poorer, the receiver richer. We have now learnt that, although the exchange of money against goods and services is familiar, the real exchange is between goods and services, goods and goods; and that money only measures values, and enables the recipient to postpone the completion of his part in the exchange. Money seemed to be wealth, because of all values it is the best understood, most easily finds a purchaser, and for a short time at least varies least in value.

Again, some transactions between man and man are completed only by gain on one side, loss on another. If one man makes a wager with another, the occurrence of the event on which the wager depends does involve loss and gain. The same reasoning applies to what are called stock exchange transactions. Here, however, it is plain that there is no mutual service, and therefore, in an economical sense, no exchange. The business of a merchant or other intermediary between producers and consumers contains in it some elements of risk or speculation. Occasionally the transactions of a trader are so speculative, that we call them by analogy, gambling engagements. But the analogy is only partial. The trader, whatever be his personal motives, does a service to society. He may try to obtain a larger advantage than ordinary, either by his being able to anticipate an urgent demand for the article in which he deals, or by his temporary control of the market; but he can effect his end only by satisfying the demands or controlling the necessities of others. He could achieve neither of these conditions unless he offered something which others are willing or anxious to have. He can reach his customer

only through his inclination to buy. A speculation in

trade is not a wager; but because the man who speculates does incur a risk, and may make a large gain, or suffer a loss in the long run, his acts, by a figure of speech, are grouped with the doings of those who merely make bets with each other. But even such trading transactions are exceptional. In the great majority of cases the trader, like the producer, desires to run as little risk as possible. He knows that the risk of failure is generally understated, the chances of success over-estimated, and that he is quite as likely to be misled by a sanguine temper, as to be justified in predicting the course of the market, in consequence of his intelligence and activity. Most business is managed cautiously.

CHAPTER II.

The Cause of Value.

JUST as there are very important services of which no true economical estimate can be given, so there are objects of great importance which are not appraised, because they are unlimited, and cannot therefore be appropriated. A supply of air is necessary for human life; but air, owing to natural agencies, is universally distributed under ordinary circumstances. So is water in temperate and thinlypeopled regions. Hence these objects have no market value. Air however must be artificially supplied in deep mines and in crowded rooms. In such places air bears a price. An artificial supply of water is needed in denselypeopled towns, and in certain manufactories. Ice has no

economical value in polar regions, but is of great importance in tropical climates, and during the summer heat of temperate regions. Solar heat has no economical value in the tropics, but the retention and economy of solar heat is a matter of great interest, and the object of great expenditure in colder climates. Thus, in the language of Adam Smith, there are two senses of value-value in use and value in exchange. With the former we have nothing to do; we shall consider the latter only.

All objects and services possessing value in exchange, derive this value from the fact that labour has been expended on them. To this rule there is only one exception, i. e. land in fully settled countries. The natural powers of the soil have their value in the fact that they are limited in extent, and are appropriated. If they are unlimited and unappropriated, as is the case in imperfectly occupied countries, they have no more economical value, under ordinary circumstances, than air and water have. The aggregate amount of labour expended on objects and services is called the cost of production, and if exchange be free, the value assigned to everything which is susceptible of an economical estimate is generally proportioned to the average cost of production.

Labour then is the cause of value. This labour is either physical or mental, i. e. is either intended to effect some change on natural objects by means of direct muscular exertion, or is busied in devising means by which this muscular exertion may be economized, sustained, made more efficient, or even superseded. Of these two kinds of labour, mental is by far the most important. It is directed towards the invention and improvement of substitutes for mere manual labour,—at first the simplest

and rudest; afterwards the most perfect tools. It has aided human labour by animal and mechanical forces, and as its discoveries are accumulated and arranged, it has produced results which we do not wonder at, only because we are so familiar with them. The wealth which the present has inherited from bygone ages is not merely the mass of material objects which have been transmitted from generation to generation, and the permanent improvements which have been induced upon the surface of the soil; but comprises the aggregate of experience, skill, and knowledge, which mankind possesses and employs in order to make the fullest use of all the powers and forces in nature.

Not every kind of muscular and mental labour is susceptible of an economical estimate. Nobody works harder than men who row in a race, shoot all day long, or engage themselves in hunting or travelling. So again, they who busy themselves in abstruse mathematical calculations, or study astronomical phenomena, undergo severe mental toil. But unless these labours are undertaken with some purpose which lies beyond the labour itself, and which can be brought to market, they are not such labour as the economist appreciates. To have any significance they must be priced and exchanged.

Nor does it follow, on the other hand, that labour, in order to have any economical meaning, should be onerous or disagreeable. Labour is no doubt generally avoided; and most labour undertaken for ulterior ends and for some material advantage is more or less involuntary. But it need not be so. The late Mr. Turner was passionately attached to painting; Beethoven was equally devoted to music.

Neither can be charged with indif

ference to the material advantages which ensued from practising these arts, though it is probable that had the former sold none of his pictures, the latter never disposed of the copyright in his music, each would have followed the pursuit in which he took so much delight.

As however in all kinds of such labour as the economist discusses, the end is preferred to the means, the product to the process; and as the end is followed, and the product effected, in order that they may be exchanged against other ends and other products, it is the interest of every one who labours to achieve the end and complete the product with the least possible expenditure of labour. In this way it is manifest that the exchange will be effected on the best terms, i. e. for most money or goods. If by some process, for example, a farmer is able to produce ten quarters of wheat at the cost of ten pounds, and by adopting some other process he can produce the same quantity at the cost of eight pounds; he will, if he be intelligent and industrious-qualities which we must postulate-choose the latter in preference to the former process.

This disposition to produce the greatest possible result with the least possible expenditure of force, leads individuals, and ultimately societies, in so far as they act together, to adopt several expedients by which labour is lessened and production is increased. These expedients are traceable in the history of civilization. First then by

Tools and implements. The savage who lives by hunting is urged, as much by the love of ease as by necessity, to economize his labour and improve the weapons which he uses in the chase. Rude as his materials are, they are singularly efficient in practised hands. The lasso