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CHAPTER I: the subject-matter of economics - Edwin Cannan, Wealth: A Brief Explanation of the Causes of Economic Wealth 
Wealth: A Brief Explanation of the Causes of Economic Wealth (London: P.S. King and Son, 1922).
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the subject-matter of economics
There is no reason for not accepting the time-honoured identification of the subject-matter of economics with “wealth.” At any rate, I intend to accept it in the present work, and consequently I shall treat the question “What is wealth?” as exactly the same question as “What is it most convenient to take as the subject-matter of economics?” Most convenient, I say, because economics is a department of science, and therefore the question what should be included in it is a question of the most convenient delimitation of the different departments of science.
To such a question the practice of writers and oral teachers usually furnishes a better answer than their preliminary search for a definition which they hope will fit the matter of their investigations. I proceed, therefore, to ask what is, in fact, the usual subject-matter of books and lectures on economics.
It is, in the first place, undoubtedly something possessed or enjoyed by human beings.
It is true that when economics first began to stand out as a separate department of science, the economists stepped straight into controversies about national wealth, and it did not occur to them to ask themselves definitely whether they had to do with any other body than “the nation.” So when Steuart, in 1767, called his large work An Inquiry into the Principles of Political O Economy, the term “political” indicated that he intended to discuss national wealth. Adam Smith, ten years later, probably imagining himself to be precluded from giving his book the same title as Steuart's, used An Inquiry into the Nature and Causes of the Wealth of Nations as synonymous. In the more general parts of his treatise, however, he often substitutes “the society” for “the nation,” and it is clear that he intended his work to cover more than a literal interpretation of the title would include. Later writers have often used the word “community” in the same way as Adam Smith used “society,” and have spoken of “the wealth of the community” when they massed into one body all the human beings with whom they were dealing.
All economists have considered the wealth of classes and individuals within the community as well as that of the whole community, so that it may be said that neither the use of the term “political” in “political economy” nor the use of the term “nation” are to be taken as intended to confine the science to the wealth of nations. The subject-matter of political economy or economics has always been the wealth of human beings generally.
Originally ''wealth” in ordinary English was the name of a state or condition of human beings such as is suggested by the prayer for the King in the Book of Common Prayer, “Grant him in health and wealth long to live. “The suffix th indicates a state or condition, so that “wealth” indicated the state or condition of being well, or as we should say in modern English, prosperous, just as “health” indicated the state of being healed or free from disease. But in course of time the word came to be applied to money and other concrete things, command over which made a person live in wealth. In the eighteenth century some writers found it necessary to protest against the view that national policy should be directed towards the aim of securing a perpetual increase of the gold and silver within the national territory. In doing so they very naturally said that wealth did not consist entirely of gold and silver, but also of certain other concrete things, such as horses and cattle, houses and orchards. This led them to lose sight of the older meaning of wealth as a state or condition of human beings, and to regard it rather as certain material possessions of human beings.
Most of the statements which an economist is likely to make relate to quantities: he deals with increases and decreases. It is impossible to make statements about increases and decreases of the wealth of human beings if their wealth is supposed to consist merely of certain concrete objects without reference to time. Propositions about increases of tables, chairs, or loaves, which at first sight appear intelligible enough, are as meaningless as propositions about the increase of raindrops without reference to time would at once appear to us. It is quite true that we do not usually; find bare statements that tables, chairs, or loaves have increased unintelligible, but that is because from the context or by some other means we have gathered that the statement refers to these things, not in the abstract, but in some definite relation to time. We are led to think of the tables and chairs in the world or some part of the world at some one instant of time, or of the loaves produced in the world or some part of it in some particular length of time, such as a week or a year.
But till quite lately the searchers for a formal definition of “wealth” overlooked this point, and great confusion resulted from the oversight. The more primitive the economy of a people, the more likely are they to have regard to their possessions at a point of time rather than to what they can expect to receive as time passes. The poorer a person is, the more likely is he to think of what he has at the moment and the less of his receipts in the past or his prospect of receipts in the future. The question “How much a year have you?” or even “How much a week?” is not one which occurs to primitive man or even at the present time to a man of the lowest class or to a child of any class in the most. “advanced” countries. To them the question is “How much have you got ? “Hence it is not surprising that the collection of objects which a man of the seventeenth or eighteenth century would usually have in his mind when he talked of increases or decreases of wealth would be the collection of things in existence at a point of time rather than the amount coming in or being created per annum or perdiem. Nor is it surprising that in cultivated society the conception of a periodical receipt should have subsequently forced its way in and overpowered the conception of a realized amount.
It is, however, perhaps rather surprising that the transition from one idea to the other should have taken place without economists noticing the change. An explanation which is at least plausible may be given. Adam Smith greatly facilitated the transition by first calling his book An Inquiry into the Nature and Causes of the Wealth of Nations, and then deliberately defining the wealth of a nation as its “annual produce,” or “the necessaries or conveniencies of life which it annually consumes.” But he did not notice the difference between the wealth of a nation defined in this way and the conception of it as a number of things possessed at a point of time, because he was engrossed with the desire to protest against the cruder conception of it as the amount of gold and silver possessed. Thus instead of saying that the wealth of a nation is not the land, cattle, machinery, and other things possessed by it at a point of time, but rather the annual produce of the land and labour of the people, he says it is not gold and silver, but the annual produce. Later writers for a long time followed him in making the same antithesis, and were thus led, like him, into overlooking the really important part of the change which was being made.
Whatever the explanation may be, there is no doubt of the fact that economists did fail to indicate clearly in their definitions of wealth whether the wealth of persons and peoples,
which alone could be meant when quantitative statements were made about “wealth,” was the collection of things possessed by them at a point of time or the collection produced by them, or somehow obtained by them, within a length of time. But in their practice they usually followed Adam Smith. Dealing, like him, with the “production” and “distribution” of wealth, they were obliged to keep length of time in their minds: the production of wealth was greater or less according as more or less was produced per annum, and the distribution of wealth, as he and they conceived it, was the distribution of the annual produce. Thus, in spite of the absence of definitions indicating the fact, the “wealth” with which economists generally intended to deal when they made quantitative statements concerning it was the wealth periodically produced or coming in, and we can now proceed to inquire of what this was supposed to consist.
The English statisticians of the latter part of the seventeenth century regarded the annual produce of the country with the eyes of a farmer. They thought of the raw produce of a farm, and regarded this as forming the subsistence of the whole of the people. The French économistes, or physiocrats, the followers of Quesnay, had the same agricultural standpoint, and made the doctrine more definite by expressly denying the quality of productivity to all labour not employed immediately on the land. Adam Smith made a change 10 the right direction by including in. “productive” labour not only the labour employed immediately on the land, but also all other labour which improved material objects, and thus, as he said, did not perish in the very instant of its performance. Probably he would not have halted here if it had not happened that he mixed up the question of productive and unproductive labour with an inquiry into the accumulation of capital, and was thus insensibly led to ask himself what labour produces capital instead of what labour produces “produce.” J. B. Say saw the weakness of his position, and extended the notion of productive labour to cover “non-material products.” From his time, in spite of J. S. Mill, who here, as often, tried to furbish up the obsolete, the annual produce was generally regarded as consisting of —services” as well as “commodities.”
The annual produce was sometimes for greater accuracy called the “net produce,” because it was seen that care must be taken to avoid double or triple reckoning of the same thing, which would occur if, for example, iron ore, pig iron, and iron pokers were all added together. The annual produce, or more precisely, the annual net produce, consequently came to be regarded as consisting only of those commodities and services which actually reach the consumer, plus those commodities which were added to the existing stock of commodities and minas those which were deducted from the existing stock. The consumer here was of course the final consumer, who consumes for his own satisfaction and not in order to secure some further result; for example, the consumer of wheat was the person who ate it in whatever form, not the miller or the baker.
Now there are no means by which we can actually distinguish net produce from gross produce in this way if we approach the subject from the side of the producer. A few commodities, such as loaves of bread, may be supposed without material inaccuracy to belong entirely to net produce. But many commodities are used both for immediate satisfaction and for further production, and there is no way, from the producer's side, of distinguishing which parts are used in one way and which in the other. For example, of lubricating oil, the quantity used in a cotton-spinning factory will be a means towards the production of another commodity, cotton cloth: the quantity used in running a motor-car for pleasure will fall into net produce. Again, gas is sent out from the same gasworks to persons who use some of their supply for driving a gas-engine to make something which they sell, and some to light their own dinner table. Another great difficulty arises from the fact that when the stock of existing things which are used by man is, as continually happens, depleted by the subtraction of some things and increased by the accession of other things, there is no way of marking out the gross additions into two parts, the net additions and the remainder. Suppose the stock of ships is diminished by the sinking or breaking up of three hundred small sailing ships and increased by the addition of fifty large steamers: it would be misleading to say simply that the number of ships was reduced by two hundred and fifty, while on the other hand, any calculation as to the relative carrying capacity of sailing ships and steamers and a consequent reduction of the two to some common measure involves all sorts of assumptions and conjectures.
A perception, not always very distinct, of these difficulties has gradually led to the substitution of “income” for “produce” or “net produce.” One of Marshall's suggestions for the definition of economics at the beginning of the earlier editions of his great work was how man “gets his income, and how he uses it.” Here we approach the subject from a different side. Instead of starting from the land and labour and trying to trace the product through its various stages, excluding double reckonings as we go, we look in the first place at the valuation of the net results which we get by considering individuals' money-incomes.
But money-income does not always include everything which we should regard as belonging to the net produce. Nearly all farmers consume part of their own produce, most wives perform domestic duties of a kind which add to the material welfare of themselves and their families, and so on. Observing this, economists have been led to add to the actual money-income a money-valuation of all economic services and commodities which are not accounted for in the money-income. This plan encounters two difficulties. How are we to decide what is economic, and how are we to value? Are the services of a mother to her child economic, and are they to be appraised at the same money-value as those of a wet-nurse?
Supposing these difficulties to be surmounted, we find ourselves dealing with a sum of money supposed to represent the commodities and services of an economic character which are enjoyed, plus those commodities which form the net addition to the stock of useful things. But quantitative statements about this sum of money are not satisfying by themselves. If we say the income of the community has increased, we do not want to be met with the retort “The income valued in money may have gone up, but that is only due to a fall in the value of gold. The increased sum of money at which you value the income means no more and no better commodities and services than before.” Consequently we are driven to “go behind” the valuation by inquiring into the purchasing power of money, and so the adoption of the money-estimate of income does not in the least relieve us from the necessity of considering. the “real” income. The inquirer who has been told that income consists of commodities and services, and that it rises and falls with the quantity of those commodities and services, still wants to know how that quantity is to be measured.
Where commodities and services of different kinds are concerned, there is clearly no possibility of comparing the quantities intelligibly by weight, bulk, or number. We might say that a collection of things consisting of one loaf of bread, one pound of beef, one pint of beer, and one railway ticket is equal to half of a collection of things consisting of two similar loaves of bread, two similar pounds of beef, two similar pints of beer, and two similar railway tickets. But we cannot make any statement about the relative quantities included in two collections one of which consists, as before, of one loaf, one pound of beef, one pint of beer, and one railway ticket, and the other collection of three leaves, half a pound of beef, and two railway tickets. At first sight of the problem we may think we can, but a moment's reflection makes us see that the comparison we then have in our minds is one of values, not of quantities.
If we drop quantities and compare values, we are satisfied so long as no doubt is raised as to the invariability of our standard. At the same time and place our standard will always “mean the same thing” in regard to the two collections of commodities and services we are considering, but as soon as the places differ, and still more as soon as the times differ, we begin to question whether the measure of value means the same thing at the two places or times. We then invariably find that it does not. Whatever standard be taken, at the one place or time some commodities or services will be worth more of it, and others less, than at the other place or time: it will even often happen that some commodities or services which are worth little of it at one place or time are wholly unprocurable by the offer of any quantity of it at the other place or time.
Eventually we find ourselves groping after a measure of the good effect of the commodities and services upon the persons who get them; we find we really want to know whether a person or body of persons with such and such an “income” in pounds sterling (or consisting of such and such commodities and services) is what we usually call as “well off” as another person or body of persons with such and such other income in pounds sterling (or consisting of such and such other commodities and services) at some other place or time.
Moreover, recent economic analysis has drawn attention to the fact that even where quantity can be measured by weight or bulk, the effect of the enjoyment of these commodities on the persons who enjoy them cannot be regarded as proportionate to the quantity. Six loaves of bread consumed per day, it is pointed out, will not make a man six times better off than one per day. Even £6,000 a year to be spent as he pleases will not make a man six times as well off as if he had only £1,000 a year. 'With £6,000 a year he will not consume six loaves instead of one: by introducing variety he can retard the fall of utility, but he cannot altogether prevent it. With the larger income he must spend some of his pounds sterling on more trivial satisfactions than would be obtained by the least important pounds spent out of the £1,000 a year.
In the last forty years it has consequently been the practice of economic teachers to deal more and more with the ultimate results of the possession, use, and consumption of commodities and services, regarding these commodities and services as the means to an end rather than an end in themselves. So, instead of having our attention directed entirely to outward objects and particular actions, we find ourselves considering “utility” or “satisfaction.” Nor is this all. The democratization of literature and political science which has taken place since the earlier part of the eighteenth century has led to the practice of bringing into account the pain and irksome toil involved in the creation of positive utility or satisfaction. Most economic writers before Adam Smith, and some after him, regarded the interests of the “nation” in some way which enabled them to exclude the interests of the “working classes,” as we call them. Most of the pain and irksome toil of production fall on this portion of the people, so that exclusion of the working classes from the nation led to a neglect of all consideration of the pain and irksome toil involved in procuring “wealth” for the nation. Whether the working classes should labour for ten hours or for sixteen was a question to be determined solely by discovering which number of hours produced the greater amount of commodities. The idea of deliberately sacrificing positive utility or satisfaction in order to have greater leisure was scarcely thought of. If he advocated it at all, an economist would regard himself as deliberately suggesting an economic sacrifice in order to secure a non-economic but greater good. Most recent economists would unhesitatingly reject this view, and regard the economic condition of a people who had a certain amount of positive satisfactions and worked ten hours a day as superior to that of a people who had the same satisfactions of a positive kind but worked sixteen hours to obtain them.
Thus the subject-matter of economics has become utility or satisfaction minus disutility or dissatisfaction, so that if we retain “wealth” as its compendious description, we must take “wealth” as having reverted to its old meaning of a particular state or condition of human beings.
What that state or condition exactly is, however, it is not very easy to say. It is compounded of satisfactions and dissatisfactions, but these are by no means exclusively economic: there are plenty of them which no one in his senses and with any regard to the ordinary usages of language would call economic, and which no one with any regard to the convenient delimitation of sciences would attempt to treat in a work on economics.
Till recently most economists, if asked to distinguish between satisfactions of an economic and uneconomic character, would have said that the economic could be bought and sold, and also said or implied that the non-economic could not be bought and sold. There are, however, several difficulties to be overcome before this can be accepted as furnishing a criterion for distinguishing what is actually treated in economic works from what is not. On the one hand, it seems to exclude from economics many things which are actually included by every economist, or would be included by him if he happened to come across them. That the satisfaction which some hundreds of thousands of people enjoy every week from the use of Hyde Park is an economic one no economist would: think of denying, but it seems impossible to describe that satisfaction as even potentially exchangeable or subject to purchase and sale. Again, if it were discovered that Mars was inhabited by people like us, and that the Martians found satisfaction in food, clothes, and shelter just as we do, no economist would be prevented from comparing the economic condition of the Martians with our own by the further discovery that the Martians had not established a system of private property nor practised exchange. Yet in that case could it reasonably be said that the satisfactions of being fed, clothed, and sheltered were saleable in Mars ? And if not, would the fact of similar things being saleable on the earth be sufficient to justify us in regarding them as “potentially saleable” in Mars? On the other hand, the criterion of buying and selling brings many things into economics which are not commonly treated there and which it does not seem convenient to treat there. A large trade has existed since (and no doubt before) history began in supplying certain satisfactions of a sensual character which are never regarded as economic goods. Indulgences to commit what would otherwise be regarded as offences against religion or morality have been sold, sometimes openly and almost at all times under some thin disguise: nobody has regarded these as economic goods.
The economists who have distinguished the sphere of economics by the aid of this test seem after all to have treated of just the same subjects as are described as economic in the everyday conversation of educated people. In such conversation the term has no necessary reference to buying and selling, nor to the potentiality of being bought and sold. We talk of “economic questions,” “economic interests,” and “the economic point of view.” We separate economic questions from religious questions, from literary questions, from historical questions, and from hundreds of other questions. We inquire whether in some particular case the economic interests of some persons are opposed to their political or their religious interests. We regard some things as desirable from an economic point of view which for some non-economic reasons we reject as on the whole undesirable.
In these and similar phrases the term economic conveys to our mind an impression about which we have so little doubt that we find it difficult to define in the same way and for the same reason as we find it difficult to explain what we mean by the terms “blue” or “red.” Confronted suddenly by the word “blue,” a weather optimist thinks of the sky; some of us think of the block marked “blue” in the box of paints with which we dabbled when we were children; others of our first or last blue frock. Confronted by the word “economic,” one man may think first of coins, another of figures in bank-books, another of crops growing in the field and cattle browsing in the meadow, and another of the morning crowd going to its work in some great city. None of them will come at all creditably through a cross-examination on any definition which they may construct either on the spur of the moment or after considerable reflection. But if one example after another were put before them all, they would be found to agree, at any rate very nearly, as to what things were to be included and what excluded from the list of things economic.
They would agree, for instance, that the question “Was Mahommed the Prophet of God ?” was not an economic one, and that the prohibition of pork as human food was of economic interest. They would agree that “Did Bacon write Shakespeare?” was not an economic question, and that the satisfaction which believers in the cryptogram would feel if it were universally accepted that Bacon did write Shakespeare would not be an economic satisfaction, while on the other hand they would agree that the controversy would have an economic side if copyright were perpetual and the descendants of Shakespeare and Bacon were disputing the ownership of the plays.
If their examination were continued, and more and more examples adduced, they would soon begin to say that there is no “hard and fast line “between economic and non-economic things, but that the one shades gradually into the other, as blue neckties shade into green, so that just as there are some ties which some persons call green while others call them blue, although every one is agreed that the sky (in fine weather) is blue and the grass green, so there are some things which some persons call economic and others non-economic, although every one is agreed that the satisfaction of hunger is economic and that the satisfaction which a Tibetan fanatic feels when he has himself immured for life in the dark is non-economic.
For ordinary purposes economic things can best be described as economic, just as blue things can best be described as blue. But if we must have a second-best description for the benefit of those who doubt whether they. know what is meant by the term economic, I think we must fall back on “having to do with the more material side of human happiness,” or more shortly,.” having to do with material welfare.”
The exact phrase used does not really matter very much, since we must face, and face boldly, the fact that there is no precise line between economic and non-economic satisfactions, and therefore the province of economics cannot be marked out by a row of posts or a fence like a political territory or a landed property. We can proceed from the undoubtedly economic at one end of the scale to the undoubtedly non-economic at the other end without finding anywhere a fence to climb or a ditch to cross. Beginning with the satisfaction of hunger and thirst as the most material, we can arrange other satisfactions roughly in order, till at last we arrive at the most purely non-material, such as that felt by a martyr dying of starvation rather than abjure his God. We shall never be able to say that 99 per cent. of such a martyr's welfare was non-material and due to religious fervour and the remaining I per cent. was material and due to the sustaining effects of the food he ate a week before. We shall never be able to say of any man that 50 per cent. of his welfare came from food, clothing, shelter, pictures, and concerts, 25 per cent. from the love of his wife, 15 per cent. from his support of his Church, and 10 per cent. from his pride in his position as president of the local party caucus. But we can quite legitimately and usefully consider what will increase or diminish the more material side of his happiness, or shortly,. his material welfare or wealth, and it is quite convenient to have a separate department of science, called economics, to deal with the causes of the material welfare or wealth of human beings, considered both as a whole, and as individuals, and also in groups.