traffickers. All these operations are only in themselves an intermediate movement between the place of Production and that of Consumption-between the first seller and the last buyer-consumer. The Physiocrates said that they are only a cost to commerce, and not a profit to the nation: and that all their gains come out of the profits of the producer and the consumer. 24. Hence we see that in Physiocrate language, WEALTH meant that portion of the raw produce of the earth which is brought into commerce. PRODUCTION meant obtaining that raw produce from the earth, and bringing it into commerce. DISTRIBUTION meant all the operations it went through to bring it to the place where it is to be ultimately purchased | for use. CONSUMPTION meant ultimately purchasing and taking the finished product out of commerce, for the purpose of use or enjoyment. The whole passage of the product from its first producer, or seller, through the various stages of distribution till its ultimate consumption, or purchase, was called COMMERCE, or EXCHANGE. Hence the Science of the Production, Distribution, and Consumption of Wealth, meant simply the science of COMMERCE or EXCHANGES. 25. One of the most important services rendered by the Physiocrates to Economics, was their re-establishment of the true doctrine of the nature and use of money. The mercantile system held that money is the only species of wealth; the evident absurdity of this doctrine was so great, that it naturally led to a reaction, and as usual in such cases opinion went to the opposite extreme. It was held that Money is not Wealth at all, but only the sign or representative of wealth. This naturally led to the doctrine that as money is only the means of obtaining other things, it is wholly indifferent what it is made of, and that it is only the command of the sovereign which gives it value. It was alleged that the sovereign might F 1 diminish the quantity of metal as much as he pleased, and still continue to affix any value he pleased to it. The extraordinary consequences that resulted from this doctrine are set forth in the chapter on Coinage. John Law maintained that there is no reason why silver alone should be considered as money, and that the value of the land and all moveable goods might be coined into money by means of paper notes as well as silver, which would maintain an equality of value with silver. The attempt to realize this idea produced the catastrophe of the Mississippi scheme, and the terrible reality of facts shattered his theory to atoms. Law's theory of money was set forth by the Abbé Terrasson, an able member of the Academy of Inscriptions, and the study of these doctrines led Turgot, then a young man of 22, to investigate the nature and use of money. Turgot and the Physiocrates shewed that money is neither allwealth, nor is it not-wealth, but that it is simply a species of merchandize, which is used for a particular purpose to facilitate commerce. It is found more convenient in commerce, instead of exchanging products directly for one another, to exchange them for some intermediate merchandize which is itself universally exchangeable. Such an operation is termed a SALE. Any merchandize whatever might have been chosen for this purpose, but there are many reasons why gold and silver are superior to all other species. The merchandize which is used for this purpose is called Money. But this kind of exchange in no way differs from any other, and the money given in exchange is the equivalent of the merchandize. Thus, though every one agrees to take money in exchange for products, it is not the sign or representative of products, but their equivalent. Money therefore is nothing but one species of merchandize, and any merchandize may be made money. Hence, though money has uses of its own, yet its value, or exchangeable power, depends on exactly the same laws as the value of any other merchandize. Money therefore is wealth in itself, but only a very small part of the general wealth. As every one is willing to exchange his products for money, money may be considered as a general Order, or Bill of Exchange on all the products of the country, and as its only use is to facilitate exchanges of products, a substitute may be found for it. The Physiocrates shewed that instead of the quantity of money in a country being the measure of its wealth, it is generally the contrary. In rich countries the valuable. paper of rich merchants supplies the place of money, and is itself an object of commerce just like money. It is only in poor and barbarous countries, where no one has confidence in his neighbour, that a large stock of money is, required. The use of more money than is absolutely required is a great loss to a country, because it can only be purchased with an equivalent amount of products, and their value is thus withdrawn from being employed in productive operations. Any country which has plenty of products can at any time purchase any amount of money it may require. The Physiocrates, therefore, strongly urged the entire abolition of all restrictions on the free export of money, and also the entire abolition of usury laws. The Physiocrate doctrine of the nature and use of money is exactly that which is developed in this work, so we need say no more about it here. 26. We now come to the most remarkable and distinctive portion of the Physiocrate doctrine. They applied the term productive labour exclusively to that employed in obtaining raw produce of all sorts from the earth. All other labour expended on the raw produce, either in fashioning it, manufacturing it, or transporting it, they called sterile or unproductive, because they alleged it adds nothing to the wealth of the country; and they maintained that neither the labour of artisans nor the operations of commerce tend to enrich the country. In the first place they said commerce cannot enrich a country, because it is only an exchange of value for equal value. Over and over again the Physiocrates repeat that commerce being only an exchange of equal values, neither side can gain or lose. They held that the only use of commerce is to vary and multiply the means of enjoyment, but that it does not add to national wealth; or, if it does, it is only by giving a value to the products of the earth, which might otherwise fail in finding a market. They contend also that as all exchanges are merely equal value for equal value, the same principles also apply to sales, and that therefore the gains that traders make are no increase of wealth to the nation. They then said that the labour of artisans in manufactures is sterile or unproductive, because, though their labour adds to the value of the product, yet during the process of the manufacture the labourer consumes his subsistence, and the value added to the product only represents the value of the subsistence destroyed during the labour. Hence in this case there is an addition to value, but no production of wealth. These are the doctrines which the Physiocrates maintained with long and repeated arguments which it would be tedious and useless to give at any length, because they were mere repetitions. But how men of the ability of the Physiocrates could maintain that a country can be enriched neither by labour or commerce, with the examples of Tyre, Carthage, Venice, Florence, Holland, and England before them is incomprehensible. With such patent glaring facts before them, it is surprising that they were not led to suspect the truth of their reasoning. It is one of those aberrations of the human intellect which we can only wonder at, but not explain. With such views, they held that the internal commerce of the country conduces nothing to its wealth; and the foreign commerce very little. They called foreign commerce only a pisaller. One truth, however, they perceived. They saw that money is the most unprofitable merchandize of any to import, and that merchants never import money when they can import products. Therefore they called the import of money in foreign commerce only the pis-aller of a pis-aller. The Physiocrates held that all the costs of trafficking come out of the profits of the producers and consumers, and though gains to them, are not profit to the nation, and said that the state ought not to tax them. They maintained that the value of the Produit Net is the only real increase of wealth to the nation, and that all taxation should come out of it directly. 27. The preceding remarks contain, we hope, a sufficient outline of the Physiocrate doctrine. We have now to point out in what it was defective. In the first place it was deficient in generalization. It placed the principle of wealth exclusively in exchangeability, but confined that to the material products of the earth, which were all that were necessary to man's subsistence. A product that was useful or agreeable and exchangeable they defined to be wealth, and those who obtained such products they termed producers. That is, they only admitted those things to be wealth which benefited the body. But man has mental wants as well as physical wants. He does not live by bread alone. His mind has necessities and enjoyments as well as the body, and there are persons who are capable of producing things useful and agreeable for the mind, which are exchangeable, and valuable, as well as those for the body. And, therefore, such things should have been included under the title of Wealth, as we have seen was done by the author of the Eryxias in ancient times. The fundamental doctrine of the Physiocrates that products of the earth are always ultimately exchanged against other products of the earth is also manifestly erroneous. The producer of a material product does not always require a material product in exchange; he may want instruction or education, or the services of a lawyer, or a physician, or mere enjoyment. Hence a material product is often exchanged against a mere service. When Goldsmith wandered about Europe, depending solely on his flute to procure him food and lodging, this was as real an exchange as that of a material product. Turgot was sensible of this, and he said that all exchanges are between products and services. Le Trosne was in error when he said that only material products are in commerce. Now these services are valued in money or products, just in the same way that any material products are, and therefore the Physiocrates should have seen that they are entitled to be classed as WEALTH. But these are not the only species of articles in commerce. Quesnay observed that money is supplemented by credit; he said that valuable paper supplies all the purposes of ready money; that they are received in exchange, and are made a commerce of just like money itself. Hence, although that stupendous system of Credit and Banking which has attained such gigantic proportions in modern times, did not prevail then, yet there was quite enough of Credit in existence to attract the notice of the Economists to the fact that it is a subject of commerce itself, and that there are not only one or two, but three species of articles in com merce. The fact was that having begun by directing their attention |