BUY AND SELL Coin Socks and other Securities on Commission only. Interest allowed on Gold and Currency Balances. THE MERCHANTS' MAGAZINE AND COMMERCIAL REVIEW. APRIL, 1867. POLITICAL ECONOMY-CAPITAL AND VALUE. BY RICHARD SULLY. The science itself has been Political economy seems hitherto to have been treated rather as an abstract science, than one that ought to be considered and studied, as the basis and guide of the statesman, in his most important function of secur ing the prosperity and happiness of the people. This negligence may be attributed no doubt, to a variety of causes. greatly incumbered by unnecessary details, which, in some instances, has led the author into serious contradictions, with respect to the principles which govern the science; while, in other cases, these principles have neither been sufficiently comprehended, nor defined with sufficient accuracy. The term capital, though designating so important an element of political economy, lacks a proper and correct definition. It does not appear to require a very extraordinary amount of wisdom or discernment, after a man has attained to sufficient gravity of mind to think for himself, that the first requisite for his commencement in business of any kind is capital; because, without it, he cannot proceed a single step. And yet the nature of capital, and its importance seems neither to have been clearly apprehended, nor pointed out, by any of the standard writers upon the subject in question. Dr. Adam Smith seems to have taken exactly opposite grounds to the French economists, though they were much nearer the truth than he sup. posed. He excluded land entirely from his category of capital, and gave to labor the greatest importance in the production of wealth or value. If the economists had assumed that the land and its products necessarily limited the supply of capital, instead of comprehending its amount, they would have been correct. M. Say admits the concurrence of natural agents in the production of value, but does not perceive that the available quantity of these natural agents must necessarily limit the supply of capital as well as, finally, the creation of value. In fact that the whole fabric of wealth, must be upheld and kept in existence by the products of these natural agents; and if the supply be cut off or limited at any given point, either by the exhaustion of the soil, or the successful competition of other consumers, a further increase of capital at that particular point, or even of value, becomes impossible. The error of the economists consisted in the assumption that the landowner still retained a monopoly of capital after the division of labor had commenced; the error of Adam Smith and the more modern political economists lies in the assumption that land is not capital. Previous to its appropriation, land would, of course, have no value, and might, under those circumstances, be considered like air or water, as practically unlimited. But after it had become the property of individuals, it would necessarily, by the division of labor and the increase of population, become valuable, and therefore ought to be considered capital. To say that land varies in productiveness with a given amount of labor, from the force of unequal fertility, is only to say that some land is more valuable than other land, and admits of the payment of what political economists call rent; but this can be no valid objection to its being ranked as capital, as it also varies in the amount of rent (net product) according to its proximity or distance from market. It also constantly increases in exchangeable value, by the accumulation of other capital, and the increasing necessity for its products, without a corresponding increase in its utility. It appears, therefore, to be a mere groundless assumption that the poorest soil in cultivation pays no rent beyond the interest of the capital invested in the fences and buildings necessary to its occupation. If there is ever so small an advantage in its cultivation, the powers of the soil will surely be remunerated to the owner. Land is, therefore, not only capital, but it has superior advantageous to any other kind of capital, and consequently ought to bear its fair share of taxation according to its value for the support of the government, but not to the extent of preventing cultivation. We should define capital, therefore, not exactly in the words of McCulloch. "as those portions of the produce of industry existing," etc., but as those portions of wealth "which may be directly employed, either to support human beings or to facilitate production." In the word wealth, therefore, we must include the fertility of the soil, as no amount of the accumulated products of labor could possibly produce a single grain of corn or other vegetable production without it. Having decided what we consider to be capital, we will, for a moment, return to the economists, merely to point out the rock upon which they split. If they (the economists) had closely observed the operations of society, they must have detected the fact that the division of labor had originated a new kind of capital, which we designate skill, and which would enable its possessor to accumulate the products of industry, which, in their turn, would become capital, and therefore yield a revenue. Laying the whole burden of taxation upon the land would not have prevented this aggregation of circulating capital, though it might have prevented the increase of agricultural capital as well as population, unless a free importation of agricultural products had at the same time been allowed, which would speedily have ruined the home producer. There is no doubt, however, that taxes ought to be as few and simple as possible. To prove the assumption that land is neither wealth nor capital, political economists generally have denied that it has any value, merely because it is one of the elements of nature, and has not been produced by the labor of man. Say considers utility to be the chief element of value. He says "to create objects which have any kind of utility is to create wealth; for the utility of things is the groundwork of their value, and their value constitutes wealth." Yet, like Smith and others, he excludes land both from wealth and capital, but is forced to acknowledge its agency in production. McCulloch also, notwithstanding he finds fault with Adam Smith for writing the following passage-"that no equal quantity of productive labor or capital employed in manufactures can ever occasion so great a reproduction as if employed in agriculture"-is himself forced to admit that nature powerfully assists the labor of man in agriculture;" but this he afterwards endeavors to neutralize by assuming that we are not less indebted to nature in every department of industry-referring to the use we make of the wind, the water, the pressure of the atmosphere, steam, etc.—and then asks if they are not all the spontaneous gifts of nature? Just as if these elements, or natural forces, could, like the land, be limited to the use, or become the property of individuals. Though the vegetable and the animal kingdoms, as well as the elements of nature, were gratuitous to man, and were really, while he was in a savage state, previous to the institution of property, his common possession, yet they never lacked utility, one of the elements of value, and only required to be limited in use, by becoming the property of individuals, to give them the other element, which may be appropriately termed, "difficulty of attainment." Most political economists who have assumed that labor is the measure of all values, have been considerably puzzled to make it fit under all circumstances. For instance, Dr. Smith says: "But though labor be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is often difficult to assertain the proportion between two different kinds of labor," etc. This is quite true with respect to the difficulty of measuring the value of different commodities, merely by the amount of labor represented, as this must be in many cases extremely uncertain, and, in some, have little bearing upon the matter. The real difficulty appears to be, that neither the term nor the principle of labor on the one hand, nor the principle of utility on the other, are sufficiently comprehensive to express concisely the compoundprinciple of value. This will be much better done by substituting the terms desirability and difficulty of attainment. These terms seem sufficiently comprehensive to include the whole of the phenomena which tend to make up this difficult problem. They include all the circumstances of supply and demand, the operations of scarcity and gluts, the lucky inci |