MRS. B

BEFORE we proceed to the subject of trade, it is necessary that you should understand what is meant by the value of commodities.

CAROLINE

That cannot be very difficult; it is one of the first things we learn.

MRS. B

What is learnt at an age when the understanding is not yet well developed, is not always well learnt. What do you understand by the value of commodities?

CAROLINE

We call things valuable which cost a great deal of money; a diamond necklace, for instance, is very valuable.

MRS. R.

But if, instead of money, you gave in exchange for the necklace silk or cotton goods, tea, sugar, or any other commodity, would you not still call the necklace valuable?

CAROLINE

Certainly I should; for, supposing the necklace to be worth 1000l., it is immaterial whether I give 1000l. in money, or 1000l. worth of any thing else in exchange for it.

MRS. B

The value of a commodity is therefore estimated by the quantity of other things generally for which it will exchange, and hence it is frequently called exchangeable value.

CAROLINE

Or, in other words, the price of a commodity.

MRS, B.

No; price does not admit of so extensive a signification. The price of a commodity is its exchangeable value, estimated in money only. It is necessary that you should remember this distinction.

MRS. B

I HAVE some further remarks to make to you on the nature of capital.

A land owner, when he increases his capital by savings from his income, may probably, instead of employing the whole of his additional capital on husbandmen, find it more advantageous to lay out some part of it on workmen to build barns and outhouses, to store his crops and shelter his cattle; he may plant trees to produce timber, build cottages, and bring into cultivation some of the waste land on his farm.

A manufacturer also, in proportion as he increases the number of his workmen, must enlarge his machinery or implements of industry.

CAROLINE

But the capital laid out in buildings, tools, and machinery will not yield a profit, like that which is employed in the payment of workmen, the produce of whose labour is brought to market?

MRS. B

The farmer and manufacturer would not lay out their capital in this way, did they not expect to reap a profit from it. If a farmer has no barn or granary for his corn, he will be compelled to sell his crops immediately after the harvest, although he might probably dispose of them to greater advantage by keeping them some time longer. So a manufacturer, by improving or enlarging his machinery, can, with less labour, perform a greater quantity of work, and his profits will be proportionate.

Thus, for instance, when a manufacturer can afford to establish a steam-engine, and employ a stream of vapour as a substitute for the labour of men and horses, he saves the expense of more than half the number of hands he before employed.

CAROLINE

IN our last conversation, Mrs. B., you pointed out the evils arising from an excess of population; they have left a very melancholy impression on my mind. I have been reflecting ever since whether there might be any means of averting them, and of raising subsistence to the level of population, rather than suffering population to sink to the level of subsistence. Though we have not the same resource in land as America; yet we have large tracts of waste land, which by being brought into cultivation would produce an additional stock of subsistence.

MRS. B

You forget that industry is limited by the extent of capital, and that no more labourers can be employed than we have the means of maintaining; they work for their daily bread, and without obtaining it, they neither could nor would work. All the labourers which the capital of the country can maintain being disposed of, the only question is, whether it be better to employ them on land already in a state of cultivation, or in breaking up and bringing into culture new lands; and this point may safely be trusted to the decision of the landed proprietors, as it is no less their interest than that of the labouring classes that the greatest possible quantity of produce should be raised. To a certain extent it has been found more advantageous to lay out capital in improving the culture of old land, rather than to employ it in bringing new land into tillage; because the soil of the waste land is extremely poor and ungrateful, and requires a great deal to be laid out on it before it brings in a return.

CAROLINE

I HAVE been reflecting much upon the subject of our last conversation, Mrs. B.; and it has occurred to me that though there may be no permanent excess and depreciation of specie in any particular country, yet it must gradually decrease in value throughout the world: for money is very little liable to wear; a great quantity of the precious metals is annually extracted from the mines, and though a considerable portion of it may be converted into plate and jewellery, yet the greater part, I suppose, goes to the mint to be coined, and this additional quantity must produce a depreciation of value?

MRS. B

An increase of supply will not occasion depreciation of value, if there should at the same time be a proportional increase of demand, and we must recollect that the consumable produce of the earth increases as well as that of the mines — the commodities to be circulated as well as the medium of circulation; and it is not the actual quantity of money, but the proportion which it bears to the quantity of commodities for which it is to serve as a medium of exchange, that regulates the price of those commodities.

Let us suppose the price of a loaf of bread to be one shilling; and say, if 1000 more loaves of bread be produced every year by agriculture, and such an additional number of shillings be obtained from the mines as will be necessary to circulate them, the price of a loaf will then remain the same, and the value of money will not, by this additional quantity of specie, be depreciated.

MRS. B

WHEN we last parted, you expressed a wish that we should raise all our corn at home, in order to be completely independant of the casualties attending a foreign supply.

CAROLINE

Yes; for were we at war with those countries which usually furnished us with corn, they would withhold the supply. Or, should they experience a dearth, they would no longer have it in their power to send us corn.

MRS. B

We occasionally import corn from different parts of America, from the shores of the Baltic, and those of the Mediterranean seas. Now it is very improbable either that we should be in a state of warfare with those various countries at the same period of time, or that they should all be afflicted with a dearth of produce in the same season. There is much greater chance of a scarcity prevailing in any single country than in every part of the world at once; and should we depend wholly on that country for our supply, where would be our resource in case of a deficiency?

CAROLINE

Under such circumstances it would certainly be right to import corn; I object only to doing so habitually, and not depending, in ordinary times, on the produce of our own country.

CAROLINE

WELL, my dear Mrs. B., since you have reconciled me to wealth, and convinced me how essential it is to the happiness and prosperity of nations, I begin to grow impatient to learn what are the best means of obtaining this desirable object.

MRS. B

Do not leave every thing to me, Caroline, I have told you that you were not without some general notions of political economy, though they are but ill arranged in your mind. Endeavour therefore, to unravel the entangled thread, and discover yourself what are the principal causes of the production of wealth in a nation.

CAROLINE

I assure you that I have been reflecting a great deal upon the subject. I do not know whether I am right, but I think it is labour which is the cause of wealth. Without labour the earth would yield but very little for our subsistence. How insignificant are its spontaneous productions compared with those derived from agriculture! The crab with the apple; the barren heath with the rich pasture of the meadow!

MRS. B

It is very true that labour is a most essential requisite to the creation of wealth, and yet it does not necessarily insure its production. The labour of the savage who possesses no wealth is often more severe than that of our common ploughman, whose furrows team with riches. The long and perilous excursions of savages in search of prey, the difficulty which, from want of skill, they must encounter in every process of industry, in constructing the simplest habitations, fabricating the rudest implements;—all concur to increase their toil.

MRS. B

IN tracing the progress of society towards civilization, we noticed the happy effects resulting from the security of property and the division of labour. From this period we may also date the distinction of rich and poor.

CAROLINE

And all the evils that arise from inequality of condition. This, alas! is the dark side of the picture. The weeds spring up with the corn.

MRS. B

I know not how this distinction can be called an evil. If it does not exist in a savage state, it is because indigence is universal; for no one being able to acquire more than what is necessary for his immediate maintenance, every one is poor. When civilization takes place, the advantages arising from the division of labour enable an industrious skilful man to acquire more wealth than will suffice to gratify his wants or desires. By continued exertion this surplus produce of his industry in the course of time accumulates, and he becomes rich, whilst the less industrious, who acquires merely a daily subsistence, remains poor or possessed of nothing.

CAROLINE

I see no great advantage in this accumulation of wealth, for it must either be spent or hoarded; if spent, the industrious man is eventually no richer than his idle neighbours; and if hoarded, the accumulation is of no use to any one.

IN offering to the Public this small work, in which it is attempted to bring within the reach of young persons a science which no English writer has yet presented in an easy and familiar form, the author is far from inferring from the unexpected success of a former elementary work, on the subject of Chemistry, that the present attempt is likely to be received with equal favor. Political Economy, though so immediately connected with the happiness and improvement of mankind, and the object of so much controversy and speculation among men of knowledge, is not yet become a popular science, and is not generally considered as a study essential to early education. This work, therefore, independently of all its defects, will have to contend against the novelty of the pursuit with young persons of either sex, for the instruction of whom it is especially intended. If, however, it should be found useful, and if, upon the whole, the doctrines it contains should appear sound and sufficiently well explained, the author flatters herself that this attempt will not be too severely judged. She hopes it will be remembered that in devising the plan of this work, she was in a great degree obliged to form the path she has pursued, and had scarcely any other guide in this popular mode of viewing the subject, than the recollection of the impressions she herself experienced when she first turned her attention to this study, though she has subsequently derived great assistance from the kindness of a few friends, who revised her sheets as she advanced in the undertaking.

MRS. B

I TRUST that you now understand both the manner in which capital is accumulated, and the various modes of employing it to produce a revenue. It remains for us to examine how this revenue may be disposed of.

CAROLINE

I have already learnt that revenue may either be spent, or accumulated and converted into capital; and that the more a man economises for the latter purpose, the richer he becomes.

MRS. B

This observation is equally applicable to the capital of a country, which may be augmented by industry and frugality, or diminished by prodigality.

CAROLINE

The capital of a country, I think you said, consisted of the capital of its inhabitants taken collectively?

MRS. B

It does; but you must be careful not to estimate the revenue of a country in the same manner, for it would lead to very erroneous calculations. Let us for instance suppose my income to be 10,000l. a-year, and that I pay 500l. a-year for the rent of my house—it is plain that this 500l. constitutes a portion of the income of my landlord; and since therefore the same property, by being transferred from one to another, may successively form the income of several individuals, the revenue of the country cannot be estimated by the aggregate income of the people.

CAROLINE

And does not the same reasoning apply to the expenditure of a country; since the 500l. a-year which you spend in house-rent will be afterwards spent by your landlord in some other manner?

CAROLINE

I HAVE been thinking a great deal of political economy since yesterday, my dear Mrs. B., but I fear not to much purpose; at least I am no farther advanced than the discovery of a great confusion of ideas which prevails in my mind on the subject. That science seems to comprehend every thing, and yet I own, that I am still at a loss to understand what it is. Cannot you give me a short explanation of the nature of the science, that I may have some clear idea of it to begin with?

MRS. B

I once heard a lady ask a philosopher to tell her in a few words what is meant by political economy. Madam, replied he, you understand perfectly what is meant by household economy; you need only extend your idea of the economy of a family to that of a whole people—of a nation, and you will have some comprehension of the nature of political economy.

CAROLINE

Considering that he was limited to a few words, do you not think that he acquitted himself extremely well? But as I have a little more patience than this lady, I hope you will indulge me with a more detailed explanation of this universal science.