the money, of which not a single farthing can ever make any part of either."1 The preceding extracts are given at length, as the only mode of presenting Smith's notions upon the subject of money. Nothing can be more inappropriate than his method to scientific discussion. He has more than Aristotle's passion for elaborate classification, resting upon no better support than his own fancies. That which divides the circulating capital of society into money, material, provisions, and finished work, is wholly arbitrary and absurd. Money-gold and silveris material in the same sense as is iron, wood, or wool. Like these, it is constantly going into the arts, into tools and finished work. It is in one sense the highest kind of finished work, as it is always received by every one in exchange for what he may have to sell. The classification given by Smith, therefore, has no warrant whatever in the nature of things. The usual classification of property that known to the law and to the books-into real and personal, is the only proper one, for the reason that it is the only one that rests upon a radical distinction in kind. - It is a capital defect in Smith, as well as in all the Economists, that he entirely overlooks interest as an element in price, and as a source of revenue. "The revenue of society," he tells us, "consists wholly of the three parts of the circulating capital, consisting of provisions, material, and finished work. The maintenance of these costs nothing; money though a part of the circulating capital—is wholly to be deducted from the neat and gross revenue, of which not a farthing can ever make any part of either. The fixed capital and that part of the circulating capital which consists of money, have, so far as they affect the neat revenue of society, a very great resemblance the one to the other." The expense of maintaining any kind of property is, in one very important particular, in direct ratio to its cost; and this is interest on its cost. Interest is always chargeable against every kind of property, for the reason that it could be realized on loans of the money paid for it. Interest, therefore, enters into the price of every article put upon the market. Take the case of a carpet: the importer of the wool used in its manu 1 Wealth of Nations, Book ii., Chap. ii. facture charges interest on its cost from the time of its purchase, in Africa or Australia, till it is delivered to the manufacturer. If it be sold on time, interest in addition to cost is charged for such time. The interest the manufacturer pays is included in the price at which the finished goods are put upon the market. If sold on time, interest is charged on such sales. If the merchant pay cash, he includes interest on the price to his customers, as the only mode in which he can be reimbursed for the use of his capital. But for such payments, he might be receiving interest on loans of the money by which they were made. The price which the consumer pays is not only the cost, but interest on the same from the time of the purchase of the material till the finished product is taken for consumption; interest on the machinery and tools employed in its manufacture; on the cost of their maintenance, cost of warehousing, cost of distribution for consumption; and a profit to all parties engaged in the various processes described. It costs far less to maintain money than it does any other kind of capital. In such a country as the United States, for example, there is at the close of every harvest a year's stock of food on hand, the value of which may be estimated at $1,000,000,000. This food is to be carried by some one for an average of six months, for which service interest is charged to the consumers, amounting, say, to $30,000,000; the cost of warehousing this food may be estimated at $20,000,000; insurance, $10,000,000: making a total of $60,000,000, every dollar of which enters into the price. It costs very little to maintain $1,000,000,000 for six months. On the contrary, while that value of produce is to be carried without interest to the holder, an equal amount of money would produce him $30,000,000. Money can be used at all times; food must be held in very large quantities, in reserve, for future use. The maintenance of such reserves is a burden to which society must submit. Such comparisons or illustrations, however, are of very little importance; for the reason that every kind of property necessary to the operations of society is to be considered as equally expensive in its maintenance, equally valuable, and equally productive in its use. But for money, the exchanges of property could not be made; nor could it have any commercial value. Money, therefore, as a medium of exchange, performs an indispensable function, and consequently is always a most impor tant source of revenue. The revenue of society, in fact, is in ratio to the amount of property it possesses, whatever be its form, whether fixed or floating, real or personal. It is not necessary even that capital-money-should be actively employed, in order that it may be regarded as productive. Every prudent person will always seek to have on hand an amount of it in excess of that necessary to his immediate wants, or uses, to meet unforeseen calls or emergencies. Such reserves will consist either of gold or silver, or of the notes and credits of Banks, which entitle their holder to gold and silver, or to whatever these will purchase. A merchant, whose profit is in the nature of a commission, is not expected to maintain on hand an amount of capital equal to the liabilities he assumes. Such liabilities may, and often do, exceed tenfold his means, apart from the merchandise in the purchase of which they were created. He is expected to discharge them by the sale of such merchandise. As he is, however, constantly liable to losses, he must maintain reserves in ratio to his liabilities; otherwise no one would trust him, as it would be seen that the first reverse might ruin him. With adequate reserves, however, the more favorable rates at which he would be able to purchase, and the greater degree of credit he would enjoy, would far more than compensate for the loss of interest on his reserves. Capital so held, therefore, though not immediately productive, may, in fact, be considered as the most productive and the most usefully employed of any that the merchant may hold. A very large amount of capital is always necessarily held in this manner. Every person has, or seeks to have, about him an amount of money, greater or less according to his means or ability, to meet future demands or opportunities; foregoing interest for the sake of having the immediate control of that which he may wish to use or spend. In some countries, from the want of social order or from the rapacity of governments, as a matter of safety and prudence interest may be foregone altogether. In all, very large amounts of capital must remain without drawing interest, involving a sacrifice for a greater good or convenience. It is a loss which society makes to secure a greater advantage or gain. If Aristotle, Hume, Smith, and other Economists, in place of declaring money to have only a fictitious or conventional value, or its value and productions to be less than those of other kinds of property, had set themselves to work to explain the phenomenon of the universal demand for money at usury, the history of Political Economy would have been wholly different. Money was in as active demand when Aristotle wrote as to-day. The rate in Greece on such as was borrowed to be used in mercantile adventures averaged 30 per cent per annum, commerce being subject to much greater risks than at the present time. It was equally in demand, though loaned at less rates, at the time of Smith and Hume. Why should not such a demand have been accepted as evidence of value? The reason was the absurd dogma of Aristotle, which no writer till Bentham ever assumed to controvert. As interest to be received on loans of capital is a prime factor in human affairs; as it is one of the most powerful motives to industry and exertion; as it is the great conservator of social order; as upon it rest institutions indispensable to the alleviation of human weakness and distress, and to the promotion of the moral, intellectual, and physical welfare of the race, without which it would relapse into a condition of comparative barbarism, to wholly overlook it in a work the object of which is to treat of the laws upon which such welfare rests, marks such a want of the proper comprehension of the subject as to throw a well-grounded distrust over whatever conclusions its author may undertake to establish. No reliance can be placed upon those derived from premises from which the most important element is wholly excluded. It is like an attempt to solve complex geometrical propositions, taking no account of elemental truths. The conclusions arrived at would be mere hap-hazard guesses, which might never coincide with the law or fact. Such guesses were Smith's conclusions in his work on Political Economy. It cannot be otherwise with any work of the kind till the principles upon which the science treated of rests are adequately established. Those upon which the science of Political Economy rests, if there be such a science, are to be found, not in the intellectual, but in the moral part of man's nature. When proper moral conditions are secured, the highest possible material prosperity is the necessary result. A distinction to which Smith is constantly returning is the difference between the wheel of circulation and the goods that are circulated by it. The one, he tells us, is wholly different from the other. Such distinction is entirely imaginary. If a person possessed of 1,000 barrels of flour sell it for $10,000 in gold, the flour may be said to move the gold. If a person possessed of such a sum in gold wish to purchase its equivalent in flour, the gold may be said to move the flour. The figure of the wheel is allowable only on the assumption that money, as such, is not capital; but an instrument of commerce, like a scale, a railroad car, or a steamboat. The wheels of the railroad car may very properly be said to be the wheels of commerce, because they are constantly moving merchandise the value and nature of which has no relation or resemblance to them; but to call one kind of merchandise, and not the other for which it is exchanged, a wheel of commerce, is to use illustrations which have no correspondence in nature, but are simply inventions, which with the indolent or superficial take the place of fundamental principles or laws. Smith, when treating of money, is always returning to his favorite distinction between money and capital, — between the real and nominal price of commodities. "If," he says, "a guinea be the weekly pension of a particular person, he can, in the course of a week, purchase with it a certain quantity of subsistence, conveniences, and amusements. In proportion as this quantity is great or small, so are his real riches, his real weekly revenue. His weekly revenue is certainly not equal to the guinea and to what can be purchased with it: but only to one or other of these two equal values; and to the latter more properly than to the former; - to the guinea's worth, rather than to the guinea. in "If the pension of such a person was paid to him, not in gold, but a weekly bill for a guinea, his revenue surely would not so properly consist in the piece of paper as in what he could get for it. A guinea may be considered as a bill for a certain amount of necessaries and conveniences, upon all the tradesmen in the neighborhood. The revenue of a person to whom it is paid does not so properly consist in the piece of gold as in what he can get for it, or in what he can exchange it for. If it could be exchanged for nothing, it would, like a bill upon a bankrupt, be of no more value than the most useless piece of paper. "Though we frequently express a person's revenue by the metal pieces which are annually paid to him, it is because the amount of these pieces regulates the extent of his power of purchasing, or the value of the goods which he can annually afford to consume. We still consider his revenue as consisting in the power of pur |