Letters to Malthus on Political Economy and Stagnation of Commerce
Jean Baptiste Say (1821)

LETTER THE FIFTH.

SIR,

On reading your Principles of Political Economy, the first object which struck my attention was that great evil which torments the human race, and prevents them from living on their productions. Although in the order of ideas, a discussion on the nature of wealth ought to precede this, in order to assist the mind in comprehending all the phenomena which relate to its formation and distribution, I have not thought it right to give it the preference, as it appears to be more peculiarly interesting to those who cultivate the science of political economy, without any view of carrying it into practice. Still I cannot lay down my pen without giving you my opinion on this head. I have your own sanction for so doing, in the noble candor with which you invite every discussion that may tend to enlighten the public. "It is to be desired," you say, (page 4) "that those who are looked upon by the public to be competent judges should agree upon the principal points." They cannot be made too clear.

You complain of the definition which Lord Lauderdale gives of wealth, when he says that "it is every thing man can desire, that can be useful or agreeable to him," as being too vague, and I think you are very right. I am seeking the definition which you think ought to be substituted for this, and I find that you give the term wealth to "all material objects that are necessary, useful, or agreeable to man" (page 28). The only difference I see between these two definitions consists in the word material, which you add to that of my Lord Lauderdale, and I must confess that this word appears too me to be contrary to the truth.

You will anticipate my reasons. The great discovery of political economy, and what will render it everlastingly precious, is the having shown that everything may be converted into wealth. From that time man has been made capable of knowing what it is necessary for him to do, to attain these happy means of satisfying his desires. But as I have formerly had occasion to observe, it is beyond the power of man to add a single atom to the mass of matter, of which the world is composed. If he creates wealth, wealth is not matter: there is no medium. By means of his capital and his land, man can only change the combination of matter, to confer utility upon it, but utility is an immaterial quality.

This is not all, Sir; I fear your definition does not contain the essential character of wealth. Allow me to give a few explanations in support of my idea.

Adam Smith and all the world have observed, that a glass of water, which is a very precious thing when we are thirsty, was not wealth.. It is however a material object, it is either necessary, useful, or agreeable to man. It fulfils all the conditions of your definition, and it is not wealth. At least not that wealth which is the subject of our study, and that of your book. What is wanting to make it so? possessing value.

There are things indeed which are natural wealth, very precious to man, but which are not of that kind .about which political economy can be employed. Can it increase them? Can it consume them? No, they are subject to other laws. A glass of water is under the government of natural law. The attachment of our friends, and our reputation in the world, depend upon the moral law, and not on that of political economy. What then is wealth, the main spring of this science? that which is susceptible of creation and destruction, of more and of less; and this more, this less, what is it against value.

You yourself, Sir, are obliged to confess it in many places. You say (page 340,) "It appears therefore, that the wealth of a nation depends partly on the quantity of production obtained by its labor, (it depends on this altogether,) and partly on the adaptation of this labor to the wants and means of the population, for the purpose of giving value to its productions." And in the following page, you are still more positive. After having gone further into the question, you admit that, "it is evident that in the present state of things, the value of commodities may be considered as the only cause of the existence of wealth." How can it be then, that so essential an ingredient as value, is wanting to your definition?

But that is not sufficient: we should know but very imperfectly the nature of wealth, if we were not well to define this word value. In order. to possess great wealth, is it enough that we value our possessions very high? If I have, built a house which I find delightful, and think it might to estimate it at a hundred thousand francs, am I really worth a hundred thousand francs on account of this house? We receive a present from a person who is dear to us, which is inestimable in our eyes — does it follow that that makes us immensely rich? You cannot think so. In order for a value to be riches, it must be an admitted value; not by the possessor, but by another person.. Now what irresistible proof can be given, that a value is admitted, if not, that in order to have it, other persons consent to give in exchange a certain quantity of other things, which are valuable.

Notwithstanding I may have estimated my house at a hundred thousand francs, what shall I have made of it, if I can find no one who will give me more than fifty thousand of those pieces which we call francs. It is in fact worth no more than fifty thousand, it makes me worth no more than fifty thousand, or whatever may be bought for fifty thousand francs.

Thus Adam Smith,(38) immediately after having observed that there are two sorts of values, one value in use, the other value in exchange, completely abandons the first, and entirely occupies himself all the way through his book with exchangeable value only. This is what you yourself have done, Sir;(39) what Mr. Ricardo has done; what I have done; what we have all done: for this reason, that there is no other value in political economy than that which alone is subject to fixed laws; that that alone forms, distributes, and destroys itself conformably to invariable rules, which may become the subject of a scientific study. By a necessary consequence, the price of each article being its exchangeable value in money, there are no other than current prices in political economy. What Smith calls natural prices have nothing more natural in them, than all the rest. It is the cost of production, the price current of productive services.

I do not pretend to deny that you have in Mr. Ricardo a powerful and respectable auxiliary. He was against you in the question of Vent, he contends with you on the question of Value, but notwithstanding my connexion with him, and the mutual esteem we entertain for each other, I have not hesitated to combat his opinions.(40) Our first inclination for each other, and I am bold to say yours and mine also, was it not for the sake of the public good and of truth?

These are Mr. Ricardo's words: "Value is essentially different from wealth, for value does not depend upon the abundance (of the things necessary or it agreeable,) but on the difficulty or facility of their production. The manufactural labor of a million of persons will always produce the stone value, but not always the same wealth. By more perfect machines, a more practised ability, a better divided labor, the opening of fresh markets giving rise to more advantageous exchanges, a million persons may produce double and treble the quantity of necessary or agreeable things, than they could produce in another social situation, and still they would add nothing to the total value.''(41)

This argument, founded on uncontested facts, appears perfectly to agree with the opinion you maintain. The question is, how these facts strengthen instead of weaken the doctrine of value, the doctrine which establishes, that wealth consists in the value of the things we possess; confining this word value to the only admitted and exchangeable value.

In fact what is value, but that quality susceptible of appreciation, susceptible of more or less, which is inherent in the things we possess. It is the quality which enables us to obtain the things we want, in exchange for the things we have. This value is the greater, in proportion to the quantity which the thing we have can obtain of that we want; for instance, when I have occasion to change my horse for wheat, if my horse is worth six hundred francs, I shall receive double the quantity of bushels of wheat than if he were worth only three hundred francs, and at the same time that part of my wealth would be double. And as the same reasoning may he generally applied to all I possess, it follows that our wealth depends on the value of the things we possess. This is a consequence that no one can reasonably refuse to admit.

You cannot on your part deny, says Mr. Ricardo to me, that we are not richer, when we have more of the necessary or agreeable things to consume, whatever may be their value in another sense. This in fact I admit, but is it not to have more things to consume, having the power to acquire them in greater quantity? To possess more wealth is to have in our hands wherewith to buy a larger quantity of useful things, a greater quantity of utility, in extending this expression to every thing that is necessary or agreeable to us. Now there is nothing in this proposition, which is contrary to what is true in the definition which Mr. Ricardo and yourself give of wealth. You say that wealth is in the quantity of necessary or agreeable things we possess. I say so too, but as these words, quantity of necessary or agreeable things, have a vague and arbitrary meaning, which cannot be admitted in a good definition, I define them by their exchangeable value; then the limitation of the idea of utility is the being equal to any other utility, which other persons consent to give in exchange for that you possess; from that time there is equation, one value can be compared with another by the means of a third. A sack of wheat is a riches equal to apiece of cloth, when one can be exchanged against the other for an equal number of crowns. This will serve as a basis for comparisons, will admit of measuring an augmentation, or a diminution — in a word, this is the basis of a science. without this, political economy does not exist. It is this consideration alone which has brought it to light: it is so essential, that you involuntarily do it homage, and there is no one of your arguments in which it is not either expressed or understood; otherwise, you would have caused the science to recede, instead of enriching it with fresh truths.

At the same time that your and Mr. Ricardo's definition fails in precision, it fails also in extent. It does not embrace the whole of what our wealth is composed of. What! our wealth confined to material objects either necessary or agreeable! And our talents? What then do you take these for? Are they not productive funds? Do we not derive income from them? Greater or less incomes, the same as we derive a greater income from an acre of good land than from an acre of brambles? I know some clever artists, who have no other income than what they derive from their talents, and who are opulent: according to your idea they would be no richer than a mere dauber.

You cannot deny it, that every thing that has an exchangeable value makes part of our riches. They are essentially composed of the productive funds we possess. These funds are either land, capital, or personal faculties. Of these funds some are alienable, as land; others are alienable and consumable, as capital; others inalienable, and yet consumable, as talents, which perish with their possessor. From these funds proceed all the revenues which keep society alive, and what appears paradoxical, although perfectly true, all these revenues are immaterial, since they are derived from an immaterial quality which is utility. The different utilities produced by our productive funds are compared with each other by their value, which I have no occasion to call exchangeable, because in political economy I recognize no other than exchangeable.

As to the difficulty Mr. Ricardo makes, when he says that, by better understood processes, a thousand persons may produce twice and three times as much wealth without producing more value, this is no difficulty, when we consider, (as we ought,) production as an exchange, in which the productive services of our labor, our land, and capital are given in order to obtain productions. By means of these productive services, we acquire all the productions that are in the. world, and this by the bye is what gives value to productions; for, after having obtained them by giving value for them, we cannot give them away for nothing. Now since our first property is the productive funds we possess, our first revenue the productive services which proceed from them, we are richer in proportion as our productive services are more valuable, as they obtain in the exchange called production, a greater or less quantity of useful things. And at the same time, as a greater quantity of useful things and their low price, are perfectly synonimous expressions, the producers are rich, when productions are more abundant and cheaper. I say producers in general, because competition compels them to give their productions for what they cost them; so that when producers of wheat or cloth succeed by help of the same productive services in producing a double quantity of wheat or cloth, all the other producers can purchase a double quantity of wheat or cloth with a like quantity of productive services, or what is the same thing, with the produce they derive from them.

Such, Sir, is the well-connected doctrine, without which I declare it to be impossible to explain the greatest difficulties of political economy, and particularly how a nation can be richer, when its productions diminish in value, although riches are value. You see that I am not afraid to reduce my pretended paradoxes to their simple expression. I strip them naked, and trust them to your equity, to that of Mr. Ricardo, and to the good sense of the public. But at the same time reserving to myself the right of explaining them, if they are ill understood, and of defending them boldly if unjustly attacked.


NOTES

38. Book 1. Chap. 4.

39. "It is therefore evident that the value of commodities, that is, the sacrifice in labor or in any other article which persons consent to make to obtain them in exchange," etc. Malthus' Principles of Political Economy. page 341. English Edition.

40. See the Notes added by me to the French Translation by M. Constance, of Mr. Ricardo's Principles of Political Economy.

41. Mr. Ricardo's Principles of Political Economy, 2d. English Edition. chap.20.


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