Principles of Political Economy quotes

Indeed, the period, the close of which is marked by J. R. McCulloch's book, was one in which the old school had seemingly come to an end of its progress, from too close an adhesion to deductions from assumed premises.

Mill's great merit was that he began the movement to better adapt political economy to society as it actually existed

; and the historical school will probably give a most desirable impetus to the same results, even though its exaggerated claims as to the true method88 can not possibly be admitted.

Money, being the instrument of an important public and private purpose, is rightly regarded as wealth; but everything else which serves any human purpose, and which nature does not afford gratuitously, is wealth also.

To be wealthy is to have a large stock of useful articles, or the means of purchasing them.

Everything forms, therefore, a part of wealth, which has a power of purchasing; for which anything useful or agreeable would be given in exchange.

for which anything useful or agreeable would be given in exchange. Things for which nothing could be obtained in exchange, however useful or necessary they may be, are not wealth in the sense in which the term is used in Political Economy.

Air, for example, though the most absolute of necessaries, bears no price in the market, because it can be obtained gratuitously

; to accumulate a stock of it would yield no profit or advantage to any one; and the laws of its production and distribution are the subject of a very different study from Political Economy.

… of [pg 068] the laborers directly, the conversion by individuals of a portion of their property, no matter of what sort, from an unproductive destination to a productive, has had the effect of causing more food to be appropriated to the consumption of productive laborers.

The distinction, then, between Capital and Not-capital, does not lie in the kind of commodities, but in the mind of the capitalist—in his will to employ them for one purpose rather than another

; and all property, however ill adapted in itself for the use of laborers, is a part of capital, so soon as it, or the value to be received from it, is set apart for productive reinvestment.

It will be observed that I have assumed that the laborers are always subsisted from capital:105 and this is obviously the fact, though the capital need not necessarily be furnished by a person called a capitalist.

The peasant does not subsist this year on the produce of this year's harvest, but on that of the last.

The artisan is not living on the proceeds of the work he has in hand, but on those of work previously executed and disposed of. Each is supported by a small capital of his own, which he periodically replaces from the produce of his labor.

in other words, that if there are human beings capable of work, and food to feed them, they may always be employed in producing something. It is very much opposed to common doctrines.106

There is not an opinion more general among mankind than this, that the unproductive expenditure of the rich is necessary to the employment of the poor.

Suppose that every capitalist came to be of opinion that, not being more meritorious than a well-conducted laborer, he ought not to fare better; and accordingly laid by, from conscientious motives, the surplus of his profits; unproductive expenditure is now reduced to its lowest limit:

the difference being, that the luxuries are shared among the community generally, instead of being confined to a few, supposing that the power of their labor were physically sufficient to produce all this amount of indulgences for their whole number.

Thus the limit of wealth is never deficiency of consumers, but of producers and productive power.

Every addition to capital gives to labor either additional employment or additional remuneration.

The fact is far otherwise. The greater part, in value, of the [pg 082] wealth now existing [in the United States] has been produced by human hands within the last twelve months.

The land subsists, and the land is almost the only thing that subsists. Everything which is produced perishes, and most things very quickly.

Most kinds of capital are not fitted by their nature to be long preserved. Westminster Abbey has lasted many centuries, with occasional repairs; some Grecian sculptures have existed above two thousand years; the Pyramids perhaps double or treble that time.

Westminster Abbey has lasted many centuries, with occasional repairs; some Grecian sculptures have existed above two thousand years; the Pyramids perhaps double or treble that time. But these were objects devoted to unproductive use.

Capital is kept in existence from age to age not by preservation, but by perpetual reproduction; every part of it is used and destroyed, generally very soon after it is produced, but those who consume it are employed meanwhile in producing more.

The growth of capital is similar to the growth of population. Every individual who is born, dies, but in each year the number born exceeds the number who die;

and they do not, therefore, propagate like swine, but are capable, though in very unequal degrees, of being withheld by prudence, or by the social affections, from giving existence to beings born only to misery and premature death.

In proportion as mankind rise above the condition of the beast, population is restrained by the fear of want, rather than by want itself.

Even where there is no question of starvation, many are similarly acted upon by the apprehension of losing what have come to be regarded as the decencies of their situation in life.

(2.)

All accumulation involves the sacrifice of a present, for the sake of a future good.

In weighing the future against the present, the uncertainty of all things future is a leading element; and that uncertainty is of very different degrees.

doubling the labor does not double the produce; or, to express the same thing in other words, every increase of produce is obtained [pg 131] by a more than proportional increase in the application of labor to the land.

This general law of agricultural industry is the most important proposition in political economy.

Were the law different, nearly all the phenomena of the production and distribution of wealth would be other than they are.

Analogous in effect to this second class of agricultural improvements are improved means of communication.

Good roads are equivalent to good tools.

It is of no consequence whether the economy of labor takes place in extracting the produce from the soil, or in conveying it to the place where it is to be consumed.

When the “sacredness of property” is talked of, it should always be remembered that any such sacredness does not belong in the same degree to landed property.

No man made the land. It is the original inheritance of the whole species.

Its appropriation is wholly a question of general expediency. When private property in land is not expedient, it is unjust. The reverse is the case with property in movables, and in all things the product of labor:

No man made the land. It is the original inheritance of the whole species. Its appropriation is wholly a question of general expediency.

When private property in land is not expedient, it is unjust.

The reverse is the case with property in movables, and in all things the product of labor: over these, the owner's power both of use and of exclusion should be absolute, except where positive evil to others would result from it;

The larger the total production of wealth, the greater the possible wages, all must admit; but it does not seem clear that General Walker has given us a solution of the real question at issue.

The larger the house you build, the larger the rooms may be; but it does not follow that the rooms will be necessarily large—as any inmate of a summer hotel will testify.

There are, however, some facts in apparent contradiction to this [the Wages-Fund] doctrine, which it is incumbent on us to consider and explain.

We are often told that the most thorough perception of the dependence of wages on population will not influence the conduct of a laboring-man, because it is not the children he himself can have that will produce any effect in generally depressing the labor market.

True, and it is also true that one soldier's running away will not lose the battle; accordingly, it is not that consideration which keeps each soldier in his rank: it is the disgrace which naturally and inevitably attends on conduct by any one individual which, if pursued by a majority, everybody can see would be fatal.

Men are seldom found to brave the general opinion of their class, unless supported either by some principle higher than regard for opinion, or by some strong body of opinion elsewhere.

A journeyman blacksmith, though an artificer, seldom earns so much in twelve hours as a collier, who is only a laborer, does in eight. His work [pg 206] is not quite so dirty, is less dangerous, and is carried on in daylight and above ground.

Honor makes a great part of the reward of all honorable professions.

In point of pecuniary gain, all things considered,” their recompense is, in his opinion, below the average. “Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business;

“Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades.

The most detestable of all employments, that of the public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.

”

But it is altogether a false view of the state of facts to present this as the relation which generally exists between agreeable and disagreeable employments.

The really exhausting and the really repulsive labors, instead of being better paid than others, are almost invariably paid the worst of all, because performed by those who have no choice.

If the laborers in the aggregate, instead of exceeding, fell short of the amount of employment, work which was generally disliked would not be undertaken, except for more than ordinary wages.

All things can not rise relatively to one another. If one half of the commodities in the market rise in exchange value, the very terms imply a fall of the other half; and, reciprocally, the fall implies a rise.

Things which are exchanged for one another can no more all fall, or all rise, than a dozen runners can each outrun all the rest, or a hundred trees all overtop one another.

A general rise or a general fall of prices is merely tantamount to an alteration [pg 251] in the value of money, and is a matter of complete indifference, save in so far as it affects existing contracts for receiving and paying fixed pecuniary amounts.

The cost of production, together with the ordinary profit, may, therefore, be called the necessary price or value of all things made by labor and capital.

Nobody willingly produces in the prospect of loss.

When a commodity is not only made by labor and capital, but can be made by them in indefinite quantity, this Necessary Value, the minimum with which the producers will be content, is also, if competition is free and active, the maximum which they can …

On an average of years sufficient to enable the oscillations on one side of the central line to be compensated by those on the other, the market value agrees with the natural value; but it very seldom coincides exactly with it at any particular time.

The sea everywhere tends to a level, but it never is at an exact level; its surface is always ruffled by waves, and often agitated by storms.

It is enough that no point, at least in the open sea, is permanently higher than another. Each place is alternately elevated and depressed; but the ocean preserves its level.

[pg 293] but their real income is their share of his corn, cattle, and hay, and it makes no essential difference whether he distributes it to them directly, or sells it for them and gives them the price.

There can not, in short, be intrinsically a more insignificant thing, in the economy of society, than money; except in the character of a contrivance for sparing time and labor.

It is a machine for doing quickly and commodiously what would be done, though less quickly and commodiously, without it; and, like many other kinds of machinery, it only exerts a distinct and independent influence of its own when it gets out of order.

There can not, in short, be intrinsically a more insignificant thing, in the economy of society, than money; except in the character of a contrivance for sparing time and labor.

It is a machine for doing quickly and commodiously what would be done, though less quickly and commodiously, without it; and, like many other kinds of machinery, it only exerts a distinct and independent influence of its own when it gets out of order.

The introduction of money does not interfere with the operation of any of the Laws of Value laid down in the preceding chapters.

that the effect of the second period on the value of silver has not been greater than was actually caused—it has not been small—is explicable only by the laws of the value of money.

If you let the same amount of water into a small reservoir which you let into a large one, the level of the former will be raised more than the level of the latter.

The great production of the first period was added to a very small existing stock of silver; that of the second period was added to a stock increased by the great previous production just mentioned.

After several international monetary conferences, in 1867, 1878, and 1881, the project seems now to have been practically abandoned by all except the most sanguine. (For a fuller list of authorities on bimetallism, see Appendix I.)

Credit has a great, but not, as many people seem to suppose, a magical power; it can not make something out of nothing.

How often is an extension of credit talked of as equivalent to a creation of capital, or as if credit actually were capital!

Now, a shock on the Bourse at Vienna is felt the same day at Paris, London, and New York. A commercial crisis in one great money-center is felt at every other point in the world which has business connections with it. Moreover, as Cherbuliez245 says:

“A country is more subject to crises the more advanced is its economical development. There are certain maladies which attack only grown-up persons who have reached a certain degree of vigor and maturity.”

It does not, indeed, follow that credit will be more used because it can be.

To the increase of that (if permitted by law) there is no check. The issuers may add to it indefinitely, lowering its value and raising prices in proportion; they may, in other words, depreciate the currency without limit.

Such a power, in whomsoever vested, is an intolerable evil.

All variations in the value of the circulating medium are mischievous: they disturb existing contracts and expectations, and the liability to such changes renders every pecuniary engagement of long date entirely precarious.

But a still stronger consideration is the importance of adhering to a simple principle, intelligible to the most untaught capacity.

Everybody can understand convertibility; every one sees that what can be at any moment exchanged for five [dollars] is worth five [dollars].

Regulation by the price of bullion is a more complex idea, and does not recommend itself through the same familiar associations. There would be nothing like the same confidence, by the public generally, in an inconvertible currency so regulated, as in a convertible one:

… the national debt, defray the expenses of government without taxation, and, in fine, to make the fortunes of the whole community, is a brilliant prospect, when once a man is capable of believing that printing a few characters on bits of paper will do it.

The philosopher's stone could not be expected to do more.

248

Although the issues since 1690 had depreciated, in 1702 £10,000 more notes were issued, because, as it was said, there was a scarcity of money.

It is always noticeable that the more issues of paper money there are made, the more there is a cry of scarcity, much like the thirst of a hard drinker after the first exhilaration has passed off.

On the new issues five per cent interest was paid, and even excises and imposts were set aside as security for their payment.

Without going into details,252 in one year, 1779, Congress issued $140,000,000, worth in coin only $7,000,000.

They, however, bravely declared that paper had not depreciated, but that the price of coin had gone up!

Legal attempts were made to repress the premium on silver; but resolutions do not create wealth as fast as money can be printed. The depreciation went on more rapidly than the issues (see Chart No.

Without going into details,252 in one year, 1779, Congress issued $140,000,000, worth in coin only $7,000,000. They, however, bravely declared that paper had not depreciated, but that the price of coin had gone up!

Legal attempts were made to repress the premium on silver; but resolutions do not create wealth as fast as money can be printed.

The depreciation went on more rapidly than the issues (see Chart No. XI, in which the black line represents the amounts of issues, and the broken line the depreciation of paper, starting at 100);

… our country by over-issues, in spite of the temptation to misuse paper money if it is in any way permitted, in spite of all the warnings of history, there seems to be a dangerous acquiescence in the presence of government paper money in our currency.

It is an open pitfall, tempting to evils whenever sudden emergencies arise.

It ought not to be allowed to remain any longer.

… and capital of a country remain in the country, they are most beneficially employed in producing, for foreign markets as well as for its own, the things in which it lies under the least disadvantage, if there be none in which it possesses an advantage.

The fundamental ground on which all trade, or all exchange of commodities, rests, is division of labor, or separation of employments.

Beyond the ordinary gain from division of labor, arising from increased dexterity, there exist gains arising from the development of “the special capacities or resources possessed by particular individuals or localities.”

It is hardly possible to overrate the value, in the present low state of human improvement, of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar.

Commerce is now, what war once was, the principal source of this contact.

Such communication has always been, and is peculiarly in the present age, one of the primary sources of progress. Finally, (4) commerce first taught nations to see with goodwill the wealth and prosperity of one another.

Before, the patriot, unless sufficiently advanced in culture to feel the world his country, wished all countries weak, poor, and ill-governed but his own: he now sees in their wealth and [pg 390] progress a direct source of wealth and progress to his own country.

It is commerce which is rapidly rendering war obsolete, by strengthening and multiplying the personal interests which are in natural opposition to it.

And it may be said without exaggeration that the great extent and rapid increase of international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character …

… myriad of things, each governed by its particular reciprocal demand, exchanging against each other, give a general result by which the goods sent out exchange against the goods brought back at such rates as are fixed by the reciprocal demands acting on all the goods.

Goods are payments for goods; the ratio of exchange depends on reciprocal demand and supply.

If we now add more countries to the example, we simply increase the number of persons (although in different countries) wanting our goods, as set off against our demands for the goods of this greater number of persons.

It gets its imports cheaper, the greater the intensity of the demand in foreign countries for its exports. It also gets its imports cheaper, the less the extent and intensity of its own demand for them.

The market is cheapest to those whose demand is small.

A country which desires few foreign productions, and only a limited quantity of them, while its own commodities are in great request in foreign countries, will obtain its limited imports at extremely small cost, that is, in exchange for the produce of a very small …

Thus do matters stand between countries, or places which have the same currency.

So much of barbarism, however, still remains in the transactions of the most civilized nations, that almost all independent countries choose to assert their nationality by having, to their own inconvenience and that of their neighbors, a peculiar currency of their own.

To our present purpose this makes no other difference than that, instead of speaking of equal sums of money, we have to speak of equivalent sums.

… find that international values also are determined by the same causes under a money and bill system as they would be under a system of barter, and that money has little to do in the matter, except to furnish a convenient mode of comparing values.

All interchange is, in substance and effect, barter; whoever sells commodities for money, and with that money buys other goods, really buys those goods with his own commodities.

And so of nations: their trade is a mere exchange of exports for imports; and, whether money is employed or not, things are only in their permanent state when the exports and imports exactly pay for each other.

This efflux of gold takes effect on prices [by withdrawing gold from the reserves of the banks, and so by stopping loans and the use of credit, or purchasing power]: its effect is to make them recoil downward.

The recoil once begun, generally becomes a total rout, and the unusual extension of credit is rapidly exchanged for an unusual contraction of it.

Accordingly, when credit has been imprudently stretched, and the speculative spirit carried to excess, the turn of the exchanges and consequent pressure on the banks to obtain gold for exportation are generally the proximate cause of the catastrophe.

A paper currency issued by Government in the payment of its ordinary expenses, in however great excess it may be issued, affects the rate of interest in no manner whatever.

It diminishes, indeed, the power of money to buy commodities, but not the power of money to buy money.

If a hundred dollars will buy a perpetual annuity of four dollars a year, a [pg 448] depreciation which makes the hundred dollars worth only half as much as before has precisely the same effect on the four dollars, and therefore can not alter the …

… level of the earnings of free labor in America, that country might be obliged to erase some of the slave-grown articles from the catalogue of its exports, and would certainly be unable to sell any of them in the foreign market at the present price.

Their cheapness is partly an artificial cheapness, which may be compared to that produced by a bounty on production or on exportation; or, considering the means by which it is obtained, an apter comparison would be with the cheapness of stolen goods.

An advantage of a similar economical, though of a very different moral character, is that possessed by domestic manufactures;

a rise of real wages would be an impossibility. This being equally contrary to reason and to fact, it is evident that a rise of money wages does not raise prices; that high wages are not a cause of high prices.

A rise of general wages falls on profits. There is no possible alternative.

Having disposed of the case in which the increase of money wages, and of the Cost of Labor, arises from the laborer's obtaining more ample wages in kind, let us now suppose it to arise from the increased cost of production of the things which …

… savage or the half-civilized, are daily accomplished by civilized nations, not by any greatness of faculties in the actual agents, but through the fact that each is able to rely with certainty on the others for the portion of the work which they respectively undertake.

The peculiar characteristic, in short, of civilized beings, is the capacity of co-operation; and this, like other faculties, tends to improve by practice, and becomes capable of assuming a constantly wider sphere of action.

[This progress affords] space and scope for an indefinite increase of capital and production, and for the increase of population which is its ordinary accompaniment. That the growth of population will overpass the increase of production, there is not much reason to apprehend.

In most years, accordingly, there was, in some part or other of any large country, a real dearth; while a deficiency at all considerable, extending to the whole world, is [now] a thing almost unknown.

In modern times, therefore, there is only dearth, where there formerly would have been famine, and sufficiency everywhere when anciently there would have been scarcity in some places and superfluity in others.

The same change has taken place with respect to all other articles of commerce.

population meanwhile always pressing so hard against the barrier that there is never any visible margin left for it to seize, every inch of ground made vacant for it by improvement being at once filled up by its advancing columns.

Agricultural improvement may thus be considered to be not so much a counter-force conflicting with increase of population as a partial relaxation of the bonds which confine that increase.

If a great agricultural improvement were suddenly introduced, it might throw back rent for a considerable space, leaving it to regain its lost ground by the progress of population and capital, and afterward to go on further.

The same determination would be equally effectual to keep up their condition in the stationary state, and would be quite as likely to exist.

I can not, therefore, regard the stationary state of capital and wealth with the unaffected aversion so generally manifested toward it by political economists of the old school.

I am inclined to believe that it would be, on the whole, a very considerable improvement on our present condition.

The experiment which has attracted most attention in the past has been that of the Messrs. Briggs, at their collieries in Yorkshire, England.330 The relations between the owners and the laborers were as bad as they could well be.

“All coal-masters is devils, and Briggs is the prince of devils,” ran the talk of the miners, when they did not choose to send letters threatening to shoot the owners.

In 1865 Messrs. Briggs tried the plan of an industrial partnership with their men, purely from business considerations. Seventy per cent of the cost of raising coal consisted of wages, and fully fifteen per cent of materials which were habitually wasted.

To tax the larger incomes at a higher percentage than the smaller is to lay a tax on industry and economy; to impose a penalty on people for [pg 542] having worked harder and saved more than their neighbors.

It is not the fortunes which are earned, but those which are unearned, that it is for the public good to place under limitation.

With respect to the large fortunes acquired by gift or inheritance, the power of bequeathing is one of those privileges of property which are fit subjects for regulation on grounds of general expediency;

to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves.

They grow richer, as it were, in their sleep, without working, risking, or economizing.

What claim have they, on the general principle of social justice, to this accession of riches?

The main reliance must be placed, and always has been placed, on the returns made by the person himself.

The tax, therefore, on whatever principles of equality it may be imposed, is in practice unequal in one of the worst ways, falling heaviest on the most conscientious.

It is to be feared, therefore, that the fairness which belongs to the principle of an income-tax can not be made to attach to it in practice.

If, therefore, by a duty on the importation, it is rendered cheaper to produce the article than to import it, an extra quantity of labor and capital is expended, without any extra result.

The labor is useless, and the capital is spent in paying people for laboriously doing nothing.

All custom duties which operate as an encouragement to the home production of the taxed article are thus an eminently wasteful mode of raising a revenue.

Are direct or indirect taxes the most eligible?

A man dislikes not so much the payment as the act of paying.

He dislikes seeing the face of the tax-collector, and being subjected to his peremptory demand. Perhaps, too, the money which he is required to pay directly out of his pocket is the only taxation which he is quite sure that he pays at all.

and I can not but think that expenditure of this sort is a most desirable subject of [pg 588] taxation.

When a thing is bought, not for its use but for its costliness, cheapness is no recommendation.

In order to reduce as much as possible the inconveniences, and increase the advantages, incident to taxes on commodities, the following are the practical rules which suggest themselves: 1.

to submit to as much of the privation immediately as can easily be borne, and, only when any further burden would distress or cripple them too much, to provide for the remainder by mortgaging their future income.

It is an excellent maxim to make present resources suffice for present wants; the future will have its own wants to provide for.

On the other hand, it may reasonably be taken into consideration that, in a country increasing in wealth, the necessary expenses of government do not increase in the same ratio as capital or population; any burden, therefore, is always less and less felt;

This is a stretch beyond the point yet reached by any private tradesman in his competition [pg 608] for business.

No shopkeeper, I should think, ever made a practice of bribing customers by selling goods to them at a permanent loss, making it up to himself from other funds in his possession.

The principle of the Mercantile Theory is now given up even by writers and governments who still cling to the restrictive system.

Independently, however, of the general impolicy of taxes on the necessaries of life, this doctrine overlooks the fact that revenue is received only on the quantity imported, but that the tax is paid on the entire quantity consumed.

To make the public pay much, that the treasury may receive a little, is no eligible mode of obtaining a revenue.

In the case of manufactured articles the doctrine involves a palpable inconsistency. The object of the duty as a means of revenue is inconsistent with its affording, even incidentally, any protection.

They must descend into the arena with Sheffield and Manchester, and yet secure the rewards of Chicago and St. Louis.

They must employ European conditions of production, and obtain American results. What is this but to quarrel with the laws of nature?

These laws have assigned to an extensive range of industries carried on in the United States a high scale of return, far in excess of what Europe can command, to a few others a return on a scale not exceeding the European proportion.

They can not do so, and at the same time secure the American rate of return on their work. The inability no doubt exists, but it is one created, not by the drawbacks, but by the exceptional advantages of their position.

It is as if a skilled artisan should complain that he could not compete with the hedger and ditcher.

Let him only be content with the hedger and ditcher's rate of pay, and there will be nothing to prevent him from entering the lists even against this rival.”368