• Exchange in Production

    Putting this book online was underwritten by The Robert Schalkenbach Foundation, publisher of Henry George's works.

    Henry George
    The Science of Political Economy
    Book III, The Production of Wealth*

    Chapter XI
    The Office of Exchange In Production

    Showing That in Man the Lack of Instinct is Supplied by the Higher Quality of Reason, Which Leads to Exchange

    The cooperation of ants and bees is from within and not from without; from instinct and not from direction -- Man has little instinct; but the want supplied by reason -- Reason shows itself in exchange -- This suffices for the unconscious cooperation of the economic body or Greater Leviathan -- Of the three modes of production, "exchanging" is the highest -- Mistake of writers on political economy -- The motive of exchange

    It is a curious fact, having in it suggestions that it would lead beyond our purpose to follow, that the living things that come nearest to the social organization of man are not those to whom we are structurally most allied, but those belonging to a widely separated genus, that of insects. The cooperation by which ants and bees build houses and construct public works, procure and store food, make provision for future needs, rear their young, meet the assaults of enemies and confront general dangers, gives to their social life a striking superficial likeness to that of human societies, and brings them in this apparently far closer to us than are animals to whom we are structurally more akin.


    The cooperation by which the social life of such insects is carried on seems at first glance to be of the kind I have called directed cooperation, in which correlation in the efforts of individual units is brought about, as it were from without, by such subordination of some of the units to other units as secures conscious obedience in response to intelligent direction. The republican monarchy of the bees has its queen, its drones, its workers; the ants range themselves for march, for battle, or for work, in militant or industrial armies.


    Yet closer observation shows that this is more in seeming than in fact, and that the great agency in the correlation of effort which the insects show is something which impresses the units not from without but from within their own nature, the force or power or impulse that we call instinct, which operating directly on the individual unit, brings each, as it were, of its own volition, to its proper place and function with relation to the whole, in something of the same way in which the vital or germinative force operates within the egg-shell to bring the separate cells into relations that result in the living bird.


    Now of this power or impulse that we call instinct conscious man has little. While the involuntary and unconscious functions of his bodily frame may be ordered and maintained by it or something akin to it, and while it may in the same way furnish the sub-stratum of what we may call his mental frame, yet instinct, so strong in the orders of life below him, seems with man to fade and withdraw as the higher power of reason assumes control. What of instinct he retains would not suffice even for such social constructions as those of ants or bees or beavers. But reason, which in him has superseded instinct, brings a new and seemingly illimitable power of uniting and correlating individual efforts, by enabling and disposing him to exchange with his fellows. The act of exchange is that of deliberately parting with one thing for the purpose and as a means of getting another thing. It is an act that involves foresight, calculation, judgment -- qualities in which reason differs from instinct.


    All living things that we know of cooperate in some kind and to some degree. So far as we can see, nothing that lives can live in and for itself alone. But man is the only one who cooperates by exchanging, and he may be distinguished from all the numberless tribes that with him tenant the earth as the exchanging animal. Of them all he is the only one who seeks to obtain one thing by giving another. A dog may prefer a big bone to a little bone, and where it cannot hold on to both, may keep one in preference to the other. But no dog or other animal will deliberately and voluntarily give up one desirable thing for another desirable thing. When between two desired things the question "Which?" is put to it, its answer is always the answer of the child, "Both," until it is forced to leave the one in order to hold the other. No other animal uses bait to attract its prey; no other animal plants edible seeds that it may gather the produce. No other animal gives another what it itself would like to have in order to receive in return what it likes better. But such acts come naturally to man with his maturity, and are of his distinguishing principle.


    Exchange is the great agency by which what I have called the spontaneous or unconscious cooperation of men in the production of wealth is brought about, and economic units are welded into that social organism which is the Greater Leviathan. To this economic body, this Greater Leviathan, into which it builds the economic units, it is what the nerves or perhaps the ganglions are to the individual body. Or, to make use of another illustration, it is to our material desires and powers of satisfying them what the switchboard of a telegraph or telephone or other electric system is to that system, a means by which exertion of one kind in one place may be transmuted into satisfaction of another kind in another place, and thus the efforts of individual units be conjoined and correlated so as to yield satisfactions in most useful place and form, and to an amount enormously exceeding what otherwise would be possible.


    Of the three modes of production which I have distinguished as adapting, growing and exchanging, the last is that by which alone the higher applications of the modes of adapting and growing are made available. Were it not for exchange the cooperation of individuals in the production of wealth could go no further than it might be carried by the natural instincts that operate in the formation of the family, or by that kind of cooperation in which individual wills are made subordinate to another individual will. These it is evident would not suffice for the lowest stage of civilization. For not only does slavery itself, which requires that the slaves shall be fed and clothed, involve some sort of exchange, though a very inadequate one, but the labor of slaves must be supplemented by exchange to permit the slave-owner to enjoy any more than the rudest satisfactions. It was only by exchanging the produce of their labor that the American slave-owner could provide himself with more than his slaves themselves could obtain from his own plantation, and a slave-based society in which there was no exchanging could hardly carry the arts further than the construction of the rudest huts and tools. When we speak of pyramids and canals being constructed by enforced labor we are forgetting the great amount of exchanging which was involved in such work.


    Many if not most of the writers on political economy have treated exchange as a part of distribution. On the contrary, it properly belongs to production. It is by exchange and through exchange that man obtains and is able to exert the power of cooperation which with the advance of civilization so enormously increases his ability to produce wealth.


    The motive of exchange is the primary postulate of political economy, the universal fact that men seek to gratify their desires with the least exertion. This leads men by a universal impulse to seek to gratify their desires by exchange wherever they can thus obtain the gratification of desire with less exertion than in any other way; and by virtue of the natural laws, both physical and mental, explained in Chapter II of this Book, this is from the very origin of human society, and increasingly with its advance, the easiest way of procuring the satisfaction of the greatest number of desires.


    And in addition to the laws already explained there is another law or condition of nature related to man which is taken advantage of to the enormous increase of productive power in exchange.**

    * No introduction or motto supplied for Book III in MS. H.G., Jr.
    ** A note, "Leave six pages," written in pencil, appears on the last page of this chapter in the MS. The indications are that it was intended not for this, but for the next succeeding chapter, which was left unfinished. -- H. G., Jr.
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