Institutes of economics; a succinct text-book of political economy for the use of classes in colleges, high schools and academies

Front matter

Class ^7 ■r . J/y ^

Book

Goi

Preface

Two main motives have prompted the composition of this book, one concerning method, the other, doctrine. The most excellent manuals of Political Economy now in use seem to the author to involve two serious faults of method. One is that they nearly everywhere say too much, totally ignoring the instructor, and on most points leaving the pupil himself little thinking to do even when they stop short of positively confusing his mind in its efforts to construe the thought in its own way. The other is that they do ^ot mark for the eye, in differences of type, any distinction between substantive and subsidiary material, their pages exhibiting principle and illustration, statement and amplification, clothed in equal dignity of form. It is believed both on psychological grounds and from much experience, that the best printed presentation of a subject for class-room purposes is the briefest which clearness will allow, leaving indispensable amplifications and illustrations to notes, and all fuller exposition to the teacher's wit or the student's search. This is the aim of the following pages. That the pupil, so soon as master of the essential idea, may be able to at once enlarge and tighten his grasp upon it through reading, most of the paragraphs are introduced by references to the best accessible authorities, more recondite works being at the same time named for the behoof of teachers. On collateral subjects of special importance the ablest convenient discussions are listed in notes. The analysis and arrangement of topics are in many particulars new, and it is hoped that some of the changes introduced will prove welcome. As the result of careful reflection, a prominence which may at first seem grotesque has been given to the paragraph-captions. Students will find this not merely a mnemonic convenience for the purposes of review and examination, but a most efficient objective help in grasp-

Vi PREFACE

ing the science. Touching the doctrine of this new class-book there is less to say. As Economics is now in transition many deprecate all elTort at present to summarize it afresh. This logic, strictly taken, presupposes the advent, sooner or later, of a fixedness in the science which we fervently hope will never arise, since it could not but imply stagnation in economic thought. Meantime our best texts, with all that is true, profound, and well said in them, blend not a few propositions that what may be called the general judgment of progressive economists pronounces inadequate, misleading, or erroneous. Such are especially numerous in regard to the nature of Wealth, the scope of Economics, and in the weighty rubrics of Value, Money, Interest, Wages, and Profits. Nearly all our treatises, besides, betray from beginning to end a deceptive air, a wry ensemble, springing from writers' too sharp sundering of Economics from general Sociology. Whether the volume now offered to the public contains in these respects aught of true amendment, those who read and use it must judge. They will at any rate find in it, not always adopted but at least sympathetically mentioned so far as these are sufficiently non-technical to be named in a work of this character, the latest views which can with any propriety pretend to be settled. The book has been written during the odd moments of a very busy year, and it will be a wonder if the critic's keen glance shall not unearth in it some inconsistencies and errors of detail. The author will be happy to be notified of any such. He is indebted to several gentlemen for their kind pains in looking over the proof sheets as they have appeared. In this, Professor J. W. Moncrief, Ph.D., of Franklin College, has rendered a pecuHarly grateful service.

E. BENJ. ANDREWS.

Introduction

I Economics Defined (i)* — § 2 General and Private Wealth (4) — § 3 Economic Evolution (5) — § 4 Economics a Science (7) — § 5 Modern (8) — § 6 Its Origin (9) — § 7 The Mercantile System (10)

— §8 Progress (12) — § 9 Physiocracy (14) — § 10 Adam Smith (15)

— §11 The Smithian School (17) — § 12 The Historical or Aposteriori Tendency (19) — §13 Professiorial Socialism (20) — §14 The Socialists Proper (23) — § 15 Our Viev/ (25) — § i6 Value of the Study (28) — § 1 7 The Division of Economics (30)

Part I Production

Except as Involving Exchange

§ 18 Various Views of Productivity (31) — § 19 Wealth-Increment which is not Production (33) — § 20 Production (34) — § 21 Special Remarks on Production (36) — § 22 The Conditions of Production (38)

CHAPTER II THE ABSOLUTE CONDITIONS OF PRODUCTION Nature — Labor

§ 23 The Materials of Nature (40) — § 24 The Forces of Nature (42) — § 25 Labor : its Necessity (43) — § 26 Its Forms (44) — § 27 Its Relation to Nature (45)

* Figures in brackets refer to pages viii TABLE OF CONTENTS

CHAPTER III THE RELATIVELY ABSOLUTE CONDITIONS OF PRODUCTION Capital — Social Organization

§ 28 Capital Defined (47) — § 29 Kinds of Capital (48) — § 30 The Place of Capital in Production (50) — § 31 Society (52) — § 32 The State i^z)

Chapter IV The Relative Conditions Of Production

§ 2)2) General View (55) — § 34 Diminishing Return and Increasing Return (56)—$ 35 The Labor-Force: Extent (57)— § 36 The Labor-Force : Quality (59) — § 37 Socialism and Production (62)

THE RELATIVE CONDITIONS, CONTINUED

§ 38 Extraneous Aids to Labor (64) — § 39 Geography and Topography (64) — § 40 Material Capital in General (66) — § 41 Machinery (67) — § 42 Unembodied Invention (68) — § 43 The Organization of Industry (69) — § 44 The Same in a Special Aspect (71) — § 45 Evils and Limitations (72) — § 46 The Form of Undertaking (73)

Chapter VI

§ 47 Metaphysical Cost (76) — § 48 Mercantile Cost (78) — § 49 Consumption (79) — § 50 Waste and Thrift (80)

Part II Exchange

Except as Involving the Science of Money

§ 51 In Rude Societies (83)— § 52 Philosophy (85)— § 53 Intrinsic Advantages (86) — § 54 Reach of Influence (87) — § 55 The Perfection of Exchange (90)

TABLE OF CONTENTS IX

CHAPTER II INTERNATIONAL EXCHANGE

§ 56 Initial View (92) — §57 Common Ground (94) — §58 The Theory of Nutrient Restriction (96) — § 59 Continuation (98) — § 60 Important Specific Points (99)

CHAPTER III VALUE: GENERAL

§ 61 Value and Value (102) — § 62 Value in Use (103) — § 63 Value in Exchange (105) — § 64 Price (107) — § 65 Normal Value in Exchange (107)

CHAPTER IV VALUE: PECULIAR PROBLEMS § 66 Competition and Value (no) — § 67 Monopoly Value (112) — § 68 Values between Non-Competing Groups (113) — § 69 Complex Cases of Value (114) — § 70 A Measure of Exchange-Value (115) — § 71 The Value of Futures (117)

Chapter III The Theory Of Money

§ 82 The First Function of Money (134) — §83 The Second Function (135) — § 84 Other Offices of Money (136)— § 85 The Value of Money (137) — §86 Paper Money (139) — § 87 Ideal Money (141)

X TABLE OF CONTENTS

§ 88 The Nature of Credit (143) — § 89 Credit and Crises (144) — § 90 Further Abuses of Credit (145) — § 91 Free Banking (146) — § 92 The John Law Theory (147) — § 93 Fiat Money (148)

§ 94 Settlements by Check (151) — § 95 International Payments (153) — §96 Special Modifiers of the Rate of Exchange (156)

Part IV Distribution

§97 General Statement (158) — § 98 Categories and Shares (159) — § 99 Blending (161) — § 100 The Law of Equal Returns to Last Increments (162) — § loi The Other General Laws of Distribution (162) — § 102 The Fifth Category (164)

RENT

§ 103 Rent in General (165) — § 104 Ground Rent (166) — § 105 Rent and Price (167) — § 106 Pecuhar and Nominal Rents (168) — § 107 Controversy (169)

§ 108 The Nature of Interest (171) _§ 109 Loan Interest (172) — § no The Rate on Loans (173) — § in Inflation and Interest (175) — § 1X2 Usury Laws (176)

TABLE OF CONTENTS XI

\VAGES

§ 113 Definition (178)— § 114 Cause and Source (179) — § "5 Developed Wages (180)— § 116 The General Rate of Gross Wages (181) — §117 The Residual Claimant Theory (182)— § 1 18 The Truth (183) — § 119 Concluding Points (184)

§ 120 Terminology (186) — § 121 Undertakers' Profits (187) — § 122 Undertaker-Talents (188) — § 123 Profits, Prices, Wages (189)

Part V Consumption

NEED

§ 124 To Resume (190) — § 125 Elasticity of Need (191) — § 126 Fashion and Progress (192) — § 127 Legitimacy of Need (193)

CHAPTER H ECONOMY IN SUPPLY

§ 128 Generic Principles (195) — § 129 Specific Principles (195) — § 130 Prevention of Loss (196) — § 131 Luxury and Idle Wealth (197)

Part VI Practical Topics Involving Economic Theory

§ 132 Colonial Times (200) — § 133 Earliest National Coinage (201) — § 134 The Dollar of the Fathers (203) — §135 Remonetization (204) — §136 The Future (206)

Xll TABLE OF CONTENTS

PAPER CURRENCY IN THE UNITED STATES

§ 137 Early (208) —§ 138 Thence to the Civil War (208) — § 139 Government Paper (209) — § 140 Government Banking (210) — § 141 The National Bank System (212)

OUR PAPER CURRENCY IN FUTURE

§ 142 Present System (213) — § 143 Difficulties (214) — § 144 Proposed Change of Basis (215) — § 145 Probable Outcome (216)

§ 146 General Principles (218) — § 147 Direct and Indirect Taxes (219) — § 148 Norms of Direct Taxation (220) — § 149 Taxation of Income (221) — §150 Emergency Taxation (222)

§151 The First Class of Remedies (223) — § 152 The Second Class (224) — § 153 Ultimate Help (225)

INSTITUTES OF ECONOMICS o>9ic

INTRODUCTION

§ I Economics Defined

Cossa, Guide, ch. i. MiH, Essays, 1829, on Method in Pol. Ec. Stdgwick, on do., Fortnightly, 1879. Roscher, Grundlagen, Einl., ch. i. Cohn, Grundlegung, Einl., chaps, i, ii, iv. Gamier, Traite d'ecoti. po!.,()i2-$.

Economics^ is that branch of learning conversant about general wealth, wealth being the collective name for all those categories ^ of things, powers,^ relations, and influences, which both result from conscious human effort and directly* contribute to human welfare in its temporal aspect. Single pieces or elements of wealth may be called * goods'^ or * values.*^ Notice in this definition (i) that not all wealth is of a material ^ nature, and (ii) that the mark * exchange,' though helpful in forming the conception of Economics, is accidental rather than fundamental thereto, since a study substantially the same might exist if men did not exchange. Economics, in discussing wealth, has of course also to canvass the conditions^ of wealth.

1 Originally and by etymology, "house-management," yet not indoor merely or mainly. oIkos meant " estate," " property." Macleod, Elements, vol. i, 132. Bacon still used eco7ioniia in its classical sense. The title " Political Economy " \_i,co7tomie politique^ first by Montchretien de Watteville, in 161 5. It is still in excellent use, but "Economics" is clearer as well as briefer. Roscher, § 16, following Uhde, who introduced the word in 1849, prefers Oekono??iik to name economic science, using Oekonomie to mean economic life. Few if any have followed this distinction, and Cohn, p. 5, explicitly repudiates it, sticking to Oekonomie as appellation for the science. Cf. § 3, below.

2 Isolated articles may be wealth, though costing no labor, as an aerolite of gold falling at your door, or a pasture-weed discovered to be a specific. But the classes of goods in which these examples belong are gotten only by labor.

3 So far as they fall under the definition, i.e., spring from man's effort and make for his welfare, powers, intellectual or physical, relations, as the good name or the custom of a business house, and influences, such as a great advocate's reputation gives, are no less truly wealth than houses, garments, or bread. If the definition of wealth as always material is simpler, which is certainly the case in expounding Distribution, it is less deep and truthful. Why, e.g., term medicine wealth, yet deny the name to the skill able to cure without medicine? In crucial analysis, material wealth itself becomes wealth only in and through its immaterial relationships. Wheat is not wealth merely because so and so constituted physically, but because it is here instead of beyond reach, adapted to our constitution, and not repugnant to our taste. Now these relations are not material entities at all. Millions of goods that have length, breadth, and thickness, would be turned to refuse by trifling supposable changes in the psychical side of our sensibility. This is a most important consideration; though it is of cour-se quite possible to frame a system of workable economic definitions on the material basis. So doing, we should style these powers etc. [immaterial wealth], conditions of wealth [note 8] . Bohm-Bawerk, Rechte und Verhaltnisse.

* There are high elements of character, perhaps also physical products, like unsalable keepsakes and family heirlooms, which are the creatures of effort and have a certain bearing upon our well-being, yet in so remote a way that it is unnatural to reckon them as wealth.

^ Most German writers approach the definition of Economics from the notions of " needs " and " need-satisfiers " or " goods." Cutting off non-temporal goods on the one hand and gratuitous ones on the other, they fence out the same economic field which our definition covers. Thus, —

INTRODUCTION

CO

E non-temporal

NEED-SA

S temporal

lis FloERS OR GOODS gratuitous

^ In the sense of " labor-requiring utilities," but not in any meaning which would involve the idea of exchange. Cf. note 7. For the force here assigned to "value," see the Chapter on this topic in Part II. Cf. Roscher, § 5 and notes.

^ Contrary to the " catallactics-theory " of Economics, held by Condillac, Bastiat [Harmonies, ch. iv], Whately, Macleod, and Perry [Elements, ch. iii], which builds the study entirely about the conception of exchange as centre, reducing it to an investigation of exchange-value. This procedure at first attracts by the simplicity it seems to impart, but is gravely unscientific. Exchange is not the substance of man's economic life, but an incident, though an important one. We can easily conceive a very complete set of economic phenomena, calling for investigation and offering full basis for a science of Economics, exchange being totally absent. Suppose a number of Robinson Crusoes [cf. Roscher, p. 5], some well off, some ill off. There would be reasons for the difference, inviting study. Pioneers in new lands exchange little, yet vary greatly in weal. So the Indians before the whites cam6, and so, still better, the ancient Peruvians. This is the chief objection to the theory named, but far from the only one. Mill, Principles, bk. iii, ch. i, § I. Q{. post, § 3, n. 9.

^ " Object-phenomena of Economics," that is, is a broader conception than " wealth," including things, circumstances, etc., helpful to wealth, and things, circumstances, etc., unfavorable to the same. Original fertility of the soil, with mines, water-powers, and the other "natural" wealth of any country, would illustrate what is meant by conditions of wealth. So would the native endowments of the people which aid thrift and accumulation, and also any acquired powers having the same tendency, if built up without conscious aim. The state is a prime condition of wealth. At this point again, however, imperfect definition need not prevent clear insight.

INTRODUCTION

§ 2 General and Private Wealth

Siorck, Zur Kritik d. Begr. von NationalreicJithum [1827]. Marshall, Economics of Industry, § 7. Hawley, Quar. Jour. Econ., vol. ii, 365 sqq. Inaina-Sternegg, Vom NaiioHal-Reichikut7t, Dejitsche R^indschau, June, 1883. Neumann-Spallart, Weltivirtschaft, Jahrg. 1883-4, pp. 8 sqq. Schmoller, Forschungen, VII.

General, national, or cosmic wealth is not merely the summed possessions^ of individuals and mercantile corporations. Immaterial ^ wealth and public property must be reckoned in, and either titles or the things to which they entitle omitted.^ Valid titles held by persons in one land to values in another are, however, part of the first land's wealth ; but all such rights have to be excluded from an inventory of the world's wealth. In estimating general wealth the test of exchange^ value has but very limited application.

1 " The wealth of the country being the aggregated wealth of its citizens," Gannett, in Int'l Rev., vol. xii. Mulhall computes the world's wealth at about 255 billion dollars: lands and forests 84^ billion, cattle lOg- billion, railways 20, houses 61, furniture 30J, merchandise b\, bullion nearly 5, shipping 15^, other forms of material goods nearly 20. He departs from Gannett's loose maxim so far as to reckon in public works, — at 15 J billion. As to the rest he probably estimates by exchange value [see n. 4]. Computing as he does, and omitting public works, we may place the whole wealth of the United States in 1888 at 51 billion, the yearly earnings at from 10 to 12, the yearly savings at 900 million, and the daily [week-day] savings at 3 million. Such approaches to fact are valuable for comparison of nation with nation and section with section, still are approaches only. The same is true of the following wealth-statistics from the United States Census Reports.

The Nation's

Percentage of

Percentage of

Average No.

Census of

Population

Wealth: Millions

Increase in

Increase in of Dollars of Dollars

Population

Total V/ealth per capita

1,072.

35.02

202.13

7,239,814

1,500.

36.43

207.20

9,638,191

1,882.

33-13

24.4

2,653-

33-4°

17,069,453

3.764-

32.67

41.7

23,191,876

7,135-8

35-87

89.6

307.67

31,500,000

16,159.

35-59

126.4

38,558,000

30,069.

86.1

50,155,783

43,642.

2 The immaterial variety is never referred to in listing wealth. The chief reason for the omission is the indefiniteness of the thought and the difficulty of appraising immaterial riches in dollars and cents. But assuredly it ought not to be ignored. Dollars cannot measure the superiority of health to sickness or of satiety to hunger, yet these differences are as thinkable and important as they are familiar.

3 If a mortgaged farm is put down for its whole worth and the mortgage too, evidently all the property covered by the mortgage is twice told. So of a railway and its stock or bonds. In case of a great corporation, if we are summing up the nation's wealth, a careful inventory would be a much safer index than the market value of the stock. A given patent or copyright is no increment to the national wealth, though a good system of such rights might be. Certain credit-instruments are wealth [§ 84, n. 3, § 86, n. 3].

* Even Knies, Geld, 23, takes money-exchange power as practically his criterion of wealth. But there is a vast deal of every land's wealth whose proportion to the whole is not so much as indicated by its power, if it has any, in exchange. How little would roads and streets sell for in comparison with the contribution they make to the community's welfare? Good sewers are worth all they cost and usually much more, but could not be sold at all.

§ 3 Economic Evolution

Schaeffle, Bau u. Leben d. socialen Korpers, vol. iii, 402, sqq. Schoenherg, Handbuck d. Pol. Oek., vol. i, ch. i. Cohn, 91-93. Hyndman &= Morris, Summary of Socialism.

In man's economic life ^ hitherto and now the following more or less clearly defined stages or gradations ^ are discernible : (i) the hunting,^ (ii) the pastoral,* (iii) the agricultural, (iv) the manufacturing and commercial, and (v) that of credit, free contract, and giant industries. In (i), man is totally dependent on nature, hardworked and poor. Industry has no diversity, war is incessant and population scant and homogeneous. Community of property^ prevails, and there is neither exchange nor money. The succeeding stages witness progressive improvement in all these particulars. In this, to a good degree, civilization consists. Slavery^ and other forms of • social cleavage begin with ii, also exchange and the genuine unrest of life and growth. In iii, industry becomes greatly diversified/ and man, no longer her slave, largely determines what nature shall produce. He settles in communities. I^aw and the state develop, military system and new social formations rise. Of iv, city life, the division of labor, exchang-e, and metallic^ money are the chief marks. Slavery now goes down and a separate wag-es-class emerges. Law and the state assume higher and more complex forms, and leisure makes possible the amassing of intellectual wealth. Stage v is that at which America and West Europe now are.^

^"Life" as opposed to "doctrine" \_Wirtschaft : Wirtschaftslehre\, Of course men have always had an economic experience of some sort, but the study of this is a recent matter. Cf. § 5. Sound economic doctrine must be based upon large knowledge of economic life.

^ " Gradations " as well as " stages," because certain peoples, the Esquimaux, Bushmen, and Hottentots, e.g., do not seem to improve at all.

3 Fishing tribes are on substantially the same plane with hunters, both these being " occupatory " industries '\_occupare in Roman law = to take possession of], but fishers are usually the better off, have the denser populations, sometimes own slaves, and are apt, instead of becoming shepherds and farmers, to grow first into pirates, then into ocean-carriers.

* Pastoral peoples are always nomadic as well, driving their herds from place to place to find the best pastures [Genesis, ch. xiii] .

^ Except perhaps in personal clothing and each man's kit of utensils for taking and skinntag animals, etc., and for war.

^ Hunters could utilize slaves only by giving them arms, which would render them dangerous; but shepherds may employ them for herdsmen.

' That is, though agriculture forms the staple calling, the lower kinds of industry still continue. Besides, many ancillary trades are now demanded, as those of smiths and wood-workers.

^ Metal money has been found among pastoral nations, gotten probably in the way of exchange with those more advanced. Cattle [so pecunia, from pecus, " Cattle " and " capital " are originally the same word, from capui through capiialis, <?] are their common medium of exchange. Slaves, too, are so used. In stage i barter prevails. For the difference between barter and money, see in Part III. Ancient society at this general level (iv) differed from modern. It did not reject slavery, and its cities sprung from commercial not from manufacturing necessities. Greece and Rome had no factories, whence to form cities like Lowell or Paterson. There were at Athens, indeed, immense workshops, where thousands of slaves wrought, but apparently they did not exist to secure division of labor. Blanqui, vol. i, 31.

^ The stage on whose phenomena all the current English works in Economics are based, — Adam Smith, Ricardo, Mill, Senior, and the numerous manuals which have been published this side the Atlantic. Only quite recently have economists seen the need of a broader historical outlook. Cf. §§ II, 12. For a graphic comparison between xivth and xixth century society, see H. C. Adams, Outline of Lectt. upon P. E., 67 sq,

§ 4 Economics a Science

Marshall, Ec. of Ind., § 2. Mill, Logic, bk. vi, ch. iii, cf. ch. vi. Schurman, Eth. Import of Darwinism, ch. i. Wagner, in Quar. Jour. Econ., vol. i, 117 sqq. Cohn, Eitil., ch. ii. Roscher, Einl., ch. ii. Cossa, pt. i., ch. iv, pt. ii, ch. i. Newcotnb, Princt. Rev., Nov. 1884. Cairnes, Logical Method, i, ii.

As Economics canvasses phenomena in classes, and ascertains and expounds their underlying laws, it may, however inexact and as yet incomplete, justly be regarded a science.^ In this character it is partly deductive, partly inductive, the first as applying certain already admitted laws of human nature and of physics, the second, inasmuch as by the aid of observation, experience, statistics, and history, it sets forth the concrete working of these laws and finds out others.

1 See Mill, as above, ch. vi, also chaps, ii, x, xi. It has been objected that Economics cannot be a science because man's will is free. But freedom and action under law are not incompatible. The notion that there is no science but exact science is as vicious as it is common {_der iiber den Strang der " Exactheif" schlagetider Naturforscher, Schaeffle, Letters, 15]. A science may be called exact when the causes and laws with which it deals are not only knowable but known. Pure mathematics approaches this character nearest. A potentially exact science, whose causes and laws are in their nature knowable but not yet studied out, as meteorology and tidology at present, might be styled " incomplete." " Inexact " are those sciences where occult causes, whose working the human mind with its present powers is unable to trace, more or less perturb the action of the knowable and known causes. All the social sciences, including Economics, are of the last order, as, in a degree, are all those which have to do with life. Study § 15 [and notes] along with this one.

§ 5 Modern

Ingram, Hist, of Pol. Ec, chaps, i, ii. Perry, Elements, ch. i.

The science is of recent origin. In ancient, and even in mediaeval times, while many true notions regarding it were advanced, as by Plato, Aristotle, Xenophon and the Roman lawyers, ^ its facts were too little observed and reduced to order to constitute a science. The real springs of public prosperity were either unperceived or not investigated.^ Slavery was universal, the accumulation of wealth decried.^ Industry and the mechanic arts were despised, wars continual, and, as to property, far more destructive than now, subjugated lands laid waste, and no means recognized of enriching one country but plundering others,

^ Thus Plato has these worthful aper^us : . gold and silver not valuable in se; too much gold possible; the advantage of the division of labor [the last, shared by all the ancients above named]. Aristotle distinguishes utility from value and natural wealth from artificial. Xenophon descries the true nature of wealth, of money, and of prices, Demosthenes that of capital [acpopfx't), epaj'os]. D. extends the notion to cover incorporeal capital. Ulpian neatly defines property [not wealth] as what can be bought and sold: Ea enim res est quae emi et venire potest. But all these writers, to mention no more of their false ideas, believe in slavery and over-value money. Is Horace consciously arguing against the bullion theory [§ 7, n. 3] at Sat. I, i, 40-45, "Unless you reduce your gold-pile it has no beauty"? On the Roman authors of economic ideas, Ingram, 18 sqq.

2 The only wealthy nations of antiquity which bred minds capable of pursuing such a study were Athens and Rome, precisely the ones whose entire economic development was artificial. They became rich by exploiting, one the Confederacy of Delos, the other the world.

§ 6 Its Origin

Blanqui, chaps, xiv-xxx. Ingram, ch. iv. Laughh'n, ed. of Mill, Int. Sketch.

The necessary new thought was turned to economic facts mainly through : i Commercial activity during and after the Crusades,^ and especially after the period of discovery began, ii Rise of prices incident to the increased bulk 2 of the precious metals consequent upon opening the American mines, iii Frequent debasement of monies by monarchs.^ iv New need of revenues and the changed mode of raising these, attending the transition from feudalism to modern states.* V Questions of trade arising in the application of the European colonial system.^ vi Enlarged acquaintance with the economic conceptions of the Roman law.^ vii The development and organization of credit.

lO INTRODUCTION

1 The greatness of the famous merchant cities, Venice, Genoa, Pisa, and Amalfi, now began. Commerce and business were henceforth reputable, and men engaged in them could be raised to the nobility. The Hanseatic League dates from about 1260, ten years before the last crusade. On this see Blanqui, ch. xvi.

^ The general law is, the more money in circulation the less the purchasing power of each piece, and the higher the range of prices. See the discussions of Part III.

^ Their regular resort for centuries so often as impecunious. The usual mode was, while leaving the face of the coins unchanged, to abstract part of the true metal, putting baser in its place. Not seldom they would force the money so debased into circulation at its face value, and accept it only at its real value. So did Emperor Ferdinand II in Bohemia, 1620.

* This change involved paid armies, costly ministries and embassies and the expensive pomp and circumstance of great courts. Systematic taxation and fiscal machinery had to be resorted to, enforcing economic study.

^ See Blanqui's excellent chapter [xxiii] on this. Every nation which had colonies regarded and used them simply as means for enriching the mother state. There were three different plans for accomplishing this : i Spain and Portugal kept colonial trade in the hands of the government, ii Holland, Sweden, Denmark, and France till 1 720, placed it exclusively in the power of a gigantic stock company, iii England [Lecky, Eur. in xviiith Cent., vol. ii, 8 sqq.], also France after 1720, effected a national monopoly by navigation laws practically to exclude foreign vessels from visiting their colonies. Here again was necessity for study.

^ Roman law was at no moment in the middle age disused or unknown, but the discovery, at the sack of Amalfi, 1135, of the Florentine copy of the Pandects immensely stimulated the study.

§ 7 The Mercantile System

Ingram, ch. iv. Ad. Smith, Wealth of Na., bk. iv, ch. i. Roscher, Gesch. d. Nat. Oek. in Deutschland, 228 sqq. Perry, Elements, ch. xiv. Blanqui, chaps, xxvixxix. Schoenberg, vol. i, 63 sqq. Cossa, Guide, 119 sqq. Cohn, 94-100.