WEALTH.
The maintenance of human life may be said to depend wholly upon human exertion. The earth, from which man draws his subsistence, furnishes only the raw materials which, though containing the necessary elements of life, are not in a form suitable for his use and consumption. The harvests of wheat, of oats, of potatoes, the various forms of animal and vegetable life which he consumes, are not the spontaneous offerings of nature. Man has had to dig, plough, sow, plant, prune, reap and labour continuously and assiduously, in order that he and his species might continue to live; and this labour is a perpetual legacy entailed upon mankind. So long as man labours, and so long only, can he maintain his right to life. A few days' cessation from toil on the part of the entire human family would suffice to destroy the world's inhabitants. Although by means of machinery labour's hardships are being continually lessened, no discovery has yet been made by which labour can be wholly dispensed with.
From a condition where his entire physical powers were employed in obtaining subsistence, man has gradually raised himself to a point where a portion of society is able to produce sufficient to support, not only themselves, but a large and constantly increasing number of non-producers. In place of labour's produce being barely sufficient for its own support, it now produces a large and increasing surplus. Nevertheless, the laws of nature prevent us from either hoping or expecting that the need for toil will absolutely cease, for the productions of men are destined to perish. Whether it be his food, wearing apparel, works of art, machines, buildings or massive structures, all are doomed to decay, disintegration and final destruction. From the moment of their birth their dissolution sets in. Although some products may stand for many years, everything must in time, sooner or later, perish. Lugubrious pronouncements would seem the perennial favourites of economists of whatever ilk.
This law of dissolution has therefore entailed upon the human race a perpetual condition of labour, a condition which nothing short of annihilation can rid it of. Labour is, in fact, the supreme condition of life. The original factors in production, as we have seen, are man and nature — nature comprising all that exists outside of man, such as land, water, air, sunshine, natural forces, etc. From the co-operation of these two original agents arise all that we eat, drink, wear, use, consume and enjoy. These products of man and nature that go to satisfy wants are termed commodities or wealth, a correct definition of which has been the subject of considerable dispute for ages.
The importance of a right conception and correct definition of wealth cannot be overestimated, since its economic production and equitable distribution is the aim of political economy, and without a proper conception the whole science becomes perverted. We agree but for different reasons and those who casually throw around words like “perverted” or “perversion” etc. are easily marked out as idealists. Kitson is already skidding. Wealth is the subject-matter of exchange. It is that which the entire human race is in constant pursuit of. It is that which shapes and directs the activities of mankind, that determines the destinies of nations. Consider what this means.
By placing human beings in the same category as commodities, their pursuit and capture was for ages regarded as a legitimate form of wealth production. By making labour a commodity, slavery in a far more extensive and oppressive form has been established. In the 12th century, conspicuous for its professions of piety, some very peculiar things were included under this term. A contemporary French writer enumerates among articles of merchandise found in the market of Landit, besides shoes, clothing, agricultural implements, etc., "femmes folles de leurs corps." (women who love women)
It was the prevalence of false ideas of wealth that brought about the ruin of Spain, and that was the cause of endless destructive wars during the i6th, 17th and i8th centuries. The incalculable evils that the mercantile theory, which made gold and silver the incarnation of wealth, created, economists have already familiarized us with. I shall in this work endeavour to show that a no less error — appalling in its economic results — still exists in the recognition of money as a part of wealth. Riegel needn't have said so, but we agree for the reasons explained in this blog and later in our critique of Kitson.
In defining the term wealth, economists seem to have laboured under considerable difficulty, judging from their writings. "To be wealthy,” says Mill, " is to have a large stock of useful articles." Water, for instance, is a very useful, an indispensably useful article. One may acquire an inexhaustible stock of it without adding one iota to his wealth. This definition is evidently indefinite.
"Wealth," says Adam Smith, "consists not in the in-consumable riches of money, but in the consumable goods annually reproduced by the labour of society." A much more comprehensive definition, but still incomplete. "To create objects which have any kind of utility, is to create wealth," says Say. A definition requiring another, viz., that of utility, which is given as follows: " To this inherent fitness or capacity of certain things to satisfy the various wants of mankind, I shall take leave to affix the name of Utility." John Ruskin, not a professional economist, but a sincere philosopher, says, "There is no wealth but life. Life, including all its powers of love, of joy, and of admiration. That country is the richest which nourishes the greatest number of noble and happy human beings." Beautiful as this definition is, it does not answer to the description of that which is the subject of exchanges. It is, rather, a description of the end to which the use of wealth should tend. Life is not, economically speaking, wealth, but wealth is that which supports and nourishes life. The most extraordinary definition of wealth occurs in "Progress and Poverty." Mr. Henry George says, "Only such things can be wealth, the production of which increases, and the destruction of which decreases the aggregate of wealth." It would be difficult to mention anything to which such a definition might not with equal satisfaction be applied. For instance, poverty is that "the production of which increases and the destruction of which decreases the aggregate of poverty.”
The definition which finds most favour with economists, and the one generally employed, is that defining it as having "power in exchange," or "power in purchasing." The ancient, as well as modern writers, made exchangeability the sole test of wealth. "For that," says Ulpian, "is wealth which can be bought and sold." And John Stuart Mill says, "Everything, therefore, forms a part of wealth which has a power of purchasing." The sense of making exchangeability the test is apparent.
Human life requires for its maintenance and happiness a variety of products, such as food, clothing, shelter, etc., and in order to maintain life a man must acquire these necessaries, and to acquire them he must produce them directly himself or procure them from others. Under economic conditions labour becomes specialized, and each man is compelled to devote himself solely to the production of but one commodity or a special class of commodities. This specialization or division of labour has been the greatest factor in the creation oif surplus wealth of modern times. Such a division of labour is a system of co-operation by which a producer produces not only for himself, but for other members of society, just as they produce for him. Such a system necessitates, therefore, a plan of distribution or exchange whereby everyone may obtain some of the various products of others in exchange for his own. In order to support himself a man's produce must be exchangeable, i. e., acceptable to others whose produce he needs. Exchangeability is, therefore, a sine qui non of wealth, for it is a contradiction in terms to say that a man is possessed of wealth and not the means for supporting life or procuring subsistence. The possessor of gold or gems would be as poor as a beggar without the power of exchanging them.
We're going to step right in here and suggest that all of these fine people who have decided that wealth must have to do with exchange have and do confuse the issue as there is clearly a difference between goods produced and that which produces them exclusive of labour. Certainly wealth is capable of exchange, right down to the land itself which must be considered as part of wealth. But we do not ordinarily confuse goods for sale in a more liquid market, say a pair of shoes or a hunk of cheese, with a piece of land capable of raising cattle from which materials may be secured for the production of shoes and cheese. To ignore the distinction makes a man with a wad of cash who owns no resources as wealthy as the man with little cash but more resources with which to produce something. The result is confusion. Therefore mere exchangeability is NOT the sine qui non of wealth, but the ability of resources to produce an income stream is wealth. Quantities of land and capital resources including machines and raw materials could be wealth when put to use. That they happen to be exchangeable for something else eliminates the useful distinction between income and wealth. Productive capacity is a far better basis for determining actual wealth than anything else!
Thus Aristotle says : " It is absurd to say that wealth is a thing of such a kind, that a man with plenty of it around him may perish with hunger, like Midas in the fable, who, from his insatiable wish, found everything before him turned into gold." Wealth, however, has usually been defined and treated from the individual rather than the social point of view, to the confusion and detriment of the science. What under our present inequitable conditions is wealth to the individual, is not necessarily wealth to society. Bonds, taxes, mortgages and judgement notes are a source of wealth to thousands, but not to society. No, and how elegantly Kitson falls right into our discernment of distinctions! Bonds, taxes, mortgages and judgement notes are a source of INCOME to thousands, and taxes are supposed to be INCOME to society, though they may not be, especially if they are used to prepare for war. Those who hold bonds, mortgages and judgement notes, or can command a level of taxation collectable by whatever FORCE may be required, are certainly in positions to regard these as wealth.
They are rather a source of what Ruskin calls “Illth” ...as in the agglomeration of illness, the opposite of health... in contradistinction to wealth. Lotteries have afforded immense revenues to individuals, but none to the world at large. Exchangeability is, therefore, not the sole test of social wealth (perhaps he's getting it, but more likely not), although it is, commercially speaking, of individual wealth. As we said before, we doubt it. Only that which is capable of producing an income stream which is itself exchangeable for other goods or services is by our definition considered wealth. A chunk of gold or silver by the usual definition is wealth, but since it is rarely capable of producing an income stream, according to our definition, it is not wealth. Nevertheless, Kitson here includes this footnote:
(No writer has done so much to expose the weakness of this definition of wealth, and the gross absurdities to which it may logically lead, as Macleod, although this exposure is evidently unperceived by him. He actually shows that by this definition debts — mere promises-to-pay, rights of action-at-law, — form part of a nation's wealth. Whence it follows that successful blackmailing that results in “promises- to-pay,” is a form of wealth production, and those laws that create taxation, and so create rights of action by the State against its citizens, create wealth. And since the science of economics is to guide mankind in the production and exchange of wealth, blackmailing and taxation should, from the economic point of view, be encouraged!! See his “Theory of Credit," Vol. I, Chap. I, especially where he endeavours to prove that wealth can be produced from nothing!! [This sounds a great deal like Keynes to me, though Macleod preceded Keynes by perhaps 3 generations.] A humorist once undertook to prove by rules of logic that nobody can move; Macleod, not a professional humorist, has undertaken as remarkable a feat! ...accomplished more recently by Keynes and his followers...)
Under the slave system human beings were made exchangeable, and constituted a large portion of the wealth of their owners. Did the Emancipation Act destroy this wealth.? Yes, so far as their owners were concerned; no, as regards the nation. On the contrary, society was admittedly the gainer. (It is generally conceded that the abolition of slavery has greatly benefited the South by compelling the white population to personally engage in production and in labour that formerly was left to the coloured portion of society. Slavery is not and cannot be an economic system of wealth production for any society, for it keeps out of production the most intelligent, and places industry in the hands of those who have no interest in it, who labour not to improve the method of production, but from compulsion — through fear of punishment. At the same time it can scarcely be doubted that by abolishing personal slavery, and establishing the wage system, a large portion of the labouring people are in a worse condition than they would be as actual slaves. By replacing in the category of wealth, persons with their labour, capitalists achieve all they want without the expense and responsibility that slavery involves. When men's persons are owned, their well-being, health and strength are a matter of solicitude on the part of their owners. Not so under wage slavery. It is only their labour that counts. If their labour is poor by reason of sickness or ill health it makes no difference to their employer. He pays only for what he gets and can replace the sick with healthy men at any time.
Count Tolstoi, comparing the present condition of the Russian peasants with their condition of serfdom, says : “Before the serfs were emancipated, I could force Vanka to do any kind of a job; and if Vanka refused I sent him to the local judge, who whipped him till he became tractable. At the same time, if I forced Vanka to overwork himself, if I did not give him land and food, the matter was reported to the authorities, and I had to answer the charge. Now the people are free; but I can force Vanka and Petrushka and Sidorka to do any kind of a job for me, and if one refuses, I give him no money to pay his taxes, and they whip him till he submits; moreover, I can force Germans, Frenchmen, Chinese to work for me, punishing them for disobedience by withholding the money which they need to lease land or buy bread; if I force them to work without food, above their strength, if I kill them with work, nobody will say a word to me; and if, in addition, I am well read in politico-economic books, I may be firmly assured that all men are free, and that money does not conduce to slavery!" 'Essay on Money,' Tolstoi. Translated by Victor Yarros. Published by Benj. R. Tucker, Boston)
Here, then, we find a destruction of private wealth attended by society's gain. Again, a definition ...of wealth... that includes the factors with their products, is clearly unscientific. Kitson gets it! ... at least this part of it. This is what the definition of mere exchangeability does. It includes both man and land, the two prime agents of production. To classify man as wealth, is to degrade him to the level of his works, and such a system ends by making him their slave; and this, political economy has already achieved. It has made of labour a commodity, and since labour cannot exist apart from the labourer, so the one cannot be exploited without the other. The buying and selling of labour is traffic in human beings. It is wealth, or as it is most generally termed, capital, that exploits labour; in other words, since capital is the product of labour, man's works have become his master. He is bought and sold by his own productions. This classification has, in fact, inverted the order of things. Wealth, like the Sabbath, is made for man, and not man for wealth. "Wealth consists of consumable things" says Smith. Man is the consumer, not the thing consumed, yet we find capital employing labour, — that is mankind, — … “human resources” ... instead of labour employing capital.
Again, to categorize land as wealth is likewise unscientific, for wealth consists of definite quantities of things possessing definite qualities, the result of definite human exertions. He's close here, but no cigar. But land, comprising as it does the soil and all beneath it, even to the earth's centre, is an indefinite, indeterminable quantity of matter of unknown qualities. In fact, it is a factor of indeterminable power and is not the product of human labour. Land in its totality comprises the earth; but the earth stands in no definite value relation to any product. It is, in fact, of indefinite value; or we may say, that since all wealth proceeds from labour and land, since it could not exist but for land, the land is of incalculable, of infinite value. In other words, land is not an economic quantity, and therefore it cannot, scientifically speaking, form a part of wealth. Land is the mother and labour the father of wealth.
Other considerations show, too, the impropriety of classifying the factors in production with the products themselves. Wealth is created for use and consumption, and the existence of society depends upon its continued and incessant creation, consumption and renewal. Wealth is naturally and inevitably perishable. It is born to die. Reproduction can only continue so long as the factors are operative, hence the safety of society and of the entire human race depends upon keeping them at all times in a condition free and fit for use. To class them with wealth is to class them with consumable things, and with things capable of being destroyed, reproduced or substituted by other things. Whilst man reproduces his species, land cannot be increased beyond the boundaries of the globe. Being incapable of destruction and increase, and not a product of labour, land is not, scientifically speaking, a part of wealth. At this point, Kitson has clearly jumped over the cliff into idealism and the abyss of confusion. Our definition makes clear that land is capable of being classified as wealth if it participates in the production of anything capable of being reduced to an income stream and moreover all our systems of cost accounting routinely consider use of land as part of their evaluations. Secondly, because Kitson has taken this leap, he is perforce required to set up some arbitrary and ultimately disinterested “authority” to determine what the basis of “social wealth” might be. He is so far oblivious to the diminishing return to scale law, which though it is a real law, one that cannot at all times and places be pre-determined or calculated, except through trial and error. He is going in over his head. It also further needs to be said that if some man or woman does not own a piece of land, then who would? Some state? Some absentee owner? Some disinterested authority? The further land ownership (or even land stewardship) passes from personal responsibility, the more irresponsible can be said to be the consequences. Those who stand against private ownership of land are truly idiots who have not thought through the consequences of their prejudices, for prejudices based on envy they frequently are. We are all aware of the benefits of setting aside certain areas as parks or preserves, but even when that happens there are frequently problems having to do with the usual monopolistic grants of privilege to certain providers of concessions, usage grants, etc.
By classifying the agents of production with produce, they become the subjects of exchange, and, therefore, of private property. The right of private property is the right to use and to prevent others from using. The Roman law defined property as the right to use and abuse one's own, within the limits of the law: “jus utendi et abutendi re sua, quatenus juris ratio patitur” The power to withhold or limit one of the factors of production from society by individuals, is a continual menace and danger to its ...society's... stability NO! This is manifestly so untrue that the very opposite has been observed true and remains so to this day!. It permits the individual to divert land to uses opposed to social welfare NO! Just who is to be the judge of just what this “social welfare” happens to be? Some disinterested panel of experts making their “great useless plans?”. Under such a system, future production is an uncertain quantity, since the extent of the agents devoted to production depends upon the caprice or pleasure of individuals NO! His reasoning is flipped on its head: The only ones who could make the best evaluation are those who have a personal stake in the outcome of production, not some far off disinterested social agent with some idealistic agenda, and by limiting the amount of productive land the number of human producers become also limited NO! Again, he is oblivious to the fact that any human enterprise suffers from inefficiencies brought about by applying too many hands to processes that have exceeded natural capacities; diminishing returns to scale. The problem which such a system presents is analogous to that of determining the product of two unknown numbers, or of a known and an unknown factor NO! His metaphor is inaccurate and misapplied! Kitson's fusillade attack on private property is hereby rejected as utterly preposterous! A real “scientific” approach would involve considering historical precedents where production and wealth worked well and even when you have actually bothered to consider the facts of these situations, these “studies” would amply demonstrate the limitations of your scientific purview; no “science” can observe the whole of anything and therefore science is a limited means of gaining knowledge sufficient to make universal claims about any “social welfare” for universal application. This blog's reason for being was to propose something far more limited and modest, which might have a wider usage; the creation of a substitute machine to handle monetary exchange rather than suggesting a universal machine for reordering society.
To ensure the most economical production of social wealth, the factors must be unrestricted in production and at all times free for social use And just who is to determine all that? Some dictator? What if he's wrong? Since he's made all the decisions for everyone, if he's wrong everyone suffers. Kitson cannot possibly be right here. It should also be noticed that land, being as necessary an agent as man, there is no good economical reason why, if one is properly the subject of exchange, the other should not be. If as Mill says, "Moral considerations have nothing to do with political economy,” man is as properly an article of merchandise as land; or, to put it in other words, slavery is quite as justifiable as private ownership of the soil. NO! And not just NO! but HELL NO! Kitson is very badly confused here and we will not let him get away with it. Private ownership of land is NOT the same as private ownership of other human beings. They cannot be compared at all!
Wealth, the way as we saw in a previous chapter, consists of those things of human production, the use of which tend to social wealth. (*It is a contradiction in terms to classify that as economic wealth which tends to society's destruction. Exchangeability does not determine this. Hence the need of a definition of wealth in its absolute or positive sense — in terms of social welfare.) Baloney! Wealth is that capable of producing income, period! There is no way whatsoever to precisely or “scientifically” determine “social” wealth, also period! It does matter to the wealthy who commands that wealth and how it is managed, but it cannot matter or have any sustainable meaning beyond strictly private ownership, PERIOD! THAT can be “scientifically,” as in by reference to repeat experimentation by historical documentation, verified, as nothing Kitson may further recommend ever can or has. But, this is an exercise in analysis, so we shall continue. And " Illth," to borrow a term from John Ruskin, are those productions which tend to social woe. (Before we go much further, to those who have been paying any attention to the “education” offered through this blog and its references to the other awake sources, Ruskin was very much part of the groups which superseded the present push for a New World Order. The source for this is Carroll Quigley. To those in Ruskin's camp, “social woe” would have been anything that implied their little group shouldn't maintain its power.) That is the highest form of wealth, the use of which fulfils, to the highest degree, the end for which it is created, viz., the prosperity and happiness of society. These definitions exclude both labour and land from the category of wealth. We are NOT in agreement here. Land is only potentially wealth as it partakes in production and the same may be said of labour as distinct from the humans who perform it. We consider Kitson's inability to divorce the man from his labour and land from production as a kind of BLINDNESS to which many speculative thinkers have and do suffer.
It is impossible to specify every commodity that answers to the above definition. Human experience alone can determine, in many instances, what is beneficial to society and what is not. This, however, is no discredit to the definition, for the object of the science is to act as a guide, and furnish a standard, by following which society will grow happier and more prosperous, until the economic goal of civilization — viz., the abolition of poverty — shall have been achieved. Guided by the principles of justice — the only foundation of a true economy — we shall be able rapidly to determine between true and spurious wealth. By now it should be quite clear where Kitson has failed. First he says that his definition cannot be satisfied by a concise summary, his experimental basis lacks boundaries, nevertheless the object of “science” is to act as a guide (the fallacy of deference to authority) and further assumes that there is a readily agreed upon economic goal of civilization, which is the abolition of poverty. Well and good if we accept his assumptions, but in order to suffice, someone – an authority- must decide.
The world's experience is already sufficient to enable us to make the requisite distinction to a very great extent. The mere transference of wealth from the pocket of one individual to that of another, for instance, is not wealth-production. Hence gambling, pocket-picking and taxation are not conducive of social weal. But as mankind becomes more and more enlightened ...which is assuming a tremendous lot..., and as society grows in scientific knowledge, its list of merchandise, of wealth, will be constantly changing. Now, he's decided that wealth is merchandise rather than that which produces it. More confusion.
Many things now sought after will be shunned, and when society shall have reached that state in which all its members have full knowledge of, and a desire for those things that promote the general happiness of mankind, exchangeability will be the sole and supreme test of social wealth. BALONEY! Thinking this way is pure idealism and pure bunk!
Until then, exchangeability will not serve to distinguish between those things that tend to weal, and those that tend to woe. It will be but the test of individual wealth. So far I have endeavoured to show the need of a definition of wealth that harmonizes at all times with what must rightly be considered the true aim of a science of political wealth, viz., human well-being. Now to define wealth as that having exchange-power, is to leave the aim of the science an open question.
Instead, then, of being a moral science, a science promoting social weal, economics becomes the science of human caprice. In defining wealth as that which satisfies human desires, it must be taken for granted that human beings desire their own happiness and well-being. Well-being is a positive and known condition, a condition that tends to the maintenance and prolongation of life, and in general, human happiness is promoted by definite actions, by the use and consumption of certain things. It is not a mere matter of opinion. Well, yes it is. So, jump on the bandwagon and any who don't or wont are the bane of the ideology he has set forth. Certainly nothing in Riegel's works ever proposed or required such nonsense!
Bread and meat go to nourish and sustain life (Vegetarians and others would disagree), and arsenic and opium to destroy it, irrespective of individual tastes and appetites (Opiates used as analgesics are quite useful for processes that would sustain life after suffering a severe trauma or injury). The science of ethics recognizes certain lines of conduct as conducive of happiness (Whose happiness? That of the rulers would be supposed); certain lines that tend to misery. It presents an ideal standard — certain fixed principles— conformity to which leads to definite results (hear the sound of thousands of goose-stepping marching feet!).
There is no good reason why, as stated in the preceding chapter, a similar standard and similar fixed rules for guidance should not be adopted by economists. In fact, since men desire their own welfare, without often knowing what conduces thereto, a definition in positive terms seems as essential in regard to wealth as to conduct. So far, Jack, your definition aint as good as mine!
For this reason I have defined wealth in terms of social well-being rather than those of individual desires. The desires of individuals are too often contrary to their own and society's welfare. Who's to say this? Kitson himself? What asinine reasoning! None but a dictator would dare declare what social well-being might be, as it is NOT definable by any means, as history has amply demonstrated, and THERE'S your “science” and its limitations.
To leave wealth in this unsettled state, is to see the science, as we find it today, opposing itself. As a practical, a relatively correct test, exchange ability is used conformably with the definition of economists. It is to this standard, however — ^its true definition in positive terms — that law-makers and social reformers MUST have regard in all their efforts to better the lot of mankind. Emphasis mine. Anyone saying MUST is always an idealist, it's a dead give away. Notice what he says next - It is toward that end that practice must be constantly directed if society is to be guided by science. Really! Perhaps societies exist which do not wish to be guided by science. What then? Are they doomed for not going along with your idealistic schemes? We know people who, in spite of what they may say to the contrary, actually believe this. Under present conditions, wealth is invariably regarded from the individual standpoint, and political economy, instead of the science by which society becomes enriched, is an egoistical economy, or the science by which the individual may enrich himself at the expense of the community. Who is actually egotistical on behalf of society here? This is a typical projection! "There have been and still are," says Ruskin, "many sciences as well as arts of individuals getting rich. Poisoning people of large estates, was one employed largely in the middle ages; adulteration of food of people of small estates, is one employed largely now. The ancient and honourable Highland method of blackmail; the more modern and less honourable system of obtaining goods on credit, and the other variously approved methods of appropriation — which, in major and minor scales of industry, down to the most artistic pocket-picking, we owe to recent genius — all come under the general head of sciences or arts of getting rich.” Yes, but none of this is really economics. Even Ruskin would have known that.
Notwithstanding the ignorance and error that still pervade our political systems, there are many signs of improvement; and legislators are beginning to perceive that the methods by which some acquire wealth are not conducive to the growth of that of society. Instance the laws against gambling, card-playing, and for the suppression of the lottery systems. If legislators were consistent, the extension of these laws to include those far more serious forms of gambling, which are reported daily by the press under the title of the "Money Market' in which the stakes consist of vast industrial enterprises, of agricultural products, of mineral wealth, with which thousands of human lives are associated and become indirectly a part of the gambling stakes, would be rapidly made. One can make all the “law” one wants without affecting anything, because there will always be those out there, speculators of all kinds, who will still want to play their games. They just go underground. These are all more signs of an idealistic outlook, which is at best beside the point and at worst a recipe for despotism.
Having determined what wealth is, in its original and true significance, we must now discuss it from the standpoint of exchange. The branch of political economy known as the science of exchange deals solely with quantities, and we shall find that the terms it employs are all quantitative terms; hence the science becomes, strictly speaking, a mathematical science. We part company with Kitson and just about every other economist here as well, because Riegel's conception of money was not a quantity but a fixed standard of value measurement irrespective of the quantity of money.
In practice, exchangeability is made the sole test of wealth. This excludes all things which nature provides in abundance, and which require no human effort to obtain, such as air, sunshine, water, etc. The term commodities comprises all those things which are properly classed as wealth, a single one or unit of which is a commodity. A commodity presents itself as a definite quantity of something possessing definite qualities. If it be a material thing it is so many pounds, tons, gallons, yards, or bushels of a substance. It is a measurable thing. The qualities of things are primarily what make them desirable by administering to our comforts; such as the strength of iron, conductivity of copper, transparency of glass, combustibility of coal, etc. It is the quantity of a thing that makes it useful. Now all commodities are useful things, but all useful things are not exchangeable, hence all useful things are not commodities. In this sense, therefore, utility alone, i. e., ability or capacity to satisfy certain wants, does not make a commodity exchangeable. (A glass of water taken from the wayside spring is as grateful as if one had to purchase it. The utility exists apart from and is altogether independent of exchangeability.) A product must first be useful to be exchangeable, but something else is necessary to ensure its exchangeability. This something else, we shall hereafter see, is scarcity or limitation of supply, whether limited by nature or artificially. Since the qualities of things are primarily what make them useful, utility is principally confined to the qualitative aspect of things. It is true that when supplied in excessive or minute quantities, certain things which would otherwise be useful, become useless, still our choice of a thing is determined first by its quality. The names by which commodities are known designate their qualities. Thus gold, wheat, wine, wool, are terms that at once convey to us qualitative ideas - and therefore utilities.
All right, but if wealth is just an accumulation of “stuff” even that stuff which has “utility” that can be exchanged, that definition isn't really very useful. We'll stick to the narrower definition: wealth or a common-wealth, is that capable of providing an income, a “living” or “livelihood” as opposed to mere “stuff.” And of course wealth can be accounted for in some monetary terms of value determined by whatever measure of value one uses. In the case of Riegel based Value Units, this is determined by preferences among a variety of needs, wants, determined by common aggregate transactions; supply and demand and usually applied and understood locally. If one uses a commodity based money, whether that be gold or bitcoin, then the speculations involving those “monies” warp their value measurement, as if today's inch or centimetre were a matter of speculation rather than a fixed measure. Today's (17 Dec, 2014) ounce of gold would buy only 688.15 Value Units, when at inception (2 Nov, 2011) it would have bought 1,000 Value Units. By any known means of value measurement, gold has lost its purchasing power since then.
In speaking of commodities in a general way, we distinguish between them by such qualitative names as above. In speaking of exchangeable commodities, however, we always define them quantitatively, such as one ton of iron, one bushel of wheat, one quart of wine, etc. It is with quantities that the science of exchange deals; it is not concerned with the qualities of things. This forms a separate study. It is the exchange relationship of commodities that economics seek to investigate, and this relationship we shall find is purely a relation of quantities.
The qualities of things are incommensurable. For instance, what do a coat, a book, and a watch possess in common to render them commensurable (or wheat, iron and gold)? How is it possible to find a common denomination for the qualities of things? When considered from their quantitative aspect, however, the relationship of commodities finds ready expression. Quantities are expressed numerically, and hence are commensurable. I shall show hereafter, at greater length, that the relationship of exchangeable commodities finds expression in numbers, and numbers only. To sum up then: commodities, when considered objectively, are regarded as definite quantities of things having different qualities; but economics deals with them only in their quantitative aspect. Considered subjectively, exchangeable commodities are useful things. As useful things they present themselves principally in their qualitative aspects; and as exchangeable things, or things of value, we deal with them from their quantitative standpoint.
We actually think not: let's suggest two examples.
1) a typical men's navy blue wool blazer that might sell for $X at large store A may sell for as much as 3 times $X at prestige men's store B, the only difference being the label inside the coat, otherwise they are identical. And 2) a jar of fruit jam having high fructose corn syrup as an ingredient sells for $X at large store A and the same jam not made with high fructose corn syrup selling for perhaps 2 times $X at a members only store B. In the first example we very well may be considering mere quantity from a common wholesaler, in the second example we are considering two different products. Matters of quality, whether real or perceived, do in fact impact price.
Before closing this chapter we must consider one difficulty that will not have escaped the thoughtful student regarding the definition of this term wealth.
The tendency of modern industrial enterprise, of inventions and labour-saving devices, is to cheapen production and vastly increase the quantity of commodities. As Professor Smart says, "Certain goods we have from nature without money and without price, and the incessant effort of the industrial world is in the direction of bringing all goods nearer to that category. Indeed, some of the necessaries of life have already been brought so nearly to that condition, that States and municipalities occasionally pay the small remaining price and distribute them as heaven does the rain." (Introduction to "Theory of Value”) But now as soon as this goal of economic production has been reached, by the definition of wealth — that having power in exchange — wealth disappears. If manna is rained from heaven, it ceases to be wealth, regardless of the fact that it supports life and economizes human labour. It is only wealth so long as it is scarce, i. e., so long as it is too limited in quantity to do more than supply the effective demand.
Applying our narrower definition helps explain why for example, for any human enterprise, there can be only a certain number of labour slots available before any more added reduces productivity; the diminishing returns to scale rule. Even if “effective demand” were never known as a quantifiable something, wealth would have to be assumed to be an ultimate scarcity. The revised definition of wealth would be that scarce quantity of anything from which to derive an income, living or livelihood.
Thus economists find themselves face to face with an extraordinary paradox, viz., that the more industry approaches its goal, the more it tends to destroy what is defined as wealth; or, to put it in other words, we grow less wealthy as we increase our substance. It is a well understood fact in commercial circles, that a man may impoverish himself by over-productiveness. The Austrian School of Economics illustrates this phenomenon in their definition and illustration of the term value. Since wealth is always estimated and defined in terms of value, the same illustration will answer for both cases. Professor Smart gives the substance of Wieser's chapter on the paradox of value in these words:
"Suppose that I have a certain good the employment of which yields me a utility represented by 10, and that I add successively ten similar goods to my stock, the marginal utility at each addition diminishing by one. The value of the stock will stand successively at lo, 18 (9x2), 24 (8x3), 28 (7x4), 30 (6x5), 30 (5x6), 28 (4x7), 24 (3x8), 18 (2x9), 10 (1x10), 0 (0x11). Here, obviously, each added good brings a smaller utility than the last, and at each addition the marginal utility, and with it the value of the utility of goods, falls. But while the value of the single good thus steadily falls, the value of the whole stock describes a peculiar course: it rises from 10 to 30, and then falls from 30 to zero. This phenomenon of increasing wealth accompanied by decreasing value is a paradox from which we shall not -escape so long as we consider value a simple and positive amount."
Nothing may be this easy to quantify but it describes a certain kind of natural law; of diminishing returns to scale.
It will be seen that after a certain point, increase of stock actually leads to a loss of wealth. This fact is the principal cause of one of the greatest economic disturbances of modern times, viz., the formation of trusts and combines, the object of which is to enhance values by restricting production. The subject which this opens up is too vast to do more than touch upon at this time. I can, therefore, merely point out what in my judgement is largely the interpretation of this paradox.!
In estimating wealth, we invariably compute in the monetary units of the country we happen to reside in. Thus we say a man is worth so many thousand, or hundred thousand dollars, although he may possess actually but a few hundred.
What we mean is, that if he disposed of his property he could realize this amount of money. Hence we define wealth in terms of the medium of exchange. When, therefore, it is said that increased productiveness often tends to lessen wealth, the expression is used in a purely relative sense and merely in relation to money. It does not mean that society is worse off with an abundance of good things than with a scarcity, but that an abundance tends to cheapen each individual portion of such things, and as their value is determined by their marginal employment, they can be sold only for less money when they are plentiful than when scarce. It will be seen that the disturbing element in this question is money.
Thus, if the exchange relations of commodities were expressed in terms of one another, and if all commodities were produced alike and were equally abundant, increase in the quantity of goods would mean a proportional increase in wealth. Money is thus the most important subject with which the industrial world has to deal, and as I shall show, later on, the solution of the paradox we have just considered is dependent upon the scientific solution of the money problem.
It must be remembered that the aim of this science is the production and distribution, not of money, in terms of which we define and estimate wealth, but of goods, of commodities. Under this definition it is the money power that determines whether the production of certain commodities is the creation of wealth, or not! It is not the ability of a commodity to satisfy human wants that makes it at the present day valuable, but ability to satisfy the demand of the money monopolist! Hence this definition of wealth, as power in exchange — meaning power to procure the medium of exchange, money — leads the science still further away from its original pursuit. Instead of aiming at the satisfaction of the wants of human beings and welfare of the human race, it is employed in endeavouring to meet the exorbitant demands and caprices of the few who have money. This it is that creates the distinction between what is known as the "actual" and "effective" demand. This is the reason that the welfare of the masses -see he uses this derogatory term too. No, it's the people, not the masses. We are not insects- is dependent upon the "law of diminishing returns of gratification" of the classes -another offensive pejorative.
In estimating wealth in terms of a special monopolized commodity — in the production of which free competition is eliminated — its acquisition has become the sole object of commerce, and commodities are produced for this one main purpose. Here, then, the paradox becomes intelligible. It arises through the perversion of money. The satisfaction of human desires, which the science seeks to gratify is attained by production, and products are the result of human labour and are the objects of exchange. As long as human beings have desires unsatisfied, so long will products that serve to satisfy those desires form a part of real wealth.
With commodities exchanged directly with each other -pure barter- this paradox would not appear. Under a just system of distribution, the law of diminishing returns could come into operation only when the desires of all were satisfied, and that would mean the extirpation of poverty and want. Superfluity arises out of inequitable distribution. The paradox that the production of commodities tends at certain points to the lessening of wealth or of values, is the result of measuring wealth by money or by a commodity which is monopolized by a privileged class of society. Hence, when a particular want of this kind becomes satiated, the moneyed class are indifferent to that particular commodity; they refuse to pay any more money for it; its value falls to zero and it ceases to be wealth, notwithstanding that thousands of men who have no money may be dying for the want of this very commodity for which they would willingly give their labour. This evil is entirely due, as we shall presently see, to a monopolized, legally-restricted currency.
With most of this, we are in substantial agreement.
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