Tuesday, July 5, 2011

The Productive Activity of the Merchant Class

Jeff Tucker advises us to show some love to the merchant class. And rightfully so. He documents how merchants benefit us on a daily basis by making sure the goods that we want are where we want when we want at prices we find acceptable. He writes:
The class of people who have chosen the path of persuasion over coercion are deserving of our gratitude even when we don't buy from them. The merchant class is that which makes everything possible in our lives: our homes, our food, our medical care, our clothing, our air conditioning, our computers, our music listening — absolutely everything that makes daily life tolerable and joyful.
He reminds us that the decision to make this calling one's vocation is not easy. They often invest their own life savings and the risk of failure is high. To be successful, entrepreneurs need not only successfully forecast future consumer demand, but they also need to hire the right people, obtain the right capital goods,  and make just the right inventory decisions. Mistakes anywhere along the process can spell doom for the merchant.

Tucker's essay brought to mind a section from Francis Wayland's Elements of Political Economy, the first edition of which was published in 1837. In his chapter on exchange, Wayland explains how and why the merchant is a very productive participant in the division of labor.
The retail merchant carries on exchanges, between the inhabitants of the same country. He purchases of the manufacturer or the importer, in quantities too large for the means of the individual consumer, and sells again, in any quantities that the consumer may desire. This produces a great saving of time, and, of course, of expense to the whole community. Were the manufacturer obliged to leave his labor, to sell a yard of calico, the price of calico would be trebled. Were the importer obliged to open his hogsheads, to sell a pound of sugar, he must charge accordingly. And besides, as each importer and manufacturer is supposed to confine himself to one particular product, the purchaser would be obliged, frequently, to go great distances, and transact, with a great number of persons, business, which he may now be able to accomplish with a single individual. Everyone must thus perceive, that a consumer saves much time by purchasing his sugar, tea, coffee, pepper, salt, etc, at one shop, instead of going to the wholesale importers of these articles individually; specially, if, as is frequently the case, they lived some hundreds of miles asunder. So therefore, it is much more economical to buy needles, tape, cotton, calico and silk, at one shop, than to go to the several individuals, in different places, who have imported or made these articles in large quantities. In consequence of this advantage to the community, the retail dealer is able to charge a profit on all the articles which he sells, and at the same time to furnish them at a much lower price that at which the purchaser could procure them, in any other manner. The purchaser not only procures them cheaper, but he procures them of a better quality. It is the business of the retail dealer to understand the quality of every article in which he traffics, and it is for his interest to purchase it as cheaply, and of as good quality, as it can be purchased in the market; since it is on the goodness and cheapness of his articles, that his custom depends. Hence, the consumer is thus enabled to employ for his benefit, a skill vastly greater than his own; and at a much less cost, than that, at which he could accomplish the business himself. Hence we see, that the retail dealers are as necessary to the prosperity of a country, and to the cheapness of productions, as any other class of persons (pp. 175-77)

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