precious metals from being sent out of the country. There are many excuses for the persons who made the mistake of confounding money and wealth. Like many others they mistook the sign for the thing signified. Wealth is always estimated in money. The income of a rich man is said to be so many thousand pounds; the national revenue and the national expenditure are said to be so many million pounds.

These and hundreds of similar facts caused the true nature of money to be misunderstood. The best way of arriving at a trustworthy conclusion respecting it is to look back into history, and see what other nations have done who have not made use of gold and silver coin. The money of the Chinese once consisted of small cubes of pressed tea; there are certain tribes of Indians who use a sort of shell as money; the pre-historic Greeks used cattle as a medium of exchange, and they substituted pieces of metal impressed with the image of an ox, only when they began to trade across the seas. Adam Smith speaks of some Arabs who also used cattle for money; they fell into the same error as those who thought that wealth was the same thing as money, for they thought that no country could be wealthy that did not possess vast herds of cattle. When they first heard of France and wished to form an idea of its wealth, they asked how many cattle it contained. There have been times in the history of every country when the use of money, even of a rude description, was unknown; all exchange then had to be carried on by means of barter.

Thus if a man who had two boats were in need of a spear, he would offer a boat in exchange to anyone who would give him a spear. Though commerce could not flourish under such a system of exchange as this, yet it is idle to assert that these barbarous communities possessed no wealth, for we previously explained that wealth was anything that had an exchange value.

The real nature of Money. What then is money? It is a measure of value, and a medium of exchange. When it is said that money is a measure of value, it is virtually affirmed that any substance is money which is selected by universal consent to serve as a standard by which the value of all

other commodities may be estimated. That this substance need not be gold or silver has been shewn above; in fact any article might be selected to serve as a measure of value.

The meaning of the assertion that money is a medium of exchange is that the exchange of commodities is usually transacted through the medium of money. Thus a farmer who wished to sell barley and buy guano would not probably effect a direct exchange of these two commodities: he would sell the barley for money and with this money he would buy the guano.

The mercantile system. The error of identifying wealth with money led to the policy briefly alluded to above, of doing everything to foster the accumulation of gold and silver. With this end in view statesmen did all they could to encourage the export trade of their own country, and to discourage importations from abroad by placing heavy duties on imported goods, and by giving bounties on exports. At the time when this policy was prevalent in England, very large duties were placed upon French wine, brandy, silks, lace, etc., with the object of preventing large quantities of these commodities being bought in England; for this, it was argued, would decrease England's wealth by causing money to be sent from England to France. The fallacies of this policy, which is known as the Mercantile System, were first exposed by Adam Smith in his great book The Wealth of Nations, which was published in 1776. In this work he pointed out the errors of a book, called England's Treasure in Foreign Trade, which was the guide of the statesmen who carried out the Mercantile System. The object of this book actually was to shew that home trade was of little consequence, because it did not increase the amount of gold and silver in the country. Adam Smith's work explained, for the first time in England, the true nature of money, and shewed that if all restrictive duties were discontinued the exports and imports of a country would tend to be equal.

Free trade. This part of our subject will be more fully explained in a subsequent chapter; at present it is only necessary to add that the policy of removing restrictive

duties on imports and allowing commerce to take its natural course is known as the Free Trade Policy.

With these few introductory remarks we pass to the consideration of the first of the three great branches into which our subject is divided: viz. the Production of Wealth.

QUESTIONS ON THE INTRODUCTORY CHAPTER.

I. What is Political Economy?

4.

Enumerate some of the articles which have at

various times been used as Money.

5. What is Barter?

6. Describe the Mercantile System.

7.

Whence arose the errors of this system?

8. By whom and how were the errors of the Mercantile System first combated?

9. By what Policy has the Mercantile System been superseded?

I. Could a man be said to be wealthy, if he had not sixpence in the world?

2. Was the Spartan nation poorer because it prohibited gold?

3. Is barter quite extinct in England?

SECTION I.

The Production of Wealth.

IT was stated in the Introduction that Political Economy investigated the laws which regulate the Production, the Exchange, and the Distribution of Wealth.

The three requisites of Production. It is proposed in this section to dwell solely upon the Production of Wealth. There are three requisites of production, by the combined agency of which wealth is produced. These are Land, Labour, and Capital. In order that the various functions of these three requisites may be clearly explained, and that the peculiar office which each performs in the production of wealth may be accurately defined, this section will be divided into three chapters, under the heads of Land, Labour, and Capital.

CHAPTER I. On Land.

Land as an agent of Production. A few moments' reflection will reveal the indispensable nature of the service which land renders to the production of wealth. There is no article of commerce, the origin of which cannot be either directly or indirectly traced to land. Look round the room in which you sit, or look at the clothes you wear, and you will notice that you can see nothing that has not been derived from the land. A piece of woollen cloth, for instance, is derived from the land. The wool of which it is made has been originally taken from the back of a sheep, which lived on the grass,

turnips, etc., grown on the land. Calico can be traced even more directly to the land. The cotton plant, from the fibres of which calico is made, is the production of the land. All manufactured articles are made either of animal, vegetable, or mineral productions, all of which are derived from the land. In fact the importance of land as an agent of production is so great that the French economists, in the time of Adam Smith, asserted that land was the sole source of wealth. It will however be shewn that Labour and Capital are also indispensable to the production of wealth.

Circumstances which increase the productive power of land. There are many circumstances that increase the productive power of land. The beneficial effects of the artificial manures which chemistry has brought within the reach of the farmer are well known. We need do no more than allude to the modern inventions of the numerous machines, such as the reaping and thrashing machines, which do so much to increase the productive power of land, labour and capital. Many large tracts of country, such as the fens of Cambridgeshire which were once useless swamps, have been turned into rich corn land by means of drainage. It is evident that the productiveness of such land is mainly dependent on the labour and capital that have been devoted to its improvement.

Large and small farming. Much controversy has been carried on as to the relative advantages and disadvantages of large and small farming. One of the principal advantages of large farming is that it makes the use of improved machinery much more available. A farmer who rents 800 acres will find it pay him to use the steam plough and steam thrashingmachine; and he will be able to avail himself of all the latest improvements in the manufacture of agricultural implements. A flock of 1000 sheep does not require twice as many shepherds as a flock of 500. The housing of a large number of cattle does not cost so much per head as the housing of a smaller number.

The principal advantage of small farming is that the farmer being himself a labourer, and being continually working with and among his assistants, there is no