Chapter I: Definitions—utility of the Subject

1. Social science comprises the statement and explanation of the natural laws which govern men in their mutual relations. Political economy is the application of that portion of those laws which pertain to the production and distribution of wealth. Now we are not to be discouraged by this term _wealth_, as though the subject were one which concerns only rich men, and in which a poor man could have no interest. The man who has a little property, worth only one or two hundred dollars, is just as really a possessor of wealth as one who has one or two millions; and to be able to acquire and rightly use these small fortunes is, in the aggregate, of more importance than the acquisition and management of the greater riches of the few.

2. But what is meant by _wealth_? For the present it is enough to say that _it comprises all things which have value_. A more complete definition will follow by and by. What, then, do we mean by _value_? This, too, has many forms of definition, but they for the most part have one element in common. The general notion concerning it is that it has reference to the amount of one commodity that may be equitably given in exchange for a designated amount of another; this is a correct notion. Thus a bushel of wheat may be exchanged for two bushels of oats, or a cord of wood for twenty yards of cloth. That is, the value of a bushel of wheat is that of two bushels of oats, and the value of twenty yards of cloth is the same as that of a cord of wood. It is thus seen to be a _relative_ term, and not indicative of any quality of any one thing considered by itself. But in all instances of relationship there must be some ground of the relation. Let us try to determine what it is in this case. A superficial thinker might decide that it is _money_, from the fact that value is generally estimated in money. But money is itself in the same relation to all other commodities in this respect as they are to one another, and its value rests upon the same basis.

3. The chief element in value, and that constitutes its original standard, is the _cost of production_; and by _cost_ is meant the amount of labor involved. _Labor is the voluntary effort put forth by man to secure some desired object._ But when we say this, a little caution is needed. We are not to infer that the present value of an article is estimated by the amount of labor required at the time of its production, especially if that was a long time ago. A hundred years since, it required the labor of a man for days to produce a yard of cotton cloth. A dozen yards of better cloth can now be produced by the same amount of labor; of course the present value of the latter is superior to the present value of the former, even if this were as good as new. It is the labor that would be required to _reproduce_ or replace an article which determines its value.

4. But there is another element which is essential to value; this is _utility_. It comprises all those qualities in an object which make it available to gratify any desire. It will readily be seen that there are objects which have utility and at the same time are without value. They are such objects as cost nothing; that is, such as involve no labor in their acquisition. Thus air, and sunshine, and rain, have no value; but they are of immeasurable utility. Value is often in the inverse ratio of utility. Iron is a far more useful metal than gold, but gold is vastly more valuable than iron. Still, though utility may exist where there is no value, there can be no value where there is no utility; because no one would put forth effort for that which could not gratify any desire, and it is the ability to gratify desire that constitutes utility. Sometimes utility becomes the paramount element in determining value; but ordinarily it is subordinate to the cost of production. When the article is one for which there is a very great demand, and of which there is a great scarcity, the value may increase many times beyond the cost. In such case the utility rather than cost rules. But where the demand is readily and fully met by the supply, the cost controls.

5. But valuable things can not be produced very largely without tools, implements, and various contrivances. These constitute _capital_. _Capital is the result of previous labor reserved and employed in further production._ This implies self-denial. A man can not consume what he has secured by labor and at the same time preserve it to aid in additional production. Hence he must restrain his desires if he would save something for this purpose. This capital is sometimes called pre-existent labor. The point to be observed is that its existence is due, not to labor alone, but to _abstinence_ as well. The two elements in the cost of production are labor and abstinence, and we may combine these in the one term, _sacrifice_. Sacrifice and utility, then, are the two essential conditions of value; and we may complete our definition of value by saying that _value is man’s estimate of the amount of sacrifice requisite to the attainment of a desired object_.

6. Hence, if wealth comprises all valuable objects, and if every desirable object which involves sacrifice has value, it would be a proper definition to say that _wealth consists of all those objects and qualities useful to man, the attainment of which involves sacrifice_. This includes not only material objects and qualities, but also all those human powers acquired by sacrifice, which enable man to master nature. This is not admitted by many writers. But Mr. Carey states, in a broad way, that “Wealth is the power to command the always gratuitous services of nature.” When man is at his weakest nature does nothing for him. Every infant, if dependent on nature alone, would inevitably perish. So in the infancy of society, it is only by the most strenuous exertion that a precarious existence is secured. But with every increment of power in man, nature multiplies her services. They are not bought but freely given, and given as soon as man is able to command them. In the most advanced civilization the forces of nature have become so subservient to man that in thousands of cases one can accomplish what a score, or sometimes even a hundred, could not formerly have done. It is this increase of power more than that of material commodities which constitutes the real wealth of the world.

7. From this it follows that the proper subject of political economy is MAN. The laws pertaining to the underlying science are found in the nature and character of man—in his tastes, his desires, in the motives influencing him and in the limitations to which he is subject. The results to be achieved are his prosperity and freedom, his mastery over nature, and his happiness. Here, then, is the prime reason why every person who aspires to any intelligence at all should have some acquaintance with this subject. It has to do more than any other study with his temporal welfare, and with the welfare of society, without the prosperity of which his individual prosperity will suffer.

8. A second reason is implied in the meaning of the terms used. Economy is from a Greek compound signifying _husbandry_. It has reference to the prudent management by a householder of his means so as to secure the largest measure of prosperity for his family. It does not mean parsimony, nor even mere frugality; that is, it does not consist in mere abstinence for the sake of saving. It is rather a wise use of means and forces, so as to make them as effective as possible. There is an old proverb which says, “There is more in calculation than in hard work,” and though sometimes perverted in the interest of human laziness, it is nevertheless full of philosophy. It is this “calculation” which such a study greatly aids.

9. _Political_ economy, as the term implies, has reference to man in society,—to “the body politic.” The social element in man is as imperative as any part of his constitution. Man’s greatest need is _association_. The solitary individual is only a minute constituent of man in man’s relation to the main purposes of life. No man is complete in himself. He must be supplemented by others, generally by many others, and he must find a large part of his own completeness in this association. Each has something that others lack, and we are designed to be sources of mutual supply to our several wants.

Here emerges another vital fact. _Individuality_ is as indispensable as association. A superficial thinker might regard these characteristics as antagonistic. The fact is so far otherwise that each is really dependent on the other. Men must _differ_ in order to be of any use to one another. It is the difference that makes the individuality. Mutual aid is the object of association. Hence the greater the difference, the greater the individuality; and the greater the individuality, the greater the association. No man would associate with another unless the one had something which the other lacked. But for this there would be no commerce. Two farmers producing nothing but wheat would have nothing to exchange with each other. Two men of precisely the same mental possessions, habits and aptitudes, would never be companions for each other.

On the other hand it is only by association that individuality becomes the most highly developed. Only by such development do the differences among men become great and numerous. In the lower grades of humanity there is comparatively little difference between individuals, and there is little association. It is only in advanced civilization that a strongly marked individuality exists, and that we find those numerous differences which make the mutual dependence the greatest. Here is a potent reason for the study of this subject. It is impossible to estimate the power of association in production alone. It is known in a general way that the combination of men gives greatly increased results as compared with those of men working separately. Yet it is not nearly realized that a hundred men properly associated in an industrial enterprise will often effect two or three hundred times as much as all the very same men working separately.

10. Again, this subject intimately concerns man in his governmental relations. For governments must furnish many of the conditions for the best economical results. Then, too, the great moral enterprises of the age, and of all ages, have to do with the principles here involved; education, pauperism, vicious social usages, the dangerous classes, have to be considered, and can only rightly be considered in the light of these truths. It is wonderful how closely this study is connected with all the great interests of humanity. Whole communities which have been impoverished and demoralized by neglecting some of the obvious principles of political economy, have revived and prospered under their application. Portions of our own country are examples of both these kinds of effects, and that, too, within the memory of men now living.

We shall follow the usual plan of the division of the subject under the heads of _production, consumption, exchange and distribution_.