Permanence of Wealth
- Value from production vs. obligation
- Material vs. spiritual
- Spiritual survives longer
- Shakespeare's boast
- Caesar's buildings & Horace's odes
- Values now
- Titles outlast gold
- Social advance destroys material value
Epigraphs to Book II
Definitions are the basis of systematic reasoning.
The mixture of those things by speech which are by nature divided is the mother of all error.
Bacon made us sensible of the emptiness of the Aristotelian philosophy; Smith, in like manner, caused us to perceive the fallaciousness of all the previous systems of political economy; but the latter no more raised the superstructure of this science, than the former created logic.... We are, however, not yet in possession of an established text-book on the science of political economy, in which the fruits of an enlarged and accurate observation are referred to general principles that can be admitted by every reflecting mind; a work in which these results are so complete and well arranged as to afford to each other mutual support, and that many everywhere and at all times be studied with advantage.
-- J.B. Say, 1803
We may cite as examples of such inchoate but yet incomplete discoveries the great Wealth of Nations by Adam Smith -- a work which still stands out, and will ever stand out, as that of a pioneer, and the only book on political economy which displays its genius to every kind of intelligent reader. But among the specialists and the schools, this work of genius which swayed all Europe in its day, is laid upon the shelf as an antiquated affair, superseded by the smaller and duller men who have pulled his system to pieces and are offering us the fragments as a science most of whose first principles are still under dispute.
-- Professor (Greek) J.P. Mahaffy, "The Present Position of Egyptology," "Nineteenth Century," August, 1894.
The Science of Political Economy
Book II, The Nature of Wealth
Of The Permanence of Wealth
Showing That Values From Obligation Seem Really to Last Longer Than Values From Production
In making the distinction between values from production that really constitute wealth in political economy, and values from obligation, which are not really wealth at all, and may at best be classified as "relative wealth" in contradistinction to "real wealth," there is an important and to our usual ways of thinking an unexpected difference to be mentioned between them with relation to permanence and to the effect of the progress of society upon their value.
Value from production, or real wealth, consists of material things. These things are taken as it were by labor from the reservoirs of nature, and by virtue of their materiality tend back to those reservoirs again from the moment they are taken, just as water, taken from the ocean, tends back to the ocean. The great body of wealth is, indeed, produced for a purposed consumption that involves immediate destruction. And since I think we may properly speak in a different sense of the consumption of a book by reading it, or of a picture or statue by looking at it, even the parts not subject to purposed and almost immediate destruction, are subject to destruction by the action of the elements, by mechanical and chemical disintegration, and finally by being lost. Indeed, the far greater part of material things if not absolutely all of them, after they have been brought into existence, require the constant exertion of labor to keep them in existence and prevent their relapsing into nature's reservoirs again.
But things having a value which does not come from the exertion of labor and which represents only the power given by human law, agreement or custom of appropriating the proceeds of exertion, have their real existence in the human mind or will, the spiritual element of man. The papers which we use in transferring them, or proclaiming them, or evidencing them, are not the things themselves, but mere aids to memory. The essence of a debt is not the due -- bill or promissory note, but a moral obligation or mental agreement; the essence of a franchise is not the written charter or engrossed act of legislature, but the will of the sovereign, theoretically supposed to be the will of all; the ownership of land is not in the title -- deeds, but in the same sovereign will or supposed general agreement.
As the spiritual part of man -- mind, will and memory -- continues the same while the matter of which his body is composed is continually passing, so a mental impression, recorded by tradition, belief or custom in what may be styled the social mentality, may endure while physical changes wrought by man are lost. It is probable that the oldest records of man's presence on the earth are to be found in words yet current, and that nursery rhymes and children's games antedate the most massive monuments. It was no idle boast of Shakespeare that his verse would outlast marble and brass. The stately buildings raised by the powerful prime minister of Augustus Caesar have failed to perpetuate his memory; but far further than his world extended, the name of Maecenas yet lives for us in the odes of Horace.
Now, in the same way, the values which cannot be included in the category of wealth are as a class much more enduring than the values which are properly so included. We of the modern civilization generally limit the time during which debts, promissory notes, and similar obligations of the individual can be legally enforced. But there are devices by which a value which is in reality but an obligation to render future labor may be continued for longer periods; while many values of similar nature we treat as perpetual, as is the case with public debts, with some franchises, and with exclusive rights to land. These may retain their value unimpaired, while the value of the great body of articles of wealth lessens and disappears.
How little of the wealth in existence in England two hundred years ago exists now! And the infinitesimal part that still exists has been maintained in existence only by constant care and toil. But stock in the public debt of England incurred then still retains value. So do perpetual pensions granted to their favorites and lemans by English kings long dust. So do advowsons, rights of fishery and market, and other special privileges. While such franchises as that of the New River Company, and the right to the exclusive use of land in many places have enormously increased in value. These things have cost no care or trouble to maintain. On the contrary, they have been sources of continual revenue to their owners -- have enabled their owners to call continually upon generation after generation of Englishmen to undergo toil and trouble for their benefit. Yet their value, that is to say their power of continuing to do this, remains still, not merely unimpaired, but in many cases enormously increased.
Of all articles of value from production those which longest retain the quality of value are precious metals and gems. In the coin and jewelry passing from hand to hand in the exchanges of modern civilization there are doubtless some particles of metal and some precious stones that had value at the very dawn of history and have retained it ever since. But these are rare and indistinguishable exceptions. So far as we can see with any certainty, the quality of value has longer and more constantly attached to the ownership of land, which is not an article of wealth, than to any other valuable thing. The little piece of land in the Sabine hills, which Maecenas gave to Horace, had doubtless been bought and sold and exchanged for centuries before that, and has, I doubt not, a value to this day. And so, certainly, with some of the building sites of Rome. Through all the mutations in the fortunes of the Imperial City, some of them have doubtless continually held a value, sometimes lower and sometimes higher. It is this permanence of value which has led the lawyers to distinguish property in land, though it is not wealth at all, as real estate or real property. Its value remains so long as population continues around it and custom or municipal law guarantees the special privilege of appropriating the profits of its use.
And between articles of wealth and things of the nature of special privileges, like franchises and property in land, which though having value are not wealth, there is still another very important distinction to be noted. The general tendency of the value attached to the one is to decrease and disappear with social advance. The general tendency of the value attaching to the other is to increase.
For social advance, involving, as it does, increase of population, extensions of exchange and improvement of the arts, tends constantly, by lessening the cost of production, steadily to reduce the value of the great body of articles of wealth already in existence, and having value from production. In some cases indeed the effect of social advance is suddenly and utterly to destroy these values. The value of almost all the products of labor has been of late years steadily and largely reduced in this way, while the value of much costly machinery has been and still is being destroyed by discoveries, inventions and improvements, which render their use in production antiquated. But the growth of population and the augmentations of the productive power of labor increase enormously the value of such special privileges as franchises and landownership in the highways and centers of social life.
It will be seen from our analysis, as indeed from observation, that the amount of wealth at any time existing is very much less than is usually assumed. The vast majority of mankind live not on stored wealth, but on their exertion. The vast majority of mankind, even in richest civilized countries, leave the world as destitute of wealth as they entered it.
It is the constant expenditure of labor that alone keeps up the supply of wealth. If labor were to cease, wealth would disappear.
And while this fact, that value from mere obligation has a permanence which does not belong to value from production, may have a bearing upon speculations too deep to be entered on here, and suggests perhaps truth on the part of those who say that the material universe may be a mere reflex and correspondence of the moral and mental universe, and that we may find reality not in what we call life, but in what we call death, and while it may make comprehensible the resurrection from the dead which to many has been most perplexing, it has immediate bearing on many things to which any consideration of the true nature and bearings of wealth comes close if it does not closely touch.