Demand is a desire to possess something, but unless persons. possess something to give in exchange for what they want to obtain, they can give no effect to their desire: and unless they can do so, no Economic phenomenon takes place.

It is easy to see that Demand is not the same thing as Consumption. Suppose, as very often happens in a country district, there is a certain quantity of milk, butter, eggs, poultry, &c. produced. The country people are accustomed to buy or consume all this produce at a certain price. There is, therefore, a certain amount of Production and Consumption. But the place, perhaps, becomes fashionable: a number of rich persons crowd in, and prices rise immensely: but the same quantity of products are consumed. Now there is the same Production and the same Consumption. There is the same Supply, but not the same Demand. If rich people crowd in and outbid poor ones, and give a higher price than the country people can do, there is a greater Demand. When prices rise above a certain point, however persons may wish to possess the object, if they cannot give these prices they cease to buy, and therefore in an Economic sense they cease to Demand. Demand, therefore, in Economics must mean the desire and the power to purchase, and, of course, the more intense the desire and the greater the power to purchase, the greater is the Demand.

Hence we may say that, while Production and Consumption constitute exchange, the relative numerical quantities in which the respective products will exchange are determined by Supply and Demand.

And here we may observe is the great, radical and fundamental difference between the Second and Third Schools of Economists. We have shewn that their Definitions of the Science are absolutely identical. But the real difference between them lies in their doctrine of the cause, or origin, of Value. The second school of Economists chiefly, and some exclusively, look to the Labour of the Producer as the cause or origin of Value. But the Physiocrates, the third school, Condillac, Whately, Bastiat, the Italian Economists, Verri, Beccaria, Genovesi, and ourselves look entirely to the Demand of the Consumer as the sole origin and source of Value, as is fully exhibited in the next chapter.

ON PRODUCTIVE and UNPRODUCTIVE LABOUR.

35. There is no part of Smith's work which has been so unanimously condemned even by his warmest admirers, or in which he is so contradictory to himself and to common parlance, as in his doctrine of Productive and Unproductive Labour.

The Physiocrates restricted the term Productive Labour to obtaining an increase of quantity of the raw products of the earth. All other labourers, all artificers, all merchants and traders they classed as sterile or unproductive, because they said that in manufactures the increased value bestowed on them by labour only replaced the products consumed by the artisans during the work, and in commerce there was only an exchange of equal values: and, therefore, in neither case was there any increase of Wealth. This designation of so many and powerful classes of society as sterile or unproductive labourers raised a great clamour against them, as if they had meant it as an insult. But the Physiocrates very justly replied that they did not mean this term in a disparaging or humiliating sense, but purely as a matter of scientific classification. They acknowledged that the labour of these classes was honourable, useful, and indeed indis. pensable, but they did not term it Productive in a scientific sense. Their answer was perfectly just, but their scientific classification was soon demonstrated to be erroneous.

Among others, Smith attacked it' and says "The third is the class of artificers, manufacturers, and merchants, whom they endeavour to degrade by the humiliating appellation of the barren or unproductive class." We shall soon see whether Smith has not fallen into exactly the same error as he charged upon the Physiocrates.

He 2 says "There is one sort of labour which adds to the value of the subject upon which it is bestowed: there is another which has no such effect. The former as it produces a value may be called productive, the latter unproductive labour. Thus the labour 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 profits." Smith then enlarges the term Productive Labour to include manufacturing, and commercial 1 Wealth of Nations, Book IV., c. 9.

2 Ibid., Book II., ch. 3.

labour of all sorts, as well as agricultural. But there he unaccountably stops, and bans all other labourers as unproductive, or in his own words, endeavours to degrade them by the humiliating appellation of barren or unproductive.

In continuation of the passage just given, he says: "The labour 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 value of these wages being generally restored with a profit, in the improved value of the subject upon which his labour is bestowed; but the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude of menial servants. The labour of the latter, however, has its value and deserves its reward as well as that of the former; but the labour of the manufacturer fixes and realizes itself in some vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour 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 necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services 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."

Now according to Smith, the cook at an hotel is a productive labourer: she prepares, dresses, and cooks the various articles of food eaten by the guests. Her labour adds to their value, and is charged for in the bill: it is fixed and realized in a vendible commodity, which lasts for some time after that labour is passed: and her labour tends to the profit of the landlord; her wages are all repaid to him in his customers' bills.

But a cook in a gentleman's family who performs exactly the same functions is a menial servant, and therefore, according to Smith she is an unproductive labourer. Where is the sense of such a distinction? By Smith's own doctrine, the various articles of food are more valuable after she has dressed and

prepared them for table than they were in a raw state. Her labour is fixed and realized in material commodities which last after that labour is passed. When these two perform exactly the same functions and are equally paid for their services, why is the one productive and the other unproductive? So that if the cook at an hotel takes a place in a gentleman's family she is at once turned from a productive into an unproductive labourer! If a cook in a private family takes a place in an hotel, she from being an unproductive, becomes a productive labourer! It is obvious that such a distinction is mischievous, futile, and contrary to common sense.

Again Smith allows all the various persons engaged in extracting the coal from the mine, transporting it to distant places, and placing it in a gentleman's cellar to be productive labourers; but the footman who carries it from the cellar to the drawingroom grate is a menial, and therefore an unproductive labourer. By Smith's own doctrine the labour of each of the series of persons who extract and transport the coal to the cellar adds to its value, and therefore for the same reason the labour of the footman who carries it from the cellar to the drawing-room adds to its value. The terminus à quo the coal starts is the mine, the terminus ad quem it is to arrive, is the drawing-room grate and why is the labourer who transports it from the mine to the cellar productive, and the labourer who transports it from the cellar to the grate unproductive? The labour of each is It is obvious that such

equally necessary, and equally paid for. a distinction is mischievous, futile, and contrary to common

sense.

Now why does a gentleman pay for a cook in an hotel or in his own house to dress his dinner? Simply to save himself the trouble of doing it for himself. Why does he pay the price for miners obtaining the coals, and dealers transporting it from place to place; and why does he pay wages to his footman to carry coals from the cellar to the drawing-room? Simply to save himself the trouble of doing so himself. And the same course of argument applies to everything else which is wanted and paid for. Now here are services wanted, demanded, produced or rendered, and paid for; and yet some are called productive and others unproductive. Is this not plainly contrary

to all scientific classification?

Smith then continues-"The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject or vendible commodity which endures after that labour is past, and for which an equal quantity of labour 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 labourers. 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 honourable, 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 labour 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, buffoons, musicians, opera singers, opera dancers, &c. The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful produces nothing which could afterwards purchase or procure an equal quantity of labour. 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."

Now in reference to what Smith says about the protection, security, and defence of the commonwealth purchased by the labour of soldiers and sailors one year not purchasing its security and defence the year after, we may observe that the food a man eats one year, or the clothes, and fuel, which keep him warm one year will not keep him in life and warmth for the year to come, and yet Smith classes those who produce food, clothes, and fuel as productive labourers, and those who produce security and defence as unproductive labourers. Can anything be more futile?

1

Smith is moreover utterly inconsistent with himself, for he himself classes as wealth, "the acquired and useful abilities 1 Book II., ch. 1.