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1. Two Persons.	4. Two Estimates.
2. Two Desires.	5. Two Renderings.
3. Two Efforts.	6. Two Satisfactions.

The thoughtful reader will note in this table the fact, that three of these elements are objective, that is, outward and visible; and the other three are subjective, that is, inward and invisible. Persons, Efforts, Renderings, are seen and known of all men; Desires, Estimates, Satisfactions, can be directly known only to the persons who feel and make them. This is a peculiarity of Political Economy, that has been far too little observed even when it has been observed at all. Objective and subjective elements in it meet and mingle in each transaction. Indeed, they alternate, as is shown in the table above: first a Seen, and then an Unseen, Element throughout. It is this commingling of outward and inward, visible and invisible, that makes all the difficulty and gives all the fascination in Political Economy. Whatever carries us into the steady though billowy play of universal human nature is at once difficult and fascinating.

Quite contrary, however, to a common impression, the certainty both of action and prediction in all the other Sciences as well as in Economics lies rather in the unseen elements than in those that are seen. Take for an example the calculation of an eclipse: it is not so much from what is visible in the heavens and on the earth that the astronomer infers and predicts to the instant the shadow of one orb thrown upon another, as it is from the wholly hidden but ever-enduring forces of gravitation constantly relating these orbs one to the other. So it is of the Sciences generally; progress is made in them and certainties are reached in connection with them, "while we look not at the things which are seen, but at the things which are not seen; for the things which are seen are but for a time; but the things which are not seen are everlasting." Invisible Desires and Satisfactions felt in connection with Exchanges are among the most constant elements of human nature; they, as it were, give birth to the relatively more transient (though visible) data of Efforts and Renderings; while inferences and conclusions and even predictions may be securely drawn from all of these, giving a solid ground for Political Economy to stand on,—almost as solid as the ground of the chief Physical Sciences.

2. We will next examine the inmost nature and the outward manifestations of Value. "Value" is by much the most important word in the Science of Economics; and we must, therefore, comprehend it thoroughly, root and branch. Nearly all the writers in English have used in place of this the word "Wealth" and those in other languages some equivalent and equally concrete word; but the present writer fully satisfied himself some twenty-five years ago, that it is impossible to use that word to any advantage in economical discussions, owing to its inherent ambiguities and concrete associations in the minds of men. He utterly discarded the word at that time, and has found not the least occasion to pick it up again since, and believes now that his substitution of the word "Value" in place of it will ultimately be seen to have been his greatest contribution to that Science, to which he devoted his life.

Even professed and excellent logicians, like John Stuart Mill, found the word "Wealth" an insoluble element in the science of Economics; he commenced his great work by writing, that it was not really needful to define the word which nevertheless he laid at the foundation of his discussions, that "every one has a notion sufficiently correct for common purposes of what is meant by Wealth"; he goes on, however, to give at least a half-dozen definitions of the word, no two of which are at all consistent with each other, only one of which embodies a clear and scientific conception, and even to this one he himself does by no means coherently adhere throughout his treatise. No wonder, that this great man died thoroughly dissatisfied with his own work in Economics, and wishing for longer life in which to recast and improve it! No wonder, too, that the crowd of writers both English and American, many of them able and thoughtful and otherwise logical, who have been content to continue to use this irreducible and utterly unscientific word at the bottom, have made a mess of it!

In dropping the word, "Wealth," accordingly, Political Economy has dropped a clog, and its movements are now relatively free and certain; and it is all the more incumbent on the Science for that very reason to define the good word that it substitutes for a bad one with absolute clearness, to explain it through and through until it become quite transparent, and then always to use it in its defined and economical sense, and none other, even though the same word be properly enough used in other senses in common speech and in other than scientific relations. Exactly that is what we are now going to attempt to do in a simple and consecutive order.

(a) Perhaps it will help us to find out precisely what Value is by seeing as clearly as possible at the outset what it is not. It is not easy, and never can be made so, to teach and to learn distinctly what Value is in its ultimate nature and constant changes. Here is the one unavoidable difficulty that lies at the very threshold of Political Economy; and this difficulty, which is not found as in the case of "Wealth" in the meaning of the word but in the complex character of that which the word describes, once overmastered, and one walks thereafter with ease and pleasure throughout the economic domain. It would be wrong and cruel to deny that just here is one hard place in the road for teacher and pupils to get over. It arises wholly from the nature of the subject, as we shall soon see, and not at all from the insufficiency of the word, Value. We have already seen fully, that Buying and Selling in each and every transaction is complex and relative, involving twelve elements every time; that Desires and Estimates and Renderings are especially relative,—each party to a trade desires something in possession of the other, estimates that something relatively to something in his own possession, and finally renders to the other his own something for the sake of receiving the other's something. Now everybody is used to all this and practically understands it perfectly, but it is complicated and reciprocal nevertheless, and Value, which is the single birth of the two Renderings, though perfectly intelligible to him that takes pains, is not a thing to be seized once for all at a passing trot.

Value, then, is not a quality of single things, belonging to them as if by nature, as hardness is a quality of a rock or gravity is an attribute of gold; because all physical qualities in physical things, all that which makes or helps to make anything such as it is, may be learned by a study of the things themselves by themselves; a careful examination and analysis of the mechanical and chemical properties of any physical thing will discover all its distinguishing characteristics, all that makes it that particular thing in distinction from all other things; but it is plain already, that the Value of anything (if it have value) cannot be found out by studying that particular thing by itself alone; the questioning of the senses however minute, the test of the laboratory however delicate, can never determine how much anything is worth, because that always implies a comparison between two things, or more strictly a comparison between two Renderings in exchange. Value is not an attribute of single things: not even if the things be physical and tangible.

Now two other kinds of things are bought and sold besides physical and tangible things, namely, personal services and commercial credits; and it is very plain, that Value cannot be a quality of any one personal service rendered, as looked at by itself, such as the service of a physician towards a fever patient, because the service in and of itself might be the same whether rendered to his own child or the child of one of his patrons, while in the former case there would be no value, and in the latter there would be; and so too the very name "commercial credit" implies an exchange of two Renderings, out of which Value always emerges, and not at all an attribute of one credit considered by itself. Value is no more a characteristic of single intangible services and claims than it is of single intangible commodities rendered.

And what makes all this still more certain is, that Value even in physical things, and perhaps still more in services and claims, is all the while changing under demand and supply, now rising and then falling, while the physical properties of things, that make them what they are, are fixed and unchangeable. A gold eagle, for example, has certain primary qualities as gold, without which it would not be gold; it is hard and heavy and colored: gold is gold the world over and in all ages: Value is not one of these primary qualities, nor even a secondary quality, nor any quality at all, of gold as such; because circumstances are readily conceived and have often occurred, in which gold has no Value even in exchange; for instance, among a crew abandoned at sea, a bag of gold belonging to one of the sailors might not buy even a biscuit belonging to another; all the natural qualities of the gold are present,—it is still yellow and weighty and solid,—but its Value has escaped altogether. Gold is always 19 times heavier than water: specific gravity is a quality and is constant in all physical things: Value is not a quality in this sense at all, inasmuch as it is something that is constantly changing, rising or falling, and not infrequently disappearing altogether, leaving no sign.

Ignorance of this vastly important truth has pecuniarily ruined thousands upon thousands of the people of this country during the last 20 years. They have gone into the mining of metals, gold and silver and copper, sometimes as individuals and more often as companies gathering in the driblets of investors, under the notion that if they could only get these metals out of the ground their Value would be just as secure and fixed as their physical qualities. They found out their mistake in bitterness of spirit. For example, the Value of an ounce of silver has gone down and down and down as the quantity of silver excavated has increased under zealous digging, in accordance with the universal and pitiless law of Supply and Demand. So of copper. And both these great monetary interests went to Congress and secured the passage of laws designed to lift artificially the Values that were sinking naturally under increased Supply, the silver men by a law requiring the United States to buy and mint at least $2,000,000 in silver each month whether the silver dollars were needed or not, and the copper men by a law imposing a tariff-tax on foreign copper that has actually lifted the price two cents a pound on the average of the whole 20 years above the average price of copper in the markets of the world.

Take another illustration of disappearing Values, this time in lands, long supposed to be the most stable in value of all human possessions. Whole tiers of farms in the writer's native town in New Hampshire, and for that matter all over New England as well, that in his boyhood supported large families, and when sold usually brought a fair price, are now abandoned of their owners as wholly or comparatively worthless, and are allowed to grow up into forest again, without a sign of present human habitation upon them. Value is something that needs to be studied carefully, if it is to be fully understood.

(b) Perhaps the origin of the word, "Value," will throw some light upon its nature and changes. Etymology can never be safely despised in scientific discussions, although words are perpetually changing their meaning in the mouths of men. No science can afford to build upon the transient meaning of a word; and yet it is clearly possible so to use words as to reach and describe ultimate and unchanging facts in science; and some knowledge of the original meaning of words is always a help in getting at those definitions and analyses of facts that are permanent in science. Let us hold fast to the cheering truth exemplified on all sides of every science, that a just analysis and exact description of ultimate facts in any department of knowledge are for all time, in spite of the transient meaning of current words.

The present word is derived from the Latin Valere, to pass for, to be worth. There is a strong hint of a comparison in the original meaning of the word, and the current use of it both in Latin and English develops the hint into a certainty. In common language, when the Value of anything is asked for, the answer always comes in the terms of something else. If the question be, How much is it worth? the answer is, So many dollars or cents. Now the cents or dollars are very different things from those whose value is thus inquired after; and so we see again from another point of view that Value is a relative matter, since it clearly implies a comparison between two distinct things; and, if so, it is clearly enough not a quality of any one thing, and of course it would be useless to try to ascertain the Value of anything by a study of that thing alone. Etymology thus easily brings us up to our present vital question, and will assist us to solve it completely.

(c) What is Value? Plainly it is the result of a comparison instituted between two things, using the word, "things," here in its broadest sense. But who institutes the comparison? And who is competent to announce the result of it in Value? A comparison is required in order to ascertain the length of a stick of timber in feet and inches, and a carpenter's square is the instrument by which the comparison is made, and it makes no difference in the result whose the square is or whose the stick of timber is, since the square and the stick have in common the physical quality of length, and a simple comparison of square with stick determines the length of the latter, and one man in this case may determine the result by himself alone, and it is not needful that he be the owner of either of the things compared.

But it is a different kind of comparison from this that issues in Value. Let us suppose an exchange of a bushel of wheat for a mason's trowel: there is no common physical quality, as length, between the wheat and the trowel; and it is evident, that no one man can measure in any form one of these two commodities by means of the other. It is a peculiar kind of comparison that is involved in any and every trade; and the first peculiarity of it is, as we have already seen in another connection, that it always requires "two persons" to make it; and each of the two persons must always be the virtual owner of one of the two things exchanged. A thief may indeed go through the motions of selling a stolen horse, but as he is not the owner of the horse there can be no sale, and the actual owner may take his horse wherever he finds it even in the hands of an innocent third party. In other words, there must ever be "two efforts" also, two legitimate efforts giving a valid claim of ownership to each of the two parties in the exchange.

And there is a second distinctive peculiarity in that comparison that ends in Value, namely, the two things to be exchanged are not compared directly with each other at all, as square and stick are compared, but in the light of the "two desires" with which we are already familiar, and in that of the "two estimates" resulting therefrom. The owner of the wheat desires a trowel, and the owner of the trowel desires a bushel of wheat; the former estimates the effort it has already cost him to procure the wheat in a sort of comparison with the effort that it would otherwise cost him to procure the trowel, and he does not trade unless the trowel seem more and better to him than does the wheat; the latter estimates the effort it has cost him to procure the trowel in a sort of comparison with the effort it would cost him to procure otherwise the wheat that he wants, and he does not trade unless the wheat then and there seem more desirable than the trowel, which he already has; and these two relative estimates of the two owners must coincide, that is, the owner of the wheat must think more of the trowel than of the wheat, and the owner of the trowel must think more of the wheat than of the trowel, before these two parties can ever trade. So of all traffic whatsoever.

Now the third and last distinctive peculiarity of that kind of comparison out of which Value emerges is this,—an action is necessary in order to complete the comparison. Desires and estimates may have been never so busy, but no Value can ever be born until an outward action takes place in the "two renderings" of our former analysis. Then first we come out upon plain and solid ground. We leave the play of the subjective elements, which yet are essential in the premises, and touch firmly objective realities. The trowel-maker passes over his tool in the sight of men to the wheat-grower in firm possession and ownership, and takes in return for it from him the grain, which the latter passes over to the former for the sake of receiving the trowel. The two "satisfactions" follow as a matter of course, and that whole transaction as a commercial exchange and as the sole subject of Political Economy is ended.

But where is the "Value," of which we have been in search? The answer is easy and certain and unevadible. The Value is in the Renderings, and nowhere else. The value of the trowel is the wheat, that is actually given in exchange for it; and the value of the wheat is equally the trowel, for the sake of getting which the wheat was rendered. What was the Value of King Hiram's cedar-timbers? The oil and wheat actually returned in pay for them. What was the Value of the oil and wheat sent northward by King Solomon? The timbers rendered in direct exchange for the same. This is not merely the only possible answer to the question, What is Value? but it is also a perfectly complete and satisfactory answer. Common language here corresponds exactly with scientific language. "How much did the horse cost?" "One hundred dollars." The dollars have nothing whatever in common with the horse, except that they express his Value at the time; the horse has nothing in common with the dollars, except that it expresses the Value of the dollars at the time. It is just as exact to say, it means precisely the same thing to say, the dollars are worth the horse, as to say, the horse is worth the dollars.

In general terms, the Value of anything is something else received in return for it, when each owner renders the one for the sake of getting the other. This is the whole of it, so far as any specific valuable thing is concerned. We shall indeed need after a little, and shall have no trouble in finding, an abstract and universal definition of "Value," as an abstract and scientific term perfectly circumscribing the field of Economics. Here and now we are dealing with the simpler concrete question, What is the value of any specific valuable thing? The unvarying answer is, Some other specific valuable thing already exchanged for the first! There may be expected value, estimated value, but actual value there is none, until a real exchange has settled how much the value is. The value of anything is something else already exchanged for it. Value is not simply a relation subsisting between two things, the result of a careful comparison between them, but rather an actual fact established in connection with them. The universal formula of Value is quid pro quo, in which formula quid stands for one of the valuables and quo for the other, and pro unfolds the motive of each owner for the reciprocal receiving and rendering.

Here a caution is needful. Because nobody can tell what the value of anything is until something else has been put over against it in order to get it and actually received therefor, and because the only possible way to express the value of either is in the terms of the other,—the trowel is worth the wheat and the wheat is worth the trowel,—one must not therefore jump to the conclusion that the value of either is settled for all time or even for any future time. It is only settled for this time. In Economics as in Christianity, Now is the accepted time. There is nothing fixed in Values, and never can be from the nature of the case, because Desires are personal to individuals, and Efforts fluctuate with times and persons, and Estimates that wait on these vary from necessity, and the Renderings of to-day may not be the chosen renderings of other persons in the same articles to-morrow. Value is not a quality at all, still less is it a permanent quality, of anything; it is a relation established between two things when these are in the hands of two given persons; but now when these are in the hands of two different persons, whose views are pretty sure to differ from the former, and a new relation is sought to be established between these in the old way of Estimates, is it strange that a new balance is struck, and Value is expressed in quite different terms?

One of the chief charms of Political Economy is the open secret, that it deals not with rigidities and inflexible qualities and mathematical quantities and the unchanging laws of matter, but with the billowy play of desires and estimates and purposes and satisfactions, all of which are mental states, and all of which are subject in the general to ascertainable laws, though laws of a quite different kind from those of Mechanics. Values come and they go. Within certain limits and under certain conditions they may be anticipated and even predicted, but never with the precision of an eclipse or the result of a known chemical combination. There is a useful and fascinating Science of Value, as we shall see indubitably by and by in the present chapter; but it is a science that deals primarily with persons and only secondarily with things, with mind and not with matter, with the general undulations of the sea and not with the crests of the waves. And all this is so, because Values are relative, because the announcements in the market-place to-day may stand listed differently to-morrow and very differently next year, and because old values may disappear altogether and many new ones come in, all in accordance with the incessant changes in the wants and labors and fashions and projects of men.

We are now in a good place to see once for all the sharp distinction there is between Utility and Value. These two are often confounded to the deep detriment of our Science; and no clear thinking is possible in Economics without drawing this line sharp, and then holding it fast; for the hazard of this confusion is all the greater, because Utility is always connected with Value, although it is a totally different thing from Value. We will see. Utility is the simple capacity of anything to gratify the desire of anybody. This is at once the etymological as well as the popular signification of the word. It is derived from the Latin utor, to make use of, a word that is often conjoined in Latin with fruor, to enjoy; so much so, that the two verbs are often put together, utor et fruor, and also often without the conjunctive, utor fruor. Utility, then, is a quality of innumerable things. Anything that is good for anything, anything useful, anything that has the power to still the desires of any person, has Utility. But multitudes of things that have this capacity to gratify human desires are never bought and sold, and therefore can have no Value, since nobody will give anything for them. The air we breathe, the water we refresh ourselves with from spring or brook, the light of the sun and moon and stars, the fragrance of the flowers, the mountain prospect that delights the eye,—all these, and thousands more, possess the highest utility, but no value whatsoever. They are free. They are the bounty of God. They are never bought and sold. They are a vast class of things by themselves, with which Political Economy as such has nothing to do.

Nevertheless the element of Utility comes into every case of Value, because the element of Desire comes into every case of Value, and whatever merely satisfies the Desire of any person is Utility, whether that capacity be the direct gift of God or whether the Efforts of men have been employed to bring it about. It is just here that we see the precise function of our "two efforts" in each case of Value, in distinction from mere Utility in all cases: much of utility is absolutely free, no effort of men having been put forth to secure it, for example, the fragrance of the wild rose; much more of utility is the commingled bounty of Nature and the gratuitous effort of men, for example, the fragrance of the domestic rose brought by the householder himself into his own yard for the gratification of his own family; while by much the most of utility is commingled free gift of God and the compensated efforts of men, for example, the fragrance of the bank of roses cultivated and cared for by the hired gardener. It is important for our purposes to discriminate carefully the three kinds of Utility: (1) what is wholly disconnected from the efforts of men, and comes freely from the hand of God; (2) what is mingled with the unpaid efforts of men, so that the satisfaction of the desire comes partly from Nature and partly from unbought effort; and (3) the compound utility that is partly free gift and partly the result of compensated labor. The last is the only kind of Utility that stands in any connection with Value.

And even this is very different from Value. Utility in all three of its forms—now free, now onerous, now partly bought—is always a quality of one thing by itself, going straight to the satisfaction of some desire, and there an end. It is simplicity itself compared with Value, which is always a resultant of several things, and is specifically a relation of mutual purchase established between two "renderings," each of which expresses the value of the other, in each of which is embodied an "effort" made by each of the two "persons" rendering, and each of which excites a "desire" and an "estimate" before being passed over in ownership to another, and a "satisfaction" afterwards.

The utility in every valuable rendering comes partly from free Nature and partly from compensated effort, but it is remarkable, that a principle, with which we are to become very familiar later on, namely, Competition, eliminates for the most part from all influence upon Value that portion of the Utility that is the free gift of God. The great Father never takes pay for anything, and never authorizes anybody to take pay in his behalf; and, moreover, has arranged things so, that it is exceedingly difficult for any person to extort anything from another person on the strength of anything that God has made, and man has not improved. Take, for example, ten horses of any general grade, brought into the same market by their ten owners for sale. These men did not make these horses, but they have cared for and trained them, or at least have become proprietors by purchase or otherwise of the results of such care and training. The Utility in each horse is compound, consisting partly of what God has done for him and partly of what man has done for him,—the two parts inextricably interwoven,—and all ten are offered now for sale. Each of the owners would indeed be glad to get something for his horse on the ground of what God has done to make him sound and strong and fleet, in addition to a fair compensation for what he (and his predecessors) has done in raising and breaking him; but the cupidity of all is likely to be thwarted by the ultimate willingness of some to sell their horses for a price covering the element of human "efforts" involved, and the action of these tends to fix a general rate for the whole ten, and thus the gratuitous element is eliminated from influence on Value. Even if the ten owners should combine for a higher price, there are doubtless a plenty of horses of that general grade elsewhere, some of whose owners are content to get back an equivalent for their own and others' "efforts" expended on their horses; and so the action of these tends to fix the general price for horses of that kind for that time and place at a point not above a fair estimate of the onerous human elements involved; thus throwing out by the action of competition all effect of natural Utility upon the Value of horses then and there. So of all other products of that kind.

It is true, that in certain unique cases, in which competition has little or no play, because there is only one or a very few owners of such unique products, one cannot certainly say that free Utility may not influence the Value to lift it above the gauge of human efforts involved; but such cases are rare, and relatively unimportant; and the tendency is immensely strong, under the natural and beneficial condition of things, for Values to graduate themselves through the reciprocal estimates and renderings of commerce, down to the actual and onerous contribution of men to that Utility that underlies Value.

Thus we are brought again and again from differing points of view to the "two renderings" as central and determinative in Value, and also more specifically to the "two efforts" of persons rather than any free contribution of Nature as constituting that portion of the compound Utility, whose function it is to gratify the "two desires" that precede the realization of Value,—that portion of the utility in any rendering that must be compensated for by the other rendering. Now in order to reach in a moment more our final definition of "Value," a definition, it is believed, that will cover all the cases and take the life out of endless disputes, we need a scientific term to carry easily and exactly the meaning of any economic rendering. Let that word be Service. We must have it in its generalized meaning, to cover the renderings of all the three kinds, in distinction from the term "personal services," which we have already used and shall continue to use to designate one class only of things exchanged, in contradistinction to "commodities" and to "credits," the other two classes.

Value is the relation of mutual purchase established between two services by their exchange.

We offer this definition of "Value" to our readers in much confidence, that they will find it exact and adequate and altogether trustworthy. No one of them, however, is precluded from attempts to improve it in breadth and brevity and beauty; and all are invited to pick logical flaws in it, whether of ambiguity or superfluity or deficiency. Many minds and many hands in many lands have left their impress on parts of this definition, for example, Aristotle in Greece and Bastiat in France and Macleod in Great Britain; the present writer thinks, that he has bettered the definition of Bastiat, namely, "Value is the relation of two services exchanged," by precisely defining the relation as one of mutual purchase; and he is sure, that he has improved the definition of Macleod, namely, "The value of any economic quantity is any other economic quantity for which it can be exchanged," by making his definition at once more abstract and more general and more definite, and also by escaping the slight implication in the word, "quantity," that only material things are exchanged in economics.

The immense importance of securing first a clear and correct Definition of "Value," which is the foundation-word and the circumference-word of Political Economy, and then of using that term and all other scientific terms in the Science in their defined senses only, will certainly be appreciated by those who have wandered in the wide wilderness of the discussions on the undefinable word, "Wealth," and especially by those who have reflected most upon the vast and illimitable significance of economic Exchanges on the welfare of mankind. Associate Justice Miller of the Supreme Court of the United States, not an Economist in the technical sense, referred in 1888, in words that are worth remembering, to "the philosophical maxim of modern times, that of all the agencies of civilization and progress of the human race commerce is the most efficient." In August of that year John Sherman of Ohio, a man far enough from being a technical Economist, said in the Senate of the United States, that "it is almost a crime against civilization" to maintain commercial barriers between Canada and the United States.

There were tokens a plenty in the year of Grace just referred to, that the Science of Value in all the lands of the civilized world, and particularly in the United States, was drawing to itself a new and more popular esteem. It was seen more clearly and felt more deeply than ever before, that this science has a weighty word for every man and woman and child in the world; that there are certain Rights in every one inherent and inalienable to buy and sell for his own advantage; that most if not all of the Governments, under the lead of comparatively few selfish and powerful men, were infringing upon these Rights, and robbing under the forms of Law the masses of their citizens to immense amounts for the special benefit of these very men; that the only sure defences of the people against these abuses of all kinds were in the maintenance and diffusion of the scientific and consequently disinterested principles and maxims of a sound Political Economy; that such a science was only friendly to the broadest rights, to universal gains, to illimitable increase in human comforts and powers, to international fellowship, to peace on earth and good-will among men; that, accordingly, a science of such scope and tendencies must be encouraged and cultivated and improved; that what had been crude in it, and narrow, and merely national, must be sloughed off; that the English and insular and special speculations of a century ago, which regarded "Wealth" as consisting of material things only, excepting however considerable portions of Adam Smith's immortal book, were antiquated and unusable; that the Science had really moved into a broader and still a well-circumscribed field, new and more permanent foundations were being laid, and fresh contributions from all countries should be welcomed; and that the time had fully come, when the accepted truths of this Science, like those of the other developed sciences, should be practically and steadily applied to the betterment of mankind. Under these broadening and inspiriting and uplifting conditions Political Economy, as never before, thanked God and took courage.

3. Having now a satisfactory definition of Value, and knowing accordingly just what Valuables are in clear distinction from all other things in the world, we must examine with some care two or three of the most general facts and laws and limits of Value, before we pass in the next following chapters to study in detail each of the three kinds of Valuables, namely, material Commodities, personal Services, commercial Credits.

(a) Since Value in general is the relation of mutual purchase between two Services, and consequently the specific value of either can only be expressed by the other,—one Valuable being always measured by the Valuable exchanged against it,—it follows as a matter of course that such a thing as a general Rise or Fall of Valuables is an impossibility. The rise of one valuable involves of necessity a fall in the other, as the fall of one implies the rise of the other. If the articles exchanged be bushels of wheat and dollars of silver, and if a bushel buys a dollar to-day, then wheat is worth a dollar a bushel; but if wheat rises next week, so that a dollar will not buy a full bushel, that is precisely the same thing as saying, that the dollar has fallen in its purchasing-power as compared with the wheat. Such specific changes in the purchasing-power of one Valuable over another are incessant throughout the commercial world, and a merchant's sagacity consists in anticipating these so far as possible and in availing himself of them alertly and prudently; but each one of us must needs see clearly and hold firmly in mind, that each fall in the purchasing-power of a Valuable means a corresponding rise of power in the other Valuable,—if the first buys more of the second than before, then the second must buy less than before of the first; and, consequently, a general rise of Valuables is a contradiction in terms, and so of course is a general fall of Valuables.

This brings us to Price. Price is Value reckoned in money; and this is the only difference in the meaning of the two terms. When one valuable is sold against another, even when one of the two is money, each is the Value of the other: Value is the general and universal term in Economics. When any other valuable is sold against money, the amount of money it buys is called its Price: Price is a specific and restricted term in Economics. Since we shall study Money thoroughly in a later chapter, and there explain the origin and extent of its functions throughout, it is only in order to remark here, that it is for convenience' sake, that is, to make easy the comparison of valuables one with another, that Value in commerce is commonly reduced to Price. Money becomes a sort of measure, by means of which to compare all other valuables with each other. In order to ascertain the Price of a Valuable, it only needs to be sold once against money; but in order to ascertain the Value of a Valuable, it would need to be sold once against all other valuables whatsoever. This last is clearly impracticable; and so Value for practical purposes is reduced to Price. The General is made Particular for convenience. Hence we have "Prices current," but never Values current.

Now it will be plain to all, how there may easily be and often is a general rise or fall of Prices while a rise or fall of Values is impossible. Price is a relative word as much as Value is, but it does not relate to so many things. Price is specific, and Value universal. Both equally involve buying and selling, but one sale of a single valuable against money leads to Price, while ten thousand sales of the same valuable against other than money would not conduct to complete Value. That would require a sale of this valuable against all other valuables in the world, and a complete statement of the comparative results.

General, or at least universal, changes of Prices in rise or fall in any given country are due to general and great changes in the Money current there. Subordinate changes in other valuables, money being supposed to remain uniform, will of course vary their Prices; but it is impossible that such changes should affect equally or even generally all the various and numberless valuables of a whole country; while some are coming easier, others are coming harder, while some are more desired than formerly others are less desired, and this will bring in of course altered prices, some higher and some lower; but a general rise of all prices, or a general fall in the same, can only come about by great changes of some kind in the circulating medium, that is, the money, of the country. For example, in the United States, between 1862 and 1878 inclusive, a government paper promise, called greenbacks, was the current money of the country; owing to its excessive issue, and to some doubt in the minds of the people whether the paper would ever be redeemed in gold, it soon became depreciated as compared with gold, the premium on which over the paper money varied at different times from 1 to 185 per centum; as all other valuables were then sold against greenback money, which had declined, their prices naturally rose in some sort of proportion as the medium fell; general values remained much as before, but general prices were much enhanced; and when, after the resumption of specie payments in January, 1879, gold became again the standard medium, general prices declined in full accordance with the same universal principle reversed.

(b) Prices, as we have now seen, are only a subordinate form of Values: the universal law that regulates all the variations of them both, within certain fixed limits to be examined shortly, is called the Law of Supply and Demand. This is perhaps the most comprehensive and beautiful law in Political Economy. We shall look at it now only in outline: the filling in will be the pastime and profit of all that is to come.

"Demand" is a technical term in Economics, and accordingly needs to be defined, and then always used in its defined sense. So is "Supply." Demand is the "desire" of a "person" for something in the hands of another person, coupled with the possession of something else capable of buying that something. Mere desire has no function in Political Economy: hungry and penniless children passing by the stalls of a great market, have no influence on the prices or values of the viands, on which they cast their eager glances: only desires accompanied by "efforts" competent to excite the desires and to pay for the efforts of another are a Demand. Supply is the same thing as Demand looked at from the other side. Supply is the correlative of Demand. The Supplyer is a person, who has in his possession something desired by the Demander, and who in turn desires something in the hands of the Demander, when both are willing to exchange their "renderings." There is no economical difference in the position of the Demander and the Supplyer. Each is equally a Demand and a Supply with reference to the other. It is the old and ever-recurring case of Value, the propositions being here stated in their most universal terms.

For simplicity's sake, however, and for convenience, without altering the substance of the definitions a particle, the valuables when looked at as a Demand are practically reduced in all markets to their equivalent in Money, so that Money offered or ready to be offered against any other exchangeable thing constitutes what is called in commercial language a Demand; and this is sufficiently accurate as well as current, although it must always be remembered that each valuable in any market in reality constitutes a Demand for another, and is equally a Supply in reference to that other. Supply is any exchangeable thing offered for sale against any other exchangeable thing. For example, corn in any market is at bottom a Demand and a Supply at once for every valuable offered in that market at that time, say, ploughs for one thing; but in the talk of the market, the presence of corn there, or its being ready to be immediately brought there and offered in exchange for money, constitutes what is called a Supply of corn; money offered, or ready to be offered, in exchange for corn, constitutes what is called a Demand.

On this account Money seems to play a much more important part in trade than it actually does play; the corn is sold in the terms of money, that is, for dollars and cents as denominations of Value; convenience dictates such a reduction of general Value to this particular form of it, because this is found to make easier the ultimate exchange; but there is not one chance in a hundred, as trade runs nowadays in the larger markets, that this seller of corn will take his pay for it in actual money whether metallic or paper; money is never an ultimate product, but only an intermediate one; this seller of corn wants perhaps a plough or some other farming implement, and ten to one he will take for his corn a bill or order in some form on the seller of ploughs, and it will be corn for a plough, each becoming a Demand and a Supply for the other, though money or rather its denominations has acted as an agent in bringing about the final trade; the details of all this in manner and result will be as plain as day when we come to study "Money" and "Credits" in following chapters; while the essential point to be noted here is, that all Valuables are a Demand and Supply as towards one another. In other words, the world over, A market for products is products in market.

What, then, is Market-Value returned in the terms of Money? And what is the universal Law of it?

Market-value is the present rate of exchange between dollars and cents and any other valuable, that can be fairly graded in a class made up of valuables similar to itself; and the law of market-value is the equation of Supply and Demand, that is, the current rate is adjusted when money enough is offered to take off within the usual times the valuables on hand and offered for sale. If Demand for any reason become quickened, and the Supply be not increased, there is competition among buyers for the stock in market, and the market-rate rises or tends to rise. If, on the other hand, Demand become sluggish, the Supply remaining the same, there is a like competition among the sellers to dispose of their stock, and market-value sinks or tends to sink. So far it is the simple action on Value of the element of one "desire" expressing itself through a money-demand, the elements of "desire" and of "efforts" expressing themselves through Supply being supposed to remain stable, and the pulsations in the market-rate follow accordingly.

How far can this simple action go? Demand increasing, Supply remaining as before, market-rate rises: how far can it rise from this cause? Here we must remember that Demand not only acts upon Value, but also Value reacts upon Demand. As Value rises, the number of those whose means or inclinations enable them to purchase at the new rate is constantly diminished: there are ten persons who may wish an article at one dollar, of whom not over four will wish it at two dollars, and perhaps only one at three dollars. Every rise in market-rate then, under the impulse of enlarged Demand, tends to cut off a part of that Demand, that is, to lessen the number of those who will purchase at the increased price; and the rate consequently can only rise to that point, whatever it be, where an equalization takes place between the Supply and Demand, between the quantity of flour, for example, offered at the enhanced rate, and the quantity of money in the hands of those willing to exchange it for flour at the higher rate.

Just so in the reverse way, when Demand is slackened, Supply continuing as before, the market-rate is sure to decline; but declining rates tend strongly in turn to increase the demand by bringing the article within the range of a larger number of purchasers; Society is like a pyramid, each lower stratum is broader than the one above; and so the decline of rates under a weaker Demand is arrested by a stronger Demand coming from a wider circle of buyers, and a new market-rate is determined at the point of equalization between the new Demand and the old Supply. Thus every rise or fall of Demand tends to check itself, and will check itself in all the great classes of valuables, even without any variations in the Supply; everything oscillates under the variations of Demand; while the point of stable equilibrium, if we may use the expression of anything so unstable as Market-value, is always the equation of Supply and Demand.

But all considerable variations of market-rate are commonly checked at an earlier point than the one just indicated by variations in the Supply. A sharper Demand carries up the market-rate, and a higher market-rate commonly acts upon Supply to enlarge it, and an increased Supply too checks the rise of market-rate. Per contra, a slacker Demand lowers market-rates, and lowered rates often lessen the Supply by the action of holders and speculators,—holders withdrawing their stock for a better market, and speculators buying now when the article is cheap to store away until it shall be dearer. Thus rise of market-rate from Demand growing stronger is checked doubly; first, by curtailing the number of would-be buyers, and second, by enlarging the Supply: the fall of market-rate from Demand growing weaker is checked doubly; first, by increasing the number of consumers of a now cheaper article, and second, by a diminution of Supply by the action of holders and speculators. This double and harmonious working of the law of the Equalization of Demand and Supply is one of the most comprehensive and beautiful laws in Political Economy.

Besides this, we must note the effect on Value of conditions in Supply only, Demand being supposed to continue steady. There are three classes of valuables in respect to the law of their Supply. (1) When the Supply is scant, and cannot be increased at all, as is the case with choice antiques and certain gems and paintings by the old masters, their value may rise to any point under the action of Demand, there is and can be in such cases no market-rate, and the individual value will be struck at the point of equalization of the demand then existing with the supply there offered. For instance, the French Government paid, in 1852, 615,300 francs for a painting by Murillo, which had belonged to Marshal Soult. The genuine Murillos are comparatively few, and their number cannot be increased, and their merit causes a strong "desire" to possess them, and their value rises in connection with the limitation of Supply to a point beyond which no one purchaser can be found. When this painting was offered in Paris for sale, many "persons" of course were anxious to buy it, there was but one painting, there could be but one purchaser, value rose under the influence of a sharp Demand, the rise could not be checked by any duplication of the Supply, and the equation was complete and the value for that sale determined when one party distanced all other competitors and offered a sum greater than any one else would give. The same principle controls all sales of this sort, and is practically the principle of the Auction, whose very name indicates its nature in this regard, that Demand becomes restricted to one party, and that the highest bidder.

(2) When the Supply, instead of being absolutely limited, can only be increased with difficulty or after the lapse of time, similar but less extreme results will be observed. Let us suppose, that pianos are selling in some rural community at $300 each, that there are twenty persons in the place who want a piano immediately, that there are but fifteen pianos on hand, and that the number cannot be increased for half a year. The market-rate will certainly rise above $300. How much above? To that point, at which only fifteen of the twenty will be willing to purchase at the new rate. The equation of Supply and Demand will be reached by a rising rate which cuts off five competitors. This is the principle, working only roughly in practice through the estimates and good judgment of dealers and purchasers. A better illustration of this second class of cases is, perhaps, the Grains and other agricultural products. When these have been gathered, there is no more home supply for a year; and any deficiency in the crops will raise their market-rate, not at all in the ratio of the deficiency, but according to the relations of the diminished Supply to a new Demand. Since the abolition of the Corn-Laws in England in 1846, and the resulting ease of grain-imports from abroad, a deficiency of home crops has no such effect on the price of cereals as it had before that time; when, according to Tooke's History of Prices, an expected falling-off of one third in the crops often doubled and sometimes quadrupled the usual prices; which shows that the world ought to become one country in respect to all food supplies, as indeed happily it is now for the most part, each country allowing them to be distributed freely everywhere in accordance with this law of Demand and Supply. Speculation is more busy in grain, in cotton, and in such things generally, because a new Supply can only be had once a year; early information is eagerly sought at the trade centres in regard to the prospects of the growing crops, and has its influence one way or the other on current prices; but the world is so wide and all the parts of it now so closely connected together by steamship and telegraph, that the prices of the great food staples are remarkably uniform over the earth, and Speculation has not the chance it once had to count and "corner."

(3) In the only remaining and by far most comprehensive class of cases, in which the Supply of Commodities and Services and Credits can be readily and indefinitely increased to meet enhanced Demand, and easily withdrawn from market and stored when Demand declines, each rise and fall of market-rate tends to be speedily checked through the mere action of Supply; and the doubly and harmoniously working Law but just now referred to keeps Value in this class of cases comparatively steady all over the world.

(c) It only remains in this branch of the general discussion on Value, to indicate the Limits, within which all oscillations of Value are contained. These extreme limits are specially to be found in the element of Value which we have called "Efforts." We have clearly seen already, that "efforts" (or Labor) are not, as has been often asserted, the cause of Value, but only one of several constituent causes; if Labor be asserted to be the sole cause of Value, the inquiry becomes instantly pertinent, what is the cause of the value of Labor; yet we know, that "efforts" always stand in preconnection with value, and, the mutual "desires" being presupposed, there must always be Limitations of Value lying partly in the efforts made by the person serving and partly in the efforts saved to the person served. In every valuable transaction, each of the parties is reciprocally serving and served, and it is clear, that the two would not exchange "renderings" unless the service which each renders to the other is less onerous than the "efforts" which each would have to make if each served himself directly. For example, it takes a certain effort for me to bring water from the spring for the use of my family; I am willing to pay a neighbor for bringing it for me, but I should not be willing to make a greater effort for him in return than the effort is to bring it myself; neither should I be willing to make an effort for him in return which I regarded just as onerous as the bringing the water myself; and unless there is some service which he will accept less onerous to me than that, I shall continue to bring the water. On the other hand, he will surely not render the service to me of bringing the water, unless it be less onerous to him to do so than the doing that for himself which I am ready to do for him.

This principle, applicable to all exchanges whatsoever, draws on the one side the outermost line, beyond which Value never can pass. It may be asserted with confidence, that no person will ever knowingly make a greater effort to satisfy a desire through exchange, than the effort needful to satisfy it without an exchange. Therefore, it follows, that all exchanges lessen onerous efforts among men relatively to the satisfaction of their desires, and tend to lessen these more and more as exchanges multiply in number and variety, otherwise the exchanges would not take place.

Moreover, within this outermost Limit of Value, which is made by the comparative onerousness of the respective "efforts," there is a second limitation of a similar kind to be found specially in the element which we have called "estimates." The estimate of each exchanger is based at once on his own effort about to be rendered and on his desire for the return service offered: the element of effort in the case of both being considered for the time as fixed, Value will vary according to the varying desire of each for the return service of the other, affecting of course the "estimate" of each, and furnishing also a secondary Limit of Value. To pursue the same illustration, suppose I regard the effort required to bring the water myself as 10; that there are several persons, who would be glad to do that service for me at a return service which I consider as 8; that there are two persons, who are willing to do it for something which I estimate at 6; and that there is only one person, who will do it for a return service which I regard as 5. It is evident, that the extreme limits of that service to me are 10 and 5. Higher than 10 it cannot go, lower than 5 it cannot sink. But why have I before me three possible classes of renderers? Because the persons in each class, while estimating their own efforts alike in the proposed rendering to me, have varying "desires" as towards a possible rendering from me to them, and consequently put differing "estimates" upon the possible transactions. The man who will bring the water for 5 has for some reason (no matter what) a stronger desire for the return than anybody else, and I should of course employ him so long as he would serve me on those terms; if he decline the exchange, I fall back on one of the two persons in the class above him, and Value rises now from 5 to 6, and will be steadier there than it was before; if each of these in turn should give out, I should fall back upon the larger class ready to serve me at 8, and Value would be very steady at that rate, because there are numerous competitors; and by no possibility could it rise above 10. Between 10 and 5 the value may fluctuate, but it cannot overpass these Limits in either direction under existing circumstances.

Therefore we may conclude, that the maximum Value of any Service in exchange will be struck at the point where the recipient will prefer to serve himself, or go without the satisfaction, rather than make the exchange; and the minimum Value of any Service in exchange is struck at the point below which the recipient cannot get himself served even by him who most highly estimates the return service offered.

(4) We come now to the last and most important Inquiry in this initial chapter, namely this, Can there be, and is there, a strict Science of Buying and Selling? Is there a Science by itself, clear and certain, that covers and controls Valuables?

Here we must go slowly, if we would go surely. We must first find out exactly what a Science is in general, and then ascertain in particular whether Political Economy bears all the marks and stands all the tests of the other genuine Sciences. What is a Science?

A Science is the body of exact definitions and sound principles educed from and applied to a single class of facts or phenomena.

The very first condition, accordingly, of any science is, that there be a single class of facts, objective or subjective, that can be separated from all other classes of facts, in the mind by a generalization and in words by a definition, and that such generalization and definition be clearly made and held; the second condition is, that the class of facts so circumscribed and defined be open to some or all of the logical processes of construction, of which the most important are Induction and Deduction; the third condition is, that the subordinate definitions and working principles within the inchoate Science be all educed from and applied to these circumscribed facts in strict accordance with these well-known logical processes; and the last condition is, that these definitions and principles have gradually become "a body," in which there is an organic arrangement of parts, all being placed in a just order and mutual interdependence. There is no old Science, and there can be no new Science, in which these four conditions do not meet and become blended; and the beauty of it is, that this Definition applies to any Science in all stages of its growth. No one of all the Sciences is as yet completed; but just so soon as any correct definitions and principles are drawn from and applied to any class of things clearly circumscribed as such, and these definitions and principles are orderly arranged in a body, there is an incipient Science; and its progress towards perfection will proceed in precisely the same manner in which its foundations have been laid; new facts and principles and definitions will gradually be discovered, and these when reapplied to the class of things out of which they have sprung, will lead to corrections and adjustments and enlargements of the Science; and no matter how far these logical processes may be carried, the general Definition with which we start will also be found ample at the end of the journey.

All of the Sciences without exception have been developed into their present position in just this manner; and they fall easily into three great classes, namely, the Exact, the Physical, and the Moral Sciences. The ground of this triple classification is partly the distinct subject-matter in the three classes of Sciences, and partly the distinctive prominence of one or more of the logical processes of construction in each.

Thus, the class of the Exact Sciences consists only of the formal Logic, and pure Mathematics. These two are distinct from all other sciences, because their logical method of procedure is wholly Deductive. Deduction is the process of the mind, by which we pass from a general truth to a particular case under it, that is to say, from more to less inclusive propositions. Stuart Mill argues at much length in his book on Logic, that even the axioms of pure Mathematics are originally gained by Induction, while others claim that the truth of these axioms is perceived intuitively, but no matter how this point is decided, the construction process of the Pure Mathematics is from the General to the Particular. So it is also with the Aristotelian logic, whose Major Premise, whether only supposed to be true or intuitively perceived or inductively proved is always General in its terms. This is the form of Aristotle's Syllogism:—All sinners deserve to be punished; John is a sinner; and therefore, John deserves punishment.

Physical Sciences are those concerned with the classifications and laws of action belonging to material substances. There are a great circle of these, of which Astronomy, Botany, and Chemistry, may serve as examples. They have been mostly developed since the time, and in accordance with the methods, of Lord Bacon; who, in strong reaction against the Deductive logic of Aristotle, exalted Induction or the mode of generalizing from particulars, as the true way of building up Sciences; and, as the subject-matter of each of the physical sciences is well open to observation and experiment, to Induction and Deduction, and to corrective verifications, both inductive and deductive, the new method proved remarkably pregnant and successful. Each of these sciences has a distinct Class of objects or phenomena to which its attention is directed; the class is circumscribed by the scientific Conception and Definition; its devotees as a rule are skilled in using the Baconian tools; and consequently, its conclusions receive the confidence and control the action of men. All of the Physical Sciences are constantly enlarging "the body of exact definitions and sound principles" connected with their several classes "of facts or phenomena."

Moral Sciences are those concerned with the classifications and laws of action belonging to beings having Thoughts and Desires and Will. The most developed of these sciences at present are Metaphysics, Ethics, and Economics. Each of these is concerned with a single class of phenomena, which may be exactly conceived of and defined, and is open to the logical processes by which alone Sciences can be built up. But Induction cannot march up with quite so sure a stride, nor Deduction descend with so large degrees of certainty, in relation to persons endowed with free-will, as in relation to physical substances held firm in the grip of unvaried law. Still, the doubt always attaches far more to the actions of an individual than to the actions of the masses of men. It is much easier to know human nature in general, than one man in particular, because many Inductions guided by observation and History make it almost certain how masses of men will act under a given set of conditions, while any one may act in a contrary way. Deduction, accordingly, cannot hold quite the same place in the Moral Sciences so far as individuals are concerned, as it holds in the Physical and Exact Sciences; but this lack is perhaps more than made up by other advantages. Experience in the moral sciences corresponds to Experiments in the physical sciences. Then there is the great advantage of Introspection; since each man has within himself the means of interpreting and testing the inductions of Metaphysics, Ethics, and Economics. Then also there is the great resource of Feigned Cases, which, provided only they be cases possible to occur, open up to Reasoning a new means of proving and correcting. Besides these, which it enjoys in common with them, Economics, as we shall soon see, possesses one other great advantage over and above the rest of the Moral Sciences.

Since, then, Political Economy deals primarily with Persons, and only quite secondarily with Things, it is, under the definition and on every ground, a "moral science"; yet it must not be confounded in the least with what is sometimes called the science of Morals, or Ethics. There is one word that marks and circumscribes the field of Ethics, and that word is Ought; there is one word also that marks and circumscribes the field of Economics, and that word is Value. Now, the idea of obligation, on which ethical science is founded, and the idea of gainful exchange, on which economical science is founded, are totally distinct ideas. The imperatives of ethical obligation rest upon the consciences of men, and Duty is to be done at all hazards; guilt is incurred if it be neglected; while pecuniary gains and losses, however large, do not, or at least ought not, weigh a feather against an intuition of Right and Wrong. Economics, on the other hand, does not aspire to place its feet upon this lofty ethical ground; no man is ever under any moral obligation to make a trade; he properly makes it or not, according to his present sense of its gainfulness to himself; and so economic science finds a solid and adequate footing upon the expedient and the useful. Ethics appeals only to an enlightened conscience, and certain conduct is approved because it is Right, and for no other reason; Economics appeals only to an enlightened self-interest, and exchanges are made because they are mutually Advantageous, and for no other reason; each of the two Sciences, therefore, has a basis and sphere of its own, and the grounds of the two are not only independent, but also incommensurable.

We will now apply seriatim to Political Economy the four fundamental conditions belonging to all recognized Sciences, and so determine for ourselves whether it be not a strict science, and thus worthy in its leading propositions of all acceptation.

(a) Every science must have to begin with a definite Class of facts, which lie in an easily circumscribable field, and which are not likely to be confounded with other facts of a differing nature. Economy has such a class of facts, that lie in such a field, and that cut themselves off by sharp lines from all other things. Valuables is its class of things. It has nothing to do with any other class of things. Its field is Value, or Sales, or Exchanges. This field is perfectly definite. Sales are never confounded with gifts, and are never confounded with thefts. They have a distinctive character of their own. They have always been in the world, will always be in the world in ever-multiplying volume, and no one ever mistakes their main features for anything else. Anything whatsoever that is salable, or is about to be made so, comes within the view of Economics, and scientifically it cares for nothing else. While it finds its field definite, it also finds it broad. It has no wish to encroach on other sciences, nor will it tolerate any encroachments on its own. Before anything is sold, or is being made ready to sell, it cares nothing what other science employs itself upon that thing; after the thing is sold, Economy loses its interest in it, and other sciences may take it up if they choose. Valuableness is the one quality that constitutes the Class of things with which the Science is conversant, and it claims complete jurisdiction over all things just so far forth as they have this one quality, and no farther. Now there is in the actual world such a Class of things; its exterior boundaries have been exactly ascertained by a long series of Inductions and Deductions, tentative, corrective, and confirmatory; and accordingly, Political Economy has now in full possession the first grand condition of a Science.

(b) This great class of facts, thus reached by logical Generalization and grasped and held by a mental Conception and fixed by an adequate verbal Definition, is remarkably open to all the logical processes of reasoning, by which alone sciences are constructed, and thus possesses in full measure the second grand condition of the Sciences. Not one logical resource is denied to the economists: all the tools of the scientific workshop are at their hands. Let us now catalogue these in their order.

(1) Induction. This is the logical and universal process, by which the mind naturally passes up from a certain number of observed cases, in which a certain quality appears, to a Generalization, which is a conception of the mind followed by a statement in words to the effect, that all possible cases of that kind will exhibit the quality already observed in the few cases. It has as its basis a confidence in the resemblances and uniformities of Nature; it proceeds upon the axiom that Nature throughout is consistent with herself; and this confidence has been ten thousand times justified in the issue, when it is found that Nature preordained the Sciences by causing grand analogies to run through each department of her works, including man and his works. The structure of the human mind corresponds with these objective resemblances; it seizes upon them, and delights in them, and naturally and joyfully infers and concludes that what has been observed of a part may be safely affirmed of the whole of that kind; accordingly, the world over, when certain things are found to be true in a considerable number of cases, the mind leaps over space and time to a whole class, and frames for itself a general rule or principle, which binds all the cases into one bundle, and thereafter confidently affirms what is known to be true of some to be probably true of all. This is inductive Generalization; and the strength and the joy of it is well expressed by Descartes: "I have thought that I could take as a just generalization that which I very clearly and vividly conceived to be true."

Experience in Economics corresponds to Experiment in the Physical Sciences, and furnishes to Induction all the fuel it can ask for to feed its logical furnace and to forge the chains that bind the Cases to the Classes. Personal experience in buying and selling, local experience in buying and selling, and national experience in buying and selling, with all that belongs to these, the records of which are full to overflowing, afford to the inductive inquirer in Economics an inexhaustible supply of material. Instances abound. Particulars may be gathered up one by one on every hand and linked into the inductive chain. If any doubt be felt about the strength of any one of these chains, another one may at once be linked in terms drawn from another field of Experience with a view to test the strength of the first. Most fortunate from this point of view is the United States, because here there are States with substantive powers of control over most matters of trade within their borders, as well as a Nation with sovereign powers of control over some points of trade within the country as a whole. This feature has given birth to commercial experiments as well as commercial experience of all kinds; and Induction rejoices in all these abundant materials for generalization thus furnished free of cost to Science, though unfortunately not free of cost to the People.

(2) Deduction. This is a logical process exactly the reverse of the first, in that it descends from a generalized statement reached by the inductive process to some particular, or subordinate class of particulars, ostensibly covered by the general maxim. Induction examines a number of particulars, and then makes a leap, it may be a long leap, over all intervening particulars, to its Generalization clamping them. The main use of Deduction is to make sure of any one of these overleaped particulars, which may come into importance, and thus confirm the generalization, or correct it. It is not strictly true, what is often alleged against deductive reasoning, that there is nothing new in its result, that the Induction had already passed through that particular in rising to its Generalization, and therefore to descend to any particular link to examine that, is something useless. The exact truth is, that it is useless to examine again deductively the very particulars that were carefully studied inductively, but on the other hand there is always much actually untraversed territory between these already examined particulars and the inductive generalization, and Deduction is often very useful in carrying us down to questionable points in this territory. Even Lord Bacon, who scorned the syllogism, admits this: "Axioms duly and orderly formed from particulars easily discover the way to new particulars, and thus render sciences active."

We will illustrate this by a reference to Franklin's famous induction to prove the identity of lightning with electricity. Only one experiment, and that a very rude one, was needful in this case; although usually many experiments, or the careful observation of many particulars, are necessary in inductions; but the generalization having been gained, Deduction had a chance to try its hand; it had long been observed that electricity could be conducted from point to point, and if electricity and lightning be identical, then lightning can be so conducted; therefore, deduced Franklin, a pointed iron rod elevated above buildings will harmlessly conduct lightning from the clouds into the ground. Deduction gave mankind the lightning-rod, and so made one point of science "active," as Bacon phrased it; and it is noticeable, that Turgot's felicitous epigram turns on the deductive rather than the inductive side of Franklin's experiment: Eripuit cœlo fulmen sceptrumque tyrannis.