cuted by the state itself. And to provide funds for the purpose, it may lay a direct tax upon the property of the citizens. But though this is the most equal mode of taxa. tion for the support of government, it is otherwise in mak ing internal improvements, as large portions of the state derive much less benefit from them than others.

§ 879. When a canal or rail-road is to be made by the state, the state borrows the money required to accomplish the undertaking, and relies for the means of its repayment on the revenue to be derived from the work. Thus direct taxation is avoided, and the expense of the work is ultimately paid by those who are benefited by the use of it.

CHAPTER XIII.

Exchange.-The Advantages of a Division of Labor in Eachange, and of the Frequency of Exchanges.

§ 880. In considering the causes of the productiveness of human industry, we have seen that one of the principal of these causes is the division of labor, by which every man is confined to one occupation, and, generally, to the creation of a single product, or even to the performance of a single operation in the manufacture of a product. And we have seen, also, that an individual or a nation increases in wealth, in proportion as labor is rendered more productive.

881. But as wealth consists essentially in the means of gratifying the desires, or of satisfying the wants of man. kind, the most abundant production of any one commodity, unaccompanied by any farther exertion or act of labor, cannot make a man wealthy. Whatever quantity of any single product a man may acquire by his industry, such pro

money exhibited in their construction by the direct taxation of all the people? 879. How may direct taxation be avoided? Can you tell how the revenue from a canal is produced?

§ 880. What has been shown to be a principal cause of the pro. ductiveness of industry? & 881 What are the benefits derived from

duct is capable of supplying but one of his numerous wants. A part only of what he produces is of any value to him, while he keeps it in his possession. If a farmer produce annually two hundred bushels of wheat, and his family consume but fifty bushels, the remainder would be of no great value, if he could not procure for it other necessaries. Hence we see, that, after production, the act or labor of exchange is necessary, before we can avail ourselves, to any considerable extent, of the objects of our industry.

§ 882. If every person should produce for himself all things essential to his existence and comfort, there would be no need of exchanges. But this, as we have seen, would be bad economy. Almost every person is better fitted for some particular kind of employment than for any other; and every man does best when he pursues a single occupation, and procures, by exchange, such of the products of other men's labor as he needs. Every laborer consumes a greater variety, and many a greater value of the products of the labor of others, than of those which he produces himself. Exchange, then, becomes an important business in economy, and next demands our attention.

§ 883. It is obvious, that, if a person, whenever he finds himself in want of any thing which he does not produce, were under the necessity of procuring such article for himself by a specific act of barter or exchange, much time would be spent in making exchanges. Many articles necessary to man's convenience, come from distant parts of the country, and from foreign countries. These could not be procured without still greater expense of time and labor, if they could be gotten at all. So that a person might about as well work at the different trades and occupations, and supply himself with such things as he could produce by his own labor, and dispense with those which it required so great a sacrifice to obtain.

§ 884. Thus we see that a division of labor is no less

the exchange of products? § 882. Why is it best for every person to pursue a single occupation? § 883. If every producer were com. pelled to make an exchange directly with every other producer for what he wants, what would be the consequence? § 884. Wherein consists the benefit of a division of labor in the business of exchange?

duction.

necessary in the business of exchange, than in that of proA very few persons may conduct the exchanges of a great number. If, therefore, one or more persons were thus employed in every neighborhood or town, a vast amount of labor and time would be saved to the community. The persons engaged in this business are called merchants: they receive from the producers the various products of their labor, in exchange for such wares and merchandise as they keep on hand to supply the wants of their customers; and the products thus received, are again disposed of to others who want them for their own consumption, or are carried to the cities, and exchanged for new supplies of such commodities as are not produced at home. These are called retail merchants; because they sell to the consumers in small quantities.

§ 885. There is another class of merchants called wholesale merchants. They reside in large commercial towns and cities, and conduct the exchanges between this country and foreign countries, and sell in whole pieces or packages to the retail merchants. They also purchase goods in large quanLities for the same purpose, from the manufacturers. Here again we see the necessity of a division of labor in effecting the exchanges of a country. The retailer could not afford to import goods in so small quantities as he needs to supply his customers. Nor could the importer break open his hogsheads, or divide his pieces or packages, in order to sell immediately to consumers. He confines his commercial transactions to the importing and wholesale business; and thus he can supply a great number of retail merchants: and the expense of importing as many goods as would supply them all, is little more than it would cost each to import for himself the small quantity necessary to meet the demands of his customers.

§ 886. But there is another class of wholesale merchants, more numerous than that above described. They do not import goods. They buy of the importers in larger quanti

What is the business of a retail merchant? § 885. What is the business of a wholesale merchant? Show the necessity and utility of a division of labor in mercantile business? § 886. How is the wholesale usiness divided? What is the benefit of this division?

ties than the retail merchants wish to purchase, in order to sell to the latter. And it is from this class of wholesale dealers that most of the retail merchants in the country towns receive their supplies. When the cargo of an im porter arrives in port, his object is to dispose of it as soon as possible, that he may be enabled with the proceeds to refit his vessel for another voyage, with as little delay as may be. He therefore generally sells his cargo to a few of these wholesale dealers, rather than to keep his vessel and seamen in port, unemployed, till he can dispose of all nis goods to a hundred country retailers.

§887. Thus we see how the community is benefited by these several classes of exchangers; and we see also the mistake of those who suppose, that, as one class of the community increases in wealth, others must of necessity grow poor. Who does not perceive, that the great body of consumers share equally with the merchants in the advantages of these exchanges? Although the prices of the goods they buy are augmented by every exchange, it is vastly better for them to pay a reasonable profit to the merchant who furnishes them with every article in just such quantities as they desire, than to be obliged to buy of the wholesale dealer in large quantities, or than to transport them from the place of importation, even though they might be purchased in any quantity desired.

§888. Hence we perceive, too, the dependence of one part of the community upon another, and the benefits of this dependence. It tends to strengthen the bonds of society, and to promote harmony and good will among its members. A like benefit results from the intercourse between nations dependent upon each other for those productions which contribute to their prosperity and happiness. This mutual de. pendence has, doubtless, been the means of reconciling differences between nations, which, under other circumstances, would have terminated in bloodshed.

§ 999. It is evident, moreover, that all parties are benefited by frequency of exchanges; or, as it is usually termed,

§887. Which of the two classes, merchants or consumers, are most benefited by mercantile operations? 888. What good effect results from the dependence of individuals or nations upon each other?

a brisk circulation: by which is meant the disposal of a commodity after its completion, or the application of it to its intended purpose, as soon as possible. A cotton trader having purchased a quantity of cotton, wishes to dispose of it immediately, in order to the reinvestment of his capital in a new operation. He sends it to New York, and receives in exchange for it goods which he can again exchange for a new cargo of cotton. The New York merchant sends the cotton to the manufacturer in New England, from whom he receives cotton cloths, which he disposes of to country merchants, for the country produce which they have taken from their customers; and the cloth is again sold by the country retailers to consumers: and all these exchanges may have been made in two or three months.

890. Now we may see how each of these persons has been benefited by this active exchange of commodities. The productive capital of the merchants and manufacturer, hav. ing reproduced itself four times during the year, their profits have been much greater than if but one investment had been made during the same time. And the consumers have been benefited by having been enabled to purchase cloths at cheaper rates. For if the cotton had been a whole year in reaching the consumer, each capitalist, when he sold the product, must have added to the profit charged, three times as much interest on his capital, as if it had returned to him once in every three months.

CHAPTER XIV.

Origin of Money, and its Utility in Exchange.

§891. FROM what has been said of exchange, we see that it is highly conducive to the happiness of mankind,

§ 889, 890. What is meant by frequency of exchange? Illustrate, by an example, the benefits to all parties, of a brisk circulation of commodities.