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IN MEMORiAM
BERNARD MOSES





IjXm
ELEMENTS



POLITICAL ECONOMY



BY

ARTHUR LATHAM PERRY, LL. D.,

ORKIN SAGK PKOFESSOR OF HISTORY AND POLITICAL ECONOMY IH

WILLIAMS COLLKGK.



Quid pro quo.



THIRTEENTH EDITION, REVISED.



NEW YORK;

SCRIBNER, ARMSTRONG, AND CO.

1875.



/y/3/6/



Enfered, according to Act of Congress, in the year 1873, by

Arthur L. Perry,

In the Office of the Librarian of Congress, at ^VashiKi^fie



BERNARD MOSES



RIVERSIDE, cambhidoe:

STEREOTYPED AND PRINTBD ST
a. O. HOUGHTON .\ND COMPAMV



To

MY ONLY BROTHER,
BAXTER EDWARDS PERRY, Esq.,

OF BOSTON,
WHOSE FAITHFULNESS TO HIS CLIENTS IS ONLY SUIIPASSED BT
HIS KINDNESS OF HEART,
IS

Cijt'ij (Qtiition ai mp Maafi

FRATERNALLY INSCRIBED,



885993



TABLE OF CONTENTS.



CHAPTER I.

PAQE

On the History of the Science 1



CHAPTER 11.
On the Field of the Science ...... 42

CHAPTER in.
On Value 56

CHAPTER IV.
On Exchange 103

CHAPTER V.
On Production 118

CHAPTER VI.
On Labor . . . 134

CHAPTER Vn.
On Capital • . . 168



VI CONTENTS.

CHAPTER VIII.
Ok Land , ^ 1



CHAPTER X.
On Monet



PAGE



CHAPTER IX.
On Cost of Pboduction 210



229



CHAPTER XI.
On Currency in the United States 32o

CHAPTER XII.
On Credit ..* ^^2

CHAPTER XIII.
On Foreign Trade ...

CHAPTER XIV.
On the Mercantile System . . . . . , ^ ^j.

CHAPTER XV.

0» American Tariffs . .

•••'«. 490

CHAPTER XVI.

On Taxation

515



ANALYSIS OF CHAPTERS.



CHAPTER I.

ON THE HISTORY OF THE SCIENCE.

PACE

A. Definition of the science 1

B. Its basis and mode of development ..... 1

C. Its history 2

a. Oriental traffic. Abraham 2

b. Hints in Homer, Ezekiel, Nahum, Herodotus . . 3

c. Greek opinions 8

(1) Xenophon's " Ways and Means," and " House-
holder" 4

(2) Plato's " Republic " 5

(3) Aristotle's " Economics," " Politics," " Ethics " . 6

(4) Three reasons why Greeks did not develop this
science 8

(5) Their practical rules were good ... 9

d. Roman opinions . . . . . . . . , 10

(1) Cicero's " De officiis " 10

(2) Cato, and the Moralists 10

(3) Two reasons for their views . . . . 10

(4) Liberality of Roman laws of property . . .11
e Middle-age opinion. Religion and the Universities . 13
/. The Bullion Theory, and its policy . . . * . 14
g. The Mercantile System x T

(1) Its origin . . 17

(2) How defended . 18

(3) The Balance of Trade 19

(4) Nations that adopted it 21

A. Recoil from the Mercantile System . . . .22



Vlll



ANALYSIS OF CHAPTERS.



Outline of the labors of its opponents . . 23

(1) English writers .....•• ^3
(a.) The pamphleteers , . . * . . 23

(6.) John Locke 24

(c.) David Hume 25

(d.) Adam Smith 26

(e.) Malthus, Ricardo, McCulloch, Senior, Mill 29

(/) The Bullion Report of 1810 . . . 30
(g.) Henry Dunning Macleod . . . .31

(2) French writers 32

(a.) Quesnay, The Physiocrats, Agricultural Sys-
tem 33

(h.) Condillac 33

(c.) Say 34

{(I.) Bastiat 85

(e) Chevalier 36

(3) Italians. Genovesi 37

(4) Germans. Zoll-Yerein, List, Stein, Rau . 38

(5) Americans. National interest in the subject . 39

(a) Secretaries of the Treasury . . . 39

(b) Congressmen. Commissioner Wells . .40

(c) A partial list of writers . ... 40

(d) Henry C. Carey, Walker, Bowen . . 41



CHAPTER H.

ON THE FIELD OF THE SCIENCE

A. Definition of a science

B. First grand condition of a science

C. Induction and deduction explained

D. Lord Bacon's methods .

E. -Experience and feigned cases .

F. Second condition of a science

G. Physical and Moral Sciences
a. Economy in one sense moral
h. In another sense not
c. Its points of contact with morals

H. It is a political, i. e. a social science

a. Men in isolation not amenable to it

b. God made men for society .



42
43

43
44
44

44

45

46

46'

47j

48

49

49



ANALYSIS OF CHAPTERS.



IS



c. God the author of economical laws .

d. Man in isolation weak, in society strong

e. Provisional view of the gains of exchange
Some leading definitions of the science

a. The word wealth useless as a scientific term

b. First reason of slow progress in the science

c. Condillac's or Whately's definition .

d. Value is a relative word

e. Second reason of slow progress
/. Other possible broader sciences



49
50
50
51
52
53
53
54
54
55



CHAPTER III.



ox VALUE.



A.. Value not a quality of one thing

B. Origin of the word value . . . . .

C. It implies a kind of comparison

D. Two persons and two owners required to fix value

E. An action of exchange required

F. Value of the pencil in cents ....

G. Exigencies of language

H. The value of anything always stated in terms of

thing else

I. The motives to an exchange ....

J. The simplest case of value

K. The ultimate definition of value

L. Only six cases of value possible ....

M. Ownership is always mutually transferred

N. Value best studied through the term services

O. Distinction between service and commodity

P. Macleod's definition of value . . . •

Q. Definition given satisfactory, because

a. It covers anomalous cases ....
(1) Analysis of services exchanged .

b. It expands the field of value to its true limits .

c. It separates the notion of value from matter

d. And from some obstinate illusions of language

e. And discriminates utility from value .

(1) Utility is free and ultimate

(2) Value is mediate, and involves effort .



66
56
57
58
58
59
60

61
62
64
66
67
67
68
68
69

69

70
74
77
79
82
83
84



X ANALYSIS OF CHAPTERS.

(3) Utility is usually a common factor . . , 85

(4) And is eliminated from influence on value . 85
/. Mistakes from confounding utility with value . 86

R. Value a different thing from price 87

a. Numerical illustrations ...... 88

h. Effect of improvements on value . . . .89

S. No perfect measure of value attainable ... 90

T. Tvin-.itations of value in the two elements of efforts . .92

U. Limitations in the two elements of desires ... 94

V. Equation of supply and demand 9G

W. Every rise or fall of demand tends to check itself . 98

a. Through a consequent rise or fall of value . . .98

h. Through action on supply V . . . . 99

X« Three classes of services in the law of their value 100

a. Those augmentable without increased difficulty . 101

&. Those augmentable through increased difficulty . 101

c. Those not augmentable at all . . . . 102

CHAPTER IV.

ON EXCHANGE.

A. Principles of human nature involved in exchange . .103

B. Society a hive of buyers and sellers . . . . 104

C. God's will as indicated in diversity of natural gifts . 105

D. Association and individuality 106

E. Interest the sole motive in exchange . . . .107

F. All exchange depends on diversity of relative advantage 1^8
a. Illustration of the tailor and blacksmith . . 108
&. The greater the diversity of relative advantage, the

more profitable exchanges become . . .109

G. Freedom, association, invention, essential to just diversity 109
H. The right to free exchange a natural right . . 110

I. Governments formerly interfered with it . . ,110

a. And thereby destroyed natural gains . . . Ill

b. And barred a natural progress . . . . .111
J. But latterly have conceded it within home boundaries 112

a. Illustration from Napoleon's policy . . . .112
K. Opposed to free exchange are monopolies . . . 113
a. Arbitrary prohibitions on the sale of home services . 113
h. Arbitrary restrictions on the admission of foreign ser-



vices



Hi



ANALYSIS OF CHAPTERS.



XJ



Patents and copyrights unobjectionable monopolies



L. The tbree great points of struggle



116
117



CHAPTER V.



ON PRODUCTION.



c.

D.
E.



G



Laws of Political Economy are cheering
Definitions of " Produce," " Producer," " Product

a. Similar meaning of the Latin producere

b. Inadequate analysis of Adam Smith .
Definition of " consume," etc.
Are producers better than consumers ? .
The beneficent law under 4)roduction .

a. Illustration of the mill

b. Illustration of the loom ....

c. Illustration from agriculture

d. Tendency towards a common right in inventions
Effect on values of Nature's help in production

a. Illustration of the gloves

b. Motive to introduce machinery .

c. Commodities decline in value relatively to labor
A general glut of products impossible .

a. Proofs of the proposition

b. Dr. Chalmers' fallacy ....

c. Each interested in the welfare of all

d. Law of partial gluts

e. Production demands intellectual attainments
H. Production increased by Division of Labor .

a. Example of the pins ....

b. Example of the watches ....

c. Advantages of the division of labor

(1) Improved dexterity ....

(2) The saving of time ....

(3) The invention of tools
Less waste of material
More economical distribution of labor
A saving in the use of tools
The advantages of wholesale and retail

Disadvantages of division of labor

(1} Monotonous work becomes irksome .



(4)
(5)
(6)
(7)



d.



118
119
119
119
120
121
121
121
122
123
124
124
125
126
126
126
127
127
127
128
128
129
129
130
130
130
130
130
130
131
131
131
131
131



jrii ANALYSIS OF CHAPTERS.

(2) Tendency to dwarf the powers . . . 131

(3) Undue dependence of the workmen . .132
e. Limitations to the division of labor . • 132

(1) From the extent of the market . . . .132

(2) From the nature of the employment . • 1*^3

CHAPTJeR VI.

ON LABOR.

A Physical labor consists in moving things . . . 134
a. Some illustrations of this .

B. Physical labor defined . . • . .
a. Nature helps gratuitously in production

C. Men have found helps in producing motion

a. The domestic animals

6. The weight of water and force of wind

c. Steam

d. To apply these capital is needed ....

e. Labor, power-agents, capital cooperate in material
production

D. The technical definition of labor ....

E. Principles of the remuneration of labor

a. Distinction between skilled and common labor

b. A natural monopoly unobjectionable .

c. Reward of skilled labor higher ...

(1) From the scarcity of appropriate original gifts

(2) From the lack of requisite industry

(3) From the lack of suitable training

F. The law of supply and demand the law of wages

G. But this law as modified through supply by

a. The agreeableness of the employments .

b. The easiness of learning them ....

c. The constancy of work in them

d. The amount of trust involved ....

e. The probability of success ....
/. Custom, prejudice, and fashion ....
g: Legal restrictions and voluntary associations .

H. Demand for labor how constituted

a. By the presence of capital ....

b. The more capital the stronger the demand



134
135
135
135
136
136
136
137

137
137
138
138
139
140
140
140
140
141

141

142
143
144
146
147
148
149
149
150



ANALYSIS OF CHAPTERS. - XIU

c. Wages-fund a dividend , 151

d. Number of laborers a divisor . . . . ,151

e. The average rate of wages the quotient . . . 152
I. Popular remedies for low wages ineffectual . . ,153

a. Government cannot act directly . . . , 153

b. But may indirectly and beneficially . , . .155

c. Public opinion may be useful ... .156

d. The^Malthus law of population 157

(1) No natural antagonism between fecundity and

food . - 158

f. Strikes are futile 158

(1) Are false in theory 159

(2) Are pernicious in practice 161

(3) Illustrations of this 162

(4) Workmen and capitalists are copartners . ,163

(5) The classes shade into each other . . 164

(6) Poor money a foe to laborers . . . .164

(7) Mind must be interested . . . . 165
/. Cooperation nothing new in principle . . .165

(1) Legislation has narrow limits in economy . 166

(2) Should give equal rights to capital and labor . 167

CHAPTER Vn.

ON CAPITAL.

A. Relations of capital to labor and power-agents . 168

B. Derivation of capital 168

a. Its definition 169

b. Some distinctions . . . . . . .169

c. Mr. Carey's definition faulty . . . . 169

d. Distinction between capital and other property . 1 70

C. How capital arises 171

a. Origin of tools 172

b. Progress in tool-making 173

c. Capital brings gratuitous forces into play . . 1 74

d. Talue of products created by aid of capital tends to

decline relatively to the value of those less aided

thus 174

e. Power of capital in reproduction . . . 1 75

D. The remuneration of capital 1 ^^



XIV



ANALYSIS OF CHAPTEES.



a. Definition of profits

b. They spring from abstinence ....

c. And are as legitimate as wages ....

d. Illustration from the flax-factory .
€. Illustration from ordinary loaning

f. The capitalist creates a beneficent fund

g Strength of the motives to abstinence depend

(1) On liberty

(2) On equality

(3) On security ......

E Relations of capitalists to laborers ....
n. No antagonism between them
6. Dependence of capital on laborers

c. Dependence of laborers on capital

d. The laborer interested in the increase of capital

e. The capitalist not injured by high wages . .

F. Mr. Carey's law of distribution ....

a. Arithmetical illustration ....

b. Profits the leavings of wages ....

c. Tendency towards equality of condition among

G. Distinction between circulating and fixed capital .

a. Changing proportions between those - .

b. Transformation of one into the other

c. Corollaries — war .....



men



175
176
176
176
178
178

179
179
179
179
180
180
181
181
182
182
182
184
184
185
185
186
187



CHAPTER Vin.

ON LAND.

A. Best test of a generalization 188

B. Questions of»land have been vexed questions . . 188

C. Means at hand of settling them . . . . .189

D. The ground principles 189

E. First proposition 190

a. Ownership came in under work . . . , 190

b. Lands originally valueless . . . .190

c. What is sold is not the inherent qualities of the soil 191

c?. Utility and value 191

e. Land proprietors cannot sell God's gifts . . 192

/. Sources of value in land 193

g. Tlie United States give away lands . . . 194



ANivLYSIS OF CHAPTERS.



KV



h. The English companies in the 1 7th century .
L The current proverb at the West
j. The value of lands like all other values .
k. Profits an element in lands ....
I. Lands under a poor currency ....

E. Second proposition

a. Proof of it

h. Gradual occupation of the earth in consequence

c. Mr. Carey fails to break down this law

d. His own law not inconsistent with this .

F. Third proposition .......

a. Exemplification of the principle

h. Produce rises as estimated in other commodities

G Fourth proposition

a. Ricardo's law of Rent

h. The truth in il

c. The errors in it . , . . •

d. The true doctrine of rent ....
IJ Fifth proposition .......

a. Fee-simple best, and reasons why .
h. Moderately small farms best, because

(1) The motives to production are more universal

(2) Better supervision is thus secured

(3) The masses are better educated

(4) National strength is better maintained

c. Illustrations from France ....

d. Illustrations from England and Scotland .

e. Illustrations from Ireland ....



194
195

195
195
196
196
197
198
198
199
199
200
200
200
201
201
202
202
203
203

204
205
205
206
206
207
208



CHAPTER IX.

ON COST OF PRODUCTION.

A. Is there such a thing as natural value ? . . . 210

B. Foresight important in production 211

C. Cost of production sometimes the element of effort . 211

a. Illustration from amputation 211

h. Illustration from knife-making . . . . 212

D. Cost of production in relation to improved processes . 213

E. Cost of production made up of two elements . . 214
a. Cost of labor 214



XVI ANALYSIS OF CHAPTERS.

b. Cost of capital 214

P. c. Cost of labor made up of three elements . . 214

(1) Efficiency of the labor 215

(2) Rate of nominal wages 215

(3) Cost of the wages-material .... 215
d. Three purposes of this analysis . . . .215

(1) To show the many elements in commercial calcu-

lation 215

(2) To explain the diversity in noniinal wages . 216

(3) To explain the division between wages and

profits 219

«. Cost of capital made up of three elements . .220

(1) The rate per cent 220

(2) The time of advance 220

(3) The risk of deterioration .... 221
G. Higher cost of labor ends in lower profits . . 223
H. A uniform rise or fall of wages does not affect value 223

I. An unequal rise or fall does affect it ... . 223

J. The same, mutatis mutandis, is true of profits . . 224

K. Machinery an important element in cost of production . 224
L. Machinery not injurious to the wages of labor, because

a. Labor is required to make, repair, and work it . .225

b. It cheapens products and thus widens the market 226

c. It cheapens products used by the laborers . . . 226
M. Price of raw materials tends to approximate the price of

finished products 227

a. Illustration in cotton cloth 227

6. Illustration in lace 228

N. Two branches now completed 228

CHAPTER X.

ON MONEY.

A. Money can be understood , 229

B. Inconveniences of barter 230

C. Money an invention — convenience sake . . . 231

D. Its sole characteristic, a generalized purchasing-power 231
a. Value in a book, and value in money . . . 232

E. Money economizes labor 232

F. Brings buyers and sellers together . , . 233



ANALYSIS OF CHAPTERS XVU

G. Generalizes a purchasing-power in point of time 233

H. Makes it portable, divisible, and loanable . . . 233

I. First proposition 234

a. Meaning of the word medium .... 234

b. Illustration of the railroad ticket .... 235

c. Small ratio of money to property .... 236

d. Hume's comparison 236

e. Money a generalized capital 23*^

/. The amount needed determined by its nature as a

medium 23J

g. Rapidity of circulation in this connection . . 240

J. Second proposition 241

a. Explanation of the word measure . . . . 242

b. Relations of denominations to the medium . . 243

c. Liability to error 244

d. French system of weights and measures . . .247

e. This second function complicates the subject of money 248
K. Third proposition 249

a. Different materials used as money , , ,249

b. Gold and silver are the best ... . 249

(1) On account of their steady value . . . 249
(a.) On account of the steady demand for them 252
{b.) Their uniform cost of production . . 253

(c.) Their quantity 254

(d.) Their fluency 256

(e.) Every rise or fall tends to check itself. . 259

(/.) A more or less rapid circulation . . 260

(2) Because they are self-regulating . . .261
(a.) Legal relations of gold to silver . . 261
(6.) Subsidiary coins ...,'., 263
(c.) The matter of alloy .... 264

(c?.) Universal Coinage 265

(e.) French plan 266

(/) Elliott's plan 267

(r/.) German and Austrian coinage . . 267

{h.) Natural laws of distribution . . . 268

(3) They are portable, divisible, and impressible . 272

L. Fourth proposition 275

a. Grounds of it 275

b. Dutch illustrations . . . • . . . .276



XVUl



ANALYSIS OF CHAPTERS.



c. English illustrations ...

d. American illustrations
M. Fifth proposition ....

a. Definition of money
h. Nomenclature of money

c. The element of credit in money

d. Difficulties about credit

e. The denomination-dollar
/. Inconvertible paper depreciates .
g. John Law and his system
h. The French assignats .
i. American Continental money .
j. American legal-tenders
k. American State bank money .
I. American national bank money .
m. History of the Bank of England
n. Different spheres of money and credit

N. Sixth proposition ....
a. Origin of usury fallacies .
h. Exposure of these fallacies .
c. Inconsistencies of governments .
rf.' Action of England ....

e. Action of Massachusetts and Rhode Island
/ Retraction of Adam Smith .



CHAPTER XI.



ON CURRENCY IN THE UNITED STATES.

A. Great variety in our forms of money

B. Colonial currencies ......

C. The depreciation of Colonial bills .

D Massachusetts redeems her bills ....

E. Parliament forbids their issue to the Colonies .

F. The Revolutionary paper

G. Alexander Hamilton and English finance
H. Mr. Morris' Bank of North America .

I. The " pine-tree " coinage of Massachusetts .
J. First suggestions of a decimal money
K. Hamilton's Report as Secretary of the Treasury
L. The Mint, its coins and ratios ....



ANALYSIS OF CHAPTERS.



XIX



a. Binary system .....

h. The word dollar

c. The figure of Liberty ....
M. A national bank then needful .
N. Its constitutionality denied ....
O. Charter of the first United States Bank .
P. Practical operation of it .
Q. Multiplication of State banks .
R. Second bank of the United States
S. Jackson's opposition to it
T. The " Specie Cu-cular " . . .
U. The sub-treasury system ....
V. The increase and character of the State banks
W. Secretary Chase and the war .
X. The national bank system of 1863

a. Its patriotic origin ....

h. Method of organization under it

c. Its benefits

d. Its dangers

e. Possible improvements of it

Y. Coin banks

Z. Different kinds United States money

a. Too much in quantity ....
h. Prof. Price's view of currency

c. Amasa Walker's view of currency .

d. Author's view of currency .



330
331
332
336
337
338
339
340
341
342
343
343
344
344
345
346
347
348
349
354
356
357
358
360
360
361



CHAPTER Xn.

ON CREDIT.

A. The peculiarity of credit

B. The terms debt and credit .

C. Traffic in credits ....

D. Macleod's distinctions .

a. Specific things and credit rights .
5. The words loan and borrow .

E. Three kinds of values

F. The instruments of credit are
a. Promises to pay . .

h. Orders to pay ....



362

363
364
364
364
365
366

367
367



XX



ANALYSIS OF CHAPTERS.



c. Promises to pay are

(1) Book-accounts •

(2) Promissory notes of individuals and nations

(3) Bank bills . . . . .

(4) Bank deposits

(a) A new capital created
(6) Actual, but limited

(5) Discounted notes

(a) Form of discountable note
(6) Form of collateral pledge .

d. Orders to pay are

(1) Bills of excliange

(2) Checks or drafts

(3) Circular letters of credit
G. The advantages of credit 885

a. It passes capital from less to more productive hands 386
&. It economizes the general operations of exchange

c. It dispenses with the use of masses of coin .
(1) But never can dispense with coin altogether

d. Other credit operations

e. Scotch cash credits ...
H. The disadvantages of credit .

a. It sometimes makes capital unavailable
&. Inherent uncertainties

c. Undue multiplications

d. Commercial crises

(1) Cause and course of a crisis" .

(2) Crisis of 1873
national debt a sort of mortgage
It has incidental advantages
But greater burdens

c. Each generation should bear its own burden . 400

d. The unfunded debt should be cancelled . . .401
c. The funded debt paid in gold . . . . 402
/. Consols explained 403



I. A

a.
b.



367
368
370
371
373
373
374
375
376

376
382
384



388
389
390
391
391
392
392
393
393
394
395
395
398
899



ANALYSIS OF CHAFIERS.



XXI



CHAPTER XIII.



ON FOREIGN TRADE.

A. No new principles in foreign trade . . •

B. But a separate treatment needful ....

C. Diversity of relative advantage ....

D. Grounds of national diversity ....

E. When international exchange is profitable
a. French silks and English cottons

F. Desires, efibrts, estimations, as before

G. Unequal absolute cost illustrated ....
H. Equal absolute cost illustrated ....

I. Limits of value in foreign trade ....
J. Equation of international demand
• a. Arithmetical illustrations

&. Same principle in gold, or other articles
K. Purchase by exports is cheap purchase .
L. Folly of attempting to " compete " in everything
M. Effect on trade of improved processes .

a. The benefit will be shared by both nations .

h. Sometimes more by the second nation • ,
N. Cost of carriage

a. It increases cost of production ....

b. Each nation does not necessarily pay its own .
O. International trade should be free . . . ,

a. The mercantile system restricted it

&. The protective system restricts it . . .

P. Origin of the word tariff

Q. Nature of the thing tariff . . . .
R. Distinction between revenue and protective tariffs

a. A distinct principle underlies them . . .

&. The two ideas cannot be united

c. Low duties more productive. Free Trade defined
B. Objections to free trade answered . . . .

a. It is not a theory

6. It will not depress wages . . . . •

c. Why protection has been advocated .

d. Manufactures would not collapse under freedom



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