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A Policy of Free Exchange: An Argument Against Socialism and Socialistic Legislation; Edited by: Mackay, Thomas
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The Science of Economics and its relation to Free Exchange and Socialism, by Henry Dunning Mac Leod

A strange consequence flowed from the doctrine that only money is wealth. It was held for many centuries that in an exchange what one side gained the other lost. What the persons who maintained this doctrine would have said to an exchange of products it would be difficult to imagine. They quite forgot that when persons bought things with money they obtained a satisfaction for their money. Nevertheless, for centuries, the wisest statesmen and philosophers maintained that in commerce what one side gained the other lost. They held that foreign commerce which did not produce an importation of money was a loss to the nation. Accordingly, in every country, laws were made to encourage the importation of money and to prohibit its export. This doctrine was the cause of innumerable wars. J. B. Say, writing in the first quarter of this century, says that during the last three hundred years fifty had been spent in wars directly arising out of the dogma that money alone is wealth. About the end of the seventeenth century it began to be perceived that it was absurd to maintain that money alone is wealth; and the term was enlarged to include all the material products of the earth which conduce to man's subsistence and enjoyment. But still they held to the doctrine of the balance of trade, which was based on the assumption that, in every transaction of commerce, what one side gained the other lost.


But, most unfortunately, the science was thrown into utter confusion, and its progress retarded for a long time, by a distinguished French writer, J. B. Say, about the beginning of this century. He adopted the second and alternative definition of the science which the Economists most unguardedly and unadvisedly suggested. Moreover, he completely changed the meaning of its fundamental terms; by which he ruined Economics as a science, and has been the cause of all the subsequent confusion and of the deplorable state in which it is at present. From this state of chaos it has only begun to recover in recent times. Those who have examined the matter closely are beginning to see that the system of J. B. Say is absolutely unworkable as a practical science, and that in order to construct Economics as a positive science it is indispensable to revert to the original concept of it as the science of exchanges or of commerce.


While the Economists declared that the expression 'production, distribution and consumption' of wealth is one and indivisible, and meant nothing but exchange, or commerce, J. B. Say broke it up into its constituent terms and completely changed their meaning. While the Economists defined production to mean bringing the rude produce of the earth into commerce, Say defined it to mean bestowing value on a product. While the Economists defined distribution to mean the intermediate operations between production and consumption, and those only, Say treats of distribution in such a nebulous way that it is difficult to make out distinctly what be means by it. The Economists and Adam Smith used the word consumption ( consommation) to mean purchase pure and simple, or demand; Say defined it to mean the destruction of value, and says that all consumption is a destruction of value. The absurdity of this is patent. When a person purchases (i.e. consumes, in the language of the Economists and Adam Smith) a diamond ring, a piece of plate, a picture, a statue, or a book—does he thereby destroy them? The fact is that consumption, which Say defined to mean destruction, is no part of Economics at all. For Economics is limited to the phenomena of exchange.


J. S. Mill was the friend and pupil of J. B. Say, and modelled his ideas very much on those of Say. Nevertheless, he has considerable divergences from him. He saw that consumption, in the sense of destruction, is no part of Economics; and he divides his work into production, distribution and exchange. But production and distribution, in the language of the Economists and Adam Smith, was exchange—so that Mill's work is really simply exchange and exchange.