Principles of Economics
By Alfred Marshall
Economic conditions are constantly changing, and each generation looks at its own problems in its own way. In England, as well as on the Continent and in America, Economic studies are being more vigorously pursued now than ever before; but all this activity has only shown the more clearly that Economic science is, and must be, one of slow and continuous growth. Some of the best work of the present generation has indeed appeared at first sight to be antagonistic to that of earlier writers; but when it has had time to settle down into its proper place, and its rough edges have been worn away, it has been found to involve no real breach of continuity in the development of the science. The new doctrines have supplemented the older, have extended, developed, and sometimes corrected them, and often have given them a different tone by a new distribution of emphasis; but very seldom have subverted them…. [From the Preface to the First Edition]
First Pub. Date
London: Macmillan and Co., Ltd.
The text of this edition is in the public domain.
- Appendix A
- Appendix B
- Appendix C
- Appendix D
- Appendix E
- Appendix F
- Appendix G
- Appendix H
- Appendix I
- Appendix J
- Appendix K
PRODUCTION. CONSUMPTION. LABOUR. NECESSARIES.
BOOK II, CHAPTER III
§ 1. Man cannot create material things. In the mental and moral world indeed he may produce new ideas; but when he is said to produce material things, he really only produces utilities; or in other words, his efforts and sacrifices result in changing the form or arrangement of matter to adapt it better for the satisfaction of wants. All that he can do in the physical world is either to readjust matter so as to make it more useful, as when he makes a log of wood into a table; or to put it in the way of being made more useful by nature, as when he puts seed where the forces of nature will make it burst out into life
It is sometimes said that traders do not produce: that while the cabinet-maker produces furniture, the furniture-dealer merely sells what is already produced. But there is no scientific foundation for this distinction. They both produce utilities, and neither of them can do more: the furniture-dealer moves and rearranges matter so as to make it more serviceable than it was before, and the carpenter does nothing more. The sailor or the railway-man who carries coal above ground produces it, just as much as the miner who carries it underground; the dealer in fish helps to move on fish from where it is of comparatively little use to where it is of greater use, and the fisherman does no more. It is true that there are often more traders than are necessary; and that, whenever that is the case, there is a waste. But there is also waste if there are two men to a plough which can be well worked by one man; in both cases all those who are at work produce, though they may produce but little. Some writers have revived the mediæval attacks on trade on the ground that it does not produce. But they have not aimed at the right mark. They should have attacked the imperfect organization of trade, particularly of retail trade
Consumption may be regarded as negative production. Just as man can produce only utilities, so he can consume nothing more. He can produce services and other immaterial products, and he can consume them. But as his production of material products is really nothing more than a rearrangement of matter which gives it new utilities; so his consumption of them is nothing more than a disarrangement of matter, which diminishes or destroys its utilities. Often indeed when he is said to consume things, he does nothing more than to hold them for his use, while, as Senior says, they “are destroyed by those numerous gradual agents which we call collectively
time*31.” As the “producer” of wheat is he who puts seed where nature will make it grow, so the “consumer” of pictures, of curtains, and even of a house or a yacht does little to wear them out himself; but he uses them while time wastes them.
Another distinction to which some prominence has been given, but which is vague and perhaps not of much practical use, is that between
consumers’ goods (called also
consumption goods, or again
goods of the first order), such as food, clothes, etc., which satisfy wants
directly on the one hand; and, on the other hand,
producers’ goods (called also
production goods, or again
instrumental, or again
intermediate goods), such as ploughs and looms and raw cotton, which satisfy wants
indirectly by contributing towards the production of the first class of goods
§ 2. All labour is directed towards producing some effect. For though some exertions are taken merely for their own sake, as when a game is played for amusement, they are not counted as labour. We may define
labour as any exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work
*33. And if we had to make a fresh start it would be best to regard all labour as productive except that which failed to promote the aim towards which it was directed, and so produced no utility. But in all the many changes which the meaning of the word “productive” has undergone, it has had special reference to stored-up wealth, to the comparative neglect and sometimes even to the exclusion of immediate and transitory enjoyment
*34; and an almost unbroken tradition compels us to regard the central notion of the word as relating to the provision for the wants of the future rather than those of the present. It is true that all wholesome enjoyments, whether luxurious or not, are legitimate ends of action both public and private; and it is true that the enjoyment of luxuries affords an incentive to exertion, and promotes progress in many ways. But if the efficiency and energy of industry are the same, the true interest of a country is generally advanced by the subordination of the desire for transient luxuries to the attainment of those more solid and lasting resources which will assist industry in its future work, and will in various ways tend to make life larger. This general idea has been in solution, as it were, in all stages of economic theory; and has been precipitated by different writers into various hard and fast distinctions by which certain trades have been marked off as productive and certain others as unproductive.
For instance, many writers even of recent times have adhered to Adam Smith’s plan of classing domestic servants as unproductive. There is doubtless in many large houses a superabundance of servants, some of whose energies might with advantage to the community be transferred to other uses: but the same is true of the greater part of those who earn their livelihood by distilling whisky; and yet no economist has proposed to call them unproductive. There is no distinction in character between the work of the baker who provides bread for a family, and that of the cook who boils potatoes. If the baker should be a confectioner, or fancy baker, it is probable that he spends at least as much of his time as the domestic cook does, on labour that is unproductive in the popular sense of providing unnecessary enjoyments.
Whenever we use the word
Productive by itself, it is to be understood to mean
productive of the means of production, and of durable sources of enjoyment. But it is a slippery term, and should not be used where precision is needed
If ever we want to use it in a different sense, we must say so: for instance we may speak of labour as
productive of necessaries, etc.
Productive consumption, when employed as a technical term, is commonly defined as the use of wealth in the production of further wealth; and it should properly include not all the consumption of productive workers, but only that which is necessary for their efficiency. The term may perhaps be useful in studies of the accumulation of material wealth. But it is apt to mislead. For consumption is the end of production; and all wholesome consumption is productive of benefits, many of the most worthy of which do not directly contribute to the production of material wealth
§ 3. This brings us to consider the term Necessaries. It is common to distinguish necessaries, comforts, and luxuries; the first class including all things required to meet wants which
must be satisfied, while the latter consist of things that meet wants of a less urgent character. But here again there is a troublesome ambiguity. When we say that a want
must be satisfied, what are the consequences which we have in view if it is not satisfied? Do they include death? Or do they extend only to the loss of strength and vigour? In other words, are necessaries the things which are necessary for life, or those which are necessary for efficiency?
The term Necessaries, like the term Productive, has been used elliptically, the subject to which it refers being left to be supplied by the reader; and since the implied subject has varied, the reader has often supplied one which the writer did not intend, and thus misunderstood his drift. In this, as in the preceding case, the chief source of confusion can be removed by supplying explicitly in every critical place that which the reader is intended to understand.
The older use of the term Necessaries was limited to those things which were sufficient to enable the labourers, taken one with another, to support themselves and their families. Adam Smith and the more careful of his followers observed indeed variations in the standard of comfort and “decency”: and they recognized that differences of climate and differences of custom make things necessary in some cases, which are superfluous in others
*37. But Adam Smith was influenced by reasonings of the Physiocrats: they were based on the condition of the French people in the eighteenth century, most of whom had no notion of any necessaries beyond those which were required for mere existence. In happier times, however, a more careful analysis has made it evident that there is for each rank of industry, at any time and place, a more or less clearly defined income which is necessary for merely sustaining its members; while there is another and larger income which is necessary for keeping it in full efficiency
It may be true that the wages of any industrial class might have sufficed to maintain a higher efficiency, if they had been spent with perfect wisdom. But every estimate of necessaries must be relative to a given place and time; and unless there be a special interpretation clause to the contrary, it may be assumed that the wages will be spent with just that amount of wisdom, forethought, and unselfishness, which prevails in fact among the industrial class under discussion. With this understanding we may say that the income of any class in the ranks of industry is below its
necessary level, when any increase in their income would in the course of time produce a more than proportionate increase in their efficiency. Consumption may be economized by a change of habits, but any stinting of necessaries is wasteful
§ 4. Some detailed study of the necessaries for efficiency of different classes of workers will have to be made, when we come to inquire into the causes that determine the supply of efficient labour. But it will serve to give some definiteness to our ideas, if we consider here what are the necessaries for the efficiency of an ordinary agricultural or of an unskilled town labourer and his family, in England, in this generation. They may be said to consist of a well-drained dwelling with several rooms, warm clothing, with some changes of underclothing, pure water, a plentiful supply of cereal food, with a moderate allowance of meat and milk, and a little tea, etc., some education and some recreation, and lastly, sufficient freedom for his wife from other work to enable her to perform properly her maternal and her household duties. If in any district unskilled labour is deprived of any of these things, its efficiency will suffer in the same way as that of a horse that is not properly tended, or a steam-engine that has an inadequate supply of coals. All consumption up to this limit is strictly productive consumption: any stinting of this consumption is not economical, but wasteful.
In addition, perhaps, some consumption of alcohol and tobacco, and some indulgence in fashionable dress are in many places so habitual, that they may be said to be
conventionally necessary, since in order to obtain them the average man and woman will sacrifice some things which are necessary for efficiency. Their wages are therefore less than are practically necessary for efficiency, unless they provide not only for what is strictly necessary consumption, but include also a certain amount of conventional necessaries
The consumption of conventional necessaries by productive workers is commonly classed as productive consumption; but strictly speaking it ought not to be; and in critical passages a special interpretation clause should be added to say whether or not they are included.
It should however be noticed that many things which are rightly described as superfluous luxuries, do yet, to some extent, take the place of necessaries; and to that extent their consumption is productive when they are consumed by producers
Novum Organon IV., says “Ad opera nil aliud potest homo quam ut corpora naturalia admoveat et amoveat, reliqua natura intus agit” (quoted by Bonar,
Philosophy and Political Economy, p. 249).
Volkswirthschaftslehre, ch. I. § 2) says bread belongs to the first order, flour to the second, a flour mill to the third order and so on. It appears that if a railway train carries people on a pleasure excursion, also some tins of biscuits, and milling machinery and some machinery that is used for making milling machinery; then the train is at one and the same time a good of the first, second, third and fourth orders.
Theory of Political Economy, ch. V.), except that he includes only painful exertions. But he himself points out how painful idleness often is. Most people work more than they would if they considered only the direct pleasure resulting from the work; but in a healthy state, pleasure predominates over pain in a great part even of the work that is done for hire. Of course the definition is elastic; an agricultural labourer working in his garden in the evening thinks chiefly of the fruit of his labours; a mechanic returning home after a day of sedentary toil finds positive pleasure in his garden work, but he too cares a good deal about the fruit of his labour; while a rich man working in like manner, though he may take a pride in doing it well, will probably care little for any pecuniary saving that he effects by it.
The Wealth of Nations which bears the title, “On the Accumulation of Capital, or on Productive and Unproductive Labour.” (Comp. Travers Twiss,
Progress of Political Economy, Sect, VI., and the discussions on the word Productive in J. S. Mill’s
Essays, and in his
Principles of Political Economy.)
The attempt to draw a hard and fast line of distinction where there is no real discontinuity in nature has often done more mischief, but has perhaps never led to more quaint results, than in the rigid definitions which have been sometimes given of this term Productive. Some of them for instance lead to the conclusion that a singer in an opera is unproductive, that the printer of the tickets of admission to the opera is productive; while the usher who shows people to their places is unproductive, unless he happens to sell programmes, and then he is productive. Senior points out that “a cook is not said to
make roast meat but to
dress it; but he is said to
make a pudding…. A tailor is said to
make cloth into a coat, a dyer is not said to
make undyed cloth into dyed cloth. The change produced by the dyer is perhaps greater than that produced by the tailor, but the cloth in passing through the tailor’s hands changes its name; in passing through the dyer’s it does not: the dyer has not produced a
new name, nor consequently a
Pol. Econ. pp. 51, 2.
Principles of Political Economy, p. 474; which called my attention to Adam Smith’s observation that customary decencies are in effect necessaries.
Charity Organization Journal, Feb. 1891.
Inquiry, A.D. 1767, II, XXI.
For the sake of giving definiteness to the ideas it may be well to venture on estimates of necessaries, rough and random as they must be. Perhaps at present prices the strict necessaries for an average agricultural family are covered by fifteen or eighteen shillings a week, the conventional necessaries by about five shillings more. For the unskilled labourer in the town a few shillings must be added to the strict necessaries. For the family of the skilled workman living in a town we may take twenty-five or thirty shillings for strict necessaries, and ten shillings for conventional necessaries. For a man whose brain has to undergo great continuous strain the strict necessaries are perhaps two hundred or two hundred and fifty pounds a year if he is a bachelor: but more than twice as much if he has an expensive family to educate. His conventional necessaries depend on the nature of his calling.