II.III.1
§ 1. Man cannot create material things. In the mental and moral world indeed he may produce new ideas; but when he is said to produce material things, he really only produces utilities; or in other words, his efforts and sacrifices result in changing the form or arrangement of matter to adapt it better for the satisfaction of wants. All that he can do in the physical world is either to readjust matter so as to make it more useful, as when he makes a log of wood into a table; or to put it in the way of being made more useful by nature, as when he puts seed where the forces of nature will make it burst out into life.
II.III.2
It is sometimes said that traders do not produce: that while the cabinet-maker produces furniture, the furniture-dealer merely sells what is already produced. But there is no scientific foundation for this distinction. They both produce utilities, and neither of them can do more: the furniture-dealer moves and rearranges matter so as to make it more serviceable than it was before, and the carpenter does nothing more. The sailor or the railway-man who carries coal above ground produces it, just as much as the miner who carries it underground; the dealer in fish helps to move on fish from where it is of comparatively little use to where it is of greater use, and the fisherman does no more. It is true that there are often more traders than are necessary; and that, whenever that is the case, there is a waste. But there is also waste if there are two men to a plough which can be well worked by one man; in both cases all those who are at work produce, though they may produce but little. Some writers have revived the mediæval attacks on trade on the ground that it does not produce. But they have not aimed at the right mark. They should have attacked the imperfect organization of trade, particularly of retail trade.
II.III.3
Consumption may be regarded as negative production. Just as man can produce only utilities, so he can consume nothing more. He can produce services and other immaterial products, and he can consume them. But as his production of material products is really nothing more than a rearrangement of matter which gives it new utilities; so his consumption of them is nothing more than a disarrangement of matter, which diminishes or destroys its utilities. Often indeed when he is said to consume things, he does nothing more than to hold them for his use, while, as Senior says, they "are destroyed by those numerous gradual agents which we call collectivelytime." As the "producer" of wheat is he who puts seed where nature will make it grow, so the "consumer" of pictures, of curtains, and even of a house or a yacht does little to wear them out himself; but he uses them while time wastes them.
II.III.4
Another distinction to which some prominence has been given, but which is vague and perhaps not of much practical use, is that between consumers' goods (called also consumption goods, or again goods of the first order), such as food, clothes, etc., which satisfy wants directly on the one hand; and, on the other hand, producers' goods (called also production goods, or again instrumental, or again intermediate goods), such as ploughs and looms and raw cotton, which satisfy wants indirectly by contributing towards the production of the first class of goods.
II.III.5
§ 2. All labour is directed towards producing some effect. For though some exertions are taken merely for their own sake, as when a game is played for amusement, they are not counted as labour. We may define labouras any exertion of mind or body undergone partly or wholly with a view to some good other than the pleasure derived directly from the work. And if we had to make a fresh start it would be best to regard all labour as productive except that which failed to promote the aim towards which it was directed, and so produced no utility. But in all the many changes which the meaning of the word "productive" has undergone, it has had special reference to stored-up wealth, to the comparative neglect and sometimes even to the exclusion of immediate and transitory enjoyment; and an almost unbroken tradition compels us to regard the central notion of the word as relating to the provision for the wants of the future rather than those of the present. It is true that all wholesome enjoyments, whether luxurious or not, are legitimate ends of action both public and private; and it is true that the enjoyment of luxuries affords an incentive to exertion, and promotes progress in many ways. But if the efficiency and energy of industry are the same, the true interest of a country is generally advanced by the subordination of the desire for transient luxuries to the attainment of those more solid and lasting resources which will assist industry in its future work, and will in various ways tend to make life larger. This general idea has been in solution, as it were, in all stages of economic theory; and has been precipitated by different writers into various hard and fast distinctions by which certain trades have been marked off as productive and certain others as unproductive.
II.III.6
For instance, many writers even of recent times have adhered to Adam Smith's plan of classing domestic servants as unproductive. There is doubtless in many large houses a superabundance of servants, some of whose energies might with advantage to the community be transferred to other uses: but the same is true of the greater part of those who earn their livelihood by distilling whisky; and yet no economist has proposed to call them unproductive. There is no distinction in character between the work of the baker who provides bread for a family, and that of the cook who boils potatoes. If the baker should be a confectioner, or fancy baker, it is probable that he spends at least as much of his time as the domestic cook does, on labour that is unproductive in the popular sense of providing unnecessary enjoyments.
II.III.7
Whenever we use the word Productive by itself, it is to be understood to mean productive of the means of production, and of durable sources of enjoyment. But it is a slippery term, and should not be used where precision is needed.
II.III.8
If ever we want to use it in a different sense, we must say so: for instance we may speak of labour as productive of necessaries, etc.
II.III.9
Productive consumption, when employed as a technical term, is commonly defined as the use of wealth in the production of further wealth; and it should properly include not all the consumption of productive workers, but only that which is necessary for their efficiency. The term may perhaps be useful in studies of the accumulation of material wealth. But it is apt to mislead. For consumption is the end of production; and all wholesome consumption is productive of benefits, many of the most worthy of which do not directly contribute to the production of material wealth.
II.III.10
§ 3. This brings us to consider the term Necessaries. It is common to distinguish necessaries, comforts, and luxuries; the first class including all things required to meet wants which must be satisfied, while the latter consist of things that meet wants of a less urgent character. But here again there is a troublesome ambiguity. When we say that a want must be satisfied, what are the consequences which we have in view if it is not satisfied? Do they include death? Or do they extend only to the loss of strength and vigour? In other words, are necessaries the things which are necessary for life, or those which are necessary for efficiency?
II.III.11
The term Necessaries, like the term Productive, has been used elliptically, the subject to which it refers being left to be supplied by the reader; and since the implied subject has varied, the reader has often supplied one which the writer did not intend, and thus misunderstood his drift. In this, as in the preceding case, the chief source of confusion can be removed by supplying explicitly in every critical place that which the reader is intended to understand.
II.III.12
The older use of the term Necessaries was limited to those things which were sufficient to enable the labourers, taken one with another, to support themselves and their families. Adam Smith and the more careful of his followers observed indeed variations in the standard of comfort and "decency": and they recognized that differences of climate and differences of custom make things necessary in some cases, which are superfluous in others. But Adam Smith was influenced by reasonings of the Physiocrats: they were based on the condition of the French people in the eighteenth century, most of whom had no notion of any necessaries beyond those which were required for mere existence. In happier times, however, a more careful analysis has made it evident that there is for each rank of industry, at any time and place, a more or less clearly defined income which is necessary for merely sustaining its members; while there is another and larger income which is necessary for keeping it in full efficiency.
II.III.13
It may be true that the wages of any industrial class might have sufficed to maintain a higher efficiency, if they had been spent with perfect wisdom. But every estimate of necessaries must be relative to a given place and time; and unless there be a special interpretation clause to the contrary, it may be assumed that the wages will be spent with just that amount of wisdom, forethought, and unselfishness, which prevails in fact among the industrial class under discussion. With this understanding we may say that the income of any class in the ranks of industry is below its necessary level, when any increase in their income would in the course of time produce a more than proportionate increase in their efficiency. Consumption may be economized by a change of habits, but any stinting of necessaries is wasteful.
II.III.14
§ 4. Some detailed study of the necessaries for efficiency of different classes of workers will have to be made, when we come to inquire into the causes that determine the supply of efficient labour. But it will serve to give some definiteness to our ideas, if we consider here what are the necessaries for the efficiency of an ordinary agricultural or of an unskilled town labourer and his family, in England, in this generation. They may be said to consist of a well-drained dwelling with several rooms, warm clothing, with some changes of underclothing, pure water, a plentiful supply of cereal food, with a moderate allowance of meat and milk, and a little tea, etc., some education and some recreation, and lastly, sufficient freedom for his wife from other work to enable her to perform properly her maternal and her household duties. If in any district unskilled labour is deprived of any of these things, its efficiency will suffer in the same way as that of a horse that is not properly tended, or a steam-engine that has an inadequate supply of coals. All consumption up to this limit is strictly productive consumption: any stinting of this consumption is not economical, but wasteful.
II.III.15
In addition, perhaps, some consumption of alcohol and tobacco, and some indulgence in fashionable dress are in many places so habitual, that they may be said to be conventionally necessary, since in order to obtain them the average man and woman will sacrifice some things which are necessary for efficiency. Their wages are therefore less than are practically necessary for efficiency, unless they provide not only for what is strictly necessary consumption, but include also a certain amount of conventional necessary.
II.III.16
The consumption of conventional necessaries by productive workers is commonly classed as productive consumption; but strictly speaking it ought not to be; and in critical passages a special interpretation clause should be added to say whether or not they are included.
II.III.17
It should however be noticed that many things which are rightly described as superfluous luxuries, do yet, to some extent, take the place of necessaries; and to that extent their consumption is productive when they are consumed by producers.
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