THIRD LESSONTRADE
Trade, forwhich Money is the Economic medium and Money-terms the Economic language, consists superficially in interchanges of tangible commodities, but essentially in interchanges of human service.
Tangible commodities, with a semi-exception as to real estate, are produced by interchanges of human service from the very extreme of the primary production of those commodities to and including their final delivery for ultimate consumption. Real estate, too, is thus produced in so far as it consists of structures, of soil cultivation, of mining mechanisms, of excavations, or of any other kind of artificial alteration.
All commodities are subjects of Trade. Artificial commodities, such as depend upon human service for production, are not only subjects of Trade but are also its products. This is absolutely true of every kind of artificial commodity that is produced to completion, inclusive of final delivery, by means of Economic specializations—specializations in human service. The primary materials and the unfinished parts are gathered together and delivered, both in the intricate process and finally, by means of Trade.
A loaf of bread, for example, is brought to completion from harvest-field to bakery, and thence as a finished product, through many deliveries (including delivery to its ultimate consumer) by means of Trade. So is the implement with which it is cut at the consumer’s table, and the plate on which it rests, the table at which it is served, the cloth which covers the table, the chair in which the consumer sits at the table, and the dining room floor beneath them all.
Of the vast variety of such commodities as loaves of bread and knives for cutting them and plates and tables and tablecloths by means of which they are served for ultimate consumption, very few if any at all of that variety of commodities—whether finished, as a loaf of bread on the consumer’s table, or unfinished, as the growing grain or the flour of which the loaf is composed, or the fuel that bakes it, or the bricks or the metal of the baker’s oven, or the finished oven itself—give distinctive expression to all the human services they embody.
That fact could be further illustrated with any artificial commodity in course of Trade. A hogshead of molasses on a wharf would answer the purpose. To thoughtless observation this commodity might seem to embody no other human service than work on a sugar plantation and by barrel-makers in a coopering shop. But if we think about it with penetration and clarity, we readily realize that it embodies the services also of lumbermen, of miners, of railway workers, of bankers, possibly of importers and mariners, probably of exporters and their assistants, certainly of draymen, of wharfmen, of merchants, of book-keepers and other accountants—a veritable host of specialists whose contributory services are not emphasized by the tangible commodity (a hogshead of molasses on a wharf) as are the services of plantation-hands and barrel-makers. Multitudes of human services in distracting variety are concealed in that familiar commodity from the vision of all but specialists; perhaps from their vision too in so far as the services are outside of their respective specialties. And if we were to follow that hogshead of molasses to its Economic destination, we might perceive many an additional human service embodied and concealed in commodities of Trade for which the material would have been supplied in partby molasses from the hogshead and probably in part by the hogshead itself.
Trade is not a mere business custom, as is sometimes carelessly supposed. Only to the extent that they conform to natural Economic law can trading customs be socially beneficial or continue without developing social disaster.
Many customs do enter into Trade, even as habits enter into the life of individuals—some beneficial and some vicious, some in harmony with natural law and some defiant or evasive of it. But essentially Trade is a natural expression of Economic relationships. It is consequently as dependent upon conformity to natural laws as are the physical functions of individuals. Drawing inspiration continuously from natural human impulses, giving constant and increasing satisfaction to natural human needs, bringing natural human units ever closer into a natural social whole, contributing one of the two indispensable and fundamentally effective as well as obvious natural powers and facilities for the continuous and increasing production of human satisfactions, Trade is evidently as natural to the social whole as is breathing or eating to the individual. It must therefore be as completely subject to natural law.
By nature man is “a trading animal.” So it has often been said, and the saying is manifestly true. There is, however, no implication here that man is an animal only. The suggestion is that, although an animal, he is more than an animal, and that Trade develops phenomena which go to prove it.
Of all animals, man only is within the jurisdiction of the natural Economic laws of Trade. What other animal than man could be correctly described, in a comprehensive sense, as “a trading animal”? Not only is this characteristic distinctive. Not only is itpeculiarly human. But also, and by force of natural Economic law—not commercial custom, but those natural sequences of effect from cause to which arbitrary commercial customs must yield or come to grief,—it enables mankind, the larger man, the social man, to multiply the Economic powers of each individual of the human race.
Primary among those natural laws of Trade is the thoroughly tested sequence alluded to above, that Trade multiplies productive power. It does so by inviting, requiring and developing that characteristic phenomenon of Trade which is commonly called “division of labor,” but may be distinguished best as Economic specialization.2This phenomenon gives to the world, gives to it as a natural effect of Trade, a productive power per capita far and away beyond the productive power of any isolated individual.
2The principle of Economic specialization could hardly be better illustrated than by the reply of an old-time compositor in a printing establishment who contemplated making a contract for the erection of a cottage home for himself and his family, when a friend suggested that he might save money by digging the cellar himself between working hours at the case. He replied: “I can dig a better cellar and more easily at the case with a composing-stick than on the spot with a pick and shovel.”
2The principle of Economic specialization could hardly be better illustrated than by the reply of an old-time compositor in a printing establishment who contemplated making a contract for the erection of a cottage home for himself and his family, when a friend suggested that he might save money by digging the cellar himself between working hours at the case. He replied: “I can dig a better cellar and more easily at the case with a composing-stick than on the spot with a pick and shovel.”
By means of a vast variety of Economic specialties—such for illustration as farming, engineering, mining, lumbering and their respective and numerous subdivisions, through a vast variety of other Economic specialties, such as transporting and manufacturing and merchandizing, along with their respective and multitudinous subdivisions, all supplemented by such other Economic specialties as banking, teaching, preaching, adjudicating, writing, acting, and the fine arts—the necessaries for individual sustenance and the luxuries for individual enjoyment are produced and delivered in quantity, variety and perfection which, when calculated per capita, rise far above and extendfar beyond all the possibilities of isolated individual life, far above and beyond the possibilities of community life in narrow environments.
Were there but one individual to be considered, the natural advantages of Trade would seem as fanciful as a fairy story. Were there only a small group, the natural advantages of Trade, though manifest, would be too few and too primitive to disclose its wondrous powers of production. But when millions of individuals cooperate, some serving all and all serving each through the intricacies of worldwide Trade, mankind is welded into an Economic unity, a gigantic oneness—a larger human being, “the social man” as this social organism is sometimes not inaptly called—an organism composed of individuals who give it vitality and whom in consequence it serves as a beneficent giant might serve a cooperating pigmy.
Involving the production of commodities by individual contributors of human service through an infinity of specializations, and their assignment to individuals by the intricate processes of service for service, Trade tends not only to increase the per capita supply of commodities, but also to effect their fair per capita assignment in proportions corresponding to the relative desirability of the numerous and various contributions of individual service to their production.
In describing Trade as consisting essentially of interchanges of human services, we are of course to be understood as including not only such services as are embodied in tangible commodities, but also personal service. Nor does it make any Economic difference whether the personal service be of the “servant” type or of the “professional” type.
“Professional” services, such as those of Economists, Engineers, Architects, Clergymen, Lawyers, Physicians and Teachers are in the Economic domainof Trade. Not only are they exchanged for tangible commodities, but they contribute to the production of such commodities by conserving, and it may be by increasing the efficiency of more obvious producers. The Economist studies productive relationships for the purpose of securing harmonious industrial adjustments; and so vital is his function that righteous social relationships are imperiled, and righteous readjustments obstructed, if he mistakes chaos for order. The Engineer designs, plans and directs; and so important is his function that the work of hosts of producers depends upon it. If he mistakes, great structures may fall. The Architect is an Engineer in a special sense: if he makes mistakes, buildings may lack stability or beauty or both. The Lawyer may disentangle societary complications that would operate as a check upon production and Trade. The Clergyman may discourage obstructive conduct; the Physician may conserve the health of more direct producers so as to increase their efficiency; the Teacher may increase their efficiency by instruction. And so of personal services of the Personal Servant type. Whatever a Personal Servant may do for a commodity specialist which otherwise the specialist must do for himself at the cost of contributing less to the production of tangible commodities, is to that extent a contribution to the production of those commodities. Interchanges of human service, if the interchangers act in freedom, each getting from the channels of Trade the equivalent in service of the service he renders, are contributions to Economic production.
The relative desirability of human services rendered in promoting production, whether directly or indirectly, is commonly as well as commercially and Economically known as Value, which, as already explained,is expressed in Money terms and compared by Money measurements.
To receive a share in the continuous distribution of commodities through Trade is the human motive for all Economic activity, from leadership in Economic service to service for “wages.”
A “wage-worker,” for illustration, lends a hand—becomes “a hand,” if you please,—at harvesting wheat. His compensation is to be, let us assume, his food and lodging during harvest and twenty dollars in Money at the end of his job. The work being done, his food and lodging having been meanwhile supplied to him, and the twenty dollars in Money having been duly paid him, what has been the Economic nature of his transaction? Has not this “harvest hand” exchanged his contribution of service to the production of wheat, for his living while helping to produce it and for a twenty-dollar measurement of any commodity or commodities he may wish to draw from the channels of Trade?
Assume now that he draws from those channels a pair of shoes, a hat and other commodities at the village store, including, perhaps, some tobacco for his pipe and a bit of candy for a little friend. As matter of Economics, then, what has he done but Trade his service at harvesting for his living while at work and some service-produced commodities for still further satisfying his desires?
And the Economic leader in that connection, the farmer who hired the “harvest hand,” what has been his part in the transaction? In the last analysis has he not for harvest service traded food, house accommodations, household service, and his Money title to twenty dollars’ worth of any commodity or commodities that may be flowing through the channels of Trade—a title for which he presumably has given, orthrough debit and credit adjustments must in the future give, his own service or the service of others which he may naturally and justly or only customarily and unjustly command as his own?
When an employer in any branch of Economics pays an employee “wages” or “salary” or other compensation for service, he buys his employee’s service by an interchange, through Trade, of human service for human service.
Nor are interchanges of service limited to employers and employees.
The point of final interchange is almost invariably like the illustrative instance of the “harvest hand” at a retail store. Through the processes of Trade, myriads of commodities for the satisfaction of human wants, commodities produced by human service to the point of delivery to ultimate consumers, flow to ultimate consumers out of retail stores. These depots for final delivery in Trade are the customary terminals of production, where certifications of service in terms of Money are usually exchanged for products of service in the form of commodities.
Although such exchanges, like other exchanges throughout the processes of Trade, are made in Money terms and by Money measurements, these terms and measurements testify, as explained in the preceding Lesson, only to the relative values which govern the exchangeable relations of any commodity or commodities with any other commodity or commodities.
Curiously enough, Economic students who ignore “value levels” readily recognize “price levels.” But what else are “price levels” than “value levels” expressed in Money terms? If a hammer will exchange for a chisel in the processes of Trade, they are of equal value—not price, but value. If the Money price of one is two dollars and that of the other is also twodollars, they are of equal price as well as equal value. And except as Money may vary in purchasing power through lack of stabilization, or commodities may vary in relative desirability or industrial cost, the price level and the value level tend to rise and fall together. That is to say, the essential consideration is one of relative values of commodities (which is determined by difficulties of production and delivery), but the superficial consideration is the purchasing power of Money, by which those relative values are more or less accurately measured and expressed in price lists.
Values thus expressed rise and fall. They do so in terms of Price when measured by Money; they do so in the essentials of Value when measured by comparisons of commodities. As a rule, however, Money-prices are fair guides to Commodity values. Commodity values rise and fall according to cost of production, inclusive of delivery; and in so far as Money is stable, the rise and fall in prices is evidence of variations in production cost.
The relative rise and fall in Value, be it measured by prices in Money or otherwise, is so common a phenomenon of Trade that critics might be pardoned for denying a Value level.
Nevertheless there is such a level. It may be illustrated by “sea level.” We readily understand and confidently base important physical calculations upon the assumption of a constantly level sea. Yet there is no such thing. Waves rise above the surface of the sea at their crest and fall below it in their hollows. Tides contribute other variations. So with Value in Trade. Literally a level of Value is unknown. Values continually rise and fall, like the waves and the tides of the sea. Yet there is as to Value a “meanlevel.” Such a level or tendency may be found in the relation of service-cost to consumption-desirability.
Though we measure service-value by Money, though Money fluctuates as a Value-measuring device, though some individual services fall in product value relatively to the productive power of service, though some individual services may increase in Value for one reason or another, there is nevertheless a Value level in Trade which tends constantly to maintain an equilibrium between service-value and service-utility. Money-measured Value and Money standards of Value may rise above or fall below the service-cost of produced commodities. Nevertheless, service-cost in commodities is the determining fact—the Value level in Trade. Measured and expressed by Money, that Value level is the Price level.
Trade phenomena, to which this Lesson has been devoted, though they lead down to the Basic Facts, the foundation facts, of Economics, do not themselves, either wholly or in any of their details, belong in the Basic Fact region. Though nearer to the Basic Facts of Economics than the phenomena of Money, our consideration of which immediately preceded our consideration of Trade, the phenomena of Trade are one layer above the Basic Facts toward which we have been delving down from the Economic surface, Money, and through the subsurface, Trade. To the Basic Facts of Economics our next Lesson will be devoted.