Four Introductory Lectures on Political Economy

by Nassau William Senior

In ordinary use, and I think it is the most convenient use, wealth comprehends all those things, and those things only, which, directly or indirectly, are made the subjects of purchase and sale, of letting and hiring. For this purpose, they must, in the first place, possess utility, or, in other words, be capable of affording pleasure or preventing pain, since no one would purchase or hire anything absolutely useless. In the second place, they must be limited in supply, since no one would buy anything of which he might acquire as much as he pleased by merely taking possession of it. The water in the open sea is practically unlimited in supply; any one who chooses to go for it, may have as much of it as he pleases. The portion of it which has been brought to London to supply salt water baths is limited, and cannot be obtained, therefore, without payment. In the third place, nothing is wealth that is not capable of appropriation. Fine weather is useful, and is limited in supply, but it is not wealth, since it cannot be appropriated. Some things are capable of appropriation only under peculiar circumstances. In an extensive, thinly inhabited plain, light and air are incapable of appropriation, every inhabitant may enjoy them equally; but in a town, one house intercepts them from another. A town house, surrounded by an open space, has more of them than one in a street. The possessor of such a house, and of the ground which surrounds it, has practically appropriated its peculiar advantages of light and air; they add to its value, and form, therefore, part of his wealth. He even may sell them without parting with his house, by selling the privilege of erecting buildings which will intercept them. Fourthly, as is implied by the definition, nothing can be wealth which is not directly or indirectly transferable. High birth is agreeable and rare, it may add to the happiness of its possessor, but, as it is absolutely incapable of transfer, it is not part of his wealth. Most of our personal qualities are only indirectly transferable; they are transferable, not in themselves, but embodied in the commodities which their possessor can produce, or in the services which he can render. The skill of a painter is transferable in the form of a commodity, his pictures; the skill of a surgeon in that of a service, the dexterity with which he performs an operation. Such qualities perish by the death of the possessor, or may be impaired or destroyed by disease, or rendered valueless by changes in the customs of the country, which put an end to the demand for their products. Even to the same person, and under the same circumstances in all other respects, they may become wealth, or cease to be wealth, merely in consequence of a change in the social position of their possessor. When Miss Linley became Mrs. Sheridan, her powers of action and song ceased to be wealth; they remained the delight of private societies, but were no longer objects of sale. If Sheridan had condescended to accept an income on such terms, his wife’s accomplishments would have enriched him. Subject, however, to these contingencies, personal qualities are wealth, and wealth of the most valuable kind. The amount of the revenue derived from their exercise in England, far exceeds the rental of all its land.

The words wealth and value differ as substance and attribute. All those things, and those things only, which constitute wealth, are valuable. As the meaning of the term value has been the subject of long and eager controversy, I shall, at a future period, consider at some length the different significations which have been given to it. It is enough to say at present that I use it in its popular acceptation, as signifying in anything the quality which fits it to be given and received in exchange, or, in other words, to be let or sold, hired or purchased.

It follows, from this definition of wealth, that in a community enjoying perfect abundance, there would be no wealth. If every object of desire could be procured by a wish, nothing would have value, and nothing would be exchanged. It follows, also, that it is possible to conceive at least a temporary diminution of the wealth of a community occasioned by an increase of their means of enjoyment. This would be the immediate consequence of any cause which should occasion the supply of any useful article to change from limited to unlimited. Thus, if the climate of England could suddenly be changed to that of Bogota, and the warmth which we extract imperfectly and expensively from fuel were supplied by the sun, fuel would cease to be useful, except as one of the productive instruments employed by art. We should want no more grates or chimney-pieces in our sitting-rooms. What had previously been a considerable amount of property in the fixtures of houses, in stock in trade, and materials, would become valueless. Coals would sink in price; the most expensive mines would be abandoned; those which were retained would afford smaller rents. The proprietors and tradesmen specially affected by the change would lose not only in wealth, but in the means of enjoyment. The owner of a mine whose rent fell from 20,000l. a year to 10,000l., would not be compensated by being saved the expense of fuel in every room except his kitchen. On the other hand, persons without fire-places or coal-cellars of their own, would lose nothing, and the rest of the world would lose only in the value of their grates, chimney-pieces, and stocks of coal; and all would gain in enjoyment by being able to devote to other purposes the money which they previously paid for artificial warmth. Still for a time there would be less wealth. That time, indeed, would be short; the capital and the labour previously devoted to warming our apartments, would be diverted to the production of new commodities. The cheapness of coal would increase the supply of manufactured articles, and there would then be as much wealth as there was before the change; probably more, and certainly much more enjoyment. It is probable that salt forms a smaller part of the wealth of England than of Hindostan, though every Englishman has twenty times as much of it as every Hindoo. The Englishman is allowed to use freely the abundant supply offered by nature. In Hindostan there is a natural scarcity, aggravated tenfold by the Government.

We may conceive a case in which unlimited abundance would destroy not only the value, but the utility of a whole class of commodities; would prevent them not merely from being objects of exchange, but even from being objects of desire. This would be the case as to all the commodities whose only utility is to be a means of displaying wealth. If emeralds were suddenly to become as abundant as pebbles, they could be no longer used as ornaments; and if no other use could be made of them, and I am not aware of any, they would be valueless. All their possessors, at the time of the change, would find themselves poorer, and neither they nor any one else would be compensated by any increased means of enjoyment. It would be a mere destruction of wealth.

It may be as well to remark, that things may be wealth to individuals without forming part of the wealth of the community to which those individuals belong. This is the case with respect to almost all the wealth created by an artificial limitation of supply. The monopolies with which Elizabeth rewarded her favourites were wealth to them, but diminished the wealth of the rest of the community. The same may be said of a patent right, or of the secrecy of a manufacturing process. The process itself, which is protected by the patent or by the secrecy, is part of the wealth of the community, since it enables them to have more or better commodities; but the monopoly granted by the patent, or guarded by the secrecy, is wealth only to its owner. As soon as the patent terminates, or the secret is divulged, the wealth of the community is increased by the increased abundance of the commodities to the production of which every one may now apply the process.

Again, the national debt is wealth to the proprietors of stock, but as the sum received in dividends is paid in taxes, it cannot form a part of the wealth of the nation. If, indeed, those two sums precisely coincided, if there were no expenses of collection, and if taxes did not interfere with the production of wealth, the national debt would not diminish the national wealth, though it could not augment it. It would be a mere matter of distribution. But the expense of collecting the national revenue, and the interference of taxation with production, are so much pure loss; and by the amount of these two sources of expense and loss, we should be richer if the national debt were repudiated.

The wealth which consists merely of a right or credit on the part of A. with a corresponding duty or debt on the part of B., is not considered by the political economist. He deals with the things which are the subjects of the right or of the credit, not with the claims or the liabilities which may affect them. In fact, the credit amounts merely to this, that B. has in his hands a part of the property of A.

I have said that my definition of wealth differs from that which has been adopted by many of my predecessors. Some political economists extend the term to all the objects of human desire; others restrict it to what they have called material products; and others to the things which cannot be acquired or produced without labour. The objections to the first definition are obvious. If wealth be the subject of Political Economy, and wealth include all that man desires, Political Economy, whether a science or an art, is the science or the art which treats of human happiness—a subject, as I have already remarked, too extensive to be included in a single treatise. The second, that which confines wealth to material objects, is more plausible. It includes all visible wealth, it includes all wealth which is capable of direct and complete sale. The things which it excludes are mere objects of the intellect. They may be shared, but cannot be completely transferred, since the proprietor, though he may impart them, cannot divest himself of them; they may produce permanent effects, but perish themselves with the individual mind of which they are qualities. But as they obey, in other respects, the same laws as material wealth, are obtained by the same means, and owe their value to the same causes, I think their exclusion a fatal objection to a definition of wealth. The definition which confines wealth to the things which cannot be acquired or produced without labour, differs little from mine, which confines it to things limited in supply. Whatever must be obtained by labour is necessarily limited in supply, the supply of labour itself being limited; and, on the other hand, there are, in fact, scarcely any, if there be any, commodities limited in supply and capable of transfer, which can be obtained without some labour. So that wealth is always found subject to both these incidents. Nor does value appear to depend on either incident exclusively. A quarter of corn from the best, and one from the worst land, of equal goodness, sell in the same market at the same price, though one may have cost three times as much labour as the other. The pictures of Hans Hemling are far more limited in supply than those of Raffaelle, and yet they sell for much less.

We can separate, however, the two qualities in our minds. We can suppose a commodity useful and transferable to be limited in supply, but that supply to be gratuitously afforded by nature. About 1,980,000 lbs. weight of silver is supposed to be now annually supplied. Now, if precisely the same quantity of pure silver as is now produced daily in each refining house, were every day to be supernaturally deposited on a table in the refining house, and all other sources of supply were to cease, silver would continue to be limited in supply just as it is now, but would no longer be procured by labour. Is there any reason for supposing that its value would alter? If its value would remain the same, it follows that it depends on limitation of supply, and that limitation of supply, not the necessity of labour, is the differentia which constitutes wealth. An uncut copy of an early printed book is worth, perhaps, ten times as much as a copy which has been fitted to be read by cutting open its leaves. Because it has cost more labour? No: it has cost rather less. Because it is more readable? No: it is useless for the purpose of reading. Simply because such copies are more limited in supply.

THE END.