A Treatise on Political Economy
BOOK III, CHAPTER III
OF THE EFFECT OF PRODUCTIVE CONSUMPTION.
The nature of productive consumption has been explained above in Book I. The value absorbed by it is what has been called Capital. The trader, manufacturer, and cultivator, purchase the raw material*8 and productive agency, which they consume in the preparation of new products; and the immediate effect is precisely the same as that of unproductive consumption, namely, to create a demand for the objects of their consumption, which operates upon their price, and upon their production; and to cause a destruction of value. But the ultimate effect is different; there is no satisfaction of a human want, and no resulting gratification, except that accruing to the adventurer from the possession of the fresh product the value which replaces that of the products consumed, and commonly affords him a profit into the bargain.
To this position, that productive consumption does not immediately satisfy any human want, a cursory observer may possibly object, that the wages of labour, though a productive outlay, go to satisfy the wants of the labourer, in food, raiment, and amusement perhaps. But, in this operation, there is a double consumption; 1. Of the capital consumed productively in the purchase of productive agency, wherefrom results no human gratification; 2. Of the daily or weekly revenue of the labourer, i.e. of his productive agency, the recompense for which is consumed unproductively by himself and his family, in like manner as the rent of the manufactory, which forms the revenue of the landlord, is by him consumed unproductively. And this does not imply the consumption of the same value twice over, first productively, and afterwards unproductively; for the values consumed are two distinct values resting on bases altogether different. The first, the productive agency of the labourer, is the effect of his muscular power and skill, which is itself a positive product, bearing value like any other. The second is a portion of capital, given by the adventurer in exchange for that productive agency. After the act of exchange is once completed, the consumption of the value given on either side is contemporaneous, but with a different object in view; the one being intended to create a new product, the other to satisfy the wants of the productive agent and his family. Thus, the object, expended and consumed by the adventurer, is the equivalent he receives for his capital; and that, consumed unproductively by the labourer, is the equivalent for his revenue. The interchange of these two values by no means makes them one and the same.
So likewise, the intellectual industry of superintendence is reproductively consumed in the concern; and the profits, accruing to the adventurer as its recompense, are consumed unproductively by himself and his family.
In short, this double consumption is precisely analogous to that of the raw material used in the concern. The clothier presents himself to the wool-dealer, with 1000 crowns in his hand; there are, at this moment, two values in existence, on the one side, that of the 1000 crowns, which is the result of previous production, and now forms a part of the capital of the clothier; on the other, the wool constituting a part of the annual product of a grazing farm. These products are interchanged, and each is separately consumed: the capital converted into wool, in a way to produce cloth; the product of the farm, converted into crown-pieces, in the satisfaction of the wants of the farmer, or his landlord.
Since every thing consumed is so much lost, the gain of reproductive consumption is equal, whether proceeding from reduced consumption, or from enlarged production. In China, they make a great saving, in the consumption of seed-corn, by following the drilling in lieu of the broad-cast, method. The effect of this saving is precisely the same, as if the land were, in China, proportionately more productive than in Europe.*9
In manufacture, when the raw material used is of no value whatever, it is not to be reckoned as forming any part of the requisite consumption of the concern; thus, the stone used by the lime-burner, and the sand employed by the glass-blower, are no part of their respective consumption, whenever they have cost them nothing.
A saving of productive agency, whether of industry, of land, or of capital, is equally real and effectual, as a saving of raw material; and it is practicable in two ways; either by making the same productive means yield more agency; or by obtaining, the same result from a smaller quantity of productive means.
Such savings generally operate in a very short time to the benefit of the community at large; they reduce the charges of production; and in proportion as the economical process becomes better understood, and more generally practised, the competition of producers brings the price of the product gradually to a level with the charges of production. But for this very reason, all, who do not learn to economise like their neighbours, must necessarily lose, while others are gaining. Manufacturers have been ruined by hundreds, because they would go to work in a grand style with too costly and complex an apparatus, provided of course at an excessive expense of capital.
Fortunately, in the great majority of cases, self-interest is most sensibly and immediately affected by a loss of this kind; and in the concerns of business, like pain in the human frame, gives timely warning of injuries, that require care and reparation. If the rash or ignorant adventurer in production were not the first to suffer the punishment of his own errors or misconduct, we should find it far more common than it is to dash into improvident speculation; which is quite as fatal to public prosperity, as profusion and extravagance. A merchant, that spends 10,000 dollars in the acquisition of 6000 dollars, stands, in respect to his private concerns and to the general wealth of the community, upon exactly the same footing, as a man of fashion, who spends 4000 dollars in horses, mistresses, gluttony, or ostentation; except, perhaps, that the latter has more pleasure and personal gratification for his money.*10
What has been said on this subject in Book I, of this work, makes it needless to enlarge here on the head of productive consumption. I shall, therefore, henceforward direct my reader's attention to the subject of unproductive consumption, its motives, and consequences; premising, that in what I am about to say, the word consumption, used alone, will import unproductive consumption, as it does in common conversation.
Notes for this chapter
The raw materials of manufacture and commerce are, the products bought with a view to the communication to them of further value. Calicoes are raw material to the calico-printer, and printed calicoes to the dealer who buys them for re-sale or export. In commerce, every act of purchase is an act of consumption; and every act of re-sale, an act of production.
One of the suite of Lord Macartney estimated the saving of grain in China, by this method alone, to be equal to the supply of the whole population of Great Britain.
There is almost insuperable difficulty in estimating with precision the consumption and production of value; and individuals have no other means of knowing, whether their fortune be increased or diminished, except by keeping regular accounts of their receipt and expenditure; indeed, all prudent persons are careful to do so, and it is a duty imposed by law in the case of traders. An adventurer could otherwise scarcely know whether his concern were gainful or losing, and might be involving himself and his creditors in ruin. Besides keeping regular accounts, a prudent manager will make previous estimates of the value that will be absorbed in the concern, and of its probable proceeds; the use of which, like that of a plan or design in building, is to give an approximation, though it can afford no certainty.
Book III, Chapter IV
End of Notes
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