Letters to Mr. Malthus And A Catechism of Political Economy

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Knight's Antipositivism. The Religion of a Skeptic: Frank H. The workman comes out of the manufactory at night with the ten fingers which he carried into it in the morning.

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He has left nothing material in the workshop. It is then an immaterial service which he has furnished towards the productive operation. This service is the daily or annual produce of a fund or estate which I call his industrious faculties, and which compose his riches: miserable riches! All these are immaterial productions, which, call them as you please, will still be immaterial productions, exchangeable mutually one with another, exchangeable for material productions; and which, in all exchanges, will still seek their market-price, founded, like every market-price in the world, upon the proportion between the supply and demand.

Letters to Mr. Malthus, and A Catechism of Political Economy - Online Library of Liberty

These services, of industry, capital, and land, which are products independent of all matter, form all our revenues, much as we are - - - - What! Yes, Sir, All: otherwise the mass of matter which composes the globe would increase every year; it must happen so, for we should every year have new material revenues. We neither create nor destroy a single atom. All that we do is to change the combinations of things; and all that we add is immaterial. It is value; and it is this value which is immaterial also, that we daily, annually consume, and upon which we live; for consumption is a change of form given to matter, or, if you Edition: current; Page: [ 18 ] prefer the expression, a derangement, as production is an arrangement of form.

If you find a paradoxical appearance in these propositions, examine the things which they express, and I have no doubt they will appear very simple and reasonable. Without this analysis, I defy you to explain the whole of the facts; for instance, how the same capital is twice consumed: productively, by a speculator, and unproductively, by his workman. By means of the foregoing analysis, it may be seen how the workman brings to market his labour, the fruits of his ability; he sells it to the master, carries home with him his wages, which forms his revenue, and consumes it unproductively.

But the master, who has bought the labour of the workman with a part of his capital consumes it reproductively, as the dyer consumes reproductively the indigo thrown into his copper. These values having been consumed reproductively, reappear in the production which comes out of the hands of the master. It is not the capital of the master which forms [Editor: illegible word] revenue of the workman, as M.

Sismondi pretends. The capital of the master is consumed in the workshops. The value consumed by the latter has another source; it is the produce of his industrious faculties. Having purchased it, he consumes it; and the workman consumes, on his part, the value which he has obtained in exchange for his labour. Wherever there is exchange, there are two values created and bartered one for the other; and wherever two values are created, there must be, and there are, in effect, two consumptions.

It is the same with the productive service rendered by capital. The capitalist who lends, sells the service, the labour of his instrument; the daily or annual hire, which a speculator pays him for it, is called interest. The terms of the exchange are, on one side, the service of the capital, on the other, the interest. The speculator, while he consumes reproductively the capital, also consumes reproductively the service of the capital. The lender, on the other hand, who has sold the service of the capital, consumes the interest unproductively, which is a material value given in exchange for the immaterial service of the capital.

Ought we to wonder that there should be a double consumption, that of the speculator to make his production, and that of the capitalist to satisfy his wants, since there are the two terms of an exchange, two values drawn from two different funds, bartered for each other, and both capable of consumption? What will eternally sustain that excellent book is, that it proclaims in every page that the exchangeable value of things is the foundation of all riches.

Letters to Mr. Malthus

From the publication of that important truth, political economy became a positive science; for the market-price of every thing is a determinate quantity of which the elements may be analysed, the causes assigned, the relations studied, and the consequences foreseen. Permit me, Sir, to say that to separate this essential character from the definition of wealth, is to plunge the science again into the depths of obscurity—to drive it back.

Instead of weakening the authority of the celebrated Inquiry into the Wealth of Nations, I support it in the most essential part; but at the same time I think Adam Smith has forgotten some real exchangeable values, in omitting those which are attached to such productive services as leave no trace because they are totally consumed; I think that he has likewise misunderstood services unquestionably real, which even leave their traces in material produce; such are the services of capital, consumed independently of the consumption of the capital itself; I think that he fell into infinite obscurities through omitting to distinguish, in the course of production, the consumption of the industrious services of a speculator from the services of his capital; a distinction which nevertheless is so real, that there is scarcely any commercial association Edition: current; Page: [ 21 ] whose regulations do not contain clauses relative to it.

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I revere Adam Smith —he is my master. When I took the first steps in political economy, and when still tottering I was pushed by the advocates of the balance of commerce on the one side, and the advocates of net produce on the other, I stumbled at every move—he shewed me the true path. Supported by his Wealth of Nations, which shews at the same time his own intellectual wealth, I learned to go alone. Now I have ceased to belong to any school, and I shall escape the sort of ridicule which attached to the reverend father Jesuits who translated the Elements of Newton with annotations.

They were sensible that physical laws would not square very well with those of Loyola; they therefore took care to inform the public by an advertisement, that, although they had apparently demonstrated the motion of the earth to complete the theory of celestial physics, they nevertheless bowed with submissive acquiescence to the decrees of the Pope, who did not acknowledge this motion.

I submit only to the decrees of eternal reason, and am not afraid to declare it: Adam Smith has not embraced all the phenomena of the production and consumption of wealth; but he has done so much that we ought to feel the deepest gratitude for his exertions. The most vague and obscure of all the sciences, will, thanks to his researches, soon become the most precise, and leave fewer facts unexplained than any of the others.

Let us then figure to ourselves the producers by which name I mean as well the possessors of capital and of land, as the possessors of industrious faculties ; let us imagine them pressing forwards with emulation to offer their productive services, or the utility derived from them, an immaterial quality. This utility is their production.

Sometimes it is fixed in a material object, which passes with Edition: current; Page: [ 22 ] the immaterial produce, but which in itself is of no importance, is nothing in political economy; for matter deprived of value is not wealth. Sometimes it passes, sold by one and bought by another, without being fixed in any substance—as the advice of the physician, that of the lawyer, the service of the soldier, and of the public functionary.

All these exchange the utility which they produce for that which is produced by others; and in as many of these exchanges as are abandoned to free competition, according as the utility offered by Paul is more or less in demand than the utility offered by James, it is sold more or less dear, that is to say, it obtains in exchange, more or less of the utility produced by the latter.

Intro to the Solow Model of Economic Growth

It is in this sense that we should understand the influence of demand and supply. It is already professed in several parts of Europe; but I ardently wish to see you convinced of its truth, and that you may think it worthy of the support of that chair which you fill with so much credit. After these necessary explanations, you will not accuse me of vain subleties, if I rely on the laws which I have shewn to be founded on the nature of things, and the facts which flow from that source.

Commodities, you say, are not exchanged for commodities only; they are also exchanged for labour. If this labour be a product which some sell and others buy and Edition: current; Page: [ 23 ] consume, I shall find little difficulty in calling it a commodity, and you will find little in assimilating other commodities to this, for they are also productions. If you will apply to each of them indiscriminately the generic name of production, you will probably agree with me that productions can only be purchased with productions. I think I have proved in my first letter that productions can only be purchased with productions: I do not therefore yet see any reason to abandon the doctrine, that it is production which opens a market to production.

I have indeed considered as productions all the services arising from our personal capacities, from our capitals, and our lands; which has obliged me to sketch anew, and in other terms, the doctrine of production, which Smith evidently did not comprehend, and has not completely described.

But on reading again the third section of your 7th chapter p. You will probably grant that productions can only be bought with productions; but you will persist in maintaining that people may create a quantity of produce in the whole exceeding their wants, and that consequently part of this produce can not be used; that there may be a superabundance and glut of all commodities at once.

In order to present your objection in its full force, I shall transform it into a sensible image, by saying: Mr. Malthus will readily allow that sacks of corn will buy pieces of stuff, in a society which has occasion for those quantities of stuff and corn for its raiment and food; but if the same society should happen to produce sacks of corn and pieces of stuff, although these two commodities may still be exchangeable for each other, he will maintain that a part of each of them will no longer find purchasers. It is therefore necessary for me to prove, first, that whatever may be the quantity produced, and the consequent depression of price, a quantity produced of one species always suffices to enable those who Edition: current; Page: [ 25 ] have produced it to acquire the quantity produced of another species; and after proving that the possibility of acquiring exists, I shall endeavour to shew how the superabundance of productions creates a demand for it, for the purpose of consumption.

manretelmahl.tk The farmer who produces corn, after having purchased the productive services of the land and capital which he employs, as well as those of his labourers, and added to these services that of his own personal labour, has consumed all those values to convert them into sacks of corn; let us suppose that each sack stands him in thirty shillings, including the value of his own labour, that is to say, his profit.

On the other hand the manufacturer who produces stuffs of linen, woollen, or cotton, after having consumed in like manner the services of his capital, those of his workmen and himself, has produced stuffs which stand him also in thirty shillings the piece. If I may be permitted to jump at once to the main point of the inquiry, I will premise that this manufacturer of stuffs represents in my mind the producers of all manufactured produce, and this grower of corn the producers of all provisions and raw materials. The question is, whether their two articles of produce, to whatever quantities they may be multiplied, and whatever depression of price may result from that multiplication, can be wholly purchased by the producers, who are also at the same time the consumers; and how wants arise always in proportion to the quantity of productions.

We must first inquire into the course of things upon the hypothesis of a perfect liberty, permitting the indefinite multiplication of all productions; and we will afterwards examine the obstacles which the nature of things, or the imperfection of society opposes to this unrestricted freedom of production; but you will remark that the hypothesis of unrestricted production is more favourable to your cause, because it is much more difficult to dispose of unlimited Edition: current; Page: [ 26 ] produce than of that which is restricted; and that the hypothesis of production restricted sometimes by one cause and sometimes by another, is more favourable to mine, which supports the doctrine that these restrictions are the very causes which, by restraining certain productions, impede the purchases which might be made of the only productions which can be indefinitely multiplied.

Upon the hypothesis, then, of perfect liberty, suppose the grower brings to market a sack of corn, which including his profit, comes to thirty shillings, and the manufacturer brings a piece of stuff which comes to the same price, and consequently these productions will be exchangeable at par.

Here we ought to observe, that upon this supposition, the producers of the piece of stuff have altogether gained wherewith to repurchase that entire piece, or to buy any other product of equal value. If, for instance, it amounts to thirty shillings, including all expenses, as well as the profit of the manufacturer at the current rate, this sum is distributed amongst all the persons concerned in the production of the piece of stuff; but in unequal shares, according to the nature and amount of the services which they have rendered in the operation of its production.

If the piece contain ten yards, he who has received six shillings can buy two yards of it; he who has received eighteen pence can only buy half a yard: but all of them together can certainly buy the whole piece. But if instead of the Edition: current; Page: [ 27 ] stuff, they wish to buy the corn, they are able, together, to purchase the whole quantity, since its value is the same with that of the stuff; so each of them can purchase, according to their respective occasions, either a part of the piece of stuff, or an equivalent portion of the sack of corn.

He who has received for his services in either of these productions six shillings, may use three shillings in the purchase of a tenth part of the piece of stuff, and three shillings in buying a tenth of the corn; in all cases it is clear that all the producers possess collectively the means of acquiring the whole of the productions. Now, Sir, come your objections.


If commodities increase, or wants diminish, you say, commodities will fall to a price too low to pay the labour requisite for their production. In proceeding to answer this objection, I wish to premise, that if I consent to employ your word labour, which, Edition: current; Page: [ 28 ] according to the explanation given in my former letter, is incomplete, I shall comprehend under that denomination, not only the productive services of the workman and his master, but the productive services rendered by capital and land; services which have their price, as well as personal labour, and a price so strictly real, that the capitalist and the landholder live upon it.

This point being understood, I answer you in the first place, that the depression of the price of productions, does not prevent the producers from purchasing the labour which has created them, or any other equivalent labour. In our hypothesis, the grower of corn will, by an improved process, produce a double quantity of corn, and the manufacturer a double quantity of stuffs; and the corn and stuffs will fall to half their prices.

What then?