Online Library of Liberty

A collection of scholarly works about individual liberty and free markets. A project of Liberty Fund, Inc.

Advanced Search

Ingram on Smith and his followers

Related Links:

Source: Ingram's A History of Political Economy. New and Enlarged Edition with a Supplementary Chapter by William A. Scott and an Introduction by Richard T. Ely (London: A. and C. Black, 1915).

Adam Smith, with his Immediate Predecessors and his Followers. England.

The stagnation in economic inquiry which showed itself in England in the early part of the eighteenth century was not broken by any notable manifestation before 1735, when Bishop Berkeley put forward in his Querist, with much force and point, views opposed to those of the mercantile school on the nature of national wealth and the functions of money, though not without an admixture of grave error. But soon a more decisive advance was made. Whilst in France the physiocrats were working after their own fashion towards the construction of a definitive system of political economy, a Scottish thinker of the first order was elucidating, in a series of short but pregnant essays, some of the fundamental conceptions of the science. What had been written on these questions in the English language before his time had remained almost altogether within the limits of the directly practical sphere. With Locke, indeed, the general system of the modern critical philosophy had come into relation with economic inquiry, but only in a partial and indeterminate way. But in Hume the most advanced form of this philosophy was represented, and his appearance in the field of economics decisively- marks the tendency of the latter order of speculation to place itself in connection with the largest and deepest thought on human nature and general human history. Most of the essays here referred to first appeared in 1752, in a volume entitled Political Discourses, and the number was completed in the collection of Essays and Treatises on Several Subjects, published in the following year. The most important of them are those on Commerce, on Money, on Interest, and on the Balance of Trade. Yet these should not be separated from the rest, for, notwithstanding the unconnected form of these little treatises, there runs through them a profound unity of thought, so that they indeed compose in a certain sense an economic system. They exhibit in full measure Hume's wonderful acuteness and subtlety, which indeed sometimes dispose him to paradox, in combination with the breadth, the absence of prejudice, and the social sympathies which so eminently distinguish him; and they offer, besides, the charm of his easy and natural style and his rare power of lucid exposition.

In the essay on money he refutes the mercantilist error, which tended to confound it with wealth. “Men and commodities,” he says, “are the real strength of any community.” “In the national stock of labour consists all real power and riches.” Money is only the oil which makes the movements of the mechanism of commerce more smooth and easy. He shows that, from the domestic as distinguished from the international point of view, the absolute quantity of money, supposed as of fixed amount, in a country is of no consequence, whilst an excessive quantity, larger, that is, than is required for the interchange of commodities, may be injurious as raising prices and driving foreigners from the home markets. He goes so far, in one or two places, as to assert that the value of money is chiefly fictitious or conventional, a position which cannot be defended; but it must not be pressed against him, as he builds nothing on it. He has some very ingenious observations (since, however, questioned by J. S. Mill) on the effects of the increase of money in a country in stimulating industry during the interval which takes place before the additional amount is sufficiently diffused to alter the whole scale of prices. He shows that the fear of the money of an industrious community being lost to it by passing into foreign countries is groundless, and that, under a system of freedom, the distribution of the precious metals which is adapted to the requirements of trade will spontaneously establish itself. “In short, a Government has great reason to preserve with care its people and its manufactures; its money it may safely trust to the course of human affairs without fear or jealousy.”

A very important service was rendered by his treatment of the rate of interest. He exposes the erroneous idea often entertained that it depends on the quantity of money in a country, and shows that the reduction of it must in general be the result of “the increase of industry and frugality, of arts and commerce,” so that it may serve as a barometer, its lowness being an almost infallible sign of the flourishing condition of a people. It may be observed in passing that in the essay devoted to this subject he brings out a principle of human nature which economists too often overlook, “the constant and insatiable desire of the mind for exercise and employment,” and the consequent action of ennui in prompting to exertion.

With respect to commerce, he points to its natural foundation in what has since been called “the territorial division of labour,” and proves that the prosperity of one nation, instead of being a hindrance, is a help to that of its neighbours. “Not only as a man, but as a British subject,” he says, “I pray for the flourishing commerce of Germany, Spain, Italy, and even France itself.” He condemns the “numberless bars, obstructions, and imposts which all nations of Europe, and none more than England, have put upon trade.” Yet on the question of protection to national industry he is not quite at the free-trade point of view, for he approves of a tax on German linen as encouraging home manufactures, and of a tax on brandy as increasing the sale of rum and supporting our southern colonies. Indeed it has been justly observed that there are in him several traces of a refined mercantilism, and that he represents a state of opinion in which the transition from the old to the new views is not yet completely effected.

We cannot do more than refer to the essay on taxes, in which, amongst other things, he repudiates the impdt unique of the physiocrats, and to that on public credit, in which he criticises the “new paradox that public encumbrances are of themselves advantageous, independent of the necessity of contracting them,” and objects, perhaps too absolutely, to the modern expedient of raising the money required for national enterprises by way of loan, and so shifting our burdens upon the shoulders of posterity.

The characteristics of Hume, which are most important in the history of economic investigation, are (i) his practice of bringing economic facts into connection with all the weighty interests of social and political life, and (2) his tendency to introduce the historical spirit into the study of those facts. He admirably illustrates the mutual action of the several branches of industry, and the influences of progress in the arts of production and in commerce on general civilisation, exhibits the striking contrasts of the ancient and modern system of life (see especially the essay On the Populousness of Ancient Nations), and considers almost every phenomenon which comes under discussion in its relations to the contemporary stage of social development. It cannot be doubted that Hume exercised a most important influence on Adam Smith, who in the Wealth of Nations calls him “by far the most illustrious philosopher and historian of the present age,” and who esteemed his character so highly that, after a friendship of many years had been terminated by Hume's decease, he declared him to have “approached as nearly to the ideal of a perfectly wise and virtuous man as perhaps the nature of human frailty will permit.”

Josiah Tucker, dean of Gloucester (d. 1799), holds a distinguished place among the immediate predecessors of Smith. Most of his numerous productions had direct reference to contemporary questions, and, though marked by much sagacity and penetration, are deficient in permanent interest. In some of these he urged the impolicy of restrictions on the trade of Ireland, advocated a union of that country with England, and recommended the recognition of the independence of the United States of America. The most important of his general economic views are those relating to international commerce. He s an ardent supporter of free-trade doctrines, which he bases on the principles that there is between nations no necessary antagonism, but rather a harmony, of interests, and that their several local advantages and different aptitudes naturally prompt them to exchange. He had not, however, got quite clear1 of mercantilism, and favoured bounties on exported manufactures and the encouragement of population by a tax on celibacy. Dupont, and after him Blanqui, represent Tucker as a follower of the physiocrats, but there seems to be no ground for this opinion except his agreement with them on the subject of the freedom of trade. Turgot translated into French (1755), under the title of Questions Importantes sur le Commerce, a tract by Tucker on The Expediency of a Law for the Naturalisation of Foreign Protestants.

In 1767 was published Sir James Steuart's Inquiry into the Principles of Political Economy. This was one of the most unfortunate of books. It was the most complete and systematic survey of the science from the point of view of moderate mercantilism which had appeared in England. Steuart was a man of no ordinary abilities, and had prepared himself for his task by long and serious study. But the time for the mercantile doctrines was past, and the system of natural liberty was in possession of an intellectual ascendency which foreshadowed its political triumph. Nine years later the Wealth of Nations was given to the world, a work as superior to Steuart's in attractiveness of style as in scientific soundness. Thus the latter was predestined to fail, and in fact never exercised any considerable theoretic or practical influence. Smith never quotes or mentions it; being acquainted with Steuart, whose conversation he said was better than his book, he probably wished to keep clear of controversy with him.1 The German economists have examined Steuart's treatise more carefully than English writers have commonly done; and they recognise its high merits, especially in relation to the theory of value and the subject of population. They have also pointed out that, in the spirit of the best recent research, he has dwelt on the special characters which distinguish the economies proper to different nations and different grades in social progress.

Coming now to the great name of Adam Smith (1723–1790), it is of the highest importance that we should rightly understand his position and justly estimate his claims. It is plainly contrary to fact to represent him, as some have done, as the creator of political economy. The subject of social wealth had always in some degree, and increasingly in recent times, engaged the attention of philosophic minds. The study had even indisputably assumed a systematic character, and, from being an assemblage of fragmentary disquisitions on particular questions of national interest, had taken the form, notably in Turgot's Reflexions, of an organised body of doctrine. The truth is, that Smith took up the science when it was already considerably advanced; and it was this very circumstance which enabled him, by the production of a classical treatise, to render most of his predecessors obsolete. But, whilst all the economic labours of the preceding centuries prepared the way for him, they did not anticipate his work. His appearance at an earlier stage, or without those previous labours, would be inconceivable; but he built, on the foundation which had been laid by others, much of his own that was precious and enduring.

Even those who do not fall into the error of making Smith the creator of the science, often separate him too broadly from Quesnay and his followers, and represent the history of modern Economics as consisting of the successive rise and reign of three doctrines—the mercantile, the physio-cratic, and the Smithian. The last two are, it is true, at variance in some even important respects. But it is evident, and Smith himself felt, that their agreements were much more fundamental than their differences; and, if we regard them as historical forces, they must be considered as working towards identical ends. They both urged society towards the abolition of the previously prevailing industrial policy of European Governments; and their arguments against that policy rested essentially on the same grounds. Whilst Smith's criticism was more searching and complete, he also analysed more correctly than the physiocrats some classes of economic phenomena—in particular dispelling the illusions into which they had fallen with respect to the unproductive nature of manufactures and commerce. Their school disappeared from the scientific field, not merely because it met with a political check in the person of Turgot, but because, as we have already said, the Wealth of Nations absorbed into itself all that was valuable in their teaching, whilst it continued more effectually the impulse they had given to the necessary work of demolition.

The history of economic opinion in modern times, down to the third decade of the nineteenth century, is, in fact, strictly bipartite. The first stage is filled with the mercantile system which, as we have shown, was rather a practical policy than a speculative doctrine, and which came into existence as the spontaneous growth of social conditions acting on minds not trained to scientific habits. The second stage is occupied with the gradual rise and ultimate ascendency of another system founded on the idea of the right of the individual to an unimpeded sphere for the exercise of his economic activity. With the latter, which is best designated as the “system of natural liberty,” we ought to associate the memory of the physiocrats as well as that of Smith, without, however, maintaining their services to have been equal to his.

The teaching of political economy was in the Scottish universities associated with that of moral philosophy. Smith, as we are told, conceived the entire subject he had to treat in his public lectures as divisible into four heads, the first of which was natural theology, the second ethics, the third jurisprudence; whilst in the fourth “he examined those political regulations which are founded upon expediency, and which are calculated to increase the riches, the power, and the prosperity of a state.” The last two branches of inquiry are regarded as forming but a single body of doctrine in the well-known passage of the Theory of Moral Sentiments (1759) in which the author promises to give in another discourse “an account of the general principles of law and government, and of the different revolutions they have undergone in the different ages and periods of society, not only in what concerns justice, but in what concerns police, revenue, and arms, and whatever else is the subject of law.” This shows how little it was Smith's habit to separate (except provisionally), in his conceptions or bis researches, the economic phenomena of society from all the rest. The words above quoted have, indeed, been not unjustly described as containing “an anticipation, wonderful for his period, of general Sociology, both statical and dynamical, an anticipation which becomes still more remarkable when we learn from his literary executors that he had formed the plan of a connected history of the liberal sciences and elegant arts, which must have added to the branches of social study already enumerated a view of the intellectual progress of society.” Though these large designs were never carried out in their integrity, as indeed at that period they could not have been adequately realised, it has resulted from them that, though economic phenomena form the special subject of the Wealth of Nations, Smith yet incorporated into that work much that relates to the other social aspects, incurring thereby the censure of some of his followers, who insist with pedantic narrowness on the strict isolation of the economic domain.

There has been much discussion on the question—What is the scientific method followed by Smith in his great work? By some it is considered to have been purely deductive, a view which Buckle has perhaps carried to the greatest extreme. He asserts that in Scotland the inductive method was unknown, that the inductive philosophy exercised no influence on Scottish thinkers; and, though Smith spent some of the most important years of his youth in England, where the inductive method was supreme, and though he was widely read in general philosophical literature, he yet thinks he adopted the deductive method because it was habitually followed in Scotland,—and this though Buckle maintains that it is the only appropriate, or even possible, method in political economy, which surely would have been a sufficient reason for choosing it. That the inductive spirit exercised no influence on Scottish philosophers is certainly not true; as will be presently shown, Montesquieu, whose method is essentially inductive, was in Smith's time studied with quite peculiar care and regarded with special veneration by Smith's fellow-countrymen. As to Smith himself, what may justly be said of him is that the deductive bent was certainly not the predominant character of his mind, nor did his great excellence lie in the “dialectic skill” which Buckle ascribes to him. What strikes us most in his book is his wide and keen observation of social facts, and his perpetual tendency to dwell on these and elicit their significance, instead of drawing conclusions from abstract principles by elaborate chains of reasoning. It is this habit of his mind which gives us, in reading him, so strong and abiding a sense of being in contact with the realities of life.

That Smith does, however, largely employ the deductive method is certain; and that method is quite legitimate when the premises from which the deduction sets out are known universal facts of human nature and properties of external objects. Whether this mode of proceeding will carry us far may indeed well be doubted; but its soundness cannot be disputed. But there is another vicious species of deduction which, as Cliffe Leslie has shown, seriously tainted the philosophy of Smith—in which the premises are not facts ascertained by observation, but the same a priori assumptions, half theological half metaphysical, respecting a supposed harmonious and beneficent natural order of things which we found in the physiocrats, and which, as we saw, were embodied in the name of that sect. In his view, Nature has made provision for social wellbeing by the principle of the human constitution which prompts every man to better his condition: the individual aims only at his private gain, but in doing so is “led by an invisible hand” to promote the public good, which was no part of his intention; human institutions, by interfering with the action of this principle in the name of the public interest, defeat their own end; but, when all systems of preference or restraint are taken away, “the obvious and simple system of natural liberty establishes itself of its own accord.” This theory is, of course, not explicitly presented by Smith as a foundation of his economic doctrines, but it is really the secret substratum on which they rest. Yet, whilst such latent postulates warped his view of things, they did not entirely determine his method. His native bent towards the study of things as they are preserved him from extravagances into which many of his followers have fallen. But besides this, as Leslie has pointed out, the influence of Montesquieu tended to counterbalance the theoretic prepossessions produced by the doctrine of the jus natures. That great thinker, though he could not, at his period, understand the historical method which is truly appropriate to sociological inquiry, yet founded his conclusions on induction. It is true, as Comte has remarked, that his accumulation of facts, borrowed from the most different states of civilisation, and not subjected to philosophic criticism, necessarily remained on the whole sterile, or at least could not essentially advance the study of society much beyond the point at which he found it. His merit, as we have before mentioned, lay in the recognition of the subjection of all social phenomena to natural laws, not in the discovery of those laws. But this limitation was overlooked by the philosophers of the time of Smith, who were much attracted by the system he followed of tracing social facts to the special circumstances, physical or moral, of the communities in which they were observed. Leslie has shown that Lord Kaimes, Dalrymple, and Millar—contemporaries of Smith, and the last his pupil—were influenced by Montesquieu; and he might have added the more eminent name of Ferguson, whose respect and admiration for the great Frenchman are expressed in striking terms in his History of Civil Society.1 We are even informed that Smith himself in his later years was occupied in preparing a commentary on the Esprit des Lois.1 He was thus affected by two different and incongruous systems of thought—one setting out from an imaginary code of nature intended for the benefit of man, and leading to an optimistic view of the economic constitution founded on enlightened self-interest; the other following inductive processes, and seeking to explain the several states in which human societies are found existing, as results of circumstances or institutions which have been in actual operation. And we find accordingly in his great work a combination of these two methods— inductive inquiry on the one hand, and, on the other, a priori speculation founded on the “Nature” hypothesis. The latter vicious proceeding has in some of his followers been greatly aggravated, while the countervailing spirit of inductive investigation has fallen into the background, and indeed the necessity or utility of any such investigation in the economic field has been sometimes altogether denied.

Some have represented Smith's work as of so loose a texture and so defective an arrangement that it may be justly described as consisting of a series of monographs. But this is certainly an exaggeration. The book, it is true, is not framed on a rigid mould, nor is there any parade of systematic divisions and subdivisions; and this doubtless recommended it to men of the world and of business, for whose instruction it was, at least primarily, intended. But it has the real and pervading unity which results from a set of principles and a mode of thinking identical throughout and the general absence of such contradictions as would arise from an imperfect digestion of the subject.

Smith sets out from the thought that the annual labour of a nation is the source from which it derives its supply of the necessaries and conveniences of life. He does not of course contemplate labour as the only factor in production; but it has been supposed that by emphasising it at the outset he at once strikes the note of difference between himself on the one hand and both the mercantilists and the physiocrats on the other. The improvement in the productiveness of labour depends largely on its division; and he proceeds accordingly to give his unrivalled exposition of that principle, of the grounds on which it rests, and of its greater applicability to manufactures than to agriculture, in consequence of which the latter relatively lags behind in the course of economic development.1 The origin of the division of labour he finds in the propensity of human nature “to truck, barter, or exchange one thing for another.” He shows that a certain accumulation of capital is a condition precedent of this division, and that the degree to which it can be carried is dependent on the extent of the market. When the division of labour has been established, each member of the society must have recourse to the others for the supply of most of his wants; a medium of exchange is thus found to be necessary, and money comes into use. The exchange of goods against each other or against money gives rise to the notion of value. This word has two meanings—that of utility, and that of purchasing power; the one may be called value in use, the other value in exchange. Merely mentioning the former, Smith goes on to study the latter. What, he asks, is the measure of value? what regulates the amount of one thing which will be given for another? “Labour,” Smith answers, “is the real measure of the exchangeable value of all commodities.” “Equal quantities of labour, at all times and places, are of equal value to the labourer.” 2 “Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. I is their real price; money is their nominal price only.” Money, however, is in men's actual transactions the measure of value, as well as the vehicle of exchange; and the precious metals are best suited for this function, as varying little in their own value for periods of moderate length; for distant times, corn is a better standard of comparison. In relation to the earliest social stage, we need consider nothing but the amount of labour employed in the production of an article as determining its exchange value; but in more advanced periods price is complex, and consists in the most general case of three elements—wages, profit, and rent. Wages are the reward of labour Profit arises as soon as stock, being accumulated in the hands of one person, is employed by him in setting others to work, and supplying them with materials and subsistence, in order to make a gain by what they produce. Rent arises as soon as the land of a country has all become private property; “the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce.” In every improved society, then, these three elements enter more or less into the price of the far greater part of commodities. There is in every society or neighbourhood an ordinary or average rate of wages and profit in every different employment of labour and stock, regulated by principles to be explained hereafter, as also an ordinary or average rate of rent. These may be called the natural rates at the time when and the place where they prevail; and the natural price of a commodity is what is sufficient to pay for the rent of the land,1 the wages of the labour, and the profit of the stock necessary for bringing the commodity to market. The market price may rise above or fall below the amount so fixed, being determined by the proportion between the quantity brought to market and the demand of those who are willing to pay the natural price. Towards the natural price as a centre the market price, regulated by competition, constantly gravitates. Some commodities, however, are subject to a monopoly of production, whether from the peculiarities of a locality or from legal privilege: their price is always the highest that can be got; the natural price of other commodities is the lowest which can be taken for any length of time together. The three component parts or factors of price vary with the circumstances of the society. The rate of wages is determined by a “dispute” or struggle of opposite interests between the employer and the workman. A minimum rate is fixed by the condition that they must be at least sufficient to enable a man and his wife to maintain themselves and, in general, bring up a family. The excess above this will depend on the circumstances of the country, and the consequent demand for labour—wages being high when national wealth is increasing, low when it is declining. The same circumstances determine the variation of profits, but in an opposite direction; the increase of stock, which raises wages, tending to lower profit through the mutual competition of capitalists. “The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality”; if one had greatly the advantage over the others, people would crowd into it, and the level would soon be restored. Yet pecuniary wages and profits are very different in different employments—either from certain circumstances affecting the employments, which recommend or disparage them in men's notions, or from national policy, “which nowhere leaves things at perfect liberty.” Here follows Smith's admirable exposition of the causes which produce the inequalities in wages and profits just referred to, a passage affording ample evidence of his habits of nice observation of the less obvious traits in human nature, and also of the operation both of these and of social institutions on economic facts. The rent of land comes next to be considered, as the last of the three elements of price. Rent is a monopoly price, equal, not to what the landlord could afford to take, but to what the farmer can afford to give. “Such parts only of the produce of land can commonly be brought to market, of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with the ordinary profits. If the ordinary price is more than this; the surplus part will naturally go to the rent of the land. If it is not more, though the commodity may be brought to market, it can afford no rent to the landlord. Whether the price is or is not more depends on the demand.” “Rent, therefore, enters into the price of commodities in a different way from wages and profits. High or low wages and profit are the causes of high or low price; high or low rent is the effect of it.”

Rent, wages, and profits, as they are the elements of price, are also the constituents of income; and the three great orders of every civilised society, from whose revenues that of every other order is ultimately derived, are the landlords, the labourers, and the capitalists. The relation of the interests of these three classes to those of society at large is different. The interest of the landlord always coincides with the general interest: whatever promotes or obstructs the one has the same effect on the other. So also does that of the labourer: when the wealth of the nation is progressive, his wages are high; they are low when it is stationary or retrogressive. “The interest of the third order has not the same connection with the general interest of the society as that of the other two;… it is always in some respects different from and opposite to that of the public.”

The subject of the second book is “the nature, accumulation, and improvement of stock.” A man's whole stock consists of two portions—that which is reserved for his immediate consumption, and that which is employed so as to yield a revenue to its owner. This latter, which is his “capital,” is divisible into the two classes of “fixed” and “circulating.” The first is such as yields a profit without passing into other hands. The second consists of such goods, raised, manufactured, or purchased, as are sold for a profit and replaced by other goods; this sort of capital is therefore constantly going from and returning to the hands of its owner. The whole capital of a society falls under the same two heads. Its fixed capital consists chiefly of (i) machines, (2) buildings which are the means of procuring a revenue, (3) agricultural improvements, and (4) the acquired and useful abilities of all members of the society (since sometimes known as “personal capital”). Its circulating capital is also composed of four parts—(i) money, (2) provisions in the hands of the dealers, (3) materials, and (4) completed work in the hands of the manufacturer or merchant. Next comes the distinction of the gross national revenue from the net—the first being the whole produce of the land and labour of a country, the second what remains after deducting the expense of maintaining the fixed capital of the country and that part of its circulating capital which consists of money. Money, “the great wheel of circulation,” is altogether different from the goods which are circulated by means of it; it is a costly instrument by means of which all that each individual receives is distributed to him; and the expenditure required, first to provide it, and afterwards to maintain it, is a deduction from the net revenue of the society. In development of this consideration, Smith goes on to explain the gain to the community arising from the substitution of paper money for that composed of the precious metals; and here occurs the remarkable illustration in which the use of gold and silver money is compared to a highway on the ground, that of paper money to a waggon-way through the air. In proceeding to consider the accumulation of capital, he is led to the distinction between productive and unproductive labour—the former being that which is fixed or realised in a particular object or vendible article, the latter that which is not so realised. The former is exemplified in the labour of the manufacturing workman, the latter in that of the menial servant. A broad line of demarcation is thus drawn between the labour which results in commodities or increased value of commodities and that which does no more than render services: the former is productive, the latter unproductive. “Productive” is by no means equivalent to “useful”: the labours of the magistrate, the soldier, the churchman, lawyer, and physician are, in Smith's sense, unproductive. Productive labourers alone are employed out of capital; unproductive labourers, as well as those who do not labour at all, are all maintained by revenue. In advancing industrial communities, the portion of annual produce set apart as capital bears an increasing proportion to that which is immediately destined to constitute a revenue, either as rent or as profit. Parsimony is the source of the increase of capital; by augmenting the fund devoted to the maintenance of productive hands, it puts in motion an additional quantity of industry, which adds to the value of the annual produce. What is annually saved is as regularly consumed as what is spent, but by a different set of persons, by productive labourers instead of idlers or unproductive labourers; and the former reproduce with a profit the value of their consumption. The prodigal, encroaching on his capital, diminishes, as far as in him lies, the amount of productive labour, and so the wealth of the country; nor is this result affected by his expenditure being on home-made, as distinct from foreign, commodities. Every prodigal, therefore, is a public enemy; every frugal man a public benefactor. The only mode of increasing the annual produce of the land and labour is to increase either the number of productive labourers or the productive powers of those labourers. Either process will in general require additional capital, the former to maintain the new labourers, the latter to provide improved machinery or to enable the employer to introduce a more complete division of labour. In what are commonly called loans of money, it is not really the money, but the money's worth, that the borrower wants; and the lender really assigns to him the right to a certain portion of the annual produce of the land and labour of the country. As the general capital of a country increases, so also does the particular portion of it from which the possessors wish to derive a revenue without being at the trouble of employing it themselves; and, as the quantity of stock thus available for loans is augmented, the interest diminishes, not merely “from the general causes which make the market price of things commonly diminish as their quantity increases,” but because, with the increase of capital, “it becomes gradually more and more difficult to find within the country a profitable method of employing any new capital”—whence arises a competition between different capitals, and a lowering of profits, which must diminish the price which can be paid for the use of capital, or in other words the rate of interest. It was formerly wrongly supposed, and even Locke and Montesquieu did not escape this error, that the fall in the value of the precious metals consequent on the discovery of the American mines was the real cause of the permanent lowering of the rate of interest in Europe. But this view, already refuted by Hume, is easily seen to be erroneous. “In some countries the interest of money has been prohibited by law. But, as something can everywhere be made by the use of money, something ought everywhere to be paid for the use of it,” and will in fact be paid for it; and the prohibition will only heighten the evil of usury by increasing the risk to the lender. The legal rate should be a very little above the lowest market rate; sober people will then be preferred as borrowers to prodigals and projectors, who at a higher legal rate would have an advantage over them, being alone willing to offer that higher rate.1

As to the different employments of capital, the quantity of productive labour put in motion by an equal amount varies extremely according as that amount is employed—(i) in the improvement of lands, mines, or fisheries, (2) in manufactures, (3) in wholesale or (4) retail trade. In agriculture “Nature labours along with man,” and not only the capital of the farmer is reproduced with his profits, but also the rent of the landlord. It is therefore the employment of a given capital which is most advantageous to society. Next in order come manufactures; then wholesale trade—first the home trade, secondly the foreign trade of consumption, last the carrying trade. All these employments of capital, however, are not only advantageous, but necessary, and will introduce themselves in the due degree, if they are left to the spontaneous action of individual enterprise.

These first two books contain Smith's general economic scheme; and we have stated it as fully as was consistent with the necessary brevity, because from this formulation of doctrine the English classical school set out, and round it the discussions of more recent times in different countries have in a great measure revolved. Some of the criticisms of his successors and their modifications of his doctrines will come under our notice as we proceed.

The critical philosophers of the eighteenth century were often destitute of the historical spirit, which was no part of the endowment needed for their principal social office. But some of the most eminent of them, especially in Scotland, showed a marked capacity and predilection for historical studies. Smith was amongst the latter; Knies and others justly remark on the masterly sketches of this kind which occur in the Wealth of Nations. The longest and most elaborate of these occupies the third book; it is an account of the course followed by the nations of modern Europe in the successive development of the several forms of industry. It affords a curious example of the effect of doctrinal prepossessions in obscuring the results of historical inquiry. Whilst he correctly describes the European movement of industry, and explains it as arising out of adequate social causes, he yet, in accordance with the absolute principles which tainted his philosophy, protests against it as involving an entire inversion of the “natural order of things.” First agriculture, then manufactures, lastly foreign commerce; any other order than this he considers “unnatural and retrograde.” Hume, a more purely positive thinker, simply sees the facts, accepts them, and classes them under a general law. “It is a violent method,” he says, “and in most cases impracticable, to oblige the labourer to toil in order to raise from the land more than what subsists himself and family. Furnish him with manufactures and commodities, and he will do it of himself.” “If we consult history, we shall find that, in most nations, foreign trade has preceded any refinement in home manufactures, and given birth to domestic luxury.”

The fourth book is principally devoted to the elaborate and exhaustive polemic against the mercantile system which finally drove it from the field of science, and has exercised a powerful influence on economic legislation. When protection is now advocated, it is commonly on different grounds from those which were in current use before the time of Smith. He believed that to look for the restoration of freedom of foreign trade in Great Britain would have been “as absurd as to expect that an Oceana or Utopia should be established in it”; yet, mainly in consequence of his labours, that object has been completely attained; and it has lately been said with justice that free trade might have been more generally accepted by other nations if the patient reasoning of Smith had not been replaced by dogmatism. His teaching on the subject is not altogether unqualified; but, on the whole, with respect to exchanges of every kind, where economic motives alone enter, his voice is in favour of freedom. He has regard, however, to political as well as economic interests, and on the ground that “defence is of much more importance than opulence,” pronounces the Navigation Act to have been “perhaps the wisest of all the commercial regulations of England.” Whilst objecting to the prevention of the export of wool, he proposes a tax on that export as somewhat less injurious to the interest of growers than the prohibition, whilst it would “afford a sufficient advantage” to the domestic over the foreign manufacturer. This is, perhaps, his most marked deviation from the rigour of principle; it was doubtless a concession to popular opinion with a view to an attainable practical improvement The wisdom of retaliation in order to procure the repeal of high duties or prohibitions imposed by foreign Governments depends, he says, altogether on the likelihood of its success in effecting the object aimed at, but he does not conceal his contempt for the practice of such expedients. The restoration of freedom in any manufacture, when it has grown to considerable dimensions by means of high duties, should, he thinks, from motives of humanity, be brought about only by degrees and with circumspection,—though the amount of evil which would be caused by the immediate abolition of the duties is, in his opinion, commonly exaggerated. The case in which J. S. Mill would tolerate protection—that, namely, in which an industry well adapted to a country is kept down by the acquired ascendency of foreign producers—is referred to by Smith; but he is opposed to the admission of this exception for reasons which do not appear to be conclusive.1 He is perhaps scarcely consistent in approving the concession of temporary monopolies to joint-stock companies undertaking risky enterprises “of which the public is afterwards to reap the benefit.”2 He is less absolute in his doctrine of Governmental noninterference when he comes to consider in his fifth book the “expenses of the sovereign or the commonwealth.” He recognises as coming within the functions of the state the erection and maintenance of those public institutions and public works which, though advantageous to the society, could not repay, and therefore must not be thrown upon, individuals or small groups of individuals. He remarks in a just historical spirit that the performance of these functions requires very different degrees of expense in the different periods of society. Besides the institutions and works intended for public defence and the administration of justice, and those required for facilitating the commerce of the society, he considers those necessary for promoting the instruction of the people. He thinks the public at large may with propriety not only facilitate and encourage, but even impose upon almost the whole body of the people, the acquisition in youth of the most essential elements of education. He suggests as the mode of enforcing this obligation the requirement of submission to a test examination “before any one could obtain the freedom in any corporation, or be allowed to set up a trade in any village or town corporate.” Similarly, he is of opinion that some probation, even in the higher and more difficult sciences, might be enforced as a condition of exercising any liberal profession, or becoming a candidate for any honourable office. The expense of the institutions for religious instruction as well as for general education, he holds, may without injustice be defrayed out of the funds of the whole society, though he would apparently prefer that it should be met by the voluntary contributions of those who think they have occasion for such education or instruction. There is much that is sound, as well as interesting and suggestive, in this fifth book, in which he shows a political instinct and a breadth of view by which he is favourably contrasted with the Manchester school. But, if we may say so without disrespect to so great a man, there are traces in it of what is now called Philistinism—a low view of the ends of art and poetry—which arose perhaps in part from personal defect; and a certain deadness to the high aims and perennial importance of religion, which was no doubt chiefly due to the influences of an a⁁e when the critical spirit was doing an indispensable work, in the performance of which the transitory was apt to be confounded with the permanent.

For the sake of considering as a whole Smith's view of the functions of government, we have postponed noticing his treatment of the physiocratic system, which occupies a part of his fourth book. He had formed the acquaintance of Quesnay, Turgot, and other members of their group during his sojourn in France in 1765, and would, as he told Dugald Stewart, had the patriarch of the school lived long enough, have dedicated to him the Wealth of Nations. He declares that, with all its imperfections, the system of Quesnay is “perhaps the nearest approximation to the truth that had yet appeared on the subject of political economy.” Yet he seems not to be adequately conscious of the degree of coincidence between his own doctrines and those of the physiocrats. Dupont de Nemours complained that he did not do Quesnay the justice of recognising him as his spiritual father. It is, however, alleged, on the other side, that already in 1753 Smith had been teaching as professor a body of economic doctrine the same in its broad features with that contained in his great work. This is indeed said by Stewart; and, though he gives no evidence of it, it is possibly quite true; if so, Smith's doctrinal descent must be traced rather from Hume than from the French school. The principal error of this school, that, namely, of representing agricultural labour as alone productive, he refutes in the fourth book, though in a manner which has not always been considered effective. Traces of the influence of their mistaken view appear to remain in his own work, as, for example, his assertion that in agriculture nature labours along with man, whilst in manufactures nature does nothing, man does all; and his distinction between productive and unproductive labour, which was doubtless suggested by their use of those epithets, and which is scarcely consistent with his recognition of what is now called “personal capital.” To the same source M'Culloch and others refer the origin of Smith's view, which they represent as an obvious error, that “individual advantage is not always a true test of the public advantageousness of different employments.” But that view is really quite correct, as Professor Nicholson has clearly shown.1 That the form taken by the use of capital, profits being given, is not indifferent to the working class as a whole even Ricardo admitted; and Cairnes, as we shall see, built or. this consideration some of the most far-reaching conclusions in his Leading Principles.

On Smith's theory of taxation in his fifth book it is not necessary for us to dwell. The well-known canons which he lays down as prescribing the essentials of a good system have been generally accepted. They have lately been severely criticised by Professor Walker—of whose objections, however, there is only one which appears to be well founded. Smith seems to favour the view that the contribution of the individual to public expenses may be regarded as payment for the services rendered to him by the state, and ought to be proportional to the extent of those services. If he held this opinion, which some of his expressions imply, he was certainly so far wrong in principle.

We shall not be held to anticipate unduly if we remark here on the way in which opinion, revolted by the aberrations of some of Smith's successors, has tended to turn from the disciples to the master. A strong sense of his comparative freedom from the vicious tendencies of Ricardo and his followers has recently prompted the suggestion that we ought now to recur to Smith, and take up once more from him the line of the economical succession. But notwithstanding his indisputable superiority, and whilst fully recognising the great services rendered by his immortal work, we must not forget that, as has been already said, that work was, on the whole, a product, though an exceptionally eminent one, of the negative philosophy of the 18th century, resting largely in its ultimate foundation on metaphysical bases. The mind of Smith was mainly occupied with the work of criticism so urgent in his time; his principal task was to discredit and overthrow the economic system then prevalent, and to demonstrate the radical unfitness of the existing European Governments to direct the industrial movement. This office of his fell in with, and formed a part of, the general work of demolition carried on by the thinkers who gave to his period its characteristic tone. It is to his honour that, besides this destructive operation, he contributed valuable elements to the preparation of an organic system of thought and of life. In his special domain he has not merely extinguished many errors and prejudices, and cleared the ground for truth, but has left us a permanent possession in the judicious analyses of economic facts and ideas, the wise practical suggestions, and the luminous indications of all kinds with which his work abounds. Belonging to the best philosophical school of his period, that with which the names of Hume and Diderot are associated, he tended strongly towards the positive point of view. But it was not possible for him to attain it; and the final and fully normal treatment of the economic life of societies must be constituted on other and more lasting foundations than those which underlie his imposing construction.

It has been well said that of philosophic doctrines the saying “By their fruits ye shall know them” is eminently true. And it cannot be doubted that the germs of the vicious methods and false or exaggerated theories of Smith's successors are to be found in his own work, though his good sense and practical bent prevented his following out his principles to their extreme consequences. The objections of Hildebrand and others to the entire historical development of doctrine which the Germans designate as “Smithia-nismus” are regarded by those critics as applicable, not merely to his school as a whole, but, though in a less degree, to himself. The following are the most important of these objections. It is said—(i) Smith's conception of the social economy is essentially individualistic. In this he falls in with the general character of the negative philosophy of his age. That philosophy, in its most typical forms, even denied the natural existence of the disinterested affections, and explained the altruistic feelings as secondary results of self-love. Smith, however, like Hume, rejected these extreme views; and hence it has been held that in the Wealth of Nations he consciously, though tacitly, abstracted from the benevolent principles in human nature, and as a logical artifice supposed an “economic man” actuated by purely selfish motives. However this may be, he certainly places himself habitually at the point of view of the individual, whom he treats as a purely egoistic force, working ‘iniformly in the direction of private gain, without regard to the good ot others or of the community at large. (2) He justifies this personal attitude by its consequences, presenting the optimistic view that the good of the community is best attained through the free play of individual cupidities, provided only that the law prevents the interference of one member of the society with the self-seeking action of another. He assumes with the negative school at large—though he has passages which are not in harmony with these propositions—that every one knows his true interest and will pursue it, and that the economic advantage of the individual coincides with that of the society. To this last conclusion he is secretly led, as we have seen, by a priori theological ideas, and also by metaphysical conceptions of a supposed system of nature, natural right, and natural liberty. (3) By this reduction of almost every question to one of individual gain, he is led to a too exclusive consideration of exchange value as distinct from wealth in the proper sense. This, whilst lending a mechanical facility in arriving at conclusions, gives a superficial character to economic investigation, divorcing it from the physical and biological sciences, excluding the question of real social utility, leaving no room for a criticism of production, and leading to a denial, like J. S. Mill's, of any economic doctrine dealing with consumption— in other words, with the use of wealth. (4) In condemning the existing industrial policy, he tends too much towards a glorification of non-government and a repudiation of all social intervention for the regulation of economic life. (5) He does not keep in view the moral destination of our race, nor regard wealth as a means to the higher ends of life, and thus incurs, not altogether unjustly, the charge of materialism, in the wider sense of that word. Lastly, (6) his whole system is too absolute in its character; it does not sufficiently recognize the fact that, in the language of Hildebrand, man, as a member of society, is a child of civilization and a product of history, and that account ought to be taken of the different stages of social development as implying altered economic conditions and calling for altered economic action, or even involving a modification of the actor. Perhaps in all the respects here enumerated, certainly in some of them, and notably in the last, Smith is less open to criticism than most of the later English economists; but it must, we think, be admitted that to the general principles which lie at the basis of his scheme the ultimate growth of these several vicious tendencies is traceable.

Great expectations had been entertained respecting Smith's work by competent judges before its publication, as is shown by the language of Ferguson on the subject in his History of Civil Society.1 That its merits received prompt recognition is proved by the fact of six editions having been called for within the fifteen years after its appearance.2 From the year 1783 it was more and more quoted in Parliament. Pitt was greatly impressed by its reasonings; Smith is reported to have said that that Minister understood the book as well as himself. Pulteney said in 1797 that Smith would persuade the then living generation and would govern the next.3

Smith's earliest critics were Bentham and Lauderdale, who, though in general agreement with him, differed on special points. Jeremy Bentham was author of a short treatise entitled A Manual of Political Economy and various economic monographs, the most celebrated of which was his Defence of Usury (1787). This contained (Letter xiii) an elaborate criticism of a passage in the Wealth of Nations, already cited, in which Smith had approved of a legal maximum rate of interest fixed but a very little above the lowest market rate, as tending to throw the capital of the country into the hands of sober persons, as opposed to “prodigals and projectors.” Smith is said to have admitted that Bentham had made out his case. He certainly argues it with great ability;1 and the true doctrine no doubt is that, in a developed industrial society, it is expedient to let the rate be fixed by contract between the lender and the borrower, the law interfering only in case of fraud.

Bentham's main significance does not belong to the economic field. But, on the one hand, what is known as Benthamism was undoubtedly, as Comte has said,2 a derivative from political economy, and in particular from the system of natural liberty; and, on the other, it promoted the temporary ascendency of that system by extending to the whole of social and moral theory the use of the principle of individual interest and the method of deduction from that interest. This alliance between political economy and the scheme of Bentham is seen in the personal group of thinkers which formed itself round him,—thinkers most inaptly characterised by J. S. Mill as “profound,” but certainly possessed of much acuteness and logical power, and tending, though vaguely, towards a positive sociology, which, from their want of genuinely scientific culture and their absolute modes of thought, they were incapable of founding.

Lord Lauderdale, in his Inquiry into the Nature and Origin of Public Wealth (1804), a book still worth reading, pointed out certain real weaknesses in Smith's account of value and the measure of value, and of the productivity of labour, and threw additional light on several subjects, such as the true mode of estimating the national income, and the reaction of the distribution of wealth on its production.

Smith stood just at the beginning of a great industrial revolution. The world of production and commerce in which he lived was still, as Cliffe Leslie has said, a “very early” and comparatively narrow one; “the only steam-engine he refers to is Newcomen's,” and the cotton trade is mentioned by him only once, and that incidentally. “Between the years 1760 and 1770,” says Mr. Marshall, “Roebuck began to smelt iron by coal, Brindley connected the rising seats of manufactures with the sea by canals, Wedgwood discovered the art of making earthenware cheaply and well, Hargreaves invented the spinning-jenny, Arkwright utilised Wyatt's and High's inventions for spinning by rollers and applied water-power to move them, and Watt invented the condensing steam-engine. Crompton's mule and Cartwright's power-loom came shortly after.” Out of this rapid evolution followed a vast expansion of industry, but also many deplorable results, which, had Smith been able to foresee them, might have made him a less enthusiastic believer in the benefits to be wrought by the mere liberation of effort, and a less vehement denouncer of old institutions which in their day had given a partial protection to labour. Alongside of these evils of the new industrial system, Socialism appeared as the alike inevitable and indispensable expression of the protest of the working classes and the aspiration after a better order of things; and what we now call “the social question,” that inexorable problem of modern life, rose into the place which it has ever since maintained. This question was first effectually brought before the English mind by Thomas Robert Malthus (1766–1834), not, however, under the impulse of revolutionary sympathies, but in the interests of a conservative policy.

The first edition of the work which achieved this result appeared anonymously in 1798 under the title—An Essay on the Principle of Population, as it affects the future improvement of Society, with remarks on the speculations of Mr. Godwin, M. Condorcet, and other writers. This book arose out of certain private controversies of its author with his father, Daniel Malthus, who had been a friend of Rousseau, and was an ardent believer in the doctrine of human progress as preached by Condorcet and other French thinkers and by their English disciples. The most distinguished of the latter was William Godwin, whose Enquiry concerning Political Justice had been published in 1793. The views put forward in that work had been restated by its author in the Enquirer (1797), and it was on the essay in this volume entitled “Avarice and Profusion” that the discussion between the father and the son arose, “the general question of the future improvement of society” being thus raised between them—the elder Malthus defending the doctrines of Godwin, and the younger assailing them. The latter “sat down with an intention of merely stating his thoughts on paper in a clearer manner than he thought he could do in conversation,” and the Essay on population was the result.

The social scheme of Godwin was founded on the idea that the evils of society arise from the vices of human institutions. There is more than enough of wealth available for all, but it is not equally shared: one has too much, another has little or nothing. Let this wealth, as well as the labour of producing it, be equally divided; then every one will by moderate exertion obtain sufficient for plain living; there will be abundant leisure, which will be spent in intellectual and moral self-improvement; reason will determine human actions; government and every kind of force will be unnecessary; and, in time, by the peaceful influence of truth, perfection and happiness will be established on earth. To these glowing anticipations Malthus opposes the facts of the necessity of food and the tendency of mankind to increase up to the limit of the available supply of it. In a state of universal physical wellbeing, this tendency, which in real life is held in check by the difficulty of procuring a subsistence, would operate without restraint. Scarcity would follow the increase of numbers; the leisure would soon cease to exist; the old struggle for life would recommence; and inequality would reign once more. If Godwin's ideal system, therefore, could be established, the single force of the principle of population, Malthus maintained, would suffice to break it down.

It will be seen that the essay was written with a polemical object; it was an occasional pamphlet directed against the Utopias of the day, not at all a systematic treatise on population suggested by a purely scientific interest. As a polemic, it was decidedly successful; it was no difficult task to dispose of the scheme of equality propounded by Godwin. Already, in 1761, Dr. Robert Wallace had published a work (which was amongst those used by Malthus in the composition of his essay) entitled Various Prospects of Mankind, Nature, and Providence, in which, after speaking of a community of goods as a remedy for the ills of society, he confessed that he saw one fatal objection to such a social organization, namely, “the excessive population that would ensue.” With Condorcet's extravagances, too, Malthus easily dealt. That eminent man, amidst the tempest of the French Revolution, had written, whilst in hiding from his enemies, his Esquisse d'un tableau historique de I'esprit humain. The general conception of this book makes its appearance an epoch in the history of the rise of sociology. In it, if we except some partial sketches by Turgot,1 is for the first time explained the idea of a theory of social dynamics founded on history; and its author is on this ground recognized by Comte as his principal immediate predecessor. But in the execution of his great project Condorcet failed. His negative metaphysics prevent his justly appreciating the past, and he indulges, at the close of his work, in vague hypotheses respecting the perfectibility of our race, and in irrational expectations of an indefinite extension of the duration of human life. Malthus seems to have little sense of the nobleness of Condorcet's attitude, and no appreciation of the grandeur of his leading idea. But of his chimerical hopes he is able to make short work; his good sense, if somewhat limited and prosaic, is at least effectual in detecting and exposing Utopias.

The project of a formal and detailed treatise on population was an after-thought of Malthus. The essay in which he had studied a hypothetic future led him to examine the effects of the principle he had put forward on the past and present state of society; and he undertook an historical examination of these effects, and sought to draw such inferences in relation to the actual state of things as experience seemed to warrant. The consequence of this was such a change in the nature and composition of the essay as made it, in his own language, “a new work.” The book, so altered, appeared in 1803 under the title, An Essay on the Principle of Population, or a View of its Past and Present Effects on Human Happiness; with an Enquiry into our prospects respecting the future removal or mitigation of the evils which it occasions.

In the original form of the essay he had spoken of no checks to population but those which came under the head either of vice or of misery. He now introduces the new element of the preventive check supplied by what he calls “moral restraint,” and is thus enabled, as he himself said, to “soften some of the harshest conclusions” at which he had before arrived. The treatise passed through five editions1 in his lifetime, and in all of them he introduced various additions and corrections. That of 1817 is the last he fully revised, and presents the text substantially as it has since been reprinted.

Notwithstanding the great development which he gave to his work, and the almost unprecedented amount of discussion to which it gave rise, it remains a matter of some difficulty to discover what solid contribution he has made to our knowledge, nor is it easy to ascertain precisely what practical precepts, not already familiar, he founded on his theoretic principles. This twofold vagueness is well brought out in his celebrated correspondence with Senior, in the course of which it seems to be made apparent that his doctrine is new not so much in its essence as in the phraseology in which it is couched. He himself tells us that when, after the publication of the original essay, the main argument of which he had deduced from Hume, Wallace, Adam Smith, and Price, he began to inquire more closely into the subject, he found that “much more had been done” upon it “than he had been aware of.” It had “been treated in such a manner by some of the French economists, occasionally by Montesquieu, and, among our own writers, by Dr. Franklin, Sir James Steuart, Mr. Arthur Young, and Mr. Townsend, as to create a natural surprise that it had not excited more of the public attention.” “Much, however,” he thought, “remained yet to be done. The comparison between the increase of population and food had not, perhaps, been stated with sufficient force and precision,” and “few inquiries had been made into the various modes by which the level” between population and the means of subsistence “is effected.” The first desideratum here mentioned—the want, namely, of an accurate statement of the relation between the increase of population and that of food—Mai thus doubtless supposed to have been supplied by the celebrated proposition that “population increases in a geometrical, food in an arithmetical, ratio.” This proposition, however, has been conclusively shown to be erroneous, there being no such difference of law between the increase of man and that of the organic beings which form his food. J. S. Mill is indignant with those who criticise Malthus's formula, which he groundlessly describes as a mere “passing remark,” because, as he thinks, though erroneous, it sufficiently suggests what is true; but it is surely important to detect unreal science, and to test strictly the foundations of beliefs. When the formula which we have cited is not used, other somewhat nebulous expressions are frequently employed, as, for example, that “population has a tendency to increase faster than food,” a sentence in which both are treated as if they were spontaneous growths, and which on account of the ambiguity of the word “tendency,” is admittedly consistent with the fact asserted by Senior, that food tends to increase faster than population. It must always have been perfectly well known that population will probably (though not necessarily) increase with every augmentation of the supply of subsistence, and may, in some instances, inconveniently press upon, or even for a certain time exceed, the number properly corresponding to that supply. Nor could it ever have been doubted that war, disease, poverty— the last two often the consequences of vice—are causes which keep population down. In fact, the way in which abundance, increase of numbers, want, increase of deaths, succeed each other in the natural ejconomy, when reason does not intervene, had been fully explained by the Rev. Joseph Townsend in his Dissertation on the Poor Laws (1786), which, we have seen, was known to Malthus. Again, it is surely plain enough that the apprehension by individuals of the evils of poverty, or a sense of duty to their possible offspring, may retard the increase of population, and has in all civilized communities operated to a certain extent in that way. It is only when such obvious truths are clothed in the technical terminology of “positive” and “preventive checks” that they appear novel and profound; and yet they appear to contain the whole message of Malthus to mankind. The laborious apparatus of historical and statistical facts respecting the several countries of the globe, adduced in the altered form of the essay, though it contains a good deal that is curious and interesting, establishes no general result which was not previously well known, and is accordingly ignored by James Mill and others, who rest the theory on facts patent to universal observation. Indeed, as we have seen, the entire historical inquiry was an afterthought of Malthus, who, before entering on it, had already announced his fundamental principle.

It would seem, then, that what has been ambitiously called Malthus's theory of population, instead of being a great discovery, as some have represented it, or a poisonous novelty, as others have considered it, is no more than a formal enunciation of obvious, though sometimes neglected, facts. The pretentious language often applied to it by economists is objectionable, as being apt to make us forget that the whole subject with which it deals is as yet very imperfectly understood—the causes which modify the force of the sexual instinct, and those which lead to variations in fecundity, still awaiting a complete investigation.1

It is the law of diminishing returns from land (of which more will be said hereafter), involving as it does—though only hypothetically—the prospect of a continuously increasing difficulty in obtaining the necessary sustenance for all the members of a society, that gives the principal importance to population as an economic factor. It is, in fact, the confluence of the Malthusian ideas with the theories of Ricardo, especially with the corollaries which the latter, as we shall see, deduced from the doctrine of rent (though these were not accepted by Malthus), that has led to the introduction of population as an element in the discussion of so many economic questions in recent times.

Malthus had undoubtedly the great merit of having called public attention in a striking and impressive way to a subject which had neither theoretically nor practically been sufficiently considered. But he and his followers appear to have greatly exaggerated both the magnitude and the urgency of the dangers to which they pointed.2 In their conceptions a single social imperfection assumed such portentous dimensions that it seemed to overcloud the whole heaven and threaten the world with ruin. This doubtless arose from his having at first omitted altogether from his view of the question the great counteracting agency of moral restraint. Because a force exists, capable, if unchecked, of producing certain results, it does not follow that those results are imminent or even possible in the sphere of experience. A body thrown from the hand would, under the single impulse of projection, move for ever in a straight line; but it would not be reasonable to take special action for the prevention of this result, ignoring the fact that it will be sufficiently counteracted by the other forces which will come into play. And such other forces exist in the case we are considering. If the inherent energy of the principle of population (supposed everywhere the same) is measured by the rate at which numbers increase under the most favourable circumstances, surely the force of less favourable circumstances, acting through prudential or altruistic motives, is measured by the great difference between this maximum rate and those which are observed to prevail in most European countries. Under a rational system of institutions, the adaptation of numbers to the means available for their support is effected by the felt or anticipated pressure of circumstances and the fear of social degradation, within a tolerable degree of approximation to what is desirable. To bring the result nearer to the just standard, a higher measure of popular enlightenment and more serious habits of moral reflection ought indeed to be encouraged. But it is the duty of the individual to his actual or possible offspring, and not any vague notions as to the pressure of the national population on subsistence, that will be adequate to influence conduct.

The only obligation on which Malthus insists is that of abstinence from marriage so long as the necessary provision for a family has not been acquired or cannot be reasonably anticipated. The idea of post-nuptial continence, which has since been put forward by J. S. Mill and others, is foreign to his view. He even suggests that an allowance might be made from the public funds for every child in a family beyond the number of six, on the ground that, when a man marries, he cannot tell how many children he shall have, and that the relief from an unlooked-for distress afforded by such a grant would not operate as an encouragement to marriage. The duty of economic prudence in entering on the married state is plain; but in the case of working men the idea of a secured provision must not be unduly pressed, and it must also be remembered that the proper age for marriage in any class depends on the duration of life in that class. Still, too early marriages are certainly not unfrequent, and they are attended with other than economic evils, so that possibly even legal measures might with advantage be resorted to for preventing them in all ranks by somewhat postponing the age of full civil competence—a change, however, which would not be without its dangers. On the other hand, the Malthusians often speak too lightly of involuntary celibacy, not recognising sufficiently that it is a deplorable necessity. They do not adequately estimate the value of domestic life as a school of the civic virtues, and the social importance (even apart from personal happiness) of the mutual affective education arising from the relations of the sexes in a well-constituted union.

Malthus further infers from his principles that states should not artificially stimulate population, and in particular that poor-laws should not be established, and, where they exist, should be abolished. The first part of this proposition cannot be accepted as applying to every social phase, for it is evident that in a case like that of ancient Rome, where continuous conquest was the chief occupation of the national activity, or in other periods when protracted wars threatened the independence or security of nations, statesmen might wisely take special action of the kind deprecated by Malthus. In relation to modern industrial communities he is doubtless in general right, though the promotion of immigration in new states is similar in principle to the encouragement of population The question of poor-laws involves other considerations. The English system of his day was, indeed, a vicious one, though acting in some degree as a corrective of other evils in our social institutions; and efforts for its amendment tended to the public good. But the proposal of abolition is one from which statesmen have recoiled, and which general opinion has never adopted. It is difficult to believe that the present system will be permanent; it is too mechanical and undiscriminating; on some sides too lax, it is often unduly rigorous in the treatment of the worthy poor who are the victims of misfortune; and, in its ordinary modes of dealing with the young, it is open to grave objection. But it would certainly be rash to abolish it; it is one of several institutions which will more wisely be retained until the whole subject of the life of the working classes has been more thoroughly, and also more sympathetically, studied. The position of Malthus with respect to the relief of destitution is subject to this general criticism, that, first proving too much, he then shrinks from the consequences of his own logic. It follows from his arguments, and is indeed explicitly stated in a celebrated passage of his original essay, that he who has brought children into the world without adequate provision for them should be left to the punishment of Nature, that “it is a miserable ambition to wish to snatch the rod from her hand,” and to defeat the action of her laws, which are the laws of God, and which “have doomed him and his family to suffer.” Though his theory leads him to this conclusion, he could not, as a Christian clergyman, maintain the doctrine that, seeing our brother in need, we ought to shut up our bowels of compassion from him; and thus he is involved in the radical inconsequence of admitting the lawfulness, if not the duty, of relieving distress in cases where he yet must regard the act as doing mischief to society. Buckle, who was imposed on by more than one of the exaggerations of the economists, accepts the logical inference which Malthus evaded. He alleges that the only ground on which we are justified in relieving destitution is the essentially self-regarding one, that by remaining deaf to the appeal of the sufferer we should probably blunt the edge of our own finer sensibilities.

It can scarcely be doubted that the favour which was at once accorded to the views of Malthus in certain circles was due in part to an impression, very welcome to the higher ranks of society, that they tended to relieve the rich and powerful of responsibility for the condition of the working classes, by showing that the latter had chiefly themselves to blame, and not either the negligence of their superiors or the institutions of the country. The application of his doctrines, too, made by some of his successors had the effect of discouraging all active effort for social improvement. Thus Chalmers “reviews seriatim and gravely sets aside all the schemes usually proposed for the amelioration of the economic condition of the people” on the ground that an increase of comfort will lead to an increase of numbers, and so the last state of things will be worse than the first.

Malthus has in more recent times derived a certain degree of reflected lustre from the rise and wide acceptance of the Darwinian hypothesis. Its author himself, in tracing its filiation, points to the phrase “struggle for existence” used by Malthus in relation to the social competition. Darwin believes that man has advanced to his present relatively high condition through such a struggle, consequent on his rapid multiplication. He regards, it is true, the agency of this cause for the improvement of our race as largely superseded by moral influences in the more advanced social stages. Yet he considers it, even in these stages, of so much importance towards that end, that notwithstanding the individual suffering arising from the struggle for life, he deprecates any great reduction in the natural, by which he seems to mean the ordinary, rate of increase.

There has been of late exhibited in some quarters a tendency to apply the doctrine of the “survival of the fittest” to human society in such a way as to intensify the harsher features of Malthus's exposition by encouraging the idea that whatever cannot sustain itself is fated, and must be allowed, to disappear. But what is repellent in this conception is removed by a wider view of the influence of Humanity, as a disposing power, alike on vital and on social conditions. As in the general animal domain the supremacy of man introduces a new force consciously controlling and ultimately determining the destinies of the subordinate species, so human providence in the social sphere can intervene for the protection of the weak, modifying by its deliberate action what would otherwise be a mere contest of comparative strengths inspired by selfish instincts.1

David Ricardo (1772–1823) is essentially of the school of Smith, whose doctrines he in the main accepts, whilst he seeks to develop them, and to correct them in certain particulars. But his mode of treatment is very different from Smith's. The latter aims at keeping close to the realities of life as he finds them,—at representing the conditions and relations of men and things as they are; and, as Hume remarked on first reading his great work, his principles are everywhere exemplified and illustrated with curious facts. Quite unlike this is the way in which Ricardo proceeds. He moves in a world of abstractions. He sets out from more or less arbitrary assumptions, reasons deductively from these, and announces his conclusions as true, without allowing for the partial unreality of the conditions assumed or confronting his results with experience. When he seeks to illustrate his doctrines, it is from hypothetical cases,—his favourite device being that of imagining two contracting savages, and considering how they would be likely to act. He does not explain—probably he had not systematically examined, perhaps was not competent to examine—the appropriate method of political economy; and the theoretic defence of his mode of proceeding was left to be elaborated by J. S. Mill and Cairnes. But his example had a great effect in determining the practice of his successors. There was something highly attractive to the ambitious theorist in the sweeping march of logic which seemed in Ricardo's hands to emulate the certainty and comprehensiveness of mathematical proof, and in the portable and pregnant formulae which were so convenient in argument, and gave a prompt, if often a more apparent than real, solution of difficult problems. Whatever there was of false or narrow in the fundamental positions of Smith had been in a great degree corrected by his practical sense and strong instinct for reality, but was brought out in its full dimensions and even exaggerated in the abstract theorems of Ricardo and his followers.

The dangers inherent in his method were aggravated by the extreme looseness of his phraseology. Senior pronounces him “the most incorrect writer who ever attained philosophical eminence.” His most ardent admirers find him fluctuating and uncertain in the use of words, and generally trace his errors to a confusion between the ordinary employment of a term and some special application of it which he has himself devised.

The most complete exposition of his system is to be found in his Principles of Political Economy and Taxation (1817). This work is not a complete treatise on the science, but a rather loosely connected series of disquisitions on value and price, rent, wages, and profits, taxes, trade, money and banking. Yet, though the connection of the parts is loose, the same fundamental ideas recur continually, and determine the character of the entire scheme.

The principal problem to which he addresses himself in this work is that of distribution,—that is to say, the proportions of the whole produce of the country which will be allotted to the proprietor of land, to the capitalist, and to the labourer.1 And it is important to observe that it is especially the variations in their respective portions which take place in the progress of society that he professes to study,—one of the most unhistorical of writers thus indicating a sense of the necessity of a doctrine of economic dynamics— a doctrine which, from his point of view, it was impossible to supply.

The principle which he puts first in order, and which is indeed the key to the whole, is this—that the exchange value of any commodity the supply of which can be increased at will is regulated, under a regime of free competition, by the labour necessary for its production. Similar propositions are to be found in the Wealth of Nations, not to speak of earlier English writings. Smith had said that, “in the early and rude state of society which precedes both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects seems to be the only circumstance which can afford any rule for exchanging them with one another.” But he wavers in his conception, and presents as the measure of value sometimes the quantity of labour necessary for the production of the object, sometimes the quantity of labour which the object would command in the market, which would be identical only for a given time and place. The theorem requires correction for a developed social system by the introduction of the consideration of capital, and takes the form in which it is elsewhere quoted from Malthus by Ricardo, that the real price of a commodity “depends on the greater or less quantity of capital and labour which must be employed to produce it.” (The expression “quantity of capital” is lax, the element of time being omitted, but the meaning is obvious.) Ricardo, however, constantly takes no notice of capital, mentioning labour alone in his statement of this principle, and seeks to justify his practice by treating capital as “accumulated labour;” but this artificial way of viewing the facts obscures the nature of the co-operation of capital in production, and by keeping the necessity of this co-operation out of sight has encouraged some socialistic errors. Ricardo does not sufficiently distinguish between the cause or determinant and the measure of value; nor does he carry back the principle of cost of production as regulator of value to its foundation in the effect of that cost on the limitation of supply. It is the “natural price” of a commodity that is fixed by the theorem we have stated; the market price will be subject to accidental and temporary variations from this standard, depending on changes in demand and supply; but the price will, permanently and in the long run, depend on cost of production defined as above. On this basis Ricardo goes on to explain the laws according to which the produce of the land and the labour of the country is distributed amongst the several classes which take part in production.

The theory of rent, with which he begins, though commonly associated with his name, and though it certainly forms the most vital part of his general economic scheme, was not really his, nor did he lay claim to it. He distinctly states in the preface to the Principles, that “in 1815 Mr. Malthus, in his Inquiry into the Nature and Progress of Rent, and a fellow of University College, Oxford, in his Essay on the Application of Capital to Land, presented to the world, nearly at the same moment, the true doctrine of rent.” The second writer here referred to was Sir Edward West, afterwards a judge of the supreme court of Bombay. Still earlier than the time of Malthus and West, as M'Culloch has pointed out, this doctrine had been clearly conceived and fully stated by Dr. James Anderson in his Enquiry into the Nature of Corn-Laws, published at Edinburgh in 1777.1 That this tract was unknown to Malthus and West we have every reason to believe; but the theory is certainly as distinctly enunciated and as satisfactorily supported in it as in their treatises; and the whole way in which it is put forward by Anderson strikingly resembles the form in which it is presented by Ricardo.

The essence of the theory is that rent, being the price paid by the cultivator to the owner of land for the use of its productive powers, is equal to the excess of the price of the produce of the land over the cost of production on that land. With the increase of population, and therefore of demand for food, inferior soils will be taken into cultivation; and the price of the entire supply necessary for the community will be regulated by the cost of production of that portion of the supply which is produced at the greatest expense. But for the land which will barely repay the cost of cultivation no rent will be paid. Hence the rent of any quality of land will be equal to the difference between the cost of production on that land and the cost of production of that produce which is raised at the greatest expense.

The doctrine is perhaps most easily apprehended by means of the supposition here made of the coexistence in a country of a series of soils of different degrees of fertility which are successively taken into cultivation as population increases. But it would be an error to believe, though Ricardo sometimes seems to imply it, that such difference is a necessary condition of the existence of rent. If all the land of a country were of equal fertility, still if it were appropriated, and if the price of the produce were more than an equivalent for the labour and capital applied to its production, rent would be paid. This imaginary case, however, after using it to clear our conceptions, we may for the future leave out of account.

The price of produce being, as we have said, regulated by the cost of production of that which pays no rent, it is evident that “corn is not high because a rent is paid, but a rent is paid because corn is high,” and that “no reduction would take place in the price of corn although landlords should forego the whole of their rent.” Rent is, in fact, no determining element of price; it is paid, indeed, out of the price, but the price would be the same if no rent were paid, and the whole price were retained by the cultivator.

It has often been doubted whether or not Adam Smith held this theory of rent. Sometimes he uses language which seems to imply it, and states prepositions which, if developed, would infallibly lead to it Thus he says, in a passage already quoted, “Such parts only of the produce of land can commonly be brought to market of which the ordinary price is sufficient to replace the stock which must be employed in bringing them thither, together with its ordinary profits. If the ordinary price is more than this, the surplus part of it will naturally go to the rent of land. If it is not more, though the commodity can be brought to market, it can afford no rent to the landlord. Whether the price is or is not more depends on the demand.” Again, in Smith's application of these considerations to mines, “the whole principle of rent,” Ricardo tells us, “is admirably and perspicuously explained.”‘But he had formed the opinion that there is in fact no land which does not afford a rent to the landlord; and, strangely, he seems to have seen that this appearance might arise from the aggregation into an economic whole of parcels of land which can and others which cannot pay rent. The truth, indeed, is, that the fact, if it were a fact, that all the land in a country pays rent would be irrelevant as an argument against the Andersonian theory, for it is the same thing in substance if there be any capital employed on land already cultivated which yields a return no more than equal to ordinary profits. Such last-employed capital cannot afford rent at the existing rate of profit, unless the price of produce should rise.

The belief which some have entertained that Smith, notwithstanding some vague or inaccurate expressions, really held the Andersonian doctrine, can scarcely be maintained when we remember that Hume, writing to him after having read for the first time the Wealth of Nations, whilst expressing general agreement with his opinions, said (apparently with reference to Bk. I, chap, vii), “I cannot think that the rent of farms makes any part of the price of the produce, but that the price is determined altogether by the quantity and the demand.” It is further noteworthy that a statement of the theory of rent is given in the same volume, published in 1777, which contains Anderson's polemic against Smith's objections to a bounty on the exportation of corn; this volume can hardly have escaped Smith's notice, yet neither by its contents nor by Hume's letter was he led to modify what he had said in his first edition on the subject of rent.

It must be remembered that not merely the unequal fertilities of different soils will determine differences of rent; the more or less advantageous situation of a farm in relation to markets, and therefore to roads and railways, will have a similar effect. Comparative lowness of the cost of transit will enable the produce to be brought to market at a smaller expense, and will thus increase the surplus which constitutes rent. This consideration is indicated by Ricardo, though he does not give it prominence, but dwells mainly on the comparative productiveness of soils.

Rent is denned by Ricardo as the price paid for the use of “the original and indestructible powers of the soil.” He thus differentiates rent, as he uses the term, from what is popularly designated by the word; and, when it is to be taken in his sense, it is often qualified as the “true” or “economic” rent. Part of what is paid to the landlord is often really profit on his expenditure in preparing the farm for cultivation by the tenant. But it is to be borne in mind that wherever such improvements are “amalgamated with the land,” and “add permanently to its productive powers,” the return for them follows the laws, not of profit, but of rent. Hence it becomes difficult, if not impossible, in practice to discriminate with any degree of accuracy the amount received by the landlord “for the use of the original powers of the soil” from the amount received by him as remuneration for his improvements or those made by his predecessors. These have raised the farm, as an instrument for producing food, from one class of productiveness to a higher, and the case is the same as if nature had originally placed the land in question in that higher class.

Smith had treated it as the peculiar privilege of agriculture, as compared with other forms of production, that in it “nature labours along with man,” and therefore, whilst the workmen in manufactures occasion the reproduction merely of the capital which employs them with its owner's profits, the agricultural labourer occasions the reproduction, not only of the employer's capital with profits, but also of the rent of the landlord. This last he viewed as the free gift of nature which remained “after deducting or compensating everything which can be regarded as the work of man.” Ricardo justly observes in reply that “there is not a manufacture which can be mentioned in which nature does not give her assistance to man.”’ He then goes on to quote from Buchanan the remark that “the notion of agriculture yielding a produce and a rent in consequence, because nature concurs with industry in the process of cultivation, is a mere fancy. It is not from the produce, but from the price at which the produce is sold, that the rent is derived; and this price is got, not because nature assists in the production, but because it is the price which suits the consumption to the supply.”1 There is no gain to the society at large from the rise of rent; it is advantageous to the landlords alone, and their interests are thus permanently in opposition to those of all other classes. The rise of rent may be retarded, or prevented, or even temporarily changed to a fall, by agricultural improvements, such as the introduction of new manures or of machines or of a better organisation of labour (though there is not so much room for this last as in other branches of production), or the opening of new sources of supply in foreign countries; but the tendency to a rise is constant so long as the population increases.

The great importance of the theory of rent in Ricardo's system arises from the fact that he makes the general economic condition of the society to depend altogether on the position in which agricultural exploitation stands. This will be seen from the following statement of his theory of wages and profits. The produce ot every expenditure of labour and capital being divided between the labourer and the capitalist, in proportion as one obtains more the other, will necessarily obtain less. The productiveness of labour being given, nothing can diminish profit but a rise of wages or increase it but a fall of wages. Now the price of labour, being the same as its cost of production, is determined by the price of the commodities necessary for the support of the labourer. The price of such manufactured articles as he requires has a constant tendency to fall, principally by reason of the progressive application of the division of labour to their production. But the cost of his maintenance essentially depends, not on the price of those articles, but on that of his food; and, as the production of food will in the progress of society and of population require the sacrifice of more and more labour, its price will rise; money wages will consequently rise, and with the rise of wages profits will fall. Thus it is to the necessary gradual descent to inferior soils, or less productive expenditure on the same soil, that the decrease in the rate of profit which has historically taken place is to be attributed (Smith ascribed this decrease to the competition of capitalists, though in one place, Book I, chap, ix,1 he had a glimpse of the Ricardian view). This gravitation of profits towards a minimum is happily checked at times by improvements of the machinery employed in the production of necessaries, and especially by such discoveries in agriculture and other causes as reduce the cost of the prime necessary of the labourer; but here again the tendency is constant. Whilst the capitalist thus loses, the labourer does not gain; his increased money wages only enable him to pay the increased price of his necessaries, of which he will have no greater and probably a less share than he had before. In fact, the labourer can never for any considerable time earn more than what is required to enable the class to subsist in such a degree of comfort as custom has made indispensable to them, and to perpetuate their race without either increase or diminution. That is the “natural” price of labour; and if the market rate temporarily rises above it population will be stimulated, and the rate of wages will again fall. Thus whilst rent has a constant tendency to rise and profit to fall, the rise or fall of wages will depend on the rate of increase of the working classes. For the improvement of their condition Ricardo thus has to fall back on the Malthu-sian remedy, of the effective application of which he does not, however, seem to have much expectation. The securities against a superabundant population to which he points are the gradual abolition of the poor-laws—for their amendment would not content him—and the development amongst the working classes of a taste for greater comforts and enjoyments.

It will be seen that the socialists have somewhat exaggerated in announcing, as Ricardo's “iron law” of wages, their absolute identity with the amount necessary to sustain the existence of the labourer and enable him to continue the race. He recognizes the influence of a “standard of living” as limiting the increase of the numbers of the working classes, and so keeping their wages above the lowest point. But he also holds that, in long-settled countries, in the ordinary course of human affairs, and in the absence of special efforts restricting the growth of population, the condition of the labourer will decline as surely, and from the same causes, as that of the landlord will be improved.

If we are asked whether this doctrine of rent and the consequences which Ricardo deduced from it, are true, we must answer that they are hypothetically true in the most advanced industrial communities, and there only (though they have been rashly applied to the cases of India and Ireland), but that even in those communities neither safe inference nor sound action can be built upon them. As we shall see hereafter, the value of most of the theorems of the classical economics is a good deal attenuated by the habitual assumptions that we are dealing with “economic men,” actuated by one principle only; that custom, as against competition, has no existence; that there is no such thing as combination; that there is equality of contract between the parties to each transaction, and that there is a definite universal rate of profit and wages in a community; this last postulate implying (i) that the capital embarked in any undertaking will pass at once to another in which larger profits are for the time to be made; (2) that a labourer, whatever his local ties of feeling, family, habit, or other engagements, will transfer himself immediately to any place where, or employment in which, for the time, larger wages are to be earned than those he had previously obtained;1 and (3) that both capitalists and labourers have a perfect knowledge of the condition and prospects of industry throughout the country, both in their own and other occupations. But in Ricardo's speculations on rent and its consequences there is still more of abstraction. The influence of emigration, which has assumed vast dimensions since his time, is left out of account, and the amount of land at the disposal of a community is supposed limited to its own territory, whilst contemporary Europe is in fact largely fed by the western States of America. He did not adequately appreciate the degree in which the augmented productiveness of labour, whether from increased intelligence, improved organization, introduction of machinery, or more rapid and cheaper communication, steadily keeps down the cost of production. To these influences must be added those of legal reforms in tenure, and fairer conditions in contracts, which operate in the same direction. As a result of all these causes, the pressure anticipated by Ricardo is not felt, and the cry is of the landlords over falling rents, not of the consumer over rising prices. The entire conditions are in fact so altered that Professor Nicholson, no enemy to the “orthodox” economics, when recently conducting an inquiry into the present state of the agricultural question,2 pronounced the so-called Ricardian theory of rent “too abstract to be of practical utility.”

A particular economic subject on which Ricardo has thrown a useful light is the nature of the advantages derived trom foreign commerce, and the conditions under which such commerce can go on. Whilst preceding writers had represented those benefits as consisting in affording a vent for surplus produce, or enabling a portion of the national capital to replace itself with a profit, he pointed out that they consist “simply and solely in this, that it enables each nation to obtain, with a given amount of labour and capital, a greater quantity of all commodities taken together.” This is no doubt the point of view at which we should habitually place ourselves; though the other forms of expression employed by his predecessors, including Adam Smith, are sometimes useful as representing real considerations affecting national production, and need not be absolutely disused. Ricardo proceeds to show that what determines the purchase of any commodity from a foreign country is not the circumstance that it can be produced there with less labour and capital than at home. If we have a greater positive advantage in the production of some other article than in that of the commodity in question, even though we have an advantage in producing the latter, it may be our interest to devote ourselves to the production of that in which we have the greatest advantage, and to import that in producing which we should have a less, though a real, advantage. It is, in short, not absolute cost of production, but comparative cost, which determines the interchange. This remark is just and interesting, though an undue importance seems to be attributed to it by J. S. Mill and Cairnes, the latter of whom magniloquently describes it as “sounding the depths” of the problem of international dealings,—though, as we shall see hereafter, he modifies it by the introduction of certain considerations respecting the conditions of domestic production.

For the nation as a whole, according to Ricardo, it is not the gross produce of the land and labour, as Smith seems to assert, that is of importance, but the net income—the excess, that is, of this produce over the cost of production, or, in other words, the amount of its rent and its profits; for the wages of labour, not essentially exceeding the maintenance of the labourers, are by him considered only as a part of the “necessary expenses of production.” Hence it follows, as he himself in a characteristic and often quoted passage says, that, “provided the net real income of the nation be the same, it is of no importance whether it consists of ten or twelve millions of inhabitants. If five millions of men could produce as much fond and clothing as was necessary for ten millions, food and clothing for five millions would be the net revenue. Would it be of any advantage to the country that to produce this same net revenue seven millions of men should be required,—that is to say, that seven millions should be employed to produce food and clothing sufficient for twelve millions? The food and clothing of five millions would be still the net revenue. The employing a greater number of men would enable us neither to add a man to our army and navy nor to contribute one guinea more in taxes.” Industry is here viewed, just as by the mercantilists, in relation to the military and political power of the state, not to the maintenance and improvement of human beings, as its end and aim. The labourer, as Held1 has remarked, is regarded not as a member of society, but as a means to the ends of society, on whose sustenance a part of the gross income must be expended, as another part must be spent on the sustenance of horses. We may well ask, as Sismondi did in a personal interview with Ricardo, “What! is wealth then everything? are men absolutely nothing!”

On the whole what seems to us true of Ricardo is this, that, whilst he had remarkable powers, they were not the powers best fitted for sociological research. Nature intended him rather for a mathematician of the second order than for a social philosopher. Nor had he the due previous preparation for social studies; for we must decline to accept Bagehot's idea that, though “in no high sense an educated man,” he had a specially apt training for such studies in his practice as an eminently successful dealer in stocks. The same writer justly notices the “anxious penetration with which he follows out rarefied minutiae.” But he wanted breadth of survey, a comprehensive view of human nature and human life, and the strong social sympathies which, as the greatest minds have recognized, are a most valuable aid in this department of study. On a subject like that of money, where a few elementary propositions—into which no moral ingredient enters—have alone to be kept in view, he was well adapted to succeed; but in the larger social field he is at fault. He had great deductive readiness and skill (though his logical accuracy, as Mr. Sidgwick remarks, has been a good deal exaggerated). But in human affairs phenomena are so complex, and principles so constantly limit or even compensate one another, that rapidity and daring in deduction may be the greatest of dangers, if they are divorced from a wide and balanced appreciation of facts. Dialectic ability is, no doubt, a valuable gift, but the first condition for success in social investigation is to see things as they are.

A sort of Ricardo-mythus for some time existed in economic circles. It cannot be doubted that the exaggerated estimate of his merits arose in part from a sense of the support his system gave to the manufacturers and other capitalists in their growing antagonism to the old aristocracy of landowners. The same tendency, as well as his affinity to their too abstract and unhistorical modes of thought, and their eudaemonistic doctrines, recommended him to the Benthamite group, and to the so-called Philosophical Radicals generally. Brougham said he seemed to have dropped from the skies—a singular avatar, it must be owned. His real services in connection with questions of currency and banking naturally created a prepossession in favour of his more general views. But, apart from those special subjects, it does not appear that, either in the form of solid theoretic teaching or of valuable practical guidance, he has really done much for the world, whilst he admittedly misled opinion on several important questions. De Quincey's presentation of him as a great revealer of truth is now seen to be an extravagance. J. S. Mill and others speak of his “superior lights” as compared with those of Adam Smith; but his work, as a contribution to our knowledge of human society, will not bear a moment's comparison with the Wealth of Nations.

It is interesting to observe that Malthus, though the combination of his doctrine of population with the principles of Ricardo composed the creed for some time professed by all the “orthodox” economists, did not himself accept the Ricardian scheme. He prophesied that “the main part of the structure would not stand.” “The theory,” he says, “takes a partial view of the subject, like the system of the French economists; and, like that system, after having drawn into its vortex a great number of very clever men, it will be unable to support itself against the testimony of obvious facts, and the weight of those theories which, though less simple and captivating, are more just on account of their embracing more of the causes which are in actual operation in all economical results.”

We saw that the foundations of Smith's doctrine in general philosophy were unsound, and the ethical character of his scheme in consequence injuriously affected; but his mode of treatment, consisting in the habitual combination of induction and deduction, we found little open to objection. Mainly through the influence of Ricardo, economic method was perverted. The science was led into the mistaken course of turning its back on observation, and seeking to evolve the laws of phenomena out of a few hasty generalisations by a play of logic. The principal vices which have been in recent times not unjustly attributed to the members of the “orthodox” school were all encouraged by his example, namely,—(i) the viciously abstract character of the conceptions with which they deal, (2) the abusive preponderance of deduction in their processes of research, and (3) the too absolute way in which their conclusions are conceived and enunciated.

The works of Ricardo have been collected in one volume, with a biographical notice, by J. R. M'Culloch (1846).1

After Malthus and Ricardo, the first of whom had fixed public attention irresistibly on certain aspects of society, and the second had led economic research into new, if questionable, paths, came a number of minor writers who were mainly their expositors and commentators, and whom, accordingly, the Germans, with allusion to Greek mythical history, designate as the Epigoni. By them the doctrines of Smith and his earliest successors were thrown into more systematic shape, limited and guarded so as to be less open to criticism, couched in a more accurate terminology, modified in subordinate particulars, or applied to the solution of the practical questions of their day.

James Mill's Elements (1821) deserves special notice, as exhibiting the system of Ricardo with thoroughgoing rigour, and with a compactness of presentation, and a skill in the disposition of materials, which give to it in some degree the character of a work of art. The a priori political economy is here reduced to its simplest expression. J. R. M'Culloch (1779–1864), author of a number of laborious statistical and other compilations, criticised current economic legislation in the Edinburgh Review from the point of view of the Ricardian doctrine, taking up substantially the same theoretic position as was occupied at a somewhat later period by the Manchester school. He is altogether without originality, and never exhibits any philosophic elevation or breadth. His confident dogmatism is often repellent; he admitted in his later years that he had been too fond of novel opinions, and defended them with more heat and pertinacity than they deserved. It is noticeable that, though often spoken of in his own time both by those who agreed with his views, and those, like Sismondi, who differed from them, as one of the lights of the reigning school, his name is now tacitly dropped in the writings of the members of that school. Whatever may have been his partial usefulness in vindicating the policy of free trade, it is at least plain that for the needs of our social future he has nothing to offer. Nassau William Senior (1790–1864), who was professor of political economy in the university of Oxford, published, besides a number of separate lectures, a treatise on the science, which first appeared as an article in the Encyclopaedia Metropolitan. He is a writer of a high order of merit. He made considerable contributions to the elucidation of economic principles, specially studying exactness in nomenclature and strict accuracy in deduction. His explanations on cost of production and the way in which it affects price, on rent, on the difference between rate of wages and price of labour, on the relation between profit and wages (with special reference to Ricardo's theorem on this subject, which he corrects by the substitution of proportional for absolute amount), and on the distribution of the precious metals between different countries, are particularly valuable. His new term “abstinence,” invented to express the conduct for which interest is the remuneration, was useful, though not quite appropriate, because negative in meaning. It is on the theory of wages that Senior is least satisfactory. He makes the average rate in a country (which, we must maintain, is not a real quantity, though the rate in a given employment and neighbourhood is) to be expressed by the fraction of which the numerator is the amount of the wages fund (an unascer-tainable and indeed, except as actual total of wages paid, imaginary sum) and the denominator the number of the working population; and from this he proceeds to draw the most important and far-reaching consequences, though the equation on which he founds his inferences conveys at most only an arithmetical fact, which would be true of every case of a division amongst individuals, and contains no economic element whatever. The phrase “wages fund ‘originated in some expressions of Adam Smith1 used only for the purpose of illustration, and never intended to be rigorously interpreted; and we shall see that the doctrine has been repudiated by several members of what is regarded as the orthodox school of political economy. As regards method, Senior makes the science a purely deductive one, in which there is no room for any other “facts” than the four fundamental propositions from which he undertakes to deduce all economic truth. And he does not regard himseli as arriving at hypothetic conclusions; his postulates and his inferences are alike conceived as corresponding to actual phenomena.1 Colonel Robert Torrens (1780–1864) was a prolific writer, partly on economic theory, but principally on its applications to financial and commercial policy. Almost the whole of the programme which was carred out in legislation by Sir Robert Peel had been laid down in principle in the writings of Torrens. He gave substantially the same theory of foreign trade which was afterwards stated by J. S. Mill in one of his Essays on Unsettled Questions2 He was an early and earnest advocate of the repeal of the corn laws, but was not in favour of a general system of absolute free trade, maintaining that it is expedient to impose retaliatory duties to countervail similar duties imposed by foreign countries, and that a lowering of import duties on the productions of countries retaining their hostile tariffs would occasion an abstraction of the precious metals, and a decline in prices, profits, and wages. His principal writings of a general character were—The Economist i.e., Physiocrat] Refuted, 1808; Essay on the Production of Wealth, 1821; Essay on the External Corn-trade (eulogised by Ricardo), 3d ed., 1826; The Budget, a Series of Letters on Financial, Commercial, and Colonial Policy, 1841–3. Haniet Martineau (1802–1876) popularised the doctrines of Malthus and Ricardo in her Illustrations of Political Economy (1832–34), a series of tales, in which there is much excellent description, but the effect of the narrative is often marred by the somewhat ponderous disquisitions here and there thrown in, usually in the form of dialogue.

Other writers who ought to be named in any history of the science are Charles Babbage, On the Economy of Machinery and Manufactures (1832), chjefly descriptive, but also in part theoretic; William Thomas Thornton, Overpopulation and its Remedy (1846), A Plea for Peasant Proprietors (1848), On Labour (1869; 2d ed., 1870); Herman Merivale, Lectures on Colonisation and Colonies (1841–2; new ed., 1861); T. C. Banfield, The Organisation of Industry Explained (1844; 2d ed., 1848); and Edward Gibbon Wakefield, A View of the Art of Colonisation (1849). Thomas Chalmers, well known in other fields of thought, was author of The Christian and Civic Economy of Large Towns (1821–36), and On Political Economy in Connection with the Moral State and Moral Prospects of Society (1832); he strongly opposed any system of legal charity, and whilst justly insisting on the primary importance of morality, industry, and thrift as conditions of popular well-being, carried the Malthusian doctrines to excess. Nor was Ireland without a share in the economic movement of the period.1 Whately, having been second Drummond professor of political economy at Oxford (in succession to Senior), and delivered in that capacity his Introductory Lectures (1831), founded in 1832, when he went to Ireland as archbishop of Dublin, a similar professorship in Trinity College, Dublin. It was first held by Mountifort Longfield, afterwards Judge of the Landed Estates Court, Ireland (d. 1884). He published lectures on the science generally (1834), on Poor Laws (1834), and on Commerce and Absenteeism (1835), which were marked by independence of thought and sagacious observation. He was laudably free from many of the exaggerations of his contemporaries; he said, in 1835, “in political economy we must not abstract too much,” and protested against the assumption commonly made that “men are guided in all their conduct by a prudent regard to their own interest.” James A. Lawson (afterwards Mr. Justice Lawson, d. 1887) also published some lectures (1844), delivered from the same chair, which may still be read with interest and profit; his discussion of the question of population is especially good; he also asserted against Senior that the science is avide de faits, and that it must reason about the world and mankind as they really are.

The most systematic and thoroughgoing of the earlier critics of the Ricardian system was Richard Jones (1790–1855), professor at Haileybury. Jones has received scant justice at the hands of his successors. J. S. Mill, whilst using his work, gave his merits but faint recognition. Even Roscher says that he did not thoroughly understand Ricardo, without giving any proof of that assertion, whilst he is silent as to the fact that much of what has been preached by the German historical school is found distinctly indicated in Jones's writings. He has been sometimes represented as having rejected the Andersonian doctrine of rent; but such a statement is incorrect. Attributing the doctrine to Malthus, he says that that economist “showed satisfactorily that when land is cultivated by capitalists living on the profits of their stock, and able to move it at pleasure to other employments, the expense of tilling the worst quality of land cultivated determines the average price of raw produce, while the difference of quality of the superior lands measures the rents yielded by them.” What he really denied was the application of the doctrine to all cases where rent is paid; he pointed out in his Essay on the Distribution of Wealth and on the Sources of Taxation, 1831, that besides “farmers' rents,” which, under the supposed conditions, conform to the above law, there are “peasant rents,” paid everywhere through the most extended periods of history, and still paid over by far the largest part of the earth's surface, which are not so regulated. Peasant rents he divided under the heads of (i) serf, (2) metayer, (3) ryot, and (4) cottier rents, a classification afterwards adopted in substance by J. S. Mill; and he showed that the contracts fixing their amount were, at least in the first three classes, determined rather by custom than by competition. Passing to the superstructure of theory erected by Ricardo on the doctrine of rent which he had so unduly extended, Jones denied most of the conclusions he had deduced, especially the following:—that the increase of farmers' rents is always contemporary with a decrease in the productive powers of agriculture, and comes with loss and distress in its train; that the interests of landlords are always and necessarily opposed to the interests of the state and of every other class of society; that the diminution of the rate of profits is exclusively dependent on the returns to the capital last employed on the land; and that wages can rise only at the expense of profits.

The method followed by Jones is inductive; his conclusions are founded on a wide observation of contemporary facts, aided by the study of history. “If,” he said, “we wish to make ourselves acquainted with the economy and arrangements by which the different nations of the earth produce and distribute their revenues, I really know of but one way to attain our object, and that is, to look and see. We must get comprehensive views of facts, that we may arrive at principles that are truly comprehensive. If we take a different method, if we snatch at general principles, and content ourselves with confined observations, two things will happen to us. First, what we call general principles will often be found to have no generality—we shall set out with declaring propositions to be universally true which, at every step of our further progress, we shall be obliged to confess are frequently false; and, secondly, we shall miss a great mass of useful knowledge which those who advance to principles by a comprehensive examination of facts necessarily meet with on their road.” The world he professed to study was not an imaginary world, inhabited by abstract “economic men,” but the real world with the different forms which the ownership and cultivation of land, and, in general, the conditions of production and distribution, assume at different times and places. His recognition of such different systems of life in communities occupying different stages in the progress of civilisation led to his proposal of what he called a “political economy of nations.” This was a protest against the practice of taking the exceptional state of facts which exists, and is indeed only partially realised, in a small corner of our planet as representing the uniform type of human societies, and ignoring the effects of the early history and special development of each community as influencing its economic phenomena.

It is sometimes attempted to elude the necessity for a wider range of study by alleging a universal tendency in the social world to assume this now exceptional shape as its normal and ultimate constitution. Even if this tendency were real (which is only partially true, for the existing order amongst ourselves cannot be regarded as entirely definitive), it could not be admitted that the facts witnessed in our civilization and those exhibited in less advanced communities are so approximate as to be capable of being represented by the same formulae. As Whewell, in editing Jones's Remains, 1859, well observed, it is true in the physical world that “all things tend to assume a form determined by the force of gravity; the hills tend to become plains, the waterfalls to eat away their beds and disappear, the rivers to form lakes in the valleys, the glaciers to pour down in cataracts.” But are we to treat these results as achieved, because forces are in operation which may ultimately bring them about? All human questions are largely questions of time; and the economic phenomena which really belong to the several stages of the human movement must be studied as they are, unless we are content to fall into grievous error both in our theoretic treatment of them and in the solution of the practical problems they present.

Jones is remarkable for his freedom from exaggeration and one-sided statement; thus, whilst holding Malthus in, perhaps, undue esteem, he declines to accept the proposition that an increase of the means of subsistence is necessarily followed by an increase of population; and he maintains what is undoubtedly true, that with the growth of population, in all well-governed and prosperous states, the command over food, instead of diminishing, increases.

Much of what he has left us—a large part of which is unfortunately fragmentary—is akin to the labours of Cliffe Leslie at a later period. The latter, however, had the advantage of acquaintance with the sociology of Comte, which gave him a firmer grasp of method, as well as a wider view of the general movement of society; and, whilst the voice of Jones was but little heard amidst the general applause accorded to Ricardo in the economic world of his time, Leslie wrote when disillusion had set in, and the current was beginning to turn in England against the a priori economics.

Comte somewhere speaks of the “transient predilection” for political economy which had shown itself generally in western Europe. This phase of feeling was specially noticeable in England from the third to the fifth decade of the present century. “Up to the year 1818,” said a writer in the Westmisster Review, “ the science was scarcely known or talked of beyond a small circle of philosophers; and legislation, so far from being in conformity with its principles, was daily receding from them more and more.” Mill has told us what a change took place within a few years. “Political economy,” he says, “had asserted itself with great vigour in public affairs by the petition of the merchants of London for free trade, drawn up in 1820 by Mr. Tooke and presented by Mr. Alexander Baring,1 and by the noble exertions of Ricardo during the few years of his parliamentary life. His writings, following up the impulse given by the bullion controversy, and followed up in their turn by the expositions and comments of my father and M'Culloch (whose writings in the Edinburgh Review during those years were most valuable), had drawn general attention to the subject, making at least partial converts in the Cabinet itself; and Huskisson, supported by Canning, had commenced that gradual demolition of the protective system which one of their colleagues” [Peel] “virtually completed in 1846, though the last vestiges were only swept away by Mr. Gladstone in 1860.” Whilst the science was thus attracting and fixing the attention of active minds, its unsettled condition was freely admitted. The differences of opinion among its professors were a frequent subject of complaint. But it was confidently expected that these discrepancies would soon disappear, and Colonel Torrens predicted that in twenty years there would scarcely “exist a doubt respecting any of its more fundamental principles.” “The prosperity,” says Mr. Sidgwick, “that followed on the abolition of the corn laws gave practical men a most impressive and satisfying proof of the soundness of the abstract reasoning by which the expediency of free trade had been inferred,” and when, in 1848, “a masterly expositor of thought had published a skilful statement of the chief results of the controversies of the preceding generation,” with the due “explanations and qualifications” of the reigning opinions, it was for some years generally believed that political economy had “emerged from the state of polemical discussion,” at least on its leading doctrines, and that at length a sound construction had been erected on permanent bases.

This expositor was John Stuart Mill (1806–73). He exercised, without doubt, a greater influence in the field of English economics than any other writer since Ricardo. His systematic treatise has been, either directly or through manuals founded on it, especially that of Fawcett, the source from which most of our contemporaries in these countries have derived their knowledge of the science. But there are other and deeper reasons, as we shall see, which make him, in this as in other departments of knowledge, a specially interesting and significant figure.

In 1844 he published five Essays on some Unsettled Questions of Political Economy, which had been written as early as 1829 and 1830, but had, with the exception of the fifth, remained in manuscript. In these essays is contained any dogmatic contribution which he can be regarded as having made to the science. The subject of the first is the laws of interchange between nations. He shows that, when two countries trade together in two commodities, the prices of the commodities exchanged on both sides (which, as Ricardo had proved, are not determined by cost of production) will adjust themselves, through the play of reciprocal demand, in such a way that the quantities required by each country of the article which it imports from its neighbour shall be exactly sufficient to pay for one another. This is the law which appears, with some added developments, in his systematic treatise under the name of the “equation of international demand.” He then discusses the division of the gains. The most important practical conclusion (not, however, by any means an undisputed one) at which he arrives in this essay is, that the relaxation of duties on foreign commodities, not operating as protection but maintained solely for revenue should be made contingent on the adoption of some corresponding degree of freedom of trade with England by the nation from which the commodities are imported. In the second essay, on the influence of consumption on production, the most interesting results arrived at are the propositions—(i) that absenteeism is a local, not a national, evil, and (2) that, whilst there cannot be permanent excess of production, there may be a temporary excess, not only of any one article, but of commodities generally,—this last, however, not arising from over-production, but from a want of commercial confidence. The third essay relates to the use of the words “productive” and “unproductive” as applied to labour, to consumption, and to expenditure. The fourth deals with profits and interest, especially explaining and so justifying Ricardo's theorem that “profits depend on wages, rising as wages fall and falling as wages rise.” What Ricardo meant was that profits depend on the cost of wages estimated in labour. Hence improvements in the production of articles habitually consumed by the labourer may increase profits without diminishing the real remuneration of the labourer. The last essay is on the definition and method of political economy, a subject later and more maturely treated in the author's System of Logic.

In 1848 Mill published his Principles of Political Economy, with some of their Applications to Social Philosophy. This title, though, as we shall see, open to criticism, indicated on the part of the author a less narrow and formal conception of the field of the science than had been common amongst his predecessors. He aimed, in fact, at producing a work which might replace in ordinary use the Wealth of Nations, which in his opinion was “in many parts obsolete and in all imperfect.” Adam Smith had invariably associated the general principles of the subject with their applications, and in treating those applications had often appealed to other and far larger considerations than pure political economy affords. And in the same spirit Mill desired, whilst incorporating all the results arrived at in the special science by Smith's successors, to exhibit purely economic phenomena in relation to the most advanced conceptions of his own time on the general philosophy of society, as Smith had done in reference to the philosophy of the eighteenth century.1

This design he certainly failed to realise. His book is very far indeed from being a “modern Adam Smith.” It is an admirably lucid and even elegant exposition of the Ricardian economics, the Malthusian theory being of course incorporated with these, but, notwithstanding the introduction of many minor novelties, it is, in its scientific substance, little or nothing more. When Cliffe Leslie says that Mill so qualified and amended the doctrines of Ricardo that the latter could scarcely have recognized them, he certainly goes a great deal too far; Senior really did more in that direction. Mill's effort is usually to vindicate his master where others have censured him, and to palliate his admitted laxities of expression. Already his profound esteem for Ricardo's services to economics had been manifest in his Essays, where he says of him, with some injustice to Smith, that, “having a science to create,” he could not “occupy himself with more than the leading principles,” and adds that “no one who has thoroughly entered into his discoveries” will find any difficulty in working out “even the minutiae of the science.” James Mill, too, had been essentially an expounder of Ricardo; and the son, whilst greatly superior to his father in the attractiveness of his expository style, is, in regard to his economic doctrine, substantially at the same point of view. It is in their general philosophical conceptions and their views of social aims and ideals that the elder and younger Mill occupy quite different positions in the line of progress. The latter could not, for example, in his adult period have put forward as a theory of government the shallow sophistries which the plain good sense of Macaulay sufficed to expose in the writings of the former; and he had a nobleness of feeling which, in relation to the higher social questions, raised him far above the ordinary coarse utilitarianism of the Benthamites.

The larger and more philosophic spirit in which Mill dealt with social subjects was undoubtedly in great measure due to the influence of Comte, to whom, as Bain justly says, he was under greater obligations than he himself was disposed to admit. Had he more completely undergone that influence we are sometimes tempted to think he might have wrought the reform in economics which still remains to be achieved, emancipating the science from the a priori system, and founding a genuine theory of industrial life on observation in the broadest sense. But probably the time was not ripe for such a construction, and it is possible that Mill's native intellectual defects might have made him unfit for the task, for, as Roscher has said, “ein historischer Kopf war er nicht.” However this might have been, the effects of his early training, in which positive were largely alloyed with metaphysical elements, sufficed in fact to prevent his attaining a perfectly normal mental attitude. He never altogether overcame the vicious direction which he had received from the teaching of his father, and the influence of the Benthamite group in which he was brought up. Hence it was that, according to the striking expression of Roscher, his whole view of life was “zu wenig aus Einem Gusse.” The incongruous mixture of the narrow dogmas of his youthful period with the larger ideas of a later stage gave a wavering and indeterminate character to his entire philosophy He is, on every side, eminently “un-final;” he represents tendencies to new forms of opinion, and opens new vistas in various directions, but founds scarcely anything, and remains indeed, so far as his own position is concerned, not merely incomplete but incoherent.1 It is, however, precisely this dubious position which seems to us to give a special interest to his career, by fitting him in a peculiar degree to prepare and facilitate transitions.

What he himself thought to be “the chief merit of his treatise” was the marked distinction drawn between the theory of production and that of distribution, the laws of the former being based on unalterable natural facts, whilst the course of distribution is modified from time to time by the changing ordinances of society. This distinction, we may remark, must not be too absolutely stated, for the organization of production changes with social growth, and, as Lauderdale long ago showed, the nature of the distribution in a community reacts on production. But there is a substantial truth in the distinction, and the recognition of it tends to concentrate attention on the question—How can we improve the existing distribution of wealth? The study of this problem led Mill, as he advanced in years, further and further in the direction of socialism; and, whilst to the end of his life his book, however otherwise altered, continued to deduce the Ricardian doctrines from the principle of enlightened selfishness, he was looking forward to an order of things in which synergy should be founded on sympathy.

The gradual modification of his views in relation to the economic constitution of society is set forth in his Autobiography. In his earlier days, he tells us, he “had seen little further than the old school” (note this significant title) “of political economy into the possibilities of fundamental improvement in social arrangements. Private property, as now understood, and inheritance appeared the dernier mot of legislation.” The notion of proceeding to any radical redress of the injustice “involved in the fact that some are born to riches and the vast majority to poverty” he had then reckoned chimerical. But now his views were such as would “class him decidedly under the general designation of socialist;” he had been led to believe that the whole contemporary framework of economic life was merely temporary and provisional, and that a time would come when “the division of the produce of labour, instead of depending, as in so great a degree it now does, on the accident of birth, would be made by concert on an acknowledged principle of justice.” “The social problem of the future” he considered to be “how to unite the greatest individual liberty of action,” which was often compromised in socialistic schemes, “with a common ownership in the raw material of the globe, and an equal participation in all the benefits of combined labour.” These ideas, he says, were scarcely indicated in the first edition of the Political Economy, rather more clearly and fully in the second, and quite unequivocally in the third,—the French Revolution of 1848 having made the public more open to the reception of novelties in opinion.

Whilst thus looking forward to a new economic order, he yet thinks its advent very remote, and believes that the inducements of private interest will in the meantime be indispensable.1 On the spiritual side he maintains a similar attitude of expectancy. He anticipates the ultimate disappearance of theism, and the substitution of a purely human religion, but believes that the existing doctrine will long be necessary as a stimulus and a control. He thus saps existing foundations without providing anything to take their place, and maintains the necessity of conserving for indefinite periods what he has radically discredited. Nay, even whilst sowing the seeds of change in the direction of a socialistic organisation of society, he favours present or proximate arrangements which would urge the industrial world towards other issues. The system of peasant proprietorship of land is distinctly individualistic in its whole tendency; yet he extravagantly praises it in the earlier part of his book, only receding from that laudation when he comes to the chapter on the future of the labouring classes. And the system of so-called co-operation in production which he so warmly commended in the later editions of his work, and led some of his followers to preach as the one thing needful, would inevitably strengthen the principle of personal property, and, whilst professing at most to substitute the competition of associations for that of individuals, would by no means exclude the latter.

The elevation of the working classes he bound up too exclusively with the Malthusian ethics, on which he laid quite an extravagant stress, though, as Bain has observed, it is not easy to make out his exact views, any more than his father's, on this subject. We have no reason to think that he ever changed his opinion as to the necessity of a restriction on population; yet that element seems foreign to the socialistic idea to which he increasingly leaned. It is at least difficult to see how, apart from individual responsibility for the support of a family, what Malthus called moral restraint could be adequately enforced. This difficulty is indeed the fatal flaw which, in Malthus's own opinion, vitiated the scheme of Godwin.

Mill's openness to new ideas and his enthusiasm for improvement cannot be too much admired. But there appears to have been combined with these fine traits in his mental constitution a certain want of practical sense, a failure to recognize and acquiesce in the necessary conditions of human life, and a craving for “better bread than can be made of wheat.” He entertained strangely exaggerated, or rather perverted, notions of the “subjection,” the capacities, and the rights of women. He encourages a spirit of revolt on the part of working men against their perpetual condemnation, as a class, to the lot of living by wages, without giving satisfactory proof that this state of things is capable of change, and without showing that such a lot, duly regulated by law and morality, is inconsistent with their real happiness. He also insists on the “independence” of the working class—which, according to him, fard da si—in such a way as to obscure, if not to controvert, the truths that superior rank and wealth are naturally invested with social power, and are bound in duty to exercise it for the benefit of the community at large, and especially of its less favoured members. And he attaches a quite undue importance to mechanical and indeed, illusory expedients, such as the limitation of the power of bequest and the confiscation of the “unearned increment” of rent.

With respect to economic method also, he shifted his position; yet to the end occupied uncertain ground. In the fifth of his early essays he asserted that the method a priori is the only mode of investigation in the social sciences, and that the method a posteriori “is altogether inefficacious in those sciences, as a means of arriving at any considerable body of valuable truth.” When he wrote his Logic, he had learned from Comte that the a posteriori method—in the form which he chose to call “inverse deduction”—was the only mode of arriving at truth in general sociology; and his admission of this at once renders the essay obsolete. But, unwilling to relinquish the a priori method of his youth, he tries to establish a distinction of two sorts of economic inquiry, one of which, though not the other, can be handled by that method. Sometimes he speaks of political economy as a department “carved out of the general body of the science of society;” whilst on the other hand the title of his systematic work implies a doubt whether political economy is a part of “social philosophy” at all, and not rather a study preparatory and auxiliary to it. Thus, on the logical as well as the dogmatic side, he halts between two opinions. Notwithstanding his misgivings and even disclaimers, he yet remained, as to method, a member of the old school, and never passed into thti new or “historical” school, to which the future belongs.

The question of economic method was also taken up by the ablest of his disciples, John Elliott Cairnes (1824–75), who devoted a volume to the subject (Logical Method oj Political Economy, 1857; 2d ed., 1875). Professor Walker has spoken of the method advocated by Cairnes as being different from that put forward by Mill, and has even represented the former as similar to, if not identical with, that of the German historical school. But this is certainly an error. Cairnes, notwithstanding some apparent vacillation of view and certain concessions more formal than real, maintains the utmost rigour of the deductive method; he distinctly affirms that in political economy there is no room for induction at all, “the economist starting with a knowledge of ultimate causes,” and being thus, “at the outset of his enterprise, at the position which the physicist only attains after ages of laborious research.” He does not, indeed, seem to be advanced beyond the point of view of Senior, who professed to deduce all economic truth from four elementary propositions. Whilst Mill in his Logic represents verification as an essential part of the process of demonstration of economic laws, Cairnes holds that, as they “are not assertions respecting the character or sequence of phenomena” (though what else can a scientific law be?), “they can neither be established nor refuted by statistical or documentary evidence.” A proposition which affirms nothing respecting phenomena cannot be controlled by being confronted with phenomena. Notwithstanding the unquestionable ability of his book, it appears to mark, in some respects, a retrogression in methodology, and can for the future possess only an historical interest.

Regarded in that light, the labours of Mill and Cairnes on the method of the science, though intrinsically unsound, had an important negative effect. They let down the old political economy from its traditional position, and reduced its extravagant pretensions by two modifications of commonly accepted views. First, whilst Ricardo had never doubted that in all his reasonings he was dealing with human beings as they actually exist, they showed that the science, as he conceived it, must be regarded as a purely hypothetic one. Its deductions are based on unreal, or at least one-sided, assumptions, the most essential of which is that of the existence of the so-called “economic man,” a being who is influenced by two motives only, that of acquiring wealth and that of avoiding exertion; and only so far as the premises framed on this conception correspond with fact can the conclusions be depended on in practice. Senior in vain protested against such a view of the science, which, as he saw, compromised its social efficacy; whilst Torrens, who had previously combated the doctrines of Ricardo, hailed Mill's new presentation of political economy as enabling him, whilst in one sense rejecting those doctrines, in another sense to accept them. Secondly, beside economic science, it had often been said, stands an economic art,—the former ascertaining truths respecting the laws of economic phenomena, the latter prescribing the right kind of economic action; and many had assumed that, the former being given, the latter is also in our possession—that, in fact, we have only to convert theorems into precepts, and the work is done. But Mill and Cairnes made it plain that this statement could not be accepted, that action can no more in the economic world than in any other province of life be regulated by considerations borrowed from one department of things only; that economics can suggest ideas which are to be kept in view, but that, standing alone, it cannot direct conduct— an office for which a wider prospect of human affairs is required. This matter is best elucidated by a reference to Comte's classification, or rather hierarchical arrangement, of the sciences. Beginning with the least complex, mathematics, we rise successively to astronomy, physics, chemistry, thence to biology, and from it again to sociology. In the course of this ascent we come upon all the great laws which regulate the phenomena of the inorganic world, of organised beings, and of society. A further step, however, remains to be taken—namely, to morals; and at this point the provinces of theory and practice tend to coincide, because every element of conduct has to be considered in relation to the general good. In the final synthesis all the previous analyses have to be used as instrumental, in order to determine how every real quality of things or men may be made to converge to the welfare of Humanity.

Cairnes's most important economic publication was his last, entitled Some Leading Principles of Political Economy newly Expounded, 1874. In this work, which does not profess to be a complete treatise on the science, he criticises and emends the statements which preceding writers had given of some of its principal doctrines, and treats elaborately of the limitations with which they are to be understood, and the exceptions to them which may be produced by special circumstances. Whilst marked by great ability, it affords evidence of what has been justly observed as a weakness in Cairnes's mental constitution—his “deficiency in intellectual sympathy,” and consequent frequent inability to see more than one side of a truth.

The three divisions of the book relate respectively to (i) value, (2) labour and capital, and (3) international trade. In the first he begins by elucidating the meaning of the word “value,” and under this head controverts the view of Jevons that the exchange value of anything depends entirely on its utility, without, perhaps, distinctly apprehending what Jevons meant by this proposition. On supply and demand he shows, as Say had done before, that these, regarded as aggregates, are not independent, but strictly connected and mutually dependent phenomena—identical, indeed, under a system of barter, but) under a money system, conceivable as distinct. Supply and demand with respect to particular commodities must be understood to mean supply and demand at a given price; and thus we are introduced to the ideas of market price and normal price (as, following Cher-buliez, he terms what Smith less happily called natural price). Normal price again leads to the consideration of cost of production, and here, against Mill and others, he denies that profit and wages enter into cost of production; in other words, he asserts what Senior (whom he does not name) had said before him, though he had not consistently carried out the nomenclature, that cost of production is the sum of labour and abstinence necessary to production, wages and profits being the remuneration of sacrifice and not elements of it. But, it may well be asked, How can an amount of labour be added to an amount of abstinence? Must not wages and profits be taken as “measures of cost”? By adhering to the conception of “sacrifice” he exposes the emptiness of the assertion that “dear labour is the great obstacle to the extension of British trade”—a sentence in which “British trade” means capitalists' profits. At this point we are introduced to a doctrine now first elaborated, though there are indications of it in Mill, of whose theory of international values it is in fact an extension. In foreign trade cost of production, in Cairnes's sense, does not regulate values, because it cannot perform that function except under a regime of effective competition, and between different countries effective competition does not exist. But, Cairnes asks, to what extent does it exist in domestic industries? So far as capital is concerned, he thinks the condition is sufficiently fulfilled over the whole field—a position, let it be said in passing, which he does not seem to make out, if we consider the practical immobility of most invested, as distinct from disposable, capital. But in the case of labour the requisite competition takes place only within certain social, or rather industrial, strata. The world of industry may be divided into a series of superposed groups, and these groups are practically “non-competing,” the disposable labour in any one of them being rarely capable of choosing its field in a higher.1 The law that cost of production determines price cannot, therefore, be absolutely stated respecting domestic any more than respecting international exchange; as it fails for the latter universally, so it fails for the former as between non-competing groups. The law that holds between these is similar to that governing international values, which may be called the equation of reciprocal demand. Such a state of relative prices will establish itself amongst the products of these groups as shall enable that portion of the products of each group which is applied to the purchase of the products of all other groups to discharge its liabilities towards those other groups. The reciprocal demand of the groups determines the “average relative level” of prices within each group; whilst cost of production regulates the distribution of price among the individual products of each group This theorem is perhaps of no great practical value; but the tendency of the whole investigation is to attenuate the importance of cost of production as a regulator of normal price, and so to show that yet another of the accepted doctrines of the science had been propounded in too rigid and absolute a form. As to market price, the formula by which Mill had denned it as the price which equalises demand and supply Cairnes shows to be an identical proposition, and he defines it as the price which most advantageously adjusts the existing supply to the existing demand pending the coming forward of fresh supplies from the sources of production.

His second part is chiefly remarkable for his defence of what is known as the wages fund doctrine, to which we adverted when speaking of Senior.1 Mill had given up this doctrine, having been convinced by Thornton that it was erroneous; but Cairnes refused to follow his leader, who, as he believes, ought not to have been convinced.2 After having given what is certainly a fallacious reply to Longe's criticism of the expression “average rate of wages,” he proceeds to vindicate the doctrine in question by the consideration that the amount of a nation's wealth devoted at any time to the payment of wages—if the character of the national industries and the methods of production employed remain the same—is in a definite relation to the amount of its general capital; the latter being given, the former is also given. In illustrating his view of the subject, he insists on the principle (true in the main, but too absolutely formulated by Mill) that “demand for commodities is not demand for labour.” It is not necessary here to follow his investigation, for his reasoning has not satisfied his successors, with the exception of Fawcett, and the question of wages is now commonly treated without reference to a supposed determinate wages fund. Cairnes next studies trades-unionism in relation to wages, and arrives in substance at the conclusion that the only way in which it can affect their rate is by accelerating an advance which must ultimately have taken place independently of its action. He also takes occasion to refute Mr. (now Lord) Brassey's supposed law of a uniform cost of labour in every part of the world. Turning to consider the material prospects of the working classes, he examines the question of the changes which may be expected in the amount and partition of the fund out of which abstinence and labour are remunerated. He here enunciates the principle (which had been, however, stated before him by Ricardo and Senior) that the increased productiveness of industry will not affect either profit or wages unless it cheapen the commodities which the labourer consumes. These latter being mostly commodities of which raw produce is the only or principal element, their cost of production, notwithstanding improvements in knowledge and art, will increase unless the numbers of the labouring class be steadily kept in check; and hence the possibility of elevating the condition of the labourer is confined within very narrow limits, if he continues to be a labourer only. The condition of any substantial and permanent improvement in his lot is that he should cease to be a mere labourer—that profits should be brought to reinforce the wages fund, which has a tendency, in the course of industrial progress, to decline relatively to the general capital of a country. And hence Cairnes—abandoning the purely theoretic attitude which he elsewhere represents as the only proper one for the economist—recommends the system of so-called co-operation (that is, in fact, the abolition of the large capitalist) as offering to the working classes “the sole means of escape from a harsh and hopeless destiny,” and puts aside rather contemptuously the opposition of the Positivists to this solution, which yet many besides the Positivists, as, for example, Leslie and F. A. Walker, regard as chimerical.

The third part is devoted mainly to an exposition of Ricardo's doctrine of the conditions of international trade and Mill's theory of international values. The former Cairnes modifies by introducing his idea of the partial influence of reciprocal demand, as distinguished from cost of production, on the regulation of domestic prices, and founds on this rectification an interesting account of the connection between the wages prevailing in a country and the character and course of its external trade. He emends Mill's statement, which represented the produce of a country as exchanging for that of other countries at such values “as are required in order that the whole of her exports may exactly pay for the whole of her imports” by substituting for the latter phrase the condition that each country should by means of her exports discharge all her foreign liabilities—in other words, by introducing the consideration of the balance of debts. This idea was not new; it had been indicated by John Leslie Foster as early as 1804,1 and was touched on by Mill himself; but Cairnes expounds it well; and it is important as clearing away common misconceptions, and sometimes removing groundless alarms.2 Passing to the question of free trade, he disposes of some often-repeated protectionist arguments, and in particular refutes the American allegation of the inability of the highly-paid labour of that country to compete with the “pauper labour” of Europe. He is not so successful in meeting the “political argument,” founded on the admitted importance for civilization of developing diversified national industries; and he meets only by one of the highly questionable commonplaces of the doctrinaire economists Mill's proposition that protection may foster nascent indutries really adapted to a country till they have struck root and are able to endure the stress of foreign competition.

We have dwelt at some length on this work of Cairnes, not only because it presents the latest forms of several accepted economic doctrines, but also because it is, and, we believe, will remain, the last important product of the old English school. The author at the outset expresses the hope that it will strengthen, and add consistence to, the scientific fabric “built up by the labours of Adam Smith, Malthus, Ricardo, and Mill.” Whilst recognizing with him the great merits of Smith, and the real abilities and services of his three successors here named, we cannot entertain the same opinion as Cairnes respecting the permanance of the fabric they constructed. We hold that a new edifice is required, incorporating indeed many of the materials of the old, but planned on different ideas and in some respects with a view to different ends—above all, resting on different philosophic foundations, and having relation in its whole design to the more comprehensive structure of which it will form but one department, namely, the general science of society.

Cairnes's Slave Power (1862) was the most valuable work which appeared on the subject of the great American conflict.

[1]Bit. v, chap i, art. 3.

[1]Smith says, in a letter to Pulteney (1773)—“I have the tame opinion of Sir James Steuart's book that you have. Without once mentioning it, I flatter myself that any false principle in it will meet with a clear and distinct confutation in mine.”

[1]“When I recollect what the President Montesquieu has written, I am at a loss to tell why I should treat of human affairs; but I too am instigated by my reflections and my sentiments; and I may utter them more to the comprehension of ordinary capacities, because I am more on the level of ordinary men.… The reader should be referred to what has been already delivered on the subject by this profound politician and amiable moralist” (Part I, sect. 10). Hume speaks of Montesquieu as an “illustrious writer,” who “has established… a system of political knowledge, which abounds in ingenious and brilliant thoughts and is not wanting in solidity” (Principles of Morals, sect. 3, and note).

[1]The following paragraph appeared in the Moniteur Universel of March n, 1790:—“On prétend que le cèléM. Smith, connn si avanta-geusement par son traité des causes de la richesse des nations, prépare et va mettre à l'impression un examen critique de l'Esprit des Lois; c'est le résultat de plusieurs années de méditation. et l'on sait assez ce qu'on a droit d'attendre d'une tête comme celle de M. Smith. Ce livre {era epoque dans l'histoire de la politique et de la philosophic, tel est du moins le jugement qu'en portent des gens instruits qui en connaissent des fragments dont ils ne parlent qu'avec un enthousiasme du plus heureux augure.”

[1]Smith takes no account in this place of the evils which may arise from a highly developed division of labour. But see Bk. v, chap. i.

[2]This sentence, which on close examination will be found to have no definite intelligible sense, affords a good example of the way in which metaphysical modes of thought obscure economic ideas. What is a“quantity of labour,” the kind of labour being undetermined? And what is meant by the phrase “of equal value”?

[1]Smith's expressions on this point are lax, as will be seen when we come to examine the (so-called) Ricardian Theory of Rent.

[1]See p. 110, on Bentham.

[1]It must, however, always be borne in mind that the adoption by a state of this sort of protection is liable to three practical dangers:—(i) of encouragement being procured through political influences for industries which could never have an independent healthy life in the country; (2) of such encouragement being continued beyond the term during which it might be usefully given; (3) of a retaliatory spirit of exclusion being provoked in other communities.

[2]Professor Bastable calls the author's attention to the interesting fact that the proposal of an export duty on wool and the justification of a temporary monopoly to joint-stock companies both appear for the first time in the third edition (1784).

[1]In the Introductory Essay to his edition of the Wealth of Nations.

[1]“The public will probably soon be furnished with a theory of national economy, equal to what has ever appeared on any subject of science whatever” (Part III, sect. 4).

[2]Five editions of the Wealth of Nations appeared during the life of the author:—the first in 1776, the second in 1779, the third in 1784, the fourth in 1786, and the fifth in 1789. After the third edition Smith made no change in the text. The principal editions containing matter added by other economists are those by William Playfair, with notes, 1805; by David Buchanan, with notes, 1814; by J. R. M'Culloch, with life of the author, introductory discourse, notes, and supplemental dissertations, 1828 (also, with numerous additions, 1839; since reprinted several times with further additions); by the author of England and America (Edward Gibbon Wakefield), with a commentary, which, however, is not continued beyond the second book, 1835–9; by James E. Thorold Rogers, Professor of Political Economy at Oxford, with biographical preface and a careful verification of all Smith's quotations and references, 1869 (zd ed., 1880); and by J. S. Nicholson, professor at Edinburgh, with an Introductory Essay, and notes referring to sources of further information on the various topics handled in the text, 1884. There is a careful Abridgment by W. P. Emerton (2d ed., 1881), founded on the earlier Analysis of Jeremiah Joyce (3d ed., 1821).

[3]Parl. Hist., vol. xxxiii, p. 778.

[1]It must be remembered, however, that the same doctrine had been supported with no less ability as early as 1769 by Turgot in his Mémoive sur les prtts d'argent.

[2]Lettres d'A. Comte à J. S. Mill, p. 4.

[1]In his discourse at the Sorbonne (1750), Sur les progris successifs de I'esprit humain.

[1]Their dates are 1806, 1807, 1816, 1817, 1826.

[1]On this subject see the speculations of Hsrbert Spencer in his Principle of Biology, Part VI, chaps, xii, xiii.

[2]Malthus himself said:—“It is probable th at, having found the bow bent too much one way, I was induced to bend it too much the other in order to make it straight.’

[1]The Essay on Population and the Inquiry into the Nature and Progress of Rent (1815), to be hereafter mentioned, are by far the most important contributions of Malthus to the science. He was also author of Principles of Political Economy (1820), Definitions in Political Economy (1827), and other minor pieces. On these less important writings of Malthus, and on his personal history, see Mallhus and his Work (1885), by James Bonar, who has also edited (1888) the Letters of Ricardo to Malthus.

[1]“Political economy, you think, is an inquiry into the nature and causes of wealth; I think it should rather be called an inquiry into the laws that determine the division of the produce of industry amongst the classes who concur in its formation.”—Letters of Ricardo to Malthas, ed. by J. Bonar (1889).

[1]Anderson's account of the origin of rent is reprinted in the Select Collection of Scarce and Valuable Economical Tracts, edited lor Lord Overstone by J. R. M'Culloch, 1859.

[1]Senior, however, has pointed out that Smith is partly right; whilst it is true that rent is demanded because the productive powers of nature are limited, and increased population requires a less remunerative expenditure in order to obtain the necessary supply; on the other hand, it is the power which most land possesses of producing the subsistence of more persons than are required for its cultivation that supplies the fund out of which rent can be paid.

[1]“As the colony increases, the profits of stock gradually diminish. When the most fertile and best situated lands have been all occupied, less profit can be made by the cultivation of what is inferior both in soil and situation, and less interest can be afforded for the stock which is so employed.” The view in question had been anticipated by West.

[1]Adam Smith says:—“It appears evidently from experience that man is. of all sorts of luggage, the most difficult to be transported” (Wealth of Nations. Bk. I, chap. viii).

[2]Tenant's Gain not Landlord's Lost 1883), p. 83.

[1]Zuiei BiicHer zur Sncialen Geschichte England!, p. 194.

[1]A sketch of Ricardo's personal history, and an account of his writings on monetary questions, which could not conveniently be introduced here, will be found under his name in the Encyclopedia Bntannica, 9th edition.

[1]Thus, is Wealth of Nations, Bk. I, chap, viii, we have the phrases—“the funds which are destined to the payment of wages,” “the funds destined for employing industry” “the funds destined for the maintenance oi servants”

[1]See the last of his Four Introductory Lectures on Political Economy, 1852.

[2]Mill, however, tells us in his Preface to those Essays that bis own views on that subject had been entertained and committed to writing before the publication by Torrens of similar opinions.

[1]Samuel Crumpe, M.D., had published at Dublin in 1793 an Essay on the Best Means of Providing Employment for the People, which obtained a prize offered by the Royal Irish Academy for the best dissertation on that subject. This is a meritorious work, and contains a good statement of some of the leading principles of Adam Smith. John Hely Hutchinson's Commercial Restraints of Ireland (1779) is important for the economic history of that country.

[1]Afterwards Lord Ashburton. For this Petition, see M'Culloch'a Literature of Political Economy, p. 57, or Senior's Lectuns on tht Transmission of the Precious Metals, &c., 2d ed., p. 78.

[1]Curiously, in an otherwise well-executed abridgment of Mill's work published in the United States (1886) by J. Laurence Laughlin, as a textbook for colleges, all that “should properly be classed under the head oi Sociology” has been omitted, Mill's own conception being thus set aside, and his book made to conform to the common type.

[1]Mr. John Morley (“Mill on Religion,” in Critical Miscellanies, 2d ser., 1877) betrays something like consternation at finding in Mill's posthumous writings statements ol opinion distinctly at variance with philosophic doctrines he had energetically maintained during his whole life.

[1]See also ilia Chapters oh Socialism, in Fortnightly Review, 1879.

[1]Economists are fond of comparing the rate of profit or wages in one nation (using this word in its economic sense) to a single fluid surface which is continually disturbed by transient influences and continually tending to recover its level. We must compare these rates in different nations to reservoirs which, not communicating with each other, stand always at different, though variable, levels. And the latter comparison will apply also to the rates (at least of wages) in different economic “groups,” or strata, within the same community.

[1]See p. 139.

[2]Jevons strangely says, in the Preface to his Theory of Political Economy, zd ed., that the wages fund doctrine “has been abandoned by most English economists owing to the attacks,” amongst others, “of Cairnes.” Cairnes was, in truth, a supporter of the doctrine.

[1]In his Essay on the Principle of Commercial Exchanges.

[2]On this whole subject see Professor C. F. Bastable's Theory of International Trade, 1887.

Last modified April 13, 2016