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that the Americans have gone too far in the direction of
saving time, so far, in fact, as to waste more money than
necessary in middlemen's costs and profits.

Marketing sometimes a social function. Another factor
enters into the success of public markets, where producer and
.consumer meet. In those countries where the system still
prevails, going to market has become a social function. The
market place is the place where citizens meet and where the
women make their social calls and pay their social obligations.
This phase of the question has played a very important part
in history. The Roman Forum, for example, was simply the
market place, in which the farmers from the surrounding
country and the people of the city of Rome met, primarily for
purposes of exchange and secondarily for purposes of social
intercourse and political discussion. The latter functions gradu-
ally displaced the former, and the Roman Forum gradually
became the center of Roman politics and eventually the center
of the world. The Olympic games, which were for many
centuries the center of Greek life, developed in connection
with a fair which was held for the exchange of products.
While the Greek people were busy with their exchanges
the young men took part in athletic and intellectual contests ;
eventually these contests became the chief feature, and the
mercantile function almost disappeared from sight.

The social function of going to market has been revived in
a number of ways in recent times. Great department stores,
in order to attract trade, especially that of ladies who have
time for social diversion, have introduced the paraphernalia of
the drawing-room, with pink teas and other accessories. They
are deliberately striving to make afternoon shopping a social
diversion, thus restoring, in the field of the marketing of frills,
some of the features which originally developed in connection
with the marketing of the necessaries of life.


Buying large quantities and selling in small parcels.

Another very important function performed by the mercantile
house is that of receiving products in large quantities, such as
are convenient for the producer to sell, and dividing them up
into small parcels, such as are convenient for the consumer to
buy. This breaking up into small parcels is a work of utility ;
it meets the convenience of both producer and consumer.
The convenience of the producer is met by his ability to sell
in bulk ; the convenience of the consumer is met by his ability
to buy in small parcels. This may, without doing violence to
our language, be called a kind of form utility. The goods are
bought in one form and sold in another. There is a certain
analogy between this process of breaking goods up into small
parcels and the process of manufacturing, in which the forms
of goods are changed in other ways.

Storing goods. One of the most important functions of the
mercantile class, however, is that of storing goods. In fact,
it is still customary to speak of certain mercantile houses as
stores. The storing of goods, of course, produces time utility.
They are kept from a point in time when they are not espe-
cially needed until a time when they are especially needed.
Their utility is thus increased. This function of storing goods
is particularly important in the case of goods which are pro-
duced by a seasonal industry, such as agriculture. The wheat
is harvested during one period of the year, but needs to be
consumed during the entire year. Unless someone were ready
to store this product, it would have to be used very inefficiently
at one period of the year, and there would be a scarcity at
another period.

Utility of storing without monopolizing. Contrary to a cer-
tain popular belief, the effect of storing vast quantities of farm
products in warehouses is beneficial rather than otherwise.
No speculator or warehouse owner would have any motive for
storing products except that of getting a higher price later on.
He could not get a higher price later on unless the goods


were scarcer later on. If they are scarcer later on, it is very
much to the interest of society that they be stored rather than
consumed at once. At the present time, May, 1917, when
prices are very high anyway, and it is found that a great deal
of grain is being stored up, there naturally develops a certain
popular dissatisfaction. Being shortsighted, we do not appre-
ciate what is likely to be our situation several months hence.
The only thing we see is that prices are now distressingly
high. We see this in connection with another fact, namely,
that large quantities of wheat are being stored. We think,
naturally enough, that if that wheat were taken out of storage
and sold at once, prices would not be so high at the present
moment. If, however, we were a little more farsighted, we
should look ahead and consider what the situation would be,
say in July of the present year. If wheat is going to be more
abundant then than now, the price will fall. If that were the
expectation, nobody would be willing to store a single bushel
of wheat until that time. Everybody would want to sell his
wheat very soon. If those who are in a position to judge be-
lieve that wheat will be scarcer in July than in May, and the
price therefore higher, they find it to their interest to store up
these products and hold them. If they are correct in their
anticipation, it is also very important for society at large that
they, or somebody, should store up wheat ; otherwise we should
consume wastefully this month and go hungry later on. It
ought not to take very much forethought or reasoning power
to understand this. It is, however, a sad commentary on the
shortsightedness of many of our people, and even of men in
high political positions, that this is so imperfectly understood
and that we are so generally resentful toward those who are
performing this important function of storing.

Another fact which should be taken into consideration is
that, formerly, large numbers of people, both producers and
consumers, did their own storing, whereas at the present time
that work is turned over to a special group of men who own


elevators, cold-storage warehouses, and other storage facilities.
In a less highly organized state of society many farmers
stored grain in their own bins, and potatoes, fruit, and vege-
tables in their own cellars. At the same time many con-
sumers bought supplies in advance and stored them in their
own cellars. At the present time comparatively few farmers
hold their products, finding it cheaper to sell them as soon as
produced than to build and maintain their own storehouses
and run their own risk of loss or deterioration of the prod-
ucts. Moreover, consumers have generally got out of the
habit of buying supplies in advance and keeping them stored
until needed, finding it cheaper to order supplies as they
are needed, depending upon other people to do the storing.
While both producer and consumer are turning this work over
to a special class, they must not forget that the only motive
which this special class has for doing this special work is the
hope of a profit. If they can make a profit and still furnish
the service cheaper than producers and consumers can furnish
it for themselves, they have earned their profit.

Cornering, or monopolizing, is destructive of utility. We
should be careful, however, to distinguish between storing for
sale on a competitive market and monopolizing for sale on
what is known as a cornered market. If there were collusion
among all those who own warehouses or who are in a position
to store products, an agreement to control the supply and fix
prices artificially, there would be a real grievance, and the
individuals who are guilty of such a practice should of course
be very severely dealt with. But if we can once satisfy our-
selves that there is no collusion or attempt at monopolization,
that the products are being stored for sale on a competitive
market, we can rest perfectly easy in our minds, because no
one could make any money by storing in this way unless it
were genuine social service to do so. By social service, of
course, we do not mean philanthropic service, but merely
useful work.


Standardization. Another very important function performed
by the mercantile class is what is known as the classification
or standardization of goods. The producer of farm products
especially cannot produce goods of uniform kind and quality.
On every apple tree there will be apples of various grades, and
in every large orchard likewise. In every poultry yard there
will be fowls of different qualities. The consumer who tried to
purchase directly from the farm might not find exactly the
grade or quality which he desired. When the farmer sells his
products in bulk, the middleman will frequently classify or
grade them into a large number of grades. Take such a simple
product, for example, as broilers. It is very difficult for one
poultryman to produce a large number of broilers all of the
same size, weight, quality, and general condition. A hotel or
restaurant, however, wishes to treat all customers alike. It does
not wish to buy broilers in a nondescript, or ungraded, mass. If
it did so, one customer would get one kind of dish and another
customer another kind, varying in size and quality. This would
produce dissatisfaction. A dealer buys broilers from a large
number of poultrymen and classifies them very minutely.
There are said to be over one hundred different grades and
classes. Each hotel and restaurant, and every private con-
sumer, can get from such a dealer exactly what he wants.
Multitudes of other illustrations could be given, but enough
has been said to show that merchandising is a very important
factor in the economy of human energy and the promotion of
national prosperity.

Deception always destruction. It is quite certain, however,
that certain practices will grow up in connection with mer-
chandising which are reprehensible. The ancient Greeks re-
garded Hermes, or Mercury, not only as the herald of the
gods but also as the god of boundaries, markets, and weights and
measures, and as the special patron of merchants, gamblers,
and thieves. There is probably no other branch of human in-
dustry or business which lends itself so easily to deception and


adulteration, and which furnishes such temptations to high-
pressure advertising and salesmanship. The old adage that
honesty is the best policy is doubtless appreciated by merchants
of the better class, but unfortunately there are always a good
many men who are doing some kind of merchandising, to whom
this adage seems more theoretical than practical. The arts of per-
suasion are developed to a high degree of proficiency, and pass
easily over into the arts of deception. The justification given
is generally summed up in the words, " business is business. "
It is not necessary to present any arguments to show that de-
ception contributes nothing to national prosperity. What one
gains by deception, someone else necessarily loses. It is prob-
ably this phase of the question that has led to the hasty con-
clusion, which is far too widely accepted, that somebody always
loses in a trade. That general conclusion was combated at the
beginning of this chapter. In so far as trading takes the form
of deception, however, the conclusion is entirely justified.

Advertising. Advertising occupies a prominent place among
the forms in which the art of persuasion is carried to a high
state of development in modern times. To what extent adver-
tising is economically justified has been a difficult question
and must remain so. Advertising is sometimes educational.
The individual sometimes learns from advertisements where
he can get something which he really wants and has wanted
for a long time. Without the advertisement he might have
found difficulty in getting it. This applies, however, mainly to
new products that have recently been put upon the market.
One scarcely needs an advertisement to tell one of the exist-
ence of soap or codfish, or to acquaint one with the fact that
such things are to be purchased at stores. In many cases of
this kind the only effect of advertising is to persuade the con-
sumer to use one man's product rather than another's. One
producer realizes that if he does not advertise, consumers may
buy the other man's product. The other man is then com-
pelled to advertise in order to defend himself against the first


advertiser, and thus it becomes a race, or contest, to get the
customer's trade, and no addition whatever is made to the
national wealth or to the well-being of society. It is not
improbable that eventually the public will exercise its authority
and use its power of compulsion to limit or redirect the adver-
tising business. This, however, would be a somewhat dangerous
experiment, because such public authority would have to be
exercised by public officers. The worst forms of advertising
are not found among merchants but among candidates for
public office. The man who has succeeded in getting elected
to office by campaigning, which is a kind of advertising, is
not necessarily the best man to decide upon what is good and
what is bad advertising either in political campaigning or in



Causing productivity in others. Falstaff said, " I am not
only witty in myself, but the cause that wit is in other men."
There are many men and women in every community who are
not directly producing wealth, but who are the cause of pro-
ductivity in others. The teacher who trains students in the
productive arts is, to say the least, a cause of productivity, and
becomes a contributor to national prosperity. The singer, the
poet, and the artist who inspire to strenuous action and noble
deeds likewise contribute their share to the greatness of the
nation. The military band is a part of the fighting strength of
the army, even though its members never handle a destructive
weapon of any kind.

The teacher, the preacher, the musician, the poet, and the
artist, however, sometimes forget their function in a great
nation and at times seem almost to imagine that they are the
objects for which the nation exists. At any rate they have
been known to go so far as to resent the idea that they have a
purpose .beyond that of contributing to knowledge for its own
sake or art for its own sake.

The social function of art, religion, etc. Quite different was
the attitude of a great French artist when he found his country
in the throes of the life-and-death struggle which began with
the invasion of 1914. Speaking before a gathering of French
artists, he said that in that crisis no art would be tolerated
" which was not noble, robust, proud, and an inciter of high
thoughts and delicate sentiments an art of heroic joy."
Facing the future, he continued : " You would not tolerate any-
thing less to-day. Then why should you tolerate anything less



hereafter, in that to-morrow when our duties shall be changed ? "
Here was a full acceptance of the view that art has an end
beyond itself and is not its own excuse for being.

Government. The officers of the government who preserve
order and protect lives and property contribute a large share
to national prosperity. An army, whose business may seem to
be destruction rather than production, by protecting against
invasion from without and insurrection and disorder from
within may be an indispensable factor in prosperity.

It is of course possible to have too many so-called non-
producers, not only in the army but in public offices of
different kinds, as well as in the various talking and ornamen-
tal professions. The work of the soldier, for example, is one of
the most honorable of all professions so long as national
defense is necessary ; but even the professional soldier himself
will generally agree that it would be an excellent thing if war
could be eliminated and the work of the soldier made unneces-
sary. The same reasoning may be applied to many other
occupations. No work is more beneficent and honorable than
that of the physician ; but every physician, if he is worthy
of the name, is working for the elimination or prevention of
disease. If it were possible to carry this work to completion,
it would greatly reduce the need for physicians. Litigation
among the citizens of the nation is, so far as it goes, almost
as wasteful as war between nations. If it could be eliminated,
it would greatly reduce the demand for lawyers. An army of
very able and talented men would thus be released for other
kinds of work for which the need persists. The best lawyers,
like the soldiers and physicians, frankly recognize this and are
willing to work to reduce the amount of litigation.

Productive and unproductive labor. Economists have gener-
ally recognized a distinction between productive and unproduc-
tive labor, but they have not always agreed as to the line of
division. Adam Smith 1 wrote :

1 The Wealth of Nations, Vol. I, pp. 332-334. Clarendon Press, Oxford, 1880.


There is one sort of labor which adds to the value of the subject upon
which it is bestowed : there is another which has no such effect. The for-
mer, as it produces a value, may be called productive ; the latter, unproduc-
tive labor. Thus the labor of a manufacturer adds, generally, to the value
of the materials which he works upon, that of his own maintenance, and of
his master's profit. The labor of a menial servant, on the contrary, adds to
the value of nothing. Though the manufacturer has his wages advanced
to him by his master, he, in reality, costs him no expense, the whole value
of those wages being generally restored, together with a profit, in the im-
proved value of the subject upon which his labor is bestowed. But the
maintenance of a menial servant never is restored. A man grows rich by
employing a multitude of manufactures : he grows poor by maintaining a
multitude of menial servants. The labor of the latter, however, has its
value, and deserves its reward as well as that of the former. But the labor
of the manufacturer fixes and realises itself in some particular subject or
vendible commodity, which lasts for some time at least after that labor is
past. It is, as it were, a certain quantity of labor stocked and stored up to
be employed, if necessary, upon some other occasion. That subject, or,
what is the same thing, the price of that subject, can afterwards, if neces-
sary, put into motion a quantity of labor equal to that which had originally
produced it. The labor of the menial servant, on the contrary, does not fix
or realise itself in any particular subject or vendible commodity. His serv-
ices generally perish in the very instant of their performance, and seldom
leave any trace or value behind them, for which an equal quantity of service
could afterwards be procured.

The labor of some of the most respectable orders in society is, like that
of menial servants, unproductive of any value, and does not fix or realise
itself in any permanent subject, or vendible commodity, which endures
after that labor is past, and for which an equal quantity of labor could
afterwards be procured. The sovereign, for example, with all the officers
both of justice and war who serve under him, the whole army and navy,
are unproductive laborers. They are the servants of the public, and are
maintained by a part of the annual produce of the industry of other people.
Their service, how honorable, how useful, or how necessary soever, produces
nothing for which an equal quantity of service can afterwards be procured.
The protection, security, and defence of the commonwealth, the effect of
their labor this year, will not purchase its protection, security and defence
for the year to come. In the same class must be ranked some both of the
gravest and most important, and some of the most frivolous professions :
churchmen, lawyers, physicians, men of letters of all kinds ; players, buf-
foons, musicians, opera-singers, opera-dancers, etc. The labor of the meanest


of these has a certain value, regulated by the very same principles which
regulate that of every other sort of labor, and that of the noblest and most
useful, produces nothing which could afterwards purchase or procure an
equal quantity of labor. Like the declamation of the actor, the harangue
of the orator, or the tune of the musician, the work of all of them perishes
in the very instant of its production.

Both productive and unproductive laborers, and those who do no labor
at all, are all equally maintained by the annual produce of the land and
labor of the country. This produce, how great soever, can never be infinite,
but must have certain limits. According, therefore, as a smaller or greater
proportion of it is in any one year employed in maintaining unproductive
hands, the more in the one case and the less in the other will remain for
the productive, and the next year's produce will be greater or smaller ac-
cordingly ; the whole annual produce, if we except the spontaneous
productions of the earth, being the effect of productive labor.

John Stuart Mill 1 makes use of the same distinction in the
following paragraphs, though he modifies it so as to allow for
labor which is mediately, or indirectly, productive.


I shall therefore, in this treatise, when speaking of wealth, understand
by it only what is called material wealth, and by unproductive labor only
those kinds of exertion which produce utilities embodied in material objects.
But in limiting myself to this sense of the word, I mean to avail myself to
the full extent of that restricted acceptation, and I shall not refuse the
appellation productive to labor which yields no material product as its direct
result, provided that an increase of material products is its ultimate conse-
quence. Thus, labor expended in the acquisition of manufacturing skill, I
class as productive, not in virtue of the skill itself, but of the manufactured
products created by the skill, and to the creation of which the labor of
learning the trade is essentially conducive. The labor of officers of govern-
ment in affording the protection which, afforded in some manner or other,
is indispensable to the prosperity of industry, must be classed as productive
even of material wealth, because without it. material wealth, in anything
like its present abundance, could not exist. Such labor may be said to be
productive indirectly or mediately, in opposition to the labor of the plough-
man and the cotton spinner, which are productive immediately. They are

1 Principles of Political Economy (from the Fifth London Edition), Bk. I,
Chapter III, p. 76. New York, 1909.


all alike in this, that they leave the community richer in material products
than they found it ; they increase or tend to increase material wealth.

By unproductive labor on the contrary, will be understood labor which
does not terminate in the creation of material wealth ; which, however
largely or successfully practised, does not render the community and the
world at large richer in material products, but poorer by all that is consumed
by the laborers while so employed.

All labor is, in the language of political economy, unproductive, which
ends in immediate enjoyment, without any increase of the accumulated
stock or permanent means of enjoyment. And all labor, according to our
present definition, must be classed as unproductive, which terminates in a
permanent benefit, however important, provided that an increase of material
products forms no part of that benefit. The labor of saving a friend's life
is not productive, unless the friend is a productive laborer, and produces
more than he consumes. To a religious person the saving of a soul must
appear a far more important service than the saving of a life ; but he will
not therefore call a missionary or a clergyman productive laborers, unless
they teach, as the South Sea Missionaries have in some cases done, the
arts of civilization in addition to the doctrines of their religion. It is, on
the contrary, evident that the greater number of missionaries or clergymen
a nation maintains, the less it has to expend on other things ; while the

Online LibraryThomas Nixon CarverPrinciples of political economy → online text (page 21 of 48)