Thus, the Mercantile System admits every mode of applying the three factors of production, but considers them really productive only in so far as they increase the quantity of the precious metals possessed by the nation, either through the agency of mining at home, or by means of foreign trade. This view stands and falls with the altogether too limited idea of national wealth before mentioned ($9), which this system advocated. The majority of the followers of the Mercantile System ascribe more power to industry to attract gold and silver from foreign parts, than to agriculture, and to the finer kinds of industry than to the coarser; to active and direct trade, more than to passive and indirect trade.

trine of production; only, in the moralizing tone of the time, he speaks rather of their dignity than of their influence in creating wealth: De Rep. I, 195. See, also, the earlier views of Franc. Patricius (ob. 1494), De Rep. I, 4, 7, 8.

? Compare A. Serra, Breve Trattato delle Cause che possono far abbondare i Regni d' Oro d' Argento, 1613. Th. Mun, England's Treasure by foreign Trade, 1664. Ch. King, British Merchant or Commerce Preserved, 1721. But, particularly, A. C. Leib, Von Verbesserung Land und Leuten etc. (1708), who, from the point of view of the Mercantile System, draws a very clear distinction between the productive and unproductive classes. See, also, infra, § 116. First thoroughly refuted by W. Petty, Political Anatomy of Ireland, 67, 82. Quantulumcunque concerning Money (1682). D. North, Discourses upon trade (1691). See Roscher's Geschichte der englischen Volkswirthschaftslehre, 77, 88, 138. And later, especially, Ad. Smith, W. of N. IV., ch. 1 ff. Adam Smith's doctrine of productive and unproductive labor is to be found already, in this period, in Petty, Several Essays, 127 ff. Political Anatomy, 185 ff; also, in the anonymous work, A Discourse of Trade, Coyn and Paper Credit, London (1697), 44, 159.

SECTION XLIX.

CRITICAL HISTORY OF THE IDEA OF PRODUCTIVENESS.— THE DOCTRINE OF THE PHYSIOCRATES.

The doctrine of the Physiocrates is to be explained in part by a very natural reaction from the narrow-heartedness of the Mercantile System, and at the same time, by a presentiment, misunderstood, of the true theory of rent. (§ 150 ff.). Of the six classes of labor mentioned above (§ 38), those only are called productive which increase the quantity of raw material useful for human ends.. All the other classes, it matters not how useful, are called sterile, salaried, because they draw their income only from the superabundance of land-owners and the workers of the soil. Tradesmen, in the narrower sense of the term, produce only a change in the form of the material, the higher value of which depends on the quantity of other material consumed for the purposes of the tradesman's labor. If any of this material is saved, the value of their products sinks, although to the advantage of the economy of the whole nation. In any case, industry could create no wealth, but only make existing wealth more lasting. It might, so to speak, accumulate the value of the quantity of food consumed during the building of a house in the house itself.'

1Qnesnay, Dialogue sur les Travaux des Artisans, 210 ff.; 389 éd Daire; Turgot, Sur la Formation etc., § 8; Dupont, Correspondence avec J. B. Say, 400, éd. Daire. B. Franklin, Letter to Dr. Evans (1768), and Positions Concerning National Wealth (1769), Works ed. Sparks, VII and II. Similarly even Aristotle, Oec., I, 2, says, that commerce, wage-labor and war win from men, with or without their will; but that only agriculture obtains booty from nature. And so Cicero says of merchants: nihil proficiunt, nisi aðmodum mentiantur. De Off., I, 42. The same view seems to have prevailed during the middle ages. See Thom. Aquin., De Rebus publicis, II, 3, 5 seq. Luther entertained a like notion (Vom Kaufhandel und Wucher, 1524). He prefers agriculture to the trades. See the Irmischer edition of his works, XXII, 284; XXXVI, 172; LXI, 352. Calvin considered commerce both useful and honorable; so that ex ipsius mercatoris diligentia atque industria, its profit may be greater than that of agriculture. (Opp. ed. Amstelod, 1664, IX, 223.) Asgill,

But if tradesmen really earned, in the value of their products, only what they had consumed during their labor, it would be difficult for them to find employers to provide them with capital. Everyone will acknowledge, that a Thorwaldsen and an ordinary stone-cutter, with the same block of marble, the same implements, the same food, would necessarily, after the same time, turn out exceedingly different values.2 And, even in the case that industry should add to the raw material only precisely the same amount of value as had been consumed by the workmen, can it be said that the work ceases to be productive simply because it is consumed by the workmen themselves? If that were so, agriculture even, would, in most countries with a low civilization, be unproductive.3

Commerce, according to the theory of the Physiocrates, only transfers already existing wealth from one hand to another. What the merchants gain by it is at the cost of the nation. Hence, it is desirable that this loss should be as

Several Assertions proved in order to create another Species of Money than Gold (1691): "what we call commodities is nothing but land severed from the soil; man deals in nothing but earth." Concerning Cantillon, compare $47, note 4. How violent an innovation the Physiocratic theory was in its time may be inferred from what Zincke writes in the Leipzig Sammlungen, X, 551 ff. (1753), p. 20, XIII, 861.

2Qnesnay, 1. c., 189, does not ignore that many workmen earn more than the cost of their necessary subsistence; but he claimed that this was a result of a natural or legal monopoly of the same. The dearer labor was, the more productive it seemed. Per contra, see Dohm on the Physiocratic system, in the Deutsch. Museum, 1778, II, 313 ff.

3 Gournay (compare Turgot, Eloge de G., in Guillaumin's edition, I, 266, 271 ff.), as well as Raynal, Histoire des Indes, vol. X, Livre 19, spite of the similarity of their and Quesnay's views, acknowledged on this account, the productiveness of industry. For some remarkable examples illustrative of how it may increase the value in exchange of raw material, see the anonymous work, Paying Old Debts without New Taxes, London, 1723. See also Algarotti (ob. 1794), 318, in Custodi, Economisti classici italiani, Parte moderna, I. Thus a cwt. of coarse cast iron is converted, in a Berlin manufactory, into 88,440 shirt buttons worth 6 silver groschens each. Hence the value is raised from 1-2 thalers to 19,653 thalers. The increase of the value in use by industrial labor is self-evident.

small as possible. Hence sterility! But, the more important branches of business, especially wholesale trade, are connected with a transportation of goods (Verri), either from one place or from one period of time, into another. Here the genuine merchant speculates essentially on the difference of the values in use which are afterwards greater than before. The ice shipped yearly from Boston to tropical lands met a much more urgent and wide-spread want there than it would if it had remained at home. And thus the storage of grain in large quantities after a bountiful harvest withdraws, indeed, an object of enjoyment from the comsumption of the people; but its sale, after a bad harvest, undoubtedly increases their enjoyment in a much greater degree than it was before diminished. Besides, the condition of both parties to the contract is usually improved in all normal trade. (Condillac.) No one parts with exchangeable goods unless they are of less use to him than the ones he receives in return. And so, the value in use of a nation's resources is really increased by commerce. To the other attributes of goods it adds one of the principal conditions of all use, accessibility (Kudler), with which it either newly endows them, or which it increases in degree. To this end, the merchant makes use of tools, just as the manufacturer

4 Quesnay, Dialogue sur le Commerce.

5 Recognized very early by Ad. Contzen, Politicorum, Lib. VIII, C. 10 (1629).

"This did not escape the notice of Frederick II. Von Raumer, Hohenstaufen, III, 535

*Condillac acknowledges the productive power both of industry and of commerce; and that the service rendered by the state is at least economically indispensable. (Le Commerce et le Gouvernment, 1776, 1, 6, 7, 10.) Beccaria, Economia pubblica (1769 ff.), IV, 4, 24. Boisguillebert (ob. 1714), Sur la Nature des Richesses, illustrated the utility of commerce by the picture of a number of men bound to pillars, one hundred steps apart, one with a superabundance of food but naked, a second with a superabundance of fuel, a third with a superabundance of clothing etc.; all of whom perish, because unable to exchange their respective surpluses with one another. According to Lotz, Revision, I, 217, “buying dear," apart from real fraud, means only a decrease of possible gain.

does. What spinning-wheels, looms and workshops are to the latter, ships, warehouses, cranes etc., are to the former. If production be not complete until the thing produced is made fit for its last end, consumption, commerce may be looked upon as the last link in the chain of productive labor. It, at the same time, constitutes a series of intermediate links; as without it no division of labor is possible, and without a division of labor, no higher economic productiveness. How commerce may increase the value in exchange of goods, and without in any way injuring the purchaser, needs no further illustration."

8

SECTION L.

THE SAME SUBJECT CONTINUED.

Even Adam Smith called services, in the narrower sense of the term (§ 3), the grave and important ones of the statesman, clergyman and physician, as well as the "frivolous" ones of the opera singer, ballet-dancer and buffoon, unproductive. The labor of none of these can be fixed or incorporated in any

Verri, Meditazioni, XXIV, instead of calling the merchant productive, calls him a mediator between producers and consumers. It would be just as reasonable to call the shoemaker a mediator between the production and consumption of leather; or the cloth merchant, who cuts the material from the piece, an assistant preparatory to the tailor. The labor of commerce is especially like that of the fisherman or the turf digger, because they produce only in so far as they transfer goods from inaccessible to accessible places. See, however, Rau, Lehrbuch, I, § 103. See the demonstration of the productive power of commerce in general, as well as of what is, by way of preference, called industry, in Ad. Smith, W. of N., IV, ch. 9. A much more fundamental refutation of the Physiocratic Principle is to be found in Jacob, N. (Ek., 204 ff.

In 1843, about 55,000 tons of ice were shipped from Boston. Less than 25 cents. per ton was paid for the ice in the first instance. When packed on board ship, it was worth $2.55 per ton. The ultimate sale brought $3,575,000. Ausland, 1844, No. 278. The ancients were acquainted with a similar production of ice, the value in exchange of which might be almost entirely reduced to the labor of commerce. See Xeuoph., Memor., II, 1, 30; Athen. III, 97; Proverbs of Solomon, 25, 13.