others, the demand for which people are not nearly so free to lessen. The value of wheat doubles the moment the quantity that can be delivered decreases one-fifth, and is trebled, when this quantity is reduced one-fourth. Wine does not increase in value in the same proportion when the quantity supplied diminishes, for the reason that its consumption is less indispensable; and the products which it is still easier to do without increase in value much less than wine when their supply diminishes. On the other hand, the qualities which render products more or less easy to keep in the state required for use, exert a sensible influence upon the decrease in their value. In case of an extraordinary or superabundant harvest, there are crops which are abandoned to the first comer who wishes to take them, because the owner can not utilize them all himself, and because the price at which he is compelled to sell them will not pay the cost of transferring them to the nearest market. What we are warranted to assert is this, that value is fixed by the relation existing between supply and demand; that it usually increases or decreases in such a way as to equilibrate the two terms of that relation, but in no wise in proportions conformable to the differences expressed in the figure of the quantities supplied.
—How decisive soever the influence exercised by the momentary state of supply and demand may be, the value of things has none the less its own raison d'étre, and a measure which, in despite of the accidents which serve to expand or contract it, constantly tends to return to its normal dimensions. Vainly do the fluctuations of supply and demand succeed one another in contrary directions, these fluctuations necessarily end by compensating one for the other, and the point at which they meet marks the natural value of things.
—What assigns a natural value to things is the fact that it costs something to produce them; that is, the onerosity which attaches to their production. This is true of all things, except of those the quantity of which can not be increased, or which can not be sufficiently increased to keep up with the demand for them. With this one exception, all things are exchanged against one another in accordance with the amount of cost necessary to fashion them for the use of, and to transport them to, the consumer. Those which cost most are exchanged in a lesser numeric quantity, against those which cost less, and thus the differences in their costs of production of various articles are balanced. (See COST OF PRODUCTION.)
—Before attempting to show that this can not be otherwise, we must first recall what constitutes the cost of production. This cost is twofold: part of the cost of production is constant and unavoidable, and enters, though in unequal amounts, into all production; part is accidental, arising from artificial or special causes, and does not attach to all production. The first part of the cost of production here referred to consists in the expenses of labor and in the expenses attached to the employment of capital. There is nothing whose production does not require a certain amount of both these expenses. In the productions of the humblest artisan, days of labor and the consumption of capital under various forms, figure. Raw material has been purchased and transformed; tools and implements have been deteriorated; there have been risks and losses which must be covered; and, in addition to all this, there is the interest which must be paid on the capital employed: it is necessary that the thing produced should be exchanged on such conditions as shall restore to the producer the wages due to his own personal labor, as well as the wages due to the labor of his workmen, if he employs any, and the profit required to bring back to him the portion of capital which he was obliged to sacrifice during the course of his labor. Suppose a product, which, in order to reach the consumer, costs six francs for workmen's wages, and four francs in profits for the preservation of, and interest on, the capital invested in it; the natural value of this product will be the sum of these two amounts; that is, ten francs. Thus the natural value of various products depends upon the proportion in which wages and profits enter into the sum total of their cost of production. All products tend to exchange one against another in proportion to this natural value; and this natural value is the value which continues to subsist for all products as their mean value, whatever departures from such mean value the momentary fluctuations caused by the variations of supply and demand may make in it.
—The reason of this is plain. No industry could subsist if the commodities and goods which it furnishes the public were not taken at the price which the cost of production requires. An industry which could not recover in full the total of its outlay would soon fail. Hence from the moment that any product ceases to exchange against other products in a quantity sufficient to balance the expenses which must be borne by those who make it, we notice that its manufacture begins to be restricted; and the restriction does not stop until it reaches the point at which the reduction in the supply of the product causes it to regain the value in which it was lacking. On the contrary, if a product receives in other products more than the equivalent of its real cost, the profits assured to those who deal in it cause a speedy increase in its production, and the increase in the amount offered very soon deprives it of its value to the extent that such value is exaggerated. Thus it is that the value in things, whenever it departs from its natural point, is finally brought back to it. Competition diminishes in industries which are not sufficiently remunerative, and the supply diminishes with it; competition increases in those industries which are uncommonly remunerative; labor and capital abandon industries which are losing, to engage in those which are gaining; and, owing to this continual change, the value respectively of the products exchanged continues to be, or becomes again, in the case of all products, the value determined by the amount of the cost incurred in their production.
—We do not mean to say that all products of the same kind, considered apart from all others, obtain in exchange merely the equivalent of their own cost in other products. Far from it; there are some which obtain much more, and for this reason: the quantity of each product which can and should be produced is determined by the demand for it, and its value always rises high enough to assure its supply in that quantity. But the conditions of labor are not in all respects equal or similar. They are less favorable in some places than in others, and when these places are called upon to furnish the market a contingent, without which the supply would be inadequate, it is the expenses which production necessitates in those places that determine the general value of products. It follows that this value corresponds, not to an average cost, but to the cost of the part of the product which reaches the market after having required the greatest amount of the different costs. In the actual state of demand that portion has its outlet just as the others have, and among similar products it is the dearest which regulate the value of all, thus adding to those which are cheaper a value greater than their cost of production. This fact is deserving of all the more attention, because many modern writers have overlooked it when discussing the large profits reaped by certain producers, and still more frequently when discussing the subject of rent.
—It is, for instance, a common opinion that the rent of land contributes to raise the price of the means of subsistence, and that it would be otherwise under combinations different from those which up to the present time have governed property. Nothing, however, could be more decidedly false. Like all other products, those of the soil owe their value to the demand for them. All lands are not equally fertile; they can not all produce on the same conditions, and whenever the wants of consumption are such that recourse must be had to lands of inferior quality, their products must necessarily be paid for at a price which will compensate for the cost attached to the cultivation of such lands. In a country like France, in which wheat has, on an average, a value of a little more than eighteen francs per hectolitre, there are lands on which its value is not twelve, and on these lands the excess of the value for which the wheat is exchanged over the costs at which it is harvested is a rent which accrues to the owners of these lands. But this rent has no influence upon the accrued value to cereals; it is simply the effect of that value. The population of France could not do without that part of the wheat crop which could not be produced at a cost less than eighteen francs per hectolitre, and it is this part which assigns to the other parts their natural value. If the demand for the means of subsistence should increase to such an extent as to require the cultivation of lands on which wheat could not be produced except at an average cost of twenty francs per hectolitre, its value would rise still higher, and with it the rent which the land paid to those who owned it.
—The superaddition of value, which the wants of consumption confer, as compared with the products of their cost, or the products of the major part of the land, exists also in the case of a multitude of different industries. Thus it is the cost of extracting ore from those mines in which such cost is greatest, but whose product is necessary in order to meet the demand, which fixes the value of the ore. The same is true in manufacturing industries; the demand for the articles which they produce raises the value of these articles to a figure necessary to pay for the products of those manufacturing industries which are carried on, it matters not for what reason, at the greatest expense; and the higher net cost which is peculiar to these latter, assures to the articles of all the other industries a value which exceeds the real amount of their cost of production.
—But, if the value of the things which are susceptible of indefinite increase finds its rule and measure in the cost of the production of those of them which in order to reach the people who want them cost most, it is otherwise with the value of the things whose quantity it is impossible to increase at the desire or whim of the public. Their rarity exercises an influence on the value of the latter; and raises their value in a proportion which has no relation whatever with what they cost or did cost to produce. A work of art from the hands of one of the old masters, the autograph of an historic personage, or some object which he used during his lifetime, a jewel, a piece of armor, a bronze, a statue found under the lava of Pompeii or among the ruins of Athens or Rome, has an immense value; and there are persons who, to obtain one of these products, would part with a quantity of things in which had been invested a thousand times more wages and profit on capital than was invested originally in the product they purchase. In like manner precious stones, pearls of the first water, gold and silver and other precious metals, possess a value far in excess of what it cost to discover and extract them. Nature did not create them in sufficient quantity to satisfy the desires of all. So also, wines, fruits and tobaccos of certain choice brands, which possess special qualities that cause them to be eagerly sought after, possess in exchange a value far superior to that which their cost of production would give them. They can not be increased; their supply has forced limits; and the desire of obtaining them induces people to give much more for them than it costs to produce them.
—Besides rarity, there are artificial circumstances which affect the value of things and help to increase it beyond what the cost of production would warrant. Such are taxes (except taxes on land, in so far as they affect only the rent), monopolies and restrictions on the freedom of trade. Every tax has the inevitable effect of increasing the price of the merchandise or product upon which it is imposed. The person who pays the tax must be reimbursed; he adds the amount of the tax to what the article costs him, and in exchange he receives back the amount which he paid the state in addition to the natural value of the thing. Such are the effects on the value of things of the taxes levied on them before they reach the consumer, no matter for what reason, at what moment or under what form such taxes are levied. The treasury of the state can levy nothing on them without increasing the cost of their production, and consequently without increasing in an equal measure the value for which they are sold. The effect of monopolies is equally pronounced, and more lamentable. Monopolies are of different kinds; some are established for the benefit of the state, and serve as a source of revenue for it. Of this kind is the monopoly on tobacco in France; the government alone purchases the product in the crude state, manufactures it, and furnishes it for sale at a price which assures the state an annual revenue. Whatever superaddition of value such monopolies give to the products which they affect, is warranted if they serve to relieve a country of other taxes which would cause still greater inconveniences, and this must be borne in mind when considering these monopolies. Patents also constitute a monopoly in favor of the patentees; they may be a just remuneration for the labor and sacrifice to which an invention was due; but it is only by exaggerating the value of the patented article that they exercise any influence. Producers who are free from all competition are masters of the market, and it is an easy matter for them so to manage as to sell only at a large profit on the cost of production. The exclusion of foreign merchandise, through custom house duties intended to reserve the home market for home producers, has to a certain extent the same effect as patents. Consumers are forced to pay a higher price for the protected products than they can be bought for elsewhere, and are subjected to sacrifices which could and should be spared them. This alteration of the natural relations of value between exchangeable products is a real evil; nothing could be more prejudicial to the proper employment of productive forces, and thereby to the progress of social power and wealth. Such acts can be justified only by the necessity of defraying public expenses; but the products whose cost of production and value are to be artificially increased by the imposition of duties, should be carefully selected. The more these products are necessary for the satisfaction of wants common to all, the less those classes who consume scarcely any other products, and who have only the labor of their hands to give in exchange therefor, will have of them, and the more difficult it will be for them to reach that degree of well-being without which their condition can not be improved.
—Value, relative in its very essence, and based for each thing solely upon the quantity of another thing, or of other things in general, which it enables one to obtain, can not be affected by any of the circumstances which act equally upon all things at once. Its elements are labor and capital. It is the very quantity of these two things which every product absorbs before becoming a fit object of consumption that fixes its relative value; and no matter what the rate of wages or profits in a country may be, as the relations of exchange between the products can not be changed by that rate, neither can values be changed thereby. This is not the case, however, when the rate of one of the elements of production only is modified, and this because all products do not contain it in a like proportion. When wages increase, the value of those things into whose cost of production it more largely enters, naturally rises, and the value of those which require less manual labor than capital is comparatively lessened. The contrary is true when the rate of profits increases. In this case, those things whose cost absorbs more capital than labor increase in value, and obtain a greater quantity of other things in exchange. Such fluctuations in the respective value of things are of frequent occurrence, and when they happen it is easy to determine their cause. It will be noticed, however, that, in the ordinary course of facts, there are things whose value tends to fall gradually. These things are those whose manufacture requires more capital. The reason of this is, that, as civilization advances, capital accumulates in such a way that those who possess it are forced to content themselves with smaller profits.
—Such are the laws which govern value, and preside over its distribution among things. Value is not a quality incorporated in things, but is for each product the effect of a relation of exchange, the effect of the quantity of other products it serves to obtain; and this relation is determined, at any given moment, by supply and demand. But, while supply and demand regulate the values of the moment, there is, none the less, for those things whose number may be increased indefinitely at man's pleasure, a natural value, which, despite all the fluctuations to which that value is subject, always prevails in the end. This natural value results from the cost of production, and is determined by the amount of labor and capital employed in the production. A clear understanding of these general principles suffices to enable us to solve all questions pertaining to value, no matter how complicated they may seem to be.