This is most clearly set forth in the Pandects'-"The essence of an obligation is not that it should cause any specific thing to be ours; but that it should bind some person to give us something." And thus the Duty to pay subsists quite irrespective of the fact that the Debtor has, or has not, any money to discharge it.

Every one knows the ridicule that was long showered on mathematicians for speaking of quantities less than nothing: and it all arose from their not clearly explaining their meaning; or rather from their not having clear conceptions of the Theory of Signs. So in a similar way, it is the commonest expression possible for a person who is in debt to say that he is worse than nothing; and it is very easily explained; for it obviously means that he has no RIGHT, but is under a Duty.

It is a somewhat curious coincidence that the early Algebraists called Negative Roots, fictitious; and it is a very common expression among writers to call Paper Credit, fictitious Capital. In both cases Negative and Fictitious Quantities are shewn to be Real Quantities, but inverse or opposite to Positive Quantities, or Money.

There can be no more apt or appropriate expression than to call Credit, Negative Capital. For we have shewn that the true definition of Capital is any Economic Quantity used for the purpose of profit; and Senior says that all Economists are agreed that whatever gives a profit is Capital.

Now a man may trade with his Money and his Credit: his total purchasing power is all his Money and all his Credit.

If he trades with his money, he parts with a Right: if he trades with his Credit, he creates a Right against himself, or he incurs a Duty.

The first proceeds of his speculation must therefore either Replace his Right, or Discharge his Duty.

Whatever remains above that in either case is his PROFIT: and supposing that there is a profit, the Money and Credit have been equally CAPITAL to him, because they have equally given a Profit.

But as all the expressions are reversed when Credit is used instead of Money, it manifestly follows that if Money is Positive Capital, Credit is Negative Capital.

1 Digest, xliv., 7: 3.

10. Sir Charles Lyell says in one of his works that when a strange proposition is published, the world first screams out that it is false: it is then said to be contrary to religion and lastly that every one knew it already.

When, years ago, we said in a former work that Credit is Capital, there was a shout of derision by many writers in England and France: Whately thought it necessary to enter into a long argument to prove to the Dons at Oxford that an Economist is not necessarily an Atheist and now we have shewn clearly that every one knew already that Credit is Capital.

CHAPTER IX.

ON VALUE AS DEPENDENT ON "QUANTITY OF LABOUR" AND " "COST OF PRODUCTION."

On Value as Dependent on QUANTITY OF LABOUR.

1. Although we have no positive proof of the fact, we have a very strong conviction that the principal object of Adam Smith in writing the Wealth of Nations was to overthrow the doctrine of the Physiocrates that Labour (other than agricultural) and Commerce do not enrich a nation.

It is indeed sometimes supposed that Smith was the father of Political Economy and of Free Trade. But the narrative given in the preceding part of this work, shews that such ideas only proceed from most inaccurate knowledge. The fact is that in Political Economy, as in the early stages of nearly every other science, England was far in arrear of France and Italy. It is said that while Professor at Glasgow, Smith advocated Free Trade doctrines. It is very probable that he did so; but as his lectures were never published, his opinions could only have been known to a very small number of persons, and certainly he produced no effect on the public, while there. The fact is that at this period the minds of the most enlightened persons in France, Spain, Italy, and England were strongly interested in Economic subjects, and there was a general reaction throughout Europe against the detestable system of commercial restrictions which at that period weighed down the energies of every nation. The doctrines of the Physiocrates demanding absolute Free Trade as one of the fundamental rights of mankind were published in 1756, twenty years before the Wealth of Nations; Genovesi and Verri in Italy, and Campomanes in Spain, were equally ardent Free Traders. Turgot, the great Free Trader, was appointed Minister in 1774, and how could all these owe anything to the Wealth of Nations, which was not published till 1776 ? In 1768, a chair of Political Economy, the third in Europe, was founded in the Palatine School of Milan, for BECCARIA, who was

celebrated throughout Europe for his work on Crimes and Punishments, and who had been led by his friend Verri, to take an interest in Economics, and had published an excellent pamphlet on the bad state of the Milanese money. Beccaria delivered a course of lectures on Political Economy in 1769; but finding that his Free Trade doctrines were likely to create a very strong opposition, his constitutional timidity prevailed, and he refrained from publishing them. He himself said that he was willing to be the apostle of humanity, but not its martyr. Hence his name is comparatively little known in connection with the subject. But there can be no doubt that if Beccaria had had the courage to complete and publish his work, he would have enjoyed the reputation which subsequently accrued to Smith. Beccaria was endowed with a great, a piercing, and a generous mind, but it was vastly less beneficial to the human race than it might have been, because it was overshadowed by a most pusillanimous soul. He was deficient in the very first requisite of a scientific mind, namely the moral courage to brave hostility. He was not one of those magnanimous spirits for whom the highest order in the ranks of Fame is reserved, who will do battle for what they know to be truth, in despite of the opposition of the vulgar of every rank.

Certo da cor, ch' alto destin non scelse

Son l'imprese magnanime neglette:
Ma le bell' alme alle bell' opre elette
Sanno gioir nelle fatiche eccelse:
Ne biasmo popolar, frale catena,

Spirto d'onore in suo cammin raffrena.

which means something of this sort

True: puny men with feeble hearts endowed

Before a noble enterprise recoil:

But great souls called to do the work of God
Know for itself to love the lofty toil:

Nor can the vulgar cry, a feeble chain,

The noble spirit in its course restrain.

His cowardice of spirit greatly lost him the esteem of Verri. Finding that the sentiments expressed in his lectures gave offence, he stopped, and left them unfinished, and he never published them. They first saw the light in 1804, in Custodi's collection of the Italian Economists. And thus he deservedly missed the fame which would otherwise have been his legitimate due.

Adam Smith, in reality and in truth, then, was the founder neither of Political Economy nor of Free Trade; but he was the founder of the SECOND School of Economists. While adopting the doctrines of the Physiocrates regarding Free Trade, he allowed the first part of his work to be tinged too much with their ideas of the nature of Wealth. But the main purpose of the constructive part of his book is to demonstrate that Labour and Commerce are productive of Wealth.

But like many other scientific reactions, the doctrine went from one extreme to another: from its being held that Labour is not productive of Wealth, it came to be held that Labour is the cause of all Wealth, and of all Value: and that the Value of every thing depends exclusively on the "quantity of labour" in producing it.

This doctrine is very prominently brought forward in Book I., ch. 5, from which we have already quoted largely,' and not to repeat the same thing twice over, we must beg our readers to refer to the passages cited. We have shewn into what utter confusion he has thrown the whole subject. But afterwards he says that unless a thing is exchangeable it is not Wealth: doctrines, as we have already shewn, which are quite incongruous.

He has involved himself in inextricable perplexity by adopting two distinct measures of value. First, the quantity of labor bestowed upon producing an article; secondly, the quantity of things it will exchange for. Ricardo clearly perceived this inconsistency, and justly censured him for it;"Adam Smith who so accurately defined the original source of exchangeable value, and who was bound in consistency to maintain that all things became more or less valuable in proportion as more or less labor was bestowed upon their production, has himself erected another standard measure of value, and speaks of things being more or less valuable in proportion as they will exchange for more or less of this standard measure. Sometimes he speaks of corn, at other times of labor, as a standard measure, not the quantity of labor bestowed on the production of any object, but the quantity which it can command in the market, as if these two were equivalent expressions, and as if because a man's labor had become doubly efficient, and he could, therefore Ante, ch. v., § 4: On a Standard of Value. 2 Principles, p. 5.