How Revenue is Distributed In SocietySeptember 30, 2015
A portion of the demand for the precious metals is occasioned by their gradual destruction by use; for, although less subject to decay than most products, they are still perishable in a certain degree; and doubtless the wear, though slow, must be considerable upon the immense quantity of gold and silver in constant use, as well in the character of money, as in the various objects of spoons, forks, goblets, dishes, and jewellery of all sorts. There is likewise a large consumption in plating and gilding. Smith asserts, that the manufacturers of Birmingham alone, in his time, worked up annually, as much as the worth of £50,000 in these ways. 27
A further allowance must be made for the consumption of embroidery, tissue, bookbinding, &c., all which may be set down as finally lost to other purposes. Add to this the buried hoards, the knowledge of which dies with the possessor, and the quantity lost by shipwreck.
The causes, which determine the value of things, and which operate in the way described in the preceding chapters, apply without exception to all things possessed of value, however perishable; amongst others, therefore, to the productive service yielded by industry, capital, and land, in a state of productive activity. Those, who have had at their disposal any one of these three sources of production, are the venders of what we shall here denominate productive agency; and the consumers of its product are the purchasers.
Its relative value, like that of every other commodity, rises in direct ratio to the demand, and inverse ratio to the supply.
The wholesale employers of industry, or adventurers, as they have been called, are but a kind of brokers between the venders and the purchasers, who engage a quantum of productive agency upon a particular product, proportionate to the demand for that product. 29 The farmer, the manufacturer, the merchant, is constantly occupied in comparing the price, which the consumer of a given product will and can give for it, with the necessary charges of its production; if that comparison determine him to produce it, he is the organ of a demand for all the productive agency applicable to this object, and thus furnishes one of the bases of the value of that agency.
If the nations of the world go on increasing their wealth, as most of them certainly have done for the last three centuries, their want of the precious metals will progressively advance, as well in consequence of the gradual wear, which will be greater in proportion to their increasing use, as of the multi- plication and increased aggregate value of other commodi- ties, which will create a larger demand for the purposes of transfer and circulation. If the produce of the mines do not keep pace with the increasing demand, the precious metals will rise in value, and less of them be given in exchange for other products in general. If the progress of mining shall keep pace with the advances of human industry, their value will remain stationary, as it seems to have done for the last two centuries; during which the demand and supply have regu- larly advanced together. 28
On the other hand, the agents of production, animate and in- animate, land, capital, and human labour, are supplied in larger or smaller quantity, according to the action of the various motives, that will be detailed in the succeeding chapters; thus forming the other bases of the value at which their agency is rated. 30
Every product, when completed, repays by its value the whole amount of productive agency employed in its completion. A great part of this agency has been paid for before the entire completion of the product, and must have been advanced by somebody= other part has been remunerated on its comple- tion; but the whole is always paid for ultimately out of the value of the product.
And, if the supply of those metals outrun the progress of gen- eral wealth, as it seems to be doing at this moment, they will fall In respect to other commodities at large. Metal-money will thereby be rendered more cumbrous; but the other uses of gold and silver will be more widely diffused. It would be a long and tedious task to expose all the false reasoning and erroneous views, originating in the perpetual confusion of the different kinds of variation, that it has cost so much time to analyze and distinguish. It is enough to put the reader into a condition himself to discover their fallacy, and estimate the tendency of measures avowedly directed to influence public wealth, by operating upon the scale of value.
By way of exemplifying the mode, in which the value of a product is distributed amongst all that have concurred in its production, let us take a watch, and trace from the commence- ment, the manner in which its smallest parts have been pro- cured, and in which their value has been paid to every one of the infinite number of concurring producers.
In the first place we find, that the gold, copper, and steel, used in its construction, have been purchased of the miner, who has received in exchange for these products, the wages 169Jean-Baptise Say, A Treatise on Political Economy of labour, interest of capital, and rent paid to the landed pro- prietor. The dealers in metal, who buy of the original pro- ducer, re-sell to those engaged in watch-making, and are thus reimbursed their advance, and paid the profits of their busi- ness into the bargain.
That portion of the value produced, which accrues in this manner to the landed proprietor, is called the profit of land; which is sometimes transferred to the farmer, in consider- ation of a fixed rent.
The portion assigned to the capitalist, or person making the advances, however minute and for however short a period of time, is called the profit of capital; which capital is some- times lent, and the profit relinquished on condition of a stipu- lated interest.
The respective mechanics, who fashion the different parts whereof a watch is composed, sell them to the watchmaker, who, in paying them, refunds the advance of their previous value, together with the interest upon that advance; and pays, besides, the wages of labour hitherto incurred. This very com- plex operation of payment may be effected by a single sum, equal to the aggregate of those united values. In the same way, the watchmaker deals with the mechanics that furnish the dial-plate, the glass, &c., and such ornaments as he may think fit to add, — diamonds, enamel, or any thing he pleases. The portion assigned to the mere mechanic or labourer is called the profit of labour; which is sometimes relinquished for certain wages. 31
Thus, each class receives its respective share of the total value produced; and this share composes its revenue. Some classes receive their share piecemeal, and consume as fast as they receive it; and these are the most numerous, for they com- prise most of the labouring classes. The land-holder and the capitalist, who do not themselves turn their means to account, receive their revenue periodically, once or twice, or perhaps four times a year, according to the terms of the contract with the transferee. But, in whatever manner a revenue may be derived, it is always analogous in its nature, and must origi- nate in actual value produced. Whatever value an individual receives in satisfaction of his wants, without having either directly or indirectly concurred in production of some kind or other, must be wholly either a gratuitous gift or a spolia- tion; there is no other alternative.
Last of all, the individual purchaser of the watch for his own use refunds to the watchmaker the whole of his advances, together with interest on each part respectively, and pays him besides, a profit on his personal skill and industry. We find, then, that the total value of the watch has been shared amongst all its producers, perhaps long before it was finished; and those producers are much more numerous than I have described or than is generally imagined. Among them, prob- ably, may be found the unconscious purchaser himself, who has bought the watch, and wears it in his fob. For who knows but he may have advanced his own capital to a mining adven- turer, or a dealer in metal; or to the director of a large factory; or to an individual who acts himself in none of these capaci- ties, but has underlent to one or more such persons a part of the funds he has borrowed at interest from the identical con- sumer of the watch?
It is in this way, that the total value of products is distributed amongst the members of the community; I say, the total value, because such part of the whole value produced, as does not go to one of the concurring producers, is received by the rest. The clothier buys wool of the farmer, pays his workmen in every department, and sells the cloth, the result of their united exertion, at a price that reimburses all his advances, and af- fords himself a profit. He never reckons as profit, or as the revenue of his own industry, any thing more than the net sur- plus, after deducting all charges and outgoing; but those out- goings are merely an advance of their respective revenues to the previous producers, which are refunded by the gross value of the cloth. The price paid to the farmer for his wool, is the compound of the several revenues of the cultivator, the shep- herd, and the landlord. Although the farmer reckons as net produce only the surplus remaining after payment of his land- lord and his servants in husbandry, yet to them these pay- ments are items of revenue, — rent to the one, and wages to the other; to the one, the revenue of his land, to the other, the revenue of his industry. The aggregate of all these is defrayed out of the value of the cloth, the whole 32 of which forms the It has been observed, that it is by no means necessary for a product to be perfected for use, before the majority of its concurring producers can have been reimbursed that portion of value they have contributed to its completion; in a great many cases, these producers have even consumed their equiva- lent long before the product has arrived at perfection. Each successive producer makes the advance to his precursor of the then value of the product, including the labour already expended upon it. His successor in the order of production, reimburses him in turn, with the addition of such value as the product may have received in passing through his hands. Fi- nally, the last producer, who is generally the retail dealer, is compensated by the consumer for the aggregate of all these advances, plus the concluding operation performed by him- self upon the product. The whole revenues of the community are distributed in one and the same manner.
profit of its external commerce. A nation that should export to the value of 20,000 dollars, and import to the value of 24,000 dollars wholly in goods, without any money passing on either side, would make a profit of 4000 dollars, in direct contradiction to the theory of the partizans of the balance of trade. 35 revenue of some one or other, and is entirely absorbed in that way. Whence it appears, that the term net produce applies only to the individual revenue of each separate producer or adven- turer in industry; but that the aggregate of individual revenue, the total revenue of the community, is equal to the gross pro- duce of its land, capital, and industry. Which entirely sub- verts the system of the economists of the last century, who considered nothing but the net produce of the land as form- ing revenue, and therefore concluded that this net produce was all that the community had to consume; instead of admit- ting the obvious inference, that the whole of what has been created, may also be consumed by mankind. 33 The voluminous head of perishable products consumed within the year, nay, often at the very moment of production, as in the case of all immaterial products, is nevertheless an item of national revenue. For what are they but so many values pro- duced and consumed in the satisfaction of human wants, which are the sole characteristics of revenue?
The estimation of individual and of national revenue is made in the same way, as that of every collection of values, under whatever varieties of form; as of the estate of a deceased per- son. Each product is successively valued in money or coin. For instance, the revenues of France are said to amount to 1300 millions of dollars which by no means implies, that the commerce of France produces a return of that amount in specie. Probably a very small amount of specie, or none at all, may have been imported. All that is meant by the asser- tion is, that the aggregate annual products of the nation, val- ued separately and successively in silver coin, make the total value above stated. The only reason of making the estimate in money is, the greater facility acquired by habit of forming an idea of the unchangeable value of a specific amount of money, than of other commodities. Were it not for that facil- ity, it would be quite as well to make the estimate in corn; and to say, that the revenues of France amounted to 1,300,000,000 bushels of wheat, which at one dollar the bushel, would make precisely the same amount.
If national revenue consisted of the mere excess of value pro- duced above value consumed, this most absurd consequence would be inevitable, namely, that, where a nation consumes in the year the total of its annual product, it will have no rev- enue whatever, Is a man possessed of an income of 2000 dol- lars a year, to be said to have no revenue, because he may think proper to spend the whole of it? The whole amount of profit derived by an individual from his land, capital, and industry, within the year, is called his an- nual revenue. The aggregate of the revenues of all the indi- viduals, whereof a nation consists, is its national revenue. 34 Its sum is the gross value of the national product, minus the portion exported; for the relation of one nation, is like that of one individual to another. The profits of an individual are limited to the excess of his income above his expenditure, which expenditure, indeed, forms the revenue of other per- sons, but, if those persons be foreigners, must be reckoned in the estimate of the revenue of the respective nations they may belong to. Thus, for instance, when a consignment of ribbons is made to Brazil to the amount of 2000 dollars, and the re- turns received in cotton, in estimating the resulting product to France from this act of dealing, the export made to Brazil in payment of the cotton must be deducted. Supposing the investment of ribbons to procure, say 40 bales of cotton, which, when they reach France, will fetch 2400 dollars, 400 dollars only of that sum will go to the revenue of France, and the residue to that of Brazil.
Money facilitates the circulation from hand to hand of the values composing both revenue and capital; but is itself not an item of annual revenue, not being an annual product, but a product of previous commerce or metallurgy, of a date more or less remote.
The same coin has effected the circulation of the former year, possibly of the former century, and has all the while remained the same in amount; nay, if the value of its material have de- clined in the interim, the nation will even have lost upon its capital existing under the form of money; just in the same way as a merchant would lose upon the fall of price of the goods in his warehouses.
Did all mankind form but one vast nation or community, it would be equally true in respect to mankind at large, as to the internal product of each insulated nation, that the whole gross value of the product would be revenue. But so long as it shall be necessary to consider the human race as split into distinct communities, taking each an independent interest, this cir- cumstance must be taken into the account. Wherefore, a na- tion, whose imports exceed its exports in value, gains in rev- enue to the extent of the excess; which excess constitutes the Thus, although the greater part of revenue, that is to say, of value produced, is momentarily resolved into money, the money, the quantity of silver coin itself, is not what consti- tutes revenue; revenue is value produced, wherewith that quan- tity of silver coin has been bought; and, as that value assumes 171Jean-Baptise Say, A Treatise on Political Economy the form of money but for a moment, the same identical pieces of money are made use of many times in the course of a year, for the purpose of paying or receiving specific portions of revenue. Indeed, some portions of revenue never assume the form of money at all. The manufacturer, that boards his work- men himself, pays part of their wages in food; so that this far greater portion of the mechanic’s revenue is paid, received, and consumed, without having once taken the shape of money, even for an instant. In the United States of America, and in countries similarly circumstanced, it is not uncommon for the colonist to derive from the produce of his own estate, food, lodging, and raiment for the whole of his establishment; re- ceiving and consuming his whole revenue in kind, without any intervention of money whatsoever. to the proprietor= 2. Of books by the capital and industry of the bookseller. The two products have been subsequently in- terchanged one for the other, and consumed each by the pro- ducer of the other= having arrived at the particular form adapted to their respective wants. So likewise of immaterial products. The opinion of the law- yer, the advice of the physician, is the product of their re- spective talents and knowledge, which are their peculiar pro- ductive means. If the merchant have occasion to purchase their assistance, he gives for it a commercial product of his own converted into money. Each of them ultimately consumes his own revenue respectively, transformed into the object best adapted to his peculiar occasions. I think I have said enough to warn the reader against con- founding the money, into which revenue may be converted, with revenue itself; and to establish a conviction that the rev- enue of an individual, or of a nation, is not composed of the money received in lieu of the products of his or their cre- ation, but is the actual product or its value, which, by a pro- cess of exchange, may undoubtedly arrive at its destination in the shape of a bag of crown pieces, or in any other shape whatsoever.