- Alexis de Tocqueville Institution
- Atlas Network
- Atlas Society
- Austrian Economics
- Austrian Economics Newsletter
- Bankrupting America
- Bastiat Institute
- Bastiat Society
- Cato Institute
- Center for Constitutional Rights
- Center for Freedom & Prosperity
- Center for Individual Freedom
- Economic Freedom
- Economic Liberty
- Economic Noise
- Emergent Orders
- Financial Sense
- Foundation for Economic Education
- Goldwater Institute
- Hoover Institution
- Institute for Justice
- James G. Rickards
- Jason Lewis
- Kahn Academy
- King World News
- Knowledge Problem
- Learn Liberty
- Liberty For All
- Library of Economics and Liberty
- Ludwig von Mises Institute
- Manhattan Institute for Policy Reasearch
- Mark Steyn
- Mark Steyn
- Mercatus Center
- Richard A. Epstein
- Russell Roberts
- Spontaneous Order Audio
- Spontaneous Order Video
- Swift Economics
- The Federalist Society
- The Freeman
- The Future of Freedom Foundation
- The Independent institute
- The Locke Institute
- The Mont Pelerin Society
- The Quarterly Journal of Austrian Economics
- The Review of Austrian Economics
- Thomas Sowell
- Uncommon Knowledge
- University of Common Sense
- Victor Davis Hanson
- Walter E. Williams
Friday, August 31, 2012
Thursday, August 30, 2012
Wednesday, August 29, 2012
Tuesday, August 28, 2012
Monday, August 27, 2012
The Role of The Government in The Economic Crisis At this point, everything the government is doing – and not just the US government but governments everywhere − is not only the wrong thing but exactly the opposite of the right thing. They’re passing more laws, raising taxes, creating more currency…
Sunday, August 26, 2012
IF we examine closely the workings of human industry, to whatever object it be applied, it consists of three distinct operations.
The first step towards the attainment of any specific product, is the study of the laws and course of nature regarding that product.
A lock could never have been constructed without a previous knowledge of the properties of iron, the method of extracting from the mine and refining the ore, as well as of mollifying and fashioning the metal.
The next step is the application of this knowledge to an useful purpose : for instance, the conclusion, or conviction, that a particular form, communicated to the metal, will furnish the means of closing a door to all the wards, except to the possessor of the key.
The last step is the execution of the manual labour, suggested and pointed out by the two former operations; as, for instance, the forging, filing, and putting together of the different component parts of the lock.
These three operations are seldom performed by one and the same person. It commonly happens, that one man studies the laws and conduct of nature; that is to say, the philosopher, or man of science, of whose knowledge another avails himself to create useful products, being either agriculturist, manufacturer, or trader; while the third supplies the executive exertion, under the direction of the former two ; which third person is the operative workman or labourer.
All products whatever will be found, on analysis, to derive existence from these three operations.
Take the example of a sack of wheat, or a pipe of wine. The first stage towards the attainment of either of these products was, the discovery by the natural philosopher or geologist, (a) of the conduct and course of nature in the production of the grain or the grape; the proper season and soil for sowing or planting ; and the care requisite to bring the herb or plant to maturity. The tenant, if not the proprietor himself, must afterward have applied this knowledge to his own particular object, brought together the means requisite to the creation of an useful product, and removed the obstacles in tho way of its creation. Finally, the labourer must have turned up the soil, sown the seed, or pruned and bound up the vine. These three distinct operations were indispensable to the complete production of the product, corn or wine.
Or take the example of a product of external commerce; such as indigo. The science of the geographer, the traveller, the astronomer, brings us acquainted with the spot where it is to be met with, and the means of crossing the seas to get at it. The merchant equips his vessels, and sends them in quest of the commodity; and the mariner and land-carrier perform the mechanical part of this production.
But, loooking at the substance, indigo, as a mere primary material of a further or secondary product, of blue cloth for instance; we all know that the chemist is first applied to for information, as to the nature of the substance, the method of dissolving it, and mordants requisite for fixing the colour; the means of perfecting me process of dyeing are then collected by the master manufacturer, under whose orders the labourer executes the manual part of the process.
Industry is, in all cases, divisible into theory, application, and execution. Nor can it approximate to perfection in any nation, til! that nation excel in all three branches. A people, that is deficient in one or other of them cannot acquire products, which are and must be the result of all three. And thus we may learn to appreciate the vast utility of many sciences, which, at first sight, appear to be the objects of mere curiosity and speculation.
The negroes of the coast of Africa are possessed of considerable ingenuity, and excel in all athletic exercises and handicraft occupations ; but they seem greatly deficient in the two previous operations of industry. Wherefore, they are under the necessity of purchasing from Europe the stuffs, arms, and ornaments, they stand in need of.
Their country yields so few products, notwithstanding its natural fertility, that the slave traders are obliged to lay in their stock of provisions beforehand, tp feed the slaves during the voyage.
In qualities favourable to industry, the moderns have greatly surpassed the ancients, and the Europeans outstrip all the other nations of the globe. The meanest inhabitant of an European town enjoys innumerable comforts unattainable to the sovereign of a savage tribe.
The single article, glass, that admits light into his apartment, and, at the same time, excludes the inclemency of the weather, is the beautiful result of observation and science, accumulated and perfected during a long course of ages. To obtain this luxury, it was necessary previously to know what kind of sand was convertible into a substance possessing extension, solidity, and transparency; as well as by the compound of what ingredients, and by what degree of heat, the substance was obtainable: to ascertain, besides, the best form of furnace. The very wood-work, that supports the roof of a glass-house, requires, in its construction, the most extensive knowledge of the strength of timber, and the means of employing it to advantage. Nor was the mere knowledge of these matters sufficient; for that knowledge might possibly have lain dormant in the memory of one or two persons, or in the pages of literature. It was further requisite, that a manufacturer should have been found, possessed of the means of reducing the knowledge into practice; who should have at first made himself master of all that was known of that particular branch of industry, and afterwards have accumulated, 01 procured the requisite capital, collected artificers and labourers, and assigned to each his respective occupation. Finally, the work must have been completed by the manual skill of the workmen employed; some in constructing the buildings and furnaces, some in keeping up the fire, mixing up the ingredients, blowing, cutting, rolling out, fitting and fixing the pane of glass.
The utility and beauty of the resulting product, are inconceivable to those who have never beheld this admirable creation of human industry. By means of industry, the vilest materials have been invested with the highest degree of utility. The very rags and refuse
of wearing apparel have been transformed into the white and thin sheets, that convey from one end of the globe to the other, the requisitions of commerce and the particulars of art; that serve as the depositories of the conceptions of genius, and the vehicles of human experience from one age to another; to them we look for the evidence of our properties; to them we entrust the most noble arid amiable sentiments of the heart, and by theYn we awaken corresponding feelings in the breasts of our fellow-creatures. The extraordinary facilities for the communication of human intelligence which paper affords, entitles it to be considered as one of the products that nave been most efficacious in ameliorating the condition of mankind.
Fortunate, indeed, would it have been, had an engine so powerful never have been made the vehicle of falsehood, or the instrument of tyranny!
It is worth while to remark, that the knowledge of the man of science, indispensable as it is to the development of industry, circulates with ease and rapidity from one nation to all the rest. And men of science have themselves an interest in its diffusion ; for upon that diffusion they rest their hopes of fortune, arid, what is more prized by them, of reputation too. For this reason, a nation, in which science is but little cultivated, may nevertheless carry its industry to a very great length, by taking advantage of the information derivable from abroad. But there is no way of dispensing with the other two operations of industry, the art of applying the knowledge of man to the supply of his wants, and the skill of execution. These qualities are of advantage to none but their possessors; so that a country well stocked with intelligent merchants, manufacturers, and agriculturists has more powerful means of attaining prosperity, than one devoted chiefly to the pursuit of the arts and sciences. At the period of the revival of literature in Italy, Bologna was the seat of science; but wealth was centered in Florence, Genoa, and Venice.
In our days, the enormous wealth of Britain is less owing to her own advances in scientific acquirements, high as she ranks in that department, than to the wonderful practical skill of her adventurers in the useful application of knowledge, and the superiority of her
workmen in rapid and masterly execution. The national pride, that the English are often charged with, does not prevent their accommodating themselves with wonderful facility to the tastes of their customers and the consumers of their produce. They supply with hats both the north and the south, because they have learnt to make them light for the one market, and warm and thick for the other.
Whereas the nation that makes but of one pattern, must be content with the home market only.
The English labourer seconds the master manufacturer; he is commonly patient and laborious, and does not willingly send out an article from his hands, without giving it the utmost possible precision and perfection; not that he bestows more time upon it, but that he gives it more of his care, attention and diligence, than the workmen of most other nations.
There is no people, however, that need despair of acquiring the qualities requisite to the perfection of their industry. It is but 150 years since England herself had made so little progress, that she purchased nearly all her woollens from Belgium ; and it is not more than 80 years since Germany supplied with cotton goods the very nation, that now manufactures them for the whole world.
I have said that the cultivator, the manufacturer, the trader, make it their business to turn to profit the knowledge already acquired, and apply it to the satisfaction of human wants. I ought further to add, that they have need of knowledge of another kind, which can only be gained in the practical pursuit of their respective occupations, and may be called their technical skill. The most scientific naturalist, with all his superior information, would probably succeed much worse than his tenant, in the attempt to improve his own land.
A first-rate mechanist would most likely spin very indifferently without having served his apprenticeship, though admirably skilled in the construction of the cotton-machinery. In the arts there is a certain sort of perfection, that results only from repeated trials, sometimes successful and sometimes the contrary. So that science alone is not sufficient to ensure the progress, without the aid of experiment, which is always attended with more or less of risk, and does not always indemnify the adventurer, whose profit, even when successful, is moderated by competition; although society at large receives the accession of a new product, or, what amounis to the same thing, of an abatement in the price of an old one.
In agriculture, experiments usually cost the rent of the soil for a year or more, over and above the labour and the capital engaged in them.
In manufacture, experiment is hazarded on safer grounds of calculation capital engaged for a much shorter period, and if success ensue, the adventurer rewarded by a longer period of exclusive advantage, because his process is less open to observation. In some places, too, the exclusive advantage is protected by patents of invention. For all "which reasons, the progress of manufacturing is generally more rapid and more diversified than that of agricultural industry.
In commercial industry, the risk of experiment would be greater than in the other two branches, if the costs of the adventure had no auxiliary and concurrent object. But it is usually in the course of a regular trade, that a merchant hazards the introduction of a virgin commodity of foreign growth into an untried market. In this manner it was that the Dutch, about the middle of the seventeenth century, while prosecuting their commerce with China, with no very sanguine expectation, made experiment of a small assortment of dried leaves, from which the Chinese were in the habit of preparing their favourite beverage. Thus commenced the tea-trade, which now occasions the annual transport of more than 45 millions of pounds weight, that are sold in Europe for a sum of more than 80,000,000 of dollars.
In some cases of very rare occurrence, boldness is nearly certain of success. When the Europeans had recently discovered the pas sage round the Cape of Good Hope and the continent of America, their world was suddenly expanded to the East and West; and such was the infinity of new objects of desire in two hemispheres, whereof one was not at all, and the other but very imperfectly known before, that an adventurer had only to make the voyage, and was sure of selling his returns to great advantage.
In all but such extraordinary cases it is perhaps prudent to defray the charges of experiments in industry, not out of the capital engaged in the regular and approved channels of production, but out of the revenue that individuals have to dispose of at pleasure, without fear of impairing their fortune. The whims and caprices that divert to an useful end the leisure and revenue which most men devote to mere amusement, or perhaps to something worse, cannot be too highly encouraged. I can conceive no more noble employment of wealth and talent. A rich and philanthropic individual may, in this way, be the means of conferring upon the industrious classes, and upon the consumers at large, in other words, upon the mass of mankind, a benefit far beyond the mere value of what he actually disburses, perhaps beyond the whole amount of his fortune however princely it may be. Who will attempt to calculate the value conferred on mankind by the unknown inventor of the plough?
If a government, that knows and practises its duties, and has large lesources at its disposal, does not abandon to individuals the whole glory and merit of invention and discovery in the field of industry.
The charges of experiment, when defrayed by the government, are not subtracted from the national capital, but from the national revenue; for taxation never does, or, at least, never ought to touch any thing beyond the revenue of individuals. The portion of them so spent is scarcely felt at all, because the burthen is divided among innumerable contributors; and, the advantages resulting from success being a common benefit to all, it is by no means inequitable that the sacrifices, by which they are obtained, should fall on the community at large.
Saturday, August 25, 2012
OF THE DIFFERENT KINDS OF INDUSTRY, AND THE MODE IN WHICH THEY CONCUR IN PRODUCTION - by mankind, that the objects of rational desire are within their provided they have the will and intelligence to employ the true means of obtaining them. Those means it is the purpose of Una work to investigate and unfold.
SOME items of human consumption are the spontaneous gifts of nature, and require no exertion of man for their production ; as air water, and light, under certain circumstances. These are destitute of exchangeable value; because the want of them is never felt, others being equally provided with them as ourselves. Being neither procurable by production, nor destructible by consumption, they come not within the province of political economy.
But there are abundance of others equally indispensable to our existence and to our happiness, which man would never enjoy at all, did not his industry awaken, assist, or complete the operations of nature. Such are most of the articles which serve for his food, garments and lodging.
When that industry is limited to the bare collection of natural products, it is called agricultural industry, or simply agriculture.
When it is employed in severing, compounding, or fashioning the products of nature, so as to fit them to the satisfaction of our various wants, it is called manufacturing industry.
When it is employed in placing within our reach objects of want which would otherwise be beyond reach, it is called commercial industry, or simply commerce.
It is solely by means of industry that mankind can be furnished, in any degcee of abundance, with actual necessaries, and with that variety of other objects, the use of which, though not altogether indispensable, yet marks the distinction between a civilized community and a tribe of savages. Nature, left entirely to itself, would provide a very scanty subsistence to a small number of human beings. Fertile but desert tracts have been found inadequate to the bare nourishment of a few wretches, cast upon them by the chances of shipwreck: while the presence of industry often exhibits the spectacle of a dense population plentifully supplied upon the most ungrateful soil.
The term products is applied to things that industry furnishes to mankind.
A particular product is rarely the fruit of one branch of industry exclusively. A table is a joint product of agricultural industry, which has felled the tree whereof it is made, and of manufacturing
industry, which has given it form. Europe is indebted for its coflee to the agricultural industry, which has planted and cultivated the bean in Arabia or elsewhere, and to the commercial industry, which
hands it over to the consumer.
These three branches of industry, which may at pleasure be again infinitely subdivided, are uniform in their mode of contributing to the act of production. They all either confer an utility on a substance that possessed none before, or increase one which it already possessed. The husbandman who sows a grain of wheat that yields twenty-fold, does not gain this product from nothing: he avails himself of a powerful agent; that is to say, of Nature, and merely directs an operation, whereby different substances previously scattered throughout the elements of earth, air, and water, are converted into the form of grains of wheat.
Gall-nuts, sulphate of iron, and gum-arabic, are substances existing separately in nature. The joint industry of the merchant and manufacturer brings them together, and from their compound derives the
black liquid, applied to the transmission of useful science. This joint operation of the merchant and manufacturer is analogous to that of the husbandman, who chooses his object and effects its attainment
by precisely the same kind of means as the other two.
No human being has the faculty of originally creating matter which is more than nature itself can do. But any one may avail himself of the agents offered him by nature, to invest matter with
utility. In fact, industry is nothing more or less than the human employment of natural agents; the most perfect product of labour, the one that derives nearly its whole value from its workmanship, rs
probably the result of the action of steel, a natural product upon some substance or other, likewise a natural product.
Through ignorance of this principle, the economists of the 18th century, though many enlightened writers were to be reckoned amongst them, were betrayed into the most serious errors. They allowed no industry to be productive, but that which procured the raw materials; as the industry of the husbandman, the fisherman and the miner; not adverting to the distinction, that wealth consists, not in matter, but in the value of matter; because matter without value is no item of wealth; otherwise water, flint-stones, and dust of the roads, would be wealth. Wherefore, if the value of matter constitutes wealth, wealth is to be created by the annexation of value. Practically, the man who has in his warehouse a quintal of wool worked up into fine cloths, is richer than one who has the same quantity of wool in packs.
To this position the economists replied, that the additional value communicated to a product by manufacture, was no more than equivalent to the value consumed by the manufacturer during the process; for, said they, the competition of manufactures prevents their ever raising the price beyond the bare*amount of their own expenditure and consumption ; wherefore their labour adds nothing to the total wealth of the community, because their wants on the one side destroy as much as their industry produces on the other.
But it should have been previously demonstrated by those who made use of this argument, that the value, consumed by mechanic and artizans, must of necessity barely equal the value produced by them, which is not the fact; for it is unquestionable, that more savings are made, and more capital accumulated from the profits of trade and manufacture, than from those of agriculture.
Besides, even admitting that the profits of manufacturing industry are consumed in the satisfaction of the necessary wants of the manufacturers and their families, that circumstance does not prevent them being positive acquisitions of wealth. For unless they were so, they could not satisfy their wants: the profits of the land-owner and agriculturist are allowed to be items of positive wealth; yet they are equally consumed in the maintenance of those classes.
Commercial, in like manner as manufacturing industry, concurs in production, by augmenting the value of a product by its transport from one place to another. A quintal of Brazil cotton has acquired greater utility, and therefore larger value, by the time it reaches a warehouse in Europe, than it possessed in one at Pernambuco. The transport is a modification that the trader gives to the commodity, whereby he adapts to our use what was not before available; which modification is equally useful, complex and uncertain in the result, as any it derives from the other two branches of industry. He avails himself of the natural properties of the timber and the metals used in the construction of his ships, of the hemp whereof his rigging is composed, of the wind that fills his sails, of all the natural agents brought to concur in his purpose, with precisely the same view and the same result, and in the same manner too, as the agriculturist avails himself of the earth, the rain, and the atmosphere.
Thus, when Raynal says of commerce, as contrasted with agriculture and the arts, that " it produces nothing of itself," he shows himself to have had no just conception of the phenomenon of production. In this instance Raynal has fallen into the same error with regard to commerce, as the economists made respecting both commerce and manufacture. They pronounced agriculture to be the sole channel of production; Raynal refers production to the two channels of agriculture and manufacture: his position is nearer the truth than the other, but still is erroneous.
Condillac also is confused in his enrl^avour to explain the mode in which commerce produces. He pretends that, because all commodities cost to the seller less than the buyer, they derive an increase of value from the mere act of transfer from one hand to another. But this is not so; for, since a sale is nothing else but an act of barter, in which one kind of goods, silver for example, is received in lieu
of another kind of goods, the loss which either of the parties dealing should sustain on one article would be equivalent to the profit he would make on the other, and there would be to the community no
production of value whatsoever.* When Spanish wine is bought at raris, equal value is really given for equal value: the silver paid, and the wine received, are worth one the other; but the wine had not the same vaiue before its export from Alicant: its value has really increased in the hands of the trader, by he circumstance of transport, and not by the circumstance, or at the moment, of exchange.
The seller does not play the rogue, nor the buyer the fool; and Condillac h/is no grounds for his position, that " if men always exchanged equal value for equal value, there would be no profit to be made by the traders."
In some particular cases the two other branches of industry produce in a manner analogous to commerce, viz. by giving a value to things to which they actually communicate no new quality, but that of approximation to the consumer. Of this description is the industry of miners. The coal or metal may exist in the earth, in a perfect state, but unpossessed of value. The miner extracts them thence, and this operation gives them a value, by fitting them for the use of mankind. So also of the herring fishery. Whether in or out of the sea, the fish is the same; but under the latter circumstances, it has acquired an utility, a value, it did not before possess, f Examples might be infinitely multiplied, and would all bear as close an affinity, as those natural objects, which the naturalist classifies only to facilitate their description.
This fundamental error of the economists, in which I have shown that their adversaries in some measure participated, led them to the strangest conclusions. According to their theory, the traders and manufacturers, being unable to add an iota to the general stock of wealth, live entirely at the expense of the sole producers, that is to say, the proprietors and cultivators of the land. Whatever new value they may communicate to things, they at the same time consume an equivalent product, furnished by the real producers: manufacturing and commercial nations, therefore, subsist wholly upon the wages they receive from their agricultural customers; in proof of which position, they alleged that Colbert ruined France by his protection of manufactures.
The truth is, that, in whatever class of industry a person is engaged, he subsists upon the profit he derives from the additional value, or portion of value, no matter in what ratio, which his ag mcy attaches to the product he is at work upon. The total value of products serves in this way to pay the profits of those occupied in production. The wants of mankind are supplied and satisfied out ot the gross values produced and created, and not" out of the net values only.
A nation, or a class of a nation, engaged in manufacturing or commercial industry, is not a whit more or less in the pay of another, than one employed in agriculture. The value created by one branch is of the same nature as that created by others. Two equal values are worth one the other, although perhaps the fruit of different branches of industry: and when Poland barters its staple product, wheat, for the staple commodity of Holland, East and West India produce, Holland is no more in the pay or service of Poland, than Poland is of Holland.
Nay, Poland herself, which exports at the rate of ten millions of wheat annually, and therefore, according to the economists, takes the sure road to national wealth, is, notwithstanding, poor and depopulated : and why ?—Because she confines her industry to agriculture, though she might be at the same time a commercial and manufacturing state. Instead of keeping Holland in her pay, she may with more propriety be said to receive wages from the latter, for the raising of ten millions of wheat, per annum. Nor is she a jot less dependent than the nations that buy wheat of her: for she has just as much desire to sell to them, as they have to buy of her.
Moreover, it is not true that Colbert ruined France. On the contrary, the fact is that France, under Colbert's administration, emerged from the distress that two regencies and a weak reign had involve.! her in. She was, indeed, afterwards ruined again; but for this second calamity, she may thank the pageantry and the wars of Louis XIV. Nay, the very prodigality of that prince is an undeniable evidence of the vast resources that Colbert had placed at his disposal. It must, however, be admitted that those resources would have been still more ample, if he had but given the same protection to agriculture, as to the other branches of industry.
Thus it is evident, that the means of enlarging and multiplying wealth within the reach of every community are much less confined than the economists imagined. A nation, by their account, was unable to produce annually any values beyond the net annual products of its lands; to which fund alone recourse could be had for the support not only of the proprietary and the idler, but likewise of the merchant, the manufacturer, and the mechanic, as well as for the total consumption of the government. Whereas we have just seen that the annual produce of a nation is composed, not of the mere net produce of its agriculture, but of the gross produce of its agriculture, commerce, and manufacture united. For, in fact, is not the sum total, that is to say, the aggregate of the gross product raised by the nation, disposable for its consumption ? Is value produced less an item of wealth, because it must needs be consumed ? And does not value itself originate in this very applicability to consumption.
The English writer, Stewart,who may be looked upon as the leading advocate of the exclusive system, the system founded on the maxim, that the wealth of one set of men is derived from the impoverishment of another, is himself no less mistaken in asserting, that, " when once a 6top is put to external commerce, the stock of internal wealth cannot be augmented."* Wealth, it seems, can come only from abroad; but abroad, where does it come from ? from abroad also. So
that in tracing it from abroad to abroad, we must necessarily, in the end, exhaust every source, till at last we are compelled to look for it beyond the limits of our own planet, which is absurd.
Forbonnais,f too, builds his prohibitory system on this glaring fallacy; and to speak freely, on this fallacy are founded the exclusive systems of all the short-sighted merchants, and all the governments of Europe and of the world. They all take it for granted, that what one individual gains must needs be lost to another; that what is gained by one country is inevitably lost to another: as ii the possessions of abundance of individuals and of communities could not be multiplied, without the robbery of somebody or other. It one man or set of men, could only be enriched at others' expense, how could the whole number of individuals, of whom a state is composed, be richer at one period than at another, as they now confessedly are in France, England, Holland, and Germany, compared with what they were formerly? How is it, that nations are in our days more opulent, and their wants better supplied in every respect, than they were in the seventeenth century? Whence can they have derived that portion of their present wealth, which then had no existence ? Is it from the mines of the new continent ? They had
already advanced in wealth before the discovery of America. Be sides, what is that which these mines have furnished? Metallic wealth or value. But all the other values which those nations now possess, beyond what they did in the middle ages, whence are they derived ? Is it not clear, that these can be no other than created values?
We must conclude, then, that wealth, which consists in the value that human industry, in aid and furtherance of natural agents, communicates to things, is susceptible of creation and destruction, of
increase and diminution, within the limits of each nation and independently of external agency, according to the method it adopts to bring about those effects. An important truth, which ought to teach mankind, that the objects of rational desire are within their provided they have the will and intelligence to employ the true means of obtaining them. Those means it is the purpose of the work to investigate and unfold.