the Economists that labour is necessary to wealth, because they declared that personal qualities and abstract rights are wealth, and they recognized three orders of economic quantities. These can be exchanged against one another in six different ways; and these six different kinds of exchange constitute commerce in its widest extent and in all its forms and varieties.

The relation of these quantities to each other is termed their value; and the laws of natural philosophy show that there can be only one general law of value, or a single general equation of Economics.

We have thus a definite body of phenomena, all based upon a single general concept; separate and distinct from all other phenomena, and circumscribed by a definition, which constitutes a science, and may be designated as pure, or analytical, Economics.

Thus, if any one had conceived the idea of describing the mechanism of these exchanges, or of commerce, Economics might have been the eldest born of all the sciences; but there was no science in existence in those days to serve as a model for the creation of a science of Economics; and a long and dreary interval had to elapse before the moderns reached the perfection of the ancients, all to redound to the immortal glory of Bacon, who was the first to point out that the physical sciences must first be created to serve as models before it is possible to create the sciences of society.

For many centuries it was held that money alone is wealth; and we must briefly state some of the consequences which flowed from this doctrine, which produced innumerable wars and other calamities.

A strange consequence flowed from the doctrine that only money is wealth. It was held for many centuries that in an exchange what one side gained the other lost. What the persons who maintained this doctrine would have said to an exchange of products it would be difficult to imagine. They quite forgot that when persons bought things with money they obtained a satisfaction for their money. Nevertheless, for centuries, the wisest statesmen and philosophers main

tained that in commerce what one side gained the other lost. They held that foreign commerce which did not produce an importation of money was a loss to the nation. Accordingly, in every country, laws were made to encourage the importation of money and to prohibit its export. This doctrine was the cause of innumerable wars. J. B. Say, writing in the first quarter of this century, says that during the last three hundred years fifty had been spent in wars directly arising out of the dogma that money alone is wealth. About the end of the seventeenth century it began to be perceived that it was absurd to maintain that money alone is wealth; and the term was enlarged to include all the material products of the earth which conduce to man's subsistence and enjoyment. But still they held to the doctrine of the balance of trade, which was based on the assumption that, in every transaction of commerce, what one side gained the other lost.

The first merit of the Economists was that they entirely overthrew the doctrine of the balance of trade; and they made a considerable advance in Economics by maintaining that in commerce neither side gains or loses.

The Economists maintained that labour engaged in agriculture is the only form of productive labour; because, they alleged, it is the only one in which the value of the produce exceeds the cost of production. The excess of the value of the produce over that of the cost of production they called the produit net; and they maintained that, as this is the only increase of wealth to a country, all taxation should be levied out of the produit net of the agriculturists, and that all other classes should go free.

They denied that commerce or manufactures can enrich a nation; because, they alleged, in commerce equal values are always exchanged for equal values-and if the values exchanged are always equal, how can there be any profit on either side? They held that the only use of commerce is to vary and multiply the means of enjoyment, but that it does not add to the national wealth; or, if it does, it is only by giving a value to the products of the earth which might

otherwise fail in finding a market. They contended also that, as all exchanges are merely equal value for equal value, the same principle also applies to sales, and therefore that the gains, which traders make, are no increase of wealth to the nation.

With such views they held that internal commerce conduces nothing to the wealth of the nation, and foreign commerce very little. They called foreign commerce only a pis aller. One very important truth, however, they perceived. They saw that money is the most unprofitable merchandise of any to import, and that merchants never import money when they can import products. Therefore they called the import of money only the pis aller of a pis aller.

They contended that the labour of artisans in manufactures is sterile or unproductive, because, though this labour adds to the value of the product, yet during the process of the manufacture the labourer consumes his subsistence; and the value added to the product only represents the value of the subsistence destroyed during the labour. Hence there was a transference of the value of the labourers' subsistence into an equivalent value of another kind; but no production of wealth.

They held that all the costs of trafficking come out of the profits of the producers and the consumers, which, though gains to them, are not profit to the nation; and therefore that the State ought not to tax them.

All classes of the community, except the agriculturists, they denominated sterile or unproductive.

These are the doctrines which the Economists maintained, with long and repeated arguments, in defiance of all opposition; but how men of the ability of the Economists could maintain that a country cannot be enriched by commerce or manufactures, with the examples of Tyre, Carthage, Venice, Florence, Holland, England, and hosts of others before them, is incomprehensible. With such patent glaring facts before them, it is surprising that they were not led to suspect the truth of their reasonings. It is one of those aberrations of the human intellect which we can wonder at, but not explain.

These doctrines provoked a reaction: men who were labouring in all sorts of vocations were roused to indignation, by being stigmatized as sterile and unproductive. Men were astounded to hear that a nation cannot be enriched by commerce or manufactures.

Nevertheless, the doctrines of the Economists seemed to be logically unassailable, provided that their fundamental dogma was right. But the consequences they drew from it were so startling, and so contrary to patent undeniable facts, that clear-sighted men began to inquire-Is it true that in commerce neither side gains?

Two writers entered the field against the Economists— Condillac in France, and Adam Smith in England. Both published their works in the same year, 1776. They overthrew the doctrine that in commerce neither side gains, and maintained that in commerce both sides gain-a truth that was seen by anticipation by the great Emperor Frederick II, in the thirteenth century; and by Boisguillebert, the morning star of Economics, in the beginning of the eighteenth century. In this brief sketch we have no space to say much about Condillac, because his explanation is not very satisfactory, and his work never attracted the slightest attention till very recently.

This, then, was the real origin of Adam Smith's work. He was neither the founder and creator of Economics nor of free trade. Economics, as a science, sprang out of the misery and calamities of the French people, and the Economists were the first to perceive and declare that there is a positive and definite science of Economics; and that, consequently, it must be constructed by exactly the same methods by which all other sciences have been created— namely, by settling its fundamental general concepts and definitions; by a strictly accurate statement of facts and phenomena; and by reducing all the phenomena to a single general law. Economics is the science of exchanges, or of commerce; and therefore the details of commerce are the phenomena of Economics. Nor was Adam Smith the founder of free trade. The Economists published their code of

с

doctrine in 1759, in which free exchange was asserted to be one of the fundamental rights of mankind; and there were numerous and powerful advocates of free trade in Italy and Spain fifteen years before Adam Smith published a line. Turgot carried out immense reforms in the direction of free trade in 1774. How did these writers and statesmen learn the doctrines of free trade from Adam Smith, when his work was not published till 1776? The fact is that Adam Smith did not attempt to disprove the theory of protection and prohibition; he assumed free trade as the doctrine approved of by all enlightened minds. Adam Smith has done sufficient services himself to Economics, and his reputation does not require the advances and services done by other persons to be attributed to him.

Adam Smith, then, attacked the doctrine of the Economists, that in commerce neither side gains or loses. By a course of masterly reasoning, far superior to that of Condillac, but too long to be set out here, he demonstrated that in commerce both sides gain; and, therefore, that nations, in multiplying their commercial relations, multiply their profits and multiply wealth. Even if Adam Smith had never done anything else for Economics than this, he would have been entitled to immortal glory. By this single demonstration he brought about a change in public opinion and in international policy which has for ever removed a perennial source of war from the world. Nations learnt that instead of destroying each other, and trying to ruin each other's commerce, it was their interest to promote each other's prosperity and to multiply their commercial relations with each other.

Adam Smith next proceeded to demolish the doctrine that neither commerce nor manufactures enrich a nation. He demonstrated that both commerce and manufactures are productive of wealth, and enrich a nation.

Furthermore, he burst the bonds of the narrow dogmatism of the Economists, that the material products of the earth alone are wealth. For under the title of fixed capital he includes the 'natural and acquired abilities of the people'; and under the title of circulating capital he includes bank