Principles of Economics by Carl Menger
Wealth
INVESTIGATIONS
OF THE NATURE of economic goods began with attempts to define the concept
wealth in the economy of an individual. Adam Smith barely touched
upon the question, but the suggestions he made have had the most
far-reaching effects on theories of wealth. “After the division of
labour has once thoroughly taken place,” he says, “. . . a man .
. . must be rich or poor according to the quantity of that labour which
he can command or which he can afford to purchase.” (Wealth of
Nations, Modern Library Edition, New York, 1937, p. 30.) From this
it may be concluded as a consistent extension of the Smithian theory
that whether or not a good provides us with command of labor (or, which
is the same thing as far as Smith is concerned, whether or not it has
exchange value) is the criterion by which its character as an object of
wealth (in the economy of an individual) is to be judged. Say also
follows this line of reasoning. In his Traité
d’économie politique (Paris, 1803, p. 2), he separates goods
that have exchange value from goods that do not, and excludes the
latter from wealth. (“Ce qui n’a point de valeur, ne saurait être
une richesse. Ces choses ne sont pas du domaine d’économie
politique.”) In his Principles of
Political Economy and Taxation (ed. by E.C.K. Gonner, London, 1891,
p. 258), Ricardo also distinguishes between value and goods (“riches”),
and differs from his predecessors only in that he employs the word
“riches” in a markedly different sense than that in which Say uses the
word “richesse.” Following Adam Smith (op. cit., pp. 314ff.),
Malthus sought the criterion of the wealth-character of goods in
whether or not they are tangible objects (Principles of Political
Economy, London, 1820, p. 28), and in his later writings as well,
he confines the concept wealth to material goods. Among German writers,
this same opinion is held by H. Storch (Cours d’économie
politique, St. Petersbourg, 1815, I, 108ff.); F.C. Fulda (Grundsätze
der ökonomisch-politischen oder Kameralwissenschaften,
Tübingen, 1816, p. 2); J.A. Oberndorfer (System der
Nationalökonomie, Landshut, 1822, pp. 64–65); K.H. Rau (Grundsätze
der Volkswirthschazftslehre, Heidelberg, 1847, p. 1); J.F.E. Lotz (Handbuch
der Staatswirthschaftslehre, Erlangen, 1837, I, 19); and Theodor
Bernhardi (Versuch einer Kritik der Gründe die für grosses
und kleines Grundeigenthum angeführt werden, St. Petersburg,
1849, pp. 134ff., and especially pp. 143ff.).
Writers who have argued against the exclusion of immaterial goods are:
J.B. Say (Cours complet d’économie politique pratique,
Paris, 1840, I, 89), J.R. McCulloch (Principles of Political Economy,
London, 1830, pp. 6ff.), F. v. Hermann (Staatswirthschaftliche
Untersuchungen, München, 1874, pp. 21ff.), and Wilhelm Roscher
(Grundlagen der Nationalökonomie, Twentieth edition,
Stuttgart, 1892, p. 16). Malthus had already recognized that the
concept of wealth cannot be correctly defined by limiting it to
material goods (Principles of Political Economy, Second Edition,
London, 1836, p. 34), but I shall have occasion at a later point to
discuss his shifting attempts to provide a definition of wealth.
The most recent representatives of political economy in England tie the
concept of wealth almost exclusively to objects having exchange value.
See, for example, McCulloch (op. cit., p. 6); J.S. Mill (Principles
of Political Economy, ed. by Sir W.J. Ashley, London, 1909, p. 9);
and N.W. Senior (An Outline of the Science of Political Economy,
London, 1836, p. 6). Among the recent French writers, Ambroise
Clément and Auguste Walras (De la nature de la richesse et de
l’origine de la valeur, ed. by Gaëtan Pirou, Paris, 1938, pp.
146ff.) in particular hold this view.
Whereas the English and French economists merely distinguish between
goods that are wealth and goods that are not, Hermann (op. cit.,
p. 12) goes much deeper, since he contrasts economic goods (objects of
economizing) with free goods. This distinction has since been
maintained in German economics with few exceptions. But Hermann defines
the concept economic goods too narrowly. For he says that an economic
good is “was nur gegen bestimmte Aufopferung, durch Arbeit oder
Vergeltung her gestellt werden kann.” He thus makes the economic
character of goods depend on labor or on trade between men (ibid.,
p. 18). But are not the fruits that an isolated individual can gather
without labor from trees economic goods for him if they are available
to him in smaller quantities than his requirements for them? And is not
spring water that is also available to him without labor and in
quantities exceeding his requirements a non-economic good?
Roscher who had defined economic goods in his Grundriss zu
Vorlesungen über die Staatswirthschaft (Göttingen, 1843,
p. 3) as goods “die in den Verkehr kommen,” and who defined them in the
earlier editions of his System der Volkswirthschaft (Edition of
1857, p. 3) as “Güter, welche des Verkehrs fähig sind, oder
wenigstens denselben fördern können,” defines them in the more recent
editions of his major work (Grundlagen der Nationalökonomie,
Twentieth edition, Stuttgart, 1892, p. 4) as “Zwecke und Mittel der
Wirthschaft.” This definition is merely a
paraphrase of the concept to be defined, and shows that the eminent
scholar considers the question of the criteria for distinguishing
between economic and non-economic goods as still open. See also
Schäffle’s Das gesellschaftliche System der menschlichen
Wirthschaft (Tübingen, 1873, I, 66ff.), and his “Die
ethische Seite der nationalökonomischen Lehre vom Werthe”
(originally published in Tübingen Universitätsschriften,
1862, and reprinted in A.E.F. Schäffle, Gesammelte
Aufsätze Tübingen, 1885, I, 184–195).
That the difficulties non-German economists have had in attempting to
define the concept “wealth” stem from the fact that they do not know
the concept “economic good” is most clearly illustrated by the writings
of Malthus. In the first edition of his Principles of Political
Economy, which was published in 1820, he defines wealth as “those material
objects which are necessary, useful, or agreeable to mankind” (p. 28).
Since this definition includes all (material) goods in the concept
“wealth,” it includes even non-economic goods, and is entirely too
broad for this reason. In his Definitions in Political Economy,
which appeared seven years later, he defines wealth as “the material
objects necessary, useful or agreeable to man, which have required some
portion of human exertion to appropriate or produce” (p. 234.) In the
second edition of his Principles (London, 1836, pp. 33–34,
note) he explains that “the latter part was added, in order to exclude
air, light, rain, etc.” But he recognizes that even this definition is
untenable and says (ibid.) that “there is some objection to the
introduction of the term industry or labour into the definition,
because an object might be considered as wealth which has had no labour
employed upon it.” Finally, in the text of the second (1836) edition of
the Principles (p. 33) he comes to the following definition of
the concept: “I should define wealth to be the material objects,
necessary, useful, or agreeable to man, which are voluntarily
appropriated by individuals or nations.” Thus he falls into a new error
by making the fact that a good is the property of an economizing
individual the source of its wealth-character (i.e., of its economic
character).
We find similar shifting attempts to arrive at a definition of wealth
in the writings of J.B. Say. In his Traité d’économie
politique (Paris, 1803, p. 2), he makes value (exchange value) the
source of the wealth-character of goods. He says that “ce qui n’a point
de valeur, ne saurait être une richesse.” This view was attacked
by R. Torrens (An Essay on the Production of Wealth, London,
1821, p. 7), and Say then shifted in his Cours complet
d’économie politique pratique (Paris, 1840, I, 66), to the
following description of goods that constitute wealth: “Nous sommes
forcés d’acheter, pour ainsi dire, ces . . . biens par des
travaux, des économies, des privations; en un mot, par de
véritables sacrifices.” In this passage, Say
takes essentially the same position as that expressed by Malthus in his
Definitions in Political Economy. But a little further on (Cours
complet, p. 66) he says, “On ne peut pas séparer de ces
biens l’idée de la propriété. Ils n’existeraient
pas si la possession exclusive n’en était assurée
à celui qui les a acquis. . . . D’un autre côté, la
propriété suppose une société quelconque,
des conventions, des lois. On peut en conséquence nommer les
richesses ainsi acquises, des richesses socials.”
To Chapter II. See notes 9 and 14
of Chapter II.—TR.
“That which has no value cannot be
wealth. These things are not within the domain of political economy.”
“what can be obtained only for a
definite sacrifice in the form of labor or monetary consideration.”
“that are capable of being traded,
or that, at least, facilitate trade.”
“ends and means of economizing.”
“We are
forced, so to speak, to buy these . . . goods by labor, economy,
abstinence,—in a word by real sacrifices.”
“One cannot separate the idea of property
from these goods. They would not exist if exclusive possession of them
were not assured to the person who has acquired them. . . . On the
other hand, property presupposes some form of society, contracts, and
laws. Hence wealth so acquired may be called social wealth.”
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