Page:The American Cyclopædia (1879) Volume XIII.djvu/688

 668 POLITICAL ECONOMY to facilitate the exchange of one commodity for another." He holds to the idea that " an increase in the amount of money in a country is rather inconvenient than advantageous, the influence which it exerts being to heighten the price of commodities, and oblige every one to pay a greater number of these little yellow or white pieces for everything he purchases." But he did not fail to observe in actual expe- rience an apparent departure from the course here laid down. He had been led to notice that " in every kingdom into which money begins to flow in greater abundance than for- merly, everything takes a new face ; labor and industry gain life ; the merchant becomes more diligent and skilful, and even the farmer fol- lows his plough with greater alacrity and at- tention." He then enters into a series of rea- sonings to show that it is not immediately upon the receipt of this money into a country that a rise in prices takes place, but that " some time is required before the money circulates through the whole state, and makes its effects felt on all ranks of the people." The rate of interest, he holds, " is not derived from the quantity of the precious metals," but " high in- terest arises from three circumstances : a great demand for borrowing, little riches to supply that demand, and great profits arising from commerce." " I should as soon dread," he adds, " that all the springs and rivers should be exhausted, as that money should abandon a kingdom where there are people and indus- try." While deprecating as unwise and illib- eral all " those numberless bars, obstructions, and imposts," which nations have laid with the object of retaining the precious metals, he says that " all taxes upon foreign commodities are not to be regarded as prejudicial or useless, but those only which are founded upon the jealousy" of the balance of trade. "A tax on German linen encourages home manufactures, and thereby multiplies our people and indus- try. A tax on brandy increases the sale of rum and supports our southern colonies." Among the earliest of the systematic books on politi- cal economy must be included Lezioni di com- mercio, o di economia civile, by the Abate An- tonio Genovesi (2 vols., Naples, 1757). In the opinion of McCulloch, it " is one of the best that has been written on the narrow and hol- low principles of the mercantile system ;" but the denunciation here implied should be taken with much allowance for McCulloch's preju- dices. The book is celebrated, and has often been reprinted. In 1767 appeared in London "An Inquiry into the Principles of Political Economy, being an Essay on the Science of Domestic Policy in Free Nations," by Sir James Steuart, a countryman of Hume. This was the largest and most elaborate, bo ok on the sub- ject which had then been written in English. It treats in detail of population, agriculture, trade, industry, money, coin, credit, debts, in- terest, banks, exchange, public credit, and taxes. Economy in general Steuart defines as ! family with prudence and frugality. Political economy he regards as an art, and also a sci- ence ; and among its important objects are " to provide everything necessary for supply- ing the wants of society, and to employ the inhabitants in such a manner as naturally to create reciprocal relations and dependencies, so as to make their several interests lead them to supply one another with their reciprocal wants." Population he considers limited by the amount of food produced, and " that when too many of a society propagate, a part must starve." He holds that if a nation would aim to be continuously great and powerful by trade, she must first apply closely to the manufac- turing of every natural product of the country; and that when a people find the balance of trade to be against them, it is to their interest to take such measures as will correct the evil. He attacks the theory of Locke and Hume respecting the effect of an increased volume in the circulating medium upon prices. He argues that, while the wealth of a country un- doubtedly exerts an influence upon the prices of certain commodities, prices are really reg- ulated by " the complicated operations of de- mand and competition ;" and that when Hume says that " the price of every commodity is in proportion to the sum of money circulating in the market for that commodity," it really means that the money to be employed in the purchase of it is a measure of the demand for it ; and it in no wise interferes with Steuart's own propo- sition respecting the operation of supply, which is fundamental. In 1772, at the request of the East India company, the same author prepared " The Principles of Money as applied to the Coin of Bengal," in many respects a very able treatise. In 1776 appeared in London the first edition of the great work of Adam Smith, destined to exert so decided an influence on political economy and legislation : u An Inqui- ry into the Nature and Causes of the Wealth of Nations." This remarkable book treats " of the causes of improvement in the produc- tive powers of labor, and the order according to which its produce is naturally distributed among the different ranks of the people ; of the nature, accumulation, and employment of stock ; of systems of political economy ; of the revenue of the sovereign or commonwealth." Dr. Smith holds that the annual labor of every nation is the fund which originally supplies it with what it annually consumes, and that the relative proportion which that produce bears to the consumers is the measure of their sup- ply in the necessaries and conveniences of life ; that the greatest improvement in the produc- tive power, skill, and judgment of labor har arisen from the division of labor ; that the ex- tent of the division of labor is limited by the market for its products ; and that labor is the only universal as well as accurate measure of value, or the only standard by which we can compare the values of different commodities at
 * the art of providing for all the wants of a