The elements of political economy, with some applications to questions of the day

Front matter

JRICA'.

UNITED STATES OF AMEl m.

APPLETONS' SCIENCE TEXT- BOOKS

Preface

IX

Teachers may use the book for a long or a short course. When there is time for no more than, perhaps, twenty-jfive lessons. Part 1 will be sufficient, as it completes the study of the principles. If a greater number of lessons is desired, selections may be made from the practical portions of Part IT. A still more extensive course is possible. The outline here presented may be completed by collateral reading from some of the books mentioned in the reference list.

The questions and problems at the end of each chapter in Part I are intended to stimulate the pupil to think out applications of principles. These questions are not provided in Part II, because its chapters are in themselves applications of principles.

Cambridge, Mass., August, 1887.

Wealth 3

I. What society does for its members. 2. With what political economy is concerned. 3. Material wealth. 4. Immaterial wealth. 5. Property in wealth. 6. Money only a part of wealth. 7. Exercises.

Book I. Production

CHAPTER n.

The Nature and Requisites of Production . . . 10 8. Our wants are various and unlimited. 9. Production is reciprocal : meaning of a market. 10. The requisites of production. 11. Land. 12. Labor. 13. Capital. 14. Exercises.

CHAPTER in.

Diminishing Returns from Natural Agents . . .17 15. Natural agents include more than land. 16. Wealth increases only through the requisites of production. 17. Land xii CONTENTS.

PAGE

limited in quantity. i8. Land varies in quality. 19. Law of diminishing returns. 20. Objection to the law. 21. The law as applied to mines. 22. Improvements counteract the law. 23. Exercises,

CHAPTER IV.

24. More produced when men utilize nature's forces. 25. Who compose the laboring-classes. 26. Physical qualities. 27. Mental qualities. 28. Moral qualities. 29. Law of Malthus. 30, Checks on population. 31. Increase of worst classes unfortunate. 32, Standard of living. 33. Distinction between productive and unproductive labor. 34. Exercises.

CHAPTER V.

35. Distinction between wealth and capital. 36. Capital necessary to labor. 37. Capital the result of saving. 38. Capital constantly consumed. 39. Ca:pital employs labor. 40. Fixed and circulating capital. 41. Growth of capital depends on the amount which can be saved. 42. And on the disposition to save. 43. Exercises.

CHAPTER VI.

44, Causes affecting the amount of wealth produced. 45. The ownership of land. 46. Division of labor gives dexterity. 47. Enables a classification according to capacity. 48. Separation of employments according to natural advantages. 49. Division of labor greatest in producing articles of general use. 50. Large production. 51. Managing ability. 52. Exercises.

Book II. Exchange

CHAPTER Vn.

53. The object of Book II. 54. Value is purchasing power. 55. Value is a ratio. 56. Why an article has value. 57. To have value, an article must be transferable. 58. A sacrifice

CONTENTS. xiii

PAGE

must be necessary to get it. 59. It must satisfy some human desire. 60. A common denominator of value. 61. Price is value expressed in money. 62. There can not be a general rise or fall of values. 63. There can be a general rise or fall of prices. 64. Exercises.

CHAPTER VIII.

Money ' . .67

65. Money and credit the tools of exchange. 66. Money a common denominator of value. 67. Money must possess value. 68. Difficulty arising from the lack of a medium of exchange. 69. Different articles used as money. 70. Why gold and silver make the best money. 71. Coining money.

72. Gold and silver not a just standard for long contracts.

73. The value of money varies. 74. The multiple standard. 75. An increase of money no advantage. 76. The dollar changes in value. 77. Distinction between v/ealth, capital, and money. 78. Exercises.

CHAPTER IX.

79. Trade exists to satisfy human wants 80. Trade due to division of labor. 81. Complexity of trade due to the variety of desires. 82. Buying and selling. 83. Producers and consumers not different classes. 84. Separation of employments necessitates stores, or markets. 85. The expense of merchants necessary for the exchange of goods. 86. Exchange in actual practice. 87. Division of labor according to capacity and natural resources. 88. Men buy most by producing that which is produced to most advantage. 89. Comparative ease of production the cause of foreign trade. 90. Home and foreign trade depend upon the same principles. 91. The gain from home and foreign trade. 92. Exercises.

CHAPTER X.

93. Our object to find the laws of value. 94. Under the supposition that competition is free. 95. Demand and supply. 96. General demand and supply. 97. General overproduction impossible. 98. Overproduction of a particular commodity. 99. The law of demand and supply as affecting value. 100. Exercises.

xiv CONTENTS.

CHAPTER XL page

Cost of Production iii

loi. Three classes of commodities. 102. True and popular use of the phrase " cost of production." 103. The sacrifice of the capitalist in production. 104. The sacrifice of the laborer in production. 105. Sacrifice different from remuneration. 106. Remuneration in proportion to sacrifice, if competition is free. 107. Cost of production not made up of wages and interest. 108. Cost of production analyzed. 109. Normal value depends upon cost of production, when competition is free. no. Market value fluctuates about normal value. III. Normal value of manufactured goods tends to decline. 112. Exercises.

CHAPTER XII.

The Value of Commodities affected by the Law of Diminishing Returns 122

113. The problem as to the value of agricultural commodities. 114. The law of value for this class. 115. Market fluctuations due to demand and supply. 116. Durability of gold and silver. 117. Principles governing the value of gold and silver. 118. Upward tendency of the prices of agricultural commodities, iig. Forces operating against this tendency. 120. Exercises.

CHAPTER XIIL

The Value of Commodities where Competition is not

free 131

121. Absence of free competition. 122. If supply is fixed, value depends on demand. 123- Artificial limitation of the supply. 124. No free competition of laborers. 125. Nor of capital. 126. Where competition is not free, rewards in production are on different levels. 127. Reciprocal demand governs value between non-competing groups. 128. This - law also controls exchanges between countries. 129. Goods are exchanged against goods. 130. Exports tend to balance imports. 131. Exercises.

CHAPTER XIV.

132. Credit is confidence. 133. A borrower really borrows wealth, not money. 134. Credit leads to more efficient

CONTENTS. XV

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production. 135. Book - credit. 136. Bills of exchange. 137. Banks buy and sell bills. 138. Promissory notes. 139. Checks. 140. Checks based on the deposit system, 141. Clearing-House. 142. Credit affects prices as well as money. 143. Prices depend upon both credit and money. 144. The extension of credit before a commercial crisis. 145. The subtraction of credit in the collapse. 146. The state of depression. 147. Exercises.

CHAPTER XV.

148. Origin. of convertible paper money. 149. Definition of convertible paper. 150. Legal-tender quality. 151. Inconvertible paper. 152. Fiat -money. 153. Causes which give value to inconvertible paper money. 154. Under Gresham's Law, inconvertible paper drives out coin. 155. Such paper causes speculation. 156. And causes extravagance. 157. High paper prices favor debtors. 158. Exercises.

Book III. Distribution

CHAPTER XVI.

The Problem of Distribution 175

159. Distribution into interest, wages, and rent. 160. The share of the landlord, and the payments for taxes and insurance. 161. The amount to be distributed described. 162. The total value to be distributed may vary. 163. For the same capital and labor the value of the product may vary.

164. The reasons for the great productiveness of an industry.

165. Why wages and interest may be higher in one country than in another. 166. Industries vary as regards the amount of labor required. 167. Exercises.

CHAPTER XVIL

168. Interest the share of capital. 169. Insurance for risk.

170. Insurance to place an industry on the level of safe ones.

171. The market rate dependent on the rate earned by producers. 172. Manner m which the market rate conforms to xvi CONTENTS.

PAGE

that earned by producers. 173. Principle determining the relative shares of labor and capital. 174. Effect of the rate of interest on accumulations. 175. Rapidity of circulation of capital. 176. Absolute rate of mterest varies with the value of the product. 177. Why wages and interest are both high in new countries. 17S. Interest tends to fall. 179. Effect of interest on prices of land and securities. 180. Exercises.

CHAPTER XVIII.

181. Real and money wages defined. 182. Standard of living. 183. Division of the product between labor and capital. 184. Working of this principle of division. 185. More hands do not alone produce more wealth. 186. Effect on wages of an increase of capital. 187. General law of wages. 188, Certain actions of labor organizations are at the expense of other workmen. 189. Wages in different industries affected relatively by reciprocal demand. 190. The share of capital relatively to labor tends to decrease. 191. Exercises.

CHAPTER XIX.

Wages of Different Classes of Laborers .... 204 192. Division of the general sum of wages among the various classes of laborers. 193. Industrial classes. 194. Numbers diminish as we go upward in the scale. 195. Wages of unskilled laborers low, because their numbers are large relatively to the demand for them. 196. The demand for unskilled laborers. 197. Remedy for low wages. 198. Non-competing groups of laborers 199. Supply of skilled laborers. 200. Demand for skilled laborers. 201. Reason for higher wages of skilled laborers. 202. Skilled laborers may suffer by a withdrawal of demand. 203. Considerations affecting wages when the same skill is required. 204. Women's wages. 205. Exercises.

CHAPTER XX.

The Industrial Manager .. = .... 222 206. The manager a necessity of modern industrial conditions. 207. Large production demands skillful management. 208. The manager not necessarily a capitalist. 209. Supply of managers small relatively to the demand for them. 210. Large "profits" mainly wages of management. 211.

CONTENTS. ■ xvii

PAGE

The conflict not between labor and capital, but between different classes of laborers. 212. Unusual gains and losses as affecting wages. 213. Doctrine of "equivalency of profits" emended. 214. Exercises.

CHAPTER XXI.

215. Resume of laws of value. 216. Expenses of production and cost of labor. 217. Cost of labor is the relation of the outlay to the return. 218. Efficiency of labor may raise both wages and "profits." 219. Under efficiency should be included natural resources, machinery, etc. 220. Relation of efficiency to prices. 221. Changes of wages in particular industries will affect prices. 222. Exercises.

CHAPTER XXII.

Rent

223. Rent defined' 224. Rent based on the law of diminishing returns. 225. Meaning of superior and inferior soils. 226. Grain grown on rich and poor soils sold at the same price. 227. The law of rent. 228. The law illustrated on different grades of land. 22g. The law illustrated by successive " doses " of labor and capital on the same land. 230. No-rent land, or the " margin of cultivation." 231. Rent estimated by the surplus above the product on the margin of cultivation. 232. Rent does not increase the price of food. 233. Connection of population and improvements with rent. 234. Case where the farmer is also the owner. 235. Ground-rent. 236. The supposition of free competition. 237. Exercises.

Part II. Descriptive Political Economy

CHAPTER XXIII.

Socialism 261

238. Part II deals with applications of economic principles. 239. Relation of the state to economics. 240. Essence of socialism is the appeal to the state. 241. The state can not xviii CONTENTS.

PAGE

know the different industrial capacities of individuals. 242. Socialism opposed to self-help. 243. Self-help illustrated in supplying London with provisions. 244. Interference of the state to be restricted so far as possible. 245. The desire of socialists to have the state control all capital. 246. Socialistic communities within the state.

CHAPTER XXIV, Taxation 271

247. Reasons for the existence of taxes. 248. Canons of taxation. 249. Direct and indirect taxation. 250. The income-tax. 251. Tax on personal property. 252. Rules for indirect taxation. 253. Discriminating taxes. 254. Revenues of the United States. 255. Articles on which the United States levies import duties. 256. Criticism on these duties.

CHAPTER XXV.

257. Beginning of the national debt. 258. Effects of the War of 1812 and of the Mexican War. 259. In the civil war the policy of borrowing was adopted. 260. Kinds of obligations issued. 261. The debt in 1865. 262. Refunding of the debt. 263. Present form of the debt. 264. Need of reducing the surplus revenue. 265. Debts of foreign countries.

CHAPTER XXVI.

266. Protection appeals to the national feeling. 267. Free trade based on the gains arising from division of labor. 268. Protection against foreign qompetition. 269. Some foreign imports desirable. 270. Protection to infant industries.

271. The argument that protection does not raise prices.

272. The tariff protects the workingmen. 273. Growth of a country affected by other things than a tarifr. 274. The industry abandoned under free trade will be the least productive. 275. Extent of unprotected industries. 276. Protection takes from the most productive and adds to the least productive industries. 277. Workingmen not protected from immigration. 278. Protection gives diversity of industries. 279. Sacrifice of real for doubtful benefits in adopting pvotec-

CONTENTS. xix

PAGE

tion. 280. Diversity of industries arises from division of labor.

CHAPTER XXVII.

281. Monetary questions in the United States. 282. Meaning of legal tender. 283. Value of gold and silver affected by different causes. 284. Gresham's law. 285. Free coinage. 286. Act of 1792. 287. Fall in the value of silver. 288. Act of 1834. 289. Act of 1853. 290. Adoption of the single gold standard in 1873-1874. 291. Fall in the value of silver. 292. Bland-Allison bill of 1878. 293. Appreciation of gold. 294. Causes affecting commodities, not gold. 295. International Monetary League.

CHAPTER XXVIII.

296. Dislike of paper money in 1789. 297. Treasury notes. 298. Demand notes of 1861. 299. Arguments for and against paper money in 1861. 300. First legal-tender act, February, 1862. 301. Suspension of specie payments. 302. Second issue, July, 1862. 303. Results of the issues. 304. Relation of the depreciation of the United States notes to the sale of bonds. 305. United States notes regarded as a temporary expedient. 306. Evils resulting from their issue. 307. The inflation movement. 308. Prohibition of further contraction in 1878. 309. Resumption of specie payments.

CHAPTER XXIX.

310. Convenience of banks for deposit. 311. Liabilities and resources of a bank. 312. Capital. 313. How a bank makes profit. 314. A deposit a right to draw money. 315. Connection between discount and deposit. 316. Cash reserve. 317. The ability to lend depends upon the ratio of reserve to deposits. 318. The three functions of banking, viz., deposit, discount, and issue. 319. Notes a demand liability. 320. Why country banks prefer the issue of notes. 321. Why city banks make little use of notes.

XX CONTENTS.

CHAPTER XXX. page

The National Banking System 339

322. Origin of the system. 323. The deposit of bonds. 324. Provisions for the immediate redemption of notes. 325. Means of contracting its issues. 326. Reserves required. 327. Free banking. 328. No " double profits " received by the banks. 329. Performance of its other functions.

CHAPTER XXXI.

330. Aims of labor organizations. 331. Strikes. 332. Influence of non-union men on the success of strikes. 333. Other causes affecting the success of strikes. 334. Conciliation and arbitration. 335. The real labor problem a conflict of laborers. 336. Saving. 337. Industrial education. 338. Christian character.

CHAPTER XXXII.

339. Forms of co-operation. 340. Advantages of co-operative stores. 341. Rules for establishing such stores. 342. Successful experiments. 343. Productive co-operation ; its difficulties. 344. Examples. 345. Profit-sharing. 346. Influence on the character of the workmen. 347. Building associations.

Index To Charts

I. — Westward Movement of Population in the United States 32

II. — Production of Gold and Silver . . . .74 III. — Occupations of American Laborers . . . «. 86 IV. — Course of Prices from 1850 to 1885 .... 120 V. — Exports and Imports of Merchandise from and

INTO THE United States 140

VI. — The Gold Premium, 1862-1879 163

VII. — Revenues of the United States . . Face 274

VIII. — Public Debt of the United States . . . " 282

IX. — Ratio of Gold to Silver since 1687 . . " 308

A TEACHER'S LIBRARY,

SELECTED FROM

ENGLISH, FRENCH, AND GERMAN AUTHORS.

General Treatises.

John Stuart Mill's " Principles' of Political Economy." Abridged, with critical, bibliographical, and explanatory notes, and a sketch of the History of Political Economy, by J. Laurence Laughlin. A text-book for colleges (1884).

Professor Fawcett's "Manual of Political Economy" (London, sixth edition, 1883) is a brief statement of Mill's book, with additional matter on the precious metals, slavery, trades-unions, co-operation, local taxation, etc.

Antoine-Elise Cherbuliez's "Precis de la science economique" (Paris, 1862, 2 vols.) follows the same arrangement as Mill, and is considered the best treatise on economic science in the French language. He is methodical, profound, and clear, and separates pure from applied political economy.

Other excellent books in French are : Courcelle-Seneuil's " Traite theorique et pratique d'economie politique " (1858), (Paris, second edition, 1867, 2 vols.), and a compendium by Henri Baudrillart, " Manuel d'economie politique " (third edition, 1872).

Roscher's " Principles of Political Economy" is a good example of the German historical method : its notes are crowded with facts ; but the English translation (New York, 1878) is badly done. There is an excellent translation of it into French by Wolowski.

A desirable elementary work, " The Economics of Industry " (London, 1879 ; second edition, 1881), was prepared by Mr. and Mrs. Marshall.

Professor Jevons wrote a "Primer of Political Economy" (1878), which is a simple, bird's-eye view of the subject in a very narrow compass.

Important General Works.

Adam Smith's "Wealth of Nations" (1776). The edition of Mc- CuUoch is, perhaps, more sei-viceable than that of J. E. T. Rogers.

Ricardo's " Principles of Political Economy and Taxation " (1817).

J. S. Mill's " Principles of Political Economy" (2 vols., 1848, sixth edition, 1865).

A TEACHERS LIBRARY. xxiii

Schonberg's " Handbuch der politischen Oekonomie " (1882). This is a large co-operative treatise by twenty-one writers from the historical school.

Cairnes's "Leading Principles of Political Economy" (1874);. " Logical Method " (1875), lectures first delivered in Dublin in 1857.

Carey's " Social Science " (1877), in three volumes. This has been abridged in one volume by Kate McKean.

F. A. Walker's "Political Economy" (1883). This author differs from other economists, chiefly on wages and questions of distribution.

Treatises on Special Subjects.

W. T. Thornton's "On Labor" (1869),

H. George's " Progress and Poverty " (1879). In connection with this, read F. A. Walker's " Land and Rent" (1884).

J. Caird's "Landed Literest" (fourth edition, 1880), treating of English land and the food-supply.

McLeod's " Theory and Practice of Banking " (second edition, 1875-1876).

Goschen's " Theory of Foreign Exchanges" (eighth edition, 1875).

A. T. Hadley's " Railroad Transportation " (1885).

F. W. Taussig's "History of the Present Tariff" (1886).

W. G. Sumner's " History of Protection in the United States."

Stebbin's "Protectionist's Manual."

Erastus B. Bigelow's "The Tariff Question."

W. G. Sumner's " History of American Currency" (1874).

John Jay Knox's " United States Notes" (1884).

Jevons's " Money and the Mechanism of Exchange " (1875).

J. L. Laughlin's " History of Bimetallism in the United States " (1885).

Tooke and Newmarch's " History of Prices " (1837-1856), in six volumes.

Leroy-Beaulieu's " Traite de la science des finances " (1883). This is an extended work, in two volumes, on taxation and finance ; " Essai sur la repartition des richesses " (second edition, 1883).

F. A. Walker's " The Wages Question " (1876) ; " Money" (1878).

Rae's " Contemporaiy Socialism" (1884) gives a compendious statement of the tenets of modern socialists. See, also, R. T. Ely's " French and German Socialism " (1883).

D. A. Wells's " Our Merchant Marine."

xxiv A TEACHER'S LIBRARY.

Dictionaries.

McCulloch's " Commercial Dictionary " (new and enlarged edition, 1882).

Lalor's " Cyclopaedia of Political Science " (1881-1884) is devoted to articles on political science, political economy, and American history.

Coquelin and Guillaumin's " Dictionnaire de I'economie politique " (1851-1853, third edition, 1864), in two large volumes.

Reports and Statistics.

The " Compendiums of the Census" for 1840, 1850, i860, and 1870, are desirable. The volumes of the tenth census (1880) are of great value for all questions ; as is also F. A. Walker's " Statistical Atlas " (1874) ; and Scribner's " Statistical Atlas of the United States," based on the census of 1880.

The United States Bureau of Statistics issues quarterly statements ; and annually a report on " Commerce and Navigation," and another on the " Internal Commerce of the United States."

The "Statistical Abstract" is an annual publication, by the same department, compact and useful. It dates only from 1878.

The Director of the Mint issues an annual report dealing with the precious metals and the circulation. Its tables are important.

The Comptroller of the Currency (especially during the administration of J. J. Knox) has given important annual reports upon the banking systems of the United States.

The reports of the Secretary of the Treasury deal with the general finances of the United States. These, with the two last mentioned, are bound together in the volume of " Finance Reports," but often shorn of their tables.

There are valuable special reports to Congress of commissioners on the tariff, shipping, and other subjects, published by the Government.

The report on the " International Monetary Conference of 1878 " contains a vast quantity of material on monetary questions.

The British parliamentary documents contain several annual "Statistical Abstracts " of the greatest value, of which the one relating to other European states is peculiarly convenient and useful. These can always be purchased at given prices.

A. R. Spofford's "American Almanac" is an annual of great usefulness.

J. H. Hickcox, Washington, publishes a very useful catalogue of the Government publications, entitled " United States Publications."

PART I.

PRINCIPLES OF POLITICAL ECONOMY.

INTRODUCTION.

CHAPTER I.

WEALTH.

I. Men are constantly laboring to satisfy their wants. The manner in which these wants are supplied is a very curious and interesting process. " Let us take, by way of illustration, a man in the humble walks of life — a village cabinetmaker, for instance — and observe the various services he renders to society, and receives from it ; we shall not fail to be struck with the enormous disproportion between them. This man employs his day's labor in planing boards, and making tables and chests of drawers. What does he receive from society in exchange for his work ? First of all, on getting up in the morning, he dresses himself ; but he has himself made none of his clothing. In order to put at his disposal this clothing, simple as it is, an enormous amount of labor and many ingenious inventions must have been employed. Americans must have produced cotton, Indians indigo, Englishmen wool and flax, Brazilians hides ; and all these materials must have been transported to various towns, where they have been worked up, spun, woven, dyed, etc. He sends his son to school, and the simple teaching which is given there is itself due to the work of many thousand minds. If he undertakes a journey, he finds that, in order to save him time and exertion, other men have removed and leveled up the soil, filled up valleys, hewed down mountains, united the banks of rivers, and brought the power of steam into subjection to human wants. It is impossible not to be struck with the measureless disproportion which exists between the enjoyments which this man derives from society and what he could obtain by his own unassisted exertions. The social mechanism, then, must be very ingenious and very powerful, since it leads to this singular result, that each man, even he whose lot is cast in the humblest condition, obtains things every day which he could not himself produce in many ages."*

2. We see one man weaving baskets and another working with a hammer making nails. Each person, by making some one thing which other people want, is thus enabled to buy with the results of his own work many of other men's products which he wants. If one makes baskets or nails, which meet the desires of men about him, he is producing wealth. We can see, then, that in the wonderful mechanism of society, men are working to produce wealth, and to satisfy one another's material wants. AIJ the world, so far as they are thus engaged in supplying their material wants, are doing things with which Political Economy is concerned. If men are occupied with other affairs than these, they are not things with which the economist is concerned. For example, if I were to row a long distance merely to see a ship launched, wealth would not result from my exertions. So, also, if I always keep a clear conscience, it may be a very desirable thing, but it is not an economic fact. A discussion as to whether congressmen or the President should appoint to office, is also outside of Political Economy. Thus we see that Political Economy deals only with questions connected

* Bastiat's " Harmonies of Political Economy," quoted by Marshall in " Economics of Industry," p. i.

WEALTH.

with wealth and with the satisfaction of material wants. It is distinct from morals or from the science of government. Political Economy does not say what is right or wrong, or how a people should be governed ; but it attempts to show what the rules are that control the production, exchange, and distribution of all the wealth which we see in the wonderful industrial system about us. It will first attempt to explain how all this wealth is produced ; then how people who make one thing succeed in exchanging it for a variety of other things ; and lastly, and most important, how this vast wealth is divided among the different persons concerned in its production.

3. We have already seen that wealth is something which satisfies a want, (a) If no one ever wanted a nail, it would not be wealth. No one would give anything for a thing which he did not want, (b) But air and water satisfy wants. Are they wealth ? Is everything which satisfies a want wealth "i No ; because it is not wealth unless there is some sacrifice in getting it. No one would work all day making a basket, merely to give it for a pail of water at evening, which he could himself get for the taking. So, also, air is free to all, and is not wealth. If land or diamonds were as plentiful as air or water, they would not be wealth. If guns were as abundant as blades of grass, no one would economize to get a gun. Consequently, in order to be considered wealth, an article must not only satisfy a desire, but some sacrifice or exertion must be required to get it. (c) Then, also, to be wealth, it should be transferable. A captured eagle might satisfy some showman's desire, and as an eagle is very hard to catch, it would be wealth ; but, if it got loose, it would not be wealth to any one. No one would give much for an eagle flying away in the sky. Material wealth, therefore, is some transferable thing, S for the enjoyment of which we are willing to undergo a 1 sacrifice.

4. But, according to some writers, not all wealth is material. You can see and touch a nail, a basket, a gun, land, or diamonds. But this is not true of all things. We maywork hard at study, in order to gain capacity and mental power, which, when attained, will not only make us better able to produce, but will also give us pleasure. But can you see or touch capacity or mental power .? No. You can only know it by its results. Nilsson's power of singing is immaterial, and you can not see it ; yet it enables her to give forth songs which delight the world. Is this power wealth? To cultivate this power she has undoubtedly studied and labored, and undergone a sacrifice. If we call this wealth, it is to be remembered that her labor was spent in accumulating something which is not material wealth. Of such a nature also are skill, intelligence, and all habits, both physical and mental, which facilitate production. Thus, the skill of a chemist is valuable to a farmer, because it enables him to get more from the soil. But it is to be kept in mind that im?naterial wealth is not capable of being transferred from one person to another, so that others than the one possessing it can not use and enjoy it. A man having great business skill can not part with it in such a way as to deprive himself of it, and hand it over to a buyer who had none before. Skill can not be transferred to a person as a hat or a coat may. One may tell others how to get skill, but that is quite different from giving it to them.

5. But most people are engaged, directly or indirectly, in collecting material wealth; and, as only such ^vealth can be appropriated and exchanged, we shall be understood as speaking of material wealth hereafter, unless particular mention is made of immaterial wealth. Since material wealth can be passed from one person to another, we see that one can have a right of property in it. By this I mean one can own it. If you own a gun or a horse, you can have the sole use and enjoyment of it, to the exclusion of every one else. If you own a house, you can do with it