gage only indicate that A B has a lien on that property for one-half its value. The credit given and received has added nothing to that value. The one property is justly subject to taxation. Who shall pay the tax? In strictest equity, each of the parties should pay a half; but, in the very terms of the mortgage, the mortgagor engages to pay all taxes that may be levied on the land. This is a part of the contract, and the interest is adjusted to that usage. If the mortgagor is taxed for the whole farm, and the mortgagee is also taxed on the mortgage he holds, there is evidently a double taxation on two thousand dollars.

These cases show the difficulty of adjusting a system of taxation in accordance with strict equity. A perfect system seems an unattainable ideal; but it will be approximated just in proportion as sentiments of honesty and patriotism are cultivated among a people, and as legislators apprehend and apply in their action on this subject the fundamental principles of Political Economy.

EXERCISES.

1. What source of revenue has our government other than taxation?

2. What was the effect on the people of Rome, when the government was wholly maintained by the plunder of the provinces, without taxation at home?

3. Is it desirable that a people should be altogether relieved from contributing to the support of their government?

4. On what grounds are the public taxes made a first lien on all private property?

5. Is it right that an aristocratic or priestly class should be exempt from taxation ?

6. Can you tell how the Turkish government levies its taxes, and what is the effect on the industry of its people? 7. What question respecting taxes was a prominent issue in the war of the American Revolution?

8. Can you state the mode of collecting taxes in France in the eighteenth century, by "farmers-general," and the wrongs that attended it?

9. How does taxation by duties on imports conflict with the first and second maxims of Adam Smith?

10. Why is the close of the year generally chosen in our country as the time for collecting taxes?

11. Is that an economical kind of tax of which half the amount is consumed in the cost of collection?

12. Illustrate the difference between specific and advalorem duties.

13. Can you state some of the complications and absurdities of our American tariff in this year, 1879 ?

14. If by requiring stamps of small amounts on bankchecks, notes, deeds, wills, &c., a revenue of several millions can be raised, with no expense for collection beyond the cost of printing the stamps, is there any good reason why the measure should not be adopted?

15. What good reasons can be urged by honest and patriotic men against a moderate income tax?

16. Is it a good sign for our nation, that the people seem averse to direct taxation, the measure and pressure of which they can exactly know and feel?

17. Is it any less dishonest, by evasion, to cheat the government out of a legitimate tax, than to cheat a laborer out of his wages, or a creditor out of his dues ?

17. Illustrate the method of assessing and collecting State taxes, by the case of a tax-receipt from the collector of your own town or city.

19. What is the meaning of a "tax-title" to land?

20. State any instance of double taxation which you know of.

21. On what grounds may school and church property be exempt from taxation ?

PART IV.

EXCHANGE.

WEALTH is transferred from producers to consumers by manifold exchanges. The division of labor which increases production necessitates exchange. With advancing civilization the processes of exchange are systematized into a very complicated and extensive social machinery, how complicated, one may see if he will try to trace the cotton in the shirt he wears back to the field on which it grew; how extensive, will appear if one will consider how many parts of the world contribute to the sum of daily comforts with which his table and his home are furnished. Hence, in the science of Political Economy, exchange holds the place of highest importance; and some have proposed to adopt, as a title for the science, the term Catallactics, the science of exchanges.

A full but concise presentation of the first principles of this part of our subject will be given in several distinct chapters. Oniy by a clear apprehension of these principles can the hard problems of economics be solved.

CHAPTER I.

THE NATURE, NECESSITY, AND AGENTS OF EXCHANGE.

As a specific act, exchange is a transaction in which two parties voluntarily transfer to each other the right of property in certain items of wealth which are regarded as equivalents. Observe that the transfer must be voluntary, else it involves robbery: it must convey on each side a right of property, else it is fraud.

It is often said that exchange may be either of commodity for commodity, as when one gives a table for a pair of boots; or of commodity for labor, as when one gives fifty pounds of flour for a day's work at mowing; or of labor for labor, as when a mason gives a day's work in exchange for a carpenter's work for a day. This is proper enough to indicate the precise form of the transaction; but in reality it is not the labor itself, but the value in some form of wealth, the product of the labor, which is contemplated.

Value is thus the central term of this branch of our science. Just here let the student turn back to the definition and explanations of value as given on pages 7 and 8. From the views there given we

derive the following formula, applicable to all exchanges :

Value = cost+or -the effect of the ratio of demand to supply.

The general arena of exchange is called the market, a term which signifies not so much a locality, as the actual relation of demand to supply at the place and time contemplated for making exchanges. By demand is meant the extent of desire for an article. Supply expresses the quantity of the article at hand to meet that desire. Between these two factors competition works continually variations in the value of commodities. When demand is great in proportion to supply, value is enhanced by competition among the buyers. When supply is great in proportion to demand, value is reduced by competition among the sellers. So, for the variation of value under the law of demand and supply, we have another simple formula, as follows: —

Value rises directly as the demand, inversely as the supply.

The tendency of free competition is to produce an equilibrium between supply and demand (see p. 79), and so to make cost the general standard of value. Mr. J. S. Mill distributes all things that are bought and sold into three classes.

First, There are things of which it is physically impossible to increase the quantity beyond certain narrow limits. Such are ancient sculptures, paintings of old masters, rare books or coins, and wines produced only under peculiar conditions of soil, climate, and exposure.