Book 2 — Footnotes (continued 4)

493.

Cabet's Icarian colony in America numbered 298 adults and only 107 children. Yet spite of this condition, so favorable to production, it did but a very sorry business. Its government was very similar to that of a house of correction or a penitentiary. Even in religious matters, spite of all pretended toleration, those members who did not agree with Cabet were described in the official weekly paper as des infames ou des aveugles. (D. Vierteljahrsschrift, 1855, October, 205 ff.)

494.

An eastern sage says, that land possesses the ideal of legal security through which a beautiful woman, decked with pearls, might travel without danger. What would such a sage say of a European country, in which even orphan children have their property not only preserved to them, but find it increased from having been placed at interest, as soon as they reach their majority? (Barrow.)

495.

“The equality of communism is the worst species of inequality, because it guarantees to one for two hours of poor labor as much as it does to an other for four hours of good work.” (Bastiat, Harmonies économiques, ch. 8.)

496.

Proudhon, Qu'est-ce que la Propriété, 283, says, very justly, that “a community of goods is the spoliation of the strong by the weak.”

497.

Called a negative community of goods, by Zacchariä, Vierzig Bücher vom Staate, IV, 146, in contradistinction to the positive and universal community of gain, as desired by the communists.

498.

Community of goods and of women among the Ichthyophages on the Red Sea, who lived in caves, went naked for the most part, plundered all shipwrecked people, and never reached an advanced age. Diodor., III, 15 ff. Peripl., Maris Erythr., 12. Concerning the Scythians, see Strabo, VII, 300; the Spaniards, Plutarch, Marius, 6; the Rhetians, Dio Cass. LIV, 22; the Triballi, Isocr., Panath., § 237; the Kilici, Sext., Empir. Pyrrh. Hypot. III, 24. Community of goods among the Caribs who performed all their work in common, and had, at least in the case of males, a common table and common stores with supplies. (Petr. Martyr, Dec. VII, 1. Rochefort, II, c. 16. B. Edwards, History of the West Indies, I, 43 ff.) Among the Kuskowimers of Russian America, all the able-bodied men of the tribe live together. (v. Wrangell, Nachrichten, 129.) Among the inhabitants of the Aleutian islands, at least in times of scarcity of food, the produce of the fisheries is divided according to their need. (V. Wrangell, 185.) The organization of labor is rigidly enforced among the Otomacs, on the banks of the Orinoco, and they are, nevertheless, more civilized than their neighbors. (Depons, Voyage, I, 295.) A community of goods must, however, be considered an advance, in the case of an isolated people; and it is an error to look upon it as the most primitive condition, as does, for instance, Ambrosius, De off. Minist. I, 28, and Frederick II, in the preface to his general code. (Allgemein. Gesetzbuche, 1231.) The hospitality of the inhabitants of the Friendly Islands borders on a community of goods. (Mariner, Freundschaftsinseln, 75, 81. Klemm, Kulturgeschichte, IV, 398.) Concerning the beginnings of property among the Esquimaux, See Klemm, II, 294.

499.

Οὐκ ἄδοξον ἧν παρὰ τοῖς παλαιοῖς ληστεύειν, ἀλλ᾽ ἔνδξον. (Didym., ad Odyss. II, 73, IX, 252.)

500.

In Mexico, the Spaniards found land ownership among the most distinguished of the natives, but only a species of possession in common and common store houses among the peasantry. (Robertson, History of America, § VII.) Hence, the agriculture of the country was so unimportant that the little army of the conquistadores frequently produced a famine by their marches.

501.

The Tcherkesses considered robbery honorable provided the robber was not caught in flagrante. Compare Koch, Reise in den kaukasischen Isthmus, I, 370 ff. Bell, Journal of a Residence in Circassia, I, 181, II, 201. The organized robber bands of ancient Egypt, when it was so highly civilized (Diodor., I, 80) may, on the other hand, be accounted for by similar conditions actually existing in the large cities of our own day.

502.

What a frightful organization of labor we find in Sparta, combined with a community of goods! Let us recall the exposing of children authorized by law, the mode of education which must have cost the life of all whose constitution was weak, the cryptia, the stern hierarchy of age etc. Plut., Inst. Lac. 2, appreciates the bad taste of the black broth at its true value. The Cretan community of goods was based chiefly on the unnatural relation created by the authorities known as paiderastia; and which was a very efficient means to prevent over-population. (Plat., De Legg, I, 636. Arist., Polit. II, 8.)

503.

Remarkable reasons therefor in Cæsar, Bell. Gall., VI, 22.

504.

There are, especially in Russia, a multitude of such institutions among the inhabitants of the country still. See Roscher, Nationalökonomik des Ackerbaues, § 71 ff.

505.

In the Corpus Juris Canonici, that crown of medieval theology, politics and jurisprudence, the ideal of a community of goods occupies a place almost as prominent as in the works of modern socialists. The only difference is, that in the former the opposition to private property arises from a one-sided religiousness and contempt of the world, while, in the latter, it arises generally from irreligiousness and over-estimation of worldly goods.

506.

This does not include the cost of the schools, churches and benevolent institutions.

507.

According to Lassalle, System der erworbenen Rechte, 1861, § 259, history shows that law, as civilization advances, curtails more and more the proprietary sphere of private individuals, inasmuch as it tends more and more to place a greater number of objects outside the circle of individual ownership.

508.

Saint Simonism is a warning example of this tendency. Saint Simon never lost an opportunity to give vent to his utter contempt for the liberals, and for constitutional government—ce bátard du régime féodal et du régime industriel; and to counsel the crown, after the example of Louis XI. to place itself at the head of the working class, and in opposition to the middle class. (Oeuvres de Saint Simon, éd. 1841, 44, 148, 209.) Bazard, Exposition, 76, demanded that all antagonism between the temporal and spiritual powers, all opposition for the sake of freedom, méfiance organisée of parliaments, and all competition, should cease. Even education he would have bestowed according to capacité, which he would have determined by the chefs légitimes de la société (280). To the criminal court should be referred all cases of delicts, that is, all inopportune acts, even in the scientific and artistic departments. They should be tried after the manner of the “courts of trade;” that is, in a summary way, without appeal, and by experts (317 ff). All the relations of property should be determined by the décision arbitrale des chefs d'industrie (326). Bazard everywhere insists that the reign of genius and of self-sacrifice on the one hand, and on the other of confidence and obedience, is the only true policy (330). Saint Simonism was nearly related to Bonapartism.

509.

Schäffle, Nat. Œk., III, Aufl., I, 61.

510.

If we remove in thought, all injurious elements from a community of goods, and add to it all the incentives and restraints necessary to be added, we shall have a state of things entirely similar to that in a nation whose public and private affairs are carried on in accordance with the principles of a healthy system of Political Economy as understood to-day. (Edinburgh Review, January, 1851.)

511.

How true freedom is accompanied by what Bastiat calls “true Saint Simonism and true communism,” see infra, § 210.

512.

The experiments of a community of goods, which have proved successful in practice, were all based on the more or less complete celibacy of the members of the societies. Compare Hermann, Staatsw. Unters., II, Aufl., 45.

513.

Thus Proudhon (Contradictions, ch. 5) says that the many socialists, who would construct their societies after the type of the family, as the molscule organique, are all wrong. The family has a “monarchical, patriarchal” character. In it, the principle of authority is formed and preserved. On it, ancient and feudal society was based; and “precisely against this old patriarchal constitution, modern democracy protests and revolts.” Fourier calls marriage, un groupe essentiellement faux: faux par le nombre borné à deux, par l'absence de liberté et par les dissidences du goṅt, qui éclatent dès le premier jour. (Nouveau Monde, 57.)

514.

On the Indians of North America, see Schoolraft, Information respecting the Indian Tribes of the United States, II, 194; on the South American d'Orbigny, Voyage, IV, 220, and passim, on the South Sea Islanders, the Novara-Reise, II, 418; on the ancient Albanians, Strabo, XI, 503.

515.

The hereditary transmission of property to posterity has an obvious tendency to make a man a good citizen. It ranges his passions on the side of duty, and induces him to make himself profit the common good, and it assures him that his reward shall not die with himself, but that it shall be handed down to those to whom he is joined by the dearest and most tender feelings. (See Blackstone's Commentaries, II, 11.) Without the right of inheritance, credit is scarcely possible, since with the death of the debtor the only stay of the creditor would cease.

516.

Testamentary freedom (which obtained in places there about the beginning of the eighteenth century) prevails completely in England at present, contrary to the principle of the Roman law requiring an obligatory portion (la légitime) to be left to the heirs, which is still binding in France, but in a very much developed form. The consequence is that last testaments are as frequent in England as they are rare in France. There were, in Paris, in 1825, 7,649 judicial, and only 1,081 testamentary partitions of property. (Monnier.) In Great Britain, in 1838, the number of testamentary alienations of property taxed stood to those in which there was no will, in the proportion of 8:3; and the values of the alienated property as 10:1. (Porter.) Among a people noted for their high moral tone, testamentary freedom is a powerful means of strengthening paternal authority on the one hand, and of keeping alive, in the minds of parents, on the other, a sense of responsibility for the future of their children. Compare Helferich, Tübinger Zeitschr., 1854, 143, ff.

517.

Polyb., XX, 6. Hence it was, that all (?) the wealth of Thebes, when it was destroyed by Alexander the Great, was only 440 talents. (Athen., IV, 148.) Drumann, Gesch. Roms. etc., VI, 333 ff. Cicero, Phil., II, 16. Hoeck, Röm. Gesch., I, 2, 118. Sueton., Octav., 66. An especially scandalous instance in Petron., 140. For a masterly theory of legacy-hunting, see Horat., Sat., II, 5. Compare Lucian, Dialogues of the Dead, 5-9. Petronius speaks of a turba hæredipetarum. (124.)

518.

Even the revolutionary shibboleth, paternité, really means nothing more than the equal right of inheritance of all, i.e., the abolition of the right of inheritance! (R. Meyer.) The strongest attack, from a scientific point of view, made on the right of inheritance in more recent times, comes from Saint Simonism. The founder himself, after a life rich in experience but poor in action, spent in the search of much but in the finding of little, succeeded only in arraying the industrial and proprietary classes against each other, in declaring the poorest class to be the most important of all, and in basing the new religion of love on the emancipation of labor. His disciples went further. In order to abolish all the privileges of birth, Bazard, Exposition de la Doctrine de Saint Simon, 1831, p. 172, ff., taught that it was not enough to distribute public employments according to merit, and in the interest of the people generally, but that the distribution of property should be made in accordance with the same principle. The inequality of ownership should correspond with the inequality of merit. Every one may, during his life, keep what he had acquired himself, but give it to the state at death. Thus would a reconciliation be effected between the general interest and private interest; and the public revenue, supplied in this way, might easily be employed in place of the revenue raised by such taxation as weighs most heavily on the inferior classes. F. Huet, also, Le Regne social du Christianisme, 1853, III, 5, would have all private property, after the death of the owner, fall également à tous les jeunes travailleurs. The practical consequences of this system may now be seen in Turkey. There, the principal military fiefs are held in this way. Hence it is, that the Turkish owner of such a fief builds as little as possible. When one of his walls threatens to fall, it is kept standing by means of props. If it falls in fact, the only consequence is that there are fewer rooms in the house, and the owner settles beside the ruins. (Denon, I, p. 193.) In the Butan, there exists a species of practical Saint Simonism. Robinson, Descriptive Account of Assan, 1841.

519.

It was chiefly fear of the consequences of the declamations of the socialists and their declamation against “monopoly” that induced Bastiat to reduce all the value of landed property to that of the capital employed in its manuring, improvement etc. (Harmonies, ch. 9.) We may, however, unreservedly grant him that, as a rule, until the time of its original possession by man, land had no valeur whatever (278).

520.

Kant thinks the very contrary: Metaph. Anfangsgründe der Rechtslehre, (Werke, IX, 72 ff). Contra, Grotius, J. B. et P., II, 2. Graswinkel, in his Schriften für die Freiheit des Meeres, 1652 ff., in Laspeyres, Geschichte der niederländischen N. Œk., 12. Hufeland, Neue Grundlegung, I, 307.

521.

“A district of Tartary of ten square miles, in which several hordes pasture their flocks, may contain between 400 and 500 shepherds, who find employment in this mode of production.” In Brie, in France, on the same area, 50,000 peasants who own no land, live and draw their sole income from their labors in the fields (J. B. Say).

522.

Schubert, Reise durch Frankreich und Italien, I, 188.

523.

“Without labor, the earth bestows nothing on man but a stopping place. Hence, the reasons for private property do not extend so far as to prove that the great land and water highways should not be reserved as common property, and as a home to every man.” (Zachariä, vom Staate, VII, 43.)

524.

This is the practice in Taway. Ritter, Erdkunde, V, 130. And so in ancient Germany. J. Grimm, Rechtsalterthümer, 92. Right of the “dead fire” in Spain and Portugal during the middle ages. S. Rosa de Viterbo: Elucidario das Palavras etc., I, 470. In many parts of Persia, the land belongs to anyone who has provided it with water by canals or wells. (Fraser, Journey in Chorasan, ch. 7.) Especially after the Mongolian devastation about the beginning of the fourteenth century, it was decreed that land which had remained uncultivated for a long time should belong to the person who made it productive. (d'Ohsson, Hist. des Mongols, IV, 418.) Similarly, in the time of the ancient Persians (Polyb., X, 28, 3), the harvest for the first five years belonged to the person who first irrigated the land. On the upper Euphrates, likewise, the land is very often neither sold nor leased. Anyone who will till it and pay one-tenth of the produce to the bey may have it for nothing. (Ritter, X, 669; compare VIII, 468; IX, 900.) So, too, among the Fulah and Mandingo negroes, and even among the Tscherkessans. (Klemm, Kulturgeschichte, III, 337 ff.) As the latest stages of development so often present instances of a reversion to the earliest, we find that Theodosius and Valentinian decreed that the agri deserti should, after two years' cultivation, belong to the possessor. L. 8, Cod. Just., XI, 58.

525.

Thus anyone may burn his own coat or throw it in the water; but no one may set fire to his own house or drown his land by the destruction of a dam. Even the non-user of a large area, in a thickly populated region, would scarcely be permitted. The taking of property by the state, at the present day in times of peace, is confined almost exclusively to land.

526.

Thus P. v. Arnim, in a work entitled “Ideen zu einer vollständigen landwirthschaftlichen,” Buchführung, 1805, a treatise on “agricultural book-keeping,” considers the farmer as a state official who should cultivate whatever he believed in conscience, or what the state declared to be, most necessary. He suggests that the state should subject all new purchasers of land to an examination to ascertain whether they are rich and noble enough to act in this way.

527.

Thus, for instance, Herbert Spencer, Social Statics, 1851, 114 ff., and to some extent Spinoza, Tract. polit., VI, 2. There are now in England several Land-Tenure-Reform-Associations, some of which would “expropriate” all land and vest the title in the state. The programme of the others embraces not only opposition to the right of primogeniture, to family fidei commissa and the assertion of the right of freedom of trade in land, and of a more democratic use of common lands, but also the appropriation by the state of the increase in the rent of land which is caused by no labor of the landlord, but solely by the increase of population and of the wealth of the community or of the nation. Newmarch, on the other hand, very correctly remarks, that since it is impossible to draw a line of demarkation showing the increase of the value of land growing out of the increase of population etc., the owner of land in making improvements would never know whether he made them for himself or for the state. (Statist. Journal, 1871, 488 ff.) Compare Wolkoff, Sur la Rente foncière, 1854, and H. H. Gossen, Entwickelung der Gesetze des menschlichen Verkehrs (1854).

528.

In Congo and on the gold coast of Guinea the land, in whole villages, is tilled in common and the harvest distributed among the families per capita. Wherever absolutism reigns, the prince is also the owner of all the land. (Klemm, III, 337.) In China, where the original tenure in common of the land by all was broken through in the third century before Christ, all the land of the country now belongs, strictly speaking, to the state; and the possessor of land who permits it to go untilled is punished. (Plath. in the phil.-hist. Sitzungsberichten der Münchener Akad., 1873, 793 ff.) In Corea, private property in land is unknown; arable land is divided by the state according to the number in a family. (Ritter, IV, 633.) The example, on the largest scale, of a country without private property in land is the British East Indies. Compare the paper by Ch. Campbell, in the Essays published by the Cobden Club; System of Land Tenure in various Countries, 1870.

529.

The legal and economic difference between property in land and property in capital is well defined by J. S. Mill, Principles, II, ch. 2, 6. “The reasons which form the justification, in an economical point of view, of property in land, are only valid in so far as the proprietor of the land is its improver. In no sound theory of private property was it ever contemplated that the proprietor of land should be merely a sinecurist quartered on it.” He here alludes specially to Ireland. The Fourierist, Considérant, distinguishes accurately between the capital produced by labor and saving, and the increase of the value of land caused by capital and labor, and its original value. Only the first two elements can justly be made property. But as, for prudential reasons, it is necessary to grant individuals the right of private property in land, those who are not such proprietors must, as a compensation for the common property which they have lost, be guaranteed the right to labor. (Théorie du Droit de Propriété et du Droit au Travail.) In England, the opinion that the compulsory support of the poor was introduced in compensation to them for the establishment of private property in land has met with considerable favor. Bishop Woodward, On the Expediency of a Regular Plan for the Maintenance of the Poor in Ireland, 1775. Compare Eden, State of the Poor, I, 413. However, the poor rates, in a country like England, are much more than an equivalent of what its soil could produce without the assistance of capital.

530.

The principal classical work on this subject is Nebenius, Der öffentliche Credit, 1820, 2d ed., 1829. Previously, Salmasius, De Modo Usurarum, 1639; and even Demosthenes, adv. Dionysiod, 1283. Compare further Schäffle, in the Deutsch. Vierteljahrsschrift, No. 106, II, 289 ff.

531.

Compulsory loans by the state, for instance, occupy an intermediate position between taxes and credit-operations, properly so called.

532.

Besides loans proper, all payments in advance, or delays made in the payments of earnest-money, all leases and lettings, which Courcelle-Seneuil calls un médiocre degré de crédit, insurances and even all contracts for wages where the payment is delayed for a long period of time, are species of credit. For a nice distinction between leasing (Pacht) and letting (Miethe), see Knies, Tübinger Ztschr., 1860, 180 ff., and the Freiburger Univ. Programm., 9. September, 1862. D. Wakefield, Essay upon Political Economy, 1804, 35, distinguishes between “loan-credit” which is given to a poor man in the hope of his paying it by means of his labor, and “exchange-credit,” or credit between property owners. Cieszkowski's definition: le crédit c'est la métamorphose des capitaux stables et engagés en capitaux circulants et dégagés. (Du Crédit et de la Circulation, 2d ed., 1847.) According to Knies, Tübinger Ztschr., 1859, 568, every credit-operation is an exchange or sale of services, one of which is to be performed in the present, and the counter-service of the other party in the future. According to Macleod, it is “a sale of debts.”

533.

Personal credit, of course, preponderates in commerce. Hence it is, that in mercantile life, information concerning the personal status, reputation etc. of his colleagues, plays so important a part with the merchant. This information was made more accessible in England by the Lloyd institution. On similar North American institutions, see Tellkampf, Beiträge, I, 51. Credit given on security is a modification, sometimes of personal and sometimes of real credit. Compare, infra, the theory on bankers, brokers etc.

534.

In despotisms, credit is almost entirely personal. Montesquieu Esprit des Lois, L.V., 15. In New York, says M. Chevalier, a merchant with resources worth 200,000 francs, can do a business of from 1,000,000 to 1,500,000 francs. In Paris, under similar circumstances, the same man would find it difficult to be credited to the extent of 500,000 francs. In Holland, two hundred years ago, a person who hypothecated his property was obliged to pay a higher rate of interest than in business (Becher, Polit. Discurs, 1763, 699), while the stationary period, one hundred years ago, made personal credit extremely difficult. In Zurich, it was encouraged by the prohibition of loaning money out of the country. (Büsch, Geldumlauf, III, 40.)

535.

Schäffle, Nat. Œk., II, Aufl., 112.

536.

Schäffle, according to the purpose which it is intended to subserve, divides credit into production-credit (investment of loans in immoveable property and in moveable property engaged in industrial operations), consumption-credit and clearing-credit, or loans made to pay respited purchase and earnest money, inheritances etc. (Kapitalismus und Socialismus, 552.)

537.

Pinto, Traité de la Circulation et du Crédit, 1771, considers loans bearing interest as new portions of the resources of a country (p. 161), and that government loans not made in excess of its powers are une alchymie réalisée dont souvent eux mêmes qui l' opèrent n' entendent pas tout le mystère, (p. 338.) Similarly and earlier, v. Schröder, F. Schatz-und Rentkammer, 238 ff; Mélon, Essai politique sur le Commerce, 1734, ch. 6; next, Hamilton, Report to the House of Representatives on the subject of Manufactures, Dec. 5, 1791; Von Struensee, Abhandlungen, 1800, I, 259. See infra, § 210. More recently, St. Chamans, Nouvel Essai sur la Richesses des Nations, 1824, 83 ff. To some extent, even Dietzel, System der Staatsanleihen, 1855, 200. This is a dangerous error, since to every credit there is a set-off in the nature of a debit of an equal amount; and the evidences of debt are nothing but claims on the future revenue of the state. This was fully recognized by Cantillon, 291 ff. One of the principal advocates of that view among writers on Political Economy is the vivacious, acute and practically not unskillful, but sophistically superficial Macleod. (Elements of Political Economy, 1858, ch. 3, Dictionary, 1862, v. Credit.) The creditor's assignable right of demand, he considers immaterial capital. While bills of lading, warehouse receipts, dock yard receipts etc., only represent goods, the bank note is new goods. Even metallic money has only a credit-value, inasmuch as it can be used only to effect exchanges. To the - of the creditor may correspond a + of the debtor; but the latter is negative only in the sense that we speak of negative electricity, a negative thermometrical degree. When an estate is leased, the owner has, in his demand for rent, a vendible plus; but the lessee no corresponding minus. (Not so. To the same extent that the proprietor has his future payments on the lease discounted, the present sale-value of his estate is diminished; or if it is not sold, the last party obtaining the discount has made his available capital as much less by the advance as that of the lessor has been increased.) The “discounting of the future,” that is, the apparent capitalization of hopes, so much in vogue at the present time, may be a great spur to production as it may also be to baseless extravagance.

538.

Many theoreticians ascribe a direct creation of new capital to credit, in so far as the capacity of the evidences of debt to circulate as a medium of exchange effects a real saving, and permits the former very costly and intrinsically valuable instruments of exchange to be used in some other way. (§ 123.) Compare Ricardo, Proposals for a secure and economical Currency (1817). J. S. Mill, Principles, II, 174 and 36. McCulloch, Commercial Dictionary, art. Credit. And so it was in the first four editions of this book of mine. But here, too, there is, immediately, only a transfer of already existing capital. The person, for instance, who accepts a bank note for payment, loans a part of his capital to the bank; and the advantage to the whole community of such credit-operations consists chiefly in this: that so large a quantity of cash-capital which lay idle in banks etc., may be used more productively.

539.

When Roesler says that credit is capital, the product of saving, and very serviceable in further production (Grands., 300), he confounds credit itself with the foundations of credit, which are, indeed, in large part material or moral capital.

540.

Compare Discourse on Trade, Coyn and Paper-Credit, London, 1697, 72 ff.

541.

Compare Buron, Guerre au Crédit, 1868. Schäffle, Tüb. Ztsch., 1869, 296 ff. With a thorough understanding of its politico-economical bearing, O. Michaelis, (Berliner V. Jahrsschr. 1863, IV, 121,) says: The capital-value of my credit is not equal to the nominal value of my evidences of indebtedness [notes etc.], but to the capitalized amount of the extra surplus which I have obtained in my business by means of credit, after deduction is made of the costs and of the risk-premium.

542.

We shall, in the books to follow this, inquire with great care, what are the means best calculated to remedy this dangerous tendency. We need only remark here, that it is to be found in a judicious association of small capitalists, and also in the capitalization, so to speak, of personal qualities. A well organized society of work-men, without capital, may indeed obtain credit, as for instance, the Schultze-Delitsch societies, the Russian artel-schnicks (market-aid societies) etc. prove. (Frühauf, Die russ. Artels in Faucher's Vierteljahrsschrift, 1868, I, 106 ff.) We may also mention the greater credit accorded to a land-owner the moment he becomes a member of a land-loan association as compared with what he could obtain before he had joined it. The popular belief of the ancient Egyptians afforded them a very great instrument of credit in the pledging of the remains of their ancestors. (Herodot., II, 136.)

543.

B. Hildebrand is of opinion that the Political Economy of the future may be characterized as credit-economy, in the same way as the Economy of the present may be called money-economy, and that of the past as barter-economy of barter. (National Œkonomie der Gegenwart und Zukunft, I, 276 ff.) Hildebrand's view is correct in so far as that, with every advance in civilization, credit comes to have absolutely and relatively an ever increasing importance, although in the middle ages, especially under feudal forms (Lehensformen), there were numberless operations in credit. Otherwise, however, Hildebrand's three kinds of economy are, by no means, coördinated. While barter and purchase through the instrumentality of money, in every instance, entirely exclude each other, it is impossible to imagine a credit-transaction of which the promise of a barter-performance or of a money-performance does not constitute the base. During a “money-economical (geldwirthschaftlichen) period” [i.e., one during which money is the medium of exchange, and not notes; and when barter does not obtain.—Translator.] the service rendered by money as a medium of exchange may, for the most part, be supplanted by credit. Money, as a measure of value, still remains the substratum of credit itself. (See Knies in the Tübinger Ztschr., 1860, 154 ff.; and in the Freiburger Programm, 9 Sept., 1862, 19.) Earlier yet, A. Wagner, Beitr. zur Lehre von den Banken, 1857 ff. Among the most practical propositions of Saint Simonism is that of a système genéral des banques, intended to administer all the goods of the nation, and to loan them to individuals engaged, in production. (Bazard, 205 ff.)

544.

It is destructive of credit to allow the debtor to await several decrees or judgments before his liability is established; to allow him, on easy terms, delays, reversals of judgment, the costs of the case etc. The term within which a creditor might bring in his claim before the meeting of creditors in the Amsterdam Boedel-chamber was formerly thirty-three and a third years. (Büsch, Darst. der Handlung, Zusatz, 82.) In the presidency of Bengal there were, in 1819, 81,000 cases in arrears, and in 1829, 140,000. Westminister Review, XIX, 142.

545.

And yet Melon is of opinion that the state should favor the debtor as much as possible. (Essai politique sur le Commerce, ch. 12, 18.) This was the view entertained on this subject by the older practitioners. In Bengal, the dhura, a species of “judgment of God,” in which the party who could hold out longest against hunger was declared the victor, was the only means to compel a debtor to pay his debt. As a consequence, the Bengal peasant could not borrow money at less than 60 per cent. per annum. Edinburgh Review, XXII, 67. On the damages attending the credit-laws and credit-courts of Russia, by which all foreign goods are rendered exceedingly dear, see v. Sternberg, Bemerkungen über R., 100 ff. In a country in which a great many powerful personages are above the laws, an incorporated loaning bank may be an indispensable necessity. (Storch, Handbuch, II, p. 23 ff.) In Naples, even as recently as 1804, no debtor could be arrested during the last six months of the queen's pregnancy. At a previous period, one might fail in business there and escape all punishment by exposing the hindermost part of himself in a nude state publicly before a column of the Vicaria. (Rehfues, Gemälde von Neapel, I, p. 203 seq., 222.) In Schwytz, the rate of interest is so high, because the law allows the debtor to pay his creditor, whether the latter will or not, in articles of household furniture, clothes etc., estimated at a very high value. (Hermann, Staatsw. Untersuchungen, 202.) It has now become quite usual in the United States, on account of the many delays granted to the debtor by “democratic” laws introduced there, instead of mere mortgage, to give full warranty deeds when capital is loaned. By this means, the creditor is in danger, when misfortune overtakes him, to see himself compelled to let his property go at one-fourth of its value.

546.

See the Heliast oath in Demosth., adv. Timocr., 746. The Roman system of credits in the time of Polybius was much better than the Carthaginian. Polyb., VI, 56, XXXII, 13.

547.

Sachsenspiegel, III, 39. J. Grimm, Deutsche Rechtsalterthümer, 612 ff. Dahlmann, Dänische Gesch., II, 245, 339. Hermann, Russ. Gesch., III, 357. On slavery for debt among the Malays, see Ausland, 1845, No. 157.

548.

Beaujour, Tableau du Commere en Grèce, II, 176.

549.

C. 2 X. De Pignor. An appropriate provision in a priestly government. Diodor., I, 79.

550.

Staying in a place by the debtor until the creditor is satisfied, and other degrading stipulations, which, however, were prohibited by the police regulations of the Empire in 1548, art. 17.

551.

Marten's Ursprung des Wechselrechts, 1797. Statuta Mediol., 1480, fol. 238 ff. The municipal law of Florence unconditionally imprisoned the father or grandfather for the debt of the son, when the latter engaged in industrial pursuits with their consent. (Stat. Flor., I, 201.) In Bologna, the brothers of a bankrupt who had constituted one household with him were held responsible for his debts. (Statuti dell' Università de Mercantati della Città di B., 1550, fol. 110.) The law of Geneva excluded from all positions of honor the son who had left his father's debts unpaid. Montesquieu, E. des Lois, XX, 16. The consequence was, that among the higher classes not a creditor lost anything for centuries. (K. L. v. Haller, Restauration der Staatswissenschaften, VI, 519.) Compare the “Nurenberger Reformation” of 1479, fol. 61 and 68 of the edition of 1564.

552.

Compare the R. P. O. of 1548, art. 22. And so, by the Code de Commerce, III, 4, I, even the simple bankrupt in contradistinction to the fraudulent bankrupt is punished, and every person unable to pay his debts is declared a simple bankrupt, who, among other things, has made excessive household expenses, or lost considerable sums by play etc. Compare Sully, Mémoires, Livre XXVI, who declares it to be his most wholesome law, that fraudulent bankrupts should, like thieves, be punished with death, and that all their fraudulent assignments, gifts, etc., should be declared void. Further, Ordonn. de Louis XIV., sur les Failletes, art. 11; J. de Wit, Mémoires, 77 ff; v. den Heuvel, Sur le Commerce de la Hollande, 110 ff. Frederick William I., in 1715, threatened with the galleys all light-headed bankrupts, and, in 1723, all those who, knowing their insolvent condition, should effect further loans. Mylius, Corp. Const. March. II, 2, 31, 40. For China, see Davis, The Chinese, I, 247 ff. Gr. Soden, Nat. Oek., III, 231, demands that, in case of doubt, the guilt of the bankrupt should always be presumed.

553.

In England only one-tenth of the number of bankrupts are considered innocent. Elliot, Credit the Life of Commerce, 1845, 50 ff.

554.

The contrainte par corps of debtors was abolished in France in 1792, but restored in 1797. Even Turgot remarked that since slavery had ceased there was no further fear (?) that the poor would be oppressed by imprisonment for debt. (Sur le Prêt d' argent, § 31.) According to Droz, the question is not one of weighing “freedom” against “miserable money,” but the deprivation of a few of that freedom and the non-fulfillment of obligations entered into, that is against the destruction of public confidence.

555.

A similar development among the Greeks: A. Rigorous slavery for debt, which Kypselos moderated at Corinth. (Pausan., V. 17, 2), and Solon abolished in Athens. (Plutarch, Sol., 15. Demosth., de fals. Legat., 412.) B. The reckless creation of debts as seen in Aristophanes; while outside of Athens slavery for debt lasted yet a long time. (Hermann, Griech. Privatalterth., § 57, 20.) In the time of Demosthenes, the merchant in arrears in the payment of his debts was cast into prison, and the bottomry-debtor who deprived his creditor of his security might be punished with death, (Demosth. adv. Pharm., 922, 958), and this although the cessio honorum was introduced. Hermann, § 70, 3. Compare Xenoph., Vectigg., 3, Demosth. adv. Apat., 892; adv. Lacrit., and adv. Dionys. In Corinth, the state superintended expenses made by parties. This was part of its credit-policy. (Athænæus, VI, 227.) For a remarkable Rhodian law relating to debts, see Sext. Emp., Hypot. I, 149. In Rome: A. The chief characteristic of the ancient law in this matter was the eventual sale of the person of the debtor on the getting of the loan (nexum); the power of the creditor to put the addictus to death or to sell him in foreign parts; finally, the in partes secanto, in the concourse of creditors. Without these rigorous provisions, the borrower might easily have evaded his debts, by the emancipation of his son and turning over his property to him. (Niebuhr, Rom. Gesch., II, 770 ff; Savigny in the Abb. der Berliner Acad., 1833. Zimmern, Gesch. des röm. Privatrechts, III, 131 ff.) B. Later, we find nothing of the execution of the debtor, or of the sale of his person; but he might be compelled to do slave labor for his creditor without any protection against ill-treatment. Slavery for debt was restricted by the Lex Poetelia. (Niebuhr, III, p. 178; Mommsen, III, 494.) The Prætorian law introduced the custom of putting the creditor in possession of the goods of the debtor, with power of sale, which proceeding rendered the debtor infamous. See several passages in Walter., Röm Rechtsgesch, 763 ff; Tertull., Apol., 4; Tab. Herac. I, 115 ff. Later, Cæsar's Lex Julia permitted the honest debtor to escape imprisonment by the assignment of his goods. C. The moneyed oligarchy which prevailed in Rome caused the adoption of exceedingly severe measures against delinquent debtors. (Plut., Lucull., 20. Cic., ad. Att. V. 21, VI.), although its members themselves incurred debts in the most reckless manner. Cæsar, in the year A.C. 62, excluding his active (activen), owed debts to the amount of 25,000,000 sesterces; M. Antonius, in the year 24, 6,000,000; in the year 38, 40,000,000; Curio, 60,000,000; Milon, 70,000,000. (Mommsen, Römische Geschichte, III, 486.) Compare Gellius, XX, 1, XV, 14.

556.

Whenever a new shop-keeper, who sells goods on monthly credits, settles in a district, the number of poor persons invariably increases. (McCulloch, Commercial Dictionary.) The ruinous credit given by the Jews to the Westphalian peasants begins with an account for the goods which they have succeeded in pressing upon them, after five or six years have elapsed. The Jew seldom sues accounts at law; but he besieges the debtor and discovers where his last head of cattle and his last little supply of provisions are to be found. As he is willing to accept everything that has any value, sometimes in payment of arrears, and sometimes in payment for some new piece of trash, he is sure to obtain his dues in the end, but not until his victim, who is sunk deeper and deeper in the abyss of debt by every “accommodation,” is entirely ruined. (Schmerz, Rheinish-Westphäl. L.W., 396 ff.)

557.

In the lower and middle stages of civilization, we find a multitude of laws by which minors, students etc., but especially land-owners are limited to a minimum of credit, which, however, varies very much with the person, and is subjected to a number of embarrassing forms, the consent of a third person, for instance etc. (Compare Bayerische L.O. von 1553, fol. 83.) Such laws, however, give as much room to the play of dishonesty as they take away from that of want of reflection.

558.

On the municipal regulations (Städteordnungen) of the 14th and 15th centuries, which compelled Jewish creditors especially to have their evidences of indebtedness redeemed within from every two to five years, see Stobbe, Juden im Mittelalter, 129. Compare further the Würtemberg L. O. of 1515, Statut. Ferrar, ed. 1650, lib. II, rub. 37, 289. According to the other provisions of the laws in North America, some book accounts were required to be sued on within six and others within seventeen years. (Ebeling, Gerchichte und Erdberschreibung der v. Staaten, II, 247, 298.) The Prussian law of March 31, 1838, provides a period of limitation of three years for all ordinary commercial debts. A similar law was passed in the Kingdom of Saxony, in 1846. In London, there has been found a great number of hatters, tailors, boot and shoe dealers etc., whose books showed credits of more than £4,000, most of them not to exceed over £10. How much of all this must be lost entirely, and how that loss must increase the sums paid for boots, shoes and hats by the prompt payer! (McCulloch, v. Credit.) We find, even in Athens, that the period of limitation was shortened in the interest of credit, and that in the case of minors, it did not exceed five years. (Demosth. adv. Nausim., 989.) Security for a debtor not over one year. (Demosth., adv. Apatur., 901.) The prohibition of Zaleukos to issue any evidences of debt whatever goes much farther. (Zenob., Proverb. V, 4.)

559.

Compare the report of the Dresden Handelskammer, 1864, 11.

560.

A. Mayer, in Faucher's Vierteljahrsschrift, 1865, IV, 65.

561.

We learn from the debates in the English parliament of February 9, 1827, that, in two years and a half, there were, in London and its environs, 70,000 cases of imprisonment for debt, the costs of which were from £150,000 to £200,000. In 1831, there were in one debtors' prison 1,120 prisoners, who owed on an average £2 3s. 2d. (McCulloch, l. c.) There was, in 1792, a case of a woman who, for a debt of £19, remained in prison 45 years, and others like it. (See Archenholtz, Annalen, IX, 87 ff; X, 169 ff, XIII, 125.) In England in 1844, arrest for sums less than £19 was prohibited. Johnson had already proposed a similar provision. (Idler, 1758, Nos. 22 and 38.) Imprisonment for debt was abolished in France, England and Austria in 1867; in the North German Confederation, on the 29th of May, 1868, but arrest for security's sake was retained. Sismondi finds fault with nearly all laws in the premises, because they attack the person of the debtor rather than his personal property, and his personal, rather than his immovable, property. He would have all this just the contrary of what it is. The first interferes with the very source of wealth, the productive power of labor; the second causes goods to be sold much below their value. Neither of these evils attends the last. (N. Principes, I, 250.)

562.

A law of the North German Confederation allows the pledging of future wages, only in the case of public officers, and those holding permanent places in the service of private parties, whose salaries are over 400 thalers per annum. The original draft had excepted only the things necessary to workmen and those directly depending on them; while the law as passed makes the prohibition general. This was undoubtedly done for the convenience of employers as well as of courts; as for instance in the circuit of Dortmund, there were, in one year, 10,000 cases in which wages were garnisheed. (Annalen des N.D. Bundes und Zollvereins, 1869, 1071 ff.) But the recklessness of those workmen whose wages are below the average, might have been just as well guarded against without dragging those whose wages are above the average down to their level, if a distinction had been made between production-credit and consumption-credit, and the latter had been limited by providing that no suit should be instituted for supplies made to public houses, taverns etc.

563.

In the second book of Moses, 22, 25 ff., and the fifth, 24, 6. A very old Norman law provides that in actions for debt, execution should not issue against effects of the debtor which are indispensably necessary to him to maintain his position, such as the horses of a count or the armor of a knight. (Dialog. de Scaccario.) Magna Charta extended this provision so as to include the agricultural implements and cattle of the peasantry. The moment these laws, in consequence of a false principle of humanity, except anything but what is absolutely necessary, they injure credit. Thus, for instance, in Brazil, a law of 1758, providing that nothing immediately employed in or directly necessary to the production of sugar should be seized on execution, caused great injury to the production of sugar. (Koster, Travels in B., 1816, 356 ff.)

564.

§ 2, Cod. De Prec. Imper. Off., I, 19. The diets of the Empire had granted such letters in the fourteenth century. (Wachsmuth, Europ. Sittengesch., IV, 690.) They were granted, as a rule, only with the previous knowledge of the Emperor, by the police ordinances of the Empire of 1548, art. 22.

565.

So in Austria, Saxony, Brunswick, the electorates of Hesse and Baden. In Prussia, they could be granted only after a juridical decree to that effect; and an appeal to a superior court was allowed to reverse or affirm it. Compare Mittermaier in the Archiv. für civilist. Praxis, XVI, and also P. de la Court, Aanwysing der politike Gronden en Maximen van Holland etc., 1669, I, ch. 25. Nürnberg obtained as a privilege, in 1495, that no moratorium should be valid as against its citizens. (Roth, Geschichte des Nürnb. Handels, I, 86.)

566.

Compare the discussions in the French National Assembly, in the month of August, 1848. It is much less disadvantageous in times of great commotion, when all business is brought to a stand still, to extend the time in which bills of exchange etc. are payable. Such a measure prevents a number of bankruptcies which the real balance of debts due to one and owing by him does not render necessary.

567.

In the persecution of the Jews in the middle ages, the so-called Brief-todten (letter-killing), or the destruction of titles, was very common. In 1188, the French government released all crusaders from the payment of interest on their debts, and granted them an extension of three years' time to pay off the principal. (Sismondi, Hist. des Français, VI, 82.) Similar compulsory measures were provided against the Jews and usurers in 1223 (Ibid, VI, 539 ff.); and in 1299 (Ordonnances, I, 1331), on the formal request of the nobility. (Ordonnances, II, 59.) Again, in 1594, there was a release of one-third of the interest on all national and private debts. (Sismondi, XXI, 318.) The general moratorium of the Milanese for a term of eight years, introduced in 1251, after their war with France, was of an essentially different character. (Sismondi, Geschichte der italienischen Republiken, III, 155.) The same is true of the general indult granted by Philip II. in Belgium. (Boxhorn, Disquisitt. politicæ, 241 ff.)

568.

The abolition or release of debts, so frequent in ancient revolutionary times, reminds us, in many ways, of the crises precipitated in modern times by paper money and produced by the state. The ancestors of Alcibiades and Hipponikos laid the foundation of an immense fortune, in Solon's time, by purchasing land in large quantities with money borrowed from several citizens, a short time before the abolition of debts. (Plutarch, Sol., 15.)

569.

Enormous consumption of wax in the churches of the middle ages. In the cathedral of Wittenberg alone, a short time before the Reformation, more than 35,000 pounds of wax candles etc. were burned yearly. At the same time, honey was generally used instead of sugar. How much more important, therefore, at that time must bee-culture have been, considered from the point of view of circulation as compared with what it is to-day. And so in Catholic countries, a difference in the external manifestation of religion causes the relative importance of the consumption of fish to increase and decrease. In 1803 there was little demand in France for ivory crucifixes, rosaries etc. In 1844, the demand for them and for prie-Dieu for the bed-room etc. was increased. (Mohl, Gewerbwissenschafliche Reise, 101.) To engage successfully in the sale of sugar in Persia, it is necessary to know that in that country it is liked only in little hat-shaped lumps, which are used only as semi-voluntary gifts; and that, in such case, custom fixes the number of lumps. (Steinhaus, Russlands commercielle etc. Verhh., 151.) In the Levant, workmen prefer bars of iron which are small and of varied form because they find it difficult to manipulate the large ones. The English bear this in mind much better than the Russians. (Steinhaus.) A merchant sending wood to Southern France must be acquainted with the form of the staves used in the manufacture of barrels there. Compare Büsch, Geldumlauf, VI, 2, 2.

570.

The circulation of goods compared to the circulation of the blood: by Mirabeau, Philosophie Rurale, ch. 3. Turgot, Sur la Formation etc. § 69. Canard., Principes, ch. 6.

571.

Eiselen, Volkswirthschaftslehre, 98 ff. If in ancient times commerce played a much less important part than it does among the moderns, it was, as Montesquieu says, because the whole commercial world was then more uniform in climate and the character of its products than it is now. (Esprit des Lois, XXI, 4.)

572.

Of the successive steps, sheaves, corn, flour, bread,—flour has the greatest capacity for circulation. And, indeed, the last operation of labor on a great many goods, because of their consequent more narrowly specialized utility, is accompanied by a decrease in their capacity for circulation. As an illustration, we may mention ready-made clothing as compared with cloth. The capacity for circulation of a commodity is very much advanced when the demand is wont to increase with the supply, as is the case with gold and silver, but not with learned books, optical instruments etc. Many commodities have but little circulating capacity, because no one desires to purchase them but at first hand. See Menger, Grundsätze, I, 245 ff.

573.

Knies., Die Eisenbahnen und ihre Wirkungen, 1853, 79.

574.

Compare Schmitthenner, I, who calls attention and with reason to the importance of loans on chattel mortgages. But Berkeley, Querist, No. 265, remarks that a squire with a yearly income of £1000 can, “upon an emergency,” do less good or evil than a merchant with £20,000 ready money.

575.

A very important difference between Russia and England.

576.

Storch, Handbuch, I, 273 ff. There is also a useless circulation which is not calculated to promote the division of labor, but to employ idle time or idle capital, as in the case of games of hazard, speculation in stocks, wheat etc. Even impoverishing consumption may produce rapidity of circulation, as in Germany during the war years 1812 and 1813. (F. G. Schulze, N. Œkonomie, 1856, 667.) Relying on this fact, Hume (1752) on Public Credit, Discourses, No. 8, argues in favor of the old opinion, that all circulation is wholesome and to be encouraged. Boisguillebert, Traité des Grains, I, 6, went so far as to laud war because it accelerated the circulation of wealth. On the necessity of a circulation sans repos, see ibid., II, 10. In a similar way Law, Trade and Money, 1705, and Dutos, Réflexions Politiques sur le Commerce, over-valued the circulation of wealth as such. Concerning the Mercantile System, see § 116. Darjes, Erste Gründe der Cameralwissenschaft, 1768, 531. And even Büsch, Geldumlauf, I, 29, 32 ff., III, 96, who in other places nearly always overlooks real production and sees only the circulation of money caused thereby. Thus he calls the poor when they are helped in money, and spend it, useful members of society! (IV, 32, 39. Similarly, v. Struensee, Abhandlungen, 1800, I, 282 ff., 400 ff.)

577.

As, for instance, happened in France in 1577, when all commerce, and in 1585 all industry, were declared to be de droit domanial. Louis XIV. was of opinion that the king was absolute master of all private property of priests and people. (Mémoires histor. de Louis XIV., II, 121.) Compare Duclos, Mémoires, I, 14 ff.

578.

Compare Theod. Cod., V, 9, 1; Just. Cod., X, 19, 8; XI, 47, 21, 23; XI, 50, 51, 52, 55, 58. How full the really classic period of the Roman jurists was of the idea of freedom of competition, we see in Paullus: L. 22, § 3, Dig. XIX, 2. The provisions concerning lœsio enormis appear first in the time of Diocletian. (Just. Cod., IV, 44, 2.)

579.

Benjamin Franklin says that the freer the form of government is, the more the people show themselves in their true aspect. Ancient Rome, with the early development of its rational disposition, soon learned to favor freedom of commercial intercourse. Compare Mommsen, Römische Geschichte, I, passim. This was, certainly, an element of its greatness, but also of the proletarian evils developed in it an early date, and which were weighed down only by the absolute growth of the state and the development of its economic interests during centuries.

580.

Nor must it be forgotten that competition raises prices as well as lowers them. The expressions higher price and lower price denote only different sides of the same relation. M. Chevalier is of opinion that our present breathless competition is characteristic only of a period of transition prolific in new inventions, a competition soon to be followed by peace. (Cours, II, 450 ff.)

581.

Ἀγαθὴ ἔρις: Hesiod., Opp., 10 ff.

582.

“Whoever speaks of competition suppresses the existence of a common aim,” says Proudhon, although he adds, after Bileam's way, that to cure the evils of competition by competition, is as absurd as to lead men to liberty by liberty, or to cultivate the mind by cultivation of the mind.

583.

Compare Bastiat, Harmonies économiques, ch. 10.

584.

If all classes were protected against competition, no class would derive any advantage from it, since a “universal privilege” is an absurdity. If only certain classes or individuals are protected, it is done at the cost of all others.

585.

The question should not be formulated thus: “Caprice or rule?” but “Rule of morals, or rule of law?” Schmoller against v. Treitschke in Hildebrand's Jahrbb.

586.

Concerning the arguments by which the commercial restrictions of the middle ages were defended, see below. They were, for the most part, well founded for the age in which they were advanced. A judicious education will often be compelled to provide limitations, but always with the intention, by this means, of making possible a really greater independence. Thus the current of commerce may be too weak in a poor and thinly settled country in order that supply and demand should always and everywhere meet and be satisfied. Under such circumstances, their artificial concentration at certain points is among the most efficient means of promoting the economy of the whole people. The policy of freedom of commerce was recommended even in the seventeenth century by J. Child, by North and Davenant. W. Roscher, Zur Geschichte der englisch. Volkswirthschaftslehre, 65 ff., 85 ff., 113 ff., 142 ff. And earlier yet, in Holland, by Salmasius, De Usurus, 1638, 583 and de la Court. Compare Tübinger Ztschr., 330 ff. Thus Boisguillebert says: Il n'y avait qu'à laisser faire la nature et la libertê, qui est le commissionaire de cette même nature. (Factum de la France, 1707, ch. 5.) See, also, Dissertation sur la Nature des Richesses, ch. VI; Détail de la France, 1697, II, ch. 13; Tr. des Grains, II, 8. For the most part dictated by a reaction against Colbertism. See further, Mélon, Essai Politique sur le Commerce, 1734, ch. 2. M. Decker, Essay on the Causes of the Decline of Foreign Trade, 1744, 31 ff, 106 ff. J. Tucker, Essay on the advantages and disadvantages which respectively attend France and Great Britain with regard to Trade, 1750. Forbonnais, Elémens du Commerce, 1754, I, 63. Genovesi, c. I, 17, 3, is of opinion that at least in case of doubt, commerce stood more in need of freedom than of protection. Verri, in his Meditazioni, goes still farther. The Physiocrates, with their laissez aller and laissez faire recommend competition as the best means to increase the net income of a people. According to Dupont, 147 ff, éd. Daire, the province of legislation is confined to declaring the laws of nature. His motto is: liberté and propriété. Adam Smith asks that the state should do only three things: insure protection against foreign states, the administration of justice at home, the establishment and maintenance of certain institutions of advantage to the whole community, but which private interest could not establish for want of means to cover the expenses attending them. (Wealth of Nations, V, ch. I, 2.) Hence he demands (III, ch. 2) the abolition of all kinds of fidei commissa, of royalty in mines (I, ch. 11, 2), of all corporate and exclusive privileges, of all protective duties etc. (IV, ch. I ff), but especially of the colonial policy hitherto in vogue. (IV, ch. 8.) The attacks of the Socialists on freedom of competition were begun by Fichte, Geschlossener Handelsstaat, 126, in which it is called a robber-system or system of spoliation. He would have the state have more solicitude for human industry than if men were so many swallows. See further, Sismondi, N. Principes, passim, who everywhere demands the protection of the government for the weaker. Fourier, N. Monde industriel, 396, who thinks that le monopole général is always a preservatif contre le commerce. Bastiat, Harmonies économiques, ch. 10, has a very valuable refutation of these follies. Recently, Rodbertus, Hildebrand's Jahrbücher, 1865, II, 272, is of opinion that “social individualism” has ever had in history the task of dissolving decaying societies, as, for instance, under the Cæsars.

587.

Whoever would sell to others must purchase of them. (Child., Discourse of Trade, 358.) Similarly Temple, Works III, 19, and Becher, Polit. Discurs, 1547. This view seems to have become the national one first in Holland. Compare also Quesnay, 71 and Mirabeau, Philosophie rurale, 1763, ch. 2.

588.

We often hear it said: “nothing sells because there is no money.” But the real cause here is, in most instances, not a want of money, but a want of other goods which might serve as a counter-value. In bad times, for instance, there is many a weaver who would consider himself fortunate, even if he could get no money for his cloth, to obtain instead, meat, bread, wood, raw material etc. If money only were wanting, that might easily be as favorable a symptom in commerce, as when there are not enough shops, steamers etc., to carry on the business of the country. Compare North., Discourses upon Trade, 1691, 11 seq., but especially J. B. Say's celebrated theory of Markets, traité I, ch. XV.

589.

See Humboldt's observations as to how, in Spanish America, agriculture in the vicinity of the mines increases and decreases with the wealth of the latter. (N. Espagne, III, 11 ff.) See also Harrington (ob. 1677), On the Prerogative of a Popular Government, I, ch. 11; Cantillon, Nature du Commerce, 16. And so Stein., Lehrbuch, 122 seq., points out how great enterprises produce especially for the consumption of the small householder without capital, and how, therefore, the flourishing condition of the one determines that of the other.

590.

Those indeed who live by the spoliation of others, as robbers, deceivers etc. are interested in the economic prosperity of the latter only so long as their spoliation of them is not endangered. Only to this extent can it be claimed with Fr. List that the nobility of the Middle Ages, in obeying the selfish calculation which led to the oppression of the peasantry, engaged in as bad a speculation as a manufacturer of our day would who should feed his steam-engine with nothing but saw-dust or scraps of old paper. The cities of the middle ages had a much more undoubted economic interest in the emancipation of the peasantry as a class than the nobles or the clergy.

591.

Such exceptions there certainly are, even if it were not true “that the most godly cannot rest in peace unless he is acceptable to his ungodly neighbor.” Nations that furnish the same products as we do may, indeed, “spoil our market,” just as at home the selfish shoemaker may desire the prosperity of all wearers of shoes, that is of all other industries, but not that of all other producers of shoes. The view that long prevailed, that one man's gain was always some other man's loss (Th. Morus, Utopia 79, ed. Colon. 1555; Baco., Sermones fideles, cap. 15; quid-quid alicubi adiicitur, alibi detrahitur; M. Montaigne, Essais I, 21: les prouficit de l'un est le dommage de l'autre) prevailed much longer in international affairs where observation is much more difficult than in national affairs; although even here, P. de la Court, Maximes politiques, 1658, contrasts the economic interest of Holland with that of the rest of the Netherlands and prefers it to theirs. Even Voltaire says: “The desire of the greatness of the Fatherland includes the desire of evil to our neighbor. Evidently no country can gain except what another loses.” (Dict. philosophique, v. Patrie.) Compare, however, the peut-être in his Histoire de la Russie, I, 1, on the occasion of the English-Russian treaty of commerce. Similarly, Galiani, Della Moneta, I, 1, IV, 1; Verri, Opuscoli, 335, and recently v. Cancrin who says that “in every-day life, property is acquired only at some other person's expense.” (Weltreichthum, 1821, 119. Oekonomie der menschl. Gesellschaft, 1845, 23.) The cosmopolitan view (Xenoph., Cyrop., III, 2, 17. Hier., 10) which prevails in Adam Smith's school was introduced by Hume, Essays, 1752, On the Jealousy of Trade. Quesnay, Encyclopédie, v. Grains, 294, ed. Daire; A. Smith, Theory of moral Sentiments, 1759, p. 6, sec. 2, ch. 2. Pinto, Lettre sur la Jalousie de Commerce, 1771, and J. Tucker, Four Tracts on commercial and political Subjects, 1776, 34 ff and 42 ff. “The system of states exercises no influence whatever on the world's commerce.” (Lotz, Handbuch I, 11.) More recently, R. Cobden, in his Russia, Edinb., 1836, among others argued, that the conquest of Turkey by the Russians would be useful to England, because then more (?) English products would probably be sold there. Russia would become no stronger thereby, as conquests always injure the conqueror more than they benefit him. The idea of European equilibrium is therefore a chimera, because no state can be prevented from having an internal growth, as great as may be. Thus, in the summer of 1853, we heard the London Times sometimes preach that every cannon-shot fired by the English at the Russians might kill an English debtor or an English customer. The Venetians entertained a similar view at the beginning of the fifteenth century. Compare M. Sanudo in Muratori, Scriptores, XXII, 950 ff. See above, § 12. Moreover, Malthus had recognized that there were natural rivalries between nations which produced exceptions to Tucker's laws. (Principles, Preface.) Similarly Garve, in Cicero's Pflichten (1783), III, 146 ff.

592.

B. Franklin, Works, vol. III, 49. Sismondi claims for all civilized nations the right of interfering with the governments of other nations with whom they have or might have commercial relations, and of insisting that they shall have a good government under which commerce may freely develop. (N. P. VII, ch. 4.)

593.

As for instance when the ami des hommes says that he felt towards an Englishman or a German as he did towards a Frenchman with whom he was not acquainted. Mirabeau, Philosophie rurale, ch. 6.

594.

Thus, for instance, the Stoic, Zeno: Plutarch. De Alex, fort, 1, 6.

595.

Compare even Lauderdale, Inquiry, 274 ff.

596.

How well, for instance, the English sustained Napoleon's continental blockade, the evils produced by which were intensified by several bad harvests. Its worst time did not, indeed, coincide with that of the struggle with the United States. The ancient Athenians, during their contest with Philip of Macedon, considered the question of the supplies from the Bosphorus etc. as one of life and death. But this can be looked upon only as a cogent proof of the small development which their commercial talents had received at the time. How easily might they not, according to our ideas, have obtained corn from Sicily or Egypt.

597.

According to the acute analysis of language made by F. J. Neumann, Tübinger Ztschr., 1872, 317 ff., the word “price” has reference to an actual purchase or sale, while the expression “value in exchange,” generally called simply value, is based upon a valuation, or intimates in a general way that an object possesses value; value in exchange is, so to speak, the average of several price-determinations. Price, according to Schäffle, is the external consequence of value in exchange, a means of representing the latter. (N. Œk., III, Aufl., I, 218.) Only through the difference between value in exchange (universal possibility) and price (special reality) is the laesio enormis of the jurists possible. (Schmitthenner, Staatswissenschen, I, 416.)

598.

By market price, prix courant, is meant the money-price of commodities, determined by competition.

599.

A problem very similar to that of the motion of bodies in space.

600.

Lotz, Handbuch, 50 ff., calls those commodities costly which are obtained only at a high cost of production, and dear, those whose price is above the cost of production.

601.

Compare Canard, Principes d'Economie politique, ch. 3. Almost simultaneously, H. Thornton, 1802, Paper-Credit of Great Britain.

602.

See Jackson's Account of Morocco, 284, for cases in which, in the Sahara, when the burning winds of the desert had dried up the water in the leathern bottles of the caravan, a drink of water cost from $10 to $500.

603.

The North American aborigines very frequently consent, in their exchanges, to take any offer made to them by their equals, however insufficient it may be, because they fear revenge. Schoolcraft, Information etc., II, 178. As to the effects of cunning, the Tungusi, when they get a glass of brandy from the Russians, grow almost idiotic, and give away their goods at mock-prices in drink. (v. Wrangell, Nachrichten, I, 233.) In the higher stages of civilization, on the other hand, very distinguished people are, by no means, privileged because of their position, in the struggle for prices. In modern times, claims (reclamen) have taken the place of greater physical or political power. Compare E. Hermann, Leitfaden der Wirthschaftslehre 1870, 91 ff.

604.

Thus Galiani says, that before one of the two parties has expressed his want to buy or to sell, the pans of the scales are in equilibrium. The first that speaks breathes on one of them, and it drops. (Dialogue sur le Commerce des Bleds, 1770, No. 6.) This has been verified in a striking manner in California, where the most valuable commodities were often purchased at auction at the lowest prices, while when purchased from merchants and even the most wretched shopkeepers, they were sold enormously dear. (Gerstäcker, in the Allg. Zeitg., May, 1850.) Thus there were harvested in France, in 1817, 48,000,000 hectolitres of wheat, valued at 2,046,000,000 francs, in 1820, 44,500,000 hectolitres valued at 895,000,000 francs. (Cordier.) This vast difference in price existed, because in 1817, the whole world was still trembling under the impression made by the failure of the crops in 1816, while in 1820, the feeling of comfort and security caused by the rich year 1819, still prevailed. Low prices at forced sales under decree etc. See below, § 5. That travelers are so frequently taken advantage of in effecting changes of money is explainable partly by their urgent wants, which are well known to the opposite party, and partly by their supposed ignorance in the matter. And so, at auction sales, out-bidding one another has something very seductive in it for ignorant or hot-headed purchasers.

605.

It was considered immoral by his contemporaries, when William the Conqueror introduced the custom of farm-letting to the highest bidder. (A. Thierry, Conquête de l'Angleterre, II, 116, éd. Bruxelles.) It is repugnant to poetic and delicate minds to think that everything has a price exactly fixed. (§ 2.) I need only refer to the picture of Helen which Zeuxis exhibited for money, which act of his was characterized, by his cotemporaries, as a species of prostitution. Val. Mac, III, 7. Ælian, V, 4, IV, 12. Socrates judgment on the payment of the sophists. Xenoph., Memor., I, 6, 13.

606.

Competition has only a negative influence on prices, inasmuch as it modifies the extreme operation of the other grounds of their determination. Thornton, Paper Credit. Lotz, Revision, 1811, I, 74 ff, 241 ff.

607.

The expression, “intensity of demand,” in Malthus, Principles, ch. 2, sec. 2. As early a writer as Sir J. Stewart calls attention to the difference between large and high and small and low demand. A high demand will always raise the price, as when, for instance, two wealthy virtuosi compete at an auction. Paucorum furore pretiosa, as Seneca says. An English penny of the time of Henry VII, once sold, on such an occasion, for £600. In 1868, at the Lafitte auction, seven bottles of wine sold to Rothschild at 235 francs a piece after the Maison dorée had offered 233. (N. freie Presse, Dec. 17, 1868.) A great demand has frequently no result but to increase the supply, and the price rises only in so far as the demand is too sudden to permit a parallel growth of the supply. (Principles, Book II, ch. 2, 10.) The present price of tea could not remain unaffected, if ten different private merchants, competing one with another, or the agent of a privileged commercial society, should send orders to China for an equal quantity of tea. (Verri, Meditazioni, IV, 8 ff.)

608.

Immense weight laid on the æqualitas permutationis (after Aristot., Eth. Nicom., V. 7,) in the ethics and economics of the scholastic middle ages, and in the time of the Reformation. Compare Melancthon, in Corp. Ref., XVI, 495 ff, XXII, 230.

609.

A very barbarous theory of price in Xenoph., De Vectigg., 4. The ancients made little progress in this respect, although there are not wanting ingenious observations on certain phenomena of prices. (See Aristot., (?) Oecon. II; Cicero, De Off. III, 12 ff.) Mariana, De Rege et Regis Institutione, 1598, III, explains price as the relation of value to quantity. According to Locke, the price of a thing is determined by the relation between “quantity” and “vent”: the increase or diminution of its useful qualities influences it only so far as it alters that relation. (Considerations on the Consequences of the Lowering of Interest etc, 1691, Works II, 20 ff.) Law, on the contrary, says that the “vent” can never be greater than the “quantity,” but that the “demand” may be. Wherefore, he proposes the formula: quantity in proportion to the demand. (Trade and Commerce considered, 1705, ch. 1.) In chap. 6, Law distinguishes three elements in price: quality, quantity and demand. The expression “quantity” is, certainly, very unsatisfactory. How many examples does not Tooke (Thoughts and Details, on the high and low Prices of the last thirty Years, 1823, part IV) give to illustrate how, when the supply was smallest, prices were lowest and vice versa! It was so almost always after the market was over-filled, when a great many speculators had lost and no one dared to purchase anew. Montanari (ob. 1687) furnishes us with an excellent theory of prices. (Della Moneta, 64 ff., Custodi.) And a still better one, Sam. Pufendorf, Jus Naturæ et Gentium, 1672, V. 1, who must be considered the best authority on the laws of prices before Stewart. Boisguillebert, Traité des Grains, II, 1, 10. Galiani, Della Moneta, I, 2, knows only the factors utilità, and rarità, although in his exposition of the latter, he discusses many points which would be called the cost of production in our time. The wisdom of Providence has granted us the most useful things in the greatest abundance to make them cheap. Stewart, Principles II, 2, 4, rendered a great service to the theory of prices, tracing back supply to the cost of production, demand to want and ability to pay; and his deserves to be called the immediate predecessor of Hermann's remarkable theory. (Hermann, Staatsw. Untersuchungen, 66 ff.) For a peculiar theory of prices, see Paganini, Saggio sopra il giusto Pregio delle Cose, 189 ff. Neri, Osservazioni, 1751, 127. Gust. Menger, Grundsätze, I, 179 ff., has made an interesting attempt to explain the formation of prices in its simplest shape, in the supposition of a monopoly in the seller, and by then going over to the subsequent modifications introduced by the competition of many sellers.

610.

“Instead of separating, in the same matter, the points of view of the buyer and seller, we may distinguish the consideration of the thing to be acquired and the thing to be given by one and the same person.” (Rau.) The possessor of the more current commodity appears especially as demanding, that of the less current as offering or supplying, (v. Mangoldt.)

611.

This is for free goods=0, for monopolized goods=1/0.

612.

The obvious fact that every price supposes a comparison of two commodities, and that every buyer is, at the same time, a seller, has been overlooked by only too many writers. And hence Dutot's opinion, that, as all men buy and few only sell, the state, in case of doubt, should favor the buyer. (Réflexions sur le Commerce et les Finances, 1738, 962, éd. Daire.) And so the often-mooted question whether universal dearness or cheapness is more useful: the latter advocated, for instance, by Herbert, Police générale des Grains, 1755; Verri, Meditazioni, V; the former by Boisguillebert, Traité des Grains, I, 7, II, 9; and by the Physiocrates. (Quesnay, Maximes générales, Nr. 18 ff., I, Problème Économique; also by A. Young, Polit. Arithmetics, ch. 8.) The laity in Political Economy understand by dearness only the general cheapness of the medium of circulation or exchange, and vice versa.

613.

Thus, even a poor man in Naples sometimes requires a glass of ice-water. The introduction of the extensive use of snow into Sicily improved the condition of the public health. (Rehfues, Gemälde von Neapel, I, 37 ff.) On the other hand, furs, in the far north, are articles of prime necessity. Newspapers in a free country satisfy a want much more urgent than in countries which are not free. And so, Senior says that shoes are “necessaries” to all Englishmen, since without them, their health would suffer. To the lower classes of Scotland they are “luxuries.” Custom permits them to go barefoot without hardship or degradation. For the middle classes of the same country, they are “decencies.” Shoes are worn there, not to protect the feet but one's civil position. In Turkey, tobacco is a decency and wine a luxury. The reverse is the case in England. (Outlines, 36 ff.)

614.

As to the relativity of the opposites of “temperance” and “excess,” every person should attend to the following points: a, not to exceed one's income; b, to provide for one's self and one's family; c, to lay by something for a rainy day; d, to place one's self in a position to care for the poor; e, to indulge in no pleasure injurious to body or mind; f, to give no bad example. (Tucker, Two Sermons, 29 ff.) Menger, Grundsätze, I, 92 ff., endeavors to compare the value in use of different commodities from the point of view, that the means of gratification of a less urgent want, when the more urgent wants of the present are satisfied completely, should be preferred to the means of over-gratifying the latter.

615.

Thus the price of many dark articles of apparel rises in a moment of unexpected universal mourning. A very remarkable case in Paris, at the death of Henry II. (Montanari, Delia Moneta, 85, Custodi.) On the other hand, a change of fashion may greatly depress the price of many commodities. Such a change may take place even in the case of precious stones; as, for instance, now in London, a perfect emerald is most highly prized. (King, Precious Stones and Metals, 1871.) The rise of many drugs in times of cholera, and of leeches, for example, in Paris, 600 per cent. Rise of the price of powder, horses etc. at the outbreak of a war, and of the price of iron caused by extensive railroad building. In Circassia, a good shirt of mail was formerly worth from 10 to 200 oxen: but since it was discovered not to be a protection against cannon balls, its price fell 50 per cent. (Bell, Journal of a Residence in Circassia, I, 403.)

616.

On “connected” (connexen) goods, the use of one of which supposes the use of the other, as, for instance, sugar and coffee, wood and stone used in the construction of buildings, see Schäffle, Nat.-Oek, II. Aufl., 179.

617.

Observed by Necker, Sur la Législation et le Commerce des Grains, 1776. Compare Roscher, Ueber Kornhandel und Theuerungspolitik, 1853, 1 ff. In Athens, for instance, the medimnos of wheat cost ordinarily five drachmas, but during the siege by Sulla it rose to 1000 drachmas. (Demosth. adv. Phorm., 918. Plutarch, Sulla, 13.) Compare II. Kings, 6, 25, 7, 1. In Paris during the siege by Henry IV. it rose to 5000 per cent. of the ordinary price. (Lauderdale, Inquiry, 60 ff.) During the siege of Breisach, in 1638, a mouse was finally worth 1 florin, the quarter of a dog, 7 florins, a quarter of wheat, 80 thalers. (Röse, Leben H. Bernhards, M., 11, 269.) Compare Strabo, V, 248 seq.

618.

Wheat is still more indispensable than meat. Hence, in the ten principal markets of Prussia, the price of rye rose much more from 1811 to 1860 than the price of beef; the former between 0.32 and 1.03 silver groschens and the latter between 2.32 and 4.94 silver groschens. (Annalen der preussischen Landwirthschaft, 1869, No. 9.) And so in the Rhine district, the wine harvests have undergone much greater changes in price than the prices of must, although the years differed very largely in the quality of the yield. Thus the crop of 1830 was only 225, that of 1868, 10,845 pieces, and yet the minimum price between 1831 and 1865 was only from 3 to 58 flr. per ome. (Engel, Preuss. Statist., Ztschr., 1871, 168 ff.)

619.

In England, the price of wheat has not unfrequently risen from 100 to 200 per cent. when the harvest was from one-sixth to one-third under the average, and when a supply from abroad had modified even this condition of things. (Tooke, History of Prices, I, 10 ff.) Tooke is of opinion that in a country with poor-laws like those of England, a deficit of one-third in the wheat crop, if there were no stores remaining and no importation from abroad, would cause the price of wheat to rise, 500, 600, and even 1000 per cent (p. 15.)

620.

See Davenant, Political and Commercial Works, London, 1771, II, 224. Tooke was somewhat acquainted with Davenant. According to this law, a deficit in the harvest of 10 per cent. would raise the price of corn 30 per cent.; one of 20 per cent. would raise the price of corn 80 per cent.; one of 30 per cent. would raise the price of corn 160 per cent.; one of 40 per cent. would raise the price of corn 280 per cent.; one of 50 per cent. would raise the price of corn 450 per cent.

621.

In England, it is 38.8 per cent. of the supply that comes to the market. (Quart. Review, XXXVI, 425.) In Belgium 40, and in Saxony at least 50 per cent. (Engel, Jahrb. der Statistik etc. von Sachsen, I, 276.) In Germany, the farmers consume on an average two-thirds themselves. (v. Viebahn, Zoll.-v-Statist., II, 958.) With this Plato, De Legg., VIII, agrees remarkably well.

622.

On the difference in this respect between England, Germany and northwestern Norway, see Hermann, p. 71.

623.

Hence it not unfrequently happens that grain grows dear not from any real want of it, but because it is generally supposed that such want exists. For an explanation of why it is that wheat and similar commodities have an almost invariable price, when the average is taken of a long series of years, see infra § 129.

624.

Case in Naples in which after a poor harvest the price of corn remained very low, because the oil-harvest had also failed, and the poor could earn nothing in that industry in which they were largely employed, and vice versa. (Galliani, Della Moneta, II, 2.) Thus Adam Smith, Wealth of Nations, I, ch. 7, distinguishes between “effectual” and “absolute” demand. Similarly J. Steuart, Principles I, ch. 18. Care should be taken to distinguish in this respect between desire and demand.

625.

Thus, in the famine in Ireland in 1821, during which potatoes rose to fabulous prices, but wheat scarcely at all, and had therefore to be exported.

626.

In Tooke, History of Prices (2d edition of the Thoughts and Details etc.), we meet repeatedly with the assertion that when the price of wheat rises, the price of colonial products and manufactured articles sinks, and vice versa. Thus, in England, the price of the evidences of national debt increases from two to three per cent. in fruitful years above what it is after a bad harvest. (Lauderdale, Inquiry, 93.) The British nation paid for the cotton it needed for their own consumption in 1845 over £19,500,000; in 1847 only £9,500,000. (Banfield, Organization of Industry, 162.)

627.

Hence J. B. Say has said that the disposable wealth of a people is like a pyramid, with the scale of prices of the various commodities inscribed on its side. The higher a commodity is in this scale of prices, the smaller is the corresponding section of the pyramid. Compare Sir W. Temple, Essay on the Origin and Nature of Government, Works I, 23 ff.

628.

This fact, in connection with the preceding, explains the well known puzzle, why the remnant of a piece of goods is comparatively cheaper than the whole piece, while a small share in the public debt is dearer than a large one. (Lauderdale, ch. 1.)

629.

Rhode Island was, it is said, bought from the Indians in 1638 for a pair of spectacles. (B. Franklin, Political ... Pieces, 1707.) According to Chalmers, it was bought for 50 threads of coral, 12 hatchets and 12 overcoats. (Political Annals of the U. States.) Compare Ebeling, II, 108. Holland cloths and opium were exchanged for a long time at Sumatra for gold dust worth ten times their value. (Saalfeld, Geschichte des holl. Kolonialwesens, I, 260.) The Hudson Bay Company realized, it is said, at the beginning of this century, in trading with the Indians, a profit of 2000 per cent. (Anderson, Origin of Commerce, a. 1751.) When Altai was discovered, the natives gave as many sable-skins for a Russian kettle or boiler as could be crammed into it. With 10 rubles in iron it was an easy easy matter to gain 500-660 rubles. Storch, Gemälde des russ., R., II, 16; K. Ritter, Erdkunde, II, 557. Similar cases among the Germans: Tacit., Germ., 5.

630.

A seller not actually engaged in the business of selling for a livelihood, and who has not purchased or produced with the intention of selling, is apt to consider instead of this the market price, towards the determination of which those actually engaged in trade have coöperated. Somewhat inaccurately, the amount of the cost of production is called by Adam Smith and Ricardo, “natural price,” by J. B. Say, prix naturel, also prix originaire, because the commodity at its first entrance into the world cost so much. Sismondi and Storch call it prix nécessaire, and Lotz, Kostenpreis. P. Cantillon, Nature de Commerce, 33 ff., understands by the prix intrinsique of a commodity, the amount of land and labor, taking the quality of both also into consideration, necessary to its production.

631.

The cheapest cotton thread is numbered from 60 to 80. The coarser is dearer on account of the quantity of raw material in it, and the finer because of the greater amount of labor in it. (Babbage.) For similar reasons, the Venetian chains cost per braccio, No. 0, the finest, 60 francs; No. 1, 40 francs; Nos. 2 and 3, 20 francs; No. 24, coarsest, 60 francs. (Rau.)

632.

If a person engaged in production has himself furnished certain of the elements of production; if, for instance, he has worked with his own hands, employed his own capital etc., he is wont to charge as much for these as they would be worth, if he hired himself out or loaned his capital.

633.

The greater number of political economists consider the cost of production only from the standpoint of the individual engaged in production. Thus Darjes, Erste Gründe, 218 seq.; Ad. Smith, Wealth of Nations, I, ch. 6. J. B. Say calls even production an exchange in which the productive services of natural forces, of labor and of capital are parted with in order to obtain products. The estimate put upon the value of these services is the cost of production. For some interesting examples as to how the cost of production, in this sense, is calculated, see Hermann, I ed., 136 ff.

634.

Jacob translated by Say, 1807, II, 450. Hufeland, N. Grundelgung, I, 309.

635.

Compare L. Lauderdale, Inquiry, 124, against the Physiocrates. (Riedel, Nat.-Oekonomie, 1838, I, 68.) A country which possesses advantages over other countries, in respect to the cost of production of a commodity, can offer it in the market cheapest. Where, for instance, with the employment of the same amount of capital, a specially large quantity of wheat can be produced, whether it be because of the unusual fertility of the soil, or because of the extensiveness of agriculture (farming over a large area), wheat will, the demand being the same, be specially cheap, whatever the proportion of the three branches of income may have been. If relatively a great number of workmen have been employed in its cultivation, each will receive smaller wages, and vice versa.

636.

Copper and steel engraving affords an example of the different kinds of wear of fixed capital, and the influence it may have on prices. Canard, Principes, ch. IV, considers that one of the most important elements in the cost of production is the length of time that capital must “stagnate” for the sake of production.

637.

On this risk depends, for instance, the high price of vanilla (Humboldt, N. Espagne, IV, 10,), sparkling wines and articles of fashion.

638.

Mangoldt, Lehre vom Unternehmergewinn, 1855, 81 ff. Compare v. Thünen, Der isolirte Staat, II, 1, 80 ff.

639.

Wool and mutton, brandy and fattened cattle, calves and milk, honey and wax, gas and coke, hens and eggs etc.

640.

Adam Smith himself remarked that all artificial lowering of the price of skins or wool must necessarily raise the price of the meat, and vice versa. (Wealth of Nations, I, ch. 11, 3.) For a very elaborate theory on this subject, see J. S. Mill, Principles, III, ch. 16, § 1. Thus Australian wool did not rise as much in price as the production of gold there might have led us to suppose, for the reason that mutton rose to an exceedingly high price.

641.

It is an important and correct remark of Carey's, that the price of a commodity depends much more on the cost of producing its like than on its own cost of production, which already belongs to the past.

642.

Compare J. S. Mill, III, ch. 3, § 1. A much too high price, caused by speculation, or a much too low one, by depreciation, is regularly followed by an ebb or flow just as much too great. (Tooke, History of Prices, III, 55.) And Law, Trade and Money, 41, remarks that the price of a commodity always tends to coincide with the “first cost.” This fact Adam Smith expresses by saying that the cost of production is the center about which the market price always gravitates. (I, ch. 7.) But here there is still the error lurking, that the producer's profit is a part of the cost of production. Compare Malthus, Definitions, ch. 6.

643.

The English view, one very characteristic of the people, is that the equilibrium of prices depends on this, that all commodities should have a value equal to that of the labor they have cost. (Compare Aristot., Eth. Nicom., V, 5.) The same doctrine is to be found in its germinal state in Hobbes, Leviathan, 24, 1651, and Rice Vaughan, Discourse of Coin and Coinage, 1675. More exhaustively in Petty, Treatise of Taxes and Contributions, 1679, 24, 31, 67. (Compare Locke, Civil government, II, § 40 ff.; B. Franklin, Inquiry into the Nature and Necessity of a paper Currency, 1729; Works, ed. Sparks, vol. II.) Adam Smith admits this to be true only of the first beginnings of society, before the origin of property in land and in capital. (Wealth of Nations, I, ch. 5.) Most largely developed in Ricardo, Principles, ch. I, 4, 30. Marx, Zur Kritik der polit. Œkonomie, 1859, 6, endeavors to improve on this by calling all values in exchange “a determinate quantity of thickly curdled working-time,” meaning by work an averaged qualitätslose, social work of production. Per contra, compare Hufeland, N. Grundlegung, I, 134, 156 ff.; and Malthus, Principles, ch. 2, secs. 2, 3, who claims very earnestly that price is not determined by the cost of production, but by the relation existing between demand and supply, the cost of production influencing it only to the extent that it influences this relation. He calls attention to the poor-rates by which the cost of production of labor is raised, but its wages decreased; also to the case of bank notes etc. (Tooke, History of Prices, V, 49 ff; J. S. Mill, Principles, III, ch. 16, 2.) For a very marked case of reaction against Adam Smith and Ricardo, see Macleod, Elements, ch. 2, who, however, is much too one-sided in considering only the amount necessary to the purchaser, and his means. Even Condillac had said: une chose n'a pas une valeur, parcequ'elle coûte, mais elle coûte (du travail ou de l'argent), parcequ'elle a une valeur. (Commerce et Gouvernement, 16.) Ricardo's doctrine is more tenable than appears at first blush. We need only to interline his theory of rent, admit that capital is accumulated labor, subtract all objects constituting a natural monopoly, and not forget that the intrinsic value of labor is one of the causes of the difference of price of different sorts of labor. Ricardo does justice to value in use even en passant. A strange effort by McCulloch to make labor the cause of the non-use of capital. (Principles, III, ch. 6, 2.) McCulloch has not unfrequently exaggerated the half-truths of his doctrines to such an extent as to produce unwittingly a reductio ad absurdum. According to Torrens, before any separation of capitalists from workmen, price depends entirely on the work done, and afterwards on the capital expended, inasmuch as wages, rent etc. are covered by the capital of the person who engages in the enterprise. (Production of Wealth, ch. 1.)

644.

Ce que l' on appelle chereté, c'est l' unique remède à la chereté. (Dupont de Nemours.) Tenders of division in common, in England, increase and decrease according to the higher or lower price of corn during the preceding year. (Tooke, Thoughts and Details, III, 105 ff.) The cotton famine after 1861 increased the price of flax-yarn in a short time fifty per cent., although the raw material of flax did not rise in price, but only because care was not taken to increase the number of flax-spinners. (Ausland, I, 1865.) However, there were in 1864, 490,000 flax-machine spindles in course of erection. (Report of the Chemnitz Chamber of Commerce, 1864, 101.)

645.

By the discovery, for instance, of new natural forces, the invention of machines, improved division of labor, improved roads etc. In France, in consequence of technic improvement, a quintal of saltpeter fell from 100 to 9 francs. See a similar instance in Chaptal, De l' Industrie française, II, 64, 70, 434.

646.

Hermann, Staatsw. Untersuchungen, 212.

647.

The highest but unattainable ideal of such progress would consist in this, that all products should be obtained without cost. If this ideal were attainable, every one would be infinitely rich and all wealth would be free, like the air and the sunshine. (Compare J. B. Say, Traité, II, 2.) The complete victory of mankind over nature would consist in that all men should be free and all the forces of nature the slaves of man. (Smitthenner.) Carey intimates something similar when he says that, with the advance of civilization the tendency is for men to become more and more valuable and commodities to have less of “value.”

648.

We might here speak of an aristocratic and democratic principle of the determination of prices. The greater utility of the latter is advocated in the Discourse of Trade, Coyn and Credit, London, 1697. Bacon has a good word to say for the maxim: “Light gains make heavy purses; for light gains come thick, whereas great come now and then.” Similarly, Gurnay in Cliquot de Blervache, Considérations sur le Commerce etc., 1758, 48, 54. As to how Morrison, the celebrated merchant, became rich by adhering to the principles: “to sell cheap as well as to buy cheap,” and “always tell the truth,” see Chadwick, in the Statistical Journal, 1862, 503. Compare the related opinion of Adam Smith's continuator in an ethical direction, Garve, zu Cicero's Pflichten, III, 100. The contrary principle, the cunning of the Judæans, according to Strabo, XVII, 800, was followed by the Dutch East India Company, when it, in 1652, caused the greater number of the vegetable roots on the Moluccas to be destroyed. Saalfeld, Geschichte des holländischen Kolonialwesens, I, 272. Also, when great quantities of roots were destroyed by burning in the East Indies. (Huysers Beschryving der Oostindischen Etablissmenten, 1789, 22.) For a clever argument against such practice, see de la Court, Anwysing der heilsame Gronden, 1663. The principle similar to that of the patent, mentioned in the text, works at the same time democratically and aristocratically, both words understood in their best sense.

649.

This is true, first of all, in those industries which are intimately connected with one another, or of those which are carried on with scarcely any fixed capital; also in lower stages of civilization, where the lights and shades caused by a highly developed division of labor are not very intense. On the numerous difficulties overlooked by Ricardo in every other case, see Sismondi, N. P., II, ch. 2. The workman thereby loses his former skill, that is his principal capital, and can certainly not wait until he has acquired other and different skill.

650.

When a lowering of prices is expected, demand is less than consumption: “postponed demand;” whereas, an expectation that the price will rise, produces “anticipated demand.” Tooke, History of Prices, II, 155.

651.

Thus, for instance, if the workmen were exposed to starvation, or were likely to take their departure; if great stores of raw material were in danger of spoiling; if fixed capital of great value were engaged in one industry and could not be easily transferred to another. The first and third causes are frequently met with in mining, and give rise to the mode of carrying on the operation known as Zubusgruben, that is, a species of working mines upon shares. In England, after the spring of 1862, cotton yarn was not so much dearer than raw cotton, that the loss caused by the decline could be made up. (Ausland, 24 Sept., 1862.)