analysis no more than utility, and they have accordingly confined the term "value" to "exchange value." Now it is plain that exchange necessarily involves two terms at least; that is to say, we can only express the exchange value of one thing in relation to one or more other things.

In early, or rather hypothetical, stages of society, when barter is assumed to be the rule, we may suppose that a person anxious to sell an ox, or an ass, offers it for so many sheep or women, or other forms of primitive wealth; that is to say, he offers a series of alternatives in the matter of payment. But in modern, and we may say in historical,1 societies a standard of comparison has been adopted; and when we speak simply of the exchange value of a thing, the correlative term is "money."2 Thus value becomes price. It is with utilities that have a price that political economy is mainly concerned, and it is principally owing to the possibility of accurate measurement thereby introduced, that the advance of political economy as an exact science that is to say, as distinct from a collection of empirical truths is to be attributed. "Every science," says Clerk Maxwell, "has some instrument of precision which may be taken as the material type of that science which it has advanced, by enabling observers to express their results as measured quantities. In astronomy we have the divided circle; in chemistry, the balance; in heat, the thermometer; while the whole system of civilised life may be fitly symbolised by a foot-rule, a set of weights, and a clock." To these symbols the economist can justly claim that a piece of standard money should be added.

Money is not only of practical use in the measurement and exchange of wealth, but is of fundamental importance in economic theory. At a later stage the theory of money

1 For the very early and general adoption of some monetary standard, see Professor Ridgeway's learned and interesting work, Origin of Currency and Weight Standards.

2 "Money" is not necessarily gold or silver, or even metallic. For the present, we may say with Professor Walker, "Money is that money does."- Money, p. 405.

UN

and prices will require special and detailed examination, but for the present it will be assumed that, under any given conditions, the general purchasing power of money is constant. In other words, the general level of prices will be considered stable relatively to any change in the particular price of some particular commodity or service. This assumption is perfectly legitimate, when we wish to investigate the value of one thing compared with "things in general," because, if the relative values of all other things (including money) are assumed to remain unchanged, we may say that general prices are unchanged. Again, the effect of a movement in the price of one commodity upon the general average of an indefinite number may be neglected. In certain inquiries, however, as for example, in estimating the accumulation of wealth over a considerable period, it may be absolutely necessary to make due allowance for any change in the value of money itself as shown in general movements of prices.

To resume the utilities with which political economy deals have in general three distinctive marks — labour, appropriation, and exchange-value. Thus, on the one side, we exclude the so-called inner personal qualities, the enjoyment of which cannot be separated from the individual, and, on the other, the so-called outer free utilities which owing to their abundance or nature cannot or need not be economised.1

It is plain that economic utilities (even when thus restricted), corresponding as they do to an infinite variety of human wants, may for different purposes be classified in a great many different ways. As one of the best known examples, we may take the division adopted by Mill,2 viz.: 1, Utilities fixed and embodied in outward objects; 2, those fixed and embodied in human beings; 3, those not fixed or embodied in any object, but consisting in a

1 See Dr. Smart's Introduction to the Theory of Value, p. 17, for an explanation of this use of "economise."

2 Principles, Bk. I., Ch. III., § 2.

mere service rendered. This classification, however, is open to the criticism that it is based upon two different principles. The distinction between the first two classes rests upon the legal and natural division between things and persons; but in the third class the differential characteristic is found in the fact that the services only exist whilst being performed, and the pleasures while being enjoyed.'

It cannot, however, be too often insisted on that utility is a relative term, and has no meaning without reference expressed or implied to the satisfaction of human wants. A natural outward object has no utility in itself; like human beings, it can only render services or give pleasures which perish in the act. If, then, it is thought desirable to distinguish between the durable qualities of persons, and the fleeting services which from time to time they render, we ought also to distinguish between the qualities of things and the pleasures which they similarly furnish from time to time. In some parts of the subject, and especially in reference to Capital, it is necessary to call attention to the fact that certain qualities of persons and things are comparatively permanent, and that their efficacy is not exhausted by a single use. It is also desirable, in discussing certain problems, to distinguish between the utility actually derived from a thing, as, for example, mountain scenery from which the public are excluded, and the potential utility that might be derived. But in general it is not necessary to emphasise the logical distinction between the capacity to render a service and the actuality of performance, whether in persons or things.1 On the other hand, the distinction between the utilities afforded by things and those afforded by persons is of fundamental importance. In popular usage, the term wealth is generally confined to the class of material things. There is, however, the authority of Adam Smith

1 When the question is discussed whether skill is wealth, it is assumed that the skill actually is or may be used, and similarly of commodities.

for including under the fixed capital of a country (and therefore under its wealth) the acquired and useful abilities of its inhabitants. Economic utilities, then, may be divided into personal (or immaterial) and material; and for practical purposes it is often convenient to substitute for the technical expression 'economic utilities,' the more familiar term wealth, and to speak of wealth as being either material or immaterial.1

1 For many years I was in the habit of using the classification given below, adapted with some modification from that of A. Held's Grundriss.

CHAPTER II.

PRODUCTION.

§ 1. Definition of Production. The controversy as to the meaning of the terms productive and unproductive is now only of interest as showing the difficulty there is in clearing fundamental conceptions from the popular growths with which they are entwined. As soon as it became clear that the terms production and productive were elliptical expressions involving the idea of a something produced, and that the correlative term was wealth, the question became identical with the proper definition of wealth. To avoid any ambiguity at the outset for the term wealth we may substitute as explained in the last chapter economic utilities,' but after this preliminary explanation, there will be little danger in speaking of immaterial (or personal) and material wealth as the objects of production.

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There is nothing to be gained by confining the term productive to the production of material wealth. Man cannot produce matter in the sense of creating it; he can only adapt it to his wants or desires; that is to say, he can endow it with utility of some kind; and in the process of adaptation he requires the constant co-operation of natural forces. In every form of production nature labours with man; this is equally true of immaterial as of material wealth. The education of a child requires not only labour on the part of the instructor, but time must be allowed for natural growth. We may force education as we force plants, but only within certain limits.