fjfi LIBRARY PRINCIPLES OF POLITICAL ECONOMY PRINCIPLES POLITICAL ECONOMY BY J. SHIELD NICHOLSON, M.A., D.Sc. PROFESSOR OF POLITICAL ECONOMY is TUB UNIVERSITY OF EDINBFBGH : SOMETIME EXAMINER IN THE UNIVERSITIES OF CAMBRIDGE, LONDON, AND VICTORIA VOL. I. ||ork MACMILLAN AND CO. AND LONDON 1893 All rights reserved COPYRIGHT, 1893, BY MACMILLAN AND CO. Xortooot) }prtss : J. S. Gushing & Co. Berwick & Smith. Boston, Mass., U.S.A. PREFACE. WHEN I was appointed in 1880 to the Chair of Political Economy in the University of Edinburgh I made several good resolutions. One that I kept was not to write out my lectures in full. With short notes it is much more easy to alter the material, and to adjust the emphasis according to the devel- opment of the subject or changes in affairs. To begin with, I took Mill's Principles of Political Economy as a text-book. Mill mastered and expressed with great lucidity and force of style all that he considered best in his predecessors, and if he was not very original himself, he has been the cause or occa- sion of originality in others. In England at any rate many of the recent changes in economic theory may be traced to the criticism or development of Mill's teaching. At the same time the abundance of these commentaries to say nothing of the work of both foreign and English writers on independ- ent lines has rendered Mill's treatment year by year less satisfactory as a survey of the whole subject, though it is still excellent for students who have time to trace the growth of economic thought. The present work is intended to cover the same ground as that of Mill. It has grown up out of my notes in the way described, and whilst presenting the older doctrines takes account also of subsequent modifications. It must be regarded, however, not so much as an abstract of the opinions of others as an independent attempt to recast the subject in the light of these opinions. vi PREFACE. In reality I owe far more to Adam Smith than to Mill. The great defect of Mill's work is the want of historical knowledge, whilst a large part of the Wealth of Nations is history of the highest order. I have availed myself of the authority of the older master to include a much greater amount of history than is usual in a statement of principles. The recent attention devoted to economic history seems also to make this procedure desirable. The mode in which the materials for this work were grad- ually collected and modified renders it impossible for me to make due acknowledgment to every writer, though I have tried to do so throughout the book. A teacher cannot trace the origin of every change of exposition. I must, however, express my great indebtedness to Pro- fessor Sidgwick and Professor Marshall, not only for their published writings but for the influence of their teaching whilst a student at Cambridge to the former especially for the ideas recently expanded in the Elements of Politics, 1 to he latter for the more purely economic work that has now taken a permanent form in the Principles of Economics. I take the greater pleasure in this acknowledgment as I differ from both in at least one favourite doctrine. Dr. Keynes has kindly revised the proofs whilst passing through the press, and my colleague, Professor Wallace, has aided me with his practical knowledge in the chapters on land and agriculture. Mr. A. B. Clark, M.A., a former pupil, has prepared the Index. ,7. SHIELD JUCHOLSON. UNIVERSITY OF EDINBURGH, September, 1898. 1 Cf. also the same writer's Principles of Political Economy, Book III. CONTENTS. INTRODUCTION. PAGE 1. Definition of political economy 3 2. The popular conception of wealth 5 3. The economic conception of wealth . 6 4. Political economy as a science 10 6. The methods of political economy ' 18 BOOK I. PRODUCTION. CHAPTER I. Utility. 1. Meaning of utility 23 2. Economic utility 26 CHAPTER II. Production. 1. Definition of production 32 2. The production of material wealth 33 3. Production of personal or immaterial wealth 37 4. Classification of the various kinds of production 44 CHAPTER III. Consumption. 1. Meaning of consumption objective and subjective .... 48 2. Kinds of consumption 49 3. The measurement of economic utility 61 4. Total and final, or marginal, utility exposition 63 5. Total and final utility criticism 65 6. Consumer's rent 57 7. The measurement of utility by labour 60 vii viii CONTENTS. CHAPTER IV. Nature. PAGE 1. The functions of nature in material production 66 2. Of the gifts of nature some are practically unlimited, others limited 68 3. The natural constituents hi national production 70 CHAPTER V. Labour. 1. Twofold meaning of labour, and first of subjective labour . . 72 2. Quantity of labour (subjective) explained 73 3. Causes of variations in the quantity of labour (subjective) . . 75 4. The efficiency of labour (objective) 78 CHAPTER VI. Capital. 1. Definition of capital, and first of revenue capital 87 2. Production capital 88 3. Consumption capital 90 4. Root-idea of capital 91 5. Disputed questions regarding capital 92 6. Fixed and circulating capital 96 7. Examination of Mill's views on the relations of labour and capital in production 97 t~*L6*+** t CHAPTER VII. Division of Labour. 1. Meaning of division of labour 104 2. Separation of employments 106 3. Specialisation of skill 108 4. Separation of employments involves combination 112 6. Division of labour is limited by the extent of the market . . 112 6. Division of labour and the localisation of industry 114 7. The disadvantages of division of labour 117 CHAPTER VIII. Production on a Large and Produc- tion on a Small Scale. 1. Division of labour tends to production on a large scale . . . 122 2. The management of production on a large scale in manufac- tures 124 3. Counteracting causes to the concentration of labour and capi- tal ... 129 4. Joint-stock companies 131 CONTENTS. CHAPTER IX. Large and Small Farming. 1. Statement of the question 138 2. Gross produce and net produce 138 3. On the meaning of the term advantage 141 4. The economies of large and small farming compared .... 142 5. The influence of natural conditions 146 G. The influence of capital, and the rate of profit 147 7. The influence of the condition of labour and of relative wages 148 8. The influence of legislation 148 CHAPTER X. The Law of Diminishing Return and the Law of Increasing Return. 1. Preliminary explanation 151 2. The law of diminishing return, as applied to the production of corn 154 3. The law of diminishing return as applied to other kinds of raw produce 165 4. How the law of diminishing return may be counteracted . . 169 5. The law of increasing return 171 CHAPTER XI. The Principle of Population. 1. The work of Malthus 175 2. The principle of population 179 3. The standard of comfort 190 4. The pressure of population on the means of subsistence . . . 194 CHAPTER XII. The Growth of Material Capital. 1. Meaning of the growth of (capital material) 197 2. The power to save 199 3. The will to save 201 4. Of the accumulation of different kinds of capital 210 5. Methods of estimating the increase of material capital . . . 213 BOOK II. DISTRIBUTION. CHAPTER I. The Distribution of Wealth. 1. Meaning of distribution 219 2. On Mill's distinction between the laws of production and those of distribution . , 220 X CONTENTS. PAGE 3. The theory of sovereignty 222 4. Application of sovereignty to the distribution of wealth . . . 223 5. Historical examples of variations in distribution 226 6. Distribution and exchange 229 7. Ideal economic distribution 231 CHAPTER II. The Institution of Private Property. 1. The economic, as distinguished from the legal and ethical, characteristics of private property 235 2. The economic bases of private property and first of (a) labour 238 3. The economic bases of private property (6) contract . . . 240 4. Economic bases of private property (c) capital 242 5. On security as a condition precedent to freedom of contract and private property 243 6. Criticism of the views of Bentham 245 7. On (d ) prescription as an economic basis of property . . . 247 CHAPTER III. Bequest and Inheritance. 1. General view of bequest and inheritance 249 2. Inheritance 250 3. Bequest 253 CHAPTER IV. Property in Land and Compensation for Expropriation. 1. Mill's views on property in land 256 2. Economic advantages of private property in land 259 3. On the limited quantity of land in certain respects .... 262 4. Economic principles of compensation 264 CHAPTER V. Competition and Custom. 1. Competition and distribution 268 2. Custom and distribution 269 3. The antagonism of competition and custom 270 CHAPTER VI. Custom and Village Communities. 1. Custom as affecting the ownership and the occupation of land 272 2. The Russian mir 273 3. Other examples of existing village communities 279 4. Survivals in Great Britain 280 5. The mediaeval village community 283 6. Origin of English village communities 285 7. Summary of results 288 CONTENTS. CHAPTER VII. Feudalism. PAGE 1. On the economic, as distinguished from other, aspects of feudalism 290 2. Principal characteristics of feudalism 291 3. Peculiar restrictions on the ownership of land under feudalism 293 4. Feudalism and the towns and cities 295 5. Economic causes of the decay of feudalism (a) the increase of security 298 6. The decay of feudalism (6) extension of money payments . 300 7. The decay of feudalism (c) changes in land laws .... 305 CHAPTER VIII. Modern Ownership of Land and Industrial Freedom. 1. Outline of the argument 307 2. On difficulties in the transfer of land 307 3. The advantages of large estates 309 4. Recent modifications of the economic principles of ownership of land 312 CHAPTER IX. Contracts for the Hire of Land. 1. Free trade in the hire of land 314 2. Rent under the free trade system 314 3. Fair or judicial rents 315 4. Compensation for improvements under the free trade system . 318 5. Tenant right and free sale 319 6. Duration of tenancy 320 7. Recent changes in the English and Scottish laws affecting the hire of land 321 8. Conclusion 322 CHAPTER X. Wages and Theories of Wages. 1. Preliminary account of custom and competition as affecting wages 324 2. Wages as the real reward for a quantity of labour 325 3. Wages as payment for work done 328 4. Conflict of interests between labourer and employer .... 329 5. Harmony of interests of labourer and employer 331 6. The natural rate of wages 333 7. The normal rate of general wages 336 8. The wages-fund theory 339 9. Criticism of the theory 343 10. Wages considered as paid from the produce of labour . . . 345 xii CONTENTS. CHAPTER XI. Relative Wages. PACK 1. The determination of relative wages 348 2. The minimum of wages that labour will accept 349 3. The maximum of wages that employers can afford .... 352 4. Natural causes of differences of wages in different employ- ments 353 5. Conditions of the operations of the natural causes .... 355 6. Artificial causes of difference of wages in different employ- ments 356 CHAPTER XII. The Effects of Law and Custom on Wages. 1. Modes in which law and custom may affect wages .... 367 2. Slavery, serfdom, and patria potestas 357 3. Apprenticeship 360 4. Craft guilds 362 5. Legislation with respect to masters and servants 365 6. The factory acts 369 7. The poor laws 371 8. Combinations 381 9. Conclusion 387 CHAPTER XIII. Profits. 1. Profits as dependent on the feelings of the capitalist . . . 388 2. Profits as dependent on the cost of labour 388 3. Loan interest 389 4. Loan interest and profit interest 392 5. The minimum rate of interest as an element of profits . . . 393 6. The equality of interest considered as an element of profits . 394 7. The inter-connection of profit-interest and loan-interest . . 396 8. Insurance against risk 396 9. Wages of superintendence 399 10. The element of chance in profits 400 CHAPTER XIV. Economic Rent. 1 . Ambiguity of the term rent 402 2. The economic rent of agricultural land in its first form . . 404 3. The theory of economic rent in its second form 406 4. Economic rent and monopoly rent 409 6. Other forms of economic rent 410 6. Of analogies to economic rent and of quasi-rent 411 CONTENTS. xiii PAGE 7. The progress of economic rent 414 8. Conclusion 415 Appendix to Chap. XIV. The causes which determine the fair rent of land . 417 CHAPTER XV. Economic History and Economic Utopias. 1. The reality of economic history 424 2. The ideality of economic Utopias 425 3. Modern socialism exposition 426 4. Modern socialism criticism 428 5. Modern socialism special criticism 432 INDEX . . 435 PRINCIPLES OF POLITICAL ECONOMY. INTRODUCTION. PRINCIPLES OF POLITICAL ECONOMY, INTRODUCTION. 1. Definition of Political Economy. As it is impossible to compress a treatise into a sentence, it follows that a pre- liminary definition of any science can be neither adequate nor exhaustive. At the same time it seems as reasonable as it is usual to indicate in an introductory chapter the nature of the subject-matter, the objects to be attained, and the methods to be adopted, in the systematic treatment of any department of knowledge. Such a preliminary statement is especially desirable in the case of political economy, in which both the adjective and the substantive naturally suggest what most writers carefully exclude, for political economy is usually held to have little or nothing to do with general politics on the one hand or domestic economy on the other. Its province may, perhaps, be best described provisionally in the words of Adam Smith, as an . inquiry into the nature and causes of the wealth of nations. This short title has been amplified and formalised by later writers into the science which treats of the laws of the production, distribution, and exchange of wealth. To this description some have added a department of consump- tion, and others the principles of governmental control, or the art of political economy. It is noteworthy, however, that on the whole, at any rate in the case of English writers, the field has been contracted. Many topics have 3 4 PRINCIPLES OF POLITICAL ECONOMY. dropped from systematic treatment which were included by Adam Smith, as, for example, the expense of justice, of defence, and of education both secular and religious. The subject, it may be alleged, has gained in exactness what it has lost in breadth, and has only obeyed the tendency to specialisation common to all sciences. There has, unques- tionably, been a gain in exactness, especially since the application of mathematical ideas ; but the natural reaction against this abstract treatment threatened at one time to break down all boundaries, and to make political economy as wide and vague as general sociology. In the present work an attempt will be made to state with precision the general theory without reducing it to a branch of applied mathematics, and to build on the broad foundations of Adam Smith and Mill without trenching unduly on the domain of ethics, jurisprudence, or politics. The abun- dance of material is so great that the main difficulty is in selection and rejection, or, in one word, in proportion. | There is not a chapter in the Wealth of Nations which could not now be enriched from the subsequent labours of historians, philosophers, and jurists as well as of professed economists. (The history of any progressive nation reveals great differences in the variety and the amount of its wealth at different times ; it shows fundamental changes in the methods of production, distribution, and exchange. A comparison of existing nations, scattered over the world, furnishes living examples of the records of the past. Religion, art, government, morality, and other forces have influenced, and continue to influence, nations both as re- gards the nature and the causes of their wealth ; but that the phenomena of wealth are capable of separate classifica- tion, and the causes of separate investigation, the extensive literature of political economy gives abundant testimony. With the Wealth of Nations more than a century old, it is absurd to go about to prove that it could not have been written. INTRODUCTION. 5 2. The Popular Conception of Wealth. But what is wealth ? At first sight it seems sufficient to reply in the words of Mill, that every one has a notion sufficiently correct for common purposes of what is meant by wealth. It may, however, be said, with a similar impatience of metaphysical nicety, that every one has for common pur- poses an equally adequate idea of right and wrong accord- ing to the laws of his country, and ignorance of the law is never admitted as a justification of the transgressor. Yet the author of a celebrated law book did well to advise the student in the first place to get rid of every idea that he had formed on the subject ; and, for the acquisition of almost every art and science, it is generally recognised that it is better for the mind to be at the outset a tabula rasa than impressed by the runic characters of popular opinion. Mill himself after the passage quoted at once proceeds to show by the example of the Mercantile system that an erroneous view of the nature and uses of wealth gave, for many generations, a false direction to the commercial policy of Europe. To Mill the error appeared so glaring i that he goes on to say: "It often happens that the uni-f versal belief of one age of mankind a belief from which no one was, nor without an extraordinary effort of genius and courage could, at the time, be free becomes to a sub- sequent age so palpable an absurdity, that the only diffi- culty, then, is to imagine how such a thing can ever have appeared credible." As regards the particular policy 1 which called forth this expression of opinion, there is little doubt that Mill was guilty of exaggeration, but there can be no doubt as to the truth of the general position. In the picturesque language of Bacon: "The idols of the* market-place are the most troublesome of all those, namely, which have entwined themselves round the under- standing from the associations of words and names. For men imagine that their reason governs words whilst, in 1 Cf. Roscher, Geschichte der National-Oekonoinik in Deutschland; and Cunningham, Grmrth of Industry and Commerce, Vol. IT. 6 PRINCIPLES OF POLITICAL ECONOMY. fact, words react upon the understanding; and this has rendered philosophy and the sciences sophistical and inac- tive." And in political economy, above all the sciences, we may expect the idols of the market-place to abound. Industrial history is full of examples of stubborn fallacies which would at once have been loosened by a Socratic induction, and altogether dispelled by a scientific analysis. It is only the deceptive familiarity of common discourse which conceals similar errors at the present time. Accord- ingly, in the opinion of the present writer, it is still one of the main functions of the economist to discover what ideas | the words stand for, and to analyse vague and complex notions into their component elements. 1 It was soon ob- served that the term wealth required a critical exposition of this kind, and considerable labour has been devoted to the task. 3. The Economic Conception of Wealth. The first sittings again to adopt Baconian language of the popular usage of the term wealth by half a century of systematic writers resulted in the definition adopted by I Mill. "Wealth," he writes, "may be defined all useful or agreeable things which possess exchangeable value ; or, in other words, all useful or agreeable things which cannot be obtained in the quantity desired without labour or sacrifice." The object of this definition was to make explicit in common language what was supposed to be implicit in common thought as to the nature of wealth. At once, however, the question arose : Does this defini- tion exclude or include more or less of the things which are as a matter of fact embraced in the popular classifica- tion or inventory of wealth ? In the language of logicians : Does the denotation correspond to the connotation ? This 1 " What we gain by discussing a definition is often but slightly repre- sented in the superior fitness of the formula that we ultimately adopt ; it consists chiefly in the greater clearness and fulness in which the charac- teristics of the matter to which the formula refers have been brought before the mind in the process of seeking it." SIDGWICK, Principles, Rk. I., Oh. II., 1. INTRODUCTION. 7 general question was again resolved into a number of special tests, of which the following are prominent exam- ples : Does the term " things " include immaterial as well as material things ? Does exchangeable value imply that the things must be actually capable of transference them- selves, or is it merely a right which is transferred? Is exchangeable value essential to the wealth of a nation as distinct from that of an individual? Must the things be comparatively permanent and capable of accumulation? Are things of no use to any one but the owner a part of his wealth ? Is labour a necessary foundation ? Is the wealth of the nation simply the sum total of the wealth of indi- viduals? These questions and they are only typical, and taken almost at random were clinched by an appeal to particular instances ; and much ingenuity was displayed in considering such examples as skill, credit, wild ani- mals, minerals in the bowels of the earth, bank money not in the vaults of the bank, break-waters, industrial organi- sation, the natural and indestructible powers of the soil, the song of a prima donna, and the advertising connection of a newspaper. Nor is it sufficient to say of science as of l;tw fa mini i)i is non curat, for in ideas as in creatures the border line of species is often most instructive. The conflict of answers suggested the necessity of a deeper analysis, and it soon appeared that the definition contained conceptions which demanded a more careful explication than wealth itself. Things were no longer described as useful or agreeable, but were said to possess utility. Common thought, aided by a vague reminiscence of Bentharn, and the utilitarian philosophy, might acquiesce in the definition of utilit}- as ' the capacity to satisfy a desire or serve a purpose,' however trivial, ornamental, or wasteful; but when economists generally adopted the distinction made by Jevons between final and total utility, they passed the extreme limits of popular phraseology and comprehension. Again, as regards the characteristic of exchangeable 8 PRINCIPLES OF POLITICAL ECONOMY. value, which is supposed to be a simple and obvious attri- bute of wealth, Adam Smith had already exposed one fundamental ambiguity, 1 and had lost his way in another; 2 Ricardo had discovered and Mill had expressed other dis- tinctions ; but the conception of value was still misty until Cournot and the mathematicians applied their analy- sis. Long before this point was reached common thought was Again left behind. Common thought, for example, has no more accurate conception of ' things in general ' than of a ' thing in itself.' 8 Even labour was not left to bear its natural and obvious meaning, whatever that may be. The first of the notes and dissertations, appended to M'Culloch's edition of the Wealth of Nations, is entitled, ' Of the Definition of Labour.' By passing with the apparent authority of Adam Smith from labouring men to labouring cattle, and without that authority from labouring cattle to labouring machines and natural agents, labour becomes at last ' any action that tends to bring about any desirable result,' and thus would include, inter alia, the fermentation of wine in the cask. Similar difficulties arise when labour is regarded, to make use of terms which suggest of themselves the divergence from common thought, not from the objec- tive, but from the subjective, point of view. Adam Smith himself has declared that the greater part of people under- I stand better what is meant by a quantity of a particular | commodity than by a quantity of labour, and that the one is a plain, palpable object, and the other an abstract notion, not altogether so natural and obvious. And the notion appears altogether the reverse of natural and obvi- ous when it is briefly described as disutility, or negative utility. 1 Value in use and value in exchange. 3 Real and nominal price. 8 "By the price of a thing we shall henceforth understand its value I in money ; by the value, or exchange value of a thing, its general power of purchasing ; the command which its possession gives over purchasable commodities in general." MILL. INTRODUCTION. 9 Sacrifice, the last word in Mill's definition, wealth being held only to include those things which cannot be obtained in sufficient abundance without labour or sacri- fice, naturally suggests the abstinejice of the capitalist. This well-chosen expression of Mr. Senior, as Mill phrases it, has given rise to a keen controversy, which is still raging. Thus, on analysis, the traditional economic definition of wealth is discovered to contain elements which apparently require more explanation than the concrete reality, just as man himself, who in ordinary life is regarded as a com- mon sort of body with a common sort of soul, without any shadow of mystery, is proved, on examination, to be a creature intricate and wonderful enough to furnish mate- rials for many sciences and religions. It will, however, be found, that in certain parts of the subject this familiar conception of wealth is not only ade- quate, but is better adapted for the argument than an amalgamation of technical notions, since much of political economy requires rather practical wisdom than scientific research. From the modern standpoint there is not a single accurate scientific definition in the whole of Adam Smith's work, yet, both for the science of political econ- omy and for the economic policy of nations, Adam Smith has done far more than any of his successors. It would be a grave misfortune if, in striving after technical cor- rectness and scientific analysis, the concrete realities of earlier writers were neglected. At the same time 'it must be acknowledged that, for other purposes, the most rigor- ous scientific statement is requisite ; in some cases, indeed, whether we like it or not, our ideas and methods must be essentially mathematical, although, it may be, only in the most general way, and without requiring any symbolical statement. And, as might be expected, in the different departments of political economy, different stress is laid upon the different constituent elements of wealth. In Consumption, for example, utility, in Production, labour, 10 PRINCIPLES OF POLITICAL ECONOMY. in Distribution, appropriation, and in Exchange, value, are, in turn, of fundamental importance, although in most cases they also overlap, because the division into depart- ments is logical and hypothetical rather than actual and positive. 4. Political Economy as a Science. Some preliminary discussion of the nature of political economy as a science seems requisite on two grounds ; in the first place to I make clear the meaning of the much-abused phrase, " laws 1 of political economy," and, secondly, to point out what methods are appropriate for the discovery of these laws. For the purpose in hand it is convenient to follow Mill and divide the sciences into two great groups, those, namely, which have to do primarily with laws of mind, the moral or mental sciences in the widest sense of the terms, and those which are primarily concerned with matter and only indirectly with mental phenomena, and which may, for contradistinction, be called the physical, or natural, sciences. This division is not intended to be sharp and exclusive, nor is the object so much to make a classification as to bring out the salient characteristics of political economy by comparing and contrasting it with other sciences. The real distinction between the two groups is found mainly in the adjustment of emphasis. Thus psychology itself may be studied in some respects from the physiological side. Again, natural philosophy may treat of sounds and notes as vibrations of a certain kind, and yet may be of service to the science of music which is concerned with the mental phenomena which correspond to these physical manifestations. Until re- cently there was no question that political economy should be placed in the moral or mental group, and the reason- ing of Mill and Cairnes was accepted as obvious and conclusive. On this view political economy deals with men as possessing certain mental and moral character- istics ; its fundamental notions are desire, effort, satisfac- tion not matter, motion, energy. INTRODUCTION. 11 In certain parts of the subject, however, it is allowed that physical facts are of great importance. Thus, in the department of production, certain general and even spe- cial characteristics of the forces and gifts of nature demand investigation, as, for example, in considering the relation of population to the food supply, the conditions favourable, or the reverse, to petite culture, the physical disadvantages of production on a large scale in manufactures, and the influence of climate upon race and accumulation. In the other departments, also, physical facts are often of impor- tance, as in some of the arguments in support of protection, and again in the attempt to discover in sun-spots, or other ; natural phenomena, the basis of inflations and depressions I of trade. It would be easy to multiply examples, but in all it would be found that the end in view is not the mere statement of these physical facts, but their connexion with men as mental and moral agents. Wealth itself cannot be regarded simply as consisting of things, but must always be considered with an expressed, or implied, reference to human wants. The practical men in the first half of this century, who narrowed the teaching of Adam Smith to a few simple dogmas, in many cases overlooked the human element in wealth. Recently attempts have been made, or rather announced as about to be made, to connect political economy with the general theory of evolution, and more especially with biology. The ideas at the root of evolution are, no doubt, capable of application to economic problems, especially to those which have to do with the progress of society ; but apart from tin's regulative or suggestive function, evolu- tion is only of service when based upon special evidence. The rise and decay of the guilds, for example, and of many other economic institutions, may be compared to the growth and degeneration of organisms, and may be de- scribed to some extent in similar phraseology. But there is no general theory which can be an adequate, or, indeed, anything but a delusive, substitute for an appeal to facts. 12 PKINCIPLES OF POLITICAL ECONOMY. Evolution a priori is nothing better than a hasty and easy anticipation of nature. Again, although man is an animal, and as such falls under the sphere of the biological sciences, biology has about as much to do with political economy as with constitutional history. No manipulation of biologi- cal ideas and phrases can bring us in sight of economic problems, such as the rate of interest, the incidence of taxation, the level of prices. Nothing has been so fatal to the progress of the sciences generally as the use of inappropriate conceptions. Medicine made very slow ad- vances as a branch of demonology, and astronomy as a branch of aesthetics ; and in the mental and moral sciences to attempt to express mind in terms of matter is to go wrong at the beginning. The moral sciences may again be divided according as they discuss the individual in isolation, or combinations of individuals in societies, though here, also, the division rests mainly upon an adjustment of emphasis. Psychology may be taken as an example of the former, though, in the treatment of the emotions, for instance, it departs in some respects from the individual standpoint, whilst jurispru- dence is placed in the social group, though, in some prob- lems, it deals mainly with the individual. It is easy to conceive of a science of wealth which would take the individual as central and discuss the mental and moral characteristics involved in the acquisition and expenditure of wealth ; but the term political implies that in political economy man is considered as a member of a state, or, at least, of an industrial society. Sometimes, no doubt, it is convenient to isolate the individual for certain purposes of abstract theory ; but such isolation is properly only pre- liminary and hypothetical. The economic man on his desert island may occasionally be of service in this way, but it is generally dangerous to construct . any social science a priori from the individual. 1 1 Compare the criticism of recent developments of the theory of utility. Infra, Bk. I., Ch. III. INTRODUCTION. 13 At this point the question naturally arises : Can we treat of one department of social science apart from the ! rest, and can political economy exist apart from general ' sociology? It is, no doubt, true that all the forces of society are in a constant state of interaction ; the system of government, the standard of morality, the condition of the fine arts, religion and superstition, all operate on eco- nomic facts. Economic history furnishes endless examples of the injurious effects of bad government, low morality and intolerant or debased religion. But every one knows , that a debased religion is one thing and a debased currency \ another, or more generally, that the domain of economic history can be separated from the history of the constitu- tion, of law, of morals, and of the church, though all have an economic side. The simple truth is, that whilst there are a number of social sciences which have attained a high degree of development, both from the historical and the theoretical point of view, general sociology is best described as an aspiration. The economist regards man as a being who produces, distributes, exchanges, and consumes wealth, and considers him as a member of a society, one of the objects of which is to deal with wealth. This is not the only object of political union, but it is sufficiently important to be studied separately. No economist imagines that wealth can be treated quite independently of other social phenomena; but he is in no worse position than any other man of science ; in the actual world we get no complete isolation. "N<> science," according to Bastiat, who was, it is true, more celebrated for observing harmonies than differences, " has natural and unalterable boundaries. In the domain of ideas, as in the domain of facts, all things are bound up and linked together ; truths run into one another, and there is no science which in order to be complete might not be made to include all. It has been said with reason that to an infinite intelligence there is but one single verity ; it is our weakness which obliges us to study separately a cer- 14 PRINCIPLES OF POLITICAL ECONOMY. tain order of phenomena." Accordingly the economist fixes his attention on wealth, and only considers other social factors as far as they appreciably affect wealth : as in every other science minor causes are neglected. Just as according to the traditional English view politi- cal economy is not to be subsumed under sociology, neither ( is it to be conjoined with ethics. In my opinion one of the greatest merits of the old English school is the sharp I distinction drawn between economic laws and moral ideals. Political economy on this view classifies and explains cer- tain social facts, and discovers their laws and relations, just as the natural sciences deal with phenomena of a different order. Thus, starting with private property and freedom ipf competition as existing facts, we may discover certain laws of rent, profits, and wages ; but whether this distribu- tion of the nation's wealth is morally just or unjust is rele- gated, together with the question wherein justice consists, to ethics. It is, no doubt, part of the business of political economy to estimate the influence and the powers of gov- ernments in altering this hypothetical distribution ; it is within its sphere to point out the objects governments have had in view in the past, or still have in the present, in making laws and regulations affecting wealth ; it may estimate how far these objects have been attained and the difficulties in the way of their attainment ; and similarly it may deal with the functions of various industrial bodies, such as agricultural communities, trade-unions, and paro- chial and municipal authorities. But all the time we are in the domain of facts; we are discussing how wealth is affected by various forms of organisation, restraining and modifying self-interest and competition. We may even go further without losing sight of the positive character of the science. We may pass from the present to the future, and consider the consequences and effects of various changes proposed as regards wealth ; we may examine the real meaning of these proposals, and the adaptability of the means suggested to the ends desired. INTRODUCTION. 15 But we are still dealing with facts in so far as we con- sider these opinions and proposals as possible reforms. Opinion, we must remember, especially in matters of dis- tribution, has real force ; the opinion of the multitude on a mathematical problem is a very different thing from its opinion on a question of practical politics. There is room in political economy for a chapter on Utopias, although it would be well to follow the example of Adam Smith, and give more attention to the actual than to the ideal. 1 It may also be observed that these discussions on Socialism and similar topics have a didactic value, in that they make clear by way of contrast the meaning of present institutions and methods. Those who have no idea of Socialism have generally an inadequate notion of private property. Beyond this stage, on the traditional English lines, the province of political economy, considered as a science, does not extend. At the same time, seeing that most writers on the subject are familiar with ethical systems in general, and adherents of one in particular, it is natural that as opportunity arises, attention should be directed to the moral side of economic facts and institutions. In the same way, a judge, whilst laying down the positive law applicable to any case, may express his own moral approval or disapprobation, and a writer on natural science may easily be led into reflections on natural theology. But experience shows that it is desirable to interpret the laws of nature and the laws of the statute-book with a careful avoidance of moral or theological bias ; and economic laws demand an equally rigorous impartiality of judgment. Whether we refer to the interpretation of the historical past or the actual present, we easily find examples of the danger of being influenced by ethical or religious notions in the examination of economic phenomena. 1 Compare Adam Smith's treatment of the Mercantilists and Physio- crats in Bk. IV., the space allotted being in the proportion of thirty to one. See, however, Oncken's criticism : (Eurres de Quesnay, Introduction. 16 PRINCIPLES OF POLITICAL ECONOMY. Adam Smith's ideas on natural theology, in spite of his extraordinary command over facts, led him to exag- gerate the benefits, and to underrate the disadvantages, of the system of natural liberty, and even vitiated, in some instances, his historical judgment. In the case of his immediate followers, this bias in favour of individual freedom made people callous to the industrial anarchy which preceded the factory legislation and the develop- ment of trade-unions. They were persuaded that if things were left to themselves, the best possible solution would be attained. They did not know that their opinion was, to a great extent, a superstition based upon an optimistic system of natural theology. But a superstition, the origin of which is lost, is generally doomed to decay, and at present the ideal of maximum freedom has fallen into disfavour. We seem, indeed, to be rapidly adopting the presumption that individuals, if left to themselves, are capable of everything bad, and that government manage- ment is capable of everything good. The suspicion is gaining ground that competition is an evil which must be met at every point by organisation. The principle of the ' greatest happiness of the greatest number' having lost touch with the 'invisible hand,' 1 by which, on Adam Smith's view, the individual was 'led to promote an end which was no part of his intention,' now seeks support in the visible hand of popular government, and literally the vox populi is being substituted for the vox dei. 'tw -irH' s*K&rC&&irvL_, . On a question of this kind there is no final appeal either to principles or authority; every writer must choose\for himself the quantity and quality of the moral reflections which he deems most suitable for illustration, ornament, or instruction. It is sufficient to say that for the purposes of this treatise political economy is regarded as a positive science, the object of which is to unfold principles, to dis- cover uniformities, and to trace causal connexions, and not 1 P. 199, MTulloch's edition. INTRODUCTION. 17 to lay down precepts, set up ideals, or pronounce moral judgments. On this view the connexion of political econ- omy with practice is extremely variable according to the nature of the subject. In other words the laws of political economy may be divided for practical purposes into several distinct species. There are some, such as the law of diminishing return to land in its simplest form, which partake, as Mill said, of the character of physical laws. No amount of ardour and self-sacrifice can enable a limited area of land, with a certain system of agriculture, to sup- port more than a certain number of people ; and we still find in the world some examples of famines, and many of agrarian pauperism. There are other economic laws which, to a great extent, depend upon human institution, and may be counteracted, or modified, by human agency. Such, in the main, are the laws of the distribution of wealth, although, as will appear subsequently, even in this case the arbitrary and optional element as a matter of fact is not so preponderant as might at first sight appear. There are other laws which are properly hypothetical ; that is to say, given certain conditions certain results follow. Thus to assert that successive issues of inconvertible paper, other things remaining the same, will lead to an inflation of prices, is as true as to say that successive applications of heat will expand metals. In either case counteracting causes may intervene, but practically that amounts to a change in the conditions. There are also economic laws which are simply generalisations founded on observed facts, and are merely explanations of past or present condi- tions. In these cases the practical application will depend upon the usual requirements necessary for the extension in place or time of empirical laws. 1 Take, for example, the generalisations as regards the results of various systems of land tenure. It only remains to add, that to speak vaguely of any proposal, as contrary to the laws of political economy, is 1 Cf. Mill's Logic, Bk. III., Ch. XVI. 18 PRINCIPLES OF POLITICAL ECONOMY. necessarily ambiguous, and the condemnation has no value until the ambiguity has been removed. Laws of political economy, in the popular sense of the term, vary in force from the laws of nature to the opinions of dead men. 5. The Methods of Political Economy. The methods of political economy are closely connected with the view taken of the subject-matter, and as the result of a pro- longed controversy between rival schools, it may now happily be taken for granted that we ought to adopt different methods according to the particular problem, or department, under discussion. Speaking broadly these methods may be divided into two great groups, different names being employed according to the stress laid on cer- ( tain special characteristics. The most general opposition is implied in the terms deductive and inductive. In the deductive method we start with certain general principles either axiomatic, or derived from other sciences ; we deduce, or draw out, particular laws ; and, in order not to be left in the land of hypotheses, we add the process of verification with the view to the discovery of any disturbing causes. The great advantage of this method is found in the com- plexity of social phenomena, and in the difficulty of making experiments. A good example is furnished by the theory of money and prices. It would be manifestly hopeless to begin with a collection of tables of prices the greater the accumulation the greater would be the confusion. Before we can arrange the facts we must have certain guiding principles. We may assume, for example, that given certain conditions, and certain modes of dealing with money and goods, the range of prices will vary with the quantity of standard money. With this as a provisional hypothesis, we may refer to the broad facts of monetary history, and thus be led to discover a number of supple- mentary, counteracting, or disturbing causes. It may happen, indeed, that some of these causes are of greater importance than the original principle ; but the fact still remains that a working hypothesis of some kind is re- INTRODUCTION. 19 quired. The great danger of the deductive method lies in the natural aversion to the labour of -verification. When a principle appears to be obviously true the exponent is apt to consider that one illustration is sufficient, the illus- tration itself often being hypothetical. Another danger is that sufficient attention may not be given to the selection of principles, and that especially with the aid of mathe- matics these principles may be elaborated beyond the possibility of practical application. At the same time, however, it must be remembered that in all the deductive sciences advances have been often made without reference to narrow views of utility, and yet in the end these advances have been of great practical value. Political economy is certainly indebted to some of the labours of mathematicians which for a time were neglected as curious and visionary. 1 In the inductive method we are supposed to start with particular facts and ascend to general principles. Here the danger is that the facts are accumulated without any rational system of classification, and that we never get beyond a collection of materials. Hitherto, however, it must be confessed that in political economy this danger has not received any conspicuous illustration, and in most cases when induction has been attempted the result has been of theoretical, as well as of practical, importance. This is especially true of those forms of induction usually styled historical and comparative. Even the Annals of Commerce of Anderson and Macpherson, although the method of arrangement is merely chronological, have borne good fruit, and the works of Thorold Rogers, although his guiding principles were too often taken from an extreme form of current politics, are of the highest value. The attention which has been recently bestowed upon eco- nomic history, as will be shown by numerous examples in the course of this work, has led to important modifications 1 See the interesting and pathetic preface to Cournot's Revue Som- maire. 20 PRINCIPLES OF POLITICAL ECONOMY. of previously accepted theories. It must be observed, how- ever, that the field of economic history is far too wide to be included in a survey of principles. An attempt to intro- duce at every point the corresponding history, even of one country, could only lead to confusion. In conclusion 1 the reader may be warned that in the study of political economy he will meet with difficulties of various kinds. The analysis of complex conceptions, the definition of terms, and the statement of abstract prin- ciples, will demand at one time the kind of intellectual strain that is required in mathematics or analytical juris- prudence, whilst at another time it will be necessary to consider and balance a reasoned classification of a number of details drawn from history and statistics. 1 Compare for more elaborate treatment of the whole subject of this chapter, Scope and Method of Political Economy, by Dr. Keynes. BOOK I. PRODUCTION. CHAPTER I. UTILITY. 1. Meaning of Utility. In the introductory chapter it was pointed out that even material wealth cannot be regarded simply as consisting of ' things,' but must always be considered with an expressed or implied reference to, human wants. A term is needed to call attention to this ever-present human element in economic phenomena, and the practice of economists has fixed upon utility as best conveying the meaning. Utility in this sense indicates " the capacity to satisfy a desire or serve a purpose." It is thus the widest conception in political economy, and as it will be constantly referred to, requires careful investi- gation at the outset. It will be observed that the definition as given is much more extensive than the popular signification would sug- gest. In common thought, useful is often opposed to orna- mental, and thus utility, the corresponding substantive, might be supposed to be only applied to things which are instrumental in rendering the more solid and important services. But in political economy a thing, which in ordi- nary language might be spoken of as useless in itself, 1 possesses utility if it serves any purpose whatever. The definition of utility here adopted requires also to be distinguished from that which is the basis of the utilitarian system of ethics. It is true that many economists under the influence of this system have assumed that the satis- i Of. Mill, p. 5. 23 f.^jU t ( t 24 PRINCIPLES OF POLITICAL ECONOMY. faction afforded by utility will always consist in increasing pleasure or alleviating pain. But in the view taken in the present work of the relation of political economy to ethics this assumption is unwarranted and misleading. It is worth recalling that Bentham himself admitted that utility, in this narrow sense, was an unfortunately chosen word, 1 and it certainly ought not to bear this restricted and peculiar meaning in economic reasoning ; for it cannot be said, without begging the answer to a most difficult and disputed psychological question, that even in the produc- tion and consumption of wealth men are actuated simply by considerations of pleasure and pain. What is called, for example, the effective desire of accumulation consists of a group of motives which we have no right to assume J^- are purely hedonistic, just as we ought not to suppose that people are honest merely because it is the best policy. Still less in the distribution of wealth amongst the differ- ent classes and members of a society are we justified in taking for granted a particular system of moral philos- ophy. The institution of private property may or may not afford the greatest happiness to the greatest number, but it is certainly not necessary in political economy to treat private property only from that point of view. Mill, for example, in comparing the relative merits of Socialism and Individualism says that " if a conjecture may be hazarded, the decision will probably depend mainly on one consideration ; viz., which of the two systems is consistent with the greatest amount of human liberty and sponta- neity." 2 Whether maximum liberty would necessarily lead to maximum happiness, it is beyond the domain of political economy to determine ; from the economic stand- point utility must be regarded as morally colourless. 1 " Utility was an unfortunately chosen word. The idea it gives is a vague one. Dumont insists on retaining the word. He is bigoted, old, and indisposed to adopt what is new, even though it should be better." Bentham's Conversations, Works, Vol. X., p. 682. 8 Principles, Bk. II., Ch. I., 3. PRODUCTION. 25 The danger involved in restricting the meaning of utility to pleasure and pain is well illustrated by the following passage from Jevons, who more than any one professes to make utility the basis of economics. " My present purpose," he writes at the conclusion of his chap- ter on the relation of political economy to moral philoso- phy, "is accomplished in pointing out this hierarchy of feeling and assigning a proper place to the pleasures and pains with which economy deals. It is the lowest rank of feelings which we here treat. The calculus of utility aims at supplying the ordinary wants of man at the least cost of labour." * On this view not only is utility reduced to a balance of j pleasure and pain, but economic utility is confined to the f lowest rank. A little reflection, however, will show that this division into higher and lower is purely arbitrary, and receives no sanction from the writings of the most eminent economists. Adam Smith, for example, discussed the economy of sup- plying the wants of a nation in defence, justice, education, and religion. 2 Mill again observes : " After the means of subsistence are assured, the next in strength of the personal wants of human beings is liberty ; and unlike the physical wants which as civilisation advances become more moder- ate and more amenable to control, it increases instead of diminishing in intensity as the intelligence and the moral faculties are more developed." The popular hostility to political economy and the pre- vailing notion, as exemplified in the writings of Mr. Rus- kin, that it is essentially immoral are largely due to the assumption that economists only deal with motives of the lowest rank. Take, for example, Mr. Ruskin's description of the teaching of the modern political economist: "As no laws but those of the devil are practicable in the world, 1 Similarly Professor Marshall speaks of political economy as dealing with the ' ordinary business of life.' 2 \Vealth of Nations, Bk. V. 26 PRINCIPLES OF POLITICAL ECONOMY. so no impulses but those of the brute (says the modern political economist) are applicable in the world. Faith, generosity, honesty, zeal, and self-sacrifice are poetical phrases. None of these things can, in reality, be counted upon ; there is no truth in man which can be used as a moving or productive power. All motive force in him is essentially brutish, covetous, or contentious. His power is only power of prey: otherwise than as the spider he cannot design; otherwise than as the tiger he cannot feed." 1 It is needless to say that this opinion is not sup- ported by quotations from any economist of repute. 2. Economic Utility. If, however, the term utility is to be used in the wide sense indicated by the definition just given, it is plain that political economy can only deal either with certain kinds of utilities, or with utility in general in certain aspects. Now economic utilities, it is generally admitted, are distinguished by three charac- teristics : they are the result of labour, they are appropri- ated, and they are exchangeable. Labour, property, value, are in succession of fundamental importance in produc- tion, distribution, and exchange respectively, and will require careful analysis subsequently. In the meantime, however, a sufficient account must be given to throw light on the nature of economic utility. Labour, then, may be simply muscular and almost automatic, or it may involve the highest strain on the intellectual and moral faculties ; the distinction turns not on the quality of the labour (whether higher or lower), but upon its association in general with the other two characteristics noted. Thus many forms of sport require severe muscular exertion and considerable technical skill ; but labour of this kind is not economic (except indirectly), because the results are in general capable neither of appropriation nor of exchange. 1 Selections from the Writings of John Buskin, p. 372. Contrast with this passage the treatment of Economic Motives by Dr. Keynes (Scope and Method of Political Economy}. See, also, Professor Marshall's Principles (2d edition), p. 147. PRODUCTION. 27 Again, to go to the other extreme, many strivings after self-culture and religious and moral ideals involve labour of the highest kind ; but in this case also political economy has in general little to say except indirectly. In other words, there are various personal qualities of the highest utility to the possessor which lie beyond the domain of political economy. On the other hand, there are certain gifts of nature (notably land) which, although not the result of labour, form part of the economic foundations of society. In this case, however, there is scope for appropriation and ex- change, and in general these natural sources require labour for their exploitation. If the gifts of nature, either owing to their abundance or their character, are exempt from appropriation and cannot be exchanged, they also claim little attention from the economist except indi- rectly. They are not, however, altogether excluded, be- cause, as, for example, in the case of climatic influences, they are often closely associated with economic utilities proper. Of appropriation, as characteristic of economic utilities, it is not necessary at this stage to say more than is implied in common thought. It may, however, be well to observe that the conception is not limited to the private property of individuals. In all communities many important eco- nomic utilities, or forms of wealth, have been appropriated by the state or by various local bodies. Again, from the economic standpoint, it is often convenient to regard skill and other qualities of labour, even when labour is free, as capable of appropriation. 1 , The third characteristic of economic utilities, namely, value, is encrusted with difficulties. Most English econo- mists, since Adam Smith, have abandoned the expressions " value in use " and " intrinsic value " as meaning on 1 Just as rent may be regarded as the sale of the use of land for a time, the payment being by instalments, so of labour and wages. Cf. Maine's Village Communities, pp. 189, 190. 28 PRINCIPLES OF POLITICAL ECONOMY. analysis no more than utility, and they have accordingly confined the term " value " to " exchange value." Now it is plain that exchange necessarily involves two terms at least ; that is to say, we can only express the exchange value of one thing in relation to one or more other things. In early, or rather hypothetical, stages of society, when barter is assumed to be the rule, we may suppose that a person anxious to sell an ox, or an ass, offers it for so many sheep or women, or other forms of primitive wealth ; that is to say, he offers a series of alternatives in the matter of payment. But in modern, and we may say in histori- cal, 1 societies a standard of comparison has been adopted ; and when we speak simply of the exchange value of a thing, the correlative term is " money." 2 Thus value be- comes price. It is with utilities that have a price that political economy is mainly concerned, and it is princi- pally owing to the possibility of accurate measurement thereby introduced, that the advance of political economy as an exact science that is to say, as distinct from a col- lection of empirical truths is to be attributed. " Every science," says Clerk Maxwell, "has some instrument of precision which may be taken as the material type of that science which it has advanced, by enabling observers to express their results as measured quantities. In astronomy we have the divided circle ; in chemistry, the balance ; in heat, the thermometer ; while the whole system of civilised life may be fitly symbolised by a foot-rule, a set of weights, and a clock." To these symbols the economist can justly claim that a piece of standard money should be added. Money is not only of practical use in the measurement and exchange of wealth, but is of fundamental importance in economic theory. At a later stage the theory of money 1 For the very early and general adoption of some monetaiy standard, see Professor Ridgeway's learned and interesting work, Origin of Cur- rency and Weight Standards. 3 "Money" is not necessarily gold or silver, or even metallic. For the present, we may say with Professor Walker, " Money is that money does." Money, p. 405. PRODUCTION. 29 and prices will require special and detailed examination, but for the present it will be assumed that, under any given conditions, the general purchasing power of money is constant. In other words, the general level of prices will be considered stable relatively to any change in the particular price of some particular commodity or service. This assumption is perfectly legitimate, when we wish to investigate the value of one thing compared with " things in general," because, if the relative values of all other things (including money) are assumed to remain unchanged, we may say that general prices are unchanged. Again, the effect of a movement in the price of one com- modity upon the general average of an indefinite number may be neglected. In certain inquiries, however, as for example, in estimating the accumulation of wealth over a considerable period, it may be absolutely necessary to make due allowance for any change in the value of money itself as shown in general movements of prices. To resume : the utilities with which political economy deals have in general three distinctive marks labour, appropriation, and exchange-value. Thus, on the one side, we exclude the so-called inner personal qualities, the en- joyment of which cannot be separated from the individual, and, on the other, the so-called outer free utilities which owing to their abundance or nature cannot or need not be economised. 1 It is plain that economic utilities (even when thus restricted), corresponding as they do to an infinite variety of human wants, may for different purposes be classified in a great many different ways. As one of the best known examples, we may take the division adopted by Mill, 2 viz. : 1, Utilities fixed and embodied in outward objects ; 2, those fixed and embodied in human beings ; 3, those not fixed or embodied in any object, but consisting in a 1 See Dr. Smart's Introduction to the Theory of Value, p. 17, for an explanation of this use of " economise." 2 Principles, Bk I., Ch. III., 2. 30 PRINCIPLES OF POLITICAL ECONOMY. mere service rendered. This classification, however, is open to the criticism that it is based upon two different principles. The distinction between the first two classes rests upon the legal and natural division between things and persons ; but in the third class the differential charac- teristic is found in the fact that ' the services only exist whilst being performed, and the pleasures while being enjoyed.' It cannot, however, be too often insisted on that utility is a relative term, and has no meaning without reference expressed or implied to the satisfaction of human wants. A natural outward object has no utility in itself ; like human beings, it can only render services or give pleasures which perish in the act. If, then, it is thought desirable to distinguish between the durable qualities of persons, and the fleeting services which from time to time they render, we ought also to distinguish between the qualities of things and the pleasures which they similarly furnish from time to time. In some parts of the subject, and especially in reference to Capital, it is necessary to call attention to the fact that certain qualities of persons and things are comparatively permanent, and that their efficacy is not exhausted by a single use. It is also desirable, in discussing certain problems, to distinguish between the utility actually derived from a thing, as, for example, mountain scenery from which the public are excluded, and the potential utility that might be derived. But in general it is not necessary to emphasise the logical dis- tinction between the capacity to render a service and the actuality of performance, whether in persons or things. 1 On the other hand, the distinction between the utilities afforded by things and those afforded by persons is of fundamental importance. In popular usage, the term wealth is generally confined to the class of material things. There is, however, the authority of Adam Smith 1 When the question is discussed whether skill is wealth, it is assumed that the skill actually is or may be used, and similarly of commodities. PRODUCTION. 31 for including under the fixed capital of a country (and therefore under its wealth) the acquired and useful abili- ties of its inhabitants. Economic utilities, then, may be divided into personal (or immaterial) and material; and for practical purposes it is often convenient to substitute for the technical expression ' economic utilities,' the more familiar term wealth, and to speak of wealth as being either material or immaterial. 1 1 For many years I was in the habit of using the. classification given below, adapted with some modification from that of A. Held's Grundriss. UTILITY (as defined above) j Inner or inward (personal) Outer or outward (non-personal) FREE ECONOMIC II II (not the result of labour, not Wealth (as defined above) appropriated, not exchanged) | INCOME = CAPITAL = (for immediate con- (for satisfaction of sumption) future needs) CHAPTER II. PRODUCTION. 1. Definition of Production. The controversy as to the meaning of the terms productive and unproductive is now only of interest as showing the difficulty there is in clearing fundamental conceptions from the popular growths with which they are entwined. As soon as it became clear that the terms production and productive were elliptical expressions involving the idea of a some- thing produced, and that the correlative term was wealth, the question became identical with the proper definition of wealth. To avoid any ambiguity at the outset for the term wealth we may substitute as explained in the last chapter * economic utilities,' but after this preliminary ex- planation, there will be little danger in speaking of imma- terial (or personal) and material wealth as the objects of production. There is nothing to be gained by confining the term pro- ductive to the production of material wealth. Man can- not produce matter in the sense of creating it ; he can only adapt it to his wants or desires ; that is to say, he can endow it with utility of some kind ; and in the process of adapta- tion he requires the constant co-operation of natural forces. In every form of production nature labours with man ; this is equally true of immaterial as of material wealth. The education of a child requires not only labour on the part of the instructor, but time must be allowed for natural growth. We may force education as we force plants, but only within certain limits. 32 PRODUCTION. 33 The objects of education are, it is true, only partly eco- nomic ; but we can make a logical distinction between those human qualities, such as skill which will command a price and those of a purely moral or religious character, just as in many material objects we can distinguish be- tween their economic and their artistic qualities, e.g., in ships, houses, bridges. 1 In some forms of immaterial wealth, the utility must be regarded as embodied not in one but in a number of indi- viduals in a combination or organisation. A good ex- ample, though in some respects liable to misrepresentation, is furnished by the credit institutions of a country. The " money " of the money market of the United Kingdom, less than five per cent of which is actually held in coin, is an economic utility of the first magnitude embracing some .600,000,000. Broadly speaking this large sum has been accumulated through certain economies gradually devel- oped in the organisation of industry. The result has only been obtained through labour of a very high quality pro- ducing certain effects on the characters and habits of men, combined with great improvements in the means of com- munication. The latter, it is plain, depend not only on man's ideas and morality, but upon the gifts and forces of nature. 2. The Production of Material Wealth. The nature of material production as the more simple may be first considered. In general there are three requisites: Land and Natural Agents, Labour, and Capital. It is usual to point out, that, in the rudimentary stages of society, land and natural agents must have been of dominant importance, that labour must have consisted mainly in the appropriation of the natural fruits of the earth, and that capital can hardly be said to have existed. On analysis, 1 " Another of the strange and evil tendencies of the present day is to the decoration of the railroad station. . . . Will a single traveller be will- ing to pay an increased fare on the South Western because the columns of the terminus are covered with patterns from Nineveh? " RCSKIN. 34 PRINCIPLES OF POLITICAL ECONOMY. however, this account of the origins of economic produc- tion seems to amount to no more than the assumption that men were at one time a little lower than bees, and a little higher than cattle in making provision for their wants. But nothing is more delusive than to construct a priori primitive societies by making abstraction of certain obvious elements of our present civilisation. Political economy has certainly little to gain from the observation of hypo- thetical societies in which capital is supposed to be un- known or of no importance. The evidences of prehistoric times, as well as the most rudimentary forms of present day barbarism, show that primitive man sought to aid his labour by tools, and to guard against his future wants by stores. The origin of many of the most useful arts is lost in antiquity. At a very remote period, as the relics of the tombs show, men could work in stone, and found leisure to indulge in making ornaments. Long before the invention of writing made history possible, certain races were far advanced in agriculture, in transport by land and water, in spinning and weaving, and in building. That is to say, even in prehistoric times, capital in its most narrow and obvious sense of material wealth devoted to production was an essential element in production. Nor was it fundamental merely in the sense that isolated individuals found instru- ments and stores of service ; the capital that an individual can make, or save, unaided by his fellows is of small im- portance. 1 It is only because the little increments of improvement are communicated and handed down that progress in the industrial arts is possible. This again involves a certain degree of security and association ; and the kind of association is found to depend to a great extent on the kind of material capital, and on the state of industrial knowledge. A good illustration of this position is to be found in the development of agriculture 1 " Mankind can never have lived as a mere struggling crowd each for himself." Tylor's Anthropology, p. 402. PRODUCTION. 35 as shown in an admirable manner by Mr. Seebohm, in his work on the English Village Community. As a particular example we may take the description of the co-aration or common ploughing of the Welsh. 1 The team for the great plough, as in England and Scotland, was of eight oxen. Those who joined in this primitive co-operative ploughing were obliged to bring a proper contribution of capital whether oxen or irons. The land ploughed was divided into erws (something less than a modern acre), and the produce of the partnership was divided according to im- memorial custom by settled rules. " The first erw ploughed was to go to the ploughman, the second to the irons, the third to the outside sod ox, the fourth to the outside sward ox, the fifth to the driver, the sixth, seventh, eighth, ninth, tenth, and eleventh to the other six oxen in order of worth, and lastly, the twelfth was the plough erw for plough-bote, i.e., for the maintenance of the wood-work of the plough." An occasion will arise subsequently 2 for further reference to the remarkable consequences extending down to the present century of the adoption in prehistoric times of peculiar methods in the applica- tion of capital to land. It is sufficient, at present, to ob- serve that for many ages agricultural systems moulded the conditions of life of the great mass of the people at least as rigorously as the modern factory system shapes the present conditions of life of large classes of opera- tives. In the open-field system there was a dead level of uniformity in the methods of cultivation. " The facts recorded with pen and ink on the venerable pages of the Domesday Book are for the most part still legible, scored deeply on the surface of the soil by the Domesday plough. . . . As we gaze on these actual acres, roods, and furlongs, we notice that they are seldom straight, but lie in great sweeping curves, shaped usually like a reversed capital J or capital S, the long, narrow fields of the present farms thus perpetuating the graceful curves of the acres curves 1 Vill Comm., p. 121. 2 Bk. II., Ch. VI. 36 PRINCIPLES OF POLITICAL ECONOMY. which can only be due to the twist of the great eight-ox plough as the leading oxen were pulled round, in prepara- tion for the turn as they approached the end of the furlong, by the villein at the near side of" the leading ox. Thus the acre strips, which were originally straight, were bent round in the course of centuries of continuous ploughing, the curvature being increased every year by an inch or two of further deviation, till at length the extremities of the furlong became shifted several feet from their original position." 1 It is no exaggeration to say that this system has left an impress upon the land itself, which is almost geological in character. We can see its traces still in the terraced slopes of hills, in the peculiar shapes of our pres- ent fields and closes, and in the direction of our country lanes, that ' meander hither and thither, taking curious rectangular turns, as if round the squares of a chess- board.' It would be easy to accumulate evidence in proof of the position that, leaving out of account the hypothetical origin of mankind, and taking the actual progress of civili- sation, capital has, from the earliest times, been one of the requisites of material production. It may be said that capital is itself the result of labour and nature, and, there- fore, not fundamental ; it would, however, be equally true to say that labour is originally the result of nature, and thus to argue that nature alone is a primary requisite. We find that historically, as shown by the shifting tribal households, capital emerged long before the appropriation of land. Even so late as the Domesday survey in England, it is probable that it was rather the possession of oxen for tillage than of land itself which constituted wealth, and that, accordingly, the system of taxation recorded in Domesday was based on the number of ploughs rather than on the number of acres. 2 Again, in the thirteenth century, accord- 1 Domesday Survivals, by Canon Isaac Taylor, in Domesday Studies, Vol. L, p. 60. 2 Domesday Studies, Vol. I., p. 52. PRODUCTION. 37 ing to Thorold Rogers, on ordinary arable land, stock was three times the value of the land, when adequate stock and farm implements were kept upon the land. 1 It is difficult to get rid of the idea that in the produc- tion 2 of material wealth there is something in the nature of a creative process. It may, then, be advantageous to give an example in which this false suggestion is not present. Such is the case, for instance, with transport, the object of which is to put into things the utility of being in the place where they are wanted. The same idea is sometimes expressed by saying that the act of production is not complete until the commodity is in the hands of the consumer. Accordingly in a modern society the toilers on the sea, the railroad, and the highway ; those who by the telegraph, the postal service, and the newspaper assist in the organisation of industry; the wholesale merchant, the retail shop-keeper, and the errand-boy, all these are as much engaged in the production of material wealth as the labourers on a farm, or the miners in a coal-pit. Just as matter in the wrong place is dirt, so wealth in the wrong place is waste. 3. Production of Personal or Immaterial Wealth. It is admitted that economic terms are in general incapable of precise and rigid definition, and that a debatable margin must be left between economic species. Such is the case with material and immaterial, or personal, wealth. One of the earliest, and also one of the most enduring, forms of capital was living capital meaning thereby not only oxen and sheep but men, women, and children. The animal first tamed by man was man. " But of property," says Aristo- tle, 3 " the first and most necessary part is that which is best and chiefest ; and this is man." An interesting ex- 1 Six Centuries of Work and Wages, Vol. I., p. 52. 2 For an excellent account of the distinction drawn by the Physiocrats between productive and unproductive, see Oncken's (Euvres de Quesnay, Introduction. 8 Economics, Book I., Ch. V. 38 PRINCIPLES OF POLITICAL ECONOMY. ample of the perpetuation of this form of living capital is furnished by the case of the colliers and salters in the south of Scotland in the reign of George III. " The persons engaged in these occupations were at this time bondsmen ; and in case they left the ground or the farm to which they belonged, and as pertaining to which their services were bought or sold, they were liable to be brought back by a summary process. The existence of this species of slavery being thought irreconcilable with the spirit of liberty, colliers and salters were declared free and put upon the same footing with other servants by the Act 15, George III. Ch. 28 (1775). They were so far from desiring, or priz- ing, the blessing conferred on them, that they esteemed the interest taken in their freedom to be a mere desire on the part of the proprietors to get rid of what they called head and harigald money payable to them when a female of their number by bearing a child made an addition to the live stock of their master's property." 1 They were not effectually emancipated till 1799. 2 The substitution of freedom for slavery, and generally of contract for status, does not from the point of view of pro- duction alter the nature of economic conceptions. Even as regards material wealth, only part, and the least im- portant part, of productive processes can be understood, if, at the same time, adequate attention is not paid to the pro- duction of immaterial, or personal, wealth. Under this heading are included those utilities produced in human beings and classed as immaterial, because a mental element is always present and often predominant. Such are the intellectual and moral qualities which are of economic importance. Thus the technical skill of the artisan, the scientific knowledge of the engineer, the trustworthiness of the banker, and the practical wisdom of the trader must all be considered as the results of economic production. The labour of man, aided by the results of previous labour in 1 Sir Walter Scott's Redgauntlet, Appendix, Note Y. 2 See McCulloch's Adam Smith, p. 172. PRODUCTION. 39 the shape of intellectual and moral capital, works upon the natural qualities of the mind. The productive power of industrial societies depends far more upon the growth of knowledge and the progress of morality than upon the mere accumulation of material capital. 1 We have to con- sider not only the science that can be inscribed in books but also that which can only be written on the mind ; whether or not the true religion can only be transmitted from living man to living man may be a matter of dispute, but there can be no dispute that a large part of our prac- tical knowledge of all kinds must be so transmitted. This has been admirably brought out by List. " The present state of the nations is the result of the accumulation of all discoveries, inventions, improvements, perfections, and exertions of all generations that have lived before us; they form the mental capital of the present human race." 2 The truth may also be illustrated from the negative side. It is through the loss not of their material but of their mental capital, in many cases, that great civilisations have been destroyed. In other cases progress has been arrested not through want of material accumulation but by the rigidity of codes and customs. " A state of high civilisa- tion is difficult to keep as well as to gain. This is the teaching of facts and not a speculation. So, also, it is not a probability, but a well-known fact, that the seats of civili- sation change. The centres of progress in the world are not always the same. They seem rather to be forever shifting. . . . Taking the whole world into view, it would seem as if there were always nations which are losing, and nations which are gaining, a high civilisation, and as if the seats of culture were forever changing." 3 The rigidity of primitive law, sa} T s Sir Henry Maine, 4 has prevented, or arrested, the progress of far the greater part of mankind. 1 Cf. infra, Ch. XI. 2 National System of Political Economy (English translation), p. 140. 8 Past in the Present, by Sir A. Mitchell, p. 214. See the same work for many illustrations of degradation and reversion. 4 Ancient Law, p. 77. 40 PRINCIPLES OF POLITICAL ECONOMY. Personal services have always been and still are of primary economic importance. In ancient times all who could afford it had their wants ministered to by slaves, and their modern representatives expend a large part of their revenue on personal attendants of various kinds. In the census * for England and Wales for 1881 the persons returned as indoor domestic servants were no fewer than 1,286,668, and exceeded the next most numerous group, the agricultural labourers, by some 50 per cent. Out of every 22 persons in the population of all ages 1 was an indoor domestic servant. Of females above 5 years of age, 1 in 9 was an indoor servant. In London, the proportion to population was 1 to 15, in Brighton 1 to 11, and in Bath 1 to 9. This account does not include coachmen, grooms, gardeners, etc., but simply indoor servants in private families. If these and similar classes of servants were included the total figure would rise to 1,803,810. 2 From the earliest times, also, the production of ideas has been recognised as involving labour, and ideas were appro- priated and possessed exchange value. The priests, poets, and judges may have offended against our ideas of religion, art, or duty; but they produced ideas after their kind, and the production of these ideas then, as now, rested partly on an economic basis. The priest had his share of the offering, 3 the minstrel his share in the feast, and the judge his reasonable or customary fee. " In the Homeric trial scene described by Homer, as depicted on the shield of Achilles, the dispute, as if expressly intended to bring out the characteristics of primitive society, is not about prop- erty, but about the composition for a homicide. One per- son asserts that he has paid it, the other that he has never received it. The point of detail, however, is the reward 1 Census Report for 1881, p. 33. 2 In his Budget speech, llth April, 1892, Mr. Goschen pointed out that the lawyers earned a larger aggregate income than the cotton manu- facturers, and the doctors than the owners of coal mines. 8 See Leviticus passim. In modern times (1719) John Law paid the Abbfi Tenc.in 10,000 (in shares) for converting him to the Catholic faith. PRODUCTION. 41 designed for the judges. Five talents of gold lie in the middle to be given to him who shall explain the grounds of decision most to the satisfaction of the audience." 1 The economic characteristics and effects of the produc- tion of ideas are notably exemplified in the Roman Catholic Church in the mediaeval period. The ideas of the ex- pounders of canon law 2 tinge all the regulations and prac- tices of commerce. The condemnation of usury of money naturally led to the condemnation of ' anything that is lent upon usury,' and thus everything in the nature of speculative dealing came under the ban of the law. Things were supposed to have a just price, almost as a species of natural attribute. The church received, consumed, and administered a large part of the annual revenue of the county. " Over and above the rents of their estates the clergy possessed in the tithes a very large portion of the rents of the other estates of every kingdom in Europe. The revenues arising from both these species of rents were the greater part of them paid in kind; in corn, wine, cattle, poultry, etc. The quantity exceeded greatly what the clergy could themselves consume ; and there were neither arts nor manufactures for the produce of which they could exchange the overplus. Both the hospitality and the charity of the ancient clergy, accordingly, are said to have been very great. They not only maintained al- most the whole poor of every kingdom, but many knights and gentlemen had frequently no other means of subsist- ence than of travelling about from monastery to monastery, under pretence of devotion, but in reality to enjoy the hospitality of the clergy." 3 But it would be grossly unfair to suppose that the me- diaeval churchmen simply received vast payments for insin- cere mummeries and degrading superstitions. Thorold 1 Maine's Ancient Laic, p. 377. See also Professor Ridgeway's Ori- gin of Currency, etc., p. 8. 2 An excellent account of the economic aspects of Canon Law is given in Ashley's Economic History, Vol. II., Ch. VI. 8 Wealth of Nations, Bk. V., Ch. I. 42 PRINCIPLES OF POLITICAL ECONOMY. Rogers, who had a profound knowledge of mediaeval life, and certainly no trace of ecclesiastical bias, writes : " England was planted full of monasteries and of capitular bodies. The monks, especially those of the Benedictine order, the most learned and respectable of the older bodies, generally chose some locality of great natural beauty, be- ing often settled in some poorly peopled district. Here they built their magnificent churches and set up their con- ventual buildings. The towns were full of these ecclesi- astical corporations whose history and whose downfall is recorded in the vast work of Dugdale. They had, to be sure, the fatal gift of wealth, but they seem to have used their wealth well. They were founders of schools, authors of chronicles, teachers of agriculture, fairly indulgent land- lords, and advocates of generous dealings towards the peas- antry. ... It is, however, very difficult to put oneself in the place of those whose devotion to saints and reverence for relics seems to us so credulous and so degrading, but it would be intolerable to believe that the respect which they professed and imposed on others was a mere hypo- critical grimace put on to serve the most sordid and dis- honest ends." 1 It may, perhaps, appear paradoxical to speak of the pro- duction of religious ideas, and the performance of ecclesias- tical ceremonies, as resting upon an economic basis. Those who think so may be referred to a chapter of Adam Smith 2 which has, unfortunately, not received sufficient attention from his successors. They will there find abundant proof that economic influences have been of the greatest impor- tance in the growth and decay of religious sects and estab- lishments. " Had the Church of Rome," says Adam Smith, " been attacked by no other enemies but the public efforts of human reason it must have endured forever. But that immense and well-built fabric which all the virtue and wis- dom of man could never have shaken, much less have over- 1 Six Centuries of English Work and Wages, p. 361. 2 Bk. V., Ch. I. PRODUCTION. 43 turned, was by the natural course of things, first weakened and afterwards in part destroyed." By the natural course of things, he alludes to those purely economic causes, which were also the chief agents in the break-up of feu- dalism. 1 With the progress of the arts and the spread of commerce, the clergy, like the barons, discovered that they could spend their whole revenues upon their own persons ; and, accordingly, their charity gradually dwindled, and their hospitality became less profuse. In these circum- stances the price paid for their spiritual services seemed extravagant. " The inferior ranks of the people no longer looked upon that order, as they had done before, as the comforters of their distress, and the relievers of their indigence. On the contrary, they were provoked and disgusted by the vanity, luxury, and expense of the richer clergy, who appeared to spend upon their own pleasures what had always before been regarded as the patrimony of the poor." In precisely the same way, Adam Smith shows that the education of youth, whether in schools or universities, to be effective, must be placed on a sound economic basis. " The proper performance of every service seems to require that its pay or recompense should be, as exactly as possible, proportioned to the nature of the service. If any service is very much under-paid, it is very apt to suffer from the meanness and incapacity of the greater part of those that are employed in it. If it is much over-paid, it is apt to suffer perhaps still more by their negligence and idleness." To suppose that those who are engaged in the laborious profession of teaching are, or ought to be, purely under the sway of philanthropic motives is a preposterous and mischievous fiction. A country would soon relapse into barbarism which had to rely solely on the voluntary efforts of amateurs in its schools and universities. Similarly, as regards other professions, the object of which, economically considered, is to produce ideas or render services, we gain 1 Cf. infra, Bk. II., Ch. VIL 44 PKINCIPLES OF POLITICAL ECONOMY. far more than we lose, if we follow the example of Adam Smith, and apply the analogies suggested by the production of material wealth. To be qualified to produce ideas or render services, a man must have certain natural gifts : he must labour these gifts as the farmer labours the soil ; and he must not only spend material capital for his sus- tenance during the process of ' waiting,' but he must avail himself of the mental capital of the past, and, in general, pay for its usance. It may then be repeated, with addi- tional force, that in all kinds of production there are three requisites : Nature, Labour, Capital. Hitherto it has been assumed provisionally that these terms were sufficiently intelligible for the purpose in hand. In the following chapters, however, a deeper analysis will be found necessary ; but before this is attempted it seems desirable to give a classification of the various kinds of production, and also to describe in broad outline the char- acteristics of economic consumption. 4. Classification of the various Kinds of Production. The basis of classification must be estimated by the end in view, and my present purpose is to give a more definite meaning to the foregoing analysis of production by enum- erating the principal species. Production, then, may be divided into two great divisions, viz., material and imma- terial, and each of these may be again subdivided. I. Under material production we include (a) mere occu- pancy ; in other words, the apprehension or appropriation of the gifts of nature. The principle is in many respects analogous to the legal principle of first occupancy which has had such important and unexpected consequences. 1 It is usual to give examples from that early stage of society in which men are assumed to live by gathering fruits and slaying animals. The economic principle, however, is best illustrated by the case of land even in recent times. " The beginning of our national career found us," says Professor Walker of the United States, "in possession of a vast 1 Cf. Maine's Ancient Law, Ch. VIII. Blackstone, Bk. II., Ch. I. PRODUCTION. 45 public domain, on which our earlier financiers looked as an important fiscal resource. A wiser policy, however, prevailed, and although that original domain has been multiplied fourfold as the result of war or purchase, it has been almost as rapidly reduced by alienations, all wise and patriotic statesmen agreeing, with almost perfect unanim- ity; that no fiscal advantage that might accrue from hold- ing the public lands as a source of revenue could be weighed against the interests to be secured by these lands becoming the individual property of actual cultivators." Practically speaking, any one who will undertake to bring land into cultivation can still obtain it gratuitously. An interesting example is furnished from early societies, in the remarkable passage quoted by Mr. Seebohm from one of King Alfred's treatises, in which he describes how a clear- ing is made in a forest and a new ham gradually erected. The first stage in the open-field system of cultivation was the measuring out of the land by rods. The great contest between champion and several (that is to say between the open fields with common cultivation and enclosures), from the fifteenth century downwards, is essentially an example of the principle in question. The man who made an enclosure put a far greater utility into the land than was represented by the palings or wall which he erected. All such appropriation may generally be regarded as in itself a kind of production constituting sometimes the first and sometimes the final stage in the adaptation of a thing for consumption. 1 (6) Under the next class we may place agriculture and the extractive industries generally, such as mines, fisheries, forestry, and the like. By these we obtain food, and the necessaries of life, as well as the raw material for the most extravagant luxury. (c) The manufacturing class may be thought to require no illustration. It may, however, be useful to mention 1 This point has been admirably worked out by the Duke of Argyll : Scotland as it was and as it is, and The Unseen Foundations of Society. 46 PRINCIPLES OF POLITICAL ECONOMY. that the term must not be confined to the modern factory system. 1 Flint implements, for instance, were manufac- tured on a large scale in early times in Scotland from materials imported from a distance. 2 Under this class in the broad meaning of the manipulation of raw material, we must include also the building of houses, ships, and bridges. (rf) It has already been explained that transport is a species of material production, and thus we easily reach the conclusion, that, in a sense, exchange, like appropria- tion, may be considered as a kind of production. The writer to whom in this classification 3 I am princi- pally indebted also places under material production the functions performed by money, banks, and credit generally. It seems difficult to escape this inclusion if exchange is admitted, but perhaps the best plan is to place this kind of production in the debatable margin (always allowed for in economic classification) between material and immaterial. II. Under immaterial production we include (a) the creation of ideas which possess economic characteristics, as, for example, in literature, art, and science. The institution of copyrights and patents shows that such ideas are capable of appropriation, and possess exchange value, and it is only by an honourable fiction that they are not supposed to require labour of an irksome kind. (b~) We also include the services rendered which have the necessary economic marks, practically, that is to say, those services for which wages of some kind are paid, but which are not directly embodied in a material product. Such, for example, are the services of domestics and re- tainers of all kinds ; of those employed in assuring defence and security ; of teachers, ministers of religion, actors and singers, and of all those engaged in the administration of justice and the government of a nation. 1 See History of the Factory System, Cooke Taylor. 2 Wright's Roman, Celt, Saxon. 8 Kleinwachter, in Schonberg's Handbuch, Vol. I, p. 190. PRODUCTION. 47 Finally it remains to be added that for certain purposes it is useful to make a distinction between production (whether material or immaterial) for home use and for sale, a topic which will require some discussion in the treatment of wages in the next book. APPENDIX TO CHAPTER II. NOTE 1. Sir Walter Scott, in the introductory epistle to the Fortunes of Nigel, has explained, in an amusing manner, the economic side of authorship and other professions. " Captain Clutterbuck. Yet it is generally held base to write from the mere motives of gain. Author. It would be base to do so exclusively, or even to make it a principal motive for literary exertion. ... So the lawyer who pleads, the soldier who fights, the physician who prescribes, the clergyman, if such there be, who preaches without any zeal for his profession, or without any sense of its dignity, and merely on account of the fee, pay, or stipend, degrade themselves to the rank of the sordid mechanic. Accordingly, in the case of the two learned faculties at least, their ser- vices are considered as unappreciable and are acknowledged, not by any exact estimate of the services rendered, but by a honorarium or volun- tary acknowledgment. But let a client or patient make the experiment of omitting the little ceremony of the honorarium, and mark how the learned gentlemen will look upon his case. Cant apart, it is the same thing with literary emolument. ... I might, perhaps, with as much truth as most people, exculpate myself from the charge of being either of a greedy or mercenary disposition ; but I am not, therefore, hypocrite enough to disclaim the ordinary motives on account of which the whole world around me is toiling unremittingly to the sacrifice of ease, comfort, health, and life." The same idea is excellently conveyed in the autobiography of Benvenuto Cellini, who was a rare mixture of the creative artist and the acquisitive man of business. NOTE 2. On the comparative value of Material and Immaterial Wealth. I have shown in a paper (in the Economic Journal, March, 1891), entitled the Living Capital of the United Kingdom, that, if we apply precisely the same methods as are applied by Mr. Giffen in his calcula- tions of the material wealth, the value of the people of the country is roughly about five times as great as that of their lands, houses, and material possessions generally. See infra, Ch. XI. CHAPTER III. CONSUMPTION. 1 1. Meaning of Consumption Objective and Subjec- tive. "Consumption," says Adam Smith, "is the sole end and purpose of all production ; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. This maxim is so perfectly self-evident that it would be absurd to attempt to prove it." 2 This passage, like many others by the same writer, has been quoted and applied without any reference to the context, or even to the general argu- ment of the whole work. It has often been assumed that if only things become cheaper nothing more need be taken into account. It is hardly credible, though perfectly true, that the excessive hours of labour of little children, before the factory legislation, were often justified on the ground of the cheapness of the commodity produced. The nature of the relations between production and consumption is best seen by expressing both in terms of utility. Production, as shown in the last chapter, con- sidered from the objective point of view, consists in putting utility into things, or more generally of creating utility; whilst, from the subjective point of view, the producer in the process sacrifices so much utility, or in the more familiar language of Adam Smith, he lays down a certain portion of his ease, his liberty, and his happiness. 1 The general reader may be recommended to pass over the latter part of this chapter. It simply gives the writer's reasons for not accepting certain new doctrines. 2 Bk. IV., Ch. IX., conclusion, p. 298, McCulloch's edition. 48 PRODUCTION. 49 The consumer, on the other hand, by the act of con- sumption regarded objectively destroys so much utility, whilst subjectively he gives himself so much utility in the satisfaction of his wants or desires. Now the vast majority of the people of a country are producers as well as con- sumers, and it is easy to see that they might gain in utility by diminishing the pains of production as well as by in- creasing the pleasures of consumption. Theoretically, then, in the manner attempted by Jevons, it seems possible to construct a calculus of utility according to which we may procure the greatest amount of what is desirable at the expense of the least that is undesirable. Before pro- ceeding, however, to examine the foundations of this doctrine, to which in recent times so much attention has been directed, something must be said of the teaching of older writers on the kinds of consumption. 2. Kinds of Consumption. 1 In the advance of civilisa- tion the use of material goods according to the increasing variety in the needs of man is divided more and more into special branches. In fact, we have a division of use, which both as cause and effect, is intimately connected with division of labour. Take, for example, the case of wool. Not only are there many kinds according to differences in breed and in methods of rearing, but it is well known that a modern wool-stapler will make several assortments from the same fleece. 2 Opposed to this, we have the principle of the combination of use. Many of the anomalies of the laws affecting railways in the United Kingdom may be traced to the fact, that it was at first assumed that traders would provide their own carriages, and manage the load- ing and unloading themselves ; but it soon became apparent that a combination of use was more advantageous. Other 1 In this section I am much indebted to Roscher's Political Economy, Bk. IV. 2 " In the same fleece diversity of wool Grows intermingled and excites the care Of curious skill to part the several kinds." Dyer's Fleece. 50 PRINCIPLES OF POLITICAL ECONOMY. illustrations are furnished by public libraries, parks, thea- tres, baths, hospitals, and, in fact, there are numberless goods of which it is not necessary to make the use exclusive. Sometimes the utility of a thing is destroyed wholly or partially, not by any change in the thing itself, but by a change in the minds of those who use it. Thus books which at one time were in demand may be converted into waste paper, and dresses once fashionable may be practi- cally useless. 1 On the other hand, sometimes the work of consumption is performed by nature altogether against the wishes of the possessor of the commodity. Thus break-waters, embankments, and docks are wasted by the powers of wind and water ; 2 buildings crumble away under atmospheric influences ; useful plants and animals are de- stroyed by living plagues ; whilst in addition to the accumu- lated effects of slowly working causes, we have occasional catastrophes through hurricanes, floods, and earthquakes. The deeper analysis of the nature of production and consumption has put an end to the controversy as to the line of division between productive and unproductive con- sumers. " There is no production possible without con- sumption. The embodiment of a special utility in any substance is a limitation of its general utility. Thus, for instance, when corn is baked into bread it can no longer be used for the manufacture of brandy or starch. When, therefore, consumption is a condition prerequisite to pro- duction it is called productive." 3 Thus we are forced to the conclusion that all consumption must be regarded as productive which is a means directly or indirectly to the satisfaction of any economic want. 4 Unproductive con- 1 This kind of consumption is called by the Germans Meinungs- Consumption. 2 It is astonishing to observe the massive masonry which is necessary in certain parts of the drainage system of the English fens. Roscher, Bk. IV., Ch. I., p. 211. 4 I have not thought it advisable to introduce the division of goods according to the order in which they rank in respect to the consumer. Cf. Marshall's Principles, Bk. II., Ch. III. PRODUCTION. 51 sumption, on the other hand, embraces every economic loss, every outlay for injurious purposes, and every superfluous outlay for useful purposes. There is no need to dwell upon the fact that much of the consumption of all producers is unproductive. There are many difficult and important problems con- nected with consumption, but they are so intimately asso- ciated with other topics, that, in my opinion, it is undesirable to treat of consumption in a separate department. 1 It seems necessary, however, in view of the stress laid by almost all recent writers on one of these problems, to examine it at this stage with some care, although it will involve to a certain extent the anticipation of the theory of value. The reader may be invited to return to the follow- ing sections in connection Avith the treatment of the problem in question in the third book. The problem referred to is the distinction between total and final (or marginal) utt7ty,and the modes by which they are measured. I regret that on this subject I must put myself in apparent opposition to recent works of great and deserved reputation. 3. The Measurement of Economic Utility. It used to be a common-place of political economy that ' things which have the greatest value in use may have little or no value in exchange.' This statement implies that utility cannot be measured by price. The most original contribution, however, to economic theory, since Mill adopted this quota- tion with approval, is to be found in the development of the conception that utility can be measured by price. This radical change of opinion is founded upon the distinc- tion with which in this country the name of Jevons is associated between total and final (or marginal) utility. The idea of measuring such an intangible variable as utility by such a concrete reality as price is certainly very fas- cinating. 1 See Political Economy, by C. S. Devas, Bk. I., Chs. IX., X., for an excellent account of the nature and kinds of consumption. Also, article " Consumption n ' in Palgrave's Dictionary, by the present writer. 52 PRINCIPLES OF POLITICAL ECONOMY. Bentham, who with rigorous logic had expressed all utilities, from poetry to push-pin, in terms of pleasure and pain, and had denied any real qualitative difference, had not advanced in the measurement of the quantity of utility beyond the enumeration of certain important causes of difference. These are indicated with sufficient accuracy in his mnemonic lines : i" Intense, long, certain, speedy, fruitful, pure, Such marks in pleasures and in pains endure." Take the corresponding substantives suggested by these adjectives, and you have the elements of the hedonistic cal- culus. Intensity, duration, certainty or uncertainty, pro- pinquity or remoteness, are obviously to be considered in making an estimate or comparison of different pleasures. Fecundity, or the chance a feeling has of being followed by feelings of the same kind ; that is, pleasures if it be a pleasure, pains if it be a pain ; purity, or the chance it has of not being followed by feelings of an opposite kind ; extent, or the number of persons to whom it extends and who are affected by it ; these are three other elements added by Bentham. 1 Now it may be admitted that pleasure and also utility in the broader sense vary according to the circumstances indicated. But, on the other hand, it may be urged that it is one thing to point out causes of variation and quite another to measure the effects ; and generally it is not the best or the simplest method to measure the effects, by indirectly measuring the causes, and then effecting a sum- mation. The most skilful physician, for example, could not measure a rise in temperature by considering the various causes in operation, whilst the patient himself by 1 Jevons characteristically observes that ' these three last circumstances are of the highest importance as regards the theory of morals ; but they will not enter into the more simple and restricted problem which we attempt to solve in Political Economy.' On the other hand, Professor Sidgwick makes economic distribution that which secures the greatest happiness of the greatest number. PRODUCTION. 53 means of a thermometer could determine it to the tenth of a degree. So long then as utility, even when reduced to pleasure, was supposed to be estimated by calculating the strength of a number of variable causes, accurate measure- ment seemed to be impossible. 1 But a rise or fall in price is as definite and measurable as a rise or fall in temperature, and if utility can be measured by price, then we have at last obtained the hedonometer (or pleasure-gauge) which from Plato downwards philosophers had sought for in vain. 4. Total and Final, or Marginal, Utility Exposition. In a work of this kind exposition must precede criticism, and it is best to begin with the simplest case. Let us take then the utility, in the sense of immediate pleasure, de- rived from the consumption of some commodity say water. Pouring water down a person's throat may under certain conditions of thirst give the most intense pleasure; the same process carried to an extreme formed one of the most exquisite tortures of the inquisition. It is obvious in this case that the degree of utility or disutility to be derived from swallowing or being made to swallow an additional mouthful of water depends inter alia upon the amount already swallowed. We may assume that the degree of utility or pleasure diminishes by continuous ' gradations, and passes through a point of indifference into disutility or pain which again increases by continuous gradations. The utility derived from the last portion swallowed is called the final or marginal utility, and the sum of the utilities of all the successive portions swallowed is the Itn1 utility. In the case of water drunk by a free agent, we may assume that consumption would go on to the point of indifference, or, more technically, to the point when the marginal utility becomes zero. The same rule would apply to the consumption of all articles of which the consumer had a supply practically unlimited. 1 See the admirable discussion of the difficulties of a hedonistic calculus in Professor Sidgwiek's Methods of Ethics, Bk. II. & 54 PRINCIPLES OF POLITICAL ECONOMY. As already pointed out, however, economic utilities are limited, and acquisition must precede consumption. For the present purpose we may next assume that the mode of acquisition is in general by the expenditure of money. It seems, also, both true and necessary to state further that the money at the disposal of every person is limited. It may, then, be laid down as a general law, that the more a person acquires of anything the less will he be inclined to pay for an addition to his stock. After a certain point is reached he will prefer to keep his money for future needs, or to spend it upon some other commodity. In this way we are able, to some extent, to connect utility with price. For we may assume, taking for the sake of emphasis some neces- sary of life, that the utility of the first portion acquired is so great that for that portion a person would be willing to pay a very great price ; but as with successive acquisitions the utility of each portion becomes less, so, also, the price which he is willing to pay becomes less. The price of the last portion bought may thus be said to measure the utility of that portion for this individual under these conditions (that is assuming a continuous diminution in utility). In other words the marginal price measures the marginal utility. The argument may, perhaps, be made clearer by consider- ing the gradual expenditure of a person's store of money. In this case it is convenient to state the law of diminishing utility in a reverse way, and to say, that as the stock of money decreases through expenditure, the marginal utility of the last portion retained continuously rises. It follows, then, that the further acquisition of a commodity for con- sumption is checked in a double manner, because as the utility of the next portion to be bought decreases, the utility of the price of money to be given for it increases. It must be remembered, also, that in highly civilised societies, at any rate, there is practically an infinite number of modes of spending a given sum of money. 1 1 This seems better than saying that only a small part of a person's ex- penditure is given to one thing. PRODUCTION. 55 This variety of choice imposes a further check on the ac- quisition of a particular thing. Thus it is no uncommon thing for people to stint themselves in what are deemed necessaries in order to satisfy some other desire, which may range from love of ornament or display or indulgence to feeding and clothing the destitute. We are now in a position to see that it is the marginal and not the total utility of a thing which governs a person's additional expenditure. Half a pound of bread it might be thought must always possess more utility for a poor man than a quarter of an ounce of tobacco ; but when we see that he spends regularly a penny a day on tobacco we | know that he thereby gains, or, what is the same thing, thinks he gains more satisfaction than by buying an addi- tional pennyworth of bread. The utility of the first loaf of his daily bread may, indeed, be infinite ; but the marginal utility of successive loaves rapidly diminishes, and it is the marginal utility that determines marginal expenditure. It follows, also, that when it is said that a thing may have great value in use but little value in exchange, value in use must be understood to refer to total utility. * To a person who has satisfied most of his wants to reple- tion, the utility of a diamond might well be greater than the utility of an addition to his food, clothes, or furniture, or than that of the retention of a fifty-pound note. 5. Total and Final Utility Criticism. We may appear now to have reached the conclusion that marginal utility, at any rate, can be measured by money. In reality, however, all that has been established is, that any individ- ual, who is guided by enlightened economic interest, ought so to adjust his expenditure, that the marginal utilities of all the commodities acquired are equal to one another. If they are not equal he has spent too much on some things and too little on others. Even this is only true on the assumption that (as in the usual curve) we have a continu- ous diminution in the utility of each successive portion. To this we may add, if we further assume that the person 56 PRINCIPLES OF POLITICAL ECONOMY. in question saves some of his money, that the marginal utility of the last penny added to his savings ought to be equal to the marginal utility of the last penny given to his expenditure. In this way, it is true, we bring in another marginal utility ; but the utility of the penny cannot be said to be measured by a penny. The utility to any person of a penny depends upon what he has and what he wants, and is subject to constant variations according to changing circumstances. The point of the criticism may be brought out more clearly, if we assume, as at one time was generally as- sumed, that money is regarded solely as a means of effect- ing exchanges. We may thus look upon a man as earning money by labour, and, in reality, exchanging his labour against commodities by means of money. In this case we should suppose that he would go on working until the dis- utility or discomfort of earning another penny was just greater than the utility, or comfort, of spending this extra penny. Here, however, we are only comparing the utility (say) of an extra pipe with the disutility of an extra quar- ter of an hour's labour. The penny does not measure either the utility or the disutility. It throws no light whatever on the question how much pleasure he feels in smoking, or how much pain in working. If utility (in other words, value in use as distinct from exchange value) were measurable in terms of money, then we ought to be able to measure, in terms of money, not merely the utilities that possess exchange value, but others equally. Sunshine, for example, is limited, and we can express the variations in the utility derived from it in various ways. But we certainly cannot express even the marginal utility of sunshine in terms of price. The simple truth is, that money measures exchange value, and exchange value does not depend only upon utility. 1 1 It is worth noting that those who have most logically tried to carry out the measurement of utility by price have been forced to the conclusion that value depends only on utility. Cf. Dr. Smart's Theory of Value, p. 8. PRODUCTION. 57 The marginal utility of any commodity, as explained above, influences the demand of a particular individual, and this demand is one of the elements that influences the price of the article. In the same market we may sup- pose that the whole stock of a commodity will be sold at the same price ; but it needs no demonstration that the acquisition of the article will give very different degrees of utility in different cases. If we assume that all the buyers have the same incomes and the same tastes, and, in fact, are in all respects similar, then we may, indeed, say that the utilities also will be equal ; but this is simply begging the question. 6. Consumer s Rent. If, however, marginal utility cannot be measured by money, still less can total utility. In this case, clearly, we never get beyond the range of Ivypotheses. We assume that for the first portion pur- chased an individual would be willing to give so much more than the actual price he is called upon to pay, and that he will go on purchasing so long as the utility of acquisition of successive portions is not less than the utility of the money expended. In the typical case, in which perfect continuity is assumed, we may suppose that he will continue to buy until the final utilities of all his purchases are just equal. It may well happen, however, that even for the last portion which he actually buys he would be willing to give much more money. To keep all his fires going in the best manner, a very rich man might give fifty pounds for the last ton of coal necessary, and yet use no more if the price fell to one pound per ton. 1 In any case, we may, of course, calculate, as regards every portion acquired, the excess of the hypothetical price over the actual price, and we may add up the differences and call the sum total consumer's rent. But all we do is, by an ingenious but dcubtful analogy, to illustrate the advan- tages of cheapness and plenty. It is, however, always 1 In this case there is discontinuity, but such discontinuity is very common. 58 PRINCIPLES OF POLITICAL ECONOMY. dangerous to give the appearance of reality to what is purely hypothetical, and the appearance of definiteness to what is indefinite. An example will, perhaps, show in the clearest way that the measurement of total utility by price is purely illusory, even if we take only a single individual. Suppose, then, that a person has 100 a year. Rather than go without a minimum of subsistence, he would give the whole 100 for this purpose. But, as the vegetarians tell us, he can live on sixpence a day, or roughly (say) on .10 a year. Therefore his consumer's rent on this part of his expendi- ture is at least 90. He has also <90 left after satisfying his hunger. Suppose, now, that to clothe himself decently, he would be willing to spend 60 of this 90, but that he can get all he requires for 10. Here, again, there emerges on the commodity of clothing a consumer's rent of 50. And he has still 80 left. Of this, suppose he was will- ing to pay 30 for furnished rooms, rather than do with- out shelter, but again let the actual cost of the rooms be 10. In this case, he obtains a consumer's rent of 20. Thus, taking only three branches of expenditure, a person with 100 a year has gained a consumer's rent of 160, and has still 70 left to spend. By taking various assump- tions similar to those above, the consumer's rent, measured in this way from the wealth obtained for his 100 may be still further increased. But such a method of measure- ment seems to me purely hypothetical and illusory. Of what avail is it to say that the utility of an income of 100 a year is worth (say) 1000 a year? If, as is sometimes done, instead of taking a limited income, and assuming that a man can give no more, even to save his life, we say that the utility of the minimum of food is practically infinite, the idea of measuring total utility or consumer's rent by money becomes still more unreal. For, now, all that we mean is, that if a man had infinite wealth, he would spend it all to save his life. But this is little better than a reminiscence of the wisdom of Job. PRODUCTION. 59 It must be observed that the criticism in this section is not directed against the qualitative distinction between total and final utility. As will appear later on, the real advantages of exchange and the nature of demand are elucidated by taking account of this difference. It is the attempt to measure utility (in either form) in terms of money that appears to me delusive. For, strictly speak- ing, we can never get beyond one individual, and that too, under hypothetical conditions. Whether or not a man will buy another portion of some commodity depends not only upon how much he has already of that thing, but upon how much money he has still to spend ; and this, again, depends partly upon how much he has already spent, and partly upon how much he had to begin with. Thus, even with the same individual, a change in the cost of some things must change his so-called subjective valuation of other things. The money measure, then, of the final utility of anything varies not only with his desires and means of satisfaction in respect of that thing, but with his desires and means in respect of all other things. All, then, we have left is the assertion that at any moment a person will not buy more of anything if he thinks he can do better by applying the money in some other way. The utility of the last piece of money given may be said, no doubt, at that time to that individual, as already explained, to equal the utility of the last portion of the commodity acquired; but to say that he likes one thing just as well as another tells nothing as to how much he likes either. When we try to introduce a number of other people, our conclusion is still more barren ; for now all we are entitled to say is that somebody, at some point, will find that the price is such that he is willing to purchase just one more portion at that price. But of the rest of the multitude, some would have been satisfied to pay a higher price for their last portion, and some are not willing to pay that price. So that the price measures the final utility 60 PRINCIPLES OF POLITICAL ECONOMY. to this individual (and others exactly similar), and as before, it only measures it in terms of the utility he and they attach to the money spent. In my opinion, then, the attempt to measure utility even marginal utility and a fortiori total utility in terms of price is misleading. It is a case of the use of an inappropriate conception. 1 It seems to me far preferable (as the older writers did) to emphasise the fact that price measures exchange value, and not utility. To do other- wise is to maintain a constant struggle with paradoxes, explanations, and hypotheses. Some of these are noticed in the appendix to this chapter. 7. The Measurement of Utility by Labour. Adam Smith has been severely criticised for the assertion that labour is ' the ultimate and real standard of value.' The truth appears to be that in discussing the difference between ' the real and nominal price of commodities, or of their price in labour and their price in money,' he passes un- consciously between objective exchange value and subjec- tive value in use (or utility). So far as exchange-value is concerned, the criticism offered by Mill 2 appears to be just; and it has been strengthened by recent work on index numbers and other methods of measuring changes in the purchasing power of money. No simple absolute measure of exchange value is attainable. " Why," asks Ricardo, 3 " should gold, or corn, or labour, be the standard measure of value, more than coals or iron? more than cloth, soap, candles, and the other necessaries of the labourer? why, in short, should any commodity, or all commodities together, be the standard, when such a standard is itself subject to fluctuation in value?" The answer, however, to this question, and the consideration of the 1 An illustration may be taken from heat. A clinical thermometer will measure accurately the heat of the body but it says nothing of the corresponding feeling. Heat is one thing as a mode of motion another as a sensation. 2 Cf. Mill, Bk. III., Ch. XV. Ricardo, Ch. XX., p. 166. PRODUCTION. 61 difficulties involved must, in the present work, be trans- ferred to the department of exchange value. But as is partially admitted by Mill, Adam Smith is on firmer footing when he proposes to measure by labour, or a quantity of labour not exchange value, but value in use or utility. 1 " Equal quantities of labour, at all times and places, may be said to be of equal value to the labourer. In his ordinary state of health, strength, and spirits, in the ordinary degree of his skill and dexterity, he must always lay down the same portion of his ease, his liberty, and his happiness. The price [i.e., disutility], which he pays must always be the same, whatever may be the quantity of goods which he receives in return for it. [Here he passes to exchange value.] Of these, indeed, it may sometimes purchase a greater and sometimes a smaller quantity ; but it is their value which varies, not that of the labour which purchases them. At all times and places, that is dear which it is difficult to come at, or which costs much labour to acquire, and that cheap which is to be had easily, or with very little labour. Labour alone, there- fore, never varying in its own value [disutility], is alone the ultimate and real standard by which the value [exchange'} of all commodities can, at all times and places be estimated and compared." In this passage we have, at any rate, a standard sug- gested for the measurement of utility, which is not open to the same objections as a "shilling's worth of happiness." The more ease, liberty, and happiness, a man is willing to lay down to acquire a thing, so much the greater must be supposed the utility to him of the thing; and we are com- paring similar things the sacrifice of happiness with the acquisition of happiness. We may suppose, according to I the law of diminishing utility, that he goes on laying down happiness with a decreasing gain, but still some gain, until he reaches the point of indifference. By a stretch of the scientific imagination, we may suppose that 1 MeCulloch's Edition, p. 15. 62 PRINCIPLES OF POLITICAL ECONOMY. a prudent man, well skilled in the use of the hedonistic calculus, might express all utilities whatever in terms of the quantity of labour he would be willing to give for them, and if we further assume the possibility of different people adopting the same subjective measure, we arrive (hypothetically) at a perfect standard of utility. It is, however, quite clear on reflection that the appearance of exact measurement (although not contradictory as in the former case) is equally illusory, and it has only been intro- duced for the purpose of showing the difficulties involved. "A franc," says Ricardo, "is not a measure of value for anything, but for the quantity of the same metal of which francs are made, unless francs and the thing to be measured can be referred to some other measure which is common to both. This, I think, they can be, for they are both the result of labour, and, therefore, labour is a com- mon measure by which their real as well as their relative value may be estimated." 1 If, by value in the first phrase, Ricardo had intended utility, he would have exactly expressed the criticism implied in this section, a franc is not the measure of the utility of anything; but the next clause shows that he is referring to objective ex- change value, which he supposes to rest upon cost of production, and this again upon quantity of labour. It must be understood that in the present section I do not profess to give an exhaustive and critical account of the opinions of the three great writers named upon the ques- tion in hand. My object is rather to indicate that what they have failed to make clear calls for close attention on the part of the reader. The exaggerated stress recently laid on the doctrine of final utility, and its consequences, must be my apology for the length and difficulty of this chapter. 1 Of. Ricardo, p. 171. PRODUCTION. 63 XOTE ON PROFESSOR MARSHALL'S TREATMENT OF CONSUMER'S RENT. If the idea of Consumer's Rent were intended simply to explain the varying degrees of satisfaction derived from spending money in various ways in other words, if it were intended simply for the explication of certain conceptions the hypothetical character of the measurements assumed might be passed over. But Professor Marshall definitely states that ' the exact measurement of the Consumer's Rent in a market has already a great theoretical interest, and may become of high practical importance.' * He applies the notion also to such definite concrete problems as the imposition of taxes and the bestowal of bounties. "It might even be to the advantage of the community, that the government should levy taxes on commodities which obey the law of diminishing return, and spend part of the proceeds on bounties to commodities which obey the law of increasing return." 2 Stripped of its technical phraseology, this amounts to saying that a government, with advantage to the com- munity, might tax bread and coals to give a bounty on calico and matches ; or more generally, that it might tax agricultural and min- eral produce to give bounties to manufactures. A paradox of this kind is only presentable when arrayed in hypotheses, and it may be useful to notice some of the most prominent. (1) In the general explanation of the doctrine of Consumer's Rent (Bk. III., Ch. VI.) 8 it is stated: "There is a difficulty in estimating the total utility of commodities, some supply of which is necessary for life ; for instance, the utility of the food required to keep a man from starvation is indefinitely great. The best plan is, perhaps, to take that necessary supply for granted, and estimate the total utility only of that part of the commodity which is in excess of this amount." Surely it is a strange procedure to leave out of the total utility of necessaries all that utility which causes them to be called by that name. Again, if the utility of the first portion is ' indefinitely great,' when measured by price the price also 'must be 'indefinitely great.' But no man can give more than he possesses, and the conception of an indefinitely great 4 price is contradictory, since all incomes are limited. (2) It is further assumed (p. 182, note) in the preliminary state- ment that it is ' not necessary to take account for our present purpose of the possibility that the marginal utility of money to him might be i Principles, Vol. I., p. 186. 2 P. 508-11. 3 P. 181, Note. 4 Of course the standard, as usual, is assumed to be constant. When incon- vertible paper is on the point of being discarded as worthless, prices measured in that medium may be said to be indefinitely great. ' 64 PRINCIPLES OF POLITICAL ECONOMY. appreciably altered in the course of his purchases.' In the mathe- matical Note VI. (p. 753) this assumption is stated still more explic- itly, and made to rest on the ulterior assumption 'which underlies our whole reasoning, that the expenditure on any one thing, as for instance, coals, is only a small part of his whole expenditure.' The same position is taken up in the text (p. 393), although on the next page it is allowed that in markets for labour the exceptions are fre- quent and important, and that a workman in fear of hunger, and putting a very high marginal utility on money, may go on selling his labour too cheap. It is, however, clear that in all cases we must consider the marginal utility of money. Even the dealer, who looks to re-selling the article, finds that the more he has bought the less he can buy, and that his potential resources are diminished by every transac- tion, e.g., in a speculation for the rise on the stock exchange, or in laying in stores in view of a scarcity, or in buying with the view of extending his business. If we take the case of the ordinary consumer, the most obvious condition which he must always take account of is, that the more he spends the less he has to spend ; and apart from this the great mass of the people spend the bulk of their earnings on a very few commodities. The importance of this assumption may be gathered from the fol- lowing passage (p. 394) : " The theory of buying and selling becomes, therefore, much more complex when we take account of the depend- ence of marginal utility on amount, in the case of money as well as of the commodity itself. When we do this we are really reverting to the problem of barter, in which the changes in the marginal utilities of both commodities are, of course, prominent. As we have remarked, barter, though earlier historically than buying and selling, is really a more complex transaction, and the theory of it is curious rather than important." (See Note on Barter, p. 395.) But what if all exchange is barter? (3) In the general statement, at first (p. 183), we are -invited to " neglect for the moment the fact that the same sum of money repre- sents different amounts of pleasure to different people." The proced- ure is, of course, logically defensible if the neglected fact is afterwards introduced. But this is not the case except in appearance. First, the nation is divided into three classes rich, middle, and poor. Within these classes the units are supposed to be similar ; but it is expressly stated that the marginal utility of money is very different in the three groups, and what the difference is, is plainly indeterminate. Secondly, it ir maintained that what is true of a composite group at Leeds would be true of a similar group at Sheffield, and, for example, that a tax of 1 per head (or conversely an increase in income) would, on the whole, affect both groups equally. But the conclusion is purely formal ; the PRODUCTION. 65 important point is, that a tax of 1 per bead would impose burdens on the members of the community, varying from zero to the pains of starvation, eviction, beggary, and the like. The principle of equality of sacrifice cannot be simplified in the manner supposed. (4) On page 184 (note) it is stated ' that it is seldom possible to get the data necessary for drawing the demand curve complete.' But unless the demand curve is complete we cannot get the total utility or the consumer's rent ; above all, we cannot get the total utility to the community. (5) On page 503 (note) it is stated: "If, therefore, a given aggre- gate taxation has to be levied ruthlessly from any class, it will cause less loss of Consumer's Rent if levied on necessaries, than if levied on comforts." Logically, class must here again mean a group of similar units, and the argument so far is formal. The paradox is resolved only at the expense of reality. Under the supposition made of a ruth- less levy, practically the best mode of exaction would be by direct money payments. As a matter of fact, Professor Marshall himself, in criticising Jevons, really destroys his own position on Total Utility and Con- sumer's Rent. (See his note on Ricardo's Theory of Value ; Principles, Bk. V., Ch. XIV., p. 538.) Professor Marshall says, for example, that "the exchange value of a thing is the same all over a market, but the final degrees of utility to which it corresponds are not equal at any two parts;" and again, in conclusion, he writes: "Perhaps Jevons' antagonism to Ricardo and Mill would have been less, if he had not himself fallen into the habit of speaking of relations, which really exist only between demand price and value, as though they existed between utility and value." Professor Marshall seems to have attempted the task of supplying Jevons' theory with the hypotheses necessary to make it true. The complexity of hypotheses is so great that it may be expected to lead, as in similar cases in other sciences, e.g., astron- omy, to the abandonment of the central theory. No expansion of the formula, * the more we have the less we want,' can be a sufficient substitute for the enumeration of the many and various actual conditions which govern the consumption of wealth, and the prices of commodities and services. CHAPTER IV. NATURE. 1. The Functions of Nature in Material Production. Nature provides man with materials and powers, and in every country natural conditions are of fundamental importance in the production or acquisition of material wealth, although, in some cases, the importance of this ele- ment is apt to be overshadowed by the growth of capital and the organisation of labour. The wealth of Holland in the seventeenth century, which was the marvel of the world, was supposed to have been acquired in spite of natural disadvantages ; and John Law expressed a common opinion when he said : " If Spain, France, or Britain, or any one of them had applied to trade as early and upon the same measures as Holland did, Holland would not have been inhabited." But Holland had natural advantages of situation, without which it could not have become the entrepot between the North and the South and the East and the West. In England, at the present time, in spite of the predominance of trade and manufactures, natural conditions are of primary importance ; the coast line and rivers, the proximity of rich coal and iron fields, the tem- perate, moist climate, and the fertility of the soil, are still the foundations of the wealth of the nation. To take a larger example, the great trades of the world are carried on between regions adapted by nature for different kinds of production. Man may modify and control, but he can never dispense with the materials and the powers of nature. This propo- 66 PRODUCTION. 67 sition may, perhaps, appear too obvious to require explicit statement; but it is closely connected with a controversy which for a long period attracted much attention, namely, whether nature gives more assistance to labour in one kind of industry or in another. Locke, in his Essay on Civil Government, had emphasised the paramount importance of labour in the production of wealth. " I think it will be but a very modest computation to say, that of the products of the earth useful to the life of man, nine-tenths are the effects of labour; nay, if we will rightly consider things as they come to our use, and cast up the several expenses about them, what in them is purely owing to nature, and what to labour, we shall find that in most of them ninety-nine hundredths are wholly to be put to the account of labour." In this passage there is no doubt a confusion between value and utilit}- ; but a little later on he speaks of " nature and the earth as furnishing only the almost worthless materials as in themselves," and we may fairly assume that, in his opinion, the utility of most things is due far more to labour than to nature. The French Economistes or Physiocrats modified this general statement, and insisted especially upon the conceit, as Mill calls it, that Nature lends more assistance to human endeavours in agriculture than in manufactures. Mill himself is content to say that "the part which nature has in any work of man is indefinite and incommensurable. It is impossible to say that in any one thing nature does more than in any other. One cannot even say that labour does less." In the strict sense of the terms, this criticism may, perhaps, be considered just and relevant ; but, after all, that only amounts to saying that the question has been badly worded. An economic dis- tinction, which Adam Smith considered real and important, has probably some element of truth in it. The truth im- plied may, perhaps, be better indicated in the proposition that, to obtain commodities of equal utility, different quan- tities of labour are necessary according to variations in natural conditions. An obvious and important example 68 PRINCIPLES OF POLITICAL ECONOMY. is furnished by the phenomena on which economic rent depends. The same labour and capital applied to different soils give different returns according to the assistance afforded by nature. 'I have discussed this question in a separate essay 1 from which the following illustration is taken. Certain things are presented to man by nature, without any labour, except the mere labour of occupation, as it has been termed. If these things are limited, and satisfy human wants, they possess value ; and this value in proportion to the labour and capital expended in their acquirement may be very great. The labour of acquisition is saved by nature, or as Adam Smith says, nature does the chief part of the work. Capi- tal devoted to the production of indigo from the natural plants yields a very large profit, whilst the same amount of capital applied artificially by chemical methods will not pay its expenses. We may fairly say that the former method is more productive because nature labours with man. 2. Of the Grifts of Nature some are practically unlimited, others limited. The distinction between the unlimited and the limited utilities afforded to man by nature, as so often happens in economic classifications, is indicated by a line which varies in different times and places. This variation appears to be due to three circumstances: namely, the number of people who desire the utility, the impor- tance they assign to it, and the art or knowledge involved in its exploitation. Take, for example, the typical manor of the early mediaeval period. Generally, the use of the common pasture was without stint, and so long as the number of inhabitants was small, and their means of wintering stock unrestricted, there was no need for limita- tion even in the interests of the lord of the manor. 2 In 1 Introductory Essay to Wealth of Nations. See also my Tenants' 1 Gain, Ch. I. 2 Thorold Rogers' Six Centuries, p. 24. On the links of Dornoch, in Sutherland, I am told that there is no limitation to the number of horses and cattle imposed on the crofters, and there is no need for the reasons stated in the text. PRODUCTION. 69 many cases, also, the use of wood for building or instru- ments or fuel was also unrestricted, whilst, at the same time, the most savage laws prevented the pursuit of game however abundant. In general, as is shown in the case of fisheries, forests, commons, and the like, in the course of industrial progress, the limited class has constantly increased at the expense of the unlimited. In rare in- stances, however, the reverse has happened through the substitution of something better adapted for the purpose, or through a change in wants or desires. The best example is furnished by the recession of the " margin of cultivation " on land. In general, the immediate effect of great agricultural improvements is to make the cultivation of some inferior land no longer profitable. The economic result (as distinct from any merely legal question of appropriation) is that land passes from the class of the limited to that of the unlimited gifts of nature. A sim- ilar effect may follow on the substitution of one kind of produce for another, land specially adapted to the old produce not being suitable to the new. In the degradation of a race, from a higher to a lower stage of civilisation, the absorption of the limited into the unlimited class of natural powers and materials, is one of the best marked characteristics. Lands become wastes and cities become open quarries. The excavations of the cities of dead civilisations show how completely, under certain circumstances, nature may regain the mastery over man. In some cases, however, the relapse of cultivated land into waste seems to be due to the exhaustion of the natural fertility. In former times there were dense populations, self-supported, in vast areas of Africa and Asia Minor, and even in certain parts of Italy and Spain, of the pro- ductiveness of the soil of which we can at present discover only slender traces. 1 1 The Earth as Modified by Human Action. MARSH. Many inter- esting and detailed examples are given in this work of the oscillations between intensive cultivation and arid waste. 70 PRINCIPLES OF POLITICAL ECONOMY. A second distinction turns not so much on the abundance, or the scarcity, of the gifts of nature, as on the capability, or incapability, of exchange and appropriation. Thus the light and warmth of the sun, and similar beneficial climatic influences, may be described as free gifts of nature which cannot be economised, but they are bestowed in very different measures upon different parts of the world. The winds and the tides are amongst the most important motive- powers ; but they can only be used directly as nature fur- nishes opportunities, and the same forces may at one time be too strong, and at another too weak, for the purpose in view. Although, as already stated, political economy has, in general, but little to say with regard to utilities that do not possess the three economic marks, in considering the production of a nation's wealth, it is necessary to take a survey of the principal natural conditions by which it may be affected, both as regards its variety and its abundance. As already stated, these natural conditions are always of fundamental importance, although in general, the truth is only adequately realised on the occurrence of some great catastrophe. 3. The Natural Constituents in National Production. 1 The most important elements in the natural resources of nations appear to be the following: 1. Climate which affects directly the vegetable and animal products, and, indirectly, at least, the efficiency of human labour. Under climate we have to consider the temperature, including not only the average but the extremes of heat and cold in different times of the year, the moisture, again including not only the average but varying degrees at different times, the direction and force of the winds, and the healthiness or the re- verse of the atmosphere. Abundant illustrations of these various influences are given in works on commercial geography, 2 and the only difficulty is one of enumeration. 1 Cf. Schonberg's Handbuch, p. 198. 2 See Chisholm's Commercial Geography. PRODUCTION. 71 2. The superficial appearance of the country introduces several factors of importance ; mountains and plains re- spectively obstruct and facilitate trade ; forests may in some cases retard, in others accelerate the growth of wealth ; the coast may be indented with natural harbours, or unapproachable through rocks and sands. 3. The fertility of the soil, and the geological formation of the earth's crust are of obvious importance, the former as largely dominating the agricultural production, and the latter the mineral wealth of the country. The discovery of mines has often transformed a district within a few years (e.g., the gold mines of Australia and California), and the virgin soils of new countries have thrown out of cultivation the less favoured lands in the Old World. 4. Water must be considered under several aspects : as furnishing means of communication in lakes or navigable rivers, as necessitating large drainage works, as in the fens of England and Holland, as providing power for mills, or in recent times, as the source of electricity. 5. The situation of a particular country, as regards the rest of the world, and especially in relation to the great trade routes, has often been the principal factor in determining commercial supremacy. It will be observed that of these gifts and powers of nature, some (e.g., climatic influences and natural harbours) are practically unalterable by use, others (e.g., the soil) are partially exhausted and renewed, and others again (e.g., mines) are gradually exploited without renewal. As in most countries agriculture in some form is the most important element of national wealth, the preservation of the properties of the soil is of especial importance. The nature of various soils, and the methods best adapted for different cases, can only be adequately discussed in works on scientific agriculture. In its general aspects, however, the subject is of economic interest, especially with reference to the rent of land, and the growth of population, and will be treated at a later stage. CHAPTER V. LABOUR. 1. Twofold Meaning of Labour, and first of Subjective Labour. Labour is used in two different senses, which are most briefly described by the philosophic terms, sub- jective and objective ; that is to say, labour may be con- sidered, on the one hand, as involving a certain degree and kind of feeling on the part of the labourer, and on the other, as effecting a certain result in doing a certain amount of work. In general, the nature of the feeling involved in economic labour must be regarded as in itself painful, disagreeable, or irksome, or, at any rate, as causing a sense of effort and strain. Accordingly, as a rule, it is undertaken and endured with the view of some ulterior object, such as the satisfaction of present or future wants. In certain degrees of civilisation, however, the natural aversion to labour is overcome by compulsion and punish- ment in case of default. Thus, in ancient civilisations generally, almost all the labourers were slaves, and the inducement to work was the fear of penalties. In modern times, the labour of children is more often the result of obedience than of any hoe of reward. Many economists have been so much impressed by the hardship of labour, that they have explicitly described the exertion as essentially painful. 1 This position, however, appears too extreme. A man in full vigour of mind and body often takes real pleasure in his work, and certainly would find idleness irksome. Again, most writers have 1 Cf. Jevoiis' Theory, Ch. VIII., p. 163 ; and see his curve, p. 168. 72 PRODUCTION. 73 followed Adam Smith in mentioning, amongst the causes of differences of wages and profits, not only the disagreea- bleness, but the agreeableness of the employment. They have agreed, also, with him, that honour forms the greater part of the reward of all honourable professions ; and, in most cases, this honour is coincident with the labour, and is not of the nature of an order of merit bestowed like wages at the end of a certain period. On the other hand, Fourier and his followers have attempted to prove that, if work were properly distributed, it should always be directly pleasurable. Under existing conditions, 1 however, as in the past, there is no doubt that the mere pleasure of working would be quite inadequate even to carry on with efficiency the most honourable of regular employments. " In England," says Adam Smith, 2 "success in the profession of the law leads to some very great objects of ambition ; and yet how few men born to easy fortunes have ever in this country been eminent in that profession." It seems to be only in the realm of sports, and not often there, that the amateur is equal to the professional ; and this is only another way of saying that the mere pleasure of work is seldom sufficient to secure the greatest proficiency. 2. Quantity of Labour (Subjective) explained. " It is often difficult to ascertain the proportion between two quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's work than in two hours' easy business. . . . The greater part of people understand better what is meant by a quantity of a particular com- modity than by a quantity of labour. The one is a plain, palpable object ; the other an abstract notion which, though it can be made sufficiently intelligible, is not altogether 1 See H. Sidgwick's Principles, p. 526. - Adam Smith, Bk. V., Chs. I. and II. 74 PRINCIPLES OF POLITICAL ECONOMY. so natural and obvious." 1 Although it may prove to be impossible to obtain any accurate or even adequate meas- ure of 'quantity of labour ' in this sense, it is quite possible to point out the causes by which it is determined, and the influences according to which it varies. And this, indeed, is one of the most important inquiries in political economy ; for, since the object of all production is utility, and since the greater part of labour in the subjective sense must be regarded as of negative utility to the worker, it is always necessary to strike a balance in order to arrive at the net advantage. This idea is at the root of the popular saying that a thing or an action may be more trouble than it is worth. A savage gathering shell-fish must decide when the pain of acquisition outweighs the pleasure of consump- tion, and in modern industrial societies a similar computa- tion is only hidden by the intervention of money. To take a simple case, the man who works by the piece, e.g., a stone-breaker, must consider whether it is worth his while to earn another sixpence, and the time-worker, under a system of real freedom of contract, must solve a similar problem with regard to his hours of labour. The general treatment of the conception and the meas- urement of a quantity of labour involve precisely the same difficulties as are found in the case of utility. Some German writers have attempted to construct a unit of measurement in the expenditure of life-force, and others have tried to express other forms of labour as equivalent to so much unskilled labour. Such methods of computa- tion, however, seem to be purely hypothetical. In the disutility of labour, as in the utility of consumption, we cannot get beyond the enumeration of the principal causes and conditions of variation. In the same way, with regard to the efficiency of labour, it is theoretically conceivable that it might be measured, like other forms of energy, in foot-pounds. But any one who makes the attempt to express 1 Adam Smith, Bk. I., Ch. V. See also my Effects of Machinery on Wages, Introduction. PRODUCTION. 75 the efficiency of different kinds of labour in this manner will soon learn to be content with -the imperfect methods of general description. The next two sections are accord- ingly devoted to an examination of the principal causes of variation in the quantity of labour (subjective), and the efficiency of labour (objective). 3. Causes of Variations in the Quantity of Labour (Subjective'). I. Time. The most important element in the quantity of labour is, in general, time; that is to say, the irksomeness of work, or, technically, the negative util- ity of labour, varies with the time during which the labour takes place. Speaking roughly, we may say that there is six times as much labour in a working week as in a day, and fifty-two times as much in a year as in a week. But even when we consider time only, the relation is not gener- ally one of such simple multiplication. In beginning to work, whether with the mind or body, there is at first a greater sense of effort than after the lapse of a certain time ; then comes a period in which this element of disagreeableness is tolerably constant, and in which the disutility is often rather neutral than positive ; but as soon as the physical or mental strength is partially exhausted there is a very rapid increase in this disutility. The quantity of labour, for example, in the twelfth hour, is far greater as a rule than that in the second. After a certain lapse of time, indeed, no amount of future benefit would be considered a sufficient recompense for the depri- vation of sleep. 1 II. Intensity. In conjunction with time we must take into account the intensity of the labour. As Adam Smith said : ' there may be more labour in an hour's hard work than in two hours' easy business.' Here, again, it is plain that the disutility increases very rapidly after a certain degree of intensity is reached. To do in an hour what would naturally, or normally, take two hours, would 1 In the extreme case of overwork we may speak of the infinite dis- utility of being dead, as corresponding to the infinite utility of being alive, due to the first results of work. 76 PRINCIPLES OF POLITICAL ECONOMY. involve far more than twice the quantity of labour, or, in other words, the strain on mind and body would be pro- portionately greater. 1 III. Preparation. Under the quantity of labour in- volved in any piece of work, we ought logically to include (as certainly every school-boy knows in his own case) all the preparation that may previously be necessary. Thus, in the labour of the professional man, we ought to take account of the time and trouble involved in qualifying for the pro- fession. Adam Smith seems then to be perfectly justified in saying that there ' is more labour in an hour's application to a trade which it costs ten years' labour to learn than in a month's industry at an ordinary or obvious employment.' IV. General conditions. We must take into account also the conditions under which the work is done, and, in many cases, not only the physical and sanitary but the mental and moral surroundings. The importance of the element is seen from the reflection that a large part of the lives of all who work is spent in doing that work. In the language of the biologists we must consider the whole environment of the worker. V. Special conditions. In addition to these general causes of variation in the quantity of labour, in every case there are certain special causes connected with the nature of the employment. Some idea may be formed of the variety and complexity of these causes in the production of material wealth by ordinary labour, if we look at the remedies for special evils provided by factory and other legislation. An excellent summary of the varieties of conditions affected by the present laws of England is given by Mr. John Morley. 2 VI. Duration of power to labour. If we take as our unit of time not the hour, or the day, but the average duration 1 Compare in racing or rowing the same distances covered in different times. 2 Life of Cobden, Vol. I., p. 303. Cf. also Effects of Machinery on Wages, Ch. III. Cf. infra, Bk. II., Ch. XI. PRODUCTION. 77 of life in various occupations, we may regard quantity of labour as involving the expenditure of a certain amount of 'life-force.' The importance of this consideration can only be realised by referring to the returns of the death-rate in different employments. 1 Without anticipating the problem of the determination of wages, we are able at once to deduce certain practical conclusions. In the first place, it is plain that a general eight hours' day would by no means involve a correspond- ing uniformity in the real strain of labour. Secondly, especially with regard to the higher forms of labour, the intensity of labour is of primary importance. It is more than doubtful whether it is desirable that when people work " they should do it with all their might and especially with all their mind," 2 even when the advice is qualified with the addition " that they should devote to labour, for mere pecuniary gain, fewer hours in the day, fewer days in the year, and fewer years of life." The constant high pressure of modern life is associated with great evils, both physical and mental. The economic waste involved in overwork was well brought out by Eden. 3 " Any system of employment, therefore, that drives a man to perpetual labour (for that may fairly be called perpetual which ad- mits only of the intervals required for sleep and meal- times), subjects him to the evils of the savage state. When the desire, however, of the artifical conveniences and enjoy- ments of life are once introduced into a society, there seems to be a greater danger of a man's overworking him- self than of his remaining idle, unless he has some other fund than his own industry to look to. It is justly re- marked (by Adam Smith) 4 that masters have rather occasion to moderate than to animate the application of their workmen." Thirdly, the philanthropic and laud- 1 These conditions are further discussed in the chapter on Division of Labour. 2 Mill, Bk. I., Ch. VII., p. 3. 8 State of the Poor, Vol. I., p. 444. 4 Wealth of Nations, Bk. L, Ch. VIII. 78 PRINCIPLES OF POLITICAL ECONOMY. able desire to provide pensions for the aged poor would, if carried into effect, seem to require equitably a speedy and vast extension. For, if under the strain of work caused by the unremitting energy of machinery, or under the pressure of general industrial conditions, a worker becomes prematurely aged, equitably, he seems even better entitled to consideration than the person who has, on the whole, run his race more easily. 4. The Efficiency of Labour (Objective'). Labour, how- ever, must be considered also from the point of view of productive power, or, in other words, we must pass from the subjective to the objective side. Here again we observe certain general and certain special characteristics, the former embracing all kinds of labour, from the lowest to the highest, and the latter varying to a large extent with different employments. Of the general characteristics the most important affect- ing the individual labourer, for it is convenient to treat separately the combination and organisation of labour, are : I. Qualities of race : physical, intellectual, and moral. All economists l have noted the contrast between the steady perseverance of the English race and the indolence and want of energy and foresight of most of the native races with which they have come in contact. The general acceptance of the theory of evolution, and especially of the principle of heredity, as well as the discoveries by anthro- pologists of great physical differences in different races, have tended to strengthen the emphasis laid upon this element of efficiency. It is necessary to observe, therefore, that it is easily capable of gross exaggeration. 2 The indo- 1 According to Adam Smith, almost the only advantage conferred on the colonies by the mother country is given in the expression, ' Magna virum mater. 1 2 Cf. Sir A. Mitchell's Past in the Present, passim. "The skulls and brains of the fossil man, that is of the earliest man we know anything about, appear to have been as good as, if not better than, the skulls and brains belonging to individuals living in the highest state of civilisation." P. 175. PRODUCTION. 79 lence and improvidence of the Celtic crofters are too often set down to racial character, regardless of the fact that the same people have formed excellent emigrants to new colonies. It seems probable also that, in one or two generations, the natives of temperate regions lose their characteristic energy when located in the tropics. Yet it cannot be maintained that a hot climate in itself is fatal to energy, nor have the northern races always taken the lead in industry, science, and art. In antiquity, China, Egypt, Greece, and Italy, to take the most obvious examples, attained a high degree of civilisation, whilst the temperate regions were peopled by barbarians ; after the fall of the Roman Empire civilisation probably owed most to Arabian influences ; and the industrial supremacy of England and of the English race, if we measure by centuries, has been only recently established. As a matter of fact, what is hastily ascribed to race is often due to influences of quite a different character. 1 II. The supply of food, and generally of the necessaries of life, has an important bearing especially on manual labour. Some interesting facts on this topic were collected by Mr. Brassey, the contractor for some of the principal railways in different countries. 2 It was shown, in many cases, that the comparative inefficiency of foreign labour was due to inferior food, the more generous living of the English navvy being conducive to much greater energy. A striking illustration was furnished by the different scales of wages paid. Many other examples might be quoted of the paradox that cheap labour is dear labour. The truth im- plied was understood and acted on in respect to labouring cattle long before it was thought of in respect to labouring men. 3 The difficulty is, as often pointed out, that with free labour the labourer is lord of himself, and the em- ployer is not so sure of how much it will profit him as he is in the case of his horses. There is, however, no doubt that manual labour, degraded by physical want, is most in- 1 See Walker's Wages Question. 2 Work and Wages. 3 Walker. 80 PRINCIPLES OF POLITICAL ECONOMY. efficient. With respect to the higher grades of labour this element is of minor significance, as the earnings make the mode of living a matter of choice. In general the style of living, at least in northern climes, of those who can afford it, errs on the side of excess. III. Sanitary conditions are often of primary importance, not only as regards the actual work, but the dwelling- place. The advantages of fresh air, warmth, and light are too obvious to be pointed out, though not sufficiently obvi- ous to be generally heeded. 1 A recent Royal Commission showed that, in Glasgow and many other cities, workers preferred their one-roomed houses in the centre of the city, in spite of facilities for travelling to the suburbs, where rents were lower and accommodation superior. In most of our villages, the elements of sanitation are utterly neg- lected, whilst the condition of the cellar population in cities is probably worse than that of the cave-dwellers of pre-historic times. IV. The intellectual ability, natural and acquired, of the labourer is of importance, even in the lower grades. In agriculture, for example, and in other industries, machin- ery cannot be used, and various processes cannot be tried, simply because of the stupidity of the workers. The pain of a new idea, as Bagehot called it, is too much for them ; if they had their way, they would lapse into the caste system of the East. With the enormous use of mechanical appli- ances general intellectual ability, contrary to what is some- times supposed, is of increasing importance on the whole. 2 In all the higher grades of labour this factor is predominant, for in these the mind is the real instrument of production. V. The moral activities and capacities are qualitatively of equal importance with the purely intellectual, but the difference in degree is not generally so striking. In the 1 In Scotland, as a whole, very nearly a third of the population live in houses of one room, more than two-thirds in houses of one or two rooms, and nearly nine-tenths in houses of four rooms and under. 2 Effects of Machinery on Wages, Ch. III. PRODUCTION. 81 economics of modern industry most stress is, as a matter of fact, laid upon self-regarding motives ; and, until recently, this emphasis was also observed in economic theory. " I have never known," said Adam Smith, " much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it." And in a later portion of his work (which has, unfortunately, dropped out of the systematic treatment of most of his successors) Adam Smith applies the same prin- ciples to the highest grades of labour, including all the professions. That the efficiency of labour varies according to the expectation of reward, and the security of enjoying of that reward, is, perhaps, both for present practical pur- poses, and for the explanation of past historical conditions and revolutions, the most important principle of political economy. And it is of especial importance at the present time, when the criticism of old doctrines is giving an ex- aggerated prominence to exceptions which had previously been too much neglected. The aversion to regular, steady, monotonous labour the kind of labour which distin- guishes the civilised man from the savage who is only capable of short outbursts requires to be met with an equally constant inducement to work, or, in current eco- nomic language, the negative utility must, at least, be bal- anced by a corresponding positive utility. Common sense morality, altogether apart from the sanctions of positive law, suffices with the great mass of a nation to enforce the fulfilment of what are pronounced to be the ordinary obli- gations of social life ; but from the point of view of common sense, a man who does any work for a less price than his services will command is considered either an enthusiast, or a fool, and if he has others dependent upon him, the condemnation is more sevece. The minister of religion and the minister of politics, the teacher, the physician, the lawyer, the author, and the artist, one and all if we 82 PRINCIPLES OF POLITICAL ECONOMY. take the average type need the spur of self-interest to surmount the ordinary drudgery of their calling. Being ordinary men and not brutes, they are on various occa- sions moved by other impulses, just as a few of their extraordinary fellows are constantly so moved. When, however, Christianity itself, dispassionately regarded by the economist, finds its earthly support in earthly rewards and honours, how can it be expected or maintained that a substitute for self-interest can be found for the ordinary business of life ? The appeal to history is still more decisive, as showing that the main-spring of economic progress has been economic interest. In this progress there has been no more powerful influence than the sub- stitution of free labour for slavery. Regardless of the fact that in the most advanced Christian nations, slavery survived down to the present century, its abolition has been ascribed, on the ground, apparently, that what ought to have been must have been, to the spread of Christianity. But the most active cause of this abolition is to be found, not in the so-called higher, but in the so-called lower nature of man. It was the discovery, not that Christ had proclaimed the equality of men, but that freedom and rewards were more efficient than slavery and punishments in calling forth the energies of labour. The Romans were indifferent to cruelty, except so far as in their sports they regarded it as a pastime. "It is very possible," says Mommsen, 1 "that compared with the sufferings of the Roman slaves, the sum of all negro suffering is but a drop ; " he refers particularly to the system of agrarian slavery, 2 "the plantation system proper, the cultivation of the fields by a band of slaves not unfrequently branded with iron, who, with shackles on their legs, performed the labours of the field under the overseers during the day, and were locked up by night in the common, frequently subterra- nean, labourers' prison." But the Romans discovered 1 History of Home, Vol. III., p. 80 (translation). * Ibid., Vol. III., p. 79. PRODUCTION. 83 that coloni, 1 of which, perhaps, the most intelligible trans- lation is serfs, were more efficient labourers than slaves. In the same way, in the mediaeval period, the villeins were, by a series of tentative experiments, converted into small tenant farmers or proprietors.* It is true that the lead in this gradual emancipation appears to have been taken by the churchmen ; but it must be remembered that they were very large land-owners, and that they also took the lead in all kinds of agricultural improvements, as for example, in sheep-breeding. " The experience of all ages and nations, I believe," says Adam Smith, 3 " demonstrates that the work done by slaves, though it appears to cost only their maintenance, is in the end the dearest of any. . . . The planting of sugar and tobacco can afford the expense of slave cultivation. The raising of corn it seems in the present times cannot. In the English colonies, of which the principal produce is corn, the far greater part of the work is done by free men. The late resolution of the Quakers in Pennsylvania, to set at liberty all their negro slaves, may satisfy us that their number cannot be very great. Had they made any considerable part of their property, such a resolution could never have been agreed to." A recent example, of the increase of the efficiency of labour with the increase in its reward, is furnished by Profit-Sharing. Here the central idea, from the production point of view, is simply that under the stimulus of a share in the profits, the workers, through increased efficiency and care, really create the profits which they are to re- ceive. When this form of industry has been most suc- cessful, it has always been founded on this purely business principle. 4 Other elements are no doubt present, but the economic foundation is an increase of efficiency under the spur of increased interest. 1 Adam Smith, Bk. III., Ch. 2. 2 Seebohm's English Village Community. 3 See McCulloch's Edition, p. 172. 4 Oilman's Profit-Sharing. 84 PRINCIPLES OF POLITICAL ECONOMY. It does not seem necessary to give further positive illustrations of a principle, which, throughout this work, will be constantly forced on the attention. One more example, however, may be offered from the negative side which deserves notice at the present time. In 1853, 1 a considerable number of the Parochial Boards of Scotland had become desirous of devising some plan for the employment of the partially disabled poor, and it was supposed that agriculture offered the best means. It was believed that the Pauper Colonies of Holland afforded a good model. Accordingly, Sir John McNeill paid a visit to Holland, and made a report. He found that the free colonies (i.e., those formed for the indigent of good character), after a trial of 30 years, were a com- plete failure. The most intelligent of the officers were of opinion, that even if the colonists had been selected from the class of agricultural peasants, the colonies could not have been made self-sufficing, so long as maintenance was secured to the colonists, irrespective of what was produced by themselves. " The failure of an experiment, conducted with so much care, by men of the highest in- telligence, with means so large, supported by the govern- ment and the nation, established on a scale so extensive, and persevered in for so many years, among a people remark- able for business habits, agricultural skill, and industry, is a valuable lesson." As for the sturdy rogues and vagabonds, who were pro- vided for in similar penal colonies, in spite of the fact that ' means of coercion were used, which would not be lawful in Scotland,' it was estimated that it required fifteen of them to perform the field work of one good day labourer. 2 In emphasising the influence of self-interest upon the efficiency of labour, I must not be understood to use the 1 History of the Scotch Poor Law, by Sir George Nicholls, Vol. I., p. 272. 2 See also Bancroft's History of the United States, Ch. V., on Sla- very. PRODUCTION. 85 term in a narrow, technical sense. The exact demarcation of the scientific frontier between self-regarding and altruistic motives is a problem in metaphysical ethics that has not yet been, and probably never will be, deter- mined. Whether the labourer who gives the greater part of his wages to his wife and family, instead of spending them on drink or tobacco, promotes their economic in- terests more than his own is, from the present stand- point, a purely verbal question. Much ingenious criticism has been directed against Adam Smith, which would never have been written if his words had been construed accord- ing to the plain meaning of the general argument of his whole work, instead of being tested by rigid and arbitrary definitions. At the same time it would be equally futile and mis- leading to assume that because there is a debatable margin, there is no real difference between the conscious promotion of private and of public interest. The difference is both real and palpable, whether or not the final result may be the same. For my own part, in the main, I follow the older writers in thinking that the great majority of people will do most good to the public by minding their own business. I cannot agree with Professor Marshall, when he writes: " Thus the struggle for existence causes, in the long run, those races of men to survive in which the individual is most willing to sacrifice himself for the benefit of his environment; and which are, consequently, the best adapted collectively to make use of this environment." l There is much more truth in my opinion in the frank avowal of Sir James Steuart: "It might, perhaps, be expected that in treating of politics, I shall have brought in public spirit, etc., as a principle of action ; whereas, all I require with respect to this principle, is merely a restraint from it; and even this is perhaps too much to be taken for granted. Were public spirit instead of private utility to become the 1 Principles, p. 302. 86 PRINCIPLES OF POLITICAL ECONOMY. spring of action in the individuals of a well-governed State, I apprehend it would spoil all. Let me explain myself." 1 1 For the explanation, the reader must refer to our author himself, who is still, in many ways, as fresh and suggestive as Adam Smith. It is, perhaps, hardly necessary to say that the principle needs, and later on will receive, qualification. But as regards the efficiency of labour of all kinds, the meaning is plain. To guard, however, against the injustice of mutilated quotation, one other sentence may be added: "Public spirit, in my way of treating the subject, is as superfluous in the governed as it ought to be all powerful in the statesman ; at least, if it is not altogether superfluous, it is fully as much so as miracles are in a religion once fully established . . . Were miracles wrought every day, the laws of nature would no longer be laws ; and were every one to act for the public and to neglect himself, the statesman would be bewildered, and the supposition is ridiculous." CHAPTER VI. CAPITAL. 1. Definition of Capital, and first of Revenue Capital. There is probably no term in economics which has given rise to so much controversy as capital, and in the limits of this chapter it will only be possible to indicate the main points in dispute, and their bearing upon fundamental questions. As usual, the historical aspect of the subject has been treated most fully by German writers. 1 The word capital is connected with caput, and, in mediae val Latin, we read constantly of the capitalis pars debiti, i.e., the principal sum as distinct from the interest. Thus, originally, the term seems to have been confined to loans of money. As the church forbade the lending of money for interest, or usury, as it was then called, and as this moral prohibition was generally given effect to by the law, all sorts of devices were resorted to in order to disguise the real nature of a loan. A thing was nominally bought by the borrower,, to be sold back after a time at a lower price to the lender (a dry bargain, as it was termed, the difference really being interest), and, gradually, exceptions were admitted on the ground of wear and tear of the thing lent, or of some indirect loss to the lender. 2 1 Compare the masterly introduction of Knies to his work on Money and Credit (Geld und Credit) ; Kapital und Kapital-Zins, by Bohm- Bawerk, translated by R. Smart ; and the article on Capital, in Schon- berg's Handbuch. In this chapter I have reproduced part of my article on Capital in Palgrave's Dictionary. 2 See Cunningham's Growth of English Industry and Commerce, pp. 236-40 for an account of damnum emergens, lucrum cessans, and pericu- l urn sort is. Also my art. Usury, in Ency clop. Britt. The point is discussed more fully below. Bk. II., Ch. XIII., 3. The excellent account of Canon Laic by Professor Ashley, Economic History, Vol. II., appeared too late for quotation. 88 PRINCIPLES OF POLITICAL ECONOMY. The elaborate theory of interest propounded by Dr. Bohm-Bawerk is essentially a development of the dry bargain. " What, then, are the capitalists as regards the community ? In a word, they are merchants who have present goods to sell. They are the fortunate possessors of a stock of goods which they do not require for the per- sonal needs of the moment. They exchange this stock, therefore, into future goods of some form or another, and allow them to ripen in their hands again, into present goods possessing full value." That is to say, present goods are always worth more than future goods, and the difference is interest. In England, before the time of the Tudors, it had become generally recognised by merchants and legislators that it was impossible to distinguish be- tween lending money itself and lending the things which had a money value. Thus, in the natural course of his- torical development, the term capital received a wider meaning. Accordingly, later on, we find Turgot, as Knies points out, expressly saying that capital consists of accu- mulated values (valeurs accumuUes), and that it makes no difference whether the accumulations consist of precious metals or -of other things. Turgot states, also, that a man can live on capital, or, rather, on the interest of capital, just as well as from personal labour, or from funds derived from possession of lands. In this way, capital comes to be considered primarily as a source of profit. This historical usage of the term is still found implied in ordinary thought, and a Socratic inquiry in the modern mercantile world would, probably, give as a first-fruit that capital is wealth which yields a revenue. 2. Production Capital. It is quite obvious, however, as the writers on canon law, founding upon a doctrine of Aristotle, were so fond of pointing out, that the precious metals are in themselves barren nummus nummum parere non potest and it is almost as obvious that any form of hoarded wealth is equally barren ; that is to say, unless it is actively employed, so as to produce more PRODUCTION. 89 wealth. In the earlier stages of agricultural development, for example, it is quite common to find that the stock is let with the land (and the custom still survives in the metayer system), but unless the stock were used for pro- ductive purposes, it could not possibly yield a revenue. It may further be noticed that, although one private person may lend to another capital which may be used unproduc- tively (e.g., money lent on mortgage), and the interest of which may still be paid punctually, it would be impossible for a whole nation (apart from lending to foreigners) to subsist on this barren use of capital. So much has this consideration impressed itself upon economists that many of them, especially English writers, have given as the root idea of capital: that part of wealth set aside for future , production. This, for instance, is Mill's view to the exclu- j sion of the older notion of revenue simply. Mill, indeed, ' makes the idea of production fundamental, even in the case of individuals, and would only include in a man's capital that part of his wealth intended to be used in pro- ducing more wealth. A little reflection, however, will show that either the meaning of production must be strained, or else the defini- tion of capital thus obtained will be much more narrow than in the popular acceptation. In estimating, for exam- ple, the accumulations of capital in the United Kingdom in recent years, Mr. Giffen l takes into account the mova- bles, furniture, pictures, etc., in private houses, and roughly surmises that they amount to about half the value of the houses themselves ; and, although in a certain sense the term " productive " might be stretched to cover houses, it could hardly be made to cover pictures and ornaments. As the result of this line of criticism, some writers (notably Knies) have made the fundamental idea in capital to be "wealth intended directly, or indirectly, to satisfy future needs." If a fair allowance be made for Adam Smith's 1 Essays on Finance. Vol. I., and (froicth of Capital. See infra, Ch. XI. 90 PRINCIPLES OF POLITICAL ECONOMY. want of scientific and technical phraseology, his views on the fundamental nature of capital (or stock, as he prefers to call it) come very near to this exposition. For Adam Smith carefully distinguishes between the wealth that is immediately consumed and the stock that is reserved or set aside out of a possible surplus. It is instructive to note that Adam Smith, in order to emphasise the distinction between income and its source, or, in other words, between immediate consumption and capital, gives a very wide and unusual meaning to the term immediate. " A stock of clothes may last several years ; a stock of furniture half a century or a century ; but a stock of houses, well built and properly taken care of, may last many centuries. Though the period of their total consumption, however, is more distant, they are still as really a stock reserved for imme- diate consumption as either clothes or household furni- ture." 3. Consumption Capital. In spite of the authority of Adam Smith, however, it may be questioned if it is advis- able to give to the term " immediate " such a paradoxical interpretation, and to exclude houses and the like from the capital of a country. A man, it may be argued, might well choose between living up to his income, and saving so much a year in order to build a house for himself, and when once the house was built it would appear to form a part of the capital not only of the individual but of the nation. In fact, on analysis, it seems that we ought to distinguish between immediate (in the more usual sense of the term) and deferred consumption. Even from this point of view, however, it is impossible to take the term " immediate " strictly, and it seems best to construe it relatively to the kind of income. The immediate con- sumption of a labourer earning weekly wages might be embraced within the week, whilst in the case of a high- salaried official a year might be taken as the unit, and in the case of a great nation spending money on armaments, etc., the term might be extended for some years. But PRODUCTION. 91 even in this last example there is still a plain difference between building forts, or strategic railways, which are supposed to last for centuries, and providing for present wants by the personal equipment of soldiers. Practically it is, of course, always difficult to know how much may be fairly charged to capital account, and how much ought to be reckoned as part of immediate consumption. Logi- cally, however, the distinction seems clear enough, and it has given rise to that description of capital called by the Germans, especially, consumption capital. The principal difficulty in this conception of capital is that, in the lan- guage of one of Mill's " four fundamental propositions on capital," all capital is consumed, which, in the sense that nothing lasts forever, is obviously true. Yet, even the school-boy who decides between a tin- whistle and a penny pie, knows that the rate of consumption in the latter case is infinitely quicker than in the former, and it may be said that if he eats the tart he is only an unproductive consumer, whilst if he buys the whistle he is a small owner of consumption capital. And, in fact, Mill's object in this proposition appears to have been rather to empha- sise the distinction between hoarding, in which case the wealth is not productively consumed, and saving in which the wealth is also used as productive capital. 4. Root-idea of Capital. So far, then, the result of the investigation of the connotation of the term capital appears to be that there are three species of capital, in each of which a different quality is emphasised accord- ingly as we consider (1) the yield of a revenue, (2) the production of more wealth, (3) the reservation of means for future enjoyment. It remains, then, to consider whether there is not some root-idea from which these three branches spring. The line of thought suggested by Adam Smith and developed by Knies is found to lead to this result : Capital is wealth set aside for the satisfaction directly or indirectly of future needs. This satisfac- tion may be obtained by the individual by lending his 92 PRINCIPLES OF POLITICAL ECONOMY. wealth at " usury," " usury of money, usury of victuals, usury of anything that is lent upon usury," or by re- serving means for future production, as in the case of the husbandman with his corn or cattle, or by laying up for himself a treasure which will be a delight for many days. In the different departments of political economy the stress is laid in general on one of these three charac- teristics to the exclusion of the other two. In the depart- ment of production, for example, as the very name implies, capital is regarded almost entirely as one of the principal agents in production, as sustaining, or auxiliary to, labour. Logically, it is not necessary to consider at this stage how the product is divided, or even that it is intended for future or immediate consumption. But, in the departments of distribution and exchange, the characteristic of yielding profit or revenue is fundamental, whilst in taxation several questions of importance spring from the distinction in- volved in consumption capital. 5. Disputed Questions regarding Capital. The prin- cipal points of fundamental importance in the qualita- tive definition have now been considered, but there are several minor questions which have given rise to much controversy. I. Is all capital the result of labour, and ought we to exclude the forces and free gifts of nature ? The answer, as in all questions of definition, must depend purely on the convenience of the classification for the subject or problem in hand. In the department of production it is often necessary to contrast capital, in the sense of accumulations due to labour (festgeronnene Arbeit-Zeit as the German socialists phrase it), and " the natural and indestructible powers of the soil " of Ricardo, as illustrated, for example (that no exception may be taken to the language), in the advantages of situation. In the department of distribu- tion, again, stress is often laid on the limitation of natural sources of supply, and the consequent unearned increment, whilst the ordinary forms of capital, with sufficient labour, PRODUCTION. 93 are assumed to be capable of indefinite extension at an ordinary rate of profit. On the other hand, however, it is extremely difficult practically to draw the line between the gifts of nature and the results of labour, and between earned and unearned increments. Even sheep farms in mountain districts require a certain amount of surface-drainage, fencing, etc., and when once the necessary labour has been bestowed, it is hard to tell how much is due to man, and how much to nature. If we consider the question from the national point of view, and take, as is natural with a nation, long periods, the labour involved in what is appar- ently the mere appropriation or first occupancy of the natural sources will be found to be considerable. Compare, for example, the condition of England before the invasion of the Romans, and during the Roman occupation, or medieval England with the England of to-day. Rivers have been diverted, extensive forests cleared, swamps and marshes drained, and natural harbours improved and pro- tected. Thus, even in production, it would not seem unreasonable to include these so-called natural sources, in order to emphasise the fact that they can only be made available, as with other forms of capital, by the labour and ingenuity of man. And although this admission is made, it would still be possible to discuss Adam Smith's favourite position that in some things, notably agricul- ture, nature labours with man to a greater extent than in others, e.g., the manufacture of scientific instruments of great delicacy. It may be observed that in estimates of national capital, such as that made by Mr. Giffen, not only is land included, but it stands first on the list in order of importance. It is obvious also that the capital value of land would certainly include from the practical standpoint, the minerals, etc., not yet extracted, as well as the value due merely to such a quality as situation. Logically, any difficulty may be technically overcome by speaking (with Held) of the " labour of appropriation," 94 PRINCIPLES OF POLITICAL ECONOMY. especially if we take into account the contribution made by the State as such to the organisation and security of labour. II. A second controversy has arisen regarding the point on which Mill lays such stress, namely: Does the dis- tinction bettveen capital and non-capital depend on the inten- tion of the capitalist, or, in other words, the owner of the potential capital? If the answer be in the affirmative, we are confronted with the difficulty from the point of view of the individual, that the same thing would at one time even on the same day be considered capital, and at another non-capital. Thus, Professor Marshall, in his earlier work, argued that a doctor's carriage, when used on professional visits would be capital, but when used for pleasure merely would not be capital. 1 This difficulty, however, would be overcome by admitting the species of consumption capital. Again, there are certain forms of wealth, machinery, tools, instruments, etc., which, from their nature can only be considered as capital, whilst other forms (e.g., seed-corn in a famine) may or may not be immediately consumed according to the intention of the owners. After all, however, the difficulty is only one of degree, and, as in other cases, we may leave open a debatable margin in the case of the individual, whilst with a nation it would be easy to determine roughly by means of statistics between the amount of goods or wares immediately consumed, and the amount on the average reserved directly or indirectly for the future. On the whole it may be doubted if it is possible or desirable to arrive at the intention except by arguing from the accom- plished fact, or from the nature of the things, and the only use of the discussion is to emphasise again the fundamen- tal distinction between the satisfaction of immediate and future needs. III. A third question has been much debated, which is, however, more properly dealt with under wealth, 2 namely, 1 Compare, however, the later treatment by the same writer in the Principles of Economics. 2 See Bk. I., Chs. I. and III. PRODUCTION. 95 Does capital include ivhat are called immaterial as distinct from material utilities ? The answer is similar to that given to the question as to the connection between labour and capital, and must depend on the convenience of emphasis- ing, or not, certain points of analogy and contrast. On the one side the " fixed skill " of a workman is, in many respects, similar to the nice adjustment of the wheels of a machine, and resembles still more closely the trained qual- ities of the domestic animals. The objection that the skill is attached to the man may be answered, as by Mill, that a coal mine is also attached to a place, or, still better, by the analogy that in matters of contract the technical skill may be considered as separated from the other qualities which go to make up the personality of the individual. On the other hand, however, it is often necessary to con- trast the worker with the work done, and the wealth pro- duced with the people for whom it is produced. By some writers (e.g., List) the acquired skill of a people, the greater part of which has been inherited from the past, and is due to the labour, and saving, and self-restraint of past gener- ations, is reckoned as the most important element in the national capital, and both in the department of production and in distribution the contribution of this "social capital" to the annual produce must be carefully considered. The principal reason why a civilised nation can so soon recover from the effects of a devastating war is to be found in the acquired skill of the inhabitants, and the same remark applies to the rapid development of new colonies. Thus Adam Smith might well include the skill of the workers in a nation in its fixed capital. If we appeal to popular usage, however, the contrast appears to have overcome the analogy. On the other hand, from the scientific stand- point, the analogy seems to have overcome the contrast, and any ambiguity, or confusion, may be avoided by using a qualifying adjective such as personal or immaterial. 1 Besides the skill of the inhabitants of a country there 1 See Marshall's Principles, Bk. II., Ch. I\ r ., p. 3. 96 PRINCIPLES OF POLITICAL ECONOMY. are other so-called immaterial utilities which have some- times been included in capital, and sometimes excluded. The precious metals which form the material money of a country have always been included under its capital, and the question arises whether, if an efficient substitute can be found, this substitute is not equally capital. There can be no doubt that, without the banking organisation of the United Kingdom, the business even of producing wealth could not be carried on, at any rate not to the same extent. Banking is an essential part of natural division of labour, and bank notes and other forms of representative money are quite as efficient agents of production as the precious metals themselves. These questions, however, can only be fully discussed at a later stage. 1 From the individual point of view such immaterial utilities as the good-will of a business, copyrights, patents, and the like, would fall under capital unless the material characteristic is consid- ered essential. 6. Fixed and Circulating Capital. Besides the three species of capital already discussed, there are other divi- sions which have found a place in the text-books. The most important is the distinction between fixed and circu- lating capital. Adam Smith took the terms, apparently, in their literal sense, and considered the essence of the differ- ence to lie in the fact whether or not the capital changed hands or circulated in order to obtain a revenue. " If it (i.e., stock) is employed in procuring future profit (as dis- tinct from present enjoyment), it must procure this profit either by staying with him or by going from him. In the one case it is a fixed, in the other it is a circulating, capital." 2 Mill, on the other hand, and most recent English econo- mists, define circulating capital as that which performs the whole of its function in a single use, whilst fixed capital can be used more than once in the same way. Of course, in particular cases, it would be difficult to draw the line accurately; but the broad distinction is quite obvious, i Bk. III. 2 Wealth of Nations, Bk. II., Ch. I. PKODUCTION. 97 Compare and contrast, for example, machinery as the type of fixed, with food supplies and raw materials of manufac- ture as the types of circulating, capital. Very often by English writers circulating is used as equivalent to wage capital. Thus under the title of the conversion of circulating into fixed capital Mill really discusses the effects of the introduction of machinery upon the condition of the working classes. The terms sustaining and auxiliary, floating and sunk, specialised and non-specialised, point to the same kind of distinction, under different aspects, as that conveyed by the terms fixed and circulating ; and they have the advantage of being more free from ambiguity and question-begging. At a subse- quent stage some important practical consequences will be seen to follow from the specialisation or. fixation of capital, especially in connection with the effects of machinery on wages. 7. Examination of Mill's Views on the Relations of Labour and Capital in Production. It may be thought by those who have been taught to regard capital, in the narrow sense of material production capital, that the extension of the term as advocated in the preceding sections is un- called for, and likely to lead to confusion ; and, in sup- port of this opinion, they may justly urge that Mill and other writers who adopt the more restricted meaning really discuss all the problems arising from the other forms of so-called capital under different headings, such as the accumulation of capital, the efficiency of industrial agents, the organisation of industry, and the influence of credit. Unquestionably many of the complicated controversies which have arisen in connection with the definition of capital, are, to a large extent, verbal, and do not involve corresponding differences on matters of fact, and to narrow a definition is not the same thing as to narrow a subject. It would, however, be a great mistake to suppose that those who have confined the term capital to 'material wealth ' intended to be 'devoted to the production of more 98 PRINCIPLES OF POLITICAL ECONOMY. material ' wealth ' have thereby escaped all confusion. It may, indeed, be doubted, if, in the whole range of economic literature, there is anything to equal the confusion, both in thought and expression, of Mill's four fundamental propo- sitions on capital. The strange combination of axiom and paradox, of error exposed and truth suppressed, of practi- cal wisdom and unreal hypothesis, has exercised the ingenuity of all subsequent writers. The principal cause of confusion is due to the fact, that, whilst apparently discussing problems in production, Mill really introduces questions of distribution, and, in doing so, takes for granted that celebrated wages-fund theory which itself is now generally admitted to be partly incomplete and partly erroneous. I shall not attempt to follow Mill in his anticipation of the theory of wages, but I shall endeavour to extract from his propositions those portions which bear upon production, and may still be applied to prevailing popular fallacies. The reaction against the wages-fund theory, and all its consequences, has tended to bring into undeserved disrepute some of the most valuable teaching of older writers. In examining these propositions capital will, of course, be taken in Mill's sense i.e., material pro- duction capital. I. Industry is limited by capital. It has already been explained that capital is an essential agent of production even in the earliest stages of industrial society, and in the later it is still more obviously a necessary element. It follows that one limit to the augmentation of industry is given by the amount of capital which a nation can com- mand. The reality of this limit is at once seen by glancing at the past and present conditions of various nations. Old countries, by bad government, excessive taxation, extrava- gant luxury, and similar causes, have, at the same time, lessened their capital and their industry ; and new coun- tries have endeavoured to advance beyond the limit im- posed by the capital they can acquire or maintain, and their industry has suffered accordingly. PRODUCTION. 99 It is equally true that any particular industry is limited by the capital devoted to it : without capital land cannot be cultivated, mines cannot be worked, factories cannot be built. Yet, in spite of these obvious truths, it long continued to be believed that laws and governments without creating capital could create industry. Particular examples of this fallacy are seen in the demand that government should always provide work for the unemployed, and in the grosser forms of the argument for protection to native industry. The English Poor Law, before the Amendment Act, and the English protective system, before the era of free trade, both rested on the fallacy against which this proposition is directed. At the present time there is an ever-increasing demand for governmental assistance: to establish peasant proprietors, to develop fisheries, to ex- tend railways, and to promote all sorts of industrial undertakings. In dealing with practical problems of this kind there are, no doubt, many other considerations to be weighed and balanced, but even the richest country must remember that industry is limited by capital. It is true that the proposition requires, as it receives from Mill, important qualifications. A government may indirectly, at any rate, increase the efficiency of labour, and thus enable the same capital to do more work, as, for ex- ample, by education, and sanitary and social legislation of various kinds. Again, capital is only one of the limits to industry, and it often happens that industiy falls short of this particular limit. Sometimes there is a deficiency of labour, and a government by attracting immigrants may give greater employment to capital. Sometimes a government may break down superstitions, prejudices, and customs which prevent the progress of industry, as has occurred, for example, in India, and still more recently in Japan. To a certain extent, indeed, government can actually create capital by laying taxes upon expenditure, and 100 PKINCIPLES OF POLITICAL ECONOMY. devoting the proceeds to production. There is, of course, the danger of checking accumulation, and of imposing restraints upon trade, and there are other difficulties con- nected with governmental management ; but such a trans- ference, or conversion, of non-capital into capital is always theoretically possible and often practicable. 1 But when all is said it still remains true that one of the real limits to industry is capital, and every nation which attempts to over-step the limit will receive a rude shock. The theory finds abundant illustration from commercial crises, and from the transference of industrial supremacy. II. Capital is the result of saving. As Mill himself points out, the use of the term saving is open to objection, for it naturally suggests privation and abstinence, whilst all that is meant is, that if capital is to increase there must be an excess of production over consumption. This is the 'really favorable balance' which as Adam Smith observed, 'necessarily occasions the prosperity, or decay, of every nation.' 2 III. Capital is consumed. This proposition is comple- mentary to the last. It explains further what is the nature of the saving process, and the distinction between saving and hoarding. The fallacy against which both are aimed is expressed in various modes : that the unproduc- tive expenditure of the rich is necessary to the employ- ment of the poor ; that saving only benefits oneself whilst spending benefits others ; that saving capital is the same as hoarding money, whilst the diffusion of money increases industry. If, however, it is admitted that capital is con- sumed, and money is regarded simply as an intermediary, it is obvious that the saving of capital is tantamount to transferring the immediate consumption of goods to others, with a concomitant increase in the annual consumable 1 Compare Mill's treatment of the tendency of profits to a minimum and its consequences for a fuller statement of this position. Bk. IV., Chs. V., VI., VII. 2 Bk. IV., Ch. III. See infra, Ch. XI. PRODUCTION. 101 produce. ' Saving, in short, enriches, and spending impov- erishes, the community, along with the individual.' Mill calls attention in connection with this proposition to the erroneous idea that most people entertain regarding the transmission and inheritance of capital. They imagine that the greater part of a nation's capital was accumulated in the past, and that any given year only produces what is added to the previous amount. The fact he asserts is far otherwise. The greater part in value of the wealth now existing in England has been produced by human hands within the last twelve months ; a very small proportion was in existence ten years ago ; and scarcely anything in the nature of productive capital has come down to us from a remote period. The land subsists, and the land is almost the only thing that sub- sists. Everything which is produced perishes, and most things very quickly. Capital is kept in existence, from age to age, not by preservation, but by perpetual repro- duction. The growth of capital is similar to the growth of population, the population increases, though not one person of those composing it was alive until a very recent date. It will be seen from these sentences which with some abbreviation are taken directly from Mill 1 that he by no means exaggerates the influence and importance of capital as compared with labour in production. On the contrary, at the outset, he is careful to state that the expression applying capital is metaphorical, that what is really applied is labour, capital . being an indispensable condition. 2 IV. Demand for commodities is not demand for labour. Unlike the first three, this proposition instead of appearing to be obviously true, seems rather obviously false. To most people the position of Sir James Steuart will com- 1 Bk. I., Ch. V., 6. 2 The perishable nature of capital, and the need for continuous repro- duction, has been well brought out, with recent and interesting statistics, by Mr. Atkinson. The Distribution of Products. 102 PRINCIPLES OF POLITICAL ECONOMY. mend itself as much more reasonable. " Reciprocal wants excite to labour, and the augmentation of wants will require an augmentation of free hands." An appeal to facts shows still mope clearly that Mill's proposition is, at any rate, extremely paradoxical. Every revival of trade may be said to begin with an increase in the demand for some commodities ; this causes an increase in the demand for labour, and this again leads to a further increase in demand for other things, and ultimately for other kinds of labour. Thus demand appears to be the main-spring of industry. I shall not attempt to decide the question, on which already so much has been written that agreement seems impossible, the question, namely, what Mill him- self did and did not mean in this singular statement. 1 I shall content myself with indicating those portions of his argument which enforce the preceding propositions. First then, he assumes, as in the first proposition, that the capi- tal of a country available and adapted for production at any time is limited, and that industry is limited by capital. Next he assumes that consumers or demanders of commodities do not advance the capital beforehand, or, in other words, that they do not convert their non-capital into capital. It follows that demand can only determine the direction and not the amount of the application of capital, and that an increase in demand at one point (as in a change of fashion) implies a corresponding diminution at another. Mill allows that if the demand happens to be of such a kind as to increase capital, it would also increase 1 His introductory sentences make the very meaning of demand doubt- ful. " Suppose that there is a demand for velvet, afimd ready to be laid out in buying velvet but no capital to establish the manufacture. It is of no consequence how great the demand may be, etc." I do not see how this passage can be made self-consistent, and still less how it can be recon- ciled with the following general description of capital (Bk. I., Ch. IV., p. 1). " What, then, is his capital? Precisely that part of his possessions, whatever it is, which is to constitute the fund for carrying on fresh pro- in a form in which it cannot directly supply the wants of labourers." duction. It is of no consequence that a part, or even the whole of it, is PRODUCTION. 103 the demand for labour ; as, for example, if a farmer were to feed and house another labourer instead of a race- horse. But he appears to forget that industry may not come up to the limit imposed by capital, that capital may be lying idle, and that in modern societies this capital is not in the hands of consumers, but is lent by them directly, or indirectly, to bankers and bill-brokers, and is thus ready to be advanced according to the demands of trade. 1 A general review of these propositions seems to show that (apart from questions of wages and distribution which cannot advantageously be discussed so early) they are intended to enforce two general positions : 1, that capital is one essential condition of production ; without instru- ments and means of support whilst the work is in progress production cannot go on : 2, that capital involves for its increase the postponement of present consumption. These positions have been proved to be useful in the exposure of certain crude fallacies, as, for example, in Bastiat's admir- able "petition of the candle-makers and others against the use of windows," with the view of " making work " in the production of artificial light. 2 In conclusion it must be observed that it is impossible to thoroughly discuss such a comprehensive term as capital without travelling over every department of economics. 3 1 See Bagehot's Postulates, especially II. : On the Transferability of Capital. 2 For recent criticisms on Mill's propositions on capital the reader may consult Sidgwick's Principles, Bk. I., Ch. V. (note) ; Marshall's Princi- ples, Bk. VI., Ch. II. (note). An excellent criticism, especially showing the effect of demand as a stimulus, is that of Cournot, Revue Sommaire, pp. 216-221. Compare also Adam Smith, Bk. IV., Ch. II., the passage commencing : " The general industry of the society never can exceed what the capital of the society can employ. . . . No regulation of commerce can increase the quantity of industry in any society beyond what its capi- tal can maintain. It can only divert a part of it into a direction into which it might not otherwise have gone, and it is by no means certain that this artificial direction is likely to be more advantageous to the society than that into which it would have gone of its own accord." 3 In illustration of this remark compare the voluminous works of Karl Marx and E. von Bohm-Bawerk on Capital. CHAPTER VII. DIVISION OF LABOUR. 1. Meaning of Division of Labour. The expression division of labour refers to several distinct but closely ^-allied conceptions. Dugald Stewart proposed as a substi- tute economy of labour, Lord Lauderdale the operation of capital in superseding labour, whilst Mill adopted the opin- ion, supposed to be due to Wakefield, that division of labour is only a single and over-rated department of the mere fundamental principle of co-operation or combination of labour. The authority of Adam Smith, however, has given division of labour a permanent place in economic nomenclature, and on the whole it seems to suggest the principal ideas intended better than the substitutes that have been proposed. It should be observed that although Adam Smith begins with an example from a " very trifling manufacture, but one in which the division of labour has been very often taken notice of namely, the trade of the pin-maker," he proceeds to give a breadth to the principle which ought to have satisfied the most exacting editor. 1 It is applied, for example, to philosophy and speculation, and we are told that the quantity of science is consider- ably increased by it. 2 Here, perhaps, the application may appear to range beyond the proper limits of economic inquiry. But no such objection can be raised to the 1 The criticism alluded to by Mill is found in a note in Wakefield's edition of Adam Smith, Vol. I., p. 26. 2 In recent times speculation in various forms of science has extended more rapidly than the necessary exchange of ideas, with great intellectual waste in consequence. 104 PRODUCTION. 105 eloquent passage * in which the effects of the principle upon the general condition of the labouring classes are described. " Observe the accommodation of the most com- mon artificer or day-labourer in a civilised and thriving country, and you will observe that the number of people of whose industry a part, though but a small part, has been employed in procuring him this accommodation exceeds all computation. The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a great multi- tude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to com- plete even this homely production. How many merchants and carriers besides must have been employed in trans- porting the materials from some of those workmen to others who often live in a very distant part of the country. How much commerce and navigation, in particular how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring together the different drugs made use of by the dyer, which often come from the remotest corners of the world. . . . Were we to examine in the same manner all the different parts of his dress and household furniture, the coarse linen shirt which he wears next his skin, the shoes which cover his feet, the bed which he lies on, and all the different parts which compose it, the kitchen grate at which he prepares his victuals, the coals which he makes use of for that purpose, dug from the bowels of the earth and brought to him per- haps by a long sea and a long land carriage, all the other utensils of his kitchen, all the furniture of his table, the 1 Marx points out that this passage is a close imitation of Mandeville's Remarks in his Fable of the Bees (edit. 1714), Capital (edit. Sonnen- schein), p. 348, note. The treatment by Marx iu Capital, Part IV. of Division of Labour and allied topics, is both learned and exhaustive, and is well worth reading. There is also much less of the rhetorical parti- sanship that is so prominent in other parts of his work. 106 PRINCIPLES OF POLITICAL ECONOMY. knives and forks, the earthen or pewter plates upon which he serves up and divides his victuals, the different hands employed in preparing his bread and beer, the glass window which lets in the heat and the light and keeps out the wind and the rain, with all the knowledge and art requisite for preparing that beautiful and happy invention without which these northern parts of the world could never have afforded a very comfortable habitation, together with the tools of all the different workmen employed in producing these different conveniences ; if we examine, I say. all these things and consider what a variety of labour is employed about each of them, we shall be sensible that without the assistance and co-operation of many thousands, the very meanest person in a civilised country could not be provided even according to what we very falsely imagine the easy and simple manner in what he is commonly accom- modated." I have transcribed the passage at length partly to show that Adam Smith used division of labour with a very wide meaning, and partly because constant familiarity with the principle and its application make us apt to forget its fundamental importance. It is obvious that division of labour must be associated with a corresponding division or application of capital, and in modern societies, as regards material wealth, we have to consider especially the effects of complicated machinery. / On analysis division of labour, taken in the broad sense just indicated, will be found to include, first, (a) separa- tion of employments, and (6) separation of processes within an employment; 1 and secondly, (a) combination as an essential condition of the separation, and thus (6) organi- sation and exchange. It will be convenient, as far as possible, to treat these conceptions separately. 2. Separation of Employments. The separation of employments is one of the most characteristic marks of 1 Some writers confine the term to this very narrow meaning. PRODUCTION. 107 economic progress. "All things," wrote Plato, 1 "will be produced in superior quantity and quality and with greater ease, when each man works at a single occupation in accordance with his natural gifts, and at the right moment, without meddling with anything else." He accordingly maintains that the numbers of a state ought to be such as to admit of an adequate separation of employments. Even at the present time, in Scotland, there are villages which cannot support a baker or butcher, 2 and owing to the dis- tance from towns cannot import their bread and meat; still less can they provide themselves with other commodities which in towns are thought necessary, such as coal, gas, and water in the houses. We find the general principle, how- ever, most strongly marked by taking stages in the devel- opment of a progressive society. 3 Compare, for example, the Domesday Survey of England with the last Census. In the earlier period the whole county was studded with manors which were practically villages in serfdom under an over-lord ; these villages were in the main self-support- ing, and the inhabitants were for the most part engaged in agriculture or in the simple industries immediately subsidiary to it. Acorns, for the food of pigs, were prob- ably of more importance in the national wealth than all the minerals in the country. The change to the present condition of industry is due to the accumulated effects of causes operating through centuries, 4 and the rapid progress of the last hundred years ought not to make us forget the advances made in former times. The mediaeval period, 5 1 Republic, Bk. I. 2 It is not so long since every man was his own candlestick-maker, the candlestick being a piece of twisted iron, and the candle a piece of resin- ous wood. 8 See an example from Saxon times in Cunningham's Growth of In- dustry and Commerce, Vol. I., p. 126. * Cf. Adam Smith, Bk. IV., Ch. IV. ' How the commerce of the Towns contributed to the Improvement of the Country.' 6 For economic purposes the mediaeval period may be said to end with the fifteenth century. 108 PRINCIPLES OF POLITICAL ECONOMY. which is still often spoken of as an age of darkness and stagnation, was, in truth, an age of enthusiasm and up- heaval ; in no department is this more plainly marked than in the economic structure of society ; and of economic progress the most simple and obvious test is the increase in the separation of employments. 3. Specialisation of Skill. The separation of employ- ments, and of processes within an employment, involves, in the first place, a specialisation of skill and of auxiliary capital. An examination of this characteristic affords an opportunity for a statement of the advantages of division of labour in the narrow sense of the term. I. The increased dexterity of the workmen, especially when associated with machinery, is of importance, not only as regards quantity, but quality. 1 Babbage, in his classical work on the Economy of Machines and Manufactures, gives many examples of things too delicate to be done by the unaided hand. Professor Marshall has recently called attention to the importance of the interchangeability of parts in machines, by which repairs can be effected at once without sending the whole machine to the maker. 2 The increase of dexterity, as Dugald Stewart observed, is not so great as might be expected in effecting an increase in the quantity produced, except so far as labour is assisted by auxiliary capital. After a certain point is reached there is a diminishing return to the dexterity of the individual, and it is more advantageous to employ an additional hand. In the higher forms of practical science, as for example chemistry, electricity, and engineering, division of labour appears to be a necessary condition of the requisite skill. II. The classification of labour according to its capacity, and the employment of the auxiliary capital to the full extent of its working power, are advantages which may be observed alike in a single factory, and in the whole indus- 1 Dugald Stewart points out that Xenophon considered improvement in quality the chief advantage of division of labour. 2 Cf. Effects of Machinery, p. 89. PRODUCTION. 109 trial system of a country. Thus the development during the present century of self-acting machinery in the cotton, flax, woollen, lace, and silk manufactures has diminished the proportion of males above eighteen compared with women and children. The adult males thus set at liberty have been absorbed largely in mining, foundries, and the transport services. 1 On the whole, as already observed, a greater degree of skill, both general and special, is required under this appropriate classification. III. The saving of time in keeping to one kind of work, though liable to be exaggerated as regards the individual, has several points of advantage. There is less time re- quired for learning one trade or occupation or process, and there is no waste in going from one employment or place to another. One of the principal advantages of the Post- office is in the saving of time in delivering and collecting letters. In one sense the saving of time involved in division of labour is of fundamental importance, as without it some things could never be accomplished within the time in which they are required. This is well put by Bastiat, who says that a workman now consumes in one day more articles than in an isolated condition he could make in one thousand years. IV. The invention of new machines and processes is stimulated by the division of labour. It is true that many improvements of a fundamental character have been due to "philosophers or men of speculation whose trade it is not to do anything, but to observe everything, and who upon that account are often capable of combining together the powers of the most distant and dissimilar objects." But when once a radical change has been introduced for its full development, it requires a continuous succession of small increments of invention, and these are most likely to be made by those constantly engaged in particular proc- esses. No complaint indeed is more common than that the 1 See Effects of Machinery on Wages, p. 80. 110 PRINCIPLES OF POLITICAL ECONOMY. real inventor or the first discoverer of the creative idea, rarely obtains any adequate reward, because his patent is at once improved upon and displaced by others. It seldom happens in material production that any real improvement is lost, 1 and in consequence the cumulative effects of these little increments become in the course of time of vast mag- nitude and complexity. " One might almost conjecture," says Mr. Seebohm, after a graphic description of the an- cient tribal house, "that as the tabernacle was the type which grew into Solomon's temple, so the tribal house built of green timber and wattle, with its high nave and lower aisles, when imitated in stone grew into the Gothic cathedral. Certainly the Gothic cathedral simplified and reduced in size and materials to a rough and rapidly erected structure of green timber and wattle would give no bad idea of the tribal house of Wales and Ireland." 2 Another excellent example is furnished by the improvements grad- ually introduced in the mediaeval period into the houses of London. 3 The growth of London is a striking instance of the cumulative effects of small increments in the course of centuries. In the reign of Stephen the vast majority of houses were built of wood and thatched with straw. Fitz-Alwyne's assize in 1189 may be considered as the first building Act. It provided that partition walls should be of stone. The houses had still only two storeys, and pent- houses were to project high enough for people to ride underneath. There were very few, if any, chimneys. Fire was much dreaded, and tubs of water were stationed at the house doors, and the bedells were furnished with hooks to rake down the burning houses. The " dawber " who filled up the timber framework with mud and straw occupied an important place in the division of labour of the time. As late as the year 1300, persons living in the city were al- 1 There are, however, important cases on record to the contrary. See Mitchell's Past in the Present. 2 English Village Community, p. 241. 8 See Liber Albus, Introduction. PRODUCTION. Ill lowed to keep pigs within their houses, and four men were appointed to kill the loose ones. Soon afterwards this privilege of keeping pigs in London houses was confined to bakers. The progress of ship-building and of the art of naviga- tion illustrates almost as well as the growth of a great city the cumulative effects of increments of invention. Take, for example, the following description, 1 written about 1200, of the origin of the mariner's compass : " This (polar) star does not move. The seamen have an art which cannot deceive by virtue of the manete, an ill-looking brownish stone, to which iron spontaneously adheres. They search for the right point, and when they have touched a needle with it and fixed it on a bit of straw, they lay it on the water and the straw keeps it afloat. Then the point infal- libly turns to the star, and when the night is dark and gloomy and neither star nor moon is visible, they set a light beside the needle and they can be assured that the star is opposite to the point ; and thereby the mariner is directed in his course. This is an art which cannot de- ceive." Equally instructive is the gradual development of the boat into the three-decker and ironclad. The Saxon ships at the end of the eighth century were scarcely more than a large boat : they had one mast with one large sail, and could probably only sail before the wind; and they were steered by a large oar with a flat end very broad passing by the side of the stern. 2 In our own times first iron and then steel have displaced wood for ship-building generally. V. The most important advantage of division of labour in material production is connected with the fact that it is an essential condition of the employment of machinery, or, more generally, of auxiliary capital, as, for example, in the 1 Quoted in Macpherson's Annals of Commerce (from the works of Hugues de Bercy, called also Guiot de Previns), Vol. I., p. 362. 2 Macpherson, Vol. I., p. 262. Another good example is the develop- ment of the mill. 112 PRINCIPLES OF POLITICAL ECONOMY. application of chemistry and electricity. The mere in- crease in manual dexterity or in quickness of vision or in sensibility of touch is of minor importance compared with the growth of man's power over nature, and this growth has always been conjoined with division of labour. 4. Separation of Employments involves Combination. It is obvious that the separation of employments and the division of processes is only possible with correspond- ing combination. Combination or co-operation of this kind is generally called complex. Even simple combina- tion, however, in which the individuals concerned do the same kind of work, has certain important advantages, (a) Some things are beyond the power of an individual, no matter how long a time he might take, e.g., hauling up a boat, lifting heavy weights, or navigating a large ship, (i) If we take into account time, there are certain operations which must be done in a limited time to be of any service. This is especially the case in agriculture : the land must be prepared, the seed sown, and the harvest gathered all in due season. The open-field system of cul- tivation furnishes an excellent example of this species of co-operation. Again, many great works can only be accomplished by being carried on continuously over a long period. In this way we have a combination of the work of the dead with that of the living, as, for example, in the construction of railways, harbours, and buildings. As already observed, this species of continuous combination is of especial im- portance in the development of the immaterial factors of the economic structure of a society. Complex co-operation or combination will receive further treatment in the next chapter in connection with the law of ' Increasing Return.' 5. Division of Labour is limited by the Extent of the Market. If, to take the classical example, it takes eighteen men to make a pin, it is plain that pin-making in this mode can only be carried on advantageously on a large PRODUCTION. 113 scale. The extension of division of labour, whether the term be taken in the broad or the narrow sense, is limited by the market. Labour and capital cannot be specialised to particular forms of work unless these methods of pro- duction give full employment to the capital and labour required. It follows, then, that an increase in demand due, for example, to the opening up of foreign markets may render possible a greater subdivision of labour and capital, and Adam Smith rightly insists that one of the principal advantages of foreign trade is found in the con- sequent augmentation of industry in the home country. Even in agriculture, to which the application of the principle is comparatively limited, the extension of the market enables specialisation to be extended. The growth of towns within an agricultural country stimulates the production of various minor commodities. Thus the posi- tion of the outlying farmers in the United States in approving of protection to manufactures is at any rate intelligible ; for, although they may pay dearer for these manufactures, they may hope to attain more than compen- satory prices for their milk, butter, eggs, and all sorts of bye-products. In immaterial, as much as in material, production we observe the dependence of division of labour on the extent of the market. A large university can afford to encourage specialisation both in teaching and in research; and the work of the universities in a great country can be supple- mented by colleges and training institutions for technical or professional purposes. In the country a doctor or lawyer is supposed to be con- versant with the whole range of law or medicine, whilst in a great city specialisation is carried to an extreme. The dependence in modern societies of division of labour upon an infinite series of contracts shows that security and exchange are of fundamental importance in the production of wealth. The vital importance of this apparently simple proposition will appear at a later stage. 114 PKINCIPLES OF POLITICAL ECONOMY. 6. Division of Labour and the Localisation of Industry. 1 As might be anticipated, and as is abundantly proved by experience, the full advantages of division of labour can only be realised by the specialisation of certain places to certain kinds of production. (a) Such specialisation may be originally due to certain natural advantages. Thus the great trades of the world have generally been between places in which the natural conditions are dissimilar. In the world at large there is the trade between the tropical and the temperate zones ; and in every nation there is the trade between the towns and the country. Mines, forests, fisheries, rivers, harbours, mountains, plains, and other natural factors have at various times been dominant conditions in the localisation of cer- tain industries. (6) The influence of natural conditions, however, must not be exaggerated, for in many cases political or social causes have been the principal elements in establishing certain industries in certain localities. Conversely also trades have been driven from their old seats by the action of governments and of municipal or local authorities. The mediaeval period of English history is very fruitful in ex- amples of this kind. Under the protection of William the Conqueror a band of Flemings settled at Norwich and established the cloth industry. For a long period only coarse cloth was made, the finer sorts being imported from the Netherlands. Simon de Montfort forbade (A.D. 1264) any cloth to be worn not of English make, and was prob- ably the first statesman to maintain that England could live on her own resources. Edward III. adopted the same policy, and enacted that no foreign cloth should be worn (except a license had been obtained from the king). He also imported another colony of Flemings, and is thus often credited with founding the cloth and woollen manu- facture. Henry VII. planted a colony of Flemings in York- 1 This topic is admirably treated, with full illustrations, in Marshall's Principles, Bk. IV., Ch. X. PRODUCTION. 115 shire. In connection with the encouragement of the cloth manufacture we may notice the curious change in policy as regards the exportation of wool. From being the prin- cipal export of the country, and in that way one of the principal sources of the king's revenue, it gradually became the most jealously guarded of the raw materials of the kingdom, and the laws against the exportation of wool and sheep were, as Adam Smith says, like the laws of Draco, all written in blood. 1 There can be little doubt, however, that this policy did much to establish the cloth manufac- ture as one of the principal English industries. Similar protection was accorded to the workers in horn, leather, and silk and other materials, and in fact during the Mid- dle Ages the protection of native industries, especially of the higher grades, altogether apart from monetary consid- erations, was fully developed. Especially was defence considered of more importance than opulence. Great im- portance, for example, came to be attached on this score to horse-breeding. A curious law was passed in the reign of Henry VIII. forbidding the exportation of any horse above the value of six shillings and eight pence, and the law was enforced by allowing any one to buy a horse about to be exported for seven shillings. In addition to this a tax of six shillings and eight pence was imposed on the export. The same monarch also enacted that all weakly foals should be killed, and only allowed the larger kinds of horses to be reared. The commencement of the superiority of English horses is ascribed to this policy. Henry VIII. also forbade the exportation of metals in the interests of the makers of firearms, and imported several foreign gun- makers. When it is remembered that from the early mediaeval period downwards great restrictions have been imposed upon foreign trade, which except as regards our own coun- try still continue, and when it is further remembered that 1 See his description of the savage penalties imposed by Queen Eliza- beth, McCulloch's edition, p. 292, Bk. IV., Ch. VIII. 116 PRINCIPLES OF POLITICAL ECONOMY. for a long time the mutual jealousy and distrust of towns in the same country were as great as is now the case with different nations, there can be little doubt that the localis- ation of industries has been largely influenced by political and social causes. Whether protection in various forms has retarded or accelerated the progress of a nation may be a matter of opinion, but there can be no question that it has altered and continues to alter the local distribution of its industries. 1 It must be observed that when once an industry has been established in any country or locality certain causes at once come into play which tend to lead to its continuance. 2 Even if the origin is accidental the initial advantage of position may sometimes be sufficient to withstand compe- tition with superior natural advantages. Both labour and capital become specialised, and gain in efficiency through continuous improvements ; industries subsidiary to the principal industry grow up side by side with it, and the means of communication 3 are adapted to the acquisition of materials and the distribution of the product. The cotton manufactures of Lancashire, the woollens of Yorkshire, and the small wares of Birmingham are striking illustrations of the cumulative force of the advantages of localisation. At the same time, however, it has often been proved in the course of history that these accumulated advantages are not sufficient to give the locality a monopoly, and that to main- tain its supremacy it must be the first to adapt itself to any new conditions. In the time of the Tudors, when England as a whole was entering on a period of the great- est prosperity, when the mediaeval economic system was being broken up and was giving place to the beginnings 1 For many other examples see Schanz, Vol. L, pp. 434-480. 2 See Rogers, Six Centuries, p. 105, for an interesting account of the restriction of industries in England in the thirteenth century. 8 Little more than one hundred years ago the Clyde was fordable twelve miles below Glasgow. Chisholm, Comm. Geography, p. 232. Compare also the Manchester Ship Canal. PRODUCTION. 117 of the modern industrial era, on all sides complaints were heard of the decay of towns and of the industries with which they were associated. In many cases, however, the apparent decay was simply the result of the restrictive regulations of the guilds and corporations, which were driving old industries to new localities. 1 In the same way, in our own times, the protection of vested interests has often checked development and in the end transferred the supremacy to other places. The tendency to localisation is manifested also in the case of immaterial wealth. Universities, colleges, and schools once fully established, have advantages with which new institutions cannot at first successfully con- tend. The London money market may be traced back to the Lombards and the Jews. Similarly the concentra- tion of the various professions in capital cities is largely due to inherited conditions. Glasgow, for example, in proportion to its wealth and population has fewer lawyers, accountants, actuaries, physicians, and surgeons than Edin- burgh. 2 In immaterial also, as in material wealth, we have abundant examples of the transference of supremacy through the neglect of natural, as distinguished from arti- ficial or accidental, economic influences. The universities of Italy, no less than its commercial cities, lost the leader- ship of the world, and the ruins and antiquities of Athens and Rome exercise now far greater influence over art than do the living cities. 7. The Disadvantages of Division of Labour. Taking division of labour in its broadest sense, all the evils con- nected with or arising from production on a large scale, from specialisation, and from organisation of industry, might be brought under the title of this section. Such a com- 1 Cunningham, Growth of Industry, Vol. I., p. 452. 2 "The Edinburgh banks were all established before any of the others, and transact 70 per cent of the entire banking business of Scotland. The Glasgow banks conduct 23 per cent, and the provincial banks 7 per cent of the business." History of Banking in Scotland, by A. W. Kerr. 118 PRINCIPLES OF POLITICAL ECONOMY. plete enumeration, however, is not to be thought of at this stage, and indeed can only be gradually made in the course of the work. At the same time it is convenient to indi- cate some of the principal of these disadvantages. Most of them, it will be seen, are not necessary and unavoidable con- sequences of the system, but rather accidental concomitants which by various legal and moral remedies are capable of removal or alleviation. They may be conveniently divided into three groups, physical, mental, and social. (a) The physical evils are illustrated by the average length of life and by the liability to special diseases in different industries. "Almost every class of artificers," says Adam Smith, 1 " is subject to some peculiar infirmity occasioned by excessive application to their peculiar spe- cies of work. Ramazzini, an eminent Italian physician, has written a particular book concerning such diseases." Mr. Bevan, in his volumes on Industrial Classes and In- dustrial Statistics generally refers to the physical condi- tion of the work and the consequences to health and duration of life. It is interesting to observe in this topic the danger of a priori reasoning even for the purpose of illustration. It might be thought that the coal-miner's occupation was peculiarly unhealthy, but this is not the case ; and but for accidents the death rate would be un- usually low. On the other hand, grinders of steel, until recently, were very short-lived. Workers in lace and in glass are liable to diseases of the eyes. " Shoddy fever " and " wool-sorters' disease " and similar terms need no explanation. The best illustration, however, is found in a perusal of the causes of and the remedies introduced by the factory legislation. 2 (6) Of the evils classed as mental, attendant on division of labour, the monotony of the work is generally supposed to be the chief. This has been well put in the mot of 1 McCulloch's edition, p. 37, Bk. I., Ch. VII. 2 See the History, by E. von Plener. PRODUCTION. 119 Lemontez: "It must be sad to reflect that one has never raised anything but a valve, nor made anything but the eighteenth part of a pin." Mr. Ruskin has expressed the same idea in a vehement protest against modern industry: "It is not, truly speaking, the labour that is divided, but the men divided into mere segments of men broken into small fragments and crumbs of life ; so that all the little piece of intelligence that is left in a man is not enough to make a pin or a nail, but exhausts itself in making the point of a pin or the head of a nail. . . . And the great cry that rises from all our manufacturing cities, louder than their furnaces' blast, is all in very deed for this that we manufacture everything there except men ; we blanch cotton, and strengthen steel, and refine sugar, and shape pottery ; but to brighten, to strengthen, to refine or to form a single living spirit never enters into our estimates of advantage." 1 Adam Smith himself gives countenance to the same idea though in much more measured language. " The man who works upon brass and iron works with instruments and upon materials of which the temper is always the same, or very nearly the same. But the man who ploughs the ground with a team of horses or oxen, works with instruments of which the health, strength, and temper are very different upon differ- ent occasions. . . . How much the lower ranks of the people in the country are really superior to those of the town is well known to every man whom either business or curiosity has led to converse with both." 2 In support of this statement, reference may also be made to the superior intelligence and morale of sailors, fishermen, shepherds, and mountaineers. At the same time, however, when we take a broad survey it is doubtful if these instances can be considered more than striking exceptions. Adam Smith himself has shown that the commerce of the towns led to 1 Stones of Venice, 11, VI. 2 Bk. I., Ch. X., Part II. Compare also the passage Bk. V., Ch. I., Part II. e-McCulloch's edition), p. 350. 120 PRINCIPLES OF POLITICAL ECONOMY. the improvement of the country ; and as a matter of history, the city and not the country was the birthplace of freedom. The villein of the Middle Ages gained his liberty by living a year and a day in a town, and there can be little doubt that one of the impulses that at present drive the agricul- tural labourers into the cities, is the idea of freedom alike in the choice of employment, expenditure, and recreation. It needs no demonstration that if the world had continued to be peopled by millions of peasant proprietors, or by similar village communities, there would have been little advance in the highest arts and sciences. Compare, for example, the general economic condition of England and Russia. In England, even during the last half century, 1 there has been a distinct increase in the numbers of the higher grades of labour at the expense of the lower. It must not be forgotten also that the monotony of work involves less mental strain, and leaves the worker, with reasonable hours of labour, energy and inclination for self-culture. The musical talents of Lancashire opera- tives are well known, and to take a wider example, the enormous circulation of cheap literature of excellent quality is direct proof of the growth of intelligence on the part of the masses of the people. In a word, we ought to expect that in the end labour-saving machinery would save the labourer and leave him mentally much more the master of himself. It is worth observing too that at the present time degradation of labour is most prevalent in those industries in which there is the least division of labour. The Staffordshire nailers, the London seam- stresses, the boatmen on canals, and the casual workers at various nondescript occupations, are far below the " hands " in the great staple industries of the manu- facturing towns. 2 1 See Mr. Giffen's Essay on the Progress of the Working Classes. Essays in Finance, Vol. II. 8 Compare on the historical side Mr. Cooke Taylor's Modern Factory System. After alluding to the " agony " of the hand-loom weavers and PRODUCTION. 121 (c-) The social evils attributed to division of labour are in general consequences of the interdependence of indus- tries and the concentration of labour and capital in great cities. It is at least conceivable that the cotton famine of the American Civil War may at some future time find an analogue in a famine in the common acceptation of the term, if in a widespread war our command of the seas were lost. Again, it is always possible that some inven- tion or discovery may throw large numbers of people out of employment, or may convert skilled into unskilled labour. The danger is, however, liable to exaggeration. For in the first place invention, as already pointed out, tends to develop not by leaps and bounds, but by small increments, and secondly from the nature of the case, though the finished products of machinery are infinitely varied, mechanical processes are comparatively simple and limited. Thus the monotony ascribed to machinery has its advantages in increasing the mobility of labour. At the same time the evils connected, essentially or accidentally, with division of labour must not be under- rated. The first fifty years of the era of machinery were full of misery and degradation to the operatives concerned, the race itself became dwarfed and stunted in mind and body, and the strongest efforts to check the evils were called for both from the state and from voluntary asso- ciations. 1 the " terrible description " of the Leicester stocking-makers, he points out that infant as well as adult labour was often cruelly abused under the domestic system, and that "the system of infant labour was at its icorst and greatest height before any one thought of a factory.' 1 '' 1 Cf. my essay, Effects of Machinery on Wages, Ch. II. CHAPTER VIII. PRODUCTION ON A LARGE AND PRODUCTION ON A SMALL SCALE. 1. Division of Labour tends to Production on a Large Scale. That division of labour when associated with suitable auxiliary capital naturally leads to the concentra- tion of industry and to production on a large scale was first, I believe, distinctly shown by Babbage l in discussing the causes and consequences of large factories. Up to a certain point every increase in the number of workers renders greater specialisation possible, and thus leads to in- creased dexterity, better classification according to capacity, and more full occupation during the time of work. In other words, as Dugald Stewart said, division of labour implies economy of labour. But as already shown, division of labour to be effective involves also division of capital ; and here also it may be said that up to a certain point every increase in capital renders possible greater division and greater economy. The tendency to concentration is well illustrated by the progress of English industry dur- ing the present century. To take the most obvious ex- ample, factories have continuously increased in size, more and more complex machinery has been concentrated in our mills, and the machinery has become more and more self- acting, involving for a given output less manual labour. Thus between 1850-75 the proportion of spindles in a cotton factory rose from 10,857 to 14,130, and the number of power-looms from 127 to 174. 2 Again, in 1837, 3 self- 1 Economy of Machines and Manufactures. The most important points are summarised by Mill, Bk. I., Ch. IX. 2 Bevan, pp. 9, 37, 38. 8 Taylor's Modern Factory System, p. 338. 122 PRODUCTION. 123 acting mules contained 324 spindles; in 1887 the ordinary size contained 1080. In other industries similar results are found; in the weaving of cloth, carpets, stockings, linen, silk ; in the working of iron, steel, brass, copper, tin, and lead ; in the nice adjustment of watches and firearms ; in shaping glass and pottery ; in the manufacture of jewelry, buttons, boots, and shoes ; finally, in making machinery itself, and in fact in all the great staples, the tendency to concentra- tion may be traced through successive gradations. In the same way ships have become larger and larger, and steamers have more and more displaced sailing-vessels. Railways, telegraphs, and other transport services have been amal- gamated. The large shop-keeper has in many cases sup- planted the small, and the co-operative store in its turn has displaced the large shop-keeper. Mines, fisheries, and most of the extractive industries employ larger and larger capitals. 1 A similar tendency may be observed in the production of immaterial wealth. Large joint-stock banks have in- creased their business enormously compared with private banks ; insurance companies and friendly societies have grown in wealth and numbers ; and the capital required to start a new daily paper is almost prohibitive. The general causes of this tendency to production on a large scale, which is manifested under so many different forms, as already indicated, may be embraced under the phrase economy of labour and capital, taking both terms in the widest sense. The particular ways by which this econ- omy is effected vary in different cases, e.g. in shoe-making and banking, and for the most part are beyond the range of economic science and belong rather to the art of busi- ness. There are, however, certain topics in connection with the management and organisation of production on a 1 See Schmoller's Geschichte der deutschen Kleingewerbe im 19 Jahr- hundert for an excellent treatment of the growth of large industries and the displacement of small. 124 PRINCIPLES OF POLITICAL ECONOMY. large scale which seem to require more special treatment than was possible in considering the general results of division of labour. 2. The Management of Production on a Large Scale in Manufactures. The development of production on a large scale in manufactures has been accompanied by a corre- sponding development of organisation. The Statute of Apprenticeship l (oth Eliz. c. 4) was in many respects a codification of mediaeval customs and regulations regarding industry, and even when its provisions did not apply, or had been forgotten, in most cases similar customary prac- tices prevailed until the industrial revolution at the close of the eighteenth century. Under this old system every workman was compelled to serve a seven-years' apprentice- ship; the number of apprentices was limited, and every journeyman had a fair prospect of becoming himself a small master. As late as 1806, the number of such small masters, in the environs of Leeds, in the woollen industry was estimated at 3500. 2 There was little difference be- tween the master and the journeyman, except that the master generally undertook the buying of the raw material, and the selling of the finished goods. With the growth of factories, the system of appren- ticeship (already condemned by Adam Smith and even earlier by Sir J. Child), although it survived in many cases, was abandoned 3 as an abuse in connection with the employment of children, and the statute was finally re- pealed in 1814. The master, as his business grew larger, concerned himself more and more with the general man- agement, leaving details to heads of departments and sub- departments. Bagehot has drawn a just and instructive 1 Cf. Brentano's Gilds and Trades Unions, p. 103. On the general effects of this Statute compare the adverse comments of Rogers in Six Centuries. See also Adam Smith, Bk. I., Ch. X., Pt. II., and infra, Bk. II., Ch. XII. 2 Brentano, p. 105. 8 Of course, the custom of apprenticeship still prevails extensively. See infra, Bk. II., Ch. XII. PRODUCTION. 125 analogy between modern warfare and modern trade and commerce. "Nowadays it is a man at the far end of a telegraph wire, a Count Moltke with his head over some papers, who sees that the proper persons are slain, and who secures the victory. So in commerce. The prim- itive weavers are separate men with looms apiece ; the primitive weapon-makers separate men with flints apiece ; there is no organised action, no planning, contriving, or foreseeing in either trade except on the smallest scale ; but now the whole is an affair of money and management ; of a thinking man in a dark office, computing the prices of guns and worsteds." l Objection may be taken to the apparent division of mankind into the two classes of ' primitive ' and ' nineteenth century ; ' but essentially as regards the great manufacturing industries and the corre- sponding trades the contrast is well founded. 2 The management of business has itself become a busi- ness. Even in the present century, in connection with the vast improvements in the mass of communications, rail- ways, telegraphs, telephones, and the like, the conduct of business has become very different in the last quarter compared with the first. I quote a passage from Mr. Cooke Taylor's work, to which I have already been much indebted : " In the first quarter of the century England was rather an aggregate of isolated districts and disunited towns than one animated, close, compact kingdom. Each city was dependent on the country in its neighbourhood for food supplies ; and many a district, rich in mineral or agri- cultural wealth, lay neglected because far from a seaport or canal. The England of to-day is the opposite of all this. It is one huge congeries, composed of various members, liter- ally bound together with links of iron, and in instantane- ous communication with every other member, and with the 1 Postulates, p. 84. 2 The factory system is not so modern as is generally supposed. Jack of Xewbury, who died in 1520, employed over 1000 persons in woollen manufacture. Taylor's Modern Factory System, Ch. II. 126 PRINCIPLES OF POLITICAL ECONOMY. whole world. In face of such changes the factory system tends to become not only more impersonal than ever (the employer, for instance, living no longer at, or perhaps near, his works, and visiting them, it may be, only occasionally) ; it tends also to be less the superlative factor in wealth creation than it was. For of this system of great industry, partly founded on capitalist production and partly on ex- traordinary facilities of communication, the factory system is now but one available member, a mesh in the ever-widen- ing web of combined and divided labour, typified by the endless miles of iron road and telegraph wire that environ it. The factory itself is but one of several productive in- struments : the line of steamships, mine, or cotton planta- tion, all of which may be in the same ownership, and all of which alike claim intimate attention. The successful employer is no longer he who bustles about among his work-people and customers as formerly, but one who in studious retirement can calculate minute quantities with the nicest accuracy, and is the greatest master of the movements of the market. Competition is not among a comparatively few employers, and between a growing or decaying mode of manufacture ; it is co-extensive with every method of employment practised under whatever conditions of political or economical compulsion in every quarter of the globe. The old type of factory master is, indeed, almost as extinct as the old machinery. His indi- viduality was first merged in the mere capitalist ; his very identity is lost now in the limited liability company or financial syndicate." l It is not so much the management of large masses of labour and capital that is characteristic of modern produc- tion on a large scale, as the necessity for rapid adapta- tion to ever-changing and interdependent conditions. The mediaeval cathedral and castle involved production on a large scale ; they required the eye of a master-genius both in design and execution ; and the building trades of the 1 Modern Factory System, p. 362. PRODUCTION. 127 period show many points of resemblance to the modern factory system. " When cathedrals and palaces were built there was but one master the architect of the present day. Between him and the workmen there were masters and foremen answering to the masters and foremen of modern factories." l Strikes were numerous, and the gen- eral conditions of work were often regulated by codes which mutatis mutandis correspond to our factory rules. The great difference was in the slowness with which such large structures were raised. 2 The modern employer of labour (the entrepreneur, or undertaker) no doubt occupies a very important place in the modern industrial system ; but the tendency is rather to exaggerate than to under-estimate his peculiar func- tions. Scientifically regarded, modern labour is infinitely complex, and passes by insensible gradations from the lowest forms of manual work to the highest professional skill. The employer of labour is obliged to employ not only the lower but also the higher grades. As the former, however, are more numerous the latter are sometimes altogether forgotten, and thus it appears on a superficial analysis that industrial society consists of a very few em- ployers superior in natural ability, education, and espe- cially business capacity and of a large mass of artisans and operatives in all these respects inferior to the former class. A survey of the occupations of the people revealed by the census, and of their incomes as shown in the revenue returns, shows that such a division of society into one class and one mass is absurd. It is like describing the railway system of a country as being carried on by the general managers on one side and the engine-drivers and porters on the other. A moment's reflection will show that engines, carriages, bridges, tunnels, buildings, in brief, permanent way and rolling-stock, must all be designed 1 Brentano, p. 80. 2 Rogers' History of Agriculture and Prices, Vol. L, p. 260. 128 PRINCIPLES OF POLITICAL ECONOMY. and constructed. Engineers are not contractors, but with- out the plans of the engineers the contractors could not begin. A railway, besides, makes numerous demands on the less technical professions lawyers, bankers, account- ants, stock-brokers. What is true of the railway system is equally true of shipping. The management of unskilled and ordinary labour, whether in ship-building or navigation, is only one of the higher forms of labour required. And what is true of the transport services is still more true of industrial society taken as a whole. Business management absorbs a part, but only a part, of the higher grades of labour, and in very few cases does it appear to call for the highest ability. Large fortunes are occasionally made in business, and it is naturally assumed that in all or in most cases they are simply the fair economic reward for services ren- dered to society; it is forgotten that much depends on opportunity and coincidence. The normal earnings of employers qua employers are by no means extravagant, and they probably represent much more justly the com- parative value of the services rendered. The regular em- ployer of a thousand men may not earn so good an income as the doctor, lawyer, and clergyman who employ nobody except domestic servants, and yet there may be no economic injustice. 1 We must remember that corresponding to the combina- tion (voluntary and unorganised) of use as regards natural things there is similar combination in the employment of persons. Scientifically regarded, professional men are labourers who are employed by a multitude of masters, and at any rate in his own department (e.g. law or medi- cine), the person employed is superior to his employer. In material industry, on the other hand, it is generally assumed that the master or manager is superior to those employed by him ; but it is quite possible that the mere business management may be an easy matter compared 1 Cf. infra, Bk. II., Ch. XIII. PRODUCTION. 120 with the technical skill required, when all the labour involved is taken into account. In spite of the obvious and almost organic interdependence of the parts of the modern industrial system, we are apt to look on different trades as quite isolated, each with one master and many men. We overlook the many masters and one man as is the case of the architect, the civil-engineer, the chemist, and the electrician ; we are still more blind to the aid afforded by the banker and bill-broker in the production of material wealth. 3. Counteracting Causes to the Concentration of Labour and Capital. Production on a large scale seems necessarily to imply the concentration of labour and capital. Accord- ingly one of the principal positions of Socialist writers, such as Karl Marx, is that in the natural development of industry all the capital of a country will find its way into a very few hands, and that the way will thus be prepared for the assumption by the state of the management of industry. The problem of the distribution of wealth may for the present be postponed, but it is desirable to observe, in taking a broad survey of the modern productive system, that like other tendencies the tendency to the concentra- tion of labour and capital is liable to be counteracted. I. The localisation of industry may be sufficient to obtain most of the advantages of the large system of pro- duction, although, in fact, a number of contiguous but inde- pendent small factories and workshops take the place of one large establishment. As Professor Marshall 1 points out, in his excellent treatment of this topic, internal and especially external economies can often be secured by the concentration of many small businesses under different management in particular localities. The localisation of industry is of very ancient origin, and in Eastern towns and cities we still find particular quarters devoted to par- ticular occupations. The localisation of industry, in some 1 Principles, Bk. IV., Ch. IX., X. See p. 325 for an explanation of the terms. 130 PRINCIPLES OF POLITICAL ECONOMY. cases, may even lead to the existence side by side of the domestic and the factory system. An interesting illustra- tion is furnished by the glove industry of Grenoble, which gives employment to about 25,000 persons, four-fifths of whom are women and children. Division of labour is carried to such an extent that each pair of gloves passes through about two hundred hands. In some cases the sewing of the gloves is done in the factories, but in most instances they are sent into the mountains, and distributed by sewing contractors among the peasant women. 1 One of the chief advantages of the concentration of capital in large factories is in the economy of motive- power. If, however, as seems probable, electricity to a great extent can be made to take the place of steam, this advantage will disappear. As I write, a striking example is afforded by the ribbon trade of St. Etienne. 2 The city council has resolved to apply electric motive-power to the hand-looms, the dynamos being driven by water from the city reservoirs. At present steam is but little used, so that we have not so much a reversion from, as a preventive of, concentration. In England, in the last century, water- power was generally used in manufactures, and it is quite possible that some industries may again return to their old seats. Again, even if the separation of processes does involve a certain loss of motive-power, it may be more than compen- sated by the greater empirical skill of the small masters, and the keener watchfulness over the quality of the work, and the economy of material. II. In connection with all large industries there are sub- sidiary industries, which in size may be ranged according to a decreasing scale. This gives scope for the employ- ment of small capitals under small masters; e.g. black- smiths, bell-hangers, plumbers, glaziers, carpenters, sweeps, engravers, horse-dealers, house-painters. 1 For full description see Board of Trade Journal for March, 1892. 3 Ibid., p. 331. PRODUCTION. 131 III. New wants give rise to new luxuries, and new luxuries create new wants. In such cases there is often required scientific or artistic skill which cannot be exer- cised on a large scale. A glance at the directory of any large town, and, still better, an examination of the occu- pation tables of the census, will reveal numbers of employ- ments which, from the nature of the case, must be conducted on a relatively small scale. Obvious examples are offered by sculpture, painting, and the fine arts generally, and by various practical sciences and their accessories. In conclusion, it may be pointed out that the world only requires a certain amount of things that can be produced uniformly on a large scale, and that, when the simpler wants have been satisfied, the tendency to variation in wants is manifested in a differentiation of productive pro- cesses. Thus, every increase in the wealth of a society is generally accompanied by an increase in the variety of its occupations. 4. Joint-Stock Companies. It is a curious fact that when production on a large scale has reached a certain point, and capital has, in accordance with the socialistic idea of development, become massed in the hands of the few, a tendency to disintegration sets in, so far as the ownership of the capital is concerned. Production still goes on on a large scale, but the capitalists become more numerous. This result is mainly achieved by the conver- sion of private firms into joint-stock companies, a conver- sion which has received a great stimulus in recent times (from A.D. 1855, in England) through the adoption and extension of the principle of limited liability. 1 It must not be supposed, however, that companies are of quite modern origin. " It has for many years been a moot case," wrote Sir Joshua Child towards the end of the seventeenth century, " whether any incorporating of mer- chants be for public good or not." About a century later 1 For a brief history of the Companies' Acts, see Leone Levi's History of British Commerce, Ft. IV., Ch. XI. 132 PRINCIPLES OF POLITICAL ECONOMY. Adam Smith, in a celebrated chapter, 1 answered the gen- eral question decidedly in the negative (though admitting some important exceptions), and supported his opinion, according to his wont, by an elaborate historical inquiry. 2 Speaking broadly, companies may be said to have been instituted primarily for the development of various branches of foreign trade, and they were divided into two kinds, regulated and joint-stock. Regulated companies "resembled in every respect the corporations of trades so common in the cities and towns of all the different countries of Europe." 3 Just as in the domestic trade, a person must obtain his freedom in the corporation, so in the particular foreign trade, he was obliged to become a member of the company which pos- sessed the monopoly. At first the right of membership was obtained (as in incorporated trades) by being appren- ticed to a member ; but gradually heavy fines or entrance fees were exacted, and other burdensome restrictions im- posed, so that Adam Smith concludes that " to be merely useless is, perhaps, the highest eulogy which can ever justly be imposed upon a regulated company." At the same time, however, it must be observed that he allows that such companies may have been useful for the first introduction of certain branches of commerce. In joint-stock companies, as the name implies, the members traded upon a common stock, and not indepen- dently as in regulated companies. They differed from private partnerships chiefly in two points: in the right of the shareholder to sell his shares without the consent of the other members, and in not being able to withdraw the capital subscribed except indirectly in this manner. 4 1 Bk. V., Ch. I. 2 For still earlier history, see Schanz's HandcV s-Politik, Vol. I., Pt. II., Ch. I. * Adam Smith, McCulloch's edition, p. 330. 4 Adam Smith adds erroneously that in a joint-stock company each partner is bound only to the extent of his share. This was true as against his co-partners, but not as against the public. PRODUCTION. 133 The management was in general confined to the directors, although they were nominally under the control of the proprietors. Joint-stock companies were held to be superior to regu- lated companies in the development of foreign trade, be- cause they were prepared to maintain forts and garrisons, and the members had no private trade that could clash with the general interests of the company. Very great abuses, however, arose from granting to private persons the right of making peace and war in undeveloped countries, and the strictures of Adam Smith may well be impressed on those who, at the present time, are anxious for the rapid development of Africa. The history of the East India Company is the most striking example both of the failure and of the success in different ways of this kind of joint- stock enterprise. It is one of the best instances of the injurious effects of a monopoly. When the monopoly was strictly maintained, the trade with India never prospered ; whenever it was relaxed through the attacks of inter- lopers, as they were called, it increased ; and finally, when the monopoly was abandoned, the increase in trade was enormous. As McCulloch points out, 1 before the abolition of the monopoly our trade with India was not so great as with Jersey or the Isle of Man ; after the abolition it fell little short of that with the United States. As regards the members of the company they gained indirectly. They did not care for dividends, for if they did not share directly in the plunder they shared in the appointment of the plunderers. 2 It was under these conditions that English adventurers came back with the wealth and style of " na- bobs " and sent up the price of seats in Parliament. " A seat in Parliament was for sale, and they bought it without hesitation or misgiving ; ... as Lord Chatham said, they forced their way into Parliament by such a torrent of cor- ruption as no private hereditary fortune could resist." 3 1 Note XX. in appendix to Wealth of Xations. 2 Adam Smith, p. 338. 3 Erskine May's Constitutional History, Vol. L, p. 335. 134 PRINCIPLES OF POLITICAL ECONOMY. And yet, on the other hand, though it was done with the cruel rapacity of Roman provincial Governors, the "na- bobs " laid the foundation of our Indian Empire. A care- ful survey of the history of the East India Company seems to show that from the first it was supported by the home government, not as a trading, but as a conquering body. Alike under Charles I., Cromwell, and Charles II., its charter was renewed and strengthened. The privileges were sometimes obtained by briber}-, as in A.D. 1688, but the continuity of policy from Elizabeth onwards suggests the persistence of a leading idea, and that idea appears to have been territorial aggrandisement. In spite of these monopolies nearly all the companies founded for the promotion of foreign trade as trading bodies failed through mismanagement. 1 It is not, then, surprising that Adam Smith, influenced as always by facts, should have supposed that joint-stock enterprises (without exclusive privileges) could only succeed under conditions in which the management could be reduced to methods of routine. His reasons are : 1st, the comparative want of self-interest on the part of the managers, when most of the money under their control is not their own ; and, 2d, the want of economy in respect to small savings. These reasons, however, do not seem of sufficient weight to support his conclusion, and during the present century joint-stock companies have increased greatly both in num- bers and success. It is true that in the periods of inflation which precede commercial crises a number of unsound concerns have been floated, but the proportion of the unsound to the sound has steadily fallen. Adam Smith was too much influenced by the history of the foreign .trade companies, and by the speculative frensy which cul- minated in the South Sea Bubble. It does not seem diffi- cult to overcome the want of self-interest in the managers. In the first place, they only attain their position after years 1 See Adam Smith's quotation from the Abbe Morellet on the failure of fifty-five of these companies in different parts of Europe. PRODUCTION. 135 of service, and they acquire an instinctive professional zeal and take pride in success. And, apart from these influences, they may be encouraged by receiving some share in the profits, and by the hope of a rise in salary. The exceptions allowed by Adam Smith really show, when properly considered, that joint-stock enterprises may be largely extended. He enumerates banking, fire and mari- time insurance, construction and management of canals, and supplying a city with water. In every one of these instances the greatest ability, zeal, and fidelity are required on the part of the manager, and if they can be obtained in these cases there seems no reason why they should not be forthcoming in others ; and, as a matter of fact, we find successful examples in shipping, gas, tramways, railways, newspapers, electricity, distilleries, and all kinds of indus- trial enterprise. At present the tendency is for every business that reaches a certain size to be converted into a company, and although at first the shares may be few in number, and practically not open to public sale, in time an increased division is certain to take place. The limitation of liability is, no doubt, one great inducement ; but, apart from this, there are other real advantages connected with joint-stock companies. The principal seem to be the following : 1. Some undertakings are beyond the scope of private capital, and the choice lies, if they are to be carried out at all, between government and joint-stock management. Any general objections to -the latter apply, as a rule, with much greater force to the former. British railways, for example, compare very favourably with those of countries in which they are controlled by the state. 1 Even the post- office probably owes much of its financial success to its monopoly, which it sometimes guards with too much zeal for the public interest. 2 1 This question has been admirably handled by Jevons in his Methods of Social Reform. See also Grierson's Railway Rates English and Foreign. 2 As in the case of telephones, the delivery of letters by messengers, the extension of postal facilities of remote districts. 136 PRINCIPLES OF POLITICAL ECONOMY. 2. Even if the capital required is not absolutely too large for private persons, it may still be relatively so large as to be better adapted for joint-stock contributions. It is certainly for the advantage of the public that in this case companies should compete with private traders, or other- wise the latter would practically have a monopoly, and at any rate could easily combine. Besides this a private trader would expect ordinary business profits upon the whole of his capital, whilst the shareholders of a company are satisfied with interest a little above the ordinary rate. If a company is earning more than this, the fact becomes known, and others are promoted. 3. There is greater security in a large capital widely distributed. Even when the principle of limited liability is adopted, there is often a large amount of uncalled capital, especially in the case of banks and insurance companies. This ultimate reserve adds greatly to the stability of such undertakings, although, of course, it adds equally to the risks of the shareholder. 4. There is greater publicity in companies, and fraud is not so easily concealed. It may be observed, however, that both as regards security and publicity, the law (in the United Kingdom) appears to require strengthening. It is satisfactory to note that the courts have (as often happens) suggested the necessity for such reform by construing existing statutes very strictly. The responsibility of direc- tors, and the publication of correct and adequate accounts, have been rigidly enforced by recent decisions. 5. Joint-stock companies serve to collect small capitals which would otherwise lie idle. And although the inves- tors can have little knowledge of, or control over, the management, by a careful distribution of their funds, over a number of different concerns, an average interest may be realised sufficient to neutralise the risk. This principle has recently led to the creation of various trust and invest- ment companies which, though liable to abuse, are essen- tially as sound as other forms of insurance. PRODUCTION. 137 6. In a private firm much depends upon the individual members. The death (or private bankruptcy) of one partner may suffice actually, or practically, to break up a business. In the case of a company, the death or insolvency of a shareholder would make no difference, and a change of management is easily effected when necessary. 7. The publicity attending the statement of expenses and earnings of joint-stock companies is of great advantage in throwing light on the general condition of the industry concerned. Thus a good idea of the cotton trade can be formed from the reports of the companies which in the Oldham district are said to have a capital of over .3,000,000. The returns of coal and iron companies, and of railways, tramways, and shipping are similarly instructive. CHAPTER IX. LARGE AND SMALL FARMING. 1. Statement of the Question. In discussing any eco- nomic problem of a practical kind it is obvious that we cannot hope to obtain the precision that is possible in ab- stract reasoning. Many fallacies, however, arise in the application of principles to practice from forgetting this very obvious distinction, and, as a natural consequence, people are apt to assume that any such application is vain. But the principles are of service if only in suggesting lines of inquiry, and in showing the necessity of breaking up a complex question into manageable fragments. There is, perhaps, no subject in the art of political economy which has been more discussed than the relative advantages of large and small farms ; and authorities of equal magnitude are found taking apparently opposite views. The differ- ence, however, is more apparent than real, because differ- ent meanings have been attached to the term advantage. All that will be attempted in the present chapter is, in the first place, to point out the various questions involved, and secondly, to enumerate the principal circumstances that must be taken into account in forming an estimate from the point of view of production. 2. Gross Produce and Net Produce. Even when the question is regarded solely as one of production, and the various elements more properly treated of under distribu- tion are neglected, at the outset an ambiguity is discovered. The general question of production may be worded : Given a certain amount of land, labour, and capital, will the large 138 PRODUCTION. 139 or the small system of cultivation give the greater return ? It will soon appear, however, that we must first of all de- cide whether we mean the gross or the net return. Nor is this the only ambiguity. In either case, in making the comparison, we ought strictly to take the same amount of land, labour, and capital ; but in practice such strictness is impossible. In discussing the advantages of peasant pro- prietors, for example, attention is always directed to the greater ardour and industry of owners compared with hired labourers ; but, in reality, this assumes a greater quantity of labour in the one case than in the other. Again, with re- gard to capital, the amount applied will vary according to the security afforded; witness the aphorisms of Arthur Young. " Give a man the secure possession of a bleak rock and he will turn it into a garden ; give him a nine- years' lease and he will convert it into a desert ; " and " the magic of property turns sand into gold." Even with regard to the land itself there is an element of uncertainty. With different kinds of produce, for ex- ample, we can only form a comparison of the returns by taking the money value, as in the typical case of grazing land and arable. But here the difference between the gross and the net returns may be of vital importance. An extreme example will best show the nature of the diffi- culty. In Scotland, on many large estates in the High- lands, land yields a higher rent under deer than under sheep ; but when a sheep-farm is converted into a deer- forest, on account of the higher rental, there is no doubt that the gross yield to the land is diminished, if by yield we mean, on the one side, wool and mutton, and, on the other, deerskins and venison. But it would be difficult to prove to a land-owner that the net yield of his estate has been diminished in spite of the rise in rent. At the same time it would be equally difficult to prove to the general public that the net yield to the land of the country, as a whole, has not been diminished. A diminution in the gross produce, however, does not 140 PRINCIPLES OF POLITICAL ECONOMY. necessarily mean a diminution in the net returns either to the individual or the nation. As will appear subsequently, a check to the gross production 1 is a necessary condition of the payment of rent, and from the national point of view, it is clear that after a certain point labour and capital will yield a greater surplus when diverted from agriculture to manufactures, as is well shown by the history of Eng- land during the present century. This position was laid down with great force by Quesnay and the supporters of the so-called Agricultural System ; the very object of which was, nevertheless, to show that land is the only source of riches, and agriculture the foun- dation of all wealth, and that manufactures certainly ought not to receive special favour from the state com- pared with agriculture. The following passage seems worth quoting : " Let lands devoted to the cultivation of grain be joined together as much as possible in large farms, managed [exploittes] by rich cultivators ; for there is rela- tively much less expense, and much greater net produce, in large agricultural enterprises than in small. The multi- plicity of small farmers is prejudicial to the population. That population is most secure, and most readily diverted into the different occupations and industries, that divide men into classes, which is supported out of the net prod- uce. Every economy made in the work done by animals, machines, water-power, etc., returns to the advantage of the population and the state, because the larger net prod- uce enables men to procure a greater gain for other ser- vices and other work." 2 It is, of course, possible, as Mill shows very clearly, that, although the non-agricultural population bears a less ratio to the agricultural under small than under large cultiva- tion, it does not follow as a consequence that it will be less numerous absolutely. " If the total population agri- iBk. II., Ch. XV. 2 Maximes generals du Gouvernement economique (fun fioyaume agri- cole. (Eui-res de Quesnay (Oncken's Edition), p. 334. PRODUCTION. 141 cultural and non-agricultural is greater, the non-agricul- tural portion may be more numerous in itself, and may yet be a smaller portion of the whole. If the gross produce is larger, the net produce may be larger and yet have a smaller ratio to the gross produce." l 3. On the Meaning of the Term Advantage. Much of the controversy on the relative advantages of the two systems, however, arises from the fact that 'the question cannot be regarded entirely from the standpoint of pro- duction. Just as in the passages quoted Mill is concerned to show that there may be under the small system a large non-agricultural population disposable for manufacture, commerce, navigation, defence, science, art, literature and other elements of national power and well-being, so at present the relative decrease in the agricultural population of Great Britain is regarded with alarm. That is to say, the mere economy of production is considered as only one species of national advantage. The health, both physical and moral, of a nation is held to depend upon a large rural population, and it is assumed that the towns must receive a continuous flow of new blood from the country. The idea is by no means new. The saying of Pliny : Latifundia perdidere Italiam ranks as a proverb, and Latimer's lament on the decay of the yeomanry is one of the few sermons that have been quoted by economists. 2 In some countries the number of hearths on the large estates has on mili- tary grounds been ordained to be kept up, and, speaking generally, it is only in quite recent times that land has come to be regarded simply as one of the agents of pro- duction. Even in the United Kingdom at the present time there are few who would maintain that property in 1 Mill, Bk. I., Ch. IX., 4. For further discussion of this point, see below, Ch. X., on the law of diminishing returns. 2 Compare also the Brief Conceipte touching the Commonwealth of England, by W. S. (A.D. 1588) : " Those sheepe is the cause of all these mischieves, for they have driven husbandry out of the country by the which was increased before all kinds of victailles and now altogether sheepe, sheepe, sheepe." 142 PRINCIPLES OF POLITICAL ECONOMY. land ought to be placed on precisely the same footing as other forms of property, and is in need of no exceptional legislation. So far as these and similar topics appear to come into the province of political economy, they naturally fall under the department of Distribution 1 and will be treated later on. It seemed necessary, however, to prevent misconcep- tion to state explicitly that the subject of large and small farms is not merely a problem in production. 2 As such, however, it must be mainly considered in the present chapter. 4. The Economies of Large and Small Farming com- pared. It is true that in agriculture under present conditions division of labour cannot be carried so far as in manufactures, but Mill's contention that a single family can generally supply all the combination of labour required for the " common farming operations," and that when " a union of many efforts is really needed" co-operation in some form will answer the purpose, seems altogether exaggerated. He allows indeed that, if the subdivision of land is so minute that the cultivators have not enough to occupy their time, the waste of productive power will be a great evil, but so long as such excessive morcellement is avoided he thinks that large farms have very few ad- vantages over the small. The difficulty in forming an estimate is mainly one of complete enumeration ; a small advantage in twenty different particulars may be more than sufficient to turn the scale against custom and tradition. If the question is considered from the point of view of land, labour and capital the three great agents in production respectively, the enumeration, if not complete, may be more readily completed than if the various items are taken at random. I. As regards the land itself there are certain advan- tages that can orrly be obtained from a comparatively large 1 See Bk. II., Ch. IV. 2 See Ch. II. of my book, Tenant's Gain. PRODUCTION. 143 surface. Such, for example, are the proper rotation of crops, the due proportion of arable to pasture, the con- venience of farm roads, and the adjustment of the drainage system. The necessity for enclosures, if improvements are to take place, was proved by a great historical struggle, and it is obvious that there must be a great waste if the enclosures are very small. II. With regard to the application of capital there are several circumstances in which large farms have the advantage. In buildings of all kinds, in implements and machines, in breeds of stock and in carriage to and from the market, the large farms have advantages which the small farmers can only partially obtain by co-operation. It does not seem, however, that co-operation is an adequate substitute, to judge from recent accounts of the French peasantry. I quote one or two passages from the interest- ing work of Lady Verney 1 : "Every day we met pro- cessions of basket carts so small as to be quite a curiosity ; sometimes fifteen or sixteen were following each other, drawn by milch cows, which often go twenty miles in the day, their milk being diminished accordingly sometimes to about seven or eight pints a day. They were carrying wood or potatoes or hay down to sell and bringing back manure. Oxen walk slowly enough, but a cow's pace is hardly moving at all, and to see the thin beasts crawling slowly up the steep hills, each with a man attending, was strange indeed. One good-sized wagon with three horses would have carried the whole lot in less than a quarter of the time ; but here each man prefers to wear out his own strength and that of his cows at his own pleasure ; co-oper- ation seemed quite impossible." Again, as regards the use of machines 2 : " That machines that are the very life of agriculture in America and with us are also occasionally to be found in France there is no doubt, but they must indeed be few when, during three weeks of very careful 1 Peasant Properties, p. 140. The reference is to Auvergne. 2 Ibid, p. 143. 144 PRINCIPLES OF POLITICAL ECONOMY. investigation and inquiry, after having seen the corn reaped in the North, the hay cut and carrying everywhere, and ploughing going on along the whole line of our jour- ney we had there only once come across a single one." Again, as regards the " inhabited stables " 1 : " The ground inside was like that without, only a little less wet. . . . There was only a glazed hole by way of a window that did not open, and light and air came in by the distant door. . . . As I followed the mistress of the house, four or five large geese rushed past her legs and nearly overset me. Here there was not the smallest opening of any kind, but she undid the upper half of the door, and I saw there a horse, a sick calf, and the place for the fowls ; here were two more beds for the men, i.e., her husband and a farm boy. The smell and the dirt were so intolerable that I hardly dared step into the place. Everywhere was the bare earth, or rather mud. This was by far the largest and richest homestead that we saw, and perhaps because there was more of it, it looked more wretchedly dirty than the rest." III. With regard to labour, it is plain that the small farmers cannot make an adjustment of work according to capacity and so as to fill up the time in the best manner or to the same degree as the large farmers. It is also plain that they are not likely to have the same scientific skill, or, what is the next best thing, to have the command of it. Nor are they likely to make experiments or follow a new lead readily. In fact the one great advantage thai the small farmer as a rule possesses is inherited and empirical skill, which, however useful under conditions fixed by cus- tom, may, when conditions are changing, prove an obstacle in the way of improvement. The devotion to labour, the ardour in cultivating to the utmost, and the proverbial thrift of peasant proprietors have also their dark side. I quote one more passage from Lady Verney's work. 2 " In 1 Peasant Properties, p. 161. 2 Ibid., p. 161. PRODUCTION. 145 England thrift appears to be a great virtue. Here one hates the very mention of it. ... The sordid, unclean, hideous existence which is the result of all this saving and self-denial, the repulsive absence of any ideal but that of 'cacher de petits sous dans de grandes ias'as an object for life is incredible, if it is not seen and studied." There can be little doubt that in general the British agricultural labourer is better off than the French peasant owner. It must, however, be -remembered that the case in France is aggravated by the law of equal inheritance, and that the excessive morcellement is partly due to the partage forcee. But the aversion to make exchanges and thus amalgamate the little plots throws a strong light on the difficulty of co-operation. And when we find as a fact that apart from such a law of inheritance there is in small farms an almost universal tendency to undue sub-division, it is, to say the least, unscientific to argue as to what might happen if this disturbing cause were absent. In the High- lands of Scotland and in Ireland * land has in many places been divided until the plots are too small to support a family. In the county of Sutherland the crofters are compara- tively well off, and their prosperity is largely due to the strict enforcement of the estate rules against sub-division of holdings, rules, it may be remarked, which are intensely disliked by the people themselves. 2 This leads me to notice the great difficulty very small cultivators must always experience in making an average income over a term of years. With fluctuations in seasons and prices, with the danger of epidemics in man and beast, with possibilities of blight and plagues of various kinds, the small cultivator cannot hope that every year will pro- vide for itself even a necessary minimum for subsistence. Famine and pestilence have shown repeatedly the reality 1 Cf. Arthur Young's Tour in Ireland, Vol. II., Ch. V. 2 The feeling is natural. As Seebohm shows, the indivisible holding is a sign of serfdom. 146 PRINCIPLES OF POLITICAL ECONOMY. of these dangers. Accordingly, I cannot refrain from expressing the opinion that the attempt recently made in Great Britain to establish a system of small farms and small proprietors, by the aid of legislation and state credit, is extremely unwise. Fortunately, for the present, it also appears to be impracticable owing to the conditions laid down. In these days, however, an act of Parliament is soon altered or developed. There is a growing tendency to make special laws for special cases, regardless of the consequences in the way of analogies, and to reduce Par- liament itself to the level of a shifting executive commis- sion. Except perhaps in name, we appear to be reverting to the mediaeval practice of enacting laws for a limited period. Ready adjustment to a changing environment is no doubt part of the meaning of evolution in general, and the rigidity of codes has long been a matter of reproach. At the same time, however, laws not founded on broad principles are, properly speaking, not laws at all ; they are only political expedients which, like causes and entities, ought not to be multiplied beyond necessity. To return from this expression of private opinion to the enumeration of facts, there are several circumstances con- nected with land (or natural conditions), capital, and labour, which, though not falling under the title of econo- mies of production, exercise a powerful influence in deter- mining what system of cultivation, the large or the small, will be actually adopted in any society. 5. The Influence of Natural Conditions. Hitherto the so-called common operations of agriculture have alone been considered. It is obvious, however, that land is the source not only of the great food staples, but of various raw materials (e.g., flax, cotton, etc.), and other products that are easily adapted for direct consumption (e.g., olives, grapes, etc.). Now some of these things, from the nature of the case, are best adapted for production on a large scale, whilst others, requiring constant care and minute oversight, are more suitable for the small system. Of the PRODUCTION. 147 former, wool may be taken as typical, of the latter, vines. Again, some kinds of produce will not bear long transport without danger, and consequently are best adapted for the neighbourhood of towns. In some cases produce of this kind (e.g., garden produce) can be grown advantageously on a small scale, the value being high in proportion to excellence of quality. It is to be observed, however, that the peculiar kind of skill required is not always forth- coming in response to an increase in demand. The climate obviously affects both the kind of crop and the kind of labour. In many parts of the South of Europe artificial irrigation is as necessary as drainage in the North, and to be successful, irrigation requires much care. The climate is also of importance as affecting the certainty or uncertainty of the yield. The quality of the soil is sometimes sufficient to deter- mine the kind of cultivation. The mountains of Scotland, Wales, and Northumberland, as Adam Smith observed, seem destined by nature to be the breeding-places of Great Britain for cattle and sheep. In France, the country par excellence of small farms, there are extensive tracts only adapted for the large system of farming. 6. The Influence of Capital and the Rate of Profit. , Large farms obviously require, in general, large capital. Thus in poor and backward countries, and sometimes in newly-settled districts, the holdings are 1 comparatively small on account of the small capital of the cultivators. As the capital accumulates the farms are amalgamated. The rate of profit to be obtained is sometimes of pre- dominant influence. The large farmer looks to the profit on his capital, whilst the small farmer looks to the employ- ment of his own labour and that of his family. Accord- ingly, with falling profit, there is often a reaction in favour of small farms. Thus, as Rogers 1 has shown, the diminu- tion of profit after the Black Death consequent on the increased cost of labour and materials, led to a great 1 Six Centuries, Ch. X., "The Landlord's Remedies." 148 PRINCIPLES OF POLITICAL ECONOMY. extent to the abandonment of cultivation on a large scale by the land-owners, who sought their remedy in letting their land in small holdings to the peasants. Again, in the sixteenth century, the profits of sheep-farming led to the adoption of the large system, with an outcry against rural depopulation as already indicated. At the present time, apart from the legislative stimulus noticed in the last section, the fall in profit, and consequently in rent, has led land-owners to look with favour on small farms. On the other hand, the difficulty is to find suitable tenants with small capital adequate for the purpose, and it is in this respect that the aid of government is chiefly demanded. 7. The Influence of the Condition of Labour and of Relative Wages. In small farming, the rate of profit is of less importance than the remuneration for labour. If labour is very dear, a man who cannot employ others is encouraged so far to employ himself. At the same time it is not the absolute but the relative rate of wages that is generally of most importance. A farmer may think agricultural labour dear, but the labourer may consider his wages low compared with the rates current in other employments. Accordingly, it has often been found that a rise of wages in the towns has a prejudicial effect on small holdings. The tenants or owners are either them- selves attracted to the towns, or send their children, and the small cultivator relies upon his family. It must be remembered, also, that in choosing between town and coun- try life the labourers themselves are the judges, and it is not to be expected that they will estimate pleasures in the same way as philosophers and poets ; and few even of these privileged classes care to live more than a part of the year in the country if they have freedom of choice. 8. The Influence of Legislation. It has been well observed by M. Hippolyte Passy, 1 that the influence of 1 Systemes de Culture en France, p. 58. Throughout this chapter I have been much indebted to this work, which is still probably the best on the subject. PRODUCTION. 149 the civil law on the modes of culture, especially with respect to the adoption of the large or the small systems, although considered by many writers the most decisive of all causes, is in reality very seldom of much importance. So far as the laws affecting property in land operate, he maintains that they influence the amount produced rather than the modes of cultivation. Large estates do not neces- sarily imply cultivation on a large scale, nor does a wider system of ownership necessarily imply small cultivation. A great estate may be let out in small farms, and a large farmer may rent land from several owners. Until recently it was a favourite contention of econo- mists in this country that if the laws of entail and primogeniture were abolished and a simple and inexpen- sive system of transfer adopted, at once a stimulus would be given to the creation of small properties and small farms. It is, however, very doubtful if the greatest simplification of the law in this direction (e.g., Par- liamentary titles and compulsory registration) would have much effect. The ownership of a large estate would still carry with it a certain social status for which people would continue to pay a high price, and so long as this is the case land must be an unprofitable investment for agricultural capital. In new countries where great im- provements are required, and where there is always a chance of a rapid rise in value, the purchase of land, if allowed by the law, may be preferable to a long lease. Again, in countries with undeveloped credit and rudi- mentary methods of saving, land may be regarded as the only savings bank that will yield any return at all, the choice being between the purchase of land and hoarding. But in Great Britain, an agricultural labourer who had saved enough money to purchase, a small farm would certainly be better advised to rent a larger one, or to emigrate with his capital. If legislation of such a kind were introduced as to impose all kinds of differential burdens on large estates, and to render it impossible to let 150 PRINCIPLES OF POLITICAL ECONOMY. land, unless under onerous conditions (such as are shortly indicated by the three F's namely, fixity of tenure, free sale, and fair rents), 1 if the social condition of the country were to become such that anything short of cultivating ownership would provoke hostility, then no doubt some encouragement would be given, especially if state credit were added, to small tenants to purchase and to large owners to sell. This process has been exemplified in Ireland, in which it may be justly said that legislation has done much to break up large estates and to create small owners. But the process has not been one of free trade in land; that method was the first tried in the act of 1860, and the first found wanting. 2 The consideration, however, of the relation of landlord and tenant naturally comes up for discussion in the second book. 3 In the meantime it is sufficient to emphasise the judgment of M. Passy, that the influence of the civil law is only one element affecting the system of cultivation, and generally not the most important. iSeeBk. II., Ch. IX. 2 Compare Richey's Irish Land Laics, Chs. VII., VIII. 8 See infra, Bk. II., Ch. IX. CHAPTER X. THE LAW OP DIMINISHING RETURN AND THE LAW OP INCREASING RETURN. 1. Preliminary Explanation. The question of pro- duction on a large and on a small scale in manufactures is closely connected with the law of increasing return, and the corresponding problem in agriculture is similarly asso- ciated with the law of diminishing return. It seems desir- able then to discuss these laws at this stage, 1 especially as they are fundamental also in the theory of population. At first sight nothing can appear more striking and simple, when once it is pointed out, than the contrast be- tween agricultural and manufacturing industry. If Eng- land under present conditions were obliged (as in a great war) to dispense with the importation of food, the conse- quent rise in prices would give an immense stimulus to agriculture ; capital and labour would, as rapidly as possi- ble, be devoted to farming; inferior land would be thrown into cultivation and good land would be cultivated to a higher degree. The annual produce would of course be increased, but it would not be increased in proportion to the additional expenditure. The inferior land would not yield so much as the good land did before, and the higher cultivation of the good land would not be proportionately more productive. In technical language, whether we con- sider the extensive or the intensive application of more capital to land, there would be a diminishing return. 1 Mill takes the law of diminishing return after the treatment of the growth of capital and population. 151 152 PRINCIPLES OF POLITICAL ECONOMY. Apart from radical improvements in the methods of production, the cost of raising this additional produce would remain high. The fertile land is limited, and the amount of capital that can be applied with advantage to any portion of land is also limited. To put too much stock on pasture, or too much manure on arable land, would be worse than useless. Although it is true that, under the conditions supposed, a stimulus would also be given to improvements in agri- culture, we could not expect that these improvements would be very rapid or very great. There is little room for greater division or greater economy of labour, the use of machinery is comparatively limited, and changes due to a better selection of plants and animals are only slowly accumulative in their effects. If, then, we consider not merely the power of increase under certain circumstances, but also the probable progress under an advance in the arts^of production, it is natural to assume that the influ- ence of the improvements will be overbalanced by the decreasing productiveness of the land, and that, speaking generally, additional supplies of food can only be obtained by a greater proportional sacrifice of labour and capital. 1 How far this second form 2 of the law of diminishing re- turns, which takes account of radical changes, is on the same footing as the first, which assumes that no such changes occur, will require subsequently careful examina- tion. In the meantime it may be observed that it found its way into English political economy at a time 3 when, under the stress of the Corn Laws and a great war, the demands of an increasing population made the recourse to inferior 1 " It is invariably found in the long run," says McCulloch, " that this is the case." Wealth of Nations, Appendix, Note III., on " Rent." See also Ricardo, Ch. V. : " The natural price of all commodities, except raw produce and labour, has a tendency to fall." 2 The dynamical as distinct from the statical. Of. Mill, Bk. IV., Ch. I, I- 8 See an excellent paper, by Mr. Cannan, on " The Origin of the Law of Diminishing Returns, 1813-15." Economic Journal, March, 1892. PRODUCTION. 153 lands a necessity. Its truth seemed obvious then, and has usually been taken for granted since. In manufactures, 1 on the other hand, it seems as if every increase in the amount of capital and labour applied will give a more than proportionate return. There seems no limit to the economy of labour or to the efficiency of auxiliary capital. Only allow time for new factories to be built and fresh labour to be trained, and, if the raw mate- rial were forthcoming, Lancashire would clothe the world with calico. Even with the same methods of manufact- ure, it seems probable that some saving in cost through the larger scale of production would take place also, and thus that the increase in production would be associated with an increasing return, Similarly, if we look to the t% natural " progress of improvements in manufactures through the invention of new machines and processes, a still greater increase might be expected, and the second (dynamical) form of the law of increasing return seems even more firmly established than the first (statical). Here, again, the progress of English manufactures since the industrial revolution towards the close of last century, seemed to confirm the results of the method of simple inspection. Those who enunciated the law of diminishing returns in agriculture, also contrasted with it the law of increasing returns in manufactures. Both laws seemed to be not only illustrated, but proved, by actual industrial conditions. The observer of the present day, who looks back over the last hundred years, will find much to confirm the opin- ions of the earlier writers. In England, in the years 1770, 1850, and 1878, respectively, the yield of wheat per acre was 23, 26|, and 28 bushels, respectively, and the price of bread per Ib. was l^t?, l^c?, and l^eJ. In the same hundred years the prices of meat and butter were nearly trebled. 2 And yet, during the same period, very great improvements had taken place in agriculture generally. 1 Ricardo, Ch. V. 2 Caird's Landed Interest, Appendix. 154 PRINCIPLES OF POLITICAL ECONOMY. A striking contrast is furnished by the cotton industry. 1 In 1779, yarn (40 hanks to the Ib.) required in the process of manufacture, 14s. of labour and capital, in 1882, only 3|c?., that is to say, the cost has fallen to ^ of what it was. In the meantime, the import of raw material (which seems the best test of the amount manufactured) has risen from about 6 million Ibs. to nearly 1800 million Ibs., that is to say, about 300 times. 2 It is not then surprising that most economists have followed the example of Senior 3 in enunciating as an inherent law of manufacturing industry, that in it increased production takes place at a smaller cost, the law of increasing return, whilst in agricul- tural industry, increased production takes place at a greater cost the law of diminishing return. It is, however, worth while recalling the guarded language of Mill, with reference to Senior's statement: "I cannot think that even in manufactures, increased cheapness follows in- creased production by anything amounting to a law. It is a probable and usual, but not a necessary, consequence." 4 And in the next section he shows that a similar criticism may be applied to the law of diminishing return in con- nection with agriculture and other industries engaged in raising raw produce. As a matter of fact, both laws, though apparently simple and axiomatic, are in reality extremely complex, and demand an inductive proof. The law of diminishing return, as more generally adopted, may be considered first. 2. The Law of Diminishing Return, as applied to the Pro- duction of Corn. For the sake of clearness and definiteness of exposition, the law of diminishing return may, first of all, be explained by taking the particular case of English arable land, or more precisely, the case of the production 1 Ellison's Cotton Trade, p. 61. 2 Ibid., pp. 49, 128. 8 Political Economy, p. 86. * Bk. IV., Ch. XI. , p. 2. See, also, for a fuller criticism on the same lines, Sidgwick's Principles, Bk. I., Ch. VI. PRODUCTION. 155 of English wheat. There are several advantages in begin- ning in this way. In the first place, most writers since the first statement of the law, have, consciously or un- consciously, taken wheat or corn as typical ; secondly, we know that from prehistoric times down to the present day corn has been grown in England, 1 and, thanks to the ardu- ous labours of Thorold Rogers, we have for some six cen- turies, very full and accurate accounts of the prices and methods of production. Over such a period we ought to be able to give a real meaning to those much abused terms " ultimately " and " in the long run." In the statement of the pure theory it will be conven- ient to use the phraseology which has now been generally adopted. By land on the margin of cultivation, is meant that land which, under the existing regime, it just pays to cultivate ; by the marginal dose of labour and capital, is meant the last portion which it just pays to apply ; and by the marginal return, is meant the yield to this marginal dose. It is obvious that the marginal dose may be considered as that which is applied to the worst land in cultivation, or as the last addition to high farming on the better lands. " What we want to fix our minds on is the return to the marginal dose ; whether it happens to be applied to poor lands or rich, does not matter ; all that is necessary is that it should be the last dose which can be profitably applied to the land." 2 As is naturally suggested by the explanation of the terms just made, it will be advantageous to give to the law (in the case of arable land and wheat) two forms of statement according as we consider first a unit (say acre) of land of the same fertility, and secondly, the whole land of different qualities of any country or industrial area. I. As applied to one portion of land, the law may be thus worded : " If to any piece of land (other things re- 1 " From the earliest times wheat has been the customary food of the people of this country." Rogers, Vol. I., p. 26. 2 Marshall's Principles, p. 210. 156 PRINCIPLES OF POLITICAL ECONOMY. maining the same) labour and capital (of the same effi- ciency per unit) be applied continuously, beyond a certain point, the return per unit will diminish." In explanation, it may be remarked that the phrase " beyond a certain point " refers not to the time but to the quantity of the applications of labour and capital. 1 Thus, in the use of ammonia or other chemical manure, all that is meant is, that if more than a certain quantity is applied the benefit will begin to diminish, and, indeed, an excessive quantity would be absolutely injurious ; whether much or little, however, is used, it may all be applied at the same time. The other qualifying clauses which may seem to make the statement of the law unduly cumbrous are also really necessary. In saying " other things remaining the same," it is intended to exclude such changes as arterial drainage of the district, an alteration of climate through the de- struction of forests and the like ; in fact, it is assumed that the environment of the piece of land remains the same. The assumption that the labour and capital considered are of the same efficiency per unit is practically equivalent to the assumption that the arts of production remain sta- tionary. Thorold Rogers 2 has shown that in the thir- teenth and fourteenth centuries the rate of seed sown to the acre was about the same as at present in the case of wheat about two bushels. But the average yield per acre was, during that period, less than eight as compared with twenty-eight bushels under modern conditions. He shows further, that this increase in production is in the main due to improvements in the methods of cultivation ; it is not wrung from the land by additional doses of labour and capital, with a continually diminishing return per unit. 1 It is not implied that the land is always exhausted by the previous doses, though of course such a case may occur. 2 History of Agriculture, Vol. I., Ch. III. PRODUCTION. 157 Sir James Caird 1 has given examples of changes in the methods of production of wheat in recent years. Thus the double-furrow plough, balancing itself with greatly less friction in proportion than the single plough, is found to do the same work with one man and three horses as two single ploughs with two men and four horses ; a saving of 50 per cent in man power and 25 per cent in horse power. Examples might be multiplied indefinitely, but enough has been said to make clear the necessity of the qualification introduced. The law does not state even as regards the production of wheat on an acre of arable land, that once the point of diminish in return has been reached, an increase in production from this acre can, through all time, only be obtained at an increasing cost ; but only that beyond a certain point, so long as the arts of production remain the same, the law will come into operation. Up to this point, as Turgot 2 clearly showed, eveiy dose of capital and labour may give a greater return than the previous dose ; that is to say, the law of increasing return may operate, but on a given portion of land, with certain methods of cultivation, a point will be reached at which the return will begin to diminish. It may be pointed out further as regards the production of wheat with the same methods, that, when the return begins to diminish, it continues to decrease very rapidly, and indeed soon reaches the vanishing point. In fact, for practical purposes, the law really amounts to this : that with certain modes of cultivation only a limited amount of capital and labour can be applied to a piece of land. The conception of successive separate doses of cap- ital, each with a corresponding return, separately marked off from those preceding, is apt to give very false impres- sions. It is often assumed, for example, that every addi- tional dose must give some return ; it is forgotten that the return would soon become negative or the labour positively injurious. 1 Landed Interest, Ch. II. 2 See Mr. Caiman's paper, referred to above. 158 PRINCIPLES OF POLITICAL ECONOMY. It might be supposed that with the qualifications stated, the law of diminishing return in this simple form, as applied to a certain portion of land, is so palpably obvious, so axiomatic, that it could never have been overlooked. There is, however, probably no other economic law of the first importance which has so often been forgotten or mis- calculated. Mill himself has bestowed extravagant praise on the ardour and perseverance of peasant proprietors, although it is certainly true that much of their labour is pushed far beyond the point of diminishing return, and is, from the economic standpoint, wasted. 1 Nor is it only the magic of property that gives the requisite stimulus to such thankless toil. Before recent legislation gave the Scottish crofters security of tenure and fair rents, they applied labour to the production of corn, in this case barley or oats, which in most cases had passed the point of dimin- ishing return in the very first step taken. On the extreme northern coast, I have seen little patches of land culti- vated with a waste of labour which could hardly have been surpassed by a peasant proprietor. The soil itself often barely covered hard rock ; its properties were renewed by seaweed, which women carried up steep cliffs in creels on their backs. The land was dug up with the spade ; the crop, generally half ruined by storms, was cut with the sickle in little handfuls. In sight of this wretched labour, the English smacks were making splendid fishing. Nor is it only in production on a small scale that waste of this kind occurs. In this same county of Sutherland the late duke spent vast sums in reclaiming land, and in many cases the last state of that land has been worse than the first, the natural plants have vanished, and the corn and roots will not repay the planting. In Scotland, generally, the farmers are probably the most enterprising and most efficient in the world ; but it too frequently happens that they themselves apply, and in some cases induce their landlords to apply, capital be- 1 See above, Ch. IX. PRODUCTION. 159 yond this point of diminishing return. In this case, there is generally a mistaken calculation ; but the mistake is often connected with a vague idea that any amount of capital judiciously expended on land must be profitable. 1 It will readily be conceded, however, that this too fre- quent neglect in practice of the law of diminishing return, with the consequent waste of effort, only emphasises the truth and importance of the law itself. But when the practical difficulties are set aside, and the law is guarded by the requisite hypothesis, the first thing that will proba- bly strike the critical reader is, that a law precisely similar applies, not only to a piece of corn-growing land, but also to every form of auxiliary material capital, buildings, machinery, and the like, and applies equally to labouring cattle and labouring men. In a factory of a certain size, with certain methods of production, only a limited amount of capital and labour can be employed ; after a certain point is reached there will be a diminishing return to suc- cessive doses of capital and to additional pairs of hands. In a steam-engine, up to a certain point, the motive power will increase with every additional unit of coal burned; but after this point is reached the return will diminish, and ultimately the fire may be choked or the boiler burst. A ship cannot be navigated at all without a certain num- ber of sailors ; and in this case also it is easy to formulate a law of increasing return, which gradually merges into a law of diminishing return. Similarly, the food of horses and the food of men may be said to follow this same law (after a certain point) with regard to the efficiency of the labour which they perform. If, then, the law as applied to land is to be something 1 Mr. Carman gives instances of the express denial of the law of dimin- ishing return even in the form under consideration. Compare also the following passage from Malthus' Essay on Population, p. 377 : " As Lord Kaimes observes, a country cannot easily become too populous for agri- culture, because agriculture has the signal property of producing food in proportion to the number of consumers." 160 PRINCIPLES OF POLITICAL ECONOMY. more than a particular case of ttrjSev ayav, and is of such peculiar importance as to deserve Mill's description of it as the most important proposition in political economy, we should expect to discover some peculiar property in which land differs from other forms of capital or instruments of production. Such a differential quality is found in the limited quantity of land, or more strictly of superior land. In any single factory there is a limit to the advantageous increase of the labour and machinery employed ; but, for practical purposes, the number of factories can be indefi- nitely increased, and equal quantities of labour and capital will give at least equal returns. If only time is allowed, old machinery can be replaced by new, and thus any advantage obtained by one factory will soon be open to others. But with land it is not so ; the better land is lim- ited and the differences in productive power are compara- tively permanent. 1 Accordingly, in old countries in which all the land best adapted to agriculture or (to take the same example as before) to corn-growing has been taken up, the produce can only be increased so long as the arts of production remain the same, either by more intensive cultivation of that land (with the diminishing return already explained) or by more extensive cultivation in the recourse to inferior land. The limit of intensive cultivation is soon reached, apart from improvements. As a matter of fact, in the case of wheat, it is probable .that the land which yields fifty bushels an acre will cost no more and possibly less to cultivate than the land which yields only fifteen. 2 Ac- cordingly, whether the increase in produce is a cause or an effect of the increase in population (a point to be discussed later), it can only be obtained, in the absence of improve- ments, by the cultivation of inferior land. Thus we arrive 1 Take, for example, the slopes of a mountain from the plain to the summit. 2 This was asserted by McCulloch in 1838. PRODUCTION. 161 at the second form of the law of diminishing return applicable to a country or industrial area embracing lands of different qualities. After a certain point is reached, every additional acre taken into cultivation, the arts of production remaining the same, gives a diminishing return to a given amount of labour and capital. For the reasons already given, it is probable that the cultivation of the wheat-growing land of any country, after a certain stage, will pari passu become both more intensive and more extensive. A good example is fur- nished by the progress of American l agriculture. For a long period the fields were systematically cropped on the principle of obtaining the largest crops with the least expenditure of labour ; very little capital was sunk in the soil in the way of improvement, and little was done to re- store its fertilising ingredients. As a consequence, the land long occupied gradually lost its fertility, and re- course was made to more distant fields of virgin freshness. Distance, it may be observed parenthetically, is eco- nomically as much a species of inferiority as is comparative sterility, for it increases the cost of marketing the produce, and the cost of procuring the articles which the land and the labourers require. As the margin of cultivation was pushed further westward, in the lands over which " the shadow of partial exhaustion " had passed, the sys- tematic agriculture of an old state was introduced ; deeper ploughing, better drainage, and natural and chemical fer- tilisers were employed to bring up and keep up the pris- tine fertility. In a word, the extension of the margin to new lands was accompanied by corresponding intensity of cultivation on the old lands. It has already been implied, but the point deserves ad- ditional emphasis, that the term " inferior " as applied to land will vary with the agricultural regime, that is to say, 1 Walker. Lund and its Rent, p. 47, note. See also the report of the Swedish traveller Kalm, in 1749, quoted by Adam Smith, p. 103, McCul- loch. 162 PRINCIPLES OF POLITICAL ECONOMY. with the arts of production and skill of the cultivators. In the earliest times the slopes of hills were the most fa- voured lands. In the valleys and beside rivers and streams the power of nature was too great for primitive man. The best land was the hill-top, and the margin of cultivation crept slowly downwards into the woods and marshes. And as the margin extended the intensity of cultivation was increased ; it is probable that many of the terraces to be seen on the high ground in various parts of Britain were constructed with infinite trouble by some pre-Aryan tribe, just as at present they are in China. 1 The high land was considered superior in these early times, not only on account of the methods of cultivation, but by reason of situation ; for the hill-tops and headlands were most easily defended, and, if the phrase may be used, were the centres of population. During the present century changes have taken place in England and France, by which the inferior land has really become superior, although it is still sometimes from old association described as poor land. 2 Without anticipating, except in a very elementary man- ner, the theory of value, it may be pointed out that the margin of cultivation will advance or recede, other things being equal, according to the demand, which again is practically expressed by the price. Thus, recently in England, under the influences of the low prices caused by foreign competition, the area of arable land devoted to wheat has been considerably contracted. The inferior lands, for this purpose, have gone out of cultivation. If, as throughout this section, the attention is confined to one kind of produce (wheat), we may consider the rent which must be paid to acquire fresh land for this purpose as an element in the cost of production. 3 Thus the diffi- 1 Gomme's Village Community, Ch. IV. a See Porter's Progress of the Nation, Sec. II., Ch. I., p. 152 ; and Passy's Systemes de Culture, Ch. II. 8 This particular assumption, as will be explained in treating the theory PRODUCTION. 163 culty of extending the margin of cultivation may lie in the fact that the land is being used for something else and is paying a high rent. Under the pressure of high prices, however, this difficulty may be overcome. Thus it may become profitable for the time at any rate as was too often the case early in the century to break up old pas- ture to grow corn. In this case the land would not be inferior, except in the economic sense of bearing this bur- den of rent, due to peculiar qualities. Sir James Caird l has shown that in time of war the pro- duction of wheat in England might be largely increased, both by the intensive and the extensive methods. By the use of various manures, especially nitrate of soda, two or more corn crops might be taken successively from the same land. " If all Europe were shut against us we should be quickly able to meet the increased home demand, by double-cropping to the extent of one-tenth of our corn- land." Apart from this resource, we have an immense reserve power of cereal productions stored up in our pas- ture lands, which in case of need, as evinced by high prices, can be broken up for tillage. Before proceeding to notice the application of the law of diminishing return to other kinds of produce, the argu- ment of this section may be briefly summarised. Whether we consider an acre of land or a whole country, after a certain point is reached, the return to a given amount of labour and capital will diminish. It will do so, however, only under the supposition that the arts of produc- tion, using the phrase in the broadest sense, remain stationary. So far, then, the law gives no countenance whatever to the assertion that in the course of time, or with the prog- ress of population, or more generally, " ultimately and in of rent, does not conflict with the general proposition that (under certain hypotheses) price determines rent, and not rent price. See infra, Bk. II., Ch. XIV. 1 Landed Interest, Ch. II., p. 19. 164 PRINCIPLES OF POLITICAL ECONOMY. the long run," the absolute cost l of production of corn must increase, or that the marginal return to the marginal dose of capital must diminish. What may happen at the end of time is a matter for prophecy and beyond the range of science, and whether in the historical past or the calcu- lable future, this has been or will be the case, depends upon the resultant of a number of very complex causes. Some of these will be discussed in the next chapter on the theory of population; and some will be noticed immedi- ately in considering how the law of diminishing return maybe counteracted. In the meantime, the difficulty may be illustrated by reference to one or two eminent authori- ties. Adam Smith 2 says that in every different stage of improvement, the raising of equal quantities of corn in the same soil and climate, will, on an average, require nearly equal quantities of labour. The reason he gives is, that the increase in the productive powers of labour will be more or less counterbalanced by the increasing cost of cattle, the principal instruments of agricultural production. On this passage, Thorold Rogers observes, that far greater quantities will be obtained by far less labour as agriculture improves, and supports his opinion by an appeal to history. Mill, when actually discussing the point, 3 says, that the answer depends on the conflict of the two antagonist agencies, increase in population and improvements in agricultural skill, and allows that in some, perhaps in most, societies both are stationary or nearly so, and that, therefore, the cost of production of food is, also, nearly stationary. In general, however, he writes as if weighed down by the conviction that population will increase at such a rate as to increase the cost of production of food ; and most of his errors in the treatment of the wages question and the distribution of wealth may be traced to this exag- gerated dread. 4 1 For the full explanation and limitation of this phrase, see infm. Bk. III. 2 Bk. I., Ch. XI., p. 198, edition Rogers. 3 Bk. IV., Ch. II., p. 3. 4 See infra, 4, and also next chapter. PRODUCTION. 165 3. The Law of Diminishing Return as applied to Other Kinds of Raw Produce. As regards most forms of agricul- tural produce, the law of diminishing return may be stated in similar terms and with similar conditions as in the case of corn. The principal differences that arise are of impor- tance not so much with respect to the relative amounts as to the relative values of the various sorts of produce. When land is abundant, and may be regarded economically as free, cattle and sheep can often be reared with very little labour and expense. An ox 1 may be had for the trouble of catching it, and sheep 2 may be more valued for their wool than for mutton. As a rule, the pastoral stage precedes, at any rate in importance, the cultivation of land for cereals, the expense of the latter being very much greater. When, however, land has been fully occupied, relatively to the stage of civilisation, the demand for meat brings into play the law of diminishing return. Various roots and grasses are grown solely for the food of animals, and they are reared on an "intensive" system in comparatively small spaces. A modern dairy farm is almost like a factory in which raw material is worked up. Again, the most distant and barren moors are brought into use for sheep; bogs are drained, dangerous places fenced, more labour is employed in herding, and the sheep are taken to the low grounds to winter on turnips. By these and similar methods the number of sheep in Scot- land, for example, has, during the present century, been very largely increased, but the increase has taken place at an increasing cost. Vineyards afford a good example of the law. Vines more than any plants appear to be affected by the nature of the soil, and in consequence the cultivation of the most favoured spots is pushed to the highest degree of intensity. Pari passu inferior wine is grown on inferior 1 See Adam Smith's reference to Buenos Ayres for cattle. Bk. I., Ch. XL, p. 68, McCulloch. 2 /fti'd., p. 106, to Spain for sheep. 166 PRINCIPLES OF POLITICAL ECONOMY. soils. 1 In this case the law of diminishing return may be said to imply a diminution of quality rather than of quantity. In other forms of produce, e.g., in the cultivation of various flowers and fruits, the law appears in the extra cost involved in improving the quality or in creating new varieties. The raw materials of clothing are derived partly from plants, e.g., cotton, or flax, etc., partly from animals, e.g., wool, skins, hair, etc. The former resemble other agri- cultural products, but the latter are often, as Adam Smith calls them, " appendages " to other sorts of rude produce. In the case of these " appendages " the law must be sup- posed to apply to the joint product. It is thus possible that, owing to the greater demand for one component and the limited demand for the other, the oesfc of the latter might fall greatly. This, from a variety of causes, has recently happened in the case of English wool. Timber and fuel can, as a rule, in early stages of society, be obtained with little real cost. Forests are in new countries often looked upon as encumbrances to be re- moved in any manner. In process of time forestry be- comes an important art, and the law of diminishing return applies both extensively and intensively. Even in many sea-fisheries the law seems to apply. In the herring fishery, for example, the fish are caught at greater distances from the shore, and the boats are larger and better equipped. The same tendency is shown still more clearly in the case of whales and seals. Mines and quarries are subject to the law in a peculiar manner. If the necessary labour and capital are forth- coming production can be increased without a correspond- ing marginal diminution, that is to say, as soon as the 1 " That the vineyard, when properly planted and brought to perfection, was the most valuable part of the farm, seems to have been an undoubted maxim in the ancient agriculture. But whether it was advantageous to plant a new vineyard was a matter of dispute among the ancient husband- men, as we learn from Columella." Adam Smith, Bk. I., Ch. XI. PRODUCTION. 167 period of transition is over. But over a term of years the original sources may be utterly exhausted, and then re- course must be made to inferior sources of supply. Analogous cases are furnished by the exhaustion of the natural fertility of land, and by fresh water fisheries and wild animals where care is not taken to keep up the stock. It will be seen from this enumeration of various kinds of typical raw produce, that the law of diminishing return operates in different modes and degrees in different cases. If we refer to the historical past we shall find that in some instances e.y., meat, milk the marginal return has considerably diminished, and that the law holds good dynamically. In other cases, if we contrast long periods, the reverse is the case, as, for example, in most mineral produce, in which the arts of mining and advances in practical geology have more than compensated the ex- haustion of the best seams or ores. Even in this case, however, it is true to say that in the absence of discoveries of new mines, and with the same extractive arts an increase | of supply will involve an increasing cost: that is to say, the law holds good statically. With regard to the general law of diminishing return that is as applicable to all sorts of raw produce, the best evidence as to the extent and degree of its operation is to be found in the course of prices. Allowance must of course be made for any exceptional conditions of demand or supply, and also (especially over long periods) for changes in the general purchasing power of money. Various theoretical difficulties involved in the calculation will be discussed at a later stage, 1 but for the present purpose a rough comparison of mediaeval and modern prices will be sufficient to illustrate the argument. According to Thorold Rogers, 2 in comparing present prices with those of five hundred years ago, we ought to multiply the latter by eight at least, and more probably by twelve, or even some 1 Theory of Value and Prices. Infra, Bk. III. 2 History of Agriculture, Vol. I., p. 259. 168 PRINCIPLES OF POLITICAL ECONOMY. higher figure, to allow for the change in the general pur- chasing power of money. Taking the lowest multiplier, namely, eight, and converting mediaeval prices accordingly, we find the average prices of the fourteenth century, compared with the average of the last ten years' l Avork, as follows: In the earlier period wheat was about one-third dearer than at present ; wool was three times as dear ; iron, eight times, and for a considerable period sixteen times ; tin, two to three times ; lead, four to six times ; and tallow, three to five times. Meat, on the other hand, was probably one-fourth of its present price, although the difference in quality to some extent neutralised this apparent advantage. The price of fish was generally very high, and foreign produce of all kinds was also very dear. The evidence of a more direct character as regards quan- tities confirms the results of the comparison of values. The amount of wheat produced per acre was about one- third of the present average ; cattle and sheep were very small; artificial grasses and roots for winter use were unknown. In fact, although probably the same number of people were employed in agriculture, at that time the great bulk of the population, the return to their labour was at the most one-seventh of what it is at present. The proportionate returns to mines and fisheries, and the other extractive industries, were still less than in agriculture. We are now in a position to see more clearly the neces- sity of stating the law of diminishing return as a tendency, which is constantly liable to be counteracted. If in a limited time, under certain conditions, it is necessary to increase the supplies of raw produce, the law will no doubt act sharply, as in the period of English agriculture, to which attention has already been directed ; but we have no right to assume that in the course of time the general resultant of the complex forces at work will be to give a lessened reward to the same quantity of labour. I pro- 1 For mediaeval prices I have taken Rogers' tables, Vol. I. ; for 1882-91, those of Sauerbeck in the Statistical Journal. PRODUCTION. 169 ceed to notice the principal counteracting causes in the most important case, namely, the food supplies of a nation. 4. How the Laic of Diminishing Return may be coun- teracted. The chief practical importance of the law of diminishing return in agriculture arises in reference to the conditions under which a nation can obtain its food supplies, especially with an increasing population. It is on this subject that Mill, under the influence of Ricardo, 1 made the gravest error in his work, an error which vitiated the larger part of his treatment of the wages question. Poverty and low wages 2 he ascribed almost entirely to over-population, and by over-population he meant the pressure of population on the means of subsistence, with the consequent recourse to inferior lands or more niggardly processes. "When," says Mill, "for the purpose of raising an in- crease of produce recourse is had to inferior land, it is evident that so far the produce does not increase in the same proportion with the labour. The very meaning of inferior land is land which with equal labour returns a smaller amount of produce." 3 In this sentence, however, he overlooks the fact that inferiority is purely relative ; his assertion is true only on the assumption that the arts of agricultural production are absolutely stationary. It is perfectly true and I hasten to admit that Mill himself goes on to give what is probably the most complete account yet published, of the modes in which this law of diminishing returns may be counteracted. The law itself, he states explicitly, is a tendency which may be and some- times is for long periods held in check. The resultant effect does not depend on a single principle, but on two antagonising principles, and the agency in constant antag- onism to the law of diminishing return is no other than 1 Ricardo's Principles, Ch. II., "On Rent." 2 Cf. Mill, Bk. II., Ch. XIII., and Bk. IV., Ch. III., IV. MU1, Bk. I., Ch. XII., and 2. 170 PRINCIPLES OF POLITICAL ECONOMY. the " progress of civilisation." This expression Mill pro- ceeds to expand into a series of important influences. There are agricultural improvements which enable the land to yield a greater absolute produce without an equiv- alent increase of labour, e.g., the disuse of fallows by rotation of crops, the introduction of new roots, better knowledge of manures, improved breeds of cattle, etc. There are next improvements which diminish the labour required without increasing the capacity of the land to produce, e.g., new machinery, more skilful economy of labour and capital. There are improvements also in the means of communication, which diminish the cost of instru- ments and materials, and also the cost of completing the act of production by putting the commodity in the hands of the consumer. This leads up to the mechanical inventions which apparently have no direct bearing on agriculture, but which enable a given amount of food to be obtained with less labour, e.g., new modes of working iron, improve- ments in mills, etc. Then a still broader view is taken of the whole industry of a country, and it is maintained that, even if the efficiency of labour in agriculture were to diminish, still, from the national point of view, that of other industries might more than proportionately increase, so that on the whole the country would, even as regards its food, have more abundant supplies ; the food might be dearer, but there would be more to buy it with, and the benefit might even extend to the poorest class. Thus Mill arrives at the position that there is no possible im- provement in the arts of production (i.e., not of agriculture only, but generally) which does not in one or another mode exercise an antagonist influence on the law of dimin- ishing return to agriculture. Even yet the climax of the conclusion has not been attained, for we are further assured that improvements in government and almost every kind of moral and social advancement operate in the same man- ner, e.g., improvements in land laws, in education, and in the friendly relations of capital and labour. Finally, we PRODUCTION. 171 are told that there is scarcely any possible amelioration of human affairs which would not, among its other benefits, have a favourable operation, direct or indirect, upon the productiveness of industry. Surely in the whole range of social philosophy it would be difficult to discover a more striking instance of the overbearing influence of a dominant idea. In spite of the enumeration of counteracting causes, of which the above is an incomplete summary, Mill introduces the whole ques- tion with an emphatic passage which leaves no doubt as to the impression the law of diminishing return had made upon his own mind : " This limited quantity of land and limited productiveness of it are the real limits to the in- crease of production. That they are the ultimate limits must always have been clearly seen. But since the final barrier has never in any instance been reached; since there is no country in which all the land capable of yielding food is so highly cultivated that a larger produce could not (even without supposing any fresh advance in agri- cultural knowledge) be obtained from it, and since a large portion of the earth's surface still remains entirely uncul- tivated, it is commonly thought, and is very natural at first to suppose, that for the the present all limitation of production or population from this source is at an indefi- nite distance, and that ages must elapse before any practi- cal necessity arises for taking the limiting principle into consideration. I apprehend this to be not only an error, but the most serious one to be found in the whole field of political economy. The question is more important and fundamental than any other; it involves the whole sub- ject of the causes of poverty in a rich and industrious community." Further criticism of this position may be deferred to the chapter on the theory of population. 5. The Law of Increasing Return. The law of increas- ing return is the exact counterpart of the law of diminishing return, and requires to be stated with similar limitations and hypotheses. Adam Smith introduces the advantages 172 PRINCIPLES OF POLITICAL ECONOMY. of division of labour by calling attention to the "great increase of the quantity of work which, in consequence of the division of labour, the same number of people are capable of performing." This may be considered as the simplest form of the law of increasing return ; given a cer- tain amount of labour and capital, the return increases by dividing the work to be done in a more economical manner. So far, then, the law is practically a summary statement of the principle of division of labour, and whenever this principle can be adopted or extended an increasing return is forthcoming. Thus under certain conditions we may have an increas- ing return to the labour and capital devoted to agriculture. Recent writers, however, have in general stated the law not so much with reference to the better employment of a given amount of labour and capital, as with reference to the results of employing additional amounts in any industry. In this form the law may be thus expressed : Under cer- tain conditions every additional unit of productive power gives more than proportional returns. This it does by ren- dering possible various internal and external economies (to adopt Professor Marshall's quasi-technical language) which on a smaller scale could not be carried out. American economists in particular, under the influence of the con- ditions of progress in their own country, have laid great stress on the importance of a growth in numbers, on the ground that the average earnings and the productive capacity of the people would increase ; especially in the case of agriculture they maintain that as population be- comes more dense it is possible to make improvements in roads and the means of communication generally, and these, as Adam Smith said, are the most important of all agricultural improvements. English economists, on the other hand, under the influ- ence of the extraordinary development of manufactures during the present century, have been inclined to suppose that the law applies in a peculiar manner to manufactures; PRODUCTION. 173 that in manufacturing industry its action is normal and constant, whilst in agriculture and the extractive indus- tries its action is only occasional and intermittent. There is reason to believe, however, that those who lay stress on the increasing return in manufactures, as con- trasted with the diminishing return in raw produce, have unconsciously included in the one case and excluded in the other a hypothesis of vital importance. They have assumed, namely, that in manufactures the progress of invention in mechanical and chemical processes will be continuous and indefinite, whilst in raw produce improve- ments in production will be comparatively unimportant and intermittent. But invention is a very different thing from economy, whether external or internal, and we have no right to assume that invention will be increased as a necessary consequence of that division of labour and pro- duction on a large scale. It is quite possible, and in my opinion it is probable, that during the next century, owing to the advances of chemistry and other practical sciences, the progress of invention may be more marked in the acquisition of raw produce than in its manufacture. Adam Smith, 1 in treating of the fall in the price of manu- factures, is careful to state that the natural effect of im- provement is to diminish gradually the real price (i.e., the labour required) of almost all manufactures, and he ex- pressly mentions the use of better machinery. He points out the remarkable improvements in the manufacture of the coarser metals during the seventeenth and eighteenth centuries, but he adds that in the clothing manufacture there had been no such progress, and that the division of labour and the machinery employed were practically the same in his day as a hundred years before. Since his time, however, the improvement in the manufacture of woollen cloth has been as remarkable as in any industry. The astonishing increase in the productive power of labour and capital in cotton-spinning has already been i Bk. I., Ch. XL, p. 112, McCulloch. 174 PRINCIPLES OF POLITICAL ECONOMY. alluded to, but it is hardly conceivable and much less probable that during the next hundred years the return will increase in a corresponding degree. It is interesting to observe that even during the last forty years the price of raw cotton has fallen more than the price of cotton yarn and cotton cloth. 1 In conclusion, it must be observed that the division of material wealth into " raw produce " and " manufactures," though intelligible and useful when extreme examples are taken (e. ing. The critique on schemes of equality was retained with an apologetic justification, first, because " when para- doxes of this kind are advanced by ingenious and able men, neglect has no tendency to convince them of their mistakes," l and secondly, because " it is probable that if the world were to last for any number of thousands of years, systems of equality would be among those errors, which, like the tunes of a barrel-organ, to use the illustra- tion of Dugald Stewart, will never cease to return at certain intervals." 2 The following passage, taken from Malthus' criticism of Condorcet, 3 furnishes an illustration, which at the present day, with our proposals for old-age pensions, and the extension of the use of state credit, needs no comment. " By the application of calculations to the possibilities of life and the interest of money, he proposes that a fund should be established which should assure to the old an assistance produced in part by their own former savings, and in part by the savings of individ- uals who, in making the same sacrifice, die before they reap the benefit of it. The same or a similar fund should be given to women and children who lose their husbands and fathers. . . . Going still further, he says, that by the just application of calculations means might be found of more completely preserving a state of equality by preventing credit being the exclusive privilege of great fortunes, and yet giving it a basis equally solid, and by rendering the progress of industry and the activity of commerce less dependent on great capitalists." 4 But al- though the critique was retained, the emphasis was read- justed, and, as Dr. Bonar points out even on the title-page in the extended description of the essay, the lettering of the 1 The references are to the seventh edition (Reeves and Turner, 1872). 2 p. 282. p . 264. 4 See also the discussion in the appendix on the system of small hold- ings, and the " one or two acres and a cow" proposal. PRODUCTION. 177 inquiry into the future becomes smaller and fainter, whilst that of the view of the past and present becomes larger and blacker. 1 If Darwin had published his first idea of the origin of species without the labour of collecting voluminous proofs, his work that is to say, in its con- structive method would have corresponded closely to the first edition of Malthus ; as he chose to wait some seventeen years, it corresponds to the last. The comparison between Darwin and Malthus both in matter and method is very instructive, but it is a mistake to suppose that the principle of population is one case of the wider Darwinian theory. The truth is, though it has, I believe, been generally overlooked, 2 that although Malthus suggested to Darwin the leading idea of his theory, as a matter of fact, he himself was definitely opposed to Dar- win's conclusion. He admits that there may be variations within certain limits, alike in man, animals, and plants, but the limits, in his view, are real and insurmountable they may be undefined but they cannot be indefinite. Speaking of men, he says : " Whether intellect could be communicated, may be a matter of doubt; but size, strength, beaut} r , complexion, and, perhaps, even longevity, are in a degree transmissible. The error does not lie, in supposing a small degree of improvement possible, but in not discriminating between a small improvement, the limit of which is undefined, and an improvement really unlim- ited." And again, more generally: "It cannot be true, therefore, that among animals, some of the offspring will possess the desirable qualities of the parents in a greater degree, or that animals are indefinitely perfectible." 3 Simi- larly, Malthus gave no countenance to the opinion that in mankind the struggle for existence would lead to the sur- 1 Malthus and His Work, p. 86. This admirable work gives by far the best account of Malthus with which I am acquainted. In the present chapter I have been much indebted to it. 2 See Dr. Bonar's work, p. 46. 'Ibid., p. 269. 178 PRINCIPLES OF POLITICAL ECONOMY. vival of the fittest, and that the ultimate product would be the highest civilisation. On the contrary, he draws a distinction not only in degree, but in kind, between the intelligence and morality of man and of other animals, and the progress of man he ascribes to the conquest by his superior attributes of those lower animal propensities. 1 The resemblance between the two writers is to be found not in the matter of their conclusions, but in the method of their research. Each started with a guiding principle, but neither, to adopt Malthus' description of his own work, entrenched himself in an impregnable fortress of abstraction and hypothesis ; on the contrary, both wan- dered in search of facts over the large field of experience. Malthus discovered and enumerated the principal causes that affect the actual growth of peoples ; similarly Darwin investigated the actual growth of species. It is a curious and suggestive fact that Malthus, who took a priori views of animals and plants, denied the theory of Darwin, whilst Darwin, who, in respect to man's higher nature, was equally a priori in reality, denied the theory of Malthus. Like all great writers, Malthus was influenced, not only by the speculative thought, but by the social conditions of his time. The work was composed in the cumulative manner described during the period 2 when the English Poor Law was gradually bringing to maturity the evils which are so graphically portrayed in the celebrated Report of the Commissioners in 1834. Without entering into the general discussion, of poor relief, which will be taken up at a later stage, 3 it may be stated that the gov- erning principle during this period was that the people, who, in the words of Pitt, had enriched their country with a number of children, should receive relief as a matter of right and honour. Even Adam Smith had declared that 1 Compare Sir A. Mitchell's Past in the Present, Part II., 2 : " How does the law of natural selection affect men ? " 2 First edition published in 1798, sixth in 1826. 8 See infra, Bk. II., Ch. XII., especially with reference to Pitt. PRODUCTION. 179 the best sign of the prosperity of a country was a rapid increase of population. It must be remembered that dur- ing the period in question, the country was engaged in a great war, and a large population was looked upon as a political necessity. Accordingly, when Malthus set himself to prove that the Poor Laws had done much more harm than good, and ought to be gradually abolished, and when he boldly asserted that, " it is not the duty of a man, simply to propagate his species, but to propagate virtue and happiness, and that if he had not a tolerably fair prospect of doing this, he is by no means called upon to have descendants," he struck straight at notions uni- versally prevalent, and his teaching was branded with op- probrious epithets. Just as Darwin shocked traditional theology regarding the origin, so Malthus offended it in respect of the continuance, of the human species. Those who think that the principle of population is an obvious truism would do well to take note of the controversy which its enunciation excited, and those who imagine that Malthus ever wrote anything opposed to common sense morality should do his memory the justice of reading the essay itself. No man has ever suffered so much from being answered by those who have never seen a line of his works. 1 2. The Principle of Population. 2 Malthus commences his essay by saying that it would be beyond the power of any individual to enumerate all the causes that have influ- enced or retarded human improvement, and that the prin- cipal object of his work is to examine the effects of one great cause intimately united with the very nature of man, namely, the constant tendency in all animated life 3 to increase be- yond the nourishment prepared for it. In this passage he disposes by anticipation of two shallow but common criti- 1 Dr. Bonar gives some unique examples, especially from the clergy. Bk. III., Ch. IV. 2 The argument is based on the final edition. 3 The tautology is that of Malthus. 180 PRINCIPLES OF POLITICAL ECONOMY. cisms. In the first place the tendency to increase is stated as applicable to all animated nature to plants as well as to animals. In a short time, as he points out, if the whole world were vacant, it would be covered by the growth of a single plant, e.g. fennel, and if the germs of existence con- tained in the earth could freely develop themselves, they would fill millions of worlds in the course of a few ages. 1 It may then be objected that the materials of food, e.g. wheat and sheep, tend to increase even faster than man- kind. 2 But the answer is plain. Mankind cannot live upon tendencies and hypotheses ; and if wheat and sheep were left to themselves the supply would soon fail. Secondly, Malthus at the very outset guards himself from the imputation which he has so frequently incurred of as- cribing all the ills of life to the one cause that he has inves- tigated. It is Mill, the disciple, and not the master himself, who is guilty of exaggerating the evil effects of the prin- ciple. Malthus went no further than to say that all society can reasonably require of its members is that they should not have families without being able to support them, and that every restraint beyond this must be considered a matter of choice and taste. 3 Accordingly, he gave his opinion that there was not much need to change the notions prevalent on the subject of marriage and children in the higher ranks of society. Mill, 4 on the other hand, writes with the ascetic fervour of a monk: "Little im- provement can be expected in morality until the producing large families is regarded with the same feelings as drunkenness or any other physical excess. But while the aristocracy and clergy are foremost to set the example of this kind of incontinence, what can be expected from the poor ? " 1 Essay, p. 2. 2 Malthus himself pointed out that wheat could increase sixfold and sheep twofold in a single year. 8 Essay, p. 43. * Principles, p. 226. PRODUCTION. 181 Whether it would be a good thing for society that its most wealthy and best educated members should set the example of small families to the poor and uneducated may be a matter for argument ; prima facie it may be urged that the contrary custom would be more conducive to the more equal distribution of wealth and to the development of higher types of humanity, and it is not very probable that the example would be followed, even if it were set. One thing, however, is certain, namely, that Malthus himself did not adopt this view of moral restraint any more than he adopted the view, with which he is popularly credited, of vicious indulgence. " That an increase in the popula- tion," these are his words " when it follows in its natural order, is both a great positive good in itself and absolutely necessary to a further increase in the annual produce of the land and labour of any country, I should be the last to deny." It is not, in his opinion, immoral to have a large family, if there is a reasonable prospect of pro- viding means of support ; the immorality of imprudence only arises when marriage is entered on with no such prospect. The principle of population is, however, best treated as a problem not of domestic but of political economy. We shall make little progress by expanding the commonplace man is a rational animal and balancing reason against instinct ; to discover what laws govern the growth of the members of a state, we must appeal, as Malthus does, to the past and present conditions of actual not hypothetical societies. The theory, as summarised by Malthus himself, is given in three propositions and a qualification. 1 The first of these propositions, namely, that population is necessarily limited by the means of subsistence, is obvi- ously true. It is, perhaps, worth noting that the means of subsistence must, in general, include something more than food and drink ; as, for example, protection against 1 SIT the general summary, Essay, p. 261, and note. 182 PRINCIPLES OF POLITICAL ECONOMY. the powers and pests of nature. 1 In any case, however, it is perfectly clear that the supply of food actually availa- ble, imposes an absolute limit to any advance in popula- tion; and the law of diminishing return to land, shows that under given conditions this supply can only be increased with increasing difficulty. 2 Thus the mathe- matical analogy of Mai thus is justifiable that whilst population may increase in a geometrical, 3 food can only increase in an arithmetical, ratio. Even in this axiomatic position, Malthus is not content with an a priori statement. He compares the increase of population, when left to exert itself " with perfect freedom," with the rate of increase in the productions of the earth under the most favourable circumstances of human industry. Perfect freedom of expansion has, of course, never existed, but an approxima- tion is found in the English settlements in North America. In these states, where the means of subsistence have been more ample, the manners of the people more pure, and the check to early marriages fewer than in any of the modern states of Europe, the population has been found to double itself for above a century and a half, in less than twenty- five years. 4 In some parts, the population has doubled itself in fifteen years, and even less. Accordingly, if the means of subsistence are forthcoming and people follow their natural inclinations as regards marriage and rearing children, we are clearly within the mark in saying that population can easily double itself in twenty-five years. But the facts already considered show that, without radi- cal improvements, the food available to human industry 1 Fuel especially is of importance. See Roscher, Bk. V., 239. 2 See the last chapter. 8 The terms are used, not strictly, but as the basis of a simile. 4 Essay, p. 3. During the last hundred years the population of the United States has increased about sixteen-fold, that is at about the same rate of increase. In a later note Malthus states that the population of the States, from the earliest settlements to 1800, doubled itself in less than twenty years. PRODUCTION. 183 cannot, after a certain point has been reached, be increased in the same proportion with equal rapidity. Improvements, no doubt, have been made in the past, and probably will be made in the future, especially through the development of the means of communication and the consequent possibility of drawing upon the supplies of unexhausted regions. We may go further and say, that unless such improvements had taken place in the past, the actual increase of population in old countries would not, have been possible ; the birth-rate might have increased, but the death-rate would have counterbalanced it. The increase of food must in reality precede the increase of population, for the needs of the present cannot be met by the prospects of the future. What the first proposition really amounts to, then, is this : that in any society, more children cannot be reared to a healthy maturity than the means of subsistence at the command of the society will permit. Children under ten 1 years (at the lowest limit) must depend for their livelihood on the exertions of their parents, or on public or private charity. The consideration that the increase of food must pre- cede the increase of population, naturally leads up to the second proposition in the Malthusian theory : " Popula- tion invariably increases when the means of subsistence increase, unless prevented by powerful and obvious checks." This second proposition is given with an im- portant qualification. By an increase in the means of subsistence is always meant such an increase as the mass of the people can command. An increase might take place which, in the actual state of any particular society, would not be distributed to the lower classes, and conse- quently would give no stimulus to population ; the food might be given, for example, to domestic animals, or to celibate clergy. In this statement Malthus follows Adam Smith. "Every species of animals naturally multiplies in proportion to the means of their subsistence, and noj 1 This is the figure taken by Malthus. 184 PRINCIPLES OF POLITICAL ECONOMY. species can ever multiply beyond it. But in civilised societies it is only among the inferior ranks of people that the scantiness of subsistence can set limits to the further multiplication of the human species." J It is plain that this second proposition, even with the qualification appended, requires an inductive proof, and it is in furnishing this proof that Malthus makes a real advance upon Adam Smith. It is this second proposition which in general has been most overlooked or misunder- stood. Malthus does not state that if population increases there will necessarily be an increasing pressure on the means of subsistence, but that if the means of subsistence increase, population will increase, unless the tendency is counteracted or suppressed by certain powerful checks. The actual growth of population is the resultant of these antagonistic forces. By a wide survey Malthus shows that some of these checks have always been in operation, and he arrives at the conclusion that such a restraining influ- ence must always be present. The question then arises, What are these checks ? and the answer is given in the third proposition. 2 " These checks and the checks which keep the population down to the level with the means of subsistence are moral restraint, vice, and misery." The ultimate check he explains 3 is a want of food, but this ultimate check is never the imme- diate check except in cases of actual famine. Famine, however, is comparatively rare, and consequently the im- mediate checks must be sought in other conditions. Such are all those customs and all those diseases which seem to be generated by a scarcity of the means of subsistence, and all those causes independent of this scarcity, whether of a moral or physical nature, which tend prematurely to weaken and destroy the human frame. These checks may be divided into two great classes, namely, those which diminish the birth-rate, and those 1 Wealth of Nations, Bk. I., Ch. VIII. 2 Essay, p. 261. 8 Ch. II., p. 6. PRODUCTION. 185 which increase the death-rate ; the former are styled pre- ventive, the latter positive. The preventive checks are, speaking broadly, either of the nature of moral restraint or of vice. The phrase " moral restraint " 1 is used in a very restricted sense, as equivalent merely to abstinence from marriage not accompanied by irregular gratifications. The preventive checks that come under the head of vice are found to exist in the lowest stages of barbarism and in the highest stages of civilisation. Of the positive checks, some arise unavoidably from the laws of nature, as, for example, from the inclemency of the seasons or the exhaustion of natural resources. To these the name of "misery" is specially applied. Other positive checks, however, are partially or wholly the result of vice, such as wars, overcrowding, and excesses. For the illus- tration and the inductive proof of the operation of these various checks, the reader must refer to the essay itself ; 2 he will be repaid by the correction of many natural but erroneous opinions. The permission of infanticide, 3 for example, is shown to increase in general the population of a country (as in China) ; for by removing the fear of too numerous a family it encourages marriage, but when chil- dren are born the natural instincts for preserving them are too strong except in extreme necessity. Slavery, 4 again, is shown to be unfavourable to propagation, and countries in which the masses are slaves are less populous than those in which they are free. The laws passed in ancient times for the encouragement of population are shown to have been not the cause of increase, but rather effects of deficiency of numbers. Similarly 5 it is stated, that whilst scarcity and extreme poverty may or may not accompany an increasing population according to circum- stances, they must necessarily accompany a permanently declining population. The account given of the causes and effects of great migrations 6 is an excellent example 1 Essay, p. 8, note. 2 See also Roscher, Bk. V. 8 Essay, p. 37. Essay, p. 12L 5 p. 379. 6 pp. 45-47. 186 PRINCIPLES OF POLITICAL ECONOMY. of the essay. Emigration does not necessarily diminish population. To resume the main argument: the sum of all these preventive and positive checks taken together forms the immediate check to population ; in every country some of them, with more or less force, are in constant operation, and yet there are few countries in which there is not a constant effort in the population (or rather part of it) to increase beyond the means of subsistence. It is this effort which tends to subject the lower classes to distress and to prevent any permanent amelioration in their condition. But the distress arises because population is repressed, not by moral restraint, but by misery and vice. A point in the argument which has hardly received sufficient attention is the economy in the application of this system of checks. With Malthus the position is fundamental and he takes great pains to establish it that the preventive and the positive checks vary inversely to each other. In countries that are naturally unhealthy or subject to a great mortality from any cause, the preven- tive checks will prevail very little. On the other hand, in countries where the preventive checks are in considera- ble force the mortality is very small. This conclusion is suggested by the expansive power of population, but it is proved by appeal to experience. 1 It naturally leads to the principal practical result of Malthus' investigation : if only the mass of the people would exercise moral restraint, the other checks that arise from misery and vice would tend to disappear. Nothing is more unfounded and unjust than the assertion that Malthus looked upon vice and misery as necessarily con- nected with the growth of population ; they are so only in the absence of the other alternative always offered ; but it is true that anything which weakens moral restraint tends to bring into play these evil tendencies. If the means of 1 Malthus refers also to the recuperative powers shown after wars and plagues. PRODUCTION. 187 subsistence increase, the principle of population will show its force unless it is counteracted ; it is for man, as a rational creature, to choose the counteracting agency ; if, like animals, human beings, regardless of consequences, give full play to the procreative force, like animals, their numbers will be kept down by the misery of positive evils ; if by a perversion of reason they fall into vice, the ultimate effect is again misery ; it is only in moral restraint that the path of safety lies. Malthus wished not for an absolute t diminution of numbers, but for a relative improvement in/ quality. He states most explicitly l that the precise reason why he maintains that more children ought not to be born than the country can support is that the greatest possible number of those that are born may be supported. He looks upon infant mortality as a private and public disas- ter; he regards every diminution of disease, every improve- ment in the condition of the people as a national benefit; and that a rich class is necessary to give employment to the poor, he repudiates with indignation. 2 Recently a reaction has set in against the exaggerated vu'\vs of Mill on the subject of population, and the im- portance of the real teaching of Malthus is in danger of being neglected. It is often assumed that because the area of our food supplies has been largely extended, the princi- ple of population is of no immediate interest ; that with the rapid increase of wealth and the fall in the price of wheat, population may expand indefinitely ; and it is some- times stated, with reference to France in particular, that the evil to be feared in the near future is rather depopula- tion 3 than over-population ; and in the rural districts of the United Kingdom the diminution in numbers is re- garded as a matter of public concern. 1 p. 472. See also p. 488, in which he speaks of the very strange sup- position that the ultimate object of his work is to check population, "as if anything could be more desirable than the most rapid increase of pop- ulation, unaccompanied by vice and misery." a p. 473. 8 oliganthropeia. 188 PRINCIPLES OF POLITICAL ECONOMY. Reflections of this kind, however, are beside the mark. It is futile to divide the aggregate wealth by the number of people, and still more futile to take as dividend the aggregate amount of wealth possible under some ideal scheme. What we have to consider is not possible sys- tems of equality, but actual systems of inequality. It is true that the principle of population may be directed as an argument against the former, but it is equally true that its power as a living force is present in the latter. In the United Kingdom there are large numbers of men and women who do not, and cannot, under present conditions, earn enough to support themselves in a state of tolerable comfort ; still less can they bring up children in a proper manner morally or physically. Yet these people marry and have children, and the numbers of this class are kept down by the positive checks of vice and misery. To say that the principle of population is of no importance be- cause on the hypothesis that if wealth were equally divided there would be enough for all, is to deal with pauperism as if it were only a hypothesis. Again, if we ascend a little higher in the scale, can any one maintain that the very early marriages of factory hands, who at the time may be earning fair wages, are likely to promote their own happiness or that of their children ? Surely every one is agreed that if only they would save for a few years, directly and indirectly it would be of the greatest benefit. But this is to admit what Malthus contends for most strongly ; for he insists not merely that moral restraint of this kind would check the evil of relative over-population, but that the actual waiting would tend to purify and ennoble the affections, and would also give greater freedom to that master-spring of industry, that great vis medicatrix naturoe, the desire of bettering our condition and the fear of mak- ing it worse. A modern industrial nation such as England is in reality an amalgam of nations, and the lowest tribes in our great cities are economically nearly on a level with the savages PRODUCTION. 189 of Terra del Fuego, 1 who, by the general consent of voyag- ers, have been placed at the bottom of the scale of human beings. Above the lowest stratum are tribes that repre- sent every degree of civilisation and culture. It is plainly absurd to take as an average sample of a composite nation, the highest class in intelligence and morality. So long as the lower stages exist, we must suppose that the principle of population will be restrained in the present as in the past. Accordingly, if the conclusions of Malthus were ever true, they are still true ; if ever applicable, they are still applicable. It may be thought that I am emphasising a truism, but the following sentence, from the most popular authority of the day upon the subject of pauperism, a writer who claims to be guided only by facts, shows that Malthus requires either refutation or confirmation : " I have not sufficient evidence to show whether, as a rule, early mar- riages and large families hang together, but .there are in- stances of it in the stories that have been told. On the whole, neither of these causes seems to have as much effect on pauperism and poverty as is sometimes sup- posed." 2 According to the table 3 given by the same writer, we find that of 1,317,104 paupers, 315,457 are children under sixteen ; and he further gives the opinion that the percent- age of little children would be greater than of those over thirteen. It is clear that as regards these juvenile pau- pers, there must have been considerable imprudence on the part of the parents, and it must be remembered that there would be a much larger number just above this class. References to house accommodation, rates of mortality, and general sanitary conditions, show that at the present time in England, numbers of children are brought into the world with no prospect of escaping from indigence and all 1 Malthus 1 Essay, Ch. III., p. 13. 2 Pauperism and the Endowment of Old Age, by Charles Booth, p. 144. 3 Ibid., p. 164. 190 PRINCIPLES OF POLITICAL ECONOMY. its consequences. 1 The vices engendered by poverty drunkenness, crime, and sexual immorality may in turn be partly traced to imprudence as the root cause. In the table referred to above, I find that the number of paupers above 65 is given at 343,962. To provide these persons with a pension of five shillings per week without encouraging improvidence, it is proposed to give every person over 65 the same pension. It would be difficult to imagine a more curious or more illusory mode of giving relief and avoiding the consequences. People who do not need it are to receive a pension so that those who do need it may appear to be on the same footing. Independence of character is supposed to be protected by making the old-age pension a matter of right, not of charity. The reader of Malthus, however, would argue that so far as the duty of supporting the parents is taken from the children and devolved on the state, so far directly and indirectly is moral restraint likely to be lessened ; and so far a positive check will be substituted for a preventive one of the best kind. To relieve those who are too old for self-support the poor in very deed is a moral obligation, but an obligation that falls in the first place on the children. If the state must interfere on the grounds of humanity, it should take care not to weaken this prior responsibility. The subject will be further discussed in connection with the Poor Laws. 2 3. The Standard of Comfort. " In most countries, among the lower classes of people," says Malthus, " there appears to be something like a standard of wretchedness, a point below which they will not continue to marry and propa- gate their species. The standard is different in different 1 See Mr. Booth's Labour and Life of the People, Vol. II., Part IV., "London Children," e.g., p. 493: "These are the children's homes; the parents are compelled by poverty, or by inclination are content, to dwell in them. Their children, born and brought up under such condi- tions, take the colour of their surroundings, and, following nature's law, grow up to repeat the parental type." 2 See Bk. II., Ch. XII. PRODUCTION. 191 countries and is formed by various concurring circum- stances of soil, climate, government, degree of knowledge, civilisation, etc. The principal circumstances which con- tribute to raise it are liberty, security of property, the diffusion of knowledge, and a taste for the conveniences and comforts of life. Those which contribute principally to lower it are despotism and ignorance. In an attempt to better the condition of the labouring classes of society our object should be to raise the standard as high as possible by cultivating a spirit of independence, a decent pride, and a taste for cleanliness and comfort. . . . The fairest chance of accomplishing this end would probably be by the establishment of a system of parochial education upon a plan similar to that proposed by Adam Smith." l It is, perhaps, a hopeful sign of progress that English economists have substituted for the ominous phrase " standard of wretchedness " the more grateful expression "standard of comfort"; it is certainly of good augury that England has, after a hundred years, followed one more of the counsels of Adam Smith. Education is now both compulsory and free. All that remains to be done is that it should also be made real. " I long," says a London teacher, 2 " to have simple practical lessons with the children on things belonging to home and a woman's work, but there is no time for it. We cannot stretch the Code." The rigidity of codes 3 has in times past been the most effective check to progress of all kinds. It is curious to find the evil influence weighing down the lowest classes in a modern state and so far arresting their elevation. Instruction in the elements of the art of living decently is neglected, to make room for teaching the little dwellers in the slums English grammar, parsing, and analysis. Correct spelling is another thankless task. Phonetic spelling is advocated on high authority on its own merits, 1 Essay, Bk. IV., Ch. IX., pp. 437-441. 8 Booth's Life and Labour, Vol. II., p. 502. 8 Cf. Maine's Ancient Law. 192 PRINCIPLES OF POLITICAL ECONOMY. apart from the economy of time and labour. Arithmetic is no doubt useful, but if the decimal system were adopted, half the labour of this department would be saved. By leaving out what is utterly useless and by adopting better methods of instruction in the necessary foundations (the three R's), time would easily be found for teaching the elements of economics (domestic and industrial the word "political" is liable to be misunderstood) and of common-sense morality. As matters stand, the knowledge of economics is left to chance, and of morality to the church, and neither, in the case of the poor, has proved a very efficient instructor. " We have lavished enormous sums on the poor," says Malthus 1 in treating of this topic, " which we have every reason to think have constantly tended to aggravate their misery. But in their education and in the inculcation of those important political truths that most nearly concern them, which are perhaps the only means in our power of really raising their condition and of making them happier men and more peaceable subjects, we have been miserably deficient." In this sentence the only change required is to substitute for the term "political" some less misleading word, if, with the equal abuse of social and moral, such a term can be found. The first requisite to raise the standard of comfort is to diffuse the knowledge of a higher standard; it is not enough to preach or teach dogmatic morality; we must also show in a way that can be appreciated with con- crete illustrations that the conditions of life may be improved and happiness increased. The state and the municipality may do something, but no amount of super- vision, control, and assistance can be a sufficient substitute for self-reliance and the love of independence. Our sense of freedom will not allow us to interfere directly with the worst abuses of home life ; the only alternative is persua- sion, and to this education is a necessary preliminary. Education that is a reality will tend to raise the con- 1 Essay, p. 438. PRODUCTION. 193 dition of the masses, so far as affected by the principle of population, in two ways. It will raise the standard of comfort and it will quicken the sense of responsibility. Labouring men will see that they cannot afford, any more than the members of the professional classes, the luxury of early marriages and large families ; if they wish to live in decency and comfort, they must begin by making some sort of provision against emergencies. In return, if they train up their children morally, intellectually, and physi- cally in a healthy manner, they will provide themselves with the best possible insurance against old age. The causes of poverty are no doubt many and various, and the remedies are equally numerous and diverse ; but one of the most certain and prevailing causes is the production of children without adequate means of support ; the best and surest remedy for this evil is to make people regard home and family life as an object that requires and deserves effort and waiting for its achievement. This is the essence of the teaching of Malthus, and there is no point in which political economy more closely harmonises with common- sense morality. " A strong conviction in a young man of the great desirability of marriage, with a strong conviction at the same time that the power of supporting a family was the only condition which would enable him really to enjoy its blessings, would be the most effectual motive imaginable to industry and sobriety before marriage, and would power- fully urge him to save that superfluity of income which single labourers necessarily possess for the accomplishment of a natural and desirable object, instead of dissipating it, as is now usually done, in idleness and vice." l For my own part, I cannot see how such doctrine is op- posed to religion, morality, or even sentiment, though the charge is still pressed in each particular, 2 whilst in vigour 1 Essay, p. 437. 2 Take, for example, the recent work on Political Economy, of C. S. Devas (one of the Manuals of Catholic philosophy), in most respects a fair text-book on the subject. The teaching of Malthus is severely 194 PRINCIPLES OF POLITICAL ECONOMY. and dignity it seems altogether superior to the proposal to bribe young men with state bounties to save for their old age. To return to the more strictly economic aspects of the question : there can be no doubt from experience that there is a tendency, in the working classes especially, to increase in numbers up to the point at which their standard of com- fort is imperilled. Accordingly, an increase in the means of subsistence (in the widest sense) is usually followed by an increase in numbers. In some cases, however, an im- provement in real wages tends to raise this standard ; but it is not probable that the effect will be permanent unless supported by improved education ; something more is needed than familiarity with a plentiful supply of neces- saries. The further treatment of this subject must be de- ferred to the chapter on wages. 4. The Pressure of Population on the Means of Subsist- ence. It will be observed that in the foregoing treatment of the theory of Malthus the increase of food has been regarded as a condition precedent to the growth of popu- lation. 1 Ricardo and other English economists, however, have assumed that population first increases, that in conse- quence there is a constant pressure on the means of subsist- ence, and that additional supplies are only to be obtained at an increasing cost. If this position were generally true it would imply that the positive checks of Malthus are always in operation in the simple and obvious form of insufficient food and its consequences ; for pressure can only show itself by deficiency marked practically by a rise in price. The opposite view has been forcibly stated by Thorold Rogers. 2 " There is not a shadow of evidence in support of the statement that inferior lands have been occupied and cultivated as population increases. The increase of condemned, and yet the writer himself lays the greatest stress on fostering family life, as if he were giving a substitute for this teaching, whilst he is only endorsing it. 1 Cf. Rogers' Political Economy, p. 73. 2 Political Economy, p. 153. PRODUCTION. 195 population has not preceded but followed this occupation and cultivation. It is not the pressure of population on the means of subsistence which has led men to cultivate inferior soils, but the fact that these soils being cultivated in another way, or taken into cultivation, an increased pop- ulation became possible. How could an increased popula- tion have stimulated greater labour in agriculture, when agriculture must have supplied the means on which that increased population could have existed? To make increased population the cause of improved agriculture is to commit the absurd blunder of confounding cause and effect." This statement, however, appears to err on the other extreme. Even at the present time, in Scotland and Ireland (not to go so far as India and China) we have congested areas with the worst forms of agrarian pauper- ism. In earlier times we find great migrations of tribes caused by the overflow of population. We must take into account also the growth of towns and cities with the con- sequent stimulus to agriculture. It is quite possible that, just as during the present century meat has risen greatly in price and made more expensive methods of production possible, so the price of food supplies and other necessaries may rise during the next hundred years under the in- fluence of an increasing population. But whilst the theo- retical possibility is admitted the actual probability may be denied. As Malthus 1 pointed out, there have often been oscillations in the advance of population and corre- sponding changes in the standard of comfort ; but a broad survey of the history of progressive nations gives no sup- port to the theory that in conjunction with these oscilla- tions there has been a general downward tendency in the condition of the mass of the people or greater difficulty in obtaining food supplies. If we consider not only the low- est forms of unskilled labour, but take a general average of the community, there can be no doubt that on the whole the necessaries of life are more abundant and more certain now than in earlier stages of society. 1 Essay, pp. 9-11. 196 PRINCIPLES OF POLITICAL ECONOMY. In conclusion, attention may be directed to the impor- tance of a nation's not relying for its main support on the cheapest forms of food. If the bulk of the people are accustomed to wheat and fresh meat, in times of scarcity they may draw upon inferior and cheaper forms of food, such as potatoes and rice. But if they are accustomed already to the cheapest food, and if their standard of com- fort so far is based upon it, there is no reserve against a failure of supply. The potato famine in Ireland (A.D. 1846) is the classical example of the truth of the theory, and it is worth noting that it was anticipated by Malthus. 1 The celebrated traveller and agriculturalist, Arthur Young, published, in 1800, a pamphlet on Scarcity and its Reme- dies, in which the following passage occurs : " If each country labourer with three children and upwards, has his ample potato ground and a cow, the price of wheat would be of little more consequence to him than it is to their brethren in Ireland. Every one admits the system to be good, but the question is how to enforce it." The com- ment of Malthus is characteristic and pointed. " I was by no means aware that the excellence of the system had been so generally admitted. For myself, I strongly protest against being included in the general term of every one, as I should consider the adoption of this system as the most cruel and fatal blow to the happiness of the lower classes in this country that they had ever received." 2 1 Essay, p. 451. 2 Roscher (Political Economy, Bk. V.) gives an excellent account of the principle of population, with many facts which supplement those col- lected by Malthus. The general reports of the census abound with infor- mation, but the statistics are too complex for quotation in the present work. The history of the growth of population over a long period is the best comment upon the theory. See, for example, the essay, by Mr. Price Williams, on the increase of population in England and Wales since 1700. Journal of the Statistical Society, September, 1880. The work of Sir W. Hunter, on India, shows the great difficulties in the way of avoiding over-population with the abolition, by a civilised government, of the posi- tive checks hitherto prevailing. CHAPTER XII. THE GROWTH OF MATERIAL CAPITAL. 1. Meaning of the Growth of (Capital Material'). As already explained, 1 the popular idea that large masses of capital are handed down from age to age without any trouble except that of investment is altogether erroneous. If it is true that all capital is saved, it is equally true that all capital is consumed, and in most cases it is consumed rapidly. Accordingly, but for popular usage, it would be preferable to speak of the growth of capital rather than of its accumulation in considering the laws of its increase. In fact, as Mill observes, the increase of capital is analogous in many respects to the increase of population. The root idea of capital is that its characteristic utility is the satisfaction of future needs. The simplest form of the creation of capital is putting aside, directly for future consumption, a portion of a stock of consumable commod- ities. Even in the highest civilisation, this direct saving is practised whenever people lay in stores for future use. To a great extent, however, the creation of capital de- pends upon the direction given to industry. Any one who has command over a certain amount of money has directly or indirectly the control of a corresponding part of the productive forces of the society in which he lives. He may choose to use this power for his immediate gratification, as, for example, by supporting a number of personal attend- 1 Ch. VI., 7. 197 198 PRINCIPLES OF POLITICAL ECONOMY. ants in the style of a feudal baron. On the other hand, he may give employment to labour in the construction of various kinds of auxiliary or sustaining capital. At the end of a given period, the labour, having been itself re- newed, is still there, and unless a miscalculation has been made the capitalist has a larger command than before over industry, for his capital is not simply replaced, but replaced with an increment, which, expressed in terms of money, is called profits. This conversion also, in a sense, involves the sacrifice of a present for the sake of a future good, though in many cases the pleasure of accumulation is much stronger than that of careless extravagance. Karl Marx and other socialists are no doubt justified, as against optimistic writers like Bastiat, in ridiculing the " abstinence " of a great capitalist, whose personal con- sumption is only limited by his tastes and inclinations, and whose ruling idea is increase of wealth for the sake of the general power which it confers. So much may be ad- mitted ; but take away from such a capitalist the disposal in the future if only by his last will and testament of the results of his abstinence, and his saving would soon be replaced by expenditure of some kind ; he might gratify his notions of magnificence by display, or, if actuated by philanthropy, direct with his own hand the distribution of his wealth between competing charities. In any case, however, there must be some attraction of some kind strong enough to make the reward of the future overbal- ance the gratification of the moment, or saving, in the broadest sense of the term, will dwindle to the vanishing point. Turning now from the individual to the society, econo- mists haye naturally divided the causes which affect the accumulation or growth of capital into two groups l ; those mainly which affect the amount of the fund from which savings may be made, and those which operate on 1 " For the development of industry, the union of power and inill is required." BENTHAM, L, p. 310. PRODUCTION. 199 the minds of the owners of wealth and lead them to save rather than to consume. 1 2. The Power to save. The maximum amount which can be added in a given period (say a year) to the capital already existing is the whole of the real net produce of the society. The capital and labour already existing must be continued in the same state of efficiency ; labour must ob- tain sufficient necessaries, raw material must be replaced, and buildings and machinery must be kept in good order. So much at least must be done simply to leave the pro- ductive power of the community unimpaired. At the same time, before any addition is possible, the consumption cap- ital also, that is to say, the more durable forms of material sources of enjoyment, must be kept up in amount and quality. In a modern society we must necessarily, for clearness of vision, introduce money to measure the growth of wealth ; and the reference to the renewal and continuance of capital is rather to the value 2 than to the things them- selves. In this way only can allowances be made for substitution and for growth, in the variety both of the means of production and of consumable commodities. The real net produce (measured in terms of money) that re- mains after the expenses indicated have been met, is obvi- ously more than is covered by the profits of capital and the rent of land ; there is always a large sum in the hands of labour, which may or may not be saved ; and this is especially to be noted if we use the term " labour " in its widest sense. This annual surplus of the national budget (if the term may be so far extended) may be spent as income, or be set aside as capital. Passing over, for the present, the motives which determine the relative proportions of the distribution between these two objects, we may assume that the amount actually saved will depend partly upon the amount which can i Cf. Mill, Bk. I., Ch. XL, 1. - Under the usual supposition of no real change in the standard. 200 PRINCIPLES OF POLITICAL ECONOMY. be saved. Accordingly, at the risk of some repetition, it seems desirable to enumerate the principal causes which determine the fund, from which, if the members of a society choose, savings can be made. Speaking broadly, this fund will depend upon the amount and the efficiency of the three great agents in production land (or nature), labour, and capital compared with what is required for expenses of all kinds, including those of government. The elements of natural resources, and the causes that govern the efficiency of labour and capital, have already been discussed. They are of especial importance in the case of new countries. The colonists carry out with them, as Adam Smith l observes, a knowledge of agriculture and of other useful arts superior to what can grow up of its own accord, in the course of many centuries among savage and barbarous nations. They apply the productive methods of an old civilisation to the virgin land and unexhausted or untried natural powers. In some countries, which at one time have apparently reached a stationary state, the growth of wealth has been again stimulated by the devel- opment of foreign trade. A striking example is furnished by Holland, after the pacification with Spain in A.D. 1648. A celebrated statesman 2 estimated that from this year to 1669, the commerce and navigation of Holland increased by one-half ; and after giving an enumeration of the in- habitants, adds, that " the eighth part of this number could not be supplied with necessaries out of the produce of Holland, it- being their gain by traffic, which brings in the necessaries for the other seven-eighth parts of the whole people." During the present century, one of the principal causes of the great increase in the wealth of the United Kingdom has been the development of foreign trade. The extension of credit increases wealth directly and indirectly. The use of credit instruments, in place of the 1 Bk. IV., Pt. II., Ch. VII. 2 De Witt, Interest of Holland; quoted by Macpherson, Annals of Commerce, Vol. II., p. 538. PRODUCTION. 201 precious metals, saves labour, capital, and time, in the dis- tribution of products ; banks and insurance societies serve to collect small sums on the one hand, and on the other, to advance large loans to productive enterprise ; and it is only by credit that the complex organisation of modern industry, with its intricate division of labour, is possible. Foreign trade and credit, in their turn, are associated with improvements in the means of communication. Steam and electricity have increased to an extraordinary degree the mobility of labour and capital and the adjustment of supply to demand. The difficulty with all these factors in national produc- tion is not to see their importance when pointed out, but to realise their magnitude relatively to small causes of disturbance. At the time of its occurrence, for example, a commercial crisis seems as if it would shake down the industrial edifice ; a local strike seems capable of ruining the country at large ; and a rise in a foreign tariff seems to endanger our whole foreign trade. In estimating the amount of a nation's wealth and the causes of variation in the rate of progress, the first requisite is a due sense of proportion ; and the preceding outline may serve to recall the general principles, which have elsewhere been dis- cussed in some detail. We have next to consider the motives which induce people to prefer future to present gratification, or the causes which determine how much of the national surplus or real net produce will be added to capital. . 3. The Will to save. The will to save, like the power to save, depends upon a group of causes, and, again, the difficulty is mainly that of enumeration with just em- phasis. The most important condition appears to be security, which operates in many ways. The power of government is overwhelming compared with that of any individual ; and one of the worst forms of insecurity is that which arises from despotic and arbitrary government. Many 202 PRINCIPLES OF POLITICAL ECONOMY. of the provinces of Turkey are endowed with splendid natural resources, and the peasantry are, by nature, indus- trious, temperate, and thrifty. But they present number- less indications of the decline following upon misgovern- ment. In Syria, for example, " the population is estimated to be less than a tenth of what it once amounted to. The soil, in many places remarkably fertile, is to a large extent impaired by neglect ; terraces, for cultivation on the hill- sides, have been allowed to fall into ruin ; and the general neglect has injured even the climate." 1 Adam Smith observes, in explaining his second canon of taxation, that the experience of all nations shows that a very consider- able degree of inequality is not nearly so great an evil as a very small degree of uncertainty. 2 Undoubtedly one of the great roots of England's commercial prosperity may be traced to the persistent opposition on the part of the people to the arbitrary exactions of the crown or the aristocracy. The leading principle of Magna Charta itself is security. " Clause by clause," says Stubbs, " the rights of the com- mons are provided for as well as the rights of the nobles, the interest of the freeholder is everywhere coupled with that of the barons and knights ; the stock of the merchant and the wainage of the villein are preserved from undue severity of amercement, as well as the settled estate of the earldom or barony. The knight is protected against the compulsory exaction of his services, and the horse and cart of the freeman against the irregular requisition even of the sheriff. In every case in which the simple freeman is not secured by the provision that primarily affects the knight or baron, a supplementary clause is added to define and pro- tect his right ; and the whole advantage is obtained for him by the comprehensive article which closes the essential part of the charter." 3 It was this same principle of security which 1 Chisholm's Commercial Geography, p. 312. 2 Of Benthara, Vol. I., p. 311: " When security and equality are in opposition, there should be no hesitation ; equality should give way." 8 Constitutional History, Vol. I., p. 631. PRODUCTION. 203 at a later stage enabled the villeins in England to pass through a species of land-and-stock lease or mStaierie to the practical ownership of their lands. 1 Elizabeth, one of the strongest of our monarchs, was compelled to abandon monopolies by the fathers of those who in the next gener- ation passed the Petition of Right 2 ; the Civil War in England, and the revolt of the American colonies, were both due to straining the prerogatives of the crown. Mill 3 has said that security consists of protection by the government, and protection against the government, and that the latter is more important ; and again, that the only insecurity that is altogether paralysing, is that arising from the government, or from persons invested with its authority. Security against the arbitrary exactions of despotism is no doubt a necessary condition for the devel- opment of industry. It is, however, rather negative than positive in character, and it is a mistake to suppose that the security afforded by the government is of compara- tively minor importance. On the contrary, as Bentham declares, the care of security is the principal object of legislation ; and without law there is " no security, conse- quently no abundance nor even certain subsistence." Se- curity, he affirms, is the distinctive mark of civilisation ; and it is entirely the work of the law. It is plain that security in this sense means much more than security against the government. It implies not only protection against robbery from within and invasion from without, but above everything, security for the enforcement of contracts. "If industry creates, it is the law which preserves; if, at the first moment we owe everything to labour, at the second and every succeeding moment we owe everything to the law." 4 The industry of modern civilisation is gov- 1 Cf. Bk. II., Ch. VII. 2 " To have suffered in the recent (1628) resistance to arbitrary taxa- tion was the sure road to a seat." GREEX. 3 Principles, Bk. I., Ch. VII., p. 6. 4 Principles / Civil Code, Pt. I., Ch. VII. : " Of Security." 204 PRINCIPLES OF POLITICAL ECONOMY. erned and animated by contract ; it depends for its very existence upon the constant fulfilment of an infinite series of bargains ; and, in the last resort, it is the possibility of appeal to the resistless power of the state that is the guarantee of fulfilment. Apart from the general enforcement of contracts, the government may increase security by rendering certain clauses in contracts compulsory and giving to certain terms an equitable interpretation. In contracts for 'the hire of land, for example, it is of great importance that the tenant should be able to put upon and into the land the capital requisite for good husbandry ; but to do this he must have the assurance either that he will be able to withdraw it on the termination of his lease, or else receive fair compensation. One of the greatest checks to the accumulation of agricultural capital until quite recently was the preferential legislation in favour of the land-owner. Another good example is furnished by the development of foreign trade ; for a long period a foreign merchant was responsible not only for his own debts and crimes in any country, but even for those of his compatriots. The earli- est commercial treaties were designed to afford to the foreign trader on reciprocal terms some part of the security enjoyed by the home trader. Returning to the general question, it may be observed that the longer the period of expectation of fulfilment is extended, so much greater ought to be the security. Just as for the moment an inconvertible currency may serve as well as gold for the medium of exchange, so for the moment martial law or lynch law may suffice to preserve order and enforce payment for purchases. For deferred payments, however, a more stable standard, and for deferred obligations a more stable government, is required. And from the nature of the case, from the very essence of the conception, the accumulation of capital involves the anticipation of security in the future. It is sometimes said that, tinder the influence of the French Revolution, PRODUCTION. 205 Bentham attached too much importance to security. It would be more just to say that at present, in the midst of profound peace, external and internal, we are so famil- iar with security that we look upon it as part of a state of nature, instead of regarding it, so far as industry is con- cerned, as the latest product of civilisation. The sub- ject will again demand attention in connection with the economic foundations of the system of private property. 1 Analogous to the security afforded by government and against government is that afforded by and against the powers of nature. If a country is naturally unhealthy, or if it is subject to earthquakes or other physical disasters, and life is uncertain, the value of a future good is dis- counted at a higher rate. The occurrence of great plagues, apart from the destruction of labour, is usually accompanied by extravagant expenditure : 2 " let us eat and drink, for to-morrow we die." Next in order to the various kinds and degrees of secur- ity we may place the group of motives which are included under the phrase, the effective desire of accumulation. This desire may be deficient simply owing to lack of imagination as regards the future, to a want of power to look forward. There may be no aversion to labour, and the dangers of famine, if provision is not made, may be very real, and yet, as in the famous instance quoted by Mill, of the Indians on the St. Lawrence, no work is under- taken in which the return is at all distant* and the growth of capital is effectually prevented. The simple reason is that the vividness of the present makes the future dim and uncertain. We may descend much lower in the scale, until indeed we reach a point at 1 See Bk. II., Ch. II., 5. a See the well-known description of Thucydides, Bk. II. : "... they justified a speedy fruition of their goods, even for their pleasure or licen- tiousness, as men that thought they lived their lives but by the day." See also De Foe's Journal of the Plague Year: "... from that hour all trade, except such as related to immediate subsistence, was, as it were, at a full stop." 206 PRINCIPLES OF POLITICAL ECONOMY. which primitive men seem lower than animals in providing for the future. " The native Australian is entirely desti- tute of foresight, being in this respect inferior to many animal species. In a general way not the most elementary idea of providing or preserving nourishment for a future occasion enters his head. In his hours of plenty he gorges, without care for the morrow, and when hunger vora- cious hunger is once appeased he wastes and even vol- untarily destroys all that is left." l Sometimes the effective desire of accumulation is defi- cient on the moral, rather than on the intellectual, side. We find abundant instances in the most civilised nations as in the disregard for the welfare of wife and children, and in the failure to secure independence in sickness and old age. In some cases, however, the desire of accumula- tion becomes a dominant or fixed idea; the end is lost sight of in the means ; and to add field to field or pound to pound becomes the mainspring of life. It is love of gain in this extreme form which has always been so severely condemned by philosophy and the Church. It is one of the best examples of the need of treating po- litical economy as a positive science which observes and classifies facts, and not as a body of doctrines which incul- cates certain maxims. From the point of view of happi- ness whether of the community or of the individual still more from the point of view of freedom, of self-culture, and of the many forms of ideal morality the effective desire of accumulation may in some cases be described as a degraded, unreasoning superstition. It is, however, a great mistake to suppose that this extreme love of wealth is only a product of the highest industrial communities, and that in the simpler stages of society it is absent. " This commercialisation of morals," says M. Letourneau, 2 " is not incompatible with a savage state. It will flourish in any society, civilised or savage, when the love of any 1 Letourneau's Property (translation), p. 30. 2 Ibid., p. 96. PRODUCTION. 207 sort of gain becomes the ruling motive, the mainspring of every act." Thus of an African tribe, we are told, by Sir Samuel Baker, 1 that " they would fight for their cattle, although they would allow their families to be carried off without resistance ; cattle would procure another family, but if the animals were stolen there would be no remedy." Again, Burton 2 says of the East African : " He will refuse a mouthful of water out of his abundance to a man dying of thirst. He will not stretch out his hand to save an- other's goods, though worth thousands of dollars, if he is not paid to do it. But of his own property, if a ragged cloth or a lame slave be lost, his violent excitement is ridic- ulous to behold." It is not necessary to dwell longer upon the pathology of the desire of accumulation; nations have been ruined by reckless extravagance, but the process of accumulation the growth of wealth is not necessarily or usually associated with the decay of men. The desire to rise in the social scale, and the importance attached to wealth as such, have been prominent factors in social progress. One of the principal fallacies of the traditional English political economy 3 arises from neglecting to observe that the mere possession of wealth may constitute its chief utility, and that the sense of power afforded by retaining wealth may be far greater than any pleasure afforded by consumption. Under a money economy in which any form of wealth through the agency of banks and brokers may be converted by the individual into credit documents which give him so much general purchasing power, the effective desire of accumulation depends largely upon this characteristic of saving. Moralists may deplore the fact i Quoted, ibid., p. 96. 2 Ibid., p. 97. 8 " The greatest part of the utility of wealth, beyond a very moderate quantity, is not the indulgences it procures, but the reserved power which its possessor holds in his hands of attaining purposes generally ; and this power no other kind of wealth confers so immediately or so certainly as money." Mill's Principles, p. 3. But he too often omits the applica- tion. 208 PRINCIPLES OF POLITICAL ECONOMY. that worth in popular estimation should in any degree be reckoned by wealth, but to deny it would be wilful illu- sion. In truth, however, the acquisition of wealth for its own sake is not so much opposed to common-sense morality as may at first sight appear; it is proverbially associated with health and wisdom; it calls for prudence, energy, and self-restraint; it opens up a path to the higher stages of political and social activity; and a cer- tain amount of accumulated wealth is, in most cases, a con- dition of independence and personal freedom. It follows, from the importance attached to the desire to rise in the social scale, that the growth of capital will vary with the distribution of the national wealth amongst differ- ent classes and with the facilities afforded for investment. If most of the land is held by an aristocracy, history proves that the love of display and magnificence generally over- powers the desire of accumulation and improvement. A well-known passage in Adam Smith l describes the way in which the feudal baron exchanged for a pair of diamond buckles, or something equally frivolous, the maintenance of a thousand men for a year, and with it all the corre- sponding weight and authority. A striking contrast is drawn with the small proprietor, who knows every part of his little territory, and who is generally, of all labourers, the most industrious, the most intelligent, and the most suc- cessful. In recent times, however, great land-owners and large farmers have caused a great increase in agricultural wealth. 2 In mercantile communities the accumulation of capital is generally rapid, although it does not commonly remain for more than two or three generations in the same fami- lies. From the national standpoint this transference is of little importance. It is obvious that, other things being equal, accumulation will vary with facilities for investment. Since the institu- 1 Bk. III., Ch. IV. 2 See supra, Ch. IX. PRODUCTION. 209 tion of savings banks, building societies and the like, the working classes have saved large sums ; and joint-stock companies with shares of small denominations have simi- larly stimulated the savings of the middle classes. At present Great Britain, like Holland at an earlier period, lends large sums to foreign states (both to governments and to individuals), and but for this outlet the difficulty of finding investments must have checked accumulation con- siderably. As Bagehot pointed out, the rapid increase of wealth in England is partly due to the democratic nature of its capital. The consideration of investments naturally leads to an examination of the effects of the rate of interest. 1 Here we have to balance opposing tendencies. If the rate is high there is so far a greater encouragement to save. But there may be a certain reaction upon labour and produc- tion. For the more wealth goes in the shape of interest to capital, there will be less left for wages in the broadest sense, and so far there will be less encouragement to work, and the amount produced will be less. To take a concrete example : if the rate of interest is high, people are so far more willing to advance money upon mortgages of land ; but if the cultivators are bound to pay large sums by way of usury, their energies are liable to be crippled. The ex- orbitant rates charged by the Jews in Russia and other countries have no doubt caused a depression in agriculture, and the hatred of the Jews Juden-Hetze has thus a natural, economic foundation, and need not be ascribed to race prejudice. From the earliest times, in all countries, the great curse of small cultivators has been the custom of mortgages. 2 On the one hand, it is true savings have been stimulated, but in general the reaction on labour has been much stronger. If the rate of interest is low, in order to secure a certain income or annuity, a larger principal sum must be saved. 1 Compare infra, Bk. II., Ch. XIII. 2 An admirable example is furnished by Mommsen's Eoman History. 1 210 PRINCIPLES OF POLITICAL ECONOMY. Thus the rates for insurance of all kinds become higher. At the same time labour obtains capital more cheaply, and consequently works at higher pressure ; so that, on the whole, there may be a larger fund from which savings can be made. Again, with a low rate of interest on old invest- ments, there is an encouragement to new undertakings. 1 Suppose, for example, that house property which for- merly yielded seven per cent now only yields five per cent. The capital value of the houses will rise, if we as- sume that, to begin with, the rents remain the same. But a great stimulus will be given to building new houses, and the ultimate result will be that the country will possess more or better houses let at lower rents. A similar argu- ment may be applied to machinery, factories, and all forms of fixed capital. Further consideration of this topic may be deferred to the treatment of the rate of interest. 2 At present we are only concerned with the rate of interest as affecting directly and indirectly the will to save. 4. Of the Accumulation of Different Kinds of Capital. Hitherto the question of the accumulation of capital has been discussed without reference, except for illustra- tion, to the different species, and capital has been treated as if it were simple and homogeneous. This assumption is justifiable when we are examining only the great forces at work, but a survey of the principal kinds of capital shows that the rates and causes of accumulation are very different. Consider, in the first place, that part which is practically sustaining capital, the elementary necessaries of food, clothing, fuel; it is plain that the better the industrial organisation, so much the less need is there for accumula- tion of large stocks. Take, for example, the food supply of Great Britain. The greater part is produced and con- sumed annually, e.g., cereals ; in other instances the period 1 See Giffen's Stock Exchange Securities, Ch. III. 2 Infra, Bk. II., Ch. XIII. PRODUCTION. 211 is shorter, e.g., fish ; in some cases, e.g., meat, more than a year is required for the full preparation of the product. Mr. Atkinson l has observed that the whole world is always within a year of starvation. It is only in undeveloped countries that it is desirable directly to accumulate stores of food against the emergencies of famine. There must, of course, always be sufficient for present needs and for future reproduction, but beyond this, in modern industrial socie- ties, accumulation of food supplies is a waste of productive power. The same argument applies to clothing and fuel ; beyond a certain point a large stock is simply an indication of bad organisation. Even as regards shelter, it is waste to build houses before they are needed ; and it is not generally good economy to aim at excessive durability, that is to say, when the build- ings are not of an artistic or monumental or religious character. As Roscher 2 points out, it is more economical to build a house that will last sixty years for 2000, than one which will last four hundred years for X4000, because the interest saved in sixty years on the former would suffice to build three such houses. The same argument applies to other quasi-permanent forms of consumptive capital, such as works of art, furni- ture, and the like. Passing over the products of genius which are beyond the operation of ordinary economic laws, substitution is in most cases better economy than accumulation. As regards the raw materials of manufacture, it is ob- viously waste to increase supplies beyond the requirements of a comparatively limited period. For in the concrete this would mean that traders lock up their capital in a shape which only yields a negative interest in the form of possible deterioration, and the certain expense of storing. 1 Distribution of Products, p. 3. 2 Bk. IV., Ch. L, 233. See also note. 212 PRINCIPLES OF POLITICAL ECONOMY. In some forms of auxiliary capital, e.g., roads, railways, bridges, regard must be paid to a more distant future, but the annual charges for repairs and renewal are always large. Machinery, owing to the liability to improvements, is in general too durable, and often becomes old iron before it is worn out. Ships may be placed in the same category. Capital sunk in the permanent improvement of land, as in the great drainage works of the fens, approaches more nearly to the popular idea of capital saved once for all, and handed down to future generations. In the words of Adam Smith : l " The capital that is acquired to any country by commerce and manufactures is all a very pre- carious and uncertain possession till some part of it has been secured and realised in the cultivation and improve- ment of its lands." We are now in a position to see more clearly the force of the positions taken up in the earlier chapters as regards the nature and function of capital. Saving is a very dif- ferent thing from hoarding ; wealth that is saved in the economic sense is at the same time used and consumed ; all that saving essentially implies is that productive power is applied and directed to the satisfaction of more or less distant needs. Accordingly, paradoxical as it may appear, in a modern industrial society, next to investment in com- panies, the typical form of saving, as, in earlier times, of hoarding, is saving of " money." The solution of the par- adox is found in the variation in the constitution and uses of money. Before credit was developed, and when inter- est was considered both sinful and illegal, the only way of saving " money " was by hoarding. At this stage, money was simply coined treasure. But with the modern system of banking, saving money really means that a person hands over to the banker the control of a certain part of his share of the real national income, including services as well as commodities. The banker advances to the broker, i Bk. III., Ch. IV. PKODUCTION. 213 the broker to the trader or manufacturer, and ultimately, the money saved is, in general, spent on some form of productive labour. I say productive labour, because the goods consumed must be replaced with profit, in order that the system may be effectually continued. 1 Thus, saving is not so much the piling up of consumable commodities, or even the making of machinery and the building of factories, as the direction of the national energy into particular channels ; and the outcome of saving is a growth in the productive power, with a corresponding increase in the consuming power of the people as a whole. By the same path we also reach a point from which the mutual dependence of material and personal capital can be appreciated. Without the latter, the former is abso- lutely useless as useless as a ship without a crew, or a city without inhabitants ; and similarly, without material capital, personal capital is like a crew that is shipwrecked, or a city after an earthquake or tornado. 5. Methods of estimating the Increase of Material Cap- ital. Before the adoption of a money economy the only method of estimating the growth of wealth is by simple enumeration. In the case of the possessions of Job, for example, we are told that his sheep, camels, oxen, and she-asses were respectively twice as numerous after his affliction as before. When a money economy has been fully established we naturally estimate the wealth of indi- viduals in terms of the monetary unit, and in process of time the same method is applied to the wealth of nations. Such estimates of national wealth have usually been made for purposes of taxation. The Domesday survey is a notable combination of detailed enumeration with valua- tion. Later on we find inventories made of the movable 1 The case of the anticipation of revenue by the unproductive consumer will be considered later ; as also the question of over-production and excess of supply. Cf. Bk. III. 214 PRINCIPLES OF POLITICAL ECONOMY. wealth of households, and a value placed upon each item so that a tenth or fifteenth might be taken by way of direct taxation. 1 Such a detailed process in modern times would be found not only odious, but impracticable, although it may be observed in the United States some attempt is made to arrive at a census of the national wealth and its value. When we are comparing distant periods, especially with the view of comparing the progress of the nation as a whole, or of various classes, it is necessary to make a sur- vey of the principal forms of wealth, and to estimate the quantity and quality as well as the value. In the same way, if we are comparing the wealth of different nations at the present time, there is little real meaning in the esti- mates of wealth per head of population in terms of money. 2 Such estimates must, at any rate, be supplemented by tak- ing into account the principal particular elements in the national resources, and the principal forms and quantities of produce. 8 Even when in modern times we compare the wealth of the same nation at comparatively short intervals, say ten years, in spite of the recent improvements in the collection and the methods of statistics, the comparison is extremely rough and can only be relied on for very general purposes. Take, for example, the estimates of the decennial increase in the wealth of the United Kingdom made by Mr. Giffen, the results of which have become part of the general information of educated people. The general method of procedure is as follows : As a basis the assessments for income-tax are taken; these furnish a reliable minimum of a considerable part of the national income. The next step is to find out the corresponding capital value. For this purpose the various schedules are consulted, and the gross income is in this way split up into classes ; and these various classes are capitalised at a suit- 1 See Dowell's History of Taxation, Vol. I., Appendix II., for very curious examples. 2 As, for example, in Mulhall's Dictionary of Statistics. 8 As given in works on commercial geography. PRODUCTION. 215 able number of years' purchase, according to the estimated permanence of the source. The method, it will be ob- served, is justified by the root conception of capital, which is based on future capacity of satisfaction. Thus land * is taken at twenty-six years' purchase, houses at fifteen, and quarries and mines at four years', respectively. Certain deductions, however, fail to be made. Thus, of the income of trades and professions, it is assumed that only one-fifth is derived from capital (material), the rest being a higher form of wages. Care, too, must be taken that debts of various kinds are not counted as assets, e.g., consols, deben- tures of companies and the like. When these and other allowances have been made, we are left with an estimate of that part of the nation's capital which yields income liable to income-tax. So far the estimate if the numbers of years' purchase are accepted is comparatively reliable. When, however, we turn to the items of income, especially ordinary wages, which are not assessed for taxation, the basis is much less solid, and it is also more difficult to know how much should be ascribed to the possession of (material) capital, such as trade, tools, etc. Mr. Giffen himself takes only one-tenth of the income, and capitalises at only five years' purchase. Corresponding uncertainty is found in estimating the capital (now generally called consumption capital) which does not yield income at all, such as the furniture, or more generally, the movables, in houses. This item is reckoned at half the value of the houses, but no reason is assigned. There are also various forms of public and municipal property, of which it is diffi- cult to get a money value, e.g., light-houses, roads, break- waters, dock-yards, etc. Apart from other difficulties, there is always the funda- mental difficulty of a possible change in the standard of value. There .can be little doubt that during the last twenty years there has been a considerable appreciation of gold, in other words, its purchasing power has risen, or 1 I take the valuation of 1885. Growth of Capital, p. 11. 216 PRINCIPLES OF POLITICAL ECONOMY. conversely, a certain aggregate money estimate represents a greater quantity of real wealth. 1 At the same time, however, in spite of the lack of pre- cision, and the conjectural character of some of the figures, calculations such as those made by Mr. Giffen are of considerable value, especially for theoretical purposes, or rather, in connection with certain very general economic problems. They bring before the mind the great bones of the national economic system, and perform the same office for the economist as large maps for the politician. It must be observed also, that if the same methods are used in obtaining and calculating the figures, although the abso- lute amounts may be inaccurate, the comparative results may be much more reliable, just as if you weigh children by the same false weights, and measure them by the same false measures, although the absolute results are erroneous, you may tell how they are thriving after an interval. 2 1 Essays in Finance, Vol. I. Recent Accumulations of Capital, p. 169. 2 Mr. Giffen, in his interesting work on the Growth of Capital, gives many calculations of previous observers, and points out very carefully many sources of error. In the limits of the present work, however, the statistical question does not admit of full examination. I have attempted to apply precisely the same methods of calculation as those adopted by Mr. Giffen to the personal or living capital of the United Kingdom, with the general result that it is more than five times the value of the material or dead capital. See Economic Journal, Vol. I., Pt. I. BOOK II. DISTRIBUTION. CHAPTER I. THE DISTRIBUTION OF WEALTH. 1. Meaning of Distribution. In treating of the produc- tion of wealth material and immaterial nothing has been said except incidentally of the conditions and laws according to which it is divided amongst the various members or classes of the community for consumption or enjoyment. This is the problem of the second great de- partment of political economy : namely, distribution. As in production, most stress is laid on the characteristic that wealth is the result of labour, so in distribution the leading idea is that it is capable of appropriation. In popular dis- course the term distribution is often used with reference to the mere transference of commodities from place to place, or from person to person, and in this sense we speak of the distribution of wealth by means of ships, roads, rail- ways, and the like, and also of its distribution by whole- sale and retail traders, and by co-operative societies. But, as already explained, distribution of this sort is really a part of production; for the act of production is not com- plete until the commodity is in the hands of the consumer. Distribution, as distinguished from production, refers to the apportionment for use or abuse of the productive powers, and of their fruits amongst the inhabitants of a countiy or industrial area, and to the causes and conse- quences of the methods of apportionment adopted. That distribution in this sense may affect not only the kind but the amount of production has been shown in the previous book ; with regard, for example, to the efficiency of labour, 219 220 PRINCIPLES OF POLITICAL ECONOMY. the accumulation of capital, and the return to land ; and in the sequel the interdependence will prove to be much closer than has yet appeared. At the same time, the logi- cal distinction between the two departments is perfectly clear, as may be shown by a simple example. Take the case of agricultural produce. It is obvious that the same annual amount (or its money value) may be distributed in different proportions amongst wages, profits, and rents at different times ; such changes are not the result of chance, and their causes ought to be capable of discovery. Simi- larly, at any particular time the relative proportions of the three great classes of income are determined by certain conditions of a general character, and within each of these classes there are species, with differences which admit of an approximate solution. To adopt an illustration of Adam Smith, 1 the individuals of a great nation are like the joint-tenants of a great estate ; the causes which gov- ern the total yield can be considered apart from the allot- ment of the shares ; the former correspond to the laws of production, the latter to those of distribution. 2. On Mill's Distinction between the Laws of Produc- tion and those of Distribution. The laws of production, Mill affirms, partake of the character of physical laws, there is nothing optional or arbitrary in them ; they depend upon the ultimate properties either of matter or mind. With the distribution of wealth, on the other hand, it is not so ; that is a matter of human institution only; the things once there, mankind, collectively or individually, can do with them as they like. The antithesis so strongly marked, and the line of demarcation so sharply denned in these sentences, Mill himself considered of such funda- mental importance, that he states in his autobiography that the emphasis which he laid upon the distinction is his principal and most original contribution to political econ- omy. As such it deserves careful examination. To resume : man cannot, by taking thought, increase the ifik. V., Ch. II., p. 347. DISTRIBUTION. 221 powers of natural agents, any more than he can add to his own stature ; he cannot, by mere force of will, make inven- tions or discover new processes ; without desire or neces- sity he may indeed do nothing, but with the best of intentions and the utmost need, the limits of production can only be stretched a little way. With the progress of society the power of man over nature may increase indefi- nitely, but at any particular time he can only work accord- ing to his means, his circumstances, and his knowledge. At first sight, however, the distribution of wealth seems to partake of the character of laws of the statute-book or even of the capricious acts of an arbitrary power. In the most highly civilised society we observe that a large number of persons perform economic services which are indispensable to the preservation of the lives of all the members, and in return receive but little more than neces- sary wages, whilst a small number of others, without any work on their own part, receive per head a thousand, or, it may be, ten thousand, times as much of the annual produce of the land and labour. In lower degrees of civilisation, the real inequalities in the distribution of wealth are still more startling, for there we often find a small number the owners, not only of the mass of the material wealth, but of the mass of the people themselves. One of the earliest and one of the most enduring forms of property is slavery. Mill's position, then, that the distribution of wealth de- pends on the laws and customs of society, which again are as variable and mutable as the opinions and feelings of mankind, may appear to be the result of an inductive inquiry. And the corresponding deduction also may seem to have a substantial foundation ; namely, that the rules of distribution might be still more different than they have been, if mankind so chose, or in the concrete, that whatever the merits or defects of socialistic schemes, they cannot be truly said to be impracticable. There can be little doubt, however, that, consciously or unconsciously, this view of the optional or arbitrary char- 222 PRINCIPLES OF POLITICAL ECONOMY. acter of the laws of distribution was deduced from a cele- brated political theory which has recently been subjected to severe criticism I mean the theory of political sov- ereignty. 1 3. The Theory of Sovereignty. The essence of the theory is, that in every independent political society, a centre of sovereignty is discoverable which in that state has irresistible power ; the forms of sovereignty may range from absolute despotism to unqualified democracy, or may be the resultant of a complicated balance of opposing forces ; but it is maintained that, from the very nature of the independent body politic, there must be one centre of sovereignty, as in the body material, one centre of mass. The theory is best understood when it is taken, as by Aus- tin, 2 in a purely abstract form. If it were objected as regards any actual concrete case that there was no such sovereign power, Austin would reply, either that the people concerned did not constitute a political society at all, that they were in a state of nature (savagedom) or a state of anarchy, or that the society was not independent. In fact, the conceptions of sovereignty and independent politi- cal society are really inseparable ; the one implies the other. The meaning of political union is habitual obedience to a sovereign power, and the essence of the sovereign power (apart from external force in which case it is not independent), is to command, and to permit is the same thing as to command. The word sovereignty, from old association, is apt to suggest tyranny or absolute mon- archy so that it may be well to repeat that this is only one species; the sovereign may, according to the number of persons concerned, be an oligarchy, an aristoc- racy, or a democracy. 3 1 The phraseology adopted by Mill in introducing the argument con- firms this view. Of. Bk. II., Ch. !.,!. 2 Jurisprudence, Lecture VI. 8 The doctrine of sovereignty is treated with somewhat wearisome re- iteration in Austin's Jurisprudence. The best account, for the purposes of the present argument, is to be found in Sir H. Maine's Early History DISTRIBUTION. 223 Now it may be admitted that in the explication of various conceptions of analytical jurisprudence e.g., law, right, duty, sanction this irresistible sovereign power is of primary importance. But, as Maine has shown, to take it as a guiding hypothesis in considering the actual history of all societies and the development of their positive laws and permitted customs is certain to lead to barren or erro- neous results. Sovereignty is, in truth, nothing more than an abstraction, and the practical value of all sciences founded on abstractions depends on the relative import- ance of the elements rejected and the elements retained in the process of abstraction.^^ 4. Application of Sovereignty to the Distribution of Wealth. Let us consider, then, the elements which must be rejected in order to arrive at Mill's position, that the ruling portion or sovereign power of any state can lay down what rules it chooses for the distribution of wealth. For the sake of clearness we may take the particular case of England at the present day, with the further assumption that the sovereign power is vested entirely, as it is practi- cally, in the House of Commons. Let it be supposed that, under a wave of speculative enthusiasm, all the members elected are pledged to introduce totally new rules of dis- tribution, to be enforced by the sovereign power. The new rules being opposed to those at present in force may be expected to be of the nature of those described by Mill in the following passage : " If individual property were excluded, the plan which must be adopted would be to hold the land and all its instruments of production as the joint property of the community, and to carry on the operations of industry on the common account. The di- rection of the labour of the community would devolve of Institutions, Lectures XII., XIII. On the historical development, see Sir F. Pollock's Science of Politics ; and for recent criticism, Professor Sidgwick's Elements of Politics. In the text I have only considered the question with a view to its economic bearings. 1 Early History of Institutions, p. 361. 224 PRINCIPLES OF POLITICAL ECONOMY. upon a magistrate or magistrates whom we may suppose elected by the suffrages of the community, and whom we must assume to be voluntarily obeyed by them. The di- vision of the produce would in like manner be a public act. The principle might either be that of complete equality or of apportionment to the necessities or deserts of individuals in whatever manner might be conformable to the ideas of justice or policy prevailing in the community." Now it may be objected at once that the assumption of voluntary or -habitual obedience, which is essential to the application of the theory of sovereignty, is in reality neutralised by the further assumption that the mode of distribution would be in accordance with the prevalent ideas of justice or policy. In order to give real effect to the arbitrary power of sovereignty, we must abstract all those ideas which, as a matter of fact, are the results of ages of growth under a complexity of all kinds of influences. A nation, however, cannot thus throw off all its practical and traditional rules in favour of any speculative theories. It is one thing to approve of an abstract resolution, and quite another to put it into practice. As regards obedience, Mill 1 himself may again be quoted : " To suppose that one or a few human beings, howsoever selected, could, by whatever machine^ of sub- ordinate agency, be qualified to adapt each person's work to his capacity and proportion each person's remuneration to his merits to be in fact the dispensers of distributive justice to every member of a community ; or that any use which they could make of this power would give general satisfaction, or would be submitted to without the aid of force is a supposition almost too chimerical to be reasoned against. A fixed rule like that of equality might be acquiesced in, and so might chance or an external neces- sity ; but that a handful of human beings should weigh everybody in the balance and give more to one and less to another at their sole pleasure and judgment, would not be i Bk. II., Ch. I., 4. DISTRIBUTION. 225 borne, unless from persons believed to be more than men, and backed by supernatural terrors." That is to say, the habitual obedience necessary to sover- eignty will not be forthcoming unless the commands issued are in accordance with prevalent common sense morality. I do not question that such moralit}' may vary from age to age and from people to people, 1 but it cannot at the same time be subject to and dominant over the sovereign power. It is vain to say that the ruling portion of a com- munity can command or permit any kind or degree of distribution if, at the same time, it is allowed that the distri- bution actually prescribed or allowed is the result of long growth and can only be gradually altered within narrow limits. It is true that the sovereign power in a modern state will enforce the fulfilment of contracts and the pay- ment of taxes, and punish with penalties up to death the violation of certain commands ; and as against the arbi- trary caprice of individuals the state is supreme. But it is contrary to all experience both past and present to suppose that a community, by a resolution of any delibera- tive assembly, can suddenly change its whole economic structure. The supposition is as absurd and unfounded as the old idea of a social contract. It is remarkable, although I believe the fact has escaped attention, that this doctrine of the perfect mobility of dis- tribution, as it may be called, is in reality exactly opposed to the most fundamental position of the traditional Eng- lish political economy. From Adam Smith downwards it has been assumed that the interference of the state beyond certain limits is not merely mischievous, but useless. The principle of laisser-faire rests quite as much on the weak- ness of the state as on the strength of individual enterprise. In the words of Adam Smith, 2 " the sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delu- 1 See next section. 2 Bk. IV., Ch. IX. 226 PRINCIPLES OF POLITICAL ECONOMY. sions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient." " Few will dispute," says Mill, 1 after a general examina- tion of laisser-faire, " the more than sufficiency of these reasons, to throw in every instance the burthen of making out a strong case, not on those who resist, but on those who recommend, government interference." It is surely inconsistent for the same writer at one time to argue that owing to the irresistible power of the state no socialistic scheme can be pronounced impracticable, although the essence of all such schemes is the extreme of interference, and at another to maintain that non-inter- ference should be the general practice on account of the incapacity of governments. 2 5. Historical Examples of Variations in Distribution. It is probable that this doctrine of the omnipotence of the state in matters of distribution would not have been so readily accepted had it not been, as already indicated, that it appears, on a hasty survey, to find abundant illustra- tions in the past. The methods of distribution which at various times have prevailed in England, offer many points of contrast with our present industrial systems. Slavery and serfdom have given place to free labour ; customary land-tenures of various kinds have given way to contract and commercial principles ; the powers of guilds and cor- porations have been in part annulled and in part trans- ferred to voluntary associations of employers and of employed; interest on loans, which for centuries was con- demned by public opinion, the church, and the law, is now associated with the highest respectability and is looked upon as essential to the stability of society. In many other cases crimes have become virtues and virtues crimes ; compare, for example, the encouragements now given to emigration with the severe penalties formerly inflicted on the emigrant and his abettor, and the whippings, brandings, and severe labour inflicted on the poor at the end of the sixteenth i Bk. V., Ch. XI. 2 See also Sidgwick's Principles, Bk. III., Ch. II. DISTRIBUTION. 227 century with the reckless indulgence in their treatment at the end of the eighteenth. 1 If we take a wider survey that shall include the civili- sations and barbarisms of the ancient world, the varia- tions in the rules for the distribution of wealth become still more perplexing ; on the one hand, we discover cus- toms (e.g., those of the caste system) that seem as strong as physical laws, and as irrational as exploded supersti- tions ; and, on the other, we observe prototypes of co-op- eration and community of goods which superficially, at least, suggest the golden age of simple justice. The results of the historical method seem to be confirmed by a comparison with various existing societies, and the actual distribution of wealth in different nations furnishes end- less examples of the permanence, the development, and the decay of the older types. 2 Even in nations of equal degrees of civilisation, there appear to be remarkable differences in the distribution, as contrasted with the production, of wealth. Mechanical inventions and new chemical processes are adopted as rapidly as possible, without regard to the nationality of their origin ; but foreign methods of public finance and foreign legislation for land or labour are regarded with sus- picion. Compare, for example, the general imitation of English railways with the general aversion to English free trade, and the compulsory division of land amongst the children in France with the law and custom of primogeni- ture in this country. Seeing, then, that different societies have acted upon very different rules in the distribution of wealth, it may seem natural to suppose that the ruling portion of any society can adopt what rules it chooses, and the conception of an arbitrary sovereign power may appear to be the only sufficient cause for the endless vari- eties of distribution. 1 Compare Nicholls' History of the English Poor Laics, Vol. I., pp. 186-187, and Vol. II., pp. 119-120. 2 Cf. Letourneau, Property, its Origin and Development. 228 PRINCIPLES OF POLITICAL ECONOMY. But as in so many other sciences, so in economics, the appeal to nature generally ends in barren verbalism or positive error. Certainly, economic history gives no coun- tenance to the theory that the distribution of wealth in the past has been due to the caprices of sovereignty ; and simply to assert that the customs actually governing dis- tribution have been permitted by the sovereign power, gives us no clue to their origin or strength. In fact, in economic as in other theory, simply to look for illustra- tions of what we consider natural, is to shut our eyes to the actual processes of development or decay. Similarly as regards the future, the conception of a sover- eign people, "once the things are there," distributing them as it chooses, is either useless or mischievous. It is use- less, if it only means that the whole is stronger than the part ; it is mischievous, if it leads enthusiasts to imagine that they have only to make their Utopias sufficiently attractive, and their establishment is simply a matter of a general election. For the purposes of practical reforms, it would be much better to assume, with the older writers, that the state is capable of nothing, rather than that it is capable of everything ; for in the former case, the spur is given to voluntary effort, whilst in the latter, we fall down before the idol of a good despotism. And what is true of practical reforms is equally true of scientific investigation. The assumption that the laws of the distribution of wealth are to be deduced from the conception of political sover- eignty, can only lead to the neglect of the forces actually at work in the past or present. The great variations in the methods of distribution do not imply that no laws are dis- coverable, but only that the discovery may be a matter of difficulty. At a time, however, when the apparent vaga- ries of dialects and of superstitions have been brought under the domain of science, it does not seem unreason- able to hope that the vagaries of the distribution of wealth may also be resolved into uniformities ; and, as a matter of fact, during recent years great progress has been made DISTRIBUTION. 229 in this direction by the application of the historical and comparative methods. Before proceeding to state the plan to be pursued in the present work with regard to the laws of distribution, I may notice an application of the term which has received considerable support. 6. Distribution and Exchange. In the two most im- portant works in political economy by English writers 1 since Mill, the distinction between distribution and ex- change has been abandoned. Certain assumptions have been tacitly or avowedly made regarding private property and freedom of contract, and the various species of income have then been regarded as essentially cases of value or price ; thus wages, profits, and rent are reduced, if we take a broad view of this method, to the prices paid for the use of labour, capital, and land, respectively. It is no doubt true, and subsequently the fact will call for con- siderable attention, that in modern industrial societies the distribution of wealth and especially of its annual pro- duce depends largely upon the reciprocal exchange of the services of the three great productive agents. But even if the dependence of distribution on exchange were closer than it is, there is no reason why a logical separa- tion should not be made. For it is equally true to say that in modern industry exchange is absolutely essential to production, and yet in this case the separation of the two departments is admitted. It seems desirable for several reasons to follow Mill's example, and to treat of the general questions of distribution apart from and ante- cedently to the particular method resting upon exchange. In the first place exchange can only be ranked as the principal factor in distribution in modern times and in the most advanced nations ; and if we are to consider this agency alone, there will be little scope for the application 1 Professor Sidgwick, in his Principles, entitles Bk. II. Distribution and E.f change ; Professor Marshall calls his Bk. VI. Value, or Distribu- tion and Exchange. 230 PRINCIPLES OF POLITICAL ECONOMY. of the historical and comparative methods which in other departments of knowledge have been most fruitful. To narrow the field of economic inquiry in this way is to make it mainly an analysis of modern practices and a col- lection of empirical rules ; any further generality can only be attained by hypotheses. But, secondly, exchange even at the present time is considerably modified by other principles of distribution. The initial advantages of posi- tion, not only of individuals but of classes, depend to a great extent upon the laws and customs governing in- heritance and bequest, and it would be absurd to speak of an exchange of services between the dead and the living. Again, logically the institution of private property must be regarded as a condition precedent to exchange, but what is and is not implied in this institution is too large a problem to be passed over with an assumption, and the distribution of private property must vary according to the content of the conception. "It is not difficult," as Maine 1 observes of a part of this problem, "to point out the extreme difference of the conclusions forced on us by the historical treatment of the subject from those to which we are conducted when, without help from history, we merely strive to analyse our prima facie im- pressions." It is common learning now that the movement of pro- gressive societies has hitherto been a movement from status to contract 2 ; but little more than a beginning has been made in the discovery of the actual stages of the process. One of the most interesting of modern specula- tions is whether this movement has reached its limit and is even to be reversed. It can hardly be maintained that the appeal to history is irrelevant ; on the contrary, it may be urged that we can only make a forecast of the future by looking back to the past. Some part of these problems, of which an indication has just been given, may no doubt be advantageously transferred to the department of the 1 Ancient Late, p. 174. 2 Ibid., p. 170. DISTRIBUTION. 231 influence of government 1 or the art of political economy, 2 but the fundamental principles involved ought to receive, as they do in Mill's arrangement, an earlier exposition. The importance and meaning of exchange as the basis of distribution can only be appreciated when presented against the background of a past in which other principles prevailed ; and if this method of distribution can be shown to be a survival of the fittest, which has been perforce thrust upon so-called sovereign powers, it will obviously, both for critical and constructive purposes, be of much greater value than if it is regarded merely as a hypothesis adopted to explain the present state of society. 7. Ideal Economic Distribution. It will of course be readily allowed by those who do not accept the theory of sovereignty, that governments may exercise great con- trol in many cases over the distribution of wealth. The methods and results of such interference will, following Mill's example, be discussed later, but a preliminary in- quiry may be touched upon at the present stage. The question is this: Seeing that governments have, in their control of distribution, proceeded at different times and places on very different principles, and seeing that philoso- phers and reformers still set up many different ideals at which governments should aim, has any one of these methods a claim to be called peculiarly economic, and if so, on what grounds ? Or, more briefly, what scheme of distribution is economically the best? If the view of the relation of political economy to ethics, taken up in the introduction to this work, be adopted, and it may claim to be the traditional English view, only one answer to this question seems possible, and that is, the answer implicitly given by Adam Smith. The leading idea in his work is always this what are the causes which make nations wealthy? The attention is not dis- tracted by discussions on the morality, according to any assumed standard of making nations wealthy, or the right- i Cf. Mill, Bk. V. 2 Sidgwick, Bk. III. 232 PRINCIPLES OF POLITICAL ECONOMY. ness or goodness of dividing the wealth in certain propor- tions according to this ideal. Adam Smith, it is true, like other writers on social topics, intersperses moral reflections, but they are essentially obiter dicta, and might be omit- ted without affecting the main argument. He indeed assumes that the system of natural liberty in industrial affairs is in harmony with the dictates of morality and religion, but he seldom appeals to, and never relies on, the assumption. Professor Sidgwick 1 justly says of Adam Smith and his earlier successors, that so far as they treated political economy as an art, they conceived its end to be that the national production of wealth should be as great as possible, and hardly appear to have entertained the notion of aiming at the best possible distribution. But his criticism is not so just, which declares that this limita- tion is not in accordance with the ordinary use of the wider term, economy, because that includes also the economic expenditure of wealth, of which the aim is to make a given amount of wealth as useful as possible. Adam Smith constantly refers to economic expenditure as a principal factor in the wealth of nations ; witness his treatment of the balance of the annual produce and con- sumption, 2 and the whole argument of his fifth book, in which he considers the most economic methods of justice, education, defence, and other functions of government. And this, I take it, is the ordinary meaning of " economy " as regards expenditure, and the notion of maximum utility is altogether different. To spend a given sum of money, so as to produce the greatest happiness to the spender, cannot properly be called economic expenditure ; this refers to value received for value given, and not to the happiness which may follow on the completion of the bargain. Still less can we advance from the individual to the community, and say that "the aim of economic dis- tribution is to apportion the produce among the members of the community, so that the greatest amount of utility 1 Bk. III., Ch. V. a Bk. IV., Ch. IV. DISTRIBUTION. 233 or satisfaction may be derived from it." l For, in this way, under the cover of the interpretation of a word, we beg the question as to the ideal scheme of distribution. It may, perhaps, be thought that the difference is rather verbal than material, and that practically the greatest happiness of the greatest number will be admitted by every one as the economic ideal. But a ready example shows that it is not so. Maximum freedom is at least as attrac- tive, and may lay claim to at least equal authority. For my own part, I should not care to regard equality of dis- tribution, even if it could be shown to be both practicable and also productive of maximum happiness, as the ulti- mate goal of human progress. Human energies, activities, ; and ambitions are not to be satisfied with a dead level of placid content. The sadness of wisdom may be preferable to the mirth of folly, and the penury of independence to the repletion of servitude. Even on the verbal question, I submit that the distribution which admits of the greatest liberty may be more properly described as economic than that which aims at greatest utility. In popular discourse, the laws of political economy are still laws of competition and freedom, and not laws of happiness and content ; and even utilitarian economists still give the first place and lay the most stress on those laws which are arrived at under the assumption of a system of national liberty. 2 But, as already explained, I do not consider the com- parison of conflicting ethical ideals, and still less, the arbi- trary choice of one in particular, to come within the province of political economy. In my view it is a positive science, and as regards the distribution of wealth, we must try to discover the real causes which have been and still j are, at work, and deduce the consequences. We have to explain the nature and effects of the institution of private property, and describe and account for various species of income. Rents, wages, and profits are as definite facts as 1 Sidgwick's Principles, Bk. III., Ch. I. 2 Cf. Sidgwick's Principles, Introduction, Ch. III. 234 PRINCIPLES OF POLITICAL ECONOMY. any treated of in the physical sciences. Just as land, labour, and capital are the great agents of production, so the owners of them are the dividers of the produce. Our present problem is to give an account of the positive methods of division. In accordance with recent practice, however, some attention will also be given, at a later stage, 1 to certain proposed schemes which are more or less social- istic in character, partly because opinion is itself an eco- nomic force, and partly because the consideration of the opposite shows the real meaning of existing institutions, and is the best antidote to familiarity. I propose, in the first place, to consider the economic principles at the root of the institution of private property, and to point out, briefly, how they have gradually become of more and more importance relatively to other principles. i Infra, Ch. XV. CHAPTER II. THE INSTITUTION OF PRIVATE PROPERTY. 1. The Economic, as distinguished from the Legal and Ethical, Characteristics of Private Property. In con- cluding his chapter on the institution of property, Mill observes that it is a subject of which, for the purposes of political economy, it is indispensable to treat, but in which we cannot usefully confine ourselves to economical considerations. In accordance, however, with the plan adopted throughout the present work, the economic will be carefully kept apart from other aspects of the question. In justification of this procedure, attention may be called, in general terms, to some of the modes in which property may be considered, which, on this view, are beyond the domain of political economy. We shall better understand what is to be included when we have decided what is to be excluded. First of all, then, property may be regarded from the purely legal standpoint, as one of the subjects of positive law. A little reflection will show that for adequate treat- ment, in this respect, a certain amount of specialisation is necessary. We may, for example, describe the nature and the kinds of property (e.g., real and personal), and the dif- ferent regulations affecting it, according to the law of England at the present time. Such is the mode of treat- ment adopted in legal text-books intended for the practi- cal purposes of education or reference. A glance at any standard law-book of this kind will show at once that the economist cannot treat of property in this way. We may go further, and trace the historical growth of this law, a 235 23G PRINCIPLES OF POLITICAL ECONOMY. study in itself of the greatest interest, and throwing light indirectly upon the social and economic condition of the people at various times. Any one, however, who has ever attempted to trace, for example, the actual history of our land laws, or even that of some small portion, will have no hesitation in saying that legal and economic history are logically quite distinct ; what is of great importance in one department is often irrelevant to the other. Finally, still keeping within the domain of positive law, we may com- pare the different laws of different nations at various times, and by a combination of the historical and comparative methods attempt to discover the origin and trace the develop- ment of the institution of private property in general. 1 An inquiry of this kind will no doubt assist in the discovery of the origins of economic history, but it is one thing to elucidate legal conceptions and practices, and another to show their connection with the economic condition of mankind at certain stages of progress. The transition in the general treatment of property from the legal to the ethical point of view is easy and natural. The reason of man is not content with observing and clas- sifying the various forms of positive law. The very obser- vation of the differences that have occurred in the past, and the reforms which are still taking place, leads to the question : What are the principles on which the positive law, as regards this institution of private property, ouyht to be based ? On this problem, from the dawn of specula- tive thought, great labour has been bestowed by a succes- sion of philosophers. The only result, however, appears to be that the contrast between conflicting ideals has been more sharply defined. There are some who will say, with Beccaria, 2 " the right of property is a terrible right and 1 For illustration of the work done recently in this direction, the gen- eral reader may compare the chapter in Blackstone's Commentaries (Bk. II., Ch. I.), on the origin of property, with the corresponding chapter in Maine's Ancient Law (Ch. VIII.). 2 Author of the famous treatise on Crimes and Punishments (Dei De- litti e delle Pene). DISTRIBUTION. 237 may not perhaps be necessary " ; and others, who will wonder, with Bentham, that " so judicious a writer should have inserted in a work, dictated by the soundest philoso- phy, a doubt subversive of the social order." There can be little doubt, in spite of the present ascendency of utili- tarianism, that men will continue to dispute as to what ought to be the basis of various positive laws, and their opinions as to what ought to be will, through their repre- sentatives, determine to some extent, at any rate, what will be. At the same time, the distinction is not only clear, but of the greatest importance. The truth has been admirably stated by Sir Frederick Pollock : " The analyt- ical branch of political science, including the pure science of positive laws, is altogether independent of ethical theories, and that is the definite scientific result which we, in England, say that the work of the past century has given us." l If, however, it is granted that the pure science of posi- tive laws is altogether independent of ethical theories, a fortiori political economy is also independent, and inter alia, the particular question of property can be treated from the economic point of view without any reference to ethics. Instead of attempting, then, to determine what the laws affecting property ought to be in conformity with the principles of reason or goodness or happiness or religion, I shall take as fundamental, the organisation of society for productive purposes, and I shall consider property as one of the conditions affecting production. I do not maintain simply that the positive law ought always to regulate prop- erty so as to secure the maximum production at the mini- mum cost. In my view there is, and need be, no question of ought in the matter, Quot homines tot sententice. Adam Smith himself asserts that defence is of more importance than opulence, and other economists have for practical pur- poses constantly appealed to other principles. The factory legislation was carried mainly on moral grounds, though it 1 History of Politics, p. 113. 238 PRINCIPLES OF POLITICAL ECONOMY. may be supported, also, on the merely economic ground of increased efficiency. Similarly, we may defend poor re- lief as a moral obligation of the nature of charity, or as an economic expedient of the nature of insurance. It cannot be denied that there must always be a close connection between production and distribution. To take a very definite case, many a country has had its productive power altogether crippled by excessive taxation. Again, the conditions under which land is held operate on the methods of cultivation. The open-field system, which seems to have been prevalent in some shape in almost every society, involved a peculiar method of production intertwined with a peculiar method of distribution. It was the break-up of the latter which caused, or permitted, the break-up of the former. 1 And in English industry at the present time production and distribution are simi- larly intertwined, although now the connecting links are an infinite series of little contractual bonds instead of a few broad laws and customs. From this point of view we do not first take for granted that " the things are there," and then consider what ought to be done with them, but we ask how the things come to be there and how they are still to be forthcoming. The survey may appear narrow and restricted, but, such as it is, it has the merit of being clear and distinct. We may now proceed, after this negative limitation of boundaries, to discuss from the positive standpoint the economic bases of private property. j i 2. The Economic Bases of Private Property and First, of (a) Labour. " The foundation of the whole institution \ *>Uu4#bi \ of property," says Mill, " is the right of producers to what they themselves have produced." More briefly, this may be described as (a) the labour basis of property. For the reasons given in the preceding section the ethical founda- tions and the legal consequences of the right may be passed 1 Compare the general argument in Seebohm's English Village Com- munity. DISTRIBUTION. 239 over. The vital consideration for the economist is that, in the words of Hobbes, 1 "plenty dependeth (next to God's favour) on the labour and industry of man," and that this labour and industry will not be forthcoming at all, or only in a modified degree, if the fruits are not given to those who undergo the toil. As already explained in connec- tion with variations in the efficiency of labour, 2 "that efficiency may be expected to be great in proportion as the fruits of industry are insured to the person exerting it; and all social arrangements are conducive to useful exertion according as they provide that the reward of every one for his labour shall be proportioned as much as possible to the benefit which it produces." 3 It is no doubt perfectly true to say that there never has been any society in which this ideal has been fully realised, but this only shows that the principle has been obstructed or counter- acted by opposing tendencies of various kinds; and we have abundant proof in history, by what logicians call the method of concomitant variations, that the nearer the ap- proximation, so much greater has been the efficiency of industry. An excellent example is afforded by Adam Smith's 4 account of the progress in agriculture after the fall of the Roman Empire. In proportion as the culti- vators of the soil obtained a fair share in the produce, so much greater was the amount produced. Slaves, coloni, metayers, tenant-farmers, cultivating owners, represent in an ascending scale the work done in proportion to the re- ward secured. Fear and punishment, public spirit and religion, custom and habit, all these motives to industry are subordinate to self-interest. And it must be observed that self-interest is always at work beneath the surface, even if its action is concealed by other dominant social forces. This point will receive further attention in a sub- sequent chapter. In the meantime the essence of the principle involved may be illustrated by taking an extreme 1 Leviathan, Ch. XXIV. * Supra, Bk. I., Ch. V., 4. 8 Mill, Bk. I., Ch. VII., 6. * Bk. III., Ch. II. 240 PRINCIPLES OF POLITICAL ECONOMY. case. Unless labour receives that mininum of the fruits of industry which is necessary for life and working effi- ciency, there will speedily be no fruits to distribute. Even slaves cannot work without sufficient maintenance, clothing, and shelter. This transient possession of these elementary goods may be regarded as the lowest form of private prop- erty, which thus becomes an essential factor in all produc- tion. 3. The Economic Bases of Private Property (>) Con- tract. It is evident, however, that the more the principle of division of labour (in its widest sense) is extended, so much the more difficult does it become to secure to each worker his share of the complex result. Under the old system of cultivation in common, an actual division might be made of the produce, but long before the complexity of modern industry has been reached, such a distribution in kind of the various products of a community becomes, if not impossible, highly inconvenient. 1 Under a money economy the only effective plan is to divide the money value of the products, and division of labour has never attained any high degree of development except under a system of money payments. Accordingly, for the simple labour basis of property, we must substitute (5) freedom of contract. A man is entitled to that share of the joint product of industry which he can obtain by fair contract. that is to say, without force or fraud. At this point, ac- cording to the view here adopted, it is still more necessary than before to get rid of the ethical conceptions naturally suggested by such terms as " fair " and " free." It is suffi- cient for our purpose to look upon freedom of contract as the form of economic distribution which corresponds to division 1 The " truck " system, or payment in kind, is at present prohibited in most industries in the interests of the labourer. A curious poem, written about the time of Edward IV. (Political Songs and Poems, Roll's Series, Vol. II.), shows that the cloth-makers in particular compelled the workers to take half of their wages in merchandise, and the writer proposes that " wyrk folk be paid in good moni." And a law to this effect was passed in the fourth year of Edward IV. Compare infra, Ch. XII. DISTRIBUTION. 241 of labour as the form of economic production. It is, of course, conceivable as theoretically possible that under a system of state socialism of some kind every individual might have allotted to him by authority his task and his reward, and that division of labour might still be ramified into the same multitude of channels and capillaries as at present. It is also conceivable, and much more probable, that if anything of the kind were attempted, division of labour would soon shrivel up into a few simple employments. Socialism of this extreme kind, however, may be relegated to the chapter on Utopias. As industry is constituted at present, its life-blood is freedom of contract. The exceptions, numerous and important as they may at first sight appear, only prove the rule. Many of them, indeed, in spite of their semblance of compulsion, are intended not to limit freedom of contract, but to give it reality. Others have been adopted on grounds professedly ethical or political, with the full consciousness that to some extent they may be anti-economic. But, on the whole, we are justified in regarding acquisition by free contract as the principal economic title to private property under a complex system of division of labour. I pass over for the present acquisi- tion by inheritance or testamentary bequest, as between the dead and the living the idea of contract is obviously inappropriate ; whilst gift inter vivos is not only compara- tively rare, but may be reduced economically to a form of contract. In substituting for the right to enjoy the results of one's own labour the right to enjoy the results of one's own contracts, it is not implied that according to any ethical standard of justice the latter is the exact equivalent of the former. I repeat that ethical ideals are beside the ques- tion. The point is, that private property resting on free- dom of contract in a modern industrial organisation, cor- responds to private property resting on the basis of labour in a simple stage of development. A man cannot consume the eighteenth part of a multitude of pins or the millionth 242 PRINCIPLES OF POLITICAL ECONOMY. part of a big ironclad in the same direct manner that he can consume his share of the produce of the soil. He can only spend his money wages, and the amount of these wages is, with free labour, a matter of stipulation. The causes which determine the shares of the joint producers under this system will be investigated subsequently ; at present we are only concerned with the general principle of con- tract as the basis of private property. 4. Economic Bases of Private Property (c) Capital. Hitherto we have regarded property as directly or indi- rectly connected with labour. But as already explained in the first book, capital is an essential factor in produc- tion. Accordingly, mutatis mutandis, the same argument may be applied to capital as to labour. A man must have the right to his savings or he will not save ; more gener- ally, in order that capital may be produced and reproduced, those who produce it must be entitled to the proceeds, or at any rate, to such a share as is sufficient to make the capital forthcoming. Thus, corresponding to the labour basis we have (c) the capital basis of private property. If, however, the shares of the labourers who work in combina- tion are determined by contract, so also must be the share of the capitalist. In the concrete, interest and profits and wages are determined in a modern industrial society by contract and not by authority. The precise terms of the contract depend, of course, upon certain general con- ditions, the most important of which are indicated by the terms "supply" and "demand." An important practical deduction may be at once derived from this basis of contract. Even leaving out of account inheritance and bequest, scope is given for large accumu- lations of wealth in the hands of individuals, and, as a consequence, for great inequality of fortunes. It is owing mainly to this inequality that socialists show such bitter hostility to freedom of contract. They are prepared to admit on principle the justice of the labour basis, but they deny that contract is an adequate means to attain the end, DISTRIBUTION. 243 and advocate in its place some form of authority or control. As regards capital, they do not allow it originally to stand on the same footing as labour as a claimant for a share in the national produce, and they maintain that the share it obtains in the present system is altogether exaggerated, owing to freedom of contract. Apart altogether from ethical considerations, and taking up the purely economic position here adopted, they strenuously deny that freedom of contract is a necessary or even an advantageous stimu- lus to the exertion of labour or the creation of capital. The criticism of this opinion may be deferred ; it seemed desirable, however, to anticipate the discussion of details by a general statement, on account of its bearing upon one of the conditions precedent to freedom of contract namely, security. 5. On Security as a Condition Precedent to Freedom of Contract and Private Property. The meaning and the im- portance of security have been admirably propounded by Bentham. " In order to form," he writes, 1 " a clear idea of the whole extent which ought to be given to the prin- ciple of security, it is necessary to consider that man is not, like the brutes, limited to the present time, either in enjoyment or suffering, but that he is susceptible of pleas- ure and pain by anticipation, and that it is not enough to guard him against an actual loss, but to guarantee to him as much as possible his possessions against future losses. The idea of this security must be prolonged to him throughout the whole vista that his imagination can measure. The disposition to look forward, which has so marked an influence on the condition of man, may be called expectation the expectation of the future. . . . Expectation is a chain which unites our present and our future existence, and passes beyond ourselves to the gener- ations which follow us. ... The principle of security comprehends the maintenance of all these hopes." " Prop- erty is only a foundation of expectation, the expectation 1 Pi-inciples of the Civil Code, Ft. I., Ch. VII. 244 PRINCIPLES OF POLITICAL ECONOMY. of deriving certain advantages from the thing said to be possessed. There is no form or colour or visible trace by which it is possible to express the relation which consti- tutes property. To have the object in one's hand, to keep it, to manufacture it, to sell it, to change its nature, to employ it, all these physical circumstances do not give the idea of property. A piece of cloth which is actually in the Indies may belong to us, whilst the dress which I have on may not be mine. . . . The idea of property consists in an established expectation in the possession of power to derive certain advantages from the object according to the nature of the case. . . . With respect to property, security consists in no shock or derangement being given to the expectation which has been founded on the laws of enjoy- ing a certain portion of good." Just as expectation is an essential part of the idea of property, present enjoyment being small relatively to anticipated fruition, so also as regards contracts in general, from the very nature of the case the fulfilment, on one side at least, is deferred. 1 In nearly all industrial contracts time is an element of the first importance. It follows at once that, without security, freedom of contract is an empty phrase. Accordingly, both directly through expec- tation and indirectly through the basis of contract, the institution of private property rests upon security. Bentham does not attempt to conceal on the contrary, he brings out with marked emphasis the continual oppo- sition between security and equality. But in cases of con- flict which are irreconcilable, he has no doubt as to which ought to be upheld. " When security and equality are in opposition there should be no hesitation ; equality should give way. The first is the foundation of life, of subsist- ence, of abundance, of happiness ; everything depends on it. Equality only produces a certain amount of happi- ness, besides which, though it may be created, it will always be imperfect ; if it could exist for a day, the revolu- 1 Cf. Pollock's Principles of Contract, p. 6. DISTRIBUTION. 245 tions of the next day would disturb it. The establishment of equality is a chimera ; the only thing which can be done is to diminish inequality." Even more strongly is the paramount supremacy of security enforced in the passage which leads up to this statement: " In consulting the great principle of security, what ought the legislator to direct with regard to the mass of property which exists ? He ought to maintain the distribution which is actually established. This, under the name of justice, is with reason regarded as his first duty ; it is a general and simple rule, applicable to all states, adapted to all plans, even those which are most opposed to each other. There is nothing more diversified than the condition of property in America, England, Hun- gary, Russia ; in the first country the cultivator is proprie- tor ; in the second he is farmer; in the third he is attached to the soil; in the fourth he is a slave. Here the supreme principle of security directs the preservation of all these disturbances, how different soever in their natures, and though they do not produce the same amount of happiness. For how shall a different distribution be made without taking from some one what he possesses ? How shall one party be stripped without attacking the security of all ? When your new distribution shall be disarranged, which it will be, the day after its establishment, how will you be able to avoid making a second? Why should you not correct this also? And in the meantime what becomes of security ? of happiness ? of industry ? " 6. Criticism of the Vieivs of Bentham. I have given at some length in the preceding section the opinions of Ben- tham on security, because by no writer with whom I am acquainted is the principle more clearly stated, and for the present it is with great principles only that we are con- cerned. The last passage quoted, however, would seem to imply that even slavery and serfdom, once definitely established, are not to be disturbed on account of the shock to securit}^. The violent conflict of such a doctrine with 246 PRINCIPLES OF POLITICAL ECONOMY. common sense morality is too obvious to call for remark, but taking, as before, a purely economic standpoint, the position in this extreme form seems untenable. For, after all, security itself is only a means to an end, and economi- cally that end, in the view here taken, is the efficiency of the productive organisation of society. But if it is admitted that slavery is the least efficient of all kinds of labour, surely it would be better to endure the momentary shock of disturbance than to suffer from the continuance of the system. In the same way, as regards the fulfilment of contracts, it is easy to conceive of cases in which it would be not only morally wrong (according to common sense), but economically inexpedient, to enforce the obligation. Free- dom of contract is, like security, a means only and not an end in itself ; that is to say, industry is not organised to promote freedom of contract, but freedom of contract is encouraged to promote industry. To a certain extent, the force of these objections is admitted by Bentham himself. Such a " civil inequality " as slavery he allows ought to be corrected, but in the process attention ought to be paid to the rights of prop- erty, and the operation should be gradual. He also gives examples of "sacrifices of security to security," e.g., for defence against internal or external enemies, or for the prevention of physical calamities. For such purposes the state must take from some to give to others ; and, logically, taxation is a violation of security. But then, "all gov- ernment is only a tissue of sacrifices ; and the best govern- ment is that in which the value of these sacrifices is reduced to the smallest amount." 1 To resume : Bentham is right in insisting on the abso- lute importance of security as an essential condition of modern industrial organisation, and his teaching deserves special attention at the present time. But he is wrong in 1 This statement is obviously too extreme. See the "social dividend " theory of taxation, Bk. V. DISTRIBUTION. 247 assuming, as he often does, that security is not so much a condition as an efficient cause of industry. He is wrong, too, in asserting that security is entirely the work of the laws. Customs of various kinds, which can only b}^^_ficlioji^be_de^cjibe^_as_Jaws, may suffice in early stages of society to afford a high degree of security, whilst in most highly developed societies, the principal basis of security is rather good faith than the fear of legal sanctions. " It is the confidence reposed and deserved by the many which affords facilities for the bad faith of the few, so that, if colossal examples of dishonesty occur, there is no surer conclusion than that scrupulous honesty is dis- played in the average of the transactions, which in the particular case have supplied the delinquent with his opportunity." l The law is indeed prepared to enforce the performance of contracts in case of need, but if every con- tract required the intervention of the law, there would be an end of contract and security. The principle of security will demand further examina- tion, in connection with compensation for the disturbance of vested interests. 7. On (a?) Prescription as an Economic Basis of Prop- erty. The legal principle of (c?) prescription, namely, that undisturbed possession for a certain term of years shall suffice to establish a valid title, may also be supported on purely economic grounds. In the first place, there is se- curity, which would be impossible if there were no finis lit ium, and if a person were always liable to be challenged to prove his claim over an indefinite period. Next, there is the series of contracts to -which the actual possession may have given rise, and which could not be upset without great disturbance to purely innocent parties. Finally, there is the actual waste of money which would be in- volved in legal and other expenses connected with the change of ownership. 1 Maine's Ancient Laic, Ch. IX., p. 306. The whole of the chapter on the history c2 contract is highly instructive, as regards the subject of the present chapter. 248 PRINCIPLES OF POLITICAL ECONOMY. The principle of prescription is of interest, not so much on account of the frequency or importance of its applica- tion in practice, but because its economic character is specially prominent. The conversion of a bad title into a good one by the mere lapse of time throws a strong light on the nature of security. This is well illustrated by the case of the appropriation of land and other natural agents, a case which, both in view of recent proposals, and as an example of principles, deserves careful examination. It seems best, however, to treat in the first place of Bequest and Inheritance. CHAPTER III. BEQUEST ASD INHERITANCE. 1. General View of Bequest and Inheritance. It is obvious, on simple inspection, that bequest and inheritance involve conceptions that are logically opposed. If bequest is altogether unrestricted, a person can distribute his prop- erty after death as freely as he can during life ; he may cut off his children with a shilling, and leave the rest " to build a house for fools or mad " ; the only condition he must obey is to declare his intentions in due form before it is too late. If, on the other hand, certain rights of inheritance are allowed, e.g., as regards certain forms of property, such as land, or in favour of certain persons, such as wife or children, freedom of bequest is so far restricted. In the progress of society, regarded historically, the general movement has been to extend bequest at the expense of inheritance. " It is doubtful," says Maine, 1 " whether a true power of testation was known to any original society except the Roman." The causes of this movement are highly complex and varied ; religious, ethi- cal, and legal, as well as economic. I shall, in accordance with the plan followed throughout, only discuss the latter. I may remark, however, that the great differences which at present prevail in the laws 2 of different nations, equally in the front rank of civilisation, show that the economic have been largely influenced by other elements. I may 1 On the general question, cf. Ancient Law, Chs. VI. and VII. 2 Compare the laws of France and England, and even those of England and Scotland. 240 250 PRINCIPLES OF POLITICAL ECONOMY. also take the opportunity of again insisting on the position explained in the introduction to this work, that because it is convenient for scientific purposes to isolate as far as possible the economic phenomena, it does not follow that they can be so isolated in practice, and still less, that they ought to be so isolated. No one would propose that the laws of bequest and inheritance should be framed entirely on economic considerations, especially with the somewhat narrow meaning of the term here adopted. It is enough for the present purpose if it be admitted that the economic elements are of sufficient importance to be studied sepa- rately ; the rest may be left to the moralist and the jurist. 1 I proceed, then, to examine the principles of inheritance and bequest from the point of view of their connection with the productive organisation of society, and, as in the preceding chapter, I shall, first of all, take the modern industrial system. 2. Inheritance. Mill boldly affirms that the right of inheritance, as distinguished from bequest, does not form part of the idea of private property. He justifies the opinion by reference to the bases of this institution exam- ined in the last chapter ; the right to inherit the wealth of a dead person cannot be traced to the labour or the saving or the contracts of the heir ; it is the dead, and not the living, who has accumulated the wealth by working and thrift and good bargains. The state as the partner in the business, who provides the field of action and affords secu- rity and protection, might have a just economic claim, but mere blood relationship the mere accident of birth is supposed to give no right, in accordance with fundamental principles. The only principle which on this view might be advanced as at all plausible, is that of prescription. But here the reply is obvious : there can be no prescription of institutions. If such a thing were possible, all reform i For an excellent analysis of all the most important principles involved, and their variations, the reader may consult Professor Sidgwick's Ele- ments of Politics, Ch. VII. DISTRIBUTION. 251 would be impossible. And we may go further, and say that at the present time the argument from antiquity has been turned round ; under the influence of the theory of evolution, and the contemplation of modern progress, we have begun to look upon the wisdom of our ancestors as foolishness ; at the least, we are inclined to maintain that in ancient times the conditions, both moral and material, were different, and that an institution that was beneficial under certain conditions is not likely to be so when the conditions have changed. Every one admits that any law may be changed ; the question may be one of expediency or morality or economy, but the reverence for the past, as such, is now not part of religion, but of superstition. It is worth noting also, that, in this particular case of inheritance, the ancient conditions were certainly different. The family was in general the real unit of society, and the family was regarded as a corporation that never dies ; 1 if extinction was threatened by natural causes, artificial rep- aration was resorted to in the form of adoption. Accord- ingly, there was no room for bequest so long as this was the ruling idea, and after bequest was instituted it was for a long period used, not for the purpose of disinheriting children, but to provide for those who, technically or legally, were no longer members of the family. But one of the most characteristic features of economic progress has been the disintegration of the family; freedom of the individual has displaced the bonds of blood relation- ship, at any rate to a considerable extent. Still, it may be possible to justify inheritance on subor- dinate grounds, even if it cannot be deduced from the fundamental principles of property. The grounds com- monly advanced are: (1) The state should do what the owner would have done. This follows from the position that bequest is assumed to be unrestricted, as being part of the general idea of property, and intestacy is a mere accident. In Mill's treatment of this argument we have a 1 Cf. Maine's Ancient Law. 252 PRINCIPLES OF POLITICAL ECONOMY. good example of the confusion that arises from the intro- duction of ethical conceptions. He maintains that since only general rules can be laid down by the state, since it is impossible to discover the intentions of particular in- dividuals after death, the state should frame its rules by considering what the owner ought to have done, that is to say, according to some ideal of duty. But this is to turn the point of the argument. Take, for example, the law of primogeniture : on the argument usually advanced, the law may be defended on the simple ground that it is founded upon a custom actually prevalent as regards es- tates in land, and yet at the same time it may be argued, on moral grounds, that the custom is bad. The essential point is simply, what is the custom? (2) The second argument commonly advanced in favour of inheritance is founded on the supposed claims of the relatives. It is sup- ported by an appeal to the general principle of security and the necessity or expediency of fulfilling just expecta- tions. But then, as before, the difficulty arises as to the proper interpretation of justice, and we are again forced to wander in search of ethical ideals. As the result of his quest (and guided for the most part by Bentham), Mill arrives at a rather startling conclusion. He would give children the right to such a portion of wealth as would give them a fair start in the world, and the amount would be determined on Stoic rather than on Epicurean princi- ples. Illegitimate children are to be placed on the same footing as legitimate. Collaterals are to have no claim, and the surplus, after the children are provided for, is to go to the state. I do not propose to discuss this posi- tion on ethical grounds, although it does not seem very difficult to attack. There is no need to appeal to ethics ; the appeal to consistency is sufficient. Mill asserts that the liberty of bequest, which on principle he admits, takes away any injustice from these limitations on inheritance. It is due to the parents to give them the right of leaving the rest of their property to the children, if they please, DISTRIBUTION. 253 but it is not due to the children to have the right to make a claim. But if bequest is allowed, surely the principles of inheritance in case of intestacy ought to be decided ac- cording to the customs prevalent in the society, and the sense of public spirit will have to be much more highly developed before it becomes a general practice to leave property to the state in preference to children, or even remote relatives. At present, if a man left his fortune towards the payment of the national debt, his will would probably be contested, on the ground that he was of un- sound mind. The only tenable conclusion thus appears to be that, if freedom of bequest is allowed, we must also allow inheritance on recognised customary lines in the ac- cidental case of intestacy. But then the question arises : Are no limitations to be placed upon freedom of bequest, and is freedom of bequest an essential part of the institu- tion of private property? In the following section an attempt is made to answer this question on economic grounds, which may, of course, be supplemented or contro- verted by other considerations. 3. Bequest. The fundamental economic reason for allowing freedom of bequest as the general principle is found in the stimulus that is given to labour and saving. People will not toil and accumulate wealth for the pur- pose of enriching the state. The attempt to impose suc- cession duties approaching a hundred per cent would be the greatest possible encouragement to wasteful extrava- gance. 1 It would be especially injurious where production is carried on on a large scale. Or, as usually happens with excesses of governmental interference, if an enact- ment of this kind was not mischievous, it would be useless. It would be evaded by gift under certain conditions, and we may be certain that trusts and legal fictions would give effect to the common sense morality or prevailing custom of the country. 1 Compare the treatment of graduated taxation, Art. " Taxation," En- cyclopaedia Britannica. 254 PRINCIPLES OF POLITICAL ECONOMY But, although the general principle is admitted, it is quite possible that certain limitations or exceptions may be justified on purely economic grounds. Some of these are indeed obvious, and have been verified by experience. (1) The interests of the public must not be sacrificed to satisfy the caprices of individuals. Thus, to lay down the order of descent for an indefinite period, as in entails in the strictest sense of the term, is plainly against the public interest. 1 Nor can such excessive freedom be justified by an appeal to the stimulus of accumulation; a man's interest in his descendants of the nth degree be- comes smaller as n becomes larger. (2) Similarly, it may be advisable to limit bequests to corporations of various kinds. Adam Smith was of opinion that, on the whole, endowments given for education had not been beneficial. At any rate, it will be admitted that after the lapse of a certain time the state should have the right of revision. Again, special restraints may be im- posed on the bequest of certain kinds of property to cor- porations. Take, for instance, the case of land, which is obviously limited. It is said that at one time the mediae- val church held more than a third of the land of England, and unless prevented by legislation the process of absorp- tion might have continued indefinitely. (3) These exceptions are obvious, but in most countries bequest is limited in favour of the children. In France, as is well known, the parental power of testamentary disposition over property is limited to a part equal to one child's share, the remainder being divided equally among the children. Apart from special objections to the incon- venience of dividing certain forms of property, especially land, there are objections derived from general economic principles. The limitation will not probably much affect the stimulus to accumulation on the part of the parents, but it may lessen the incentives to industry on the part of the children. As Dr. Johnson tersely remarked, the great 1 The special arguments are given below. DISTRIBUTION. 255 advantage of primogeniture is that it makes but one fool in a family. Another objection is that undue limits are placed on parental control. It might well happen that one son, owing to special aptitudes for some business or pro- fession, might with advantage obtain a larger share than the others, or, conversely, if one had succeeded and another had failed, an adjustment might be made on the death of the parent. The example of France also serves to show that the limitation in question may lead to an injurious restraint of population. On the other hand, under certain conditions such restraint might be desirable, and it is pos- sible that the idea of providing a small competency for the children may lead to a rise in the standard of comfort. Usually, however, the limitation is defended, on the ground that it leads to greater equality in the distribution of wealth. There can be little doubt that such must be the tendency, and, on utilitarian principles, this argument would have much weight. For the reasons given in the preceding chapters, I cannot regard equality as of such economic importance. Taking, as I have done, the pro- ductive organisation of society as the guiding principle of distribution, freedom must take the place of happiness ; and freedom is likely to cause a certain degree of inequality. Mill's desire to treat the question in a broad, philosophical manner, and not to confine himself to purely economic con- siderations, has again led him into a fantastical conclusion. He approves of the promotion of equality contemplated by the French law, but he objects to the means. Accordingly, he proposes that the state should limit directly the amount received by any person, including the children, either by bequest or inheritance. But, in the present constitution of society, this is to abandon altogether the right of free- dom of bequest, and, but for the eminence of the writer who makes the proposal, it is hardly worth serious con- sideration. CHAPTER IV. PROPERTY IN LAND AND COMPENSATION FOR EXPROPRI- ATION. 1. MilVs Vieivs on Property in Land. Opinion, it has been observed, in social, political, and economic affairs, is an active force, and public opinion on various questions connected with land has been formed, to a great extent, on the principles laid down in Mill's treatise. To Mill, for example, may be traced the germs of various proposals for land nationalisation, for the establishment of peasant pro- prietors, for access to mountains, and for dealing with Irish land by peculiar methods. It is true that Mill introduces many qualifications which, in the process of popular simplification, have been allowed to drop out of sight, but even with these qualifications some of his views appear to require modification. His argument runs as follows. Since the fundamental conception of property is the right to enjoy the fruits of , one's own labour and saving, this cannot apply directly to land considered as the raw material of the earth ; land as such is neither made nor saved. Mill, as usual, lays stress on the moral aspects of the question, and appeals to natural ideas of justice. His position, however, may be best maintained on purely economic grounds. So far as the " original and indestructible " powers of the soil are concerned, the economic stimulus is not required for their creation or preservation, they are so far different from other forms of capital. But we now pass to an important distinction. Mill points out that the use of land must be exclusive for the 256 DISTRIBUTION. 257 time, a position which is supported on purely economic grounds. Exclusive use, however, does not necessarily imply private ownership. We might have periodical or even annual division, either by village communities or by the state, or the state might be the universal landlord, with tenants holding from it under various conditions. These methods, as will be shown presently, have all been more or less exemplified in different stages of develop- ment ; private property in land, as we understand it, is of comparatively modern origin. Whether we consider land for agricultural or building purposes, some kind of exclu- siveness is necessary ; but the essential point is that occu- pation is not ownership. So far, then, Mill seems to countenance the extreme view that private property in land ought to be abolished. At once, however, he introduces important qualifications. Though land in itself, he proceeds, is not the product of industry, most of its valuable qualities are, and, therefore, so far land must be placed on the same footing as other forms of property. Some of these qualities have only been attained by the labour of generations, as, for example, the *** drainage of fens, the embankment and diversion of rivers, the clearance of forests, and the gradual improvement of the soil itself by good tillage. So far the land is the result . .fl* of labour and of saving, and we may even regard it, with- out much straining of language, as manufactured. The logical conclusion then is reached, that, so far as the original qualities are concerned, property in land is not justified by the fundamental economic bases, but as regards the derivative qualities, the same principles are applicable as to movables. But the next stage in the argument does not attain the same degree of cogency. " These are the reasons," Mill continues, " which form the justification in an economical point of view of property in land. It is seen that they are only valid in so far as the proprietor of land is its im- prover. Whenever in any country the proprietor, gener- 258 PRINCIPLES OF POLITICAL ECONOMY. ally speaking, ceases to be the improver, political economy has nothing to say in defence of landed property as there established. In no sound theory of private property was it ever contemplated that the proprietor of land should be merely a sinecurist quartered on it." 1 This position ap- pears weak, both logically and practically. Why should the owner of any form of capital necessarily be the user of it ? It has been admitted that most of the valuable quali- ties of land are capital in the economic sense, and it is certain that these qualities cannot be detached from such natural and original qualities as situation. On all kinds of capital interest is received, and for the interest as such as distinct from the wages of superin- tendence and other elements in profits the owner does nothing. Then why should the owner of land, simply because he ceases to improve it himself, incur particular censure ? From the nature of the case, there are limits in any given stage of agricultural practice to the improve- ments that can be made ; there are even cases on record in which improvements have been carried too far. Use and ownership can be separated as regards land, just as in banks, railways, and all kinds of commercial under- takings. The tendency of modern industry has been to separate more and more interest, as such, from wages and profits, as is shown by the increasing amount of borrowed capital in the hands of employers. The weakness of Mill's position is, however, best ex- posed by considering his views on compensation. "The claim of the land-owners to the land is altogether subordi- nate to the general policy of the state. The principle of property gives them no right to the land, but only a right to compensation for whatever portion of their interest in the land it may be the policy of the state to deprive them of. To that, their claim is indefeasible. It is due to land- owners and to owners of any property whatever, recog- nised as such by the state, that they should not be dispos- i Bk. II., Ch. II., 6. DISTRIBUTION. 259 sessed of it without receiving its pecuniary value, or an annual income equal to what they derived. This is due to the general principles on which property rests. If the land was bought with the produce of the labour and absti- nence of themselves or their ancestors, compensation is due to them on that ground ; even if, otherwise, it is still due on the ground of prescription. Nor can it ever be necessary for accomplishing an object, by which the com- munity altogether will gain, that a particular portion of the community should be immolated. When the property is of a kind to which peculiar affections attach themselves, the compensation ought to exceed a bare pecuniary equiva- lent." This principle of compensation, it will be seen, is stated with such emphasis that a pretium affectionis is to be awarded in cases of expropriation. It follows, at once, that the state cannot hope to make a pecuniary gain by a transaction of this kind. Its present value must include the value of any prospective rise, and for the pretium affec- t i<> /i is there can be no return whatever. Accordingly, we are forced to make a long descent from the lofty position at first assumed, and are obliged to discuss the relative merits of state management and that of private ownership. Deferring, then, for the present, the examination of the principles of expropriation and compensation, which are not altogether so simple and obvious as Mill appears to think, I propose to point out the economic advantages of private ownership and the disadvantages of state man- agement. 2. Economic Advantages of Private Property in Land. The case we have to consider is not that of cultivating ownership, but that of the landlord and tenant. The prin- cipal example of the former, namely, peasant proprietor- ship, has already been examined critically, and the peculiar merits and demerits of large estates will be treated later. The first advantage of the landlord and tenant system, as contrasted with state control of some kind, is that land I am speaking now only of agricultural land 260 PRINCIPLES OF POLITICAL ECONOMY. comes under the influence of the competition of individ- uals. It is for the interest of the land-owner to obtain the highest rent and the best treatment of his land, and, speak- ing broadly, those will offer most for it who can make the best use of it. The agriculture of Great Britain is a good example of the excellence of this system. A land-owner almost invariably makes more out of his land by letting it to others than by cultivating it himself. The objections to State management are obvious and to my mind conclusive. The officials the factors of the government must either have the power at present possessed by the land-owners, with all its liability to jobbery and caprice, or else they must be bound down by most rigid rules of routine ; it is difficult to say which evil would be the greater. If, on the other hand, an attempt is made to get rid of the tenants by making them all owners, great difficulties are at once suggested. There is the danger of mortgages, in which case the real landlord is the Jew, and more is paid by way of interest than would have been paid in rent. If mortgages are forbidden by law, experience shows that the result will be higher usury, on account of the bad security. If the tenant is fortunate enough to be able to purchase outright without borrowing, he is forced to take a much smaller farm ; the capital that he might have de- voted to stock, and on which he would have earned profits, can now only yield a very low rate of interest. Mill himself insists on the importance of improve- ments, and approves of ownership so long as the owner is an improver. But improvements of a very arduous kind, that involve considerable expense and a long period of time, are hardly possible without ownership. In Great Britain, so-called permanent improvements have generally been made by the landlord ; and in Ireland, where this was not the case, there arose, practically, in Ulster a system of divided ownership, the tenant having the right to sell his improvements. In the most recent laws affecting agricul- ture, it is assumed, in Great Britain, that the landlord still DISTRIBUTION. 261 makes the permanent improvements, whilst in Ireland the principle of tenant right has been extended over the whole country. It may of course be argued that the state, as universal landlord, would make the permanent improvements, but the appeal to history does not confirm this view. The case of the United States has already been mentioned, 1 and the opinion of Adam Smith on the crown lands may also be cited. " The revenue which in any civilised monarchy the crown derives from the crown lands, though it appears to cost nothing to individuals, in reality costs more to the society than perhaps any other equal revenue which the crown enjoys. It would, in all cases, be for the interest of the society to replace this revenue to the crown by some other equal revenue, and to divide the lands among the people, which could not well be done better, perhaps, than by exposing them to public sale." 2 He goes on to say that only lands which are sources of expense, and not of revenue, such as parks and gardens, ought to belong to the crown in any highly civilised monarchy. It is sometimes maintained that land, if subject to private ownership, becomes a monopoly, and as such unjustifiable. This argument is supposed to derive its strength from the fact that land is limited. But so far as land is merely an instrument of production belonging to different owners, not in combination, there is no monopoly proper. The es- sence of monopoly is not limitation, but absence of compe- tition. Mere limitation is essential to all wealth. In a country of peasant proprietors, no one would speak of monopoly, and yet there is limitation ; in a country of large estates, the farms are let by competition, and, generally speaking, the land-owners cannot lower farmers' profits, or raise the prices of produce to the consumer. The latter consideration is especially clear if there is, as at present in the United Kingdom, keen foreign competition. i Cf. Bk. I., Ch. II., 4. - Wi'Klth f \ Py/y/n-ty, Ch. IV. See, however, the criticism of De Coulanges, Origin of Property in Land, p. 113 (transla- tion). DISTRIBUTION. 281 In England there still survive a number of commons and lammas-lands in which certain members of a village have definite rights, and there are abundant traces of the old agricultural communities. In most of the countries of Europe where private property has become the rule, there are also survivals which point to the wide prevalence of customary cultivation in common. The work of Mr. Seebohm, on the historical development of the English Village Community, in which, like a geologist, he proceeds to construct the past out of fragmentary and scanty records, deserves the attention of every student of political econ- omy as a brilliant example of the historical method. His results may require modification, 1 but his mode of treat- ment is always suggestive and fruitful. Although nomi- nally this work is confined to England, the search for a rational explanation has led the writer to make a wide survey of many other countries at different times. Before Mr. Seebohm's work appeared, many writers had called attention to the wide prevalence of common cultivation in England in recent times. A passage is quoted by Sir Henry Maine 2 from Marshall's Treatise on Landed Property (1804), in which the writer, from per- sonal observation of "provincial practice," attempts to construct a picture of the ancient agricultural state of England. He notices the division of the arable land into three great unenclosed fields adapted for the regular trien- nial succession of fallow, wheat (or rye), and spring crops (oats, beans, peas, etc.). He describes also the division of these fields into strips, and the modes in which the meadows and the waste were used. He gives also statistics on the extent to which, in his day, these open and common fields existed, which have been summarised by the late Professor Nasse. 3 Mr. Seebohm 4 points out that taking the whole 1 Cf. Vinogradoff's Villeinage in England. 2 Village Communities, p. 90. 8 The Common Field System of England in the Middle Ages. 4 Op. fit., p. 14. 282 PRINCIPLES OF POLITICAL ECONOMY. of England with, roughly speaking, its 10,000 parishes, nearly 4000 Enclosure Acts were passed between 1760 and 1844, the object of these acts being expressly to get rid of the old common unenclosed fields. But in spite of the Enclosure Acts, the old system has left many indelible traces on the surface of the land itself and the nature of the holdings, in the size and shape of the fields. 1 The open fields were originally divided into long-acre strips, a furlong (i.e., a furrow-long) in length and four rods in width. Originally, these strips were separated by green balks of unploughed turf, and these balks can still be traced. A bundle of these long-acre strips a furlong in width made a "shot" (Anglo-Saxon), " quarentena " (Latin), "furlong" (old English), and these furlongs were divided by broader balks generally overgrown with bushes. The roads by which access was obtained to the strips usu- ally lay along the side of the furlong and at the end of the strips, and these roads, often at right angles to one an- other, still survive. There are further traces on the land itself of the old " headlands " (Scotch head-rig), the "linches," "butts," "gored acres," and pieces of "no man's land." 2 Canon Taylor, in the paper cited above, gives some very remarkable examples of the effects of the same method of ploughing in these open fields, having been practised for many generations. Not only on the surface of the land, however, but in the present distribution of the fields and closes constitut- ing a farm, the effect of the common open fields may be traced. Taking any manor as a centre, we find the farms of which it is composed not consisting only of solid blocks, as in the newly-settled land of the United States, but of a number of little fields scattered about in the most admired disorder, and at a considerable distance from one another. Of the present inconvenience and want of economy in- 1 Compare, also, Canon Taylor's paper in Domesday Studies or " Domes- day Survivals." 2 Seebohm, p. 6. DISTRIBUTION. 283 volved in the arrangement of farming land there can be no doubt from the modern agricultural standpoint, and if a tabula rasa could be made of the land, this is the last method of distribution which would be adopted. The in- ference is plain that this irregular, straggling, scattered ownership and occupation of the land must be a survival from a past custom, of which the inner meaning has been lost. I proceed to note the principal features of the system at the time of the Conquest, and the processes and causes of its decay. 1 5. The Mediaeval Village Community. At the comple- tion of the Conquest there were certainly manors every- where, some belonging to the king, others to great barons and prelates, and others to the mesne tenants of these greater lords. 2 Some lords held many manors and were represented by a steward or reeve (villicus). The typical manor was a manorial lord's estate, with a village or town- ship upon it, under his jurisdiction, and held in the pecul- iar system of serfdom known as villeinage. Passing now to the internal economic constitution of one of these manors, and leaving the legal difficulties on one side, we observe that the arable land was divided into the lord's demesne and the land in villeinage. The whole of the arable land was in three great open fields, and the demesne land was interspersed with the villein's land. For the present purpose liberi homines may be omitted, and we may observe that there were three classes of ten- ants in villeinage, namely, villani (villeins proper), cotarii or bordarii (cottagers), and servi (slaves). 3 The chief 1 In this brief sketch I have followed, in the main, Mr. Seebohm, with indications of the principal points of divergence in other writers. I have also availed myself of my article on " Agricultural Communities," in Palgrave's Dictionary. - (7. Madox, Exchequer. 8 On the accurate meanings of the terms and their derivations, see Vinogradoff, Ch. V., Essay I. : " An investigation into the legal aspect of villeinage discloses three elements in its complex structure. Legal theory and political disabilities would fain make it all but slavery ; the manorial 284 PRINCIPLES OF POLITICAL ECONOMY. interest attaches to the villeins. The typical villein hold- ing was a virgate or yard-land, and a virgate normally consisted of thirty acres, namely, ten of the long-acre strips in each of the three great open fields. It has been calcu- lated l that about 5,000,000 acres were under the plough in the counties named in the survey, about half being held by the villeins. The normal virgate was an indivisible bundle of strips of land passing with the homestead by re-grant from the lord to a single successor. There were also rights to use of meadow and waste. The virgates with their home- steads were sometimes called for generations by the family name of the holder. The central idea of the system was to keep up the services of various kinds due to the lord of the manor, and the virgate was a typical family holding. The services consisted of so much week-work, generally three days, an uncertain quantity of boon-work (adprecem, precarious), at the will of the lord, and certain payments, occasionally of money, but more frequently in kind. There were also restrictions upon the personal freedom of the villeins, e.g., the lord's license must be obtained on the marriage of a daughter, or the sale of an ox, etc., and no one could leave the land without the lord's assent. The normal outfit of the villein was a pair of oxen, and the ploughing was usually done with a team of eight oxen. Thus, even so far as the beasts were concerned, the co-op- eration of at least four villeins was required. We find, also, that certain craftsmen held their virgates in virtue of their services to the village, and the principal wants of the community were satisfied by its own labour. Everywhere and in everything custom was in force limiting the nature and amount of the services, and prescribing the times and methods of cultivation. The principal differences between the English village community at the Conquest and at the system ensures it something of the character of the Roman colonatus ; there is a stock of freedom in it which speaks of Saxon tradition." 1 Seebohm, p. 102. DISTRIBUTION. 285 time of the Black Death (A.D. 1349), are found to be in the gradual break-up of these overpowering customs, and the increasing scope given to individual enterprise and variety. The nature of the movement is shown by the increasing irregularity of the holdings, and the departure from the normal type, by the progressive limitation of the services demanded, and, above all, by the substitution of money payments for these services and payments, in kind. This commutation in the mode of rendering tribute to the land- owner was the most potent cause of economic progress in the mediaeval period. 1 By the time of the Black Death the option, at any rate of money payments, had become usual. The land-owner found his advantage in the greater efficiency of hired labour, and the villein had the power of benefiting himself by exceptional industry. For a long time, however, the customary methods of cultivation prevailed, and, as pointed out above, the open fields remained down to the close of the last century. The principal point to observe is that, starting with the Con- quest, economic and agricultural improvement has been closely connected with the disintegration of the village community. The nature of this movement is, however, often overlooked, because a comparison is made at differ- ent times between different parts of the social scale, the modern farm labourer being compared to the villein with the virgate, to the apparent disadvantage of the former, in spite of serfdom. But the true counterpart of the modern labourer is the mediaeval slave, and the villein corre- sponds to the modern small farmer or land-owner. 6. Origin of English Village Communities. When we go back beyond the Conquest we find strong evidence of the prevalence in the eastern districts of Britain of these village communities in serfdom under manorial lords, though the points of similarity are at first disguised by the 1 Cf. Vinogradoff, Essay I., Ch. VI. ; Thorold Rogers' Six Centuries, Ch. VIII. ; Cunningham's Groicth of Industry, Vol. I. , Bk. II. See also infra, next chapter. 286 PRINCIPLES OF POLITICAL ECONOMY. difference of language. There seems, however, little doubt that, whatever may have happened at the time of the Saxon invasion, and in the dark period which followed after the departure of the Romans, as soon as the Saxons were settled they developed (or adapted) the essential economic features of the manor. 1 It is at this point that the principal controversy arises. The older view, generally associated with the name of Yon Maurer, was that the Saxons imported into this island the fully developed mark system. The members of the mark were freemen, and in their assemblies decided on points of interest to the com- munity. The arable land was divided, and the portions of meadow were allotted by popular vote. According to this view the village community in historical Saxon times had degenerated from this original type, the overlordship of a single individual having taken the place of the free as- sembly of equals. Against this view, however, Mr. See- bohm has made out a very strong case. His principal points are that the Saxons in their own homes do not appear to have cultivated land on the three-field system ; that as soon as historical evidence is available we find the closest analogies between the agricultural systems in Saxon-England and that in the Romano-Teutonic portion of southern Germany; that there is no sufficient time allowed for the full development, independently, of the manorial from the mark system, and that there is no reason to suppose that the Saxons exterminated the inhabitants and treated the land as if it were virgin forest. 2 The conclusion is, that, to a great extent, the Saxons simply adopted the system which they found already established by the Romans, during their four centuries of occupation. This opinion is supported by the close anal- ogy between the conditions of tenure of the Romano- British colonus and the later villani? Thus the Roman 1 Cf. the Laws of Ine, quoted by Mr. Seebohm, p. 142. 2 Cf. Coote's Romans in Britain. 8 Seebohm, p. 267. DISTRIBUTION. 287 villa is made to contribute some of the most important elements of the late English village. But now the ques- tion arises: Whence were the elements of the Roman system in Britain derived? Did the Romans themselves import their own agricultural customs and impose them upon the inhabitants, or did they adapt what they found to their own use? It is known from other sources that the most usual course of the Romans in their policy of parcere subjedis was to amalgamate, as far as possible, foreign customs with their own. It is known, also, from historical evidence, that before the Roman invasion, in many parts of Britain there was a settled system of agri- culture, notably in the south-east, and it would be in accordance with their usual practice for the Romans to take what they found as the basis of their own methods of cultivation and of extracting revenue from the people. We are thus thrown still further back, in order to discover the elements of this system, which existed in Britain be- fore the Roman invasion, and in the search we discover, following the lines of Mr. Seebohm's investigation, that through the whole period, from pre-Roman to modern times, there were two parallel systems of rural economy, the essential features of which were preserved in spite of the Roman, English, and Norman invasions, namely, the village community in the east, and the tribal community in the west, of the island. Neither system was introduced into Britain during a historical period of more than 2000 years. The village community of the east was connected with a settled system of agriculture ; the equality and uniformity of the holdings were signs of serfdom, and this serfdom again had itself arisen from a lower stage of slav- ery. The mark, with its equal freemen, so far as this part of Britain is concerned, is thus an untenable hypothesis. We have equality and community, it is true, but they are based not on freedom, but on organised serfdom. On the other hand, the tribal system, which prevailed in the west of Britain (especially Scotland and Wales), and also in 288 PRINCIPLES OF POLITICAL ECONOMY. Ireland, was connected with an earlier stage of economic development, mainly of a pastoral kind. The tribal com- munity was bound together by the strong ties of blood- relationship between free tribesmen. This free equality involved an equal division amongst the tribesmen, accord- ing to various tribal rules, and the custom of subdivision has survived to our own day in the " run-dale " or " run- rig " system of the west of Scotland and Ireland. In this brief summary many interesting points have been omitted, and many certainly require further investigation. The origin of the size and shape of the long-acre strips, the original object of the irregular scattering, and the way in which the system became solidified in such an inconvenient form for modern requirements, can only be alluded to. Perhaps the most remarkable general result is that co- operation, which we are accustomed to regard as a purely modern product, is very ancient ; but whether this co-opera- tion arose, unlike most other ancient institutions, purely from rational elements and from motives of economy and convenience, has not yet been the subject of sufficient in- vestigation. Certainly, hitherto the principal danger in reconstructing primitive societies has been to import too readily modern ideas, and not to allow sufficiently for what we should now call irrational elements. 7. Summary of Results, The survey of village com- munities brings into prominence certain general features which seem to be beyond the reach of controversy : (1) Whether in their origin they were in the main free or servile, whether the original type is the manor or the mark, and it is probable that under different conditions different elements were predominant, in the course of time they readily lent themselves to some form of external domination. Thus, in Russia and in India the collectors of taxes from the communes gradually assumed the rights of overlordship ; and in England, if the village communi- ties were ever free, it was at a very remote period, and they were absorbed in the feudal manors. (2) It is DISTRIBUTION. 289 only in the non-progressive nations that they have sur- vived. In England, in particular, the course of develop- ment has been marked by the disintegration of the various customs which had their origin in ownership and cultiva- tion in common. (3) Thus, the system of private prop- erty and freedom of contract, as regards land, stands out as the natural result of economic evolution. 1 It will appear in the next chapter that the examination of feudalism, already to some extent anticipated, leads to a similar conclusion. 1 The reader may consult, for the latest results, the careful work of Dr. Andrews on the Old English Manor. Mr. Garnier's History of the Eng- lish Landed Interest shows an unusual combination of historical reading and practical knowledge. CHAPTER VII. FEUDALISM. 1. On the Economic, as distinguished from other, Aspects of Feudalism. As the system on which the whole structure of mediaeval society rested, feudalism is of fun- damental importance in constitutional history as determin- ing the form of government and the relations of governors and governed. It is of great importance also in general history, for the wars and policy of the state were often de- termined by feudal considerations. In the history of law the feudal system is for a long period predominant, and there are many technicalities in existing laws which can- not be understood without going back to their roots in feudalism. For the present purpose, however, we have only to con- sider the system in its economic bearings ; that is to say, as involving a peculiar organisation in the production and distribution of wealth. An examination of feudalism from this point of view is instructive in two respects: first, because it offers a striking contrast to the present indus- trial system, and secondly, because it broke down mainly under the pressure of the economic forces which have gradually become dominant in progressive nations. The close connection with the subject of this book may be illustrated by reference to the origin of the term. The word feudum, fief, or fee, is derived from the German word for cattle, 1 the secondary meaning being goods, especially money and house property in general. 2 1 Vieh, Anglo-Saxon feoh. 2 Stubbs' Constitutional History, Vol. I., p. 251, note. 290 DISTRIBUTION. 291 2. Principal Characteristics of Feudalism. 1 In its essence the feudal system was a great military organisa- tion. The typical feudal state was a nation ready to take arms. The king was like the commander-in-chief ; his im- mediate feudal tenants were generals, each of whom not only commanded but equipped his contingent. These con- tingents again were made up by the contribution of lesser tenants, of whom some were bound to take the field with a certain number of men and horses, some only to serve in person. This part of the system was antecedent to feudal- ism, and was almost universal in early societies. But the peculiarity of the feudal system was that the type of mili- tary organisation was fixed and solidified by being made territorial. Land, as the ultimate source of wealth, and at that time almost the only direct one, was regarded by the state according to its capacity for supporting the defence of the nation. Hence, military service in some form either personal, or definite provision for it was the essence and condition of the landholder's title. Ac- cording to this view, the feudal tenant is best regarded as an officer settled upon land, rather than as the owner of land; that is to say, we shall find the conception of military obligation taking the place at present held by contract. 2 This mode of regarding the feudal system, in which I have followed Sir F. Pollock, must be considered as in- tended to bring into prominence certain typical features and structural arrangements. It must not be supposed that the feudal system was ever actually established on the simple lines here laid down. Historically, it had a complex origin, and from the first it was modified, in dif- ferent countries, by various social forces. A few points may be noticed bearing upon the history of feudalism in England. Under the Anglo-Saxons the general character of the 1 Pollock's Land Laws, p. 52, and Stubbs, Vol. I., Ch. IX. 2 Cunningham's Groirth of Industry, Vol. I., p. 130. 292 PRINCIPLES OF POLITICAL ECONOMY. development has been described by Stubbs l as a movement from the personal to the territorial organisation ; in the former the free man of pure blood has a right to share in the land of his race, the king is king of the race, the host is the people in arms, the courts are the people in council : in the latter stage of development possession of land usurps the place of freedom of blood, although remnants of the old influences are still left. The country, at the Conquest, was thus well fitted for the imposition of the feudalism which the Norman brought " full grown from France." This institution was derived from two great sources, technically known as the benefi- cium and commendation. The beneficiary system arose partly from gifts of land by the kings to their kinsmen and retainers under the condition of fidelity, and partly from the surrender by land-owners of their estates to churches or powerful men to be received back and held by them as tenants for rent and service. By the practice of commendation the inferior put himself under the per- sonal care of a superior lord, but without altering his title to his estate ; he became a vassal and did homage by plac- ing his hands between those of his lord. The union of the land tenure of the former element the beneficium with the personal connexion of the latter commendation completed the idea of feudal obligation. The rights of defence and service were supplemented by the right of jurisdiction ; the lord judged as well as defended his vassal, and the vassal did suit as well as service to his lord. It is evident from the general principles of feudalism that the great danger is the weakness of the central authority, or, in other words, the tendency of the feudal lords to become practically independent of the king. In England the reign of Stephen furnishes a striking example of the reality of this danger, and shows how much the per- sonal character of the monarch affected the whole national i Vol. I., p. 166. DISTRIBUTION. 293 well-being. 1 On the other hand, England is also the best example of the subjugation of the disruptive tendencies of feudalism by a combination of the forces of royal authority and popular love of freedom. It seemed advisable to make this very brief survey from the historical and political standpoint, in order that the effects of the more purely economic elements might be more clearly appreciated. Under the feudal system we have as foundations a peculiar land system and a peculiar form of personal obligation. In neither was the idea of economic advantage predominant, as such advantage is understood in the present time. In its ideal form the personal tie was that of devoted attachment, as shown in the poetry of chivalry ; and, similarly regarded, the land system rested upon military obedience. 3. Peculiar Restrictions on the Owner ship of Land under Feudalism. It follows at once that some of the most important characteristics of ownership of land in the modern industrial system were opposed to the general principles of feudalism, and were logically inadmissible. Take, for example, freedom of alienation or the right to sell an estate. Under strict feudalism there was no room for it. The tenant, by military service, as Sir F. Pollock observes, was no more entitled to put a newcomer in his place than a soldier on duty to assign his place to another. It is true that feudalism of this strict type soon began to decay, or rather, the ideal was never completely attained ; but for the present we are concerned with principles, and it is sufficient to notice that in England at the present day many of the difficulties in the transfer of land may be traced to this characteristic of feudalism. Again, freedom of disposal by will was still more repug- nant to the feudal theory. Logically the land should revert to the king or other superior for the appointment of a new officer, to follow the original analogy. 1 The influence of the personal element has been justly emphasised by Dr. Cunningham, Growth of Industry, Vol. I., p. 130. 294 PRINCIPLES OF POLITICAL ECONOMY. In the same way the right of inheritance falls to the ground, if feudalism is regarded from the purely military standpoint. But historically feudalism was not only, as already shown, of mixed origin, but it was modified by other institutions, and notably by that of the family. In the ancient types of the family, whilst there was no room for alienation or bequest, the right of inheritance was fundamental, although different modes were adopted in various circumstances. The rule that came to be general under feudalism was that of primogeniture. The origin is obscure, 1 but once it was adopted there are obvious reasons why it should become general and stringent. To divide a great feudal estate would be like dividing the command of an army corps, and when division did not take place it was natural that the eldest son should take the command, as being in most cases the strongest. So strongly did the law of primogeniture take root in England that it was applied in time to estates in land unconnected with military tenures, 2 and in case of intes- tacy it still prevails in England as regards all real prop- erty. It has been observed by Thorold Rogers 3 that, during the early Middle Ages the effects of primogeniture on land were modified by the custom which prevailed, of the great land-owners cultivating their own estates at their own risk. On ordinary arable land, in the thirteenth century, he states that stock was three times the value of the land, when there were adequate implements and cattle (the pro- portions being 6s. to 8s. per acre for the land, and 18s. to 20. for the capital). Now the younger sons shared, unless deprived by will, in this personal estate, and to keep the estate in working 1 Cf. Maine's Ancient Law. 2 Copy-holds and socage land, for example. In these cases the adop- tion was only gradual. In Kent, to this day, gavel-kind (equal division) prevails. Cf. Elton's Origins. Cf. Pollock's Land Laws, Note D. 8 Six Centuries, p. 51. DISTRIBUTION. 295 order the eldest son would be obliged to make some agree- ment with the younger, probably at first by sub-in- feudation. To return to the general question of feudal inheritance, it must be added that the right only existed when there was mention of heirs in the original grant, and in any case the heir did not succeed as a matter of free and common right, but he owed the lord a payment called relief. Here again we have survivals at the present day. 1 One other technicality which had important conse- quences must be noticed. In general, in a grant in which heirs were mentioned, some particular kind (e.g., heirs male of his body) was prescribed, and in case of failure the estate reverted to the superior. It is to this practice that we are mainly indebted for entails. 4. Feudalism and the Towns and Cities. The feudal system laid its hand on the town no less firmly than on the country, although it was sooner compelled to relax its grip. As in the preceding section, for the purpose of illustration, reference may be made to England. It is only with an effort we can picture the economic condition of the towns in England in the early mediaeval period. At the present day, any one can settle in any town he pleases, establish any manufacture, practise any industry, buy or sell anything that he likes. In the Middle Ages it was not so ; towns in the same country were rela- tively more exclusive than independent countries are at present. This mutual exclusiveness was closely connected with feudalism, and to the same source must be attributed many of the burdens and restrictions which were only com- pletely destroyed after the struggle of centuries. 2 From the time of the Norman Conquest the cities and towns of England were vested either in the crown or else in the clergy or in the baronage, and great men of the 1 Compare, for example, the system of feuing land in Scotland for building purposes. 2 Compare Adam Smith, Bk. III., Ch. III. 296 PRINCIPLES OF POLITICAL ECONOMY. laity 1 ; that is to say, the king was immediate lord of some towns, and particular persons, either of the clergy or laity, were immediate lords of other towns. Of those vested in the king some were by one title and some by another ; some he held as the ancient inheritance of the crown, others had lapsed to him by escheat (for want of heirs), some he had obtained by forfeiture, by attainder, by exchange, and by the dissolution of religious houses. The test of ancient inheritance was a reference to Domesday, and the differ- ence was of importance with regard to the exaction of dues. A very great number of towns and cities were, at the time of the survey, vested in the crown, 2 arid when a king spoke of his towns it was no mere political reference, he regarded them as sources of revenue equally with his great landed estates. The following passages from Madox 3 give a graphic description of the meaning of the king's over- lordship. " When the king was seised of a particular city or town in demesne, he had a complete seisin of it with all its parts and adjuncts. He was lord of the soil, to wit, of all the land within the site and precincts of the town ; of all the burgage houses, sheds, stalls, and buildings erected on the said land ; he was lord and proprietor of the profits (if any) of aldermanries ; the herbage and productions of the earth, profits of fairs and markets; pleas and per- quisites of courts ; in a word, of all issues, profits, and ap- purtenances of the city or town of any kind which had not been aliened by the king or some of his ancestors. But sometimes the crown thought fit to grant some part of a city or town, or some profit or appurtenant thereof to a private man or to a religious house. By which means it sometimes came to pass that the property of a city or town was divided into a half or third, or other part or parts, or perhaps certain of the profits of the city or town became severed from the corpus civitatis" 4 1 Madox, Firma Burgi, p. 4. Cunningham, Vol. I., p. 197. 2 Cf. Madox, p. 7. 8 Ibid., p. 14. 4 It is hardly necessary to observe that the object of the above quota- DISTRIBUTION. 297 It is to be understood, however, as the same writer ex- presses it, that in former times the kings were not wont to reserve to themselves a rent or ferme out of an airy or bar- ren franchise. The yearly proceeds arose out of certain definite rents and profits, and it was only if these fell short that a general collection was made. The revenues of the towns included, besides these rents, stallage (rent stalls in markets) and other market dues, tolls, fines, forfeitures of criminals and other transgressors, and various casual- ties. The natural correlative of the manorial overlordship of the towns was the communal responsibility of their inhabi- tants. This is shown not only in the payment of regular or customary dues, but is still more noticeable in excep- tional exactions. Thus, a corporate community might be answerable for the trespass or debt of particular persons, members of it, and particular members answerable for the debt or wrong-doing of the whole community. 1 Thus, as late as A.D. 1305, Edward I. entrusted a French hostage to the men of Winchester to keep, but they let him escape. Thereupon, the king commanded the mayor and bailiffs, together with six of the more discreet and substantial citi- zens, to appear for the community before his council, and they were imprisoned. 2 Again, particular persons were, for several centuries, charged to the king with a debt due to him from their corporate community. A common example is when towns are charged with having acquired the property of a felon or other persons forfeited to the king, in which case the king seems to have taken any citizen on whom he could conveniently lay hands. On the other hand, it must be observed, that this com- munal responsibility was associated with a certain measure tion is to give prominence to the feudal elements in the constitution of mediaeval towns. There were, from very early times, important modifi- cations due to other influences. Cf. Stubbs, Vol. I., Ch. XI. 1 Madox, p. 154. 2 Ibid., p. 156. 298 PRINCIPLES OF POLITICAL ECONOMY. of self-government, and, under the Norman kings, we find several instances of towns being fined for setting up a com- mune without warrant, which proves that this rudimentary combination was regarded as a privilege. The kings, however, soon found it to their interest to make alliance with the towns against the barons ; and the charters became more and more favourable. 1 5. Economic Causes of the Decay of Feudalism (a) the Increase of Security. Just as feudalism was of mixed origin, so it was broken down by a variety of in- fluences, constitutional, legal, and religious, as well as those more properly styled economic. These last, how- ever, were of primary importance, and, as far as possible, they will be considered apart from the other factors. Although it is clear, from the very nature of the feudal system, that we cannot expect any complete isolation of the economic phenomena, still, as Adam Smith 2 has shown in treating the same problem, the other influences may themselves be regarded from the economic standpoint. The point is well illustrated by the first of the great forces which tended to break up feudalism, namely, the increase in security. Here, the importance of the consti- tutional and legal aspects cannot be overlooked. In Eng- land, for example, the first blow to strict feudalism was given by William I., at the great council of Salisbury, A.D. 1086, at which all holders of land swore allegiance to the king. This event, which used to be regarded as the formal establishment of feudalism, really marked the be- ginning of its downfall. " It is," according to Stubbs, "a measure of precaution taken against the disintegrating power of feudalism, providing a direct tie between the sovereign and all freeholders, which no inferior relation existing between them and the mesne lords would justify them in breaking." 3 It thus prepared the way for a system of law and justice applicable to the whole country. 1 Madox, p. 242. 2 Adam Smith, Bk. III., Ch. III. a Cf. Stubbs, Vol. I., Ch. IX., p. 266. DISTRIBUTION. 299 The mere exaction, however, of an oath of allegiance would, in itself, have been of little consequence, unless supported by more substantial guarantees. In its ideal form of a great military organisation, feudalism already exacted perfect obedience and fidelity to the central authority, although, in all but the highest ranks, the mode of expression was indirect. But, as Adam Smith 1 observes, the authority of government, under feudalism, was too weak in the head, and too strong in the inferior members, and the excessive strength of the inferior members was the cause of the weakness of the head. Feudalism, with its regular train of subordination, from the king to the lowest retainer, ought to have strengthened the authority of the king and weakened that of the great proprietors ; but it could not do either sufficiently for establishing order and good government among the inhabitants of the country, because it could not alter sufficiently that state of prop- erty and manners from which the disorders arose. William I., however, and his strongest successors suc- ceeded in keeping in check the disruptive tendencies, and to some extent, at any rate, in performing the first function of government from the economic standpoint; they did something, namely, towards providing a fair field for the play of economic forces ; they led the way, no doubt un- consciously, and actuated by other motives, to the substi- tution of an industrial for a military organisation. The alliance of the kings with the towns and cities was of equal importance with the direct suppression of the powers of the great barons, in the establishment of that degree of security which is necessary for the development of trade and commerce. 2 " Order and good government, and along with them the liberty and security of individuals, were, in this manner, established in cities at a time when the occupiers of land in the country were exposed to every sort of violence." J In other countries, especially Italy and i Bk. III., Ch. IV. 2 C f. Cunningham. 8 Adam Smith, p. 179. 300 PRINCIPLES OF POLITICAL ECONOMY. Switzerland, the cities gradually became independent re- publics, conquered all the nobility in their neighbourhood, obliged them to pull down their castles and live like other peaceable inhabitants in the city. This is the short his- tory, says Adam Smith, of the republic of Berne, as well as of several other cities in Switzerland, and it is also the history of most of all the considerable Italian republics (except Venice) between the end of the twelfth and the beginning of the sixteenth centuries. If it is remembered that the essence of feudalism was a military organisation, subject to chronic mutiny on the part of the superior officers, and consequent relapses into anarchy and plunder, it is plain that the decay of the sys- tem may be measured by the growth of industrial security. Laws and governments no doubt did something to provide room for this growth, but the vital powers and nourish- ment were derived from economic agencies operating silently and insensibly below the surface. 6. The Decay of Feudalism (Jf) Extension of Money Payments. The chief agency in the progress of society from status to contract has undoubtedly been the extended use of money, the substitution of money payments for various kinds of services and obligations. Without money, exchange cannot be the fundamental principle in the distribution of wealth ; distribution must necessarily be dominated by different forms of authority. We are now accustomed to speak of the rigidity of early laws and customs ; it is time we recognised that the princi- pal loosener of this rigidity is money. The history of money might be made the guiding thread to the history of civilisation ; money has destroyed, or helped to destroy, the privileges founded on birth, superstition, and force ; money has promoted, or helped to promote, freedom of labour, reward in proportion to services, and equality of sacrifice in taxation, the three great principles in which ethics comes into closest contact with economics. The clamour of the socialists for the abolition of money is a curious illus- DISTRIBUTION. 301 tration of the way in which incidental evils turn the atten- tion from the essential benefits of any institution. There never yet was power for good which might not in some respects be turned into a power for evil. The intention of these reflections is illustrated and justified by the effects of money on feudalism ; here, at any rate, the advantages altogether outweighed the disadvantages. Under strict feudalism, personal military service was exacted, service of so many days, irrespective of the time employed in getting to and returning from the seat of war. The possessions of the English kings abroad rendered this personal service very burdensome. Hence a commutation into money payments was desired and achieved. This was known as scutage. 1 It enabled the English monarch to maintain a force of picked and trained volunteers, and thus strengthened the central authority. The abuse of this power by John was one of the causes of Magna Charta, 2 and indirectly of the power of Parliament over the public purse, for it soon became evident that the king must not be allowed to claim scutage as he pleased, on pretence of a continental war. Another important effect is pointed out by Rogers. 3 None but freeholders (that is to say, those who did not hold their land only by villein services) could serve in the national militia, but servile birth was no obstacle to enlistment in the king's army, and by this path a serf might even rise to knighthood. Scutage applied strictly only to those feudal tenants who held immediately (in capite) of the king, but they transferred it to their sub-tenants. " The tenants," says Madox, 4 " paid escuage to their lord to enable him to pay his escuage to the king," and thus the effect was more general than might at first sight appear. The substitution 1 Cf. Madox, Exchequer (Ch. XVI.), for full account. The term is derived from a knight's shield (scutum}. It first appears in the time of Henry II., and is ascribed to Thomas a Becket, A.D. 1159. See Rogers' Six Centuries, p. 29. Stubbs, Vol. I., pp. 454, 456. 2 Stubbs, Vol. I., p. 533. Op. cit., p. 32. * Madox, Exchequer, p. 4G9. 302 PRINCIPLES OF POLITICAL ECONOMY. of money payments for produce rents of various kinds was far more wide-reaching in its influences, and the process has lasted down to our own times. In England this spe- cies of commutation seems to have begun on the royal demesne soon after the Conquest. A graphic description is given in the Dialogue on the Exchequer l of the incon- veniences of payment in kind, especially when the king was engaged in foreign wars, and also of .the burdens im- posed on those engaged in agriculture by these exactions. As with scutage, the substitution of money payments was desired on both sides. The importance of the adoption of a money economy is still better shown by the changes that occurred in the lowest strata of the feudal system, in those parts, namely, in which feudalism had been imposed on the agricultural regime derived from the village communities. 2 At first we have a system of labour rents. The villeins held their land on condition inter alia of performing so much w r ork for the lord on his demesne, and of rendering other ser- vices and payments in kind. Although the personal freedom of the villein was much restricted, as he was subject to the arbitrary power of his lord in many ways, his services and payments in the nature of rent were fixed and customary. Gradually these customary dues became more favourable, but the most favourable change of all was the commutation into money payments. This was effected in England by the silent operation of economic causes. The land-owners and their bailiffs found that forced labour was inefficient and not readily adjusted to the needs of various times and places. In some cases the land-owners required more, in others less, than the customary amounts, but the one thing they always were in want of was money. From the point of view of the villein, the 1 Stubbs' Select Charters, p. 193. Some of the rates of commutation are interesting ; e.g., board for 100 men, one shilling ; an ox, one shilling j a sheep, 4d. 2 Of. Ch. VI. DISTRIBUTION. 303 change to money payments was equally desirable. The abolition of forced labour gave opportunities for earning wages and thus for saving; and, side by side with the process of commutation, we find increasing irregularity in the size of the holdings. The process was facilitated, and the beneficial effects were increased, through the practice of freeholders acquiring servile lands. The rates of commutation were moderate and, like the customs which they displaced, fixed. Thus the first step was taken towards the creation of peasant proprietors. The occurrence of the Black Death (A.D. 1349) almost completed the act of emancipation. It intensified both in violence and rapidity the movement already in progress. Too late the land-owners discovered that they had sold their birthright below its value. In vain they tried to exact the old forced labour; the crops were rotting on the ground, and the villein would be welcomed wherever he chose to wander. In the end the scarcity of labour and its high price rendered landlord cultivation by bailiff supervision unprofitable ; and, to a great extent, the demesne itself became merged in the peasant land. The method of transition was by the land and stock lease which has been so fully and admirably described by Rogers. 1 The landlords let both land and stock on lease to the tenant. In principle, the system was a species of metairie, but it differed in important details. It was looked on as a temporary expedient ; the rents were fixed for short periods and open to periodical adjustment; and the stock was valued to the tenant and restored by him on the termination of his lease. The system lasted on the average about seventy years ; at the end of that time the tenants had become either yeomen practically inde- pendent, or farmers with their own capital. Thus, in England economic forces effected a social revolution in the fourteenth century, which in Germany and Russia has 1 Six Centuries, p. 229. 304 PRINCIPLES OF POLITICAL ECONOMY. ^only found its counterpart in the nineteenth century by the direct intervention of the state. 1 The decay of the feudal power in the towns of England, and the growth of freedom and self-government, is inti- mately connected with a peculiar system of payments. At first, the yearly profits which the king made of his towns were raised and paid in different ways ; sometimes they were levied by the sheriff of the county ; sometimes the towns were farmed out to particular persons ; and, in process of time, the farm (or ferme) was let to the towns- men themselves either for a term of years or in perpetuity. 2 It may be observed that in the mediaeval period there was a constant tendency for payments which were, in their origin, proportional or variable to become fixed. 3 In this way, the kings and other superiors lost, in general, their share in the growing wealth of the towns. The fee-farm of the town or city signified a perpetual rent, 4 and the townsmen, after a time, generally obtained the farm in fee. The fixation of the payment, as Adam Smith observes, naturally also made the corresponding privileges perpetual, 1 Compare Systems of Land Tenure (Cobden Club) " Germany and Russia." To prevent misunderstanding, I may repeat that I do not intend to imply that this social revolution was entirely due to the eco- nomic forces described ; it is enough for the present purpose to say that, without their influence, it would have been impossible. The part played by Wiclif's poor priests, in the peasant revolt of 1381, shows that ideas of equality derived from primitive Christianity were fermenting in the minds of the people ; and, on the other hand, there had been, on the legal side, a gradual development of personal freedom, as shown, for example, by Magna Charta. Some years ago I ventured to advocate some form of land and stock lease, as a solution of the crofter difficulty in Scotland. I was assured, however, by the best practical authorities, that the scheme was impracti- cable. It is noteworthy, however, that metairie is spreading in France. 2 Madox, Firma Bnrgi. Adam Smith, Bk. III., Ch. III. 8 The tenth and fifteenth, in taxation, form a good example. Cf. Dowell. 4 " Fee is derived from /eodwro, and was applied by usage, in England, to a perpetual estate or inheritance in land ; it was also applied to herita- ble offices, called offices in fee." MADOX. DISTRIBUTION. 305 and these privileges were constantly increased, in return for additional payments, which again became fixed. It is hardly necessary to point out that, although the kings sacrificed, as events showed, a great revenue which might afterwards have been used for the general purposes of the state, the gain to the country as a whole far more than counterbalanced this loss. The firma burgi was essential to the progress of the towns, and the progress of the towns was essential to the improvement of the country. 1 7. The Decay of Feudalism (e) Changes in Land Laws. The substitution of money payments for all sorts of dues and services prepared the way for freedom of alienation of land ; and, side by side, freedom of bequest struggles to the front. The family instinct of the nobility, however, prompted them to endeavour to establish a strict system of entails, 2 but the attempt was defeated by a variety of legal fictions, which gave expression to the common sense of the community and especially to the interests of the church. 3 The nobles, on the other hand, whilst striving to hold fast their land, were equally anxious to escape from the obligations incidental to feudal tenures. They endeavoured to make ownership merely nominal for obli- gation ; to make the dues as small as possible, and, above all, to avoid forfeiture. This led to the system of uses or trusts, which again involved secrecy of transfer. The invention is ascribed to the church, but the instruction was bettered by the nobles, and gradually became the rule. Accordingly, although the victory of economic ideas was complete in principles, it was far from complete in methods; it was only achieved by the use of cumbrous legal devices, the evil effects of which still remain. It is 1 Adam Smith, Bk. III., Ch. IV. 2 Cf. Statute de Donis, A.D. 1285. 8 The sixteenth and seventeenth centuries in England were years of almost complete freedom of alienation ; but later on the beneficial mediae- val legal devices were, to a great extent, defeated by other inventions for keeping the land in the family. Cf. Scrutton, Land in Fetters, Ch. VIII.; Brodrick, English Land and English Landlords, Ch. III. 306 PRINCIPLES OF POLITICAL ECONOMY. impossible, with due regard to the scope of the present work, to do more than indicate, in this very brief manner, some of the salient points in the legal development and degeneration of feudalism. 1 1 The works of Sir F. Pollock and Mr. Scrutton, cited above, give an excellent survey, intelligible to the lay reader, of the principal stages in the progress and decay of feudalism. They are written from the legal standpoint, but with a due appreciation of economic influences. See also Garnier's History of the English Landed Interest. Professor Ashley's Economic History, Vol. II., appeared after this work was in the press. His criticism of Rogers deserves careful consideration. CHAPTER VIII. _ MODERN OWNERSHIP OF LAND AND INDUSTRIAL FREEDOM. 1. Outline of the Argument. In the last two chap- ters I have examined two great systems of land tenure, which, in some form or other, seem to have prevailed almost universally. In this chapter and the next I pro- pose to indicate the economic effects of the survivals of these systems, the principles of legislation affecting land that arise with the development of industrial freedom, and some of the recent modifications of those principles. Briefly stated* my object is to examine the economic effects of certain kinds of land laws which are of impor- tance at the present time. I shall first consider laws relat- ing to the ownership of land in the modern sense, and secondly, 1 those relating to landlord and tenant. 2. On Difficulties in the Transfer of Land. One of the principal results of the survivals of old laws and customs is that land cannot be bought and sold so readily as other forms of property. Great advances have recently been made both in England and Scotland, but the fact still remains, that the transfer of land falls short of that sim- plicity which is assumed as fundamental under the system of industrial freedom. It would be impossible to indicate in the compass of this work the nature of the technical legal difficulties ; all that I propose to do is to exam- ine the effects of such difficulties in the way of sale or transfer, 1 See next chapter. 307 308 PRINCIPLES OF POLITICAL ECONOMY. 1st. In the first place there is a waste in unnecessary legal expenses, e.g., in ascertaining the nature of the title. It is to be observed, however, that from the nature of the case, land can never be so easily transferred as some other forms of property, e.g., consols, or other stocks and shares. 44 Stock," it has been well said, " possesses no boundaries, conceals no minerals, supports no game, pays no tithes, admits of no easements, is let to no tenant, and is ham- pered by no adjoining owners." l The expense also, at any rate in Scotland, where a system of registration of deeds prevails, is not now so great as is generally supposed. According to the calculations of Mr. Auldjo Jamieson, 2 who has had a very wide experience, the average expenses in the case of large estates is about equal to that of trans- ferring railway stock, and the stamps required by law amount to a little more than half of the legal expenses. The expenses, however, are not proportioned to the value of the estate, being proportionately much heavier in the case of small properties. Accordingly, so far a special check is imposed on the transfer of land in small quanti- ties. But for the reasons already given, it is doubtful if the abolition of all expenses connected with the transfer of land would, in Great Britain, lead to a system of peas- ant proprietors. 2d. " Simplicity and facility," as Mr. Jamieson observes, "are as valuable as cheapness," 3 and the law's delay is often of greater consequence than the law's costs. Again, any uncertainty or difficulty in ascertaining the title renders it difficult to borrow on mortgage ; and, on the other hand, encumbrances of various kinds, especially when effected with more or less secrecy, also tend to make transfer difficult. The consequence is that land does not find its way into the hands of those best able to make use of it. One of the worst abuses connected with 1 Land Laic Reform in England, p. 10, by Osborne Morgan. 2 Transactions of the Chartered Accountants Students' 1 Society of Ed- inburgh, Vol. I., Ch. I. Ibid., p. 16. DISTRIBUTION. 309 land is that, in many cases, the nominal is not the real owner. It is worth observing, that the economic functions of settlements in land are not nearly so important as they once were. The rent of land, as recent experience has shown, is by no means the most certain form of income. It is a curious popular fallacy to suppose that land is, in some way, particularly safe because it is always there ; it is forgotten that land which yields no rent is of as little value as the air above it, which also technically is assumed to be part of the property. 3d. The idea of keeping land in a particular family is, under modern conditions, essentially anti-economic. It is true that the popular notion that land can be now strictly entailed in England and Scotland, for an indefinite period, is fortunately as erroneous as the idea that, by the law of primogeniture, land necessarily goes to the eldest son, just as in France it is compulsorily divided. Both entail and primogeniture, as at present practised, gain most of their force not from law but from custom, but the custom has deep roots in history and sentiment. It is worth recalling the evils that ensued when entails were comparatively strict ; they have been summarised in a famous passage by Blackstone. " Children grew disobedient, farmers were ousted from their leases, for if such leases had been valid, then, under colour of long leases, the issue might have been virtually disinherited ; creditors were defrauded of their just debts, for heirs might have been defrauded by mortgaging; innumerable latent entails were produced to deprive purchasers of their land, hence law-suits were encouraged, and also treason, as estates-tail were not liable to forfeiture." 3. The Advantages of Large Estates. It would, how- ever, be a serious mistake to suppose that large family estates have no advantages. 1 Before assenting to the 1 "Some very interesting calculations on the distribution of landed prop- erty were made by Joseph Kay in his book, Free Trade in Land, Letter I., under date Dec. 15, 1877 : 310 PRINCIPLES OF POLITICAL ECONOMY. popular condemnation, the following points ought to be considered. Ownership on a large scale does not involve, necessarily, cultivation on a large scale. The larger the estate, the less likely is the owner to cultivate it himself, and I venture to say that, economically, this is an advan- tage ; mere ownership does not imply technical agricultural skill any more than the ownership of railway shares im- plies the capacity to drive an engine. In Great Britain there are more than half a million tenant-farmers, and they are the most skilful in the world; the Scottish farmers are said to be superior to the English, and in Scotland estates are larger. 1 The relations of landlord and tenant are generally better on large estates. The owner feels more responsibility; the estate is governed by general rules, and there is not so much room for caprice. A great land-owner, imbued with family traditions, is now in some respects like a constitutional monarch, just as in ancient times he was like a despot. 2 There is greater security 1. England and Wales, total area, 37 millions of acres. A body of men not exceeding 4500 own more than half. Less than 280 people own one-sixth of the enclosed land. Sixty-six people own one-eighteenth part. One man owns 186,397 acres (Kay, p. 14). 2. In Scotland the figures are still more striking. Total acreage about 19 millions. One owner has 1,326,000 acres, and 32,000 in England as well. There are five owners with more than 300,000 each. Twelve own- ers have a quarter of Scotland. Nine-tenths of the whole of Scotland belongs to fewer than 1700 people. 3. Ireland. Total area is 20 million acres. Two hundred and ninety- two people own one-third of estate. Seven hundred and forty-four people own one-half of estate. There are 3 people with more than 100,000 acres each. The following summary is still more startling : Two-thirds of the whole of England and Wales owned by 10,207 persons. Two-thirds of the whole of Scotland owned by 330 persons. Two-thirds of the whole of Ireland owned by 1,942 persons. For more recent figures, see Shaw Lefevre's Agrarian Tenures, p. 14. 1 The exceptional skill of the Aberdeen farmers is, perhaps, to be at- tributed to the severity of the climate. 2 Compare Adam Smith's description of Cameron of Lochiel, Bk. III., Ch. IV. DISTRIBUTION. 311 of tenure. In England, many farms have been held for generations in the same family as yearly tenancies. What is called a fair commercial rent, as will appear presently, depends on a complexity of causes, and is difficult to esti- mate. Hence, in one way, it is good that contracts for the hire of land should not be too rigidly interpreted; there should be something of the uberrima fides of partner- ship. Recently, for example, in Great Britain it has been found necessary to reduce rents, owing to an unprece- dented fall in prices. The great land-owners have been much more ready and more liberal in their reductions. As a matter of fact, the rental of a moderate estate is a pre- carious source of income; and it is generally burdened with debt and dignity. The Scottish laird is neither a lord nor a yeoman, and the sooner his estates are absorbed or divided the better for the country. A small land-owner has little capital for permanent improvements, which in Great Britain are generally made by the landlord. The case of very small tenants, e.g., crofters, is, of -course, pe- culiar, but experience has shown that as a rule they are better off under large land-owners. The people who rack- rent most are the peasant owners abroad, e.g., Flanders. The principal argument for small estates is founded on political and social stability, but it is of more importance in other countries, e.g., France and Germany, than in Great Britain. This advantage is, moreover, seldom so great as might be supposed, owing to the pernicious and apparently inevitable custom of mortgaging small properties. In ancient Greece there were continual outcries against usury and appeals for seisachtheia, a shaking off of bur- dens, just as in Russia and Germany we have at present intense hatred of the Jews, which is based far more on their usury than on their race. The principal argument usually advanced against large estates is also political and social; the owners are supposed to have too much influ- ence for a democracy. But of late both the political and the social power of large ownership have been largely 312 PRINCIPLES OF POLITICAL ECONOMY. abated. It should be remembered also that in return for social powers there are certain social advantages. In Ire- land, the greatest outcry was against the new commercial proprietors, who, after the act of 1860, bought land to make as large profit as possible. Again, under the system of large estates with family settlements of various kinds, far more are interested than the merely nominal owners. The landed interest in Great Britain is, perhaps, a more reliable basis of social stability than the peasant proprie- tary of the Continent. 4. Recent Modifications of the Economic Principles of Ownership of Land. It is remarkable that in the United Kingdom, before the commercial system has been fully applied to land, that is to say, before the old survivals have been got rid of, new modifications on different prin- ciples have been adopted. The natural course of develop- ment had been to differentiate ownership from tenancy, and to substitute conventional for customary tenures of various kinds. These feudal obligations and common rights had been largely abolished, and the owners of land had acquired proportionately greater freedom. A good ex- ample is furnished by the agrarian legislature of Prussia during the present century. " It is marked by the demoli- tion of the feudal edifice and the removal of the materials of which it was built." * Before the reforms, the peasants held the peasant-land by as good a title as the lord held the noble-land ; the peasant paid no rent, in the ordinary sense, but he was forced to perform certain services. The essence of the reforms consisted in enabling the peasants to compound for their services by surrendering part of the peasant-land and holding the remainder free from feudal obligations. The popular idea that peasant proprietors were established by taking part of the land of the nobles, is exactly the reverse of the truth. 2 " In every progressive society," it has been said, " the 1 Systems of Land Tenure " Prussia," by R. B. D. Morier. 2 Morier, op. cit., p. 3G2, note. Richey's Irish Land Laics, p. 5, note. DISTRIBUTION. 313 laws relative to the rights and duties of the owner and hirer of land tend to follow an invariable order of change ; the parties are permitted to make their own bar- gains ; land may be dealt with as any other commodity." l When this order of change has been perfected, we may assume that the owner of land can do with the land as he pleases, and let it, if he likes, on any terms that conform to the ordinary rules of lawful contract. Recently, how- ever, in the United Kingdom, of all places, before the old fetters have been altogether removed, new fetters have been imposed. In other words, a reversion has been made towards the ancient confusion of ownership and tenure, and part of the rights of the owner have been transferred to the tenant. Some account of the principles involved will be given in the next chapter. 1 Richey, op. cit., p. 8. CHAPTER IX. CONTRACTS FOR THE HIRE OF LAND. 1. Free Trade in the Hire of Land. In his excellent work on the Irish Land Laivs, 1 Dr. Richey, with the object apparently of illustrating his subject by the light of con- trast, gives, by way of introduction, an account of the French law as laid down in the Code Napoleon. 2 The principles of this law were in the main those developed by the great Roman jurists, who were altogether free from feudal influences. Briefly described, the French law is "the most complete and equitable application of the rules of free trade to the case of the letting and hiring of land." According to this system, the same rules are applied to land as to any other commodity ; the relative rights and obligations of landlord and tenant depend entirely on con- tract ; any kind of agreement may be made, not showing signs of force or fraud or other flaw that would vitiate any contract; and it is only in so far as the agreement is silent that the law steps in to secure an equitable division in case of dispute. The same principles are applied with the utmost impartiality to landlord and tenant. It is cer- tainly remarkable that in the country to which we are most often referred for examples of small cultivation, the principles of the law should be so strictly unbiassed. The subject may be considered with reference to three topics : rent, compensation for improvements, duration of tenancy. 2. Rent under the Free Trade System- The same principle is applied as in the case of the sale of anything. 1 Irish Land Laws, Chs. III.-V. 2 ch. V., p. 33. 314 DISTRIBUTION. 315 The use of the land is considered as sold for a term of years, with payment by instalments. Now, in ordinary sales, the court would only interfere if the price seemed so ridiculously high (or low) as to imply misrepresenta- tion on one side or the other. It is assumed, then, that the landlord must have covenanted that the annual prod- uce should at any rate exceed the rent. Accordingly, if the crop fails he must share in the loss. In practice some rule is necessary, and liability to share in the loss only arises if the crop is less than half an average, and in cases of a term of years the tenant must show that, taking good years with bad, he has lost more than half the crop. Thus the law does not attempt to determine " fair " rents ; it leaves abundant scope for enterprise and speculative bar- gains ; it only steps in when the implied condition, namely, that the landlord lets a valuable subject (posses- sion utile) is not fulfilled, the practical test being this rule of half the crop. 1 3. Fair or Judicial Rents. In Ireland generally, and in Scotland partially, the law in recent years has been ex- tended much farther, and in many quarters a still greater extension is demanded. Government has undertaken to fix fair rents for a term of years, not by the application of any broad principles, but by precise valuation in every particular case. It is interesting to notice the grounds upon which this remarkable inroad has been made into the " fair field " of contract. I pass over, of course, the politi- cal exigencies that cannot be regarded as economic. For the present purposes it is enough to consider whether judicial rents are in any cases economically justifiable. It is alleged that in contracts for the hire of land, land- lord and tenant are not on an equal footing, that there may be land-hunger on the one side and monopoly on the, other. It may be at once granted that the old cottieri rack-rents of Ireland greater than ever could be paid were unjustifiable even on the free trade principles of the 1 Cf. Tenant's Gain, p. 97. 316 PRINCIPLES OF POLITICAL ECONOMY. French law. And we may go farther and admit that, with land-hunger and agrarian pauperism of this kind, freedom of contract was a vain name ; the tenants had neither the means nor the audacity to appeal to the courts, even if there had been laws in their favour ; and, accordingly, the direct intervention of government was desirable. But it must be carefully noted that, so far, the real grounds of the intervention were, first, the right of the state to control monopolies, and secondly, the duty of the state to alleviate pauperism, and these two grounds are in their nature essentially distinct. It may be questioned if the fundamental evil in land-hunger is ever rack-rent- ing. Nothing can be more certain than that where minute subdivision of the soil exists, the fair rent (judged by the capacity of the tenant to pay) is something below zero ; and it may be doubted, when the holdings are sufficiently large, if rack-renting in itself has ever been such as to justify governmental interference. In the case of real agrarian pauperism, judicial rent is simply a mode of out- door relief ; l and the relief is generally too small to allevi- ate distress, and in reality tends to perpetuate the evil by taking away another inducement to emigration. It is worth observing that the arguments I have been examining may be applied to the lowest forms of labour generally. It may be said that capital and labour are not on an equal footing, e.g., as in the case of a master-sweater and his victims, and that the house-rents of the poor are governed by monopoly. But the attempts under the old poor laws to determine fair wages, and to provide house- room at fair rents, are the reverse of encouraging. 2 It is plain, however, that if the cultivators are not paupers and the land-owners are not monopolists, judicial rents, if advocated, must be supported on other grounds. The ordinary British farmer fortunately neither suffers from land-hunger nor from landlord tyranny. At present, 1 It is like the allowance for house-rent, described in the Poor Law Re- port (1834). Cf. infra, Ch. XL, 7. DISTRIBUTION. 317 indeed, the hunger is not for the land but for the tenant, and the land-owner in many cases haa to bribe his tenants to stay. In these circumstances it is not easy to give the appearance of plausibility to the demand for judicial rents. It is true that it is extremely difficult l to forecast for a term of years the rent which a piece of land can really afford to pay ; to pass over particulars, there is the uncer- tainty of seasons and the uncertainty of prices. But to suppose that governments can foresee what is hidden from those most interested is worse than rural simplicity. The best answer, however, to the proposal for governmental interference, on the ground of superior knowledge, is that the information, if it exists, should be published ; at present, in reality, forecasts of judicial rents would prob- ably not be so reliable as those of meteorology. The fatal objection to judicial rents ex post facto, that is to say, on behalf of tenants in present occupation is, that the competition of more efficient tenants is excluded. The practical result is to hand over to the present tenants part of the rights of ownership. It must also be observed that, if the state is to come in to adjust reductions on the ground of unexpected losses, equitably, it should also come to the aid of the land-owners in the contrary case of unex- pected profits. There is one other reason sometimes advanced in sup- port of governmental interference in exceptional cases : when a large number of tenants are in danger of insolvency, if their rents are exacted, it is maintained that agriculture is an industry of such magnitude, and the capital and skill required in it take so long a time to build up, that any- thing approaching the ruin of the present tenants would be a national disaster. In the first place, however, it must be borne in mind that agriculture has steadily progressed in spite of a series of prophecies of impending ruin during several centuries, especially the present; and secondly, that it would be for the interest of the landlords, in the i See infra. Bk. II., Oh. XIV., Appendix. 318 PRINCIPLES OF POLITICAL ECONOMY. prospect of such a calamity, to make reductions volun- tarily ; the recent reductions in Great Britain certainly evinced a kindly feeling, but they also evinced a sound understanding. It may be added, that if British agri- culture were in real danger of ruin, the total abolition of rents would do little to prevent it; and the argument under review, if pushed to its logical extreme, must lead to protection a far simpler remedy. 4. Compensation for Improvements under the Free Trade System. The general principle of the French law as regards improvements, is that a tenant, on leaving the farm, should give it up in exactly the same state in which he received it, apart, of course, from any voluntary agree- ment to the contrary. Accordingly, he has the right to remove anything that he can e.g., buildings consistently with this condition, and conversely, the land-owner can compel him, so far as possible, to remove anything that he pleases. If, however, the landlord elects to retain the im- provements, he can do so by giving the original cost, with- out any regard to a subsequent rise in value. The obvious effect of this rule is to prevent the tenant making any serious changes without the consent of the landlord. The idea is, that the land is let for a limited term for a definite purpose, and that if the tenant knowingly goes beyond this, he has no claim. At the same time, the land-owner cannot (as in the case of fixtures in England), so to speak, fine the tenant by forfeiture ; the case is treated as one of separating two kinds of property that have become mingled; the tenant obtains the original cost, but any rise in value is credited to the land. The same principle is applied in the case of deterioration or dilapidation by the tenant. He is bound to treat the land according to the rules of good husbandry, and to leave buildings, fences, etc., in as good condition as they were on entry. In Ireland, and in Great Britain to a less degree, legis- lation has gone much further in the interest of the tenant, and its principles deserve careful attention. DISTRIBUTION. 319 5. Tenant Right and Free Sale. It is a difficult task to compress into a single section the principles of the re- cent revolution in Irish land tenures, but for the purpose in hand it is best to avoid details. In Ulster the custom had prevailed for a long time of the tenant making all the improvements, and upon this custom there had grown up the right of selling them to the incoming tenant. In other parts of Ireland it was maintained that the custom had prevailed without the corresponding right, and that the land-owner, by raising the rent, practically robbed the tenant of his improvements. The hardship was aggra- vated by the practice of absenteeism. 1 The first step taken in the way of reform (1860) was to abolish every remnant of the old feudal law, and to reduce the relation of land- lord and tenant to one of contract, as in the French sys- tem. It was held, however, that as between the landlord and a majority of the tenants there was not and could not be any real freedom of contract, because the tenants had no other means of livelihood in case of eviction, and must ^submit to any terms. Many encumbered estates were sold (under special provisions in a very simple way) to capital- ists, who bought them purely as investments to yield money. The consequence, it was said, was an increase in rack- renting, and still greater confiscation of improvements. The threat of eviction was the sword in the balance. Accordingly, an attempt was next made (1870) to give security of tenure. The principle was introduced of com- pensation for disturbance. The landlord might still evict, but the process was made expensive. The principle was novel, and the application 2 showed that it was introduced for indirect and ulterior consequences. At any rate, whether intended or not, the consequences soon appeared. Obviously, the land-owner could not equitably be com- 1 The reader interested in the Irish land question should begin with Arthur Young's Tour in Ireland (1776). 2 Cf. Richey, Ch. IX., for the scale adopted, which was extremely peculiar and illogical. 320 PRINCIPLES OF POLITICAL ECONOMY. pelled to give compensation for disturbance, if the ground of eviction was non-payment of rent ; otherwise, a tenant could practically live rent-free until his arrears were equal to the expense of getting rid of him, 1 and if he were evicted before, he would actually make a profit in addition. But if non-payment of rent destroyed the right of compensation, where was the security of tenure ? What was to prevent the land-owner from raising his rents to the full competi- tive value? To make the compensation for disturbance a reality, it was found necessary to initiate judicial rents ; a beginning was made in the act of 1870, and in 1881 the method was fully developed. At the same time it was discovered or propounded that the law of 1870 had implicitly recog- nised the tenant's right to his improvements, and that no doubt might remain, he was now allowed to sell his right to the highest bidder. It is easy to see that logically free sale involves fair rents. For, as regards the tenant, the value of his right depends partly on the rent that must be paid, and if the landlord could raise the rent as he pleased, he could destroy the tenant's interest. On the other side, if the outgoing tenant was allowed to sell at the highest price, he might obtain what was equitably due to the land- lord, owing to a natural rise in rent. It is, however, equally obvious that( free sale,) as has been well said, kills ( fair rent. }.If there is land-hunger, the value of the tenant right will be pushed by competition to such an extreme, that the interest on the sum, added to the judicial rent, will amount to a rack-rent. This discovery was fortu- nately made in time to prevent the grant of the doubtful boon of free sale to the crofters in Scotland. They ob- tained judicial rents and fixity of tenure, but, in their case, to make the fixity of tenure a reality, it now appears to be intended to give more land, or, as it will probably be called for the sake of alliteration, a fair share of the land. 6. Duration of Tenancy. It has already been implied 1 In the case of small farms the compensation was seven years' rental. DISTRIBUTION. 321 that fixity of tenure is associated with fair rent and free sale, but the point deserves distinct statement. The length of the lease, under the French law, is of course left to contract, and in case of dispute, reference is made to the circumstances of the case. The general principle applied is that it takes a certain time to remove capital and get in crops. Any further fixity of tenure obviously excludes competition, and is unjust to the land-owner and to others who wish to take land. Fixity of tenure neces- sarily involves fair rent; otherwise, the land-owner has simply to raise the rent to secure eviction. 7. Recent Changes in the English and Scottish Laws affecting the Hire of Land. In Great Britain, with the ex- ception of the case of Scottish crofters, the inroads made in freedom of contract in the hire of land have not been so great. A beginning, however, has been made, and already the law requires amendment. According to the Act of 1883, improvements are classified in three groups. In the first, which are supposed to be permanent, e.g., buildings, no compensation is given except by agreement ; in the second, e.g., drains, the landlord is to have the option of making them himself and charging the tenant so much interest, but, in case of refusal, the tenant may do them and make a claim for compensation ; in the third, e.g., manures, com- pensation is compulsory. The general principle appears to be that land is supposed to be let bona fide for agricultural purposes, and that, in order to treat the land according to the modern rules of good husbandry, it is absolutely neces- sary to fix in or on the soil certain forms of capital. The more permanent forms are naturally (and by custom) pro- vided by the land-owner, but those of a less durable char- acter are furnished by the tenant, and it is considered only just that the tenant should secure compensation for such as are unexhausted on the termination of the lease. The justice of the case is supported on the purely economic ground, that if compensation is not given, the tenant, towards the end of his lease, will try to extract the value 322 PRINCIPLES OF POLITICAL ECONOMY. from the land to the detriment of the land-owner. Under the old system of a nineteen years' lease, it was said that six years were required to get the land into condition by putting capital into it, during seven years the tenant treated the land as if he loved it, and the last six years were occupied in taking the capital out that was put in in the first six. In a former work 1 1 advocated the extension of the principle of compulsory compensation, to any im- provements that did not change the character of the hold- ing. The working, however, of the recent act has been so unsatisfactory that I am inclined to doubt whether any kind of compulsion is desirable. As so often happens, it is in the practical application that the law breaks down. It is extremely difficult to estimate unexhausted improve- ments, and great discrepancies have occurred in the valua- tion of different arbiters. It must be remembered also, as is forcibly argued by the Duke of Argyll, 2 that compensa- tion for improvements will not benefit the tenant so much as is generally supposed, because the privilege itself will have a pecuniary value ; that is to say, a landlord will de- mand, and the tenant can afford to give, a higher rent in proportion. Under the old improving leases, as they were called, the rent was low because ultimately the permanent improvements were to go to the landlord. 8. Conclusion. It may, perhaps, be plausibly main- tained that the provisions of the Agricultural Holdings' Acts which apply to England and Scotland were intended to give effect to the real intentions of the contracting parties. There can be no doubt, however, that the three F's, fair rents, fixity of tenure, free sale of tenant right, and the fourth F, a fair share in the land, are directly opposed to freedom of contract, and the statesman who introduced them did well to send political economy to Saturn. Whether the principles can be justified on other grounds, such as social stability, differences of race, and 1 Tenants' Oain, Ch. X. 2 Commercial Principles applied to Contracts for the Hire of Land. DISTRIBUTION. 323 the like, it is beyond my province to inquire. It is, however, worth pointing out that the logical outcome of the Irish land legislation is to enable the tenants by state credit to purchase their holdings, and it seems unfor- tunate that the simple plan of expropriation was not at once adopted. It is also remarkable that, in spite of the series of boons conferred upon the tenants, the original giver should have thought it necessary, in the interests of security, to grant political independence or autonomy. At the same time, to prevent misapprehension, I should like to record the impression made upon my mind by a visit to Ireland some ten years ago. The country had all the appearance of being under military occupation, and government by force is repugnant to English feeling and tradition. The people, even in the most disturbed dis- tricts, showed not the slightest national animosity ; on the contrary, they were excellent comrades, but any reference to land was certain to evoke some passionate outburst. As with the government, so with the land, something was wrong ; and to give peace and prosperity to Ireland might well seem to be the highest ambition and the most pressing duty of a British statesman. If my criticism of the Irish land legislation seems too severe, it is at any rate not due to any want of sympathy. I may conclude this digression with observing that Adam Smith most strongly advocated the union of Ireland with Great Britain, 1 and he enforced his opinion by reference to the advantages which Scotland had derived from the union with England. 2 1 Wealth of Nations, Bk. V., Ch. III. 2 Since this chapter was written, Mr. Shaw Lefevre has published his work on Agrarian Tenures. He gives a very clear and succinct account of recent land legislation. CHAPTER X. WAGES AND THEORIES OF WAGES. 1. Preliminary Account of Custom and Competition as Affecting Wages. Just as customary tenures of land pre- ceded conventional tenures, so also we may say that cus- tomary wages preceded competition wages. In the early land tenures there were, it is true, always present certain germs of freedom of contract, which eventually destroyed the old organisation ; and similarly, in the determination of wages competition was never altogether absent, and in the course of economic progress it has become the preponderat- ing influence. Even at present, however, in the most advanced industrial societies, wages depend partly upon causes which are more properly classed under custom than under competition. Most economists, in treating of wages, take wages as meaning the price paid for the use of labour, and apply the principles of demand and supply and cost of production as in the case of other commodities that bear a price. "The demand for men," says Adam Smith, 1 "like that for any other commodity, necessarily regulates the production of men " ; and Ricardo, 2 " Labour, like all other things that are purchased and sold, and which may be in- creased or diminished in quantity, has its natural and its market price." Both writers allow for the effects of the habits and customs of the people, each according to his usual style of procedure ; Ricardo, in a sentence and a foot- note that are generally overlooked, and Adam Smith, in a chapter 3 on economic history that has been reproduced in 1 Bk. I., Ch. VIII. 2 Principles, Ch. V. 3 B k. I., Ch. X., Pt. II. 324 ng on 1, only/ Lifying) DISTRIBUTION. 325 whole or in part in all the text-books. Later writers have also pointed out important differences between man and other commodities, but in general they have considered these differences only in so far as they modify the action of demand and supply ; the idea of exchange value or price is still fundamental. In the design of the present work, however, this mode of procedure is unsuitable, and instead of looking on custom as modifying competition I shall, first of all, consider competition as part of the forces modifyii custom. In tracing historically the growth of the power of competition the advantage of this method is obvious ; it takes its place as one branch of the inquiry into the progress of society from status to contract. In such extreme cases as slavery and serfdom competition is plainly an inappropriate conception even as a guiding hypothesis, and in a modern industrial system there are many important influences affecting wages which are the results of the cumulative effects 1 of past conditions. In the first place, however, it will be necessary to give a careful analysis of wages, and to point out the variable elements on which wages depend. Some of these elements, we shall find, easily fall under the sway of custom, whilst others are more liable to be determined by competition. It will also be necessary, secondly, to indicate broadly the laws by which wages are governed under a system of industrial competition and freedom, before proceeding to the historical development. The mode of procedure is that already adopted in reference to property in general and land in particular. 2. Wages as the Real Reward for a Quantity of Labour. Waives, like labour, may be regarded from two points of view, which, to adopt the phraseology formerly 2 employed, may be called subjective and objective, respectively. The words, it is true, are reminiscent rather of modern phi- losophy than of ancient custom, but they are useful ab- i Cf. Marshall's Principle*, Bk. VI., Ch. IX. 2 Bk. I.. Ch. V. 326 PRINCIPLES OF POLITICAL ECONOMY. breviations for the purpose in hand ; and the distinction implied is always of fundamental importance. We may first consider wages as the reward for laying down so much ease and happiness (as Adam Smith phrases At), or, in modern parlance, as the utility that accrues to /the labourer in return for the disutility of his toil ; that j is to say, we may look on work as involving a certain j quantity of labour in the subjective sense, 1 and wages as furnishing so much happiness and satisfaction in the shape of the conveniences and necessaries of life. If we reckon the reward simply in terms of money, the wages are called nominal; if we go behind the money and consider what it will purchase, and if, further, we take into account all the other desirable things the worker obtains in virtue of his toil, we arrive at the conception of real wages. It is clear, however, that in either sense nominal or real wages is always a correlative term; it implies a certain quantity of labour. In nominal wages, time is generally the only element considered on the other side, and we describe wages as so much money per hour, day, week, or year. If other things remained the same, this would be sufficient for purposes of comparison; but in general, to estimate real wages we must go much further both in respect to wages and quantity of labour. As regards quantity of labour, even time itself cannot be taken as uniform in its effects ; the toil of the first hour is very different from the toil of the thirteenth. There are besides the other elements already 2 described in detail; the intensity of the labour, the preliminary preparation, the various general and special conditions under which the work is done, mental, moral, and physical, and the effects on the duration of life. In estimating the real wages 3 that correspond to a certain amount of nominal wages, we have to consider : 1 The elements involved have been examined in Bk. I., Ch. V. 2 Bk. I., Ch. V., 3. 3 See especially Walker's Wages Question, p. 12. sq. DISTRIBUTION. 327 I. Variations in the purchasing power of money. These variations may be due to general causes l which ultimately result in an alteration of the general level of prices. It is the period of transition that is of practical importance in the case of labour. Variations of this kind may be caused \)y a debasement of the currency, and there can be little doubt that wages do not readily rise in proportion to the debasement. Rogers has described the debasement of the currency under the Tudors as one of the principal causes of the subsequent degradation of labour over a long period; and Macaulay has given a graphic account of the suffer- ings of the labouring classes before the recoinage of 1695. Similarly, the issues of inconvertible notes in excess have frequently caused a disturbance in real wages. On the other hand, it is probable in some cases that a rise in prices, due to great discoveries 2 of the precious metals may give such a stimulus to trade and industry as to cause a rise in real wages. Apart from these general variations we must consider also variations in local prices, and in making any estimate of the real value of nominal wages we must have regard especially to the principal items of expenditure 3 in the class of labour under review. II. Varieties in the form of payment require careful at- ; tention. Sometimes the payment is only partly in money, ; especially in agriculture. In many parts of Scotland the labourers still receive meal, peats, potatoes, etc. ; often there are cottages and allotments, and sometimes a right of grazing for so much stock. In former times the use of a certain amount of land was the most common form of wages ; it is, in fact, the correlative form of labour rent. III. Opportunities for extra earnings are sometimes of 1 The causes are examined in Bk. III. The variations due to them are here only noted for completeness of enumeration. 2 See Effects of discoveries of the Precious Metals, in my book, " Money and Monetary Problems." 8 Now often spoken of as Working-class Budgets. 328 PKINCIPLES OF POLITICAL ECONOMY. great importance, especially if we take as the wage-earning unit the family and not the individual. At the present time, in Northumberland, a "hind" (i.e., agricultural la- bourer) is more valued if he has a large working family and the family earnings are relatively large. IV. Regularity of employment must always be taken into account. One of the most frequent errors is to assume constancy of employment when the reverse is the case, and to convert hourly, daily, or weekly wages into yearly wages by a process of simple multiplication. V. Liabilities for extra work on various occasions are sometimes of importance, especially in cases in which the work done consists in services rendered. Thus, in attempting to estimate real wages, we have to consider all the various discomforts (and occasional com- forts) involved in the quantity of labour as well as all the conveniences which the nominal wages will purchase, and tall the supplements in kind. 3. Wages as Payment for Work done. From the objec- tive standpoint, we have to consider wages as payment made for a certain amount of work, e.g., raising so many foot-pounds, or rendering so much service. The quantity of labour (subjective) is now of importance only indirectly as an obstacle to be overcome, or as affecting the efficiency of labour. To the employer the vital economic considera- tion is not what the labourer feels, but what he does ; and, again, not what the labourer gets in real reward, but what his work costs. Efficiency of labour takes the place of quantity of labour as fundamental, and real cost the place of real wages. The causes affecting the efficiency have already 1 been examined: qualities of race (mental and physical), the supply of food and other necessaries, sani- tary conditions, intellectual and moral activities of vari- ous kinds, and, finally, the elements embraced in division of labour 2 and the organisation of industry. As regards the real cost of labour, we must take into i Bk. I., Ch. V., 4. 2 Bk. I., Ch. VII. DISTRIBUTION. 329 account not only the money paid, but everything which involves any sacrifice on the part of the employer ; in brief, the various elements noticed in the last section as affect- ing the real reward must be taken into account conversely as influencing the real cost. The amount of work done may be measured 1 in different ways : (1) Simply by time. In this case, however, if the agreement is voluntary, there is always a tacit or expressed condition that so much work is done, measured by some other standard ; and if the labour is forced, punishment of some kind is used to secure the same end. (2) In some cases a definite task is set to be done in a specified time, e.g., to mow an acre of ^corn in a day. (3) Sometimes | the work is measured by the piece, the time being appar-' ently left to the choice of the worker. Here, however, there is, as before, really a condition implied or expressed that a certain minimum is done in a certain time. Correspond- ing to these modes of measuring work, we have time-wages, task-wages, and piece-wages. It will be seen, on reflection, that the differences depend on an adjustment of emphasis ; domestic servants, for example, almost of necessity, receive time-wages, but unless they do a certain amount of work of a certain quality, they will be dismissed. The variety, however, in the services rendered, makes an exact measure of the work impossible. Again, in task-work or piece- work, the time occupied is often of great importance, and more than proportionately higher wages will be paid if more work is compressed into a given time, e.g., in all operations dependent on the weather. Piece-work done in over- time, that is to say, beyond the normal hours of work, is generally more highly paid. 4. Conflict of Interests between Labourer and Employer. It is to the economic interest of the worker to give a mini- mum quantity of labour for a maximum real reward ; of the employer to obtain a maximum of work at a minimum 1 Cf. Schloss, Methods of Industrial Remuneration. See also Eco- nomic Journal, December, 1892. 330 PRINCIPLES OF POLITICAL ECONOMY. real cost to himself. Thus the elements of conflict are always present, and are generally intensified by prejudice and want of appreciation of the real interests involved. To take the simplest case : the worker naturally wishes to work fewer hours a day for higher wages, whilst his employer wishes for more hours' work and less wages ; the former is apt to forget that wages, after a certain point, must fall if hours are reduced, whilst the latter does not allow enough for the increased efficiency of short hours and good pay. But the simplest case is not a fair sample of the actual complexities of the wages question. There is not one of the elements which go to make up a " quantity of labour," that may not give rise, at any rate, to an apparent conflict of interests ; and this is equally true of the corresponding real wages. When we leave the simple elements of time and money, we may seem to enter the region of vague generalities ; but good and evil of various kinds may be very real, although not capable of exact measurement, and it is certain that the real economic progress (or degra- dation) of the working classes can only be estimated when the various conditions of life and work are taken into account. Between the lowest forms of slavery and the highest types of free labour there are numberless grada- tions. We read of slaves, in ancient times, who were treated by their masters with the utmost respect and even friendship, just as, in modern times, we have instances of nominal freedom with real slavery. It is precisely in the determination of the conditions of work, both general and special, that custom is often of supreme importance. Even when time, money, and quantity of work are fixed by free contract, there are always a number of tacit conditions imposed by custom, as well as others compulsory by law, which, as already explained, may economically be considered as a species of custom. In the conflict of interests between labourer and ein- DISTRIBUTION. 331 ployer, custom, in the broad sense here understood, has sometimes favoured one and sometimes the other. On the whole, however, in tracing the history of progressive societies, competition and freedom of enterprise seem to have continuously diminished the sphere of custom and authority in the determination of work and wages. One of the most important and interesting of economic inquiries is whether, by this process, the condition of the working classes has been ameliorated ; for, if the answer is in the negative, the presumption may be established in favour of a restriction of individual freedom. The difficulty of the question is increased when we observe that custom, in some of its forms, has in reality increased industrial freedom, whilst appearing to fetter it, and that sometimes custom is, as Professor Marshall points out, 1 a disguised form of slowly moving competition. 5. Harmony of Interests of Labourer and Employer. In many cases the economic interests of labourer and em- ployer are only apparently in conflict, the difficulty is for the stronger side to recognise the real harmony. Rogers 2 has observed that every act of the legislature that seems to interfere with the doctrine of laisser-faire, and has stood the test of experience, has been endorsed, because it has added to the general efficiency of labour. The principle involved may be carried further ; there can be little doubt that many institutions, laws, and customs, apparently only designed to diminish the inten- sity of labour, have increased also the work done for the employer. Similarly, a rise in money wages has often resulted in a diminution of the cost of labour, 3 and that cheap labour is dear labour has long ceased to be a para-* 1 Principles, First Edition, p. 14. " Six Centuries, p. 528. 8 The old ideas of Petty, Child, and other writers in the seventeenth and eighteenth centuries was that low wages and high prices of food forced labourers to work at higher pressure, whilst high wages made them lazy. Cf. Breatauo, Arbeitsluhn und Arbeitszeit, Second Edition, p. 2, and Appendix. 332 PRINCIPLES OF POLITICAL ECONOMY. dox. 1 Especially when \ve regard the question from the national standpoint, and over a considerable period, does this real harmony become more apparent. At the same time it must be admitted that the pre-es- tablished harmonies of writers like Bastiat are only tenable with the supplement of an optimistic natural theology. The conflict of interests in some points is as real as the harmony in others. It is true that a general increase in the national productive power tends so far to benefit all classes, and if there is more to distribute, all kinds of income may possibly experience a rise simultaneously. It was a favourite doctrine" with Adam Smith 2 that it is not the actual greatness of national wealth, but its continual increase, which occasions a rise in the wages of labour, and his argument assumes that the incomes of employers being increased, there is more to spend on labour. He also maintained, however, that the most decisive mark of the prosperity of any country is the increase of the num- ber of the inhabitants. The theory of wages, implied rather than expressed in the first position, is at any rate incomplete, and in spite of the second, may be easily turned or twisted into the wages-fund theory, from which Mill made such unfortunate and unsound deductions. But Adam Smith was always as much a historian as a theorist, and he gives important examples 3 of the process that he goes on to explain. But it is clear that though the general increase in wealth may increase all incomes, it may do so very unequally, and, in spite of an average rise, in some cases may be accompanied by a diminution. Thus there is always room for conflict ; profits, rents, and wages may rise together, but a rise in one may also be due to a fall in one or both of the others. More broadly, the general economic condition of all classes may be improved 1 See The Economy of High Wages, by J. Schoenhof, for an excellent collection of modern instances. 2 Bk. I., Ch. VIII. 8 E.g., the growth of the American Colonies is contrasted with the stationary state of China. DISTRIBUTION. 333 at the same time ; it is also possible, however, that one class may benefit at the expense of the rest. 6. The Natural Rate of Wages. The older economists supposed that there was a certain " natural " rate about which " market " wages oscillated, and, in general, they also assumed that this rate was determined under a system of freedom of competition by the cost of producing and maintaining, at a certain standard, a certain number of labourers. 1 Recent economists, however, have objected to the use of the term natural as a question-begging epithet which implies a necessity that does not exist in fact and which may, in idea, be either optimistic or pessimistic, ac- cording to the philosophical bias of the writer. Accord- ingly, they have substituted the colourless term normal. 2 The change, which at first was one of words only, has in process of development been associated with a change of doctrine. This change, in substance, will be examined later on ; at present we only need observe that, instead of confining the term to the results of free competition over a long period, they have extended it so as to embrace the meaning suggested by its etymology ; and normal, as used in political economy, is defined as the adjective corre- sponding to economic law. With this wide meaning, however, it is clear that the temporary fluctuations of market rates may be described as normal, equally with the average rates found by taking considerable periods. We may also speak of the normal values determined by monopolies and combinations, equally with the normal value of free competition. All economic phenomena are subject to laws, if only these laws can be discovered, and in this sense every economic effect is the normal result of certain causes. It might be thought, at first sight, that this indefinite 1 The clearest statement of this doctrine is, perhaps, that of McCul- loch, Principles, Pt. III., Ch. II. (Edition 1843). 2 C/. Marshall's Economics of Industry (Edition 1879), Bk. II., Chs. I. and XIII., with the later treatment of " Normal " in his Principles, p. 84. 334 PRINCIPLES OF POLITICAL ECONOMY. expansion of the term " normal " (or natural) has been un- fortunate, because for a meaning definite and particular we have substituted one that is indefinite and general. But the truth is that the older meaning was only definite be- cause it was false. It really implied that if time were allowed for the full play of competition, the average real wages in particular employments .would conform to the general average of all wages in all employments ; in other words, that the oscillations about a fixed point, or above and below a certain surface, would balance one another. The favourite illustration was the waves and the sea level. It was supposed that the natural level, or the general rate on the average over a long period, could be determined without reference to the temporary and local disturbances of markets. This natural level depended on the standard of comfort, which again, after certain allowances were made, was supposed to be uniform over the whole country con- sidered ; some writers, indeed, allowed that this standard was subject to slow variations, but it was assumed that the supply of labour would always be adjusted to the standard of its day and generation. There were also, it is true, per- manent and natural causes of differences of wages in dif- ferent employments, but having regard to these, all wages might be considered as, in the long run, about equal. McCulloch, as usual, may be taken as representing the ultra-orthodox school. " When," he writes, " the cost of their education, the chances of their success, and the vari- ous disadvantages incident to their professions are taken into account, those who receive the highest wages are not really better paid than those who receive the lowest. The wages earned by the different classes of workmen are equal, not when each individual earns the same number of shillings or of pence in a given time, but when each is paid in proportion to the severity of the labour he has to per- form, to the degree of education and skill that it requires, and to the other causes of variation already specified. So long, indeed, as the principle of competition is allowed to DISTRIBUTION. 335 operate without restraint, or each individual is allowed to employ himself as he pleases, we may be assured that the higgling of the market will adjust the rate of wages in the different employments on the principle now stated, and that they will be, all things considered, nearly equal. If wages in one employment be depressed below the common level, labourers will leave it to go to others, and, if they be raised above that level, labourers will be attracted to it from those departments where wages are lower, until their increased competition has sunk them to the average stand- ard. A period of greater or less duration, according to the peculiar circumstances affecting each employment, is always required to bring about this equalisation. But all inquiries that have the establishment of general principles for their object, either are, or should be, founded on periods of average duration ; and whenever such is the case, we may always, without falling into any material error, assume that the wages earned in different employments are, all things taken into account, about equal." 1 This doctrine of the real equality of wages obviously 1 rests on the foundation of a natural rate of wages, and is \ supposed to be brought about by the action of free com- I petition ; equality means levelling, and the level is a certain standard of comfort that can only change over considerable periods. The fallacy involved in this doctrine in the extreme form is so gross, that it may be exposed by simply looking to the ideas the words stand for. It amounts to saying that a given quantity of labour over an average period tends to obtain the same real reward ; or, in less technical language, that all kinds of labourers, taking one thing with another, obtain an equal amount of happiness as the result of their toil ; that freedom of competition tends, in the long run, to give the same balance of agreeable feel- ings to all classes of workers, from the lowest to the highest. 1 McCulloch, op. cit., p. :J27. 336 PRINCIPLES OF POLITICAL ECONOMY. If, however, wages were equal from this subjective standpoint, they could not also be equal from the objective standpoint, unless we also assume that all labour is equally efficient, and that the products of equal " quantities of labour " (i.e., disagreeable feelings) always sell at the same price. But it is quite clear that no such simple harmony exists. In the same line of employment, competition tends to proportion wages to the efficiency of the worker, or to the quantity of work done; and wages in different employ- ments, as will be shown later on, depend on a number of causes of which the feelings of the workers are only one. At the same time, there is an element of truth in the theory : under the system of industrial competition, labour tends to flow into those occupations in which " wages are above the common level," and conversely. It must always be remembered that the average child may be trained to any ordinary employment or profession ; the choice de- pends in general not on the special aptitudes of the child, but on the means and circumstances of the parent. But it is one thing to say that any rates above or below the level are unstable, so far as certain forces are concerned, and quite another to say that the final result of this instability must be equality. If the economic conditions of a society are subject to constant change, certain causes may have failed to produce their full effect before other causes come into play. 7. The Normal Rate of General Wages. Are we then to say that the normal rate of general wages is practically an unmeaning expression, 1 and that " normal " only implies certain laws that cannot be discovered, and " general " an average that cannot be struck? By no means ; the expres- sion has a very real meaning, and some progress has been made towards the solution of the corresponding problem. It is no doubt difficult, when we consider the immense variety of " occupations " in any civilised country, and the constant changes which are taking place, to form an ade- 1 Such is the opinion of Mr. Drvas. DISTRIBUTION. 337 quate conception of the general rate of wages. At the same time, however, no one will deny that if sufficient statistics are forthcoming, we can estimate the real prog- ress of the working classes over a given period, or that we can compare their relative positions in different countries. The estimate may be only approximate and the comparison rough, but as far as they go they are real. The difficulties presented are of the same kind as those met with in the determination of the value of money, or the general level of prices, and may be overcome, to some extent, by the same methods. An " index number " may be formed by taking various kinds of labour as fair samples, and the nominal wages first taken may be corrected by a consider- ation of the elements in the real wages to which they cor- respond. Care must be taken, however, that the quantity I and quality of labour compared at different times l and ' places are the same, just as in the case of commodities similar precautions are necessary. In a work of this kind, the business of which is to unfold principles, nothing ought to be taken for granted on the score of familiarity. Accordingly I may observe that the adoption of "index numbers," or any other method of striking an average by taking samples, neces- sarily assumes that there are certain general causes and conditions operating upon all the class from which the samples are taken. If this assumption is not made we can never pass from the samples to the class. We can- not, for example, calculate the average height of the people of a country by taking samples of the heights of the houses and chimneys. 2 Similarly we cannot argue because the prices of 22 commodities have fallen, that the prices of 22,000 other commodities have also fallen, unless we assume that movements in prices are due, in 1 The difficulties are well set forth and good illustrations are given by Cunningham, Vol. II., Appendix 1. 2 We might do so, however, if we made the assumption constantly implied in GnUircr''s Travels. 338 PRINCIPLES OF POLITICAL ECONOMY. part at least, to general causes. We must, if the infer- ence is to be at all accurate, go farther than this and assume that in the 22 articles the causes affecting the relative prices have, on the whole, balanced one another, and thus left the movement due to general causes open to measurement. 1 To resume the main argument: however difficult it may be to measure the general rate of wages in the same country at different times, or in different countries at the same time, there is no doubt that we can distinguish between the causes that affect wages generally and those that affect some particular kind. The distinction was drawn and developed by Adam Smith, and has been adopted by all subsequent writers. Where the conflict of opinion arises is as to the nature and number of the gen- eral and special causes respectively. In most economic treatises since Ricardo, by a " country " or " nation " is understood an area or population through- out which industrial competition may be considered as the 1 If it be assumed that mere changes in currency cannot ultimately disturb relative values, it follows that after time has been given for re- adjustment, such changes must have operated uniformly. If, then, a number of commodities be selected, the relative values of which have remained comparatively steady (that is to say, which have not suffered any considerable change in the conditions of production or demand), the movement in prices in these commodities must be ascribed to causes of a general kind. Hitherto, so far as I know, no one has attempted to select commodities with this principle definitely in view. " The only mode of eliminating these fluctuations," says Jevons, Currency and Finance, p. 26, "is to render our inquiry not more exclusive but more inclusive." The assumption is that the variations of some will compensate those of others. If the surface of a lake or reservoir were still, the fall or rise during any period might plainly be measured at any point. If there were great waves and the measure were taken from a boat, an average of soundings must be made to determine the rise or fall in the depth of the water. Similarly the index numbers of particular commodities will furnish a measure of any general alteration in the height of prices. If relative values remained absolutely steady a movement in the price of any single commodity would measure the movement of the whole ; but if relative values change a compensatory method must be adopted. DISTRIBUTION. 339 principal economic force in the distribution of wealth, and in which laws and customs are supposed to have compara- tively little effect. Thus Mill: "Competition must be regarded in the present state of society as the principal regulator of wages and custom or individual character only as a modifying circumstance, and that in a compara- tively slight degree." * As already stated, however, in the present work, this view will be adopted as provisional only, in order to bring out by contrast the earlier stages of development. The theory of wages, then, may be divided into two parts, giving answers to two questions : 1. What are the causes which determine the general rate of wages? 2. Why are wages in some occupations and at some times and places above or below this general rate? 8. The Wages-Fund Theory. With regard to the first question, Adam Smith, as in almost every important eco- nomic theory, gives an answer which combines two views which were subsequently differentiated into antagonism. " The produce of labour constitutes the natural recom- pense or wages of labour," is the opening sentence of his chapter on wages. 2 But then he goes on to say that "this ; original state of things, in which the labourer enjoyed the whole produce of his own labour, could not last beyond the first introduction of the appropriation of land and the accumulation of stock." And he thus arrives at the con- clusion that " the demand for those who live by wages, it is evident, cannot increase, but in proportion to the in- crease of the funds which are destined to the payment of wages." This is the germ of the celebrated wages-fund theory which was carried to an extreme by J. S. Mill and others ; and, although Mill abandoned the theory some time before his death, he was unable to eradicate it from his systematic treatise, and to reduce it to its proper dimen- sions. It is important to observe that in the -hands of iBk.II., Ch. XI., l. 2 In discussing the general rate of wages I have made considerable use of my article " Wages" in the Encyclop. Brit. 340 PRINCIPLES OF POLITICAL ECONOMY. Mill this theory was by no means, as was afterwards main- tained by Professor Cairnes, a mere statement of the prob- lem to be solved. According to Cairnes J the wages-fund theory, as given in Mill's Principles? embraces the follow- ing statements : (1) The wages-fund is a general term used to express the aggregate of all wages at any given time in possession of the labouring population ; (2) the average wage depends on the proportion of this fund to the num- ber of people ; (3) the amount of the fund is determined by the amount of general wealth applied to the direct pur- chase of labour. These propositions Cairnes easily reduces to mere verbal statements, and he then states that the real difficulty is to determine the causes which govern the demand and supply of labour. But the most superficial glance, as well as the most careful survey, will convince the reader of Mill's chapters on wages, that he regarded the theory, not as the statement, but as the solution of the problem. For he applies it directly to the explanation of movements in wages, to the criticism of popular remedies for low wages, and to the discovery of what he considers to be legitimate and possible remedies. In fact, it was principally on account of the application of the theory to concrete facts that it aroused so much opposition, which would have been impossible if it had been a mere state- ment of the problem. The wages-fund theory, as a real attempt to solve the wages question, may be resolved into three proposi- tions, which are very different from these verbal truisms. (1) In any country, at any time, there is a determinate amount of capital unconditionally destined for the pay- ment of labour. This is the wages-fund. (2) There is also a determinate number of labourers who must work independently of the rate of wages, that is, whether the rate is high or low. (3) The wages-fund is distributed amongst the labourers solely by means of competition, 1 Leading Principles of Political Economy. 2 Bk. II., Ch. XL, 1. DISTRIBUTION. 341 masters competing with one another for labour, and labourers with one another for work, and thus the average rate of wages depends on the proportion between wage- capital and population. It follows then, according to this view, that wages can only rise either owing to an increase of capital or a diminution of population, and this accounts for the exaggerated importance attached by Mill to the Malthusian theory of population. It also follows from the theory, that any restraint of competition in one direc- tion can only cause a rise of wages by a corresponding fall in another quarter, and in this form it was the argument most frequently urged against the action of trade unions. It is worth noting, as showing the vital connexion of the theory with Mill's principles, that it is practically the foundation of his propositions on capital in his first book, and is also the basis of the exposition in his fourth book of the effects of the progress of society on the condition of the working-classes. It has often been remarked that, in economics as in other sciences, what eventually assumes the form of the develop- ment of, or supplement to, an old theory, at first appears as if in direct antagonism to it, and there is reason to think that the criticism of the wages-fund theory was carried to an extreme, and that the essential elements of truth, which it contains, were overlooked. In many respects the theory may be regarded as a good first approximation to the complete solution of the problem. The causes which it emphasises too exclusively are after all verce causce, and must always be taken into account. There can be no doubt, for example, that under certain conditions, a rapid increase in the labouring population niav, cause wages to fall, just as a rapid decline may make them rise. The most striking example of a great improvement in the con- dition of the labouring classes in English economic history is found, as already shown, immediately after the occur- rence of the Black Death in the middle of the fourteenth cen- tury. The sudden and extensive thinning of the ranks of 342 PRINCIPLES OF POLITICAL ECONOMY. labour was manifestly the principal cause of the great improvement in the condition of the survivors. Again, as regards the amount of capital competing for labour, the reality of the cause admits of no dispute, at any rate in any modern society. The force of the element is, perhaps, best seen by taking a particular case, and assuming that the general wages-fund of the country is divided into a number of smaller wages-funds. Take, for example, the wages of domestic servants, when the pay- ment of wages is made simply for the service rendered. We may fairly assume that the richer classes of the com- munity practically put aside so much of their revenue for the payment of the wages of their servants. The aggre- gate of these sums is the domestic wages-fund. Now, if owing to any cause, the amount available for this purpose falls off, whilst the number of those seeking that class of employment, remains the same, the natural result would be a fall in wages. It may, of course, happen in this, as in other cases, that the result is not so much a direct fall in the rate of wages, as a diminution of employment but even in this case, if people employ fewer servants, they must do more work. Again, if we were to seek for the reason why the wages of governesses are so low, the essence of the answer would be found in the excessive supply of that kind of labour compared with the funds destined for its support. And similarly, through the whole range of employments in which the labour is employed in perishable services and not in material prod- ucts, the wages-fund theory brings into prominence the principal causes governing the rate of wages, namely, the number of people competing, the amount of the fund com- peted for, and the effectiveness of the competition. This view, also, is in harmony with the general principles of demand and supply. If we regard labour as a commodity and wages as the price paid for it, then we may say that the price will be so adjusted that the quantity demanded will be made equal to the quantity offered at that price, DISTRIBUTION. 343 the agency by which the equation is reached, being com- petition. But when we turn to other facts for the verification of the theory, we easily discover apparent, if not real, contra-> dictions. The case of Ireland, after the potato famine, af- fords an instance of a rapidly declining population without any corresponding rise in wages, whilst, in new countries, we often find a very rapid increase of population accom- panied by an increase in wages. In a similar manner, we find that the capital of a country may increase rapidly without wages rising in proportion as, for example, seems to have been the case in England, after the great mechanical improvements at the end of last century, up to the repeal of the Corn Laws, whilst in new countries, where wages are highest, there are generally complaints of the scarcity of capital. But, perhaps, the most striking conflict of the theory with facts, is found in the periodical inflations and depressions of trade. After a commercial crisis, when the shock is over and the necessary liquidation has taken place, we generally find that there is a period during which there is a glut of capital and yet wages are low. The abundance of capital is shown by the low rate of interest, and the difficulty of obtaining remunerative investments. 9. Criticism of the Theory. This apparent failure of the theory, at least partially, makes it necessary to examine the propositions into which it was resolved more care- fully, in order to discover, in the classical economic phrase- ology, the " disturbing causes." As regards the first of these propositions, that there is always a certain amount of capital destined for the employment of labour, it is plain, that this destination is not really unconditional. In a modern society, whether or not a capitalist will sup- ply capital to labour, depends on the rate of profit expected, and this again depends, proximately, on the course of prices. But the theory, as stated, can only consider profits and prices as acting in an indirect roundabout manner upon 344 PRINCIPLES OF POLITICAL ECONOMY. wages. If profits are high, then more capital can be accu- mulated, and there is a larger wages-fund, and if prices are high, there may be some stimulus to trade, but the effect on real wages is considered to be very small. In fact, Mill writes it down as a popular delusion, that high prices make high wages. And if the high prices are due, purely, to currency causes, the criticism is in the main correct, and in some cases, as was shown above, high prices may mean low real wages. If, however, we turn to the great classes of employments in which the labour is em- bodied in a material product, we find on examination, that wages vary with prices in a real and not merely an illusory sense. Suppose, for example, that, owing to a great in- crease in the foreign demand for our produce, a rise in prices takes place, there will be a corresponding rise in nominal wages, and, in all probability, a rise in real wages. Such was, undoubtedly, the case in Great Britain, on the conclusion of the Franco-German war. On the other hand, if prices fall and profits are low, there will so far be a tendency to contract the employ- ment of labour. At the same time, however, to some ex- tent the capital is applied unconditionally ; in other words, without obtaining what is considered adequate remunera- tion, or even at a positive loss. The existence of a certain amount of fixed capital practically implies the constant employment of a certain amount of labour. Nor is the second proposition perfectly true, namely, that there is always a certain amount of labourers who must work independently of the rate of wages. For the returns of pauperism and other statistics show that there is always a proportion of "floating" labour sometimes employed and sometimes not. Again, although, as Adam Smith says, man is of all baggage the most difficult to be transported, still labour as well as capital may be attracted to foreign fields. The constant succession of strikes shows that in practice the labourers do not at once accept the " natural " market rate. Still, on the whole, this sec- DISTRIBUTION. 345 ond proposition is a much more adequate expression of the truth than the first ; for labour cannot afford to lie idle or to emigrate so easily as capital. The third proposition, that the wages-fund is distributed solely by competition, is also found to conflict with facts. Competition may be held to imply in its positive mean- ing that every individual strives to attain his own economic interests, regardless of the interests of others. But in some cases this end may be attained most effectively by means of combination, as, for example, when a number of people combine to create a practical monopoly. Again, the end may be attained by leaving the control to govern- ment, or by obeying the unwritten rules of long-established custom. But these methods of satisfying the economic instincts are opposed to competition in the usual sense of the term, and certainly as used in reference to labour. Thus, on the negative side, competition implies that the economic interests of the persons concerned are attained neither by combination, nor by law, nor by custom. Again, it is also assumed, in making competition the principal distributing force of the national income, that every person knows what his real interests are, and that there is perfect mobility of labour both from employment to employment, and from place to place. Without these assumptions, the wages-fund would not be evenly dis- tributed according to the quantity of labour. It is, how- ever, obvious, that even in the present industrial system, competition is modified considerably by these disturbing agencies ; and, in fact, the tendency seems to be more and more for combinations of masters on one side, and of men on the other, to take the place of the competition of individuals. 10. Wages considered as paid from the Produce of Labour. The attempted verification of the wages-fund theory leads to so many important modifications, that it is not surprising to find that in recent times the tendency has been to reject it altogether. And thus we arrive at 346 PRINCIPLES OF POLITICAL ECONOMY. the development of Adam Smith's introductory statement, namely, that the produce of labour constitutes the natural recompense or wages of labour. The most important omission of the wages-fund theory is that it fails to take account of the quantity produced and of the price obtained for the product. If we bring in these elements, we find that there are several other causes to be considered besides capital, population, and competition. There are, for ex- ample, the various factors in the efficiency of labour and capital, in the organisation of industry, and in the general condition of trade. To some extent these elements maybe introduced into the old theory ; but, in reality, the point of view is quite different. This is made abundantly clear by considering Mill's treatment of the remedies for low wages. His main contention is that population must be rigidly re- strained in order that the average rate of wages may be kept up ; but, as several American economists have pointed out, in new countries, especially, every increase in the num- ber of labourers may be accompanied by a more than pro- portionate increase in the produce, and thus in the wages of labour. Again, the older view was that capital must be first accumulated in order afterwards to be divided up into wages, as if, apparently, agriculture was the normal type of industry, and the workers must have a store to live on until the new crop was grown and secured. But the produce theory of wages considers that wages are paid continuously out of a continuous product, although in some cases, they may be advanced out of capital or accu- mulated stores. According to this view, wages are paid out of the annual produce of the land, capital, and labour, and not out of the savings of previous years. There is a danger, however, of pushing -this theory to an untenable extreme, and overlooking altogether the function of capi- tal in determining wages ; and the true solution seems to be found in a combination of the "produce" theory with the " fund " theory. An industrial society may be regarded, in the first place, DISTRIBUTION. 347 as a great productive machine turning out a vast variety of products for the consumption of the members of the society. The distribution of these products, so far as it is not modified by other social and moral conditions, depends upon the principle of "reciprocal demand." In a preliminary rough classification, we may make three groups, the owners of land and natural agents, the owners of capital, or reserved products and instruments, and the owners of labour. To obtain the produce requisite even for the necessary wants of the community, a combination of these three groups must take place, and the relative reward obtained by each will vary in general according to the demands of the others for its services. Thus, if capital, both fixed and circulating, is scanty, whilst labour and land are both abundant, the reward of capital will be high relatively to rent and wages. This is well illustrated in the high rate of profits obtained in early societies. According to this view of the question, the aggregate amount paid in wages depends partly on the general pro- ductiveness of all the productive agents, and partly on the relative power of the labourers as compared with the owners of land and capital (the amount taken by Govern- ment and individuals for taxes, charity, etc., being omit- ted). Under a system of perfect industrial competition the general rate of wages would be so adjusted that the demand for labour would be just equal to the supply at that rate. CHAPTER XL RELATIVE WAGES. 1. The Determination of Relative Wages. The deter- mination of the causes of wages in different employments, so far as they depend upon industrial competition, involves the application of the same principles as in the last chap- ter; but the application is much more difficult, because, instead of two great groups of labourers and capitalists, we have a multitude of subdivisions all under the influence of reciprocal demand. Each of these industrial groups, again, consists of employers and employed, and the pro- portional distribution of wages and profits is a matter of conflict. Every group might at first be supposed, like a great monopolist, to try to obtain as much as possible of the general product of the society, which is practically measured in money. But the conflict within the group weakens its collective power in bargaining. At the same time the power is still further weakened by the competi- tion of master with master, and man with man. Thus, the idea of a multitude of struggling monopolistic groups is out of place precisely in proportion as industrial competi- tion is effective. It is fortunate, both for the theory of wages and the progress of civilisation, that it is so ; for, all that we can predicate, with any probability, of a nation of monopolistic castes is that, on the whole, less would be produced at a greater real cost. At the present stage, without anticipating the theory of value, it is possible, on the lines laid down by Adam Smith, to indicate some of the principal causes of differences of wages in different 348 DISTRIBUTION. 349 employments. In the first place, it will be shown that both the minimum that any class of labourers will accept, and the maximum that any class of employers can give, are both subject to variation ; and, secondly, the modes in which industrial competition affects relative wages will be examined. We shall thus be prepared to discuss in the next chapter the modes in which wages were once mainly and are still partially determined by law and custom. 2. The Minimum of Wages that Labour will accept. It may be thought to need no demonstration that the lowest rate of wages that can be permanent in any occu- pation must be sufficient to support the labourers, and to enable them one with another to keep up their numbers. 1 In most countries, however, in which slavery has prevailed, it has been found cheaper to import slaves than to rear them. In most societies, also, in which labour is free, there is a certain class sometimes very considerable in numbers the members of which do not earn even the bare necessaries, and who depend, in part at least, on some form of charity. In the richest countries in the world, at the present day, the margin of able-bodied pauperism fluctuates. When we ascend above these low levels of subsistence, we reach the strata in which the standard of comfort be- comes still more variable from class to class, place to place, and time to time. The standard of comfort operates mainly by affecting the supply of labour through the birth- rate, and its working depends, not so much on the judg- ment of individuals whether their children will eventually be as well off as themselves, as on a mass of customs and opinions that may or may not be well-founded. In some countries people cannot marry under a certain age or with- out a certain amount of money, and in others where the law is silent, the voice of class sentiment is equally strong. It may well happen, however, that in spite of these restric- tions and ideas the supply of children may be excessive, ' Cf. Adam Smith. Bk. I., Ch. VIII. Ricardo, Ch. V. 350 PRINCIPLES OF POLITICAL ECONOMY. the standard of comfort may fall in the next generation, and the process may be continued indefinitely. It is to be observed that at first sight the standard of comfort seems to operate, as a rule, most strongly in the higher classes of labour, especially amongst the so-called professional classes, that is to say, in these classes it operates most in retarding marriage and diminishing the number of children. But these classes are liable to be increased from above and below under modern conditions, and in former times the same result was achieved through the action of different causes, especially charitable educa- tion. 1 It appears, then, that the standard of comfort is not itself sufficient to determine the minimum of wages, whether in the lower or the higher grades of labour, for this standard is itself variable and elastic, and only oper- ates indirectly and slowly. Masons, shoemakers, and even common labourers, as Adam Smith has shown, have for long periods had a higher minimum wage than curates, and " that unprosperous race of men called men of letters " ; and, in our own day, many artisans habitually receive a higher minimum than teachers and clerks, in spite of the apparently higher standard of comfort of the latter. It is worth recalling the reasons given by Adam Smith 2 to show that the wages of common agricultural labourers in Great Britain in his time were nowhere regulated by the lowest rate " consistent with common humanity." In most cases the reasons apply with still more force at the present time. (a) Summer wages he is referring to agricultural labour are always highest; but especially owing to the cost of fuel, the maintenance of a family is most expensive in winter. (6) Wages do not fluctuate with the price of provisions, and accordingly if the labourers can live in the dear years they have a surplus over the minimum when food is cheap. 1 Cf. Adam Smith, Bk. I., Ch. X., p. 2. 2 Bk. I., Ch. VIII. DISTRIBUTION. 351 (j ohfrfa fl V ^ If, however, the equality of profit-interest in different employments is so imperfect, how can we say that, on the average, profit-interest tends to be equal to the loan-inter- est of the particular time and place ? In a modern indus- trial society, the interest obtained from first-class securities, in which both the risk and the trouble of investment may be neglected, flows on in a constant stream ; the rate varies, it is true, but comparatively slowly. For a long period the yield to consols has varied between very narrow limits, and the same is true of first-class mortgages and the like. Whatever the explanation may be, there is no question as to the fact. Can we affirm that over a similar period there has been present in the profits of the great staple industries of the country a corresponding constant element? On the contrary, do we not rather expect the rate of profit to vary with the periodic inflations and depressions of trade ? and 1 A single day might ruin a great many banks, but the creation of new banks is difficult. 396 PRINCIPLES OF POLITICAL ECONOMY. is it not usual to contrast the uncertainty of profits with the sweet simplicity of the three per cents? 7. The Inter-connection of Profit-interest and Loan- interest. There is, however, undoubtedly a connection between the rate of interest attainable on loans and that element in the profits of industry which is usually looked upon as the pure interest on the capital employed. In the analysis of general wages we saw that we might consider the distribution (between wages and profits) of the joint product of labour and capital as depending ultimately on the reciprocal demand for the services of one another, that is to say, under a system of industrial competition. But the same idea may be expressed by saying that cap- ital is lent to labour, that labour must return it, or its equivalent, to the owners at the end of a certain time, and that something must be paid by way of interest. To the owner of capital it is a matter of indifference whether it is lent to productive or unproductive consumers. And the analogy may be carried much further when, instead of assuming perfect competition, we look at the historical development of industry. Just as in early usury the necessities of the borrower gave undue power to the lender, so, also, in the early relations of labour to capital, the power of the latter was generally excessive. The difficulties that are found in detecting the element of interest in profits, arise from the fact that the other two elements, until recently, were in general inextricably combined with it. The tendency of modern industry, however, is more and more to separate this so-called pure interest from the insurance against risk and the wages of superintendence. The owner of capital is being differen- tiated from the employer of labour, and the former alone receives interest. 8. Insurance against Risk. " In all the different em- ployments of stock," says Adam Smith, "the ordinary rate of profit varies, more or less, with the certainty or uncer- tainty of the returns. ... It always rises, more or less, DISTRIBUTION 397 with the risk. It does not, however, seem to rise in pro- portion to it, so as to compensate it completely. Bank- ruptcies are most frequent in the most hazardous trades." The insufficiency of the compensation is accounted for by the gambling spirit in human nature ; but, making allow- ance for this, we may assume that the effect of industrial competition is, on the whole, to equalise the element of risk in different employments. The development of i surance societies, especially in modern times, has tended! still further to make profits independent of particular risks. But, although the question is simple when we are considering the equality of profits in different industries in any given society, the same difficulty arises as in the case of interest, when we look upon "compensation for risk " as an element in general profits. Just as interest is generally regarded as remuneration \ for abstinence, or for forbearing to consume, so insurance, as a part of gross profits, is supposed to be a reward for under- going the danger of losing the capital. If the security is at all imperfect in the case of a loan, an additional charge is naturally made ; and it may be similarly argued that when capital is lent to labour there is always some risk that the principle with interest will not be returned. Unlike a government, that may pledge its taxes, or a land- owner, who may pledge his land, the labourer, as such, has j nothing to pledge. In former times he pledged his body, I and the creditor, in case of default, sold it alive or used \ it to "bait fish withal," according to his fancy. Under present conditions, whenever money is subscribed for any new industrial undertaking, however promising, in which the only security lies in the success of the undertaking, there is a considerable element of insurance ; and, to some extent, in all industries that use borrowed capital the same influence is felt. Most economists, 1 however, have considered that the element of risk operates still more generally. They em- 1 E.g.. Mill, Bk. II., Ch. XV., 2. 398 PRINCIPLES OF POLITICAL ECONOMY. phasise the importance of security as affecting the accunii> lation of capital, and, accordingly, they argue that if in any society the security of property is endangered, a direct stimulus is given to immediate consumption. The conclu- sion is that people will not save unless tempted by a very high rate of compensation for risk. " The rate of profit." says Mill, with reference to the insecurity under Asiatic governments, " which persons of average dispositions will require to make them forego the immediate enjoyment of what they happen to possess, for the purpose of exposing it and themselves to these perils, must be very considerable." But it by no means follows that the rate of profit will rise in response to the feelings of the capitalist. His feelings may, indeed, diminish the supply if a high rate is not forthcoming ; but demand must also be taken into account. Under a system of official and unofficial robbery and extor- tion there may be very little effectual demand. The desire to borrow may be very strong, but mere desire is not suf- ficient, the will must be backed by ability. It is the game as in the case of a famine. It is said that in Eastern pountries people may be dying by thousands of starvation without any appreciable effect on the price of food, because their demand is not effectual. But, if they cannot buy for present payment, neither can they borrow for future payment. Again, to take a modern instance from highly developed societies, after a commercial crisis there is a general feeling of insecurity on the part of the owners of capital, but instead of a rise in the rate of profit there is a contraction of enterprise ; the field of effectual demand is narrowed. The general conclusion, then, appears to be that insecu- rity checks the accumulation of capital, 1 but it also fetters industry. Taking a broad view, there is less to divide between capital and labour, and, though labour may be compelled to take less, it does not follow that capital will obtain more. And, indeed, it would be against all experi- i See Bk. I., Ch. XI. DISTRIBUTION. 399 ence to maintain that under a system of arbitrary and tyrannical government the general profits of industry must be high on account of the risk. Thus, we again see the danger of relying on a subjective analysis ; even in com- pensation for risk, there is more to be considered than the feelings of the lender. 9. Wages of Superintendence. Adam Smith, in a passage which has been too often overlooked, calls atten- tion to the fluctuation in the rate of profit. 1 " It varies, not only from year to year, but from day to day, and almost from hour to hour." Later on, in maintaining that ordinary profits in the same neighbourhood in different in- dustries are more nearly on an equality than the wages of different forms of labour, he points out that the apparent differences in the profits of different trades is generally a deception, arising from not always distinguishing what ought to be considered as wages from what ought to be considered as profit. It is thus indicated that the principal source of uncertainty and inequality in profit is to be found in the third element, namely, wages of superintend- ence. This position has been developed by recent writers 2 until it has become quite usual to consider the wages of superintendence as the wages given for the exercise of certain business powers. In old established industries which have felt the full force of competition, if allowance is made for interest on capital and for insurance against risk, the part left over as wages of superintendence is com- paratively small. It may, indeed, often vanish entirely, and, yet the industry continue to be carried on for a consider-j able time. 3 This is accounted for by the fact that the onlyl way to obtain interest on the capital sunk in the business, ' and to prevent its deterioration is to go on working. On the other hand, however, especially in new under- takings, the possession, or the command, of a certain 1 Bk. I., Ch. IX. 2 E , g ^ Walker and Marshall. 8 E.IJ.. the Lancashire cotton manufacturers are said to have fallen into this state for several years past. 400 PRINCIPLES OF POLITICAL ECONOMY. amount of capital is a necessary condition of obtaining the opportunity of exercising business power and obtain- ing wages of superintendence. With the development of credit and the democratising, as Bagehot called it, of cap- ital, this restriction on competition becomes less and less, and wages of superintendence tend to conform to other kinds of wages. What is most requisite, is not so much material as personal capital, the result of training and education, but this applies also to other forms of wages ; and, after the long examination already given of wages, both general and relative, it seems unnecessary to notice this element in greater detail. I will only observe that, so far as profits can be reduced to wages, a reconciliation is effected between capital and labour. Most of the crude fallacies of socialism arise from neglecting the higher forms of labour, including that of the management of capital. 10. The Element of Chance in Profits. There is a further element in profits, to which, in general, sufficient attention has not been paid. Led astray by supposed ten- dencies and harmonies, and by appeals to the long run, many economists have eliminated altogether what is, in some instances, the most important element in profits, namely, the reward for good fortune and audacity. It has been supposed that, on the average, in the long run, the risk will, so to speak, just effect its own insurance. In a stable society, with established methods of production, this tendency may be admitted ; but in progressive societies, and with revolutions in industry, the reward may far ex- ceed the risk. The most striking case is afforded by the rapid development of new countries. A speculator who has the good luck (for, in general, there is more luck than skill) to hit upon the site of a future town has simply to sit still. But there are many other instances of Conjunc- tur, as the Germans call it, and they naturally excite a good deal of envy on the part of the less fortunate. In my opinion, this envy is more natural than reasonable. DISTRIBUTION. 401 The possibility of obtaining these occasional large returns has always been one of the greatest incentives to enter- prise ; it has been the principal factor in spreading the Anglo-Saxon race over the world. At the same time, it must be admitted that the artificial monopolies of trusts and syndicates are on a different footing, and, also, that certain kinds of exceptional gain may be a good subject for exceptional taxation. The discussion, however, of these topics must be deferred, and, following Mill's example, I shall also postpone the consideration of the tendency of profits to a minimum. CHAPTER XIV. ECONOMIC RENT. 1. Ambiguity of the Term Rent. " Rent," says Ri- cardo, " is that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil. It is often, however, confounded with the interest and profit of capital, and, in popular language, the term is applied to whatever is annu- ally paid by a farmer to a landlord." l He goes on to observe that the term is used in a still wider sense, as, for example, in the case of the price paid for cutting timber or for ex- tracting minerals, in which it is plain that the price is paid for the commodities, and not for the use of the original and indestructible powers of the soil. And he might have given instances of still wider applications. Thus, as Madox 2 shows, "in ancient times, both in England and France, Ferm signified Rent" and the fee ferme which the towns paid to the king for their privileges was a perpetual rent. The word is still applied to the hire of many other things besides land, and, in French, any one who lives on the in- terest of his capital is a rentier, and rente means revenue. A recent writer, 3 in a very able work, has contended that there is no essential difference between the rent of land and these other species of rents, and has endeavoured to reduce Ricardo's theory to mere verbalism. That the theory calls attention to real causes, and that economic rent is not to be confounded with profits or in- 1 Principles, Ch. II. - Firma Burgi, p. 3. 3 The Duke of Argyll, Unseen Foundations, p. 35. 408 DISTRIBUTION. 403 terest, is best seen from the following consideration : " It is found," says Ricardo, " that the laws which regulate the progress of rent are widely different from those which regulate the progress of profits, and seldom operate in the same direction. In all improved countries, that which is annually paid to the landlord, partaking of both characters,! rent and profit, is sometimes kept stationary by the effects of opposing causes; at other times advances or recedes, as' one or other of these causes preponderates." As regards interest, speaking broadly, in progressive societies the tendency is to fall to a minimum, whilst the rent of land especially of land for building tends to rise. It is not asserted that under all conditions such is the case ; it is sufficient that a fall in the rate of interest pari passu with a rise in rent has often been observed. Stress, also, deserves to be laid on the phrase of Ricardo's to which most exception has been taken, namely, " the origi- nal and indestructible powers of the soil." As so often pointed out already, there are three great agents in pro- duction : Land (typical of nature), Labour, and Capital ; and, corresponding to them, in distribution, we have three classes of revenue: Rent, Wages, and Profits. We - have seen that economically the two latter are necessary condi- tions for the creation and continuance of the respective agents. If labour does not obtain a certain reward, it must perish ; and if capital does not replace itself with some rec- ompense, it will not be accumulated. Ethically, also, it is usual to observe that the labourer is worthy of his hire, and that the capitalist deserves something for his abstinence, risk, and trouble. But, so far as land and the gifts of nature are concerned, in their original state, they are independent of human effort ; no doubt, to yield a revenue they must, in practice, be conjoined with the other two agents, but, logically, they are quite distinct. Economically, the pe- culiarity is that land may yield, for an indefinite period, an increasing income, whilst the owner does nothing ; take, for example, the land on which London is built. At the 404 PRINCIPLES OF POLITICAL ECONOMY. same time there is land that, comparatively, yields only a nominal rent. The ethics of ownership of land, as already explained, 1 is by no means so simple as the ethics of wages, or even of profits. Seeing, then, that land is, in general, the most important item in the inventory of national wealth, and that there is this striking difference between the yield to land and the yield to most other forms of capital, a prima facie case is made out for giving special consideration to the rent of land. It will appear presently that some other forms of revenue are analogous to the rent of agricultural land, as defined by Ricardo, and it is convenient to apply the general term " economic rent " to all those cases where the analogy holds good. In the first place, however, for the sake of simplicity, we may begin with the economic rent of agri- cultural land. 2. The Economic Rent of Agricultural Land in its First Form. In the case of agricultural land, economic rent follows as a consequence from the law of diminishing returns, 2 and, as this law assumes two forms, so also does the theory of rent. The peculiar importance of the law in agriculture arises, in the first place, from the limited quantity and limited productiveness of land. If land were in the class of the free gifts of nature that are unlimited, it would yield no rent. And, historically, both in ancient and modern times, we have examples of land being super- abundant. 3 Thus, to the primitive tribal households, with their annual or frequent shifting of holdings, the land was economically as " free " as the air or the water ; and in new colonies land can generally be obtained freely under the condition of cultivating it. Secondly, it will be remembered that land is not uniform i Cf. Bk. II., Ch. IV. 3 See supra, Bk. I. , Ch. X. The reader may be recommended to refer to this chapter in connection with the present. 8 Cf. the well-known sentence of Tacitus, describing the Germans : " Arva per annos mutant et superest ager." Germcinia, XX. DISTRIBUTION. 405 in quality, and that the superior land is still more limited. As already explained, the superiority varies with the agri- cultural regime ; but, at any particular time and place in general some land, for some reason or other, is considered superior to the rest. Thirdly, at a very early stage land is appropriated 1 ; it may not be held as what would now be considered private property, but it is appropriated, at any rate, to the extent of bearing burdens and to the exclusion of intruders. One of the most ancient of sins was the removal of landmarks, and much of early religion is associated with the posses- sion of land. It follows, then, that if land is not uniform in quality, and if the superior land is not sufficient to support the population, recourse must be had to inferior soils. As soon as this occurs the produce is raised at different costs. The differential advantage of the superior land over the inferior gives rise to economic rent. It makes no differ- ence, logically, whether the land is let or not ; the eco- nomic rent, under these conditions, is always there. It is also plain that it will be just as profitable for a husband- man to pay something for the superior land as to obtain the inferior land rent-free. Accordingly, if the produce is sold for money and the expenses are also reckoned in money, the rent also may be stated in money. We have seen, in this way, how rent arises ; the next point to consider is, why it continues. It is simply be- cause, under the general conditions of demand and sup- ply, the inferior land must be cultivated in order that the supply may meet the demand. The shortness of supply raises the price, and the rise in price renders it profitable to resort to worse land. Accordingly, with demand un- slackened, and the arts of production stationary, this worse land can be profitably cultivated on condition that the price remains high. This is the essential difference. In the typical case of manufactures, shortness of supply would also 1 Cf. the Duke of Argyll, op. cit. 406 PRINCIPLES OF POLITICAL ECONOMY. raise the price, but in this case the supply would event- ually be increased at the same or at a decreasing cost. It is easy to see now how rent is measured. So long as any land gives any exceptional profit, it will yield a rent, and it will also pay to go to inferior land, if there is any. At last, however, the land on the margin of cultivation is reached, the land which at the price current will only yield the ordinary rate of profit, and which no man will cultivate, if he has to pay a rent. The difference between the profits earned on superior land and the minimum rate on the margin measures the economic rent. It must be carefully observed that, in the preceding exposition, no reference has been made to any particular unit of land. The theory is so far independent of the quantity of land. The vital consideration is, in the words of Ricardo, that "rent is always the difference between the produce obtained by the employment of two equal quantities of capital and labour," not from the employ- ment of two equal quantities of land. It follows at once that it is quite possible that all land should yield some rent, that is to say, economic rent in the strict sense. This point was admirably brought out by Adam Smith. It is sometimes argued that good land and bad land are so intermingled that there is always some land that would not pay rent if it were let by itself. But the assumption is always confusing and often er- roneous. Wherever the conditions of demand and pro- duction are such that land yields any exceptional profit, that exceptional profit is rent. The consideration of this point naturally leads up to a statement of the theory of economic rent in its second form. 3. The Theory of Economic Rent in its Second Form. Let us assume now, for the sake of simplicity, that all the land of a country, or industrial area, is uniform in quality and equally advantageously situated. If it is limited in quantity it may still yield a rent, owing to the other form of the law of diminishing returns. The increased demand DISTRIBUTION. 407 for food, with the consequent rise in price, may render it possible to adopt a more intensive form of cultivation. But, as explained in the first book, 1 if the last doses of capital yield the ordinary rate of profit, the previous doses must yield more ; and again, this exceptional profit con- stitutes rent. As before, unless the price remains high, it- will not pay to work in these more expensive modes, there- fore, if the supply is to be forthcoming, the price must be kept up, and consequently the first doses continue to yield rent. In this case, under the assumptions made, all the land yields a rent, and the same rent per acre. This form of the theory of economic rent is not gener- ally so readily grasped as the first form. The difficulty arises from the fact that in practice the separation of the doses of capital does not take place in the clear and dis- tinct manner that the pure theory, especially in some kind of mathematical presentment, assumes. It is, however, none the less true that rent does arise in this way, and every farmer is constantly finding out that some mode of applying capital has reached the marginal limit. Very often farmers make mistakes, and apply capital that does not really yield even the ordinary returns. It follows in this case that, if they are to obtain the ordinary rate on the whole of their capital, to make good the loss on the last portions they must draw upon the gains of the first. But that would be to deprive the landowner of part of his economic rent. Accordingly, it is for the interest of the landowner that the application of capital should not be pushed too far. Of course, if the farmer is content with less than the ordinary rate of profit, he may apply more capital and be able to pay a higher rent in consequence. Such is the case with peasant cultivators, who are content with a moderate return in the form of wages. It is worth observing, also, that if the owner of a large estate happened to be a good farmer and to have plenty of capital, it might pay him better to keep his farms in i Bk. I., Ch. X. 408 PRINCIPLES OF POLITICAL ECONOMY. his own hands. Suppose which was once true that farming profits are 10 per cent, that is to say, that a farmer will not take land unless his total capital employed gives that return. Now, by the theory under review, it is possible that if to a piece of land he applied 5000, it might yield 12 per cent, that is to say, .600. In that case he could pay a rent of 100, namely, the differen- tial 2 per cent beyond the 10 per cent which he regards as a minimum. But it is possible that if he were to apply 10,000, on the whole he would obtain only 10 per cent, and consequently he could pay no rent. The owner of the land, if an equally good farmer, would also, on the first 5000 applied, obtain 12 per cent profit or 600, but if he tried simply to invest the second 5000 on good security, he could not expect more than 4 per cent or 200. Thus, by devoting all his capital to his land, he would obtain 10 per cent on the whole, or 1000 a year in place of 800. This is really a particular case of a general principle. Every trader, at least when trade is good, naturally em- ploys all the capital he can in his own business, because in that he gets a greater return than by lending some of it ; he gets, namely, the difference between profits and inter- est. In fact, one may go further and say that the natural tendency, as noted long ago by Bacon, 1 is for traders to borrow at the ordinary rate, so as to get more of this dif- ference. Hence, a cultivating landowner might, under certain circumstances, advantageously borrow to extend his cultivation. For practical purposes we must remember 2 that, in a country where land is extensively let, the owner, who hap- pens to be a good farmer, may do well to sell his land in order to obtain on the purchase-money the high rate of profit in farming. In general, as Ricardo was careful to point out, we have 1 Essay on Uswy. 2 See above, Bk. II., Ch. VIII. ; Bk. I., Ch. IX. DISTRIBUTION. 409 both forms of economic rent conjoined ; that is to say, pari passu with the recourse to inferior land there is also the adoption of more expensive modes of cultivating the old land. 4. Economic Rent and Monopoly Rent. It has been shown in the last section that all land might yield economic rent, even if the land were uniform in quality and there were no natural differential advantages ; the rent arises from the differential profits of successive doses of capital. For the sake of logical completeness, however, we may go further and say that, even if the conditions of production were such that the returns to every dose of capital applied to land were precisely equal, economic rent might arise. All that is necessary is, that the land should be appropriated, and that the produce should sell so as to . give more than ordinary profits. The competition of the | various owners of land would prevent them from exacting a monopoly rent, 1 but the competition of farmers would secure to them any differential profit obtained from the sale of the produce. It will be observed, however, that in this case also we find the same elements as before ; the land is considered as a gift of nature, but limited in quantity and appropriated ; there is a differential profit ; and this differential profit is, other things remaining the same, permanent. At the same time, economic rent even of this kind, which may be called a simple scarcity rent, and a fortiori other kinds, must be distinguished from monopoly rent. The essence of monopoly, as before observed, is not limitation but absence of competition. If all the land of a country belonged to the same owner, he might exact a charge as a condition precedent to any use of the land. Such a case would arise, for example, if government, in a new country where land was abundant, compelled every settler to pay a certain rent. If, further, it excluded foreign competition, such a rent might rise to 1 See next section. 410 PRINCIPLES OF POLITICAL ECONOMY. a great height. It would in reality partake of the nature of a tax ; and it might in any concrete case be blended with strictly economic rent just as this again is blended with profit rent. If the cultivators paid the whole gross rental with which the land was burdened to government, it would be difficult practically to distinguish the three elements, but theoretically the distinction is clear and important. A similar difficulty arises in connection with other varia- tions of economic rent as will be seen presently. 5. Other Forms of Economic Rent. Next to agricul- tural land, we may notice the rent of building land. Here the purely economic rent must be considered as the differential, price paid for superior advantage of situa- tion. The law again assumes two forms ; recourse may be made to inferior land or the better land may be used for higher buildings. We may assume in a simple state- ment of the theory that the last site occupied and the last story built, are on the margin and pay no economic rent, that is to say that they contribute nothing beyond ordinary profits. As before, also, we shall probably have a blend- ing of economic, with monopoly and profit, rents. What seems to be part of the ground rent pure and simple, may be payment for roads, drainage, etc., or it may be a tax that the occupier cannot transfer. The rent of mines is generally partly of the nature of the economic rent. If the demand for the minerals increases and the price rises, people will resort to worse mines and to more expensive methods. The gross rental of any mine besides the three elements just examined will be partly a payment, as Ricardo pointed out, for the produce itself, and not for the mere use of the mine. A similar element is found in all natural sources that are capable of exhaustion : e.g., forests, fisheries, hunting grounds, mineral springs. So far as they are renewed by nature they yield under cer- tain conditions an economic rental, but so far as the re- newal requires the industry of man, what appears as rent is really profits or wages. DISTRIBUTION. 411 It remains to add, that if land (as typical of natural agents) can be put to alternative uses, the landowner will let it for that purpose which yields the highest net rent. This again will depend on various conditions of demand and supply. Thus under the old laws in England there were oscillations between arable and pasture, and such oscillations must constantly occur to a greater or less extent. If, then, people require land already let for one purpose, e.g., corn, for something different, e.g., to grow tobacco, they must pay at least, the economic rent for- merly yielded. But the more land is used for certain things, the less is left for other things. This is especially true of land the advantages of which are rather of a gen- eral than a special character. Accordingly, as regards any particular product, the necessity of resorting to inferior land is sooner felt. The full consideration of these topics must be deferred until the theory of value has been explained in the next book; as also, the precise connection between rent and price. At present, we are concerned mainly with qualita- tive distinctions, and they are not yet exhausted. 6. Of Analogies to Economic Rent and of Quasi-rent. So far we have confined the term economic rent to cases in which the limitation of the superior source is supposed to be absolute, owing in general, to certain natural quali- ties. But we may get absolute limitation of anything for a certain period, and, in the meantime, some producers may obtain differential profits. Thus suppose that there is suddenly a great increase in the price of some com- modity which requires, for its production in the best and cheapest mode, expensive and durable machinery. It may well happen that until this can be obtained, other inferior modes of production may be carried on, e.g., the use of manual labour in place of machinery. In this case so long as the price remained high, and enough of the bet- ter machinery was not forthcoming, the owners of the machinery in use would obtain differential profits. To 412 PRINCIPLES OF POLITICAL ECONOMY. profits of this kind, Professor Marshall has applied the term quasi-rent, and he has made a very extensive applica- tion of his theory. The question is, whether the resemblances outweigh the differences to such an extent as to justify the use of the term rent in this sense. I am inclined to think they do not, and that even with the constant prefix quasi the new term is misleading. It is true that the analogy was pointed out by Ricardo, and that he, too, speaks of the rent of machinery under certain conditions, 1 and he ought to be considered an authority on the theory that bears his name. But the case he takes is not only hypothetical but inten- tionally the reverse of the truth ; he is illustrating, as he so often does, by contrast. He is trying to show that the rent paid for land cannot be looked on as a surplus yielded by nature like so much manna without any labour. Rent, he affirms, arises not from the generosity, but from the niggardliness of nature. "If the surplus produce which land affords in the form of rent be an advantage, it is de- sirable that every year the machinery newly constructed should be less efficient than the old, as that would un- doubtedly give a greater exchangeable value to the goods manufactured not only by that machinery, but by all the other machinery in the kingdom ; and a rent would be paid to all those who promised the most productive machinery." To bring the matter to an issue it may be well to re- capitulate the conceptions that are fundamental in the economic rent of land in the strict or narrow sense. (1) Rent in this sense is paid for the use of those qualities of land that are not created by labour and capital, and which cannot be increased by human industry in the words of Ricardo the original and indestructible powers of the soil. It was this element Adam Smith had in view when he said that "the rent of land considered as the price paid 1 P. 39, McCulloch's edition. See, also, p. 37 for an application of marginal cost to all valuable things including manufactures. DISTRIBUTION. 413 for the use of land is naturally a monopoly price. It is not at all proportioned to what the landlord may have laid out on the improvement of the land or to what he can afford to take, but to what the farmer can afford to give." ! (2) In the second place, however, we find that the con- ception of differential advantage is equally fundamental. Considered as an instrument of production land is of differ- ent qualities : there are, for example, always the differ- ences of situation. It follows then, that if the worst land in use yields a nominal rent (or no rent) the superior kinds of land yield a substantial surplus. A man apply- ing a certain amount of labour and capital to one piece of land can only just make it pay, whilst if he applies the same amount to another piece of land there is an excess of profits. This is the differential element in economic rent. (3) Although the land itself cannot be increased it may be used to a greater and greater degree. If, owing to an increased demand, there is a rise in the price of its produce, the exceptional profit will lead to an increase in the supply, but the supply can only be obtained at an increasing cost; that is to say, other things remain- ing the same, the law of diminishing return comes into operation. So long, then, as the demand continues the price must remain high enough to compensate for these inferior methods of production. In brief, then, economic rent is paid for something not made by hands ; it is in all cases a differential profit ; and this differential profit, other things remaining the same, is permanent. In quasi-rent, however, as I understand it, the essential condition is that for a time the instruments of production cannot be increased in response to an increase in demand and rise in price, and consequently the possessors of the old instruments obtain for a time a differential profit. 1 Bk. I., Ch. XI. He should have said ' scarcity ' instead of ' monop- oly,' but his meaning is clear. 414 PRINCIPLES OF POLITICAL ECONOMY. Thus, of the three elements in economic rent, only one is present, for the quasi-rent is paid for the work of man and is not permanent ; on the contrary, the supply of the in- struments of production will be increased as fast as possi- ble and the quasi-rent will dwindle in proportion. Pushed to its logical extreme, the doctrine of quasi- rent amounts to saying that the difference between the market price of anything and its normal price is an unsta- ble profit, which it will take a longer or shorter time to redress. The subject will again call for discussion in the theory of value in the next book. In the meantime, I may observe that in the case of land itself, it takes time to ad- just the cultivation, either extensively or intensively to an increased demand : therefore, during this time, more than the normal economic rent will be paid for the natural qualities, and this difference will be a quasi-rent. In this case, at any rate, the advantage of the analogy seems doubtful. On the whole, in my opinion, quasi-rent is a species of Conjunctur profits. To prevent misunderstanding, I must remind the reader that so far my difference with Professor Marshall is mainly verbal, or at most, it is a question of classification and analog}'. Such questions, however, often have important consequences. 7. The Progress of Economic Rent. I propose to take up at a later stage, the consideration of the effects of industrial progress on rent, but as in the preceding sec- tions I have followed, for the purpose of clear exposition, the hypothetical description of Ricardo, a word of criticism and explanation seems necessary. Ricardo, under the influence of his time, assumes that there is a constant tendency for economic rent to rise, owing to the constant increase of population and the resort to inferior lands or more expensive modes of production. That is to say, it is supposed that population first increases, that more is produced at a greater cost and that, therefore, rents rise. We find" that this does actually occur in some cases when DISTRIBUTION. 415 the population is mainly rural and engaged for the most part in agriculture. But first, it must be remarked that such an increase of population is generally against the interest of the landowner, since minute subdivision tends to make rents disappear and to increase poor rates in some form. Secondly, when an increase of population has tended to raise rents, it has generally been an increase of the town population as explained by Adam Smith, in the chapter, entitled : " How the Commerce of Towns con- tributed to the improvement of the country." 1 Thirdly, we find historically, that, in general, it is not the increase of population that makes an extension of the margin in- evitable, but that improvements in cultivation render the increase of population possible. Farmers learn to culti- vate inferior land with advantage and to apply more capi- tal to the better land. That part of the increased rent which is due entirely to improvements, is of course, profit rent, but there may be at the same time, a rise in economic rent, and, in fact, economic rent may be steadily rising, although the price of produce is steadily falling. 2 8. Conclusion. A point has now been reached in the treatment of the laws of the distribution of wealth, at which it becomes necessary to consider in the words of Mill, the instrumentality by which, in civilised societies, that distribution is, for the most part, effected : the ma- chinery of exchange and price. It is true that to some extent, the theory of value has been anticipated, especially in the present chapter, but it has not been made funda- mental. My object has been, instead of assuming simply that exchange is the principal agency in distribution in the highest modern civilisations, to indicate the gradual development in the force of this principle and the gradual suppression and extrusion of other principles. The gen- 1 Bk. IV., Ch. iv. 2 In the same way there might be a rise in ground rents, whilst the gross rental (that is, including the building profit) was falling. The problem, however, is one of value. 416 PRINCIPLES OF POLITICAL ECONOMY. eral conclusion is, that the increasing complexity of the processes of production instead of calling forth increased control on the part of the state, has diminished that control relatively, if not absolutely ; it has made voluntary agree- ment the ruling force of the whole system. The millions of contracts of millions of individuals in the body politic, may be compared to the cells of which the human body is built up, and which perform their functions unobserved and uncontrolled by the reason: the reason may indeed assist in the prevention or cure of disorders to some ex- tent, and so, also, may the state ; but if compulsion is to take the place of freedom, the present industrial system of production must fall to pieces. The position, however, is too important to be passed over with an illustration which may be misleading; in the concluding chapter of this book, I propose to apply the results so far obtained, to test some prominent forms of economic Utopias. DISTRIBUTION. 417 APPENDIX TO CH. XIV. The following is a reprint of Ch. VIII. of my book, Tenant's Gain not Landlord's Loss, written in 1883. THE CAUSES WHICH DETERMINE THE FAIR RENT OF LAND. "The rent of land corresponds to the price of goods, but doubtless was infinitely slower in conforming to economical law, since the impression of a brotherhood in the ownership of land still survived when goods had long since become the subject of individual property. . . . What is sometimes called the feudal feeling has much in common with the old feeling of brotherhood, which forbade hard bargains, though, like much else, it has passed from the collective community to the modern representative of its autocratic chieftain." Village Communities. SIR HENRY S. MAINE. WHATEVER opinion is held concerning the theoretical value of Ricardo's doctrine of Rent, it must, I think, be admitted that it is too abstract to be of practical utility. The rents which should be paid in Great Britain depend on a number of variable causes, which it is impossible to bring in merely as modifications of the law of diminish- ing returns. These causes fall naturally into three groups, according as they affect (a) the amount of produce, (>) the price of that produce, and (c) the expenses of production. (a) Causes affecting the amount of the produce. The recent agri- cultural depression has made abundantly clear that over the period of the average duration of a lease the most important factor in determin- ing the amount of the produce is the state of the seasons, and it seems equally clear that even nineteen years is not sufficiently long to ensure an "average" crop. No one who entered on a lease ten years ago could have foreseen the seasons which were to follow, and but for the natural persistence of good old customs, the lease system would have received its death-blow. Next in importance to the seasons, as affecting the amount of the produce, is the security for the investment of capital by the tenant. Even that extent of security afforded by a nineteen-years' lease has made Scotch farming, in the opinion of the best authorities, the most productive in the world. The advantage of such security is shown as much by the faults as by the merits of the 418 PRINCIPLES OF POLITICAL ECONOMY. lease system. It is well known that as the lease approaches its close the farmer, in the natural and undisguised endeavour to get back as much of his capital as possible, takes so much out of the land that for some years after the yield is considerably reduced. The extraordi- nary improvements effected by peasant proprietors must also be ascribed to the security afforded by ownership. Another cause of primary importance in determining the amount of the produce is the energy and skill of the farmer. 1 Perhaps the best illustration of this is to be found in the fact that large estates farmed under a system of delegated management are not nearly so productive as when let to tenant farmers. There is nothing a large proprietor dislikes so much as having farms thrown on his hands. Again, it has often been asserted that there is at present a good opening for Scotch farmers in the Midlands of England, on farms which have been abandoned by the less skilful Southerner. Agriculture, too, is rapidly becoming more dependent on science and technical training. A farmer, for example, who does not understand the composition of the artificial manures he uses, and who does not know, except by hearsay, the effect of the different ingredients, cannot obtain so much from his land as the man who has carefully studied these matters, and it would be easy to extend the list of scientific requirements. In connection with agricultural skill, " freedom of cropping " ought to be mentioned, taking the term in its widest sense ; for there can be no doubt that in many cases land is less productive than it might be, owing to restric- tions placed on the enterprise of the farmer as regards the kind of crop. The efficiency of the labourers must also operate largely, and it appears from the Report of the Agricultural Commission that farmers have suffered from the deterioration of agricultural labour. This may be easily accounted for by the increasing emigration of the better members of that class, owing to the higher rate of wages and greater chance of success in manufacturing industries. Another illustration is afforded by the slovenly work performed under the old system of poor relief. In some cases production is checked by want of capital on the part of the tenant, and this is one of the principal arguments against the laws of distress and hypothec. It is said that the landlord, knowing himself to be secure, takes a tenant without sufficient capital, and the tenant is unable to borrow, owing to the preferential claim of the landlord. Again, it can hardly be doubted that the want of capital is one of the chief causes of the comparative unproductiveness of Irish agriculture. (6) Causes affecting the price of the produce. The second group of causes determining rent consists of those which affect the prices 1 An Aberdonian, it is said, can pay 30 per cent more rent for his land than the average British farmer conld afford. DISTRIBUTION. 419 obtained for the produce. Changes in price may occur either owing to some change in the standard of value, or to changes in the demand and supply or in the conditions of production, of agricultural com- modities. It is unnecessary at this point to enumerate the various causes which may affect prices generally the rate of production of the precious metals, the economies in their use, the expansion or contraction of trade, changes in the currency of nations, etc. but it may be asserted with some confidence that the course of general prices for the next nineteen years is as uncertain and indeterminate as the course of the seasons. It has been estimated that in England 99 1 per cent of commercial transactions are completed without the intervention of money, and much further economy in the use of bullion seems hardly possible. Yet, at the same time, this gigantic credit system has for its foundation the \ per cent of bullion ; if a few millions were withdrawn from the Bank of England, the whole structure would totter or collapse. Whilst this is the case in England and in the more populous and civilised parts of America, in the Western States, on the other hand, there is an increasing demand for bullion. It is possible that America, if its trade and population increase as rapidly as they have done during this century, may for the future absorb gold as steadily as India does silver. In the sixteenth century English agriculture was seriously affected by the amount of treasure brought from the New World ; the general rise in prices consequent on the increase of the precious metals began with those commodities which were most marketable, and only slowly extended over the articles which did not naturally find their way into the general markets of the country. It is quite possible that the absorp- tion of the precious metals by America and our Colonies may lead to results of a converse kind. If a general fall of prices occurs before the end of the century, the commodities first affected will, no doubt, be manufactures ; but wages tend more and more to follow the course of prices in manufacturing industries, and a general fall in wages will immediately lead to a fall in the price of agricultural luxuries (meat, etc.). If such an event occurs, the farmer obviously cannot at once recoup himself by the diminished expenses of labour. It is sometimes assumed that any cause which affects prices in general makes no difference in relative values, and it may be supposed that the farmer will gain with one hand what he loses with the other. But although the assumption is correct when equilibrium has been attained, the passage from one level of prices to another is, as a matter of fact, accompanied by very great disturbances of relative values. Many more arguments might be brought forward in support of the conten- tion that for nineteen, or even for ten years the course of general prices is indeterminate, and that a change in general prices wHl 420 PRINCIPLES OF POLITICAL ECONOMY. disturb the relative values of agricultural produce; but enough has been said to illustrate the extreme uncertainty of the prices the farmer will obtain, even when we take into account only the causes which affect the value of commodities in general. But this uncertainty becomes still greater when we take into consideration the causes which affect agricultural prices specially. As far as corn is concerned, it may be maintained that its price will for many years be determined by its cost of production in America or our Colonies. The supplies we receive from abroad form such a large proportion of the total amount consumed (about one-half), that any falling-off in the importations would be immediately followed by a rise in price. It will be remembered that on the outbreak of the war between Turkey and Russia the price of the quartern loaf was raised one penny on account of the anticipated check to the Russian trade, and it is note- worthy that, in spite of the great deficiency of the home harvests during the recent depression, the price of corn was not affected, owing to the enormous supplies from America. It may be anticipated that, in spite of the rapid growth of population in the New World and the Colonies, a long period must elapse before the point of diminish- ing return is reached. There are still vast tracts of country to be brought under the plough, and when all the land has been put under cultivation, it has still to be subjected to the serious operation of high farming, in place of the " tickling " practised at present. As soon as high farming becomes profitable, the settlers on the new lands can avail themselves of all the arts of the Old World. There can be but little doubt then that for a considerable period the cost of production abroad will determine the price of corn in this country. But whether this cost of production is likely to rise or fall can hardly be con- jectured. The cost of transport will probably diminish, and the rate of profit may possibly fall ; but, on the other hand, the cost of labour may rise, and, when the virgin soil is exhausted, manures must be used. Again, if America adopts free trade, an enormous stimulus will be given to agriculture, and a still further fall in the price of corn ensue, for free trade may be expected to lower the price of corn in America in the same way as it lowered the price of manufactures in our own country. The prices of meat and dairy produce, in so far as independent of the price of corn, do not seem at present to be quite so much under the influence of foreign competition. Apart from the difficulties of transport the quality of the article has to be considered, and as far as the better qualities are concerned competi- tion is not so much to be feared. Still there can be no doubt that the foreign supply will increase, and it is quite possible that English mutton may follow the example of English wool. It is clear, then, that the kind of crop is an important element in determining rent. DISTRIBUTION. 421 (c) Causes affecting the expenses of production. The third group of causes which operate on rent consists of the factors which enter into the expenses of production. One of the most important is the cost of labour. It may, I think, be anticipated that the rate of agricul- tural wages will for some time continue to rise relatively to other wages. The spread of education will inevitably increase the number of emigrants, and we may expect the best agricultural labourers to go to the Colonies, where their peculiar qualifications are most in request. Hence, probably, labour will both become dearer and less efficient; and the report of the late Commission shows that these effects have already commenced. Immigration to the towns operates as powerfully in the same direc- tion as emigration from the country. It has long been a subject of remark, that the rate of agricultural wages is always higher in the neighbourhood of large towns, and the conjecture may be hazarded, that with increased knowledge and increased facilities of communica- tion, agricultural wages may at no distant date rank higher than the rate in most manufactures. If such an event takes place, no doubt encouragement will be given to substitute machinery, but such ma- chinery will require greater skill in its manipulation, and wages may rise still higher. The other elements of expense involve technical rather than economic considerations, but perhaps the opinion may be expressed that the cost of machinery will tend to fall, and the price of manures to rise. There is, however, still one element affecting rent to be taken into account, which, logically, should be classed with expenses, and that is farmers' profits. Under a system of competition rents, where farming is, like any other business, carried on for profit, the usual rate of profit is as much part of the expenses as the usual rate of wages. If education and increased facilities of communication tend to increase the emigration of labour, still more will they increase the emigration of the farmer and his capital. The number of British farmers who have emigrated during the last ten years is very consid- erable, and would, no doubt, have been greatly increased, but for the system of leases. Landlords cannot expect fanners to go on cultivat- ing their laud if they are to obtain little or no profit. In determining a " fair " rent, then, the rate of profit is an important factor. It follows, from the variety of causes considered, and the number might have been easily increased, that a "fair" rent is a surplus which is uncertain and indeterminate. The popular notion, probably founded on the tradition of customary rents, and in England on the fact that land was until recently generally undervalued, that for every farm there is a certain " natural " rent, which a " practical " man can easily determine from the quality of the soil, the state of the drains, 422 PRINCIPLES OF POLITICAL ECONOMY. etc., must be abandoned. The relative value of two farms, as instru- ments of production, the practical men may, no doubt, readily deter- mine, but the fair letting value, for a long term of years, requires mauy more, and more complex considerations to be taken into account. The practical man certainly shot very wide of the mark ten years ago. The persistence of the notion is very well illustrated by the fact that the proposal to fix rents in Ireland for a term of fifteen years met with very little opposition. It is to be hoped, on political and social grounds, that the Commissioners have left a con- siderable margin in favour of the tenant. As an illustration of the difficulty of determining rent, I give a table from the Appendix to Sir James Caird's Landed Interest, which shows the average rent of cultivated land per acre at three different periods, and some of the principal elements which affect rent. TABLE Showing the Rent of Cultivated Land, the Price of Provisions, the Wages of the Agricultural Labourer, the Bent of Cottages, and the average Produce of Wheat, in three periods, during more than a hundred years in England. 1770. 1850. 1878. s. d. s. d. s. d. Rent of Cultivated Land per acre . . . 13 27 30 Price of Bread per Ib 01 1 01 1 Price of Meat per Ib OQl Oc Price of Butter per Ib Oa In Agricultural Labourer's Wages per week. 1 3 9 7 14 Rent of Labourer's Cottage per week 8 1 5 2 Bushels. Bushels. Bushels. Produce of Wheat per acre in bushels . 23 26$ 28 Now how can the fact that between 1770 and 1878 rent was more than doubled be explained ? The yield per acre has indeed increased, butter contra, the rate of wages has been almost doubled; again, the price of bread is the same, whilst meat and butter have risen to nearly three times their former value. As far as the facts in the table indicate, the causes of the rise in rent appear to be the increased DISTRIBUTION. 423 productiveness of the soil, and the great rise in the price of other kinds of produce than corn. Rut the problem could not be fully solved without bringing in other elements, e.g., the relative amounts of taxation incident on land, the rates of profit current at the two periods, the cost of carriage of materials, and products, etc. We should further have to take into account the course of seasons in the years preceding, and the course of prices. It would have to be con- sidered also, how far in the former period rents were customary, and how fa: in the latter they were really competition rents. And after making all allowances, it would be well to compare the corresponding rise in Belgium, and especially in France, where there has been no increase in population. CHAPTER XV. ECONOMIC HISTORY AND ECONOMIC UTOPIAS. 1. The Reality of Economic History. Economic His- tory is a history of certain kinds of facts, and not of certain kinds of opinions and theories, except in so far as these last serve to account for and explain the facts. The pre- cise limits of its sphere as distinguished from the history of law, religion, art, and morality will vary partly with the mode of treatment adopted, and partly with the period and country under consideration ; just as the treatment of the principles of political economy must be tinged to some extent with the personality of the author and the spirit of his time. As in other forms of history and in other sciences, the evidence is always more or less incomplete, and consequently a description is liable to be corrected and a judgment to be upset when new facts are brought to light, or stronger minds and wider grasp are devoted to the subject. The central position, however, is perfectly clear: economic history deals with the actual conditions of the past. It follows at once, that, although, as in geology, guiding hypotheses are necessary, and sometimes the reasoning is pushed far from the substratum of facts, still there must be a constant and arduous search for fresh evidence. The principal danger is to accept too readily any testimony which appears to be favourable to pre-conceived opinions. This danger receives a very vivid illustration from the numerous examples of the reconstruction of primi- tive societies a priori. If with our present knowledge we turn to some of the histories of this kind written in the 424 DISTRIBUTION. 425 eighteenth century, we discover not only that they are in- complete, but that they are in general the exact opposite of the truth. In this liability to error, economic history is, of course, not peculiar ; primitive religions and languages, to take but t\vo examples, have in our own days been built upon equally imaginary foundations. The so called natural sciences also have suffered in the same way ; geology has been warped by the religion, astronomy by the imagina- tion, and even mathematics by the philosophy 1 of the investigator. Nor must we suppose that the mere recogni- tion of the danger and the attempt to apply a better method is sufficient to secure us from similar errors. The founda- tion of all reasoning is the discovery of differences and resemblances, and the first comparison we naturally make is with our own opinions and desires, and an apparent agreement is readily accepted. Yet, when all is said, and we have humbled ourselves to the earth, the truth stands out that the sciences are progressive ; facts have been added to facts, and theories have grown and decayed ac- cordingly ; and in no case has the advance been more marked in recent times than in the historical sciences that deal with the earlier stages of society. 2. The Ideality of Economic Utopias. If, as shown in the last section, we are liable to reconstruct the past by the simple plan of taking away from, and adding to, the present conditions of society how much more liable are we to this danger where our object is to set up an ideal future. Accordingly it will be found that the usual method of con- structing a Utopia is to magnify what the author approves, and to destroy what he disapproves in our actual social arrangements, the gaps in the structure being filled up and the additions supplied in unison with the central idea. In some famous cases it has long been doubted whether the Utopia was intended as a satire upon contem- poraries or as a guide to posterity. At first sight it might be thought that since Utopias are 1 Take, for example, the mathematical theory of probability. 426 PRINCIPLES OF POLITICAL ECONOMY. made so easily they would present great variety, but it is a truism that the imagination has very limited powers of construction compared with nature ; on the one side, we have a short span of life and a small brain, and on the other eternity and the universe. On the surface, indeed, Utopias seem abundantly diverse, but when we examine them carefully we find many points of agreement. They are naturally vague, indistinct, shadowy, and if reality is sought for by the introduction of fictitious persons, the didactic element destroys the fiction; the princes, magis- trates, and guardians, in general, are less real than Swift's Houhnhymns. It is doubtful if any Utopia has retained its hold on the public beyond its day and generation, that is to say, beyond the time when the satire, conscious or un- conscious, has lost its force through the change of social conditions. An appeal to the lending libraries would give a poor return even for Plato's Republic, and Sir Thomas More's Utopia. If old Utopias are read at all, it is gener- ally as part of the literature, or of the history of philosophy, and not as practical guides to economic reform. 3. Modern Socialism Exposition. It is the boast, however, of modern socialists, that their schemes are due, not to efforts of the imagination, but to the careful study of history and the observation and criticism of actual con- ditions. They base their doctrines on the theory of evolu- tion, and their tone is rather prophetic than didactic, that is to say, they take up the position that in the past and present of social arrangements they can discover certain tendencies which only need time for their full develop- ment into the socialism which they regard as an ideal. Socialism of this kind has already a vast literature, and it is hazardous, and perhaps unfair, to attempt a general de- scription and criticism ; at the same time to select one or two particular writers would be arbitrary and out of har- mony with the proportions of the present work. The brief account that follows must be taken as represent- ing the impressions formed, in the manner of composite DISTRIBUTION. 427 photographs, from a survey of a number of works which are usually described as socialistic, and are certainly modern. In the first place, then, the socialists of the order it is now intended to describe maintain that the development of the modern industrial system has resulted in the con- centration of capital in large masses, with a corresponding increase in the power of capital over labour. Next, they insist that competition leads directly and indirectly to the exploitation and degradation of labour; directly, because the competition of labourers with one another leads them to accept ' necessary ' wages, and indirectly, because the competition of capitalists with one another causes over- production, commercial crises, and general instability of industry. Further, they argue that the inequalities in the distribution of wealth, and the disproportionate rewards given to the various contributors to the social well-being, are due, not simply to the privileges and spoliation of the past, but are a necessary result of the present system the system of capitalistic production is "continuous rob- bery." Accordingly, it would be of no avail to rectify the survivals of past evils, to make, for example, an equal distribution of the various existing forms of wealth, for unless the whole system resting on large capitals- and competition were destroyed, these evils would very soon reappear. The central idea of the proposed reform or revolution is thus to make the state the sole owner of capital that is to say, of land and all the instruments of production and in place of competition to substitute organisation. The transition, it is supposed, will, in the course of time, become comparatively easy, because when production has attained a certain magnitude, all that is necessary will be to appoint official managers instead of competing entrepreneurs. In support of this view, the socialists point to the state regulation of the army and navy, of railways and of education, and to the continuous increase in the industrial functions of government. In 428 PRINCIPLES OF POLITICAL ECONOMY. fact, some recent writers prefer to describe their socialism not as a definite and particular reconstruction of society but as a tendency, which may manifest itself in a multi- tude of forms, towards the increase in the power of the state in the control of industry. 4. Modern Socialism Criticism. The reader of the preceding pages will readily understand that in my view, socialism of this kind is based on a total misconception of history, and sets up an ideal with which I can have no sympathy. The doctrine which Mill regarded as his most important contribution to political economy, namely, that the distribution of wealth depends ultimately on popular opinion and that the various schemes of communism and socialism cannot be truly said to be impracticable, has, in my opinion, been mischievous, both in theory and prac- tice; in theory, because it has caused the great results obtained by the so-called orthodox economists, such as Adam Smith and Ricardo, to be neglected or undervalued, and in practice, because one of the principal supports of individual liberty has been weakened. The younger gen- eration of economists think it is their principal business to invent and justify new modes of governmental interfer- ence, and the secondary and remote effects they look upon as quantities that may be neglected. They take much pleasure in expressing the sentiments and emotions aroused in their minds by industrial conflicts and the contempla- tion of the submerged tenth. They have a child-like faith in the omnipotence of a duly reformed Parliament, in the altruism of the common man, and in the virtue of obedience. On these points, however, I have to confess myself a disciple of Adam Smith, who believed very little in senates, and less in those who profess to trade for the public good and who, in his praises of liberty, has had the singular honour of furnishing mottoes and texts to the literature of Russian anarchists. The general result of a survey of the economic history of progressive societies appears to be, that although cer- DISTRIBUTION. 429 tain kinds of organisation have at first satisfied some real need and done good work, none have shown themselves capable of adaptation to varying circumstances, but on the contrary by keeping to the letter of their rules and taking advantage of their powers, for the selfish purposes of the members, they have become worse than useless. It is hardly too much to say that the great agency of progress has been competition, and the great obstructive the debris of old organisations. This failure of organisation and con- trol from above is so marked, and is seen under such differ- ent circumstances, that it seems natural to seek for some very general explanation, especially if we are to apply the teaching of history to our own times. Socialists and others who are continually calling for fresh functions to be imposed on the sti'.te, or the municipalities, or communities within the state, are liable to make two dis- tinct mistakes regarding the appeal to history. In the first place, they exaggerate the benefits derived from control, whilst for a brief period an institution was vigorous and rational, and they overlook the natural decay ; whilst as regards competition and individual freedom they exagger- ate the evil results and minimise the good. This is the first error an error of fact and historical perspective. The second is to suppose that granting the failure of state interference in the past, circumstances at present are so different, and the ideas of regulation to be applied so much more just and beneficial, that the history of the past has little to teach even in the way of warning. But many organisations in the past certainly did not fail for want of nobility of aim, and the Church, in the mediaeval period, tried to enforce, and so far as law was concerned, did en- force many of the doctrines which it is the aim of the socialists of our day to establish. Especially, as already shown, did the church insist on the dignity, the moral discipline, and the real worth of labour. It refused to allow interest in any shape or form it taught that time as such and dead capital as such had no claim to reward. 430 PRINCIPLES OF POLITICAL ECONOMY. The church, actuated by the same lofty conceptions, struck also at every form of speculation, it aimed at fixing the just price of goods, and at preventing the middleman from reaping where he had not sown. It struck, too, at the extravagance of the rich, and by its agencies immense sums were spent upon the education of children, and relieving the necessities of the poor. The mediaeval church has never received the due reward of praise for its nobleness of purpose ; the evil done has lingered in the memory, but the good has been forgotten. There can, however, be no doubt, that for genuine enthusiasm for humanity, it would be difficult to find the equals of the original founders of the great orders of monks and friars. The heart of the world has recently been stirred by the record of the life of Father Damian ; but we forget that in the Middle Ages every town in England had its lepers, and that one of the greatest orders of friars the Franciscan was especially founded to succour and soothe these miserable outcasts. There is no finer picture in history than the description of the way in which a cultured man, in the fulness of health and youth, ate from the same plate, and shared in every detail the horrible life of the meanest lepers. Most emphatically it was not in nobility pf aim, that the Christian Socialism of the Middle Ages lailed, and our modern religion of humanity will have to Acquire warmer feelings and wider views before it can hope tio arouse in its disciples any resemblance to mediaeval enthusiasm. And yet the mediaeval church was a gigantic failure, and, just as on the religious side, a reformation was needed, the essence of which was the right of individual judgment, so also, on the economic side a similar revolution was inevitable the essence of which also was the freedom of the individual. It is a saddening truth, repeated over and over again in history, that the acquisition of wealth and authority by any society has generally sufficed to make it forget its original duties and to cause to spring DISTRIBUTION. 431 up all those evils of selfishness and inhumanity which it was expressly designed to combat. Such was the fate of the great religious societies and such was the fate of the guilds and industrial organisations. The failure of control in so many forms, and in so many cases with such splendid regulative ideas, must obviously be due to some very general causes. It seems impossible to increase the power for good with- out, at the same time, increasing the opportunity for abus- ing that power. Authority granted for one purpose, endowments and property accumulated for one set of ideas are used superficially and in appearance only, for the original design, whilst in essence, they are used for the selfish aims of the actual representatives for the time being. Industrial control is primarily intended to, check the results of selfish human nature, but it must work by men, and enthusiasm and ruling noble ideas cannot be passed on like wealth and power. It is so easy to strain the letter, and so difficult to keep the spirit of just laws. Again, not only are the agents human and liable to abuse their powers, but they have not they cannot have the knowledge and the foresight to guide the development of a great nation. The only force that can grapple with the infinities of ignorance is the force of freedom with its infinite variations of individual and circumstance. Thus, negatively, authority has failed because it cannot suppress the selfish tendencies, and freedom has succeeded, because instead of aiming at suppression, it has given full scope to the play of individual effort. Competition of individual with individual has done more for the progress of society, than all the authority and organisations which one set of human beings have made others obey. No economist ever stated the truth better than the poet : " The old order changeth, giving place to new, Lest one good custom should corrupt the world." The great economic forces which are implied in competition have not only destroyed such palpable evils as serfdom 432 PRINCIPLES OF POLITICAL ECONOMY. and class distinction, but they have opened up the ways for development, which, with the best of intentions, had been closed by governments and religions. I repeat that I do not mean to assert that governments and societies have no industrial functions, 1 nor did Adam Smith nor any of the great economists who have lauded the benefits of freedom and exposed the weakness of governments. But it is desirable to emphasise most that which is most apt to be forgotten, and in these days, no one is likely to forget that the state and trade-unions and co-operative societies have power for good. The factory acts which protect children against the criminal carelessness and self- ishness of parents and employers, show the beneficial power of the state ; trade-unions have enabled labour, in many cases, to make a just bargain, otherwise impossi- ble, and have trained their members to a sense of new responsibility ; whilst the objection most frequently made to co-operative societies is, that they are not numerous and not large enough. But whilst we allow that certain forms of voluntary or compulsory organisation may be beneficial, we must not forget that freedom of action and freedom of movement are the essential conditions of industrial development. 5. Modern Socialism Special Criticism. It is a com- mon answer with scientific men when challenged to expose the devices of the spiritualists, to say that when the spirits reveal anything of importance they will be prepared to sacrifice the necessary time. The economist might well be excused for adopting a similar attitude towards the protean forms of state socialism, which are manifestly impracticable. There is, however, some advan- tage to be derived from the contrast of these schemes with the present system of society. In the first place, it is clear, that if the state is to control distribution, it must also control production ; it must determine the kinds of occupation, the hours of labour, the localities for work 1 These will be examined in Vol. II., Bk. V. DISTRIBUTION. 433 and residence, and, in brief, must circulate the power of its authority alike through the main arteries and the smallest capillaries of industry. How, under a compli- cated system of division of labour, such a degree of organ- isation could be obtained, seems absolutely inconceivable. The magnitude of the change is perhaps best seen from the usual proposal to abolish the use of money. Let any one try to imagine how the business of a great country is to be carried on without money and prices, how the value to the society of various species of labour is to be esti- mated, and how the relative utilities of consumable com- modities and transient services are to be calculated, and he will soon discover that the abolition of money would logically end in the abolition of division of labour. This prospect throws a strong light on the claims of the social- ists to base their doctrines on the tendencies of history and the actual processes of evolution, for as already shown in detail, the principal characteristic of industrial progress has been the continuous extension of the use of money. In reality, however, socialism is still more vitally opposed to historical development, since it aims at reversing the broadest principle of progress, the continuous substitution, namely, of contract for status. It is equally false in its assumptions as to the present relations of capital and labour; the idea of the tyranny of dead capital over living labour is utterly unreal ; dead capital without liv- ing capital is powerless, and living capital is stored in the brains and hearts of men. The interest pure and simple, apart from wages of superintendence, on the dead capital of the United Kingdom is probably less than one-third of the gross annual income, and most of it is due to labour in the past of a highly specialised kind, which has bene- fited society to a much greater extent. 1 The notion that the modern system has tended to make one very large class of very poor and one very small class of very rich, is 1 Consider, for example, the interest afforded by railways, banks, and improvements in lands and buildings. 434 PRINCIPLES OF POLITICAL ECONOMY. the reverse of the truth. It is in countries in which the principle of competition is carried to the greatest pitch, that the middle class is relatively greatest, and the pro- portion of skilled to the unskilled workmen the highest. Not only, however, does socialism rest upon a false view of past and present conditions, but it sets up an ideal which would dwarf the minds and cripple the energies of mankind. The principle of population would soon assert itself, and because an objection is not new, it does not follow that it is not valid. Above all, the liberty of the individual would be stifled, and with it, self-reliance, inde- pendence, and enterprise. State socialism, if carried out, could only end in state pauperism, and the best critique on the so-called historical socialism is the history of the English Poor Laws. INDEX. ABSOLUTE ownership, 272. Abstinence, 100, 198, 388, 389, 393, 403. Access to mountains, 202, 263. Accumulation: influence of climate on, 11 ; effective desire of, 25 (cf. 205-208); in United Kingdom, 89, Book I. Ch. XII.; scope for, given by capital-basis of private property, 242; stimulus of freedom of bequest, 253, 254; acquisition of a right of separate, 360; effects of rate of in- terest, 393, 394 (cf . 209, 210) ; of se- curity. 998. Acquisition, labour of, 68. (See also Appropriation.) Adoption : in Russian family commu- nity, L'74. Advantage, meaning of term, 138, 141, 142. Ap-nts of production, 33 seq., 200, 229, J-l, 403. Agricultural Holdings Act (1883), 321, m. Agricultural : labourers, what drives them into towns, 120; condition of English, compared with French peas- ant, 145; systems, Book II. Ch. VI.; land and its economic rent, 404-409; produce, causes affecting its amount, 417,418; price, 418-420; expenses of production, 421. Agricultural System, 140. Agriculture, 45 ; Nature's part in, 67 ; importance of, 71 ; effect of exten- | sion of market, 113, Book I. Ch. IX. ; ; law of diminishing return in, 151; i American, 161; English, 168; im- ! provements and inventions in, 170, 1T'_': British, 2(10; and judicial rents, 317, 318 ; apprenticeship in, 363, 364 ; British, 417-123 ; Irish, 41s. Africa, 69, 133; tribes of, 207. Alfred, King, 45. Alienation, freedom of, 293, 294, 305. Allmends of Switzerland, 280. Allowance system, 378. America: agriculture of, 161, 420; de- mand for gold in, 419. American economists, 172, 346. Amsterdam, Bank of, 392. Analytic method, 268. Anarchists, Russian, 428. Anderson, 19. Andrews, Dr., 289. Anglo-Saxons, 291, 292. (See also Saxons.) Anticipation of the future, 243. (See also Discounting the future, and Expectations.) Antiquity, argument from, 251. Appreciation of gold, 215, 419. Apprenticeship: statute of, 124, 360, 361, 366-368; system of, 124, 360- 362, 3(53-364, 370. Appropriation: emphasised in distri- bution, 10; mark of economic utili- ties, 26, 27, 29 ; of natural fruits, 33 ; of ideas, 40, 46; a species of pro- duction, 44, 45; labour of, 93; of land, 40^409. Arabian influence on civilisation, 79. Argyll, Duke of, 45 N, 322, 370 N, 402 N, 405 N. Aristotle, 37, 88, 390. Ashley, Prof., 41 N, 306 N. Asia Minor, (i!>. Asiatic governments, 398. Atkinson, E., 101 x, 211. Austin, L'^-J. Australian, the native, 206. Auxiliary capital, 97; specialisation of, 108; and division of labour, 111, 112, 122, 153, 212. BABBAGK, 108, 122. Bacon: idols of the market-place, 5; " fraternities in evil," 365, 408. Bagehot, 103 x, 124, 125, 209. 435 436 INDEX. Bain, 364 N. Baker, Sir Samuel, 207. Bancroft, 84. Bank of England, 419. Banking organisation, 96, 201, 207, 212. Barter, 64. Bastiat, 13, 14, 103, 109, 198, 332, 388. Beccaria, 236. Belgium, 423. Beneficium, 292. Beutham, 7, 24, 52, 198 N, 202 N, 203, 205, 237 ; on security, 243-245 ; criti- cism of his views on security, 245, 246, 252, 267 N. Bequest, 230, 241, Book II. Ch. III. ; 21)4,305. Beran, 118. Berkshire bread-scale (1795), 377. Bible, the, on usury, 390. Biology and Political Economy, 12. Black Death (1349), 147, 285, 303, 341, 365. Blackstone, 44 N, 236 N, 309. Blood-relationship, 250, 251 ; in Russia, 274; in West Britain and Ireland, 288. Bohm-Bawerk, E. von, 87 N, 88, 103 N, 390. Bonar, Dr., 176, 177 N. Booth, Charles, 189, 190 N. Brassey, Mr., 79. Brentano, L., 124 N, 127 N, 331 N, 352 N, 360 N, 361 N, 362, 365 N, 367 N, 369 N, 381. Brodrick, 305 N. Budget, National, 199. Burton : East African morality, 207. Business management. See Manage- ment, also Entrepreneur. CAIRD, SIR JAMES, 153 N, 157, 163, 422. Cairnes: Political economy a moral science, 10; wages-fund theory, 340. Cannan, E., 152 N, 157 N, 159 N. Canon law, 41, 88. Capital, 30; a requisite of production, 33 seq., 44, 200, 403; historically prior to appropriation of land, 36; living, 37, 38 ; mental and moral, 38, 39 ; growth of, 66, Book I. Ch. VI. ; economy of, 122, 123; concentration of, 122-124, 129-131, 427, 433, 434; and large farms, 142, 143; and size of farms, 147 ; growth of (material), Book I. Ch. XII. ; profit the price paid for use of, 229; an economic basis of private property, 242, 24:5; includes most valuable qualities of land, 258; interest received on, ib. ; in wages-fund theory, 340 seq. ; ad- vantage in bargaining, 390 ; demo- cratic, 400; landowners' interest in, application of, 407, 408 ; relations of labour and, 433. Capitalist, profits dependent on feel- ings of, 388. Capitation tax in Russia, 276. Caste system, 227. Cavour, 274. Cellini, Benvenuto, 47 note 1. Celtic crofters, indolence of, 79. Champion and several, 45, 278. Chance, element of, in profits, 400, 401. (See also Conjunctur.) Checks to population, 184 seq. Child, Sir J., 124, 131, 331 N. Children : employment of, 120 N, 1'24, 360, 370; views on increase of, 178, 182, 183, 187, 188; pauper, 189; obli- gation to support parents, 190, 375. China, 79, 162, 185, 11(5. Chisholm, G. G., 70 N, 116 N, 202 N. Christian Fathers and usury, 390, 391. Christian Socialism: of Middle Ages, 430. Christianity and self-interest, 82. (See also Church.) Church, mediaeval: and the economic basis of ideas, 41-43 ; prohibits inter- est, 87, 226; condemnation of love of gain, 206 ; held a third of English land, 254, 269; and the poor, 373, 374; nobility of aim, 429, 430. Circulating capital, 96, 97. Civilisation, 36, 39, 79; security, con- tract and, 203-205; and inequalities of distribution, 221 ; money the guid- ing thread to its history, 300. Civil law: influence on systems of cultivation, 149, 150. Classification of labour, 108, 109, 122. Clerk Maxwell, 28. Climate, 8; a constituent in national production, 70; affects systems of cultivation, 147. Cloth manufacture in England, origin of, 114, 115. Co-aration, 35. Code, Napoleon, 314. Collaterals and inheritance, 252. Collections for impotent poor, 373 seq. Coloni, 83, 239; and villani, 286. INDEX. 437 Combination : of use, in natural things, 49, 50; in employment of persons, IL'S. 12'.: of labour, KM, 112; modi- fies competition, 345, 351, 357. Comfort, standard of : its influence on population, 190-194, 1!I5; limitation of bequest and, 255; and "natural" rate of wages, 333-335; and mini- mum wages, 349-351. Comforts, taxation of, <>T>. Commendation, practice of, 292. Commercial treaties, object of the earliest, 204. Commodities: consumable, 199, 213, 433; labour treated like other, 324, 325, 342. Commons, peculiar rights over, 273. Communications, means of, improve- ments in, 125, 170, 183, 201. Communism, 428. Companies, joint stock, 131-137 ; regu- lated, 132. Comparative method, 19, 277-229, 230, 236, 273, 279. Compensation : for expropriation, Book II. Ch. IV.; for improvements, 204, 318-323; for risk, 396-399. Competition: relation of political economy to, 14, 233; and custom, Book II. Ch. V. ; in determination of wages, 324 ; modifies custom, 325 ; has diminished the sphere of custom, 331, 333, 335, 33(5, 340 seq.; what it implies, 345; modified by combina- tion, law, and custom, ib., 348, 355, 356, guilds' attempt to restrict, 364 ; and equality of interest, 394, 395; tends to equalise risks, 397 ; and economic rent, 409 ; and degradation of labour, 427 ; the great agency of progress, 429-434. Concentration : of industry, 122-124 : of labour and capital, 129-131; of capital, 427. Conditions of work, as affecting quan- tity of labour, 76; affected by law and custom, 330, 331, 357. Condorcet, 176. Conflict of interests between labourer and employer, 329-331, 332, 333. Con*unctur, 400, 414. (See also Chance.) Consumer's rent, 57-60, 63-65. Consumption, 1, 9, Book I. Ch. III. ; immediate, 90, 398. Consumption-capital, 90, 91, 199, 211, 215. Consuls, their constancy of yield, 395, 396. Contract : movement from status to, 38, 230, 300, 325; socialists would reverse this, 433; freedom of, 230; as a basis of private property, 240- 242; hostility of socialists to, 242, 243; security essential to, 244, 245; a means to an end, 24(i: the true ideal of a trades union, 387. Contracts : security for enforcement of, 203, 204 : state secures fulfilment of, 225; customary land tenures have given way to, 226; time an impor- tant element in, 244; relation of the law to, 247; for the hire of laud, Book II. Ch. IX.; for labour, 357. Conventional land tenure substituted for customary, 312, 324. Co-operation, 104, 10(5, 112; among peasant proprietors, 142, 143, 145, 227 ; very ancient, 288 ; power for good, 432. Coote, 28t! N. Corn : cost of production of, 164 ; causes affecting its price, 419, 420. Corn Laws, 152, 343. Corporations: powers annulled, 226; the ancient family a corporation, 251 ; bequests to, should be limited, 254, 269. Cost of labour, 328-331, 388, 420. Cost of production : and rent, 162, 163 ; absolute, of corn, 164; applied to wages of labour, 324, 333. Cottier, rack-rents in Ireland, 315, 316. Coulanges, De, 280 N. Country, meaning of term, 338, 339. Cournot, 8, 19 N, 103 N. Craft-guilds, 362-365. (See also Guilds.) Credit institutions: a form of im- material wealth, 33; produced by labour, ib.,- its extension increases wealth, 200, 201. Crisis, commercial, 134, 201, 266, 343. Crofters, Scottish, 74, 145, 158, 320. Cultivation of land : intensive or ex- tensive, 151, KM), 161, 165, 166; in common, 240, 273 seq.; in Russian mir, 278, 280, 281; intensive, 407. (See also Improvements.) Currency : debasement of, 327 ; changes in, 419. Custom, 142, 144, 221, 227, 228, 230, 252, 253; and competition, Book II. Ch. V. ; and village communities, Book II. Ch. VI. ; money the prin- 438 INDEX. cipal loosener of, 300, 309; wages depend partly on, 324, 325 ; and con- ditions of work, 330, 356, 417. Customary land tenures, 312; wages, 324. DAMIEN, Father, 430. Darwin compared with Malthus, 177- 179. Deductive method, 18, 19. Deer Forests, 262, 263. Defence v. Opulence, 115, 237. De Foe, 205 N. Degradation of labour, 120, 121, 327, 427. Demand : for commodities, is it demand for labour ? 101-103 ; the mainspring of industry, 102 ; effect of an in- crease on division of labour, 113; and margin of cultivation, 162 ; ex- j pressed by price, ib.; exceptional; conditions of, 167 ; and supply, ad- j justmeut of, 201 ; as conditions of , contract, 242 ; as determining price of labour, 324, 325, 342, 354, 355 ; and \ rent, 405, 406-407, 411 ; effectual, 398 ; reciprocal, 347, 348, 396. Devas, C. S., 51 N, 193, 194 N, 336 N. De Witt, 200. Dexterity and division of labour, 108, 112, 122. Diminishing: return, 108; law of, Book I. Ch. X. ; utility, law of, 54, 61. Disadvantages of division of labour, 117-121. Discounting the future, 205. (See also Anticipation and Expectation.) Disintegration : of family, a feature of economic progress, 251 ; of Russian "great family," 274, 359, 360; of custom in England, 284, 285, 289. Distance economically a species of inferiority, 161. Distress, law of, 418. Distribution : appropriation important in, 10, 26; from economic stand- point, 14 ; laws of, partly of human institution, 17, 220 seq.; what is capital in, 92; large and small farming and, 138, 142 ; and growth of capital, 208, Book II. Ch. I. ; j competition, custom, and, 268-271 ; j development of exchange as chief agency in, 415. (See also Inequali- ties.) Distributive justice, 224. Disturbance, compensation for, 319. Disutility, 8, 53, 56, 61, 74, 75, 320, 388. Division of labour, Book I. Ch. VII. ; tends to production on large scale, 122; implies economy of labour, ib.; involves division of capital, 106, 1^-' ; gives increasing return, 172 ; private property and, 240-244; socialism and, 433. Division of use, 49. Domesday: Book, 35, 296; Studies, 36 N, 282 N ; Survey, 36, 107, 213. Dornoch, 68 N. Dose of capital and labour, 155, 157, 407, 409. Dowell, S., 214 N. Dry bargain, 87, 88, 390. Duration of power to labour, 76, 77. Dynamical forms of law of diminishing and of increasing return, 152, 153, 167. EARNINGS, opportunities for extra, 327, 328. East India Company, 133, 134. Economic: advantages of private property in land, 259-262; bases of private property, Book II. Ch. II. ; conception of wealth, 6 seq.; distri- bution, 231-234; expenditure, _'.;_': evolution, its goal, 289; history, 13, 19, 20, 228, 236; laws, 14-18; man, 12 ; methods, 18-20 ; motives not purely hedonistic, 24 ; nor of lowest rank, 25; phenomena not isolated in reality but capable of separate study, 13, 14, 249, 250, 264, 298; stimulus, freedom of bequest as an, 253; system mediaeval, 114-115, 116-117; utility, 26-31, 32. Economics, elements of, should be taught in elementary schools, 192, 193. Economistes, the French, 67. Economists: American, 172, 346 ; Eng- lish, 3, 14, 172 ; the younger genera- tion of, 428. Economy: of labour and capital, 122, 123; meaning of term. 2:'>2. Eden, Sir F. M., 77, 360 N, 366, 372 N seq. Education, 191-193, 194; endowments for, 254. Edward I., 297. Edward III., 114. Edward VI., 374, 382. Effectual demand, 398. INDEX. 439 Efficiency of labour, 74, 75, 78 seq., 11(5, 156 seq.; affected by distribution, 81, 219, 239; overcrowding and, 263; and real cost, 328, 330, 346, 389. Egypt. 79. Eight hours day, 77. Elasticity: of principle of compensa- tion, 266; of standard of comfort, 191, 195, 349-351. Electricity displacing steam as a mo- tive power, 130. Elizabeth, 134; (Act of 1G01), 372 seq. Ellison, 154 x. Elton, 2!>4x. Emigration : effect on population, 186 ; variations in treatment of, 226; judicial rents and, 31(>, 418, 421. Emphasis, adjustment of, 10, 329. Empirical : skill of small masters, 130 ; of small farmers, 144 ; rules, econo- mics reduced to a collection of, 230. Employment, regularity of, 328. Employments, separation of, 106-108. Employers and employed, relations of, in making contracts, 357, 383. Enclosure Acts, 282. Enclosures, 45, 143 ; absence in Russian mi.: -J7s. Km-in-htpiedia Britannica, 87 x, 253x, 330 ir. England : natural advantages of, 67 ; supremacy of, 79; pre-Roman and present, 93; economic condition of, 120; industrial transformation of, 12."., 12i!: diversion of capital from agriculture to manufactures, 140, 151 ; industrial conditions, since 1770, 153, 154; corn grown since prehistoric times, 155 : changes in methods of cultivation, 1G2; wheat production, 163; parochial educa- tion in, 191 ; prosperity and security, 202; democratic capital, 20!); varia- tions in distribution, 226 : the farmer cultivator, 245: mediaeval church land, 254; competition modified in, 2< !S; rights over commons, 273; village communities, 281-283, 285- L's^; disintegration of customs, 284, 285, 28!); feudalism, 291 seq. ; in 14th century. ."03: laud transfer simpli- fied, :'-07. "09. English: economists. 3. 14. 172, 428; race, 78, 79 : Poor Law, 99, 178, 179, 371-381; political economy and law of diminishing return. 152; progress of manufactures, 153 ; production of wheat, 155, 168; fall in price of wool, 16(5 ; settlements in America, 122 : industry and contract, 238, 272, 279. Entail: law of, 14!), 254; origin of, 295, 305, 309. Enterprise, freedom of, 269; fettered by the mir, 278; has diminished the sphere of custom, 331, 418. Entrepreneur, the, 127, 128, 427. Epicurean principles, 252. Equality: of distribution, 233; doc- trine of wages, 334-336 ; tendency of profits to, 38!), 393-395. Erskiue May, Sir, 133 N. Ethics and political economy, 14 seq., 24, 231, 233, 2:U, 237, 252, 38!), 403. Exchange: value important in, 26; a kind of production, 46, 92, 113; and distribution, 229-231 ; of services, 229, 230; importance of money to, 300, 301 ; principal agent in distribu- tion, 415. Exchangeable value : is attribute of wealth, 6, 8; of labour, 325. (See also Value.) Expectation, 243, 244, 252. (See also Anticipation and Discounting.) Expenses of production, 421. Expropriation, compensation for, Book II. Ch. IV. Extent of market, division of labour limited by, 112, 113. Extractive industries, 45, 168. Evolution : and political economy, 11, 146, 251 ; and socialist doctrines, 426, 433; of the mir, 273 seq. F'S, THE THREE, 322. Facilities for investment, 208, 209. Factories, 122, 124. Factory Acts, 369-371. Factory system : one aspect of great industry system, 125, 126; legisla- tion, 237; and mediaeval building trades, 127 ; and apprenticeship, 361, 370. Fair-rent, 280, 311, 315-318, 319 seq., 417-423. Family : in ancient times the real unit of society, a corporation, 251, 294; in Russia, 274. (See also Disintegra- tion.) Farming, large and small, Book I. Ch. IX. Faucher, Julius, 279N. 440 INDEX. Perm, 402. Fertility of soil, 71. Feudal: law, its remnants abolished in Ireland, 319; system, 269, 273, 275, 276, Book II. Ch. VII. ; obliga- tions gradually abolished, 312. Field, J. D., 279N, 280N. Fielden, 371 N. Fielding, Henry, 376 N. Final utility, 51, 53 seq., 62. (See also Marginal.) Fixed Capital, 96, 97. Fixity of Tenure, 280, 319 seq. Flanders, rack-rent in, 311. Flemings, colonies planted in England, 114. Floating Capital, 97. Food supply : increase of and popula- tion, 180-184, 194, 195 ; accumulation of, 210, 211; nation should avoid cheapest, 196, 352; price of, and wages, 350, 351. Foreign trade : and division of labour, 113, 134; and security, 204. Fourier, 73. Fowle, 372 N. France : peasant proprietors, 143 seq.; subdivision of land, 145, 147; changes in methods of cultivation, 162 ; population of, 181 ; compulsory division of land, 227, 309 ; power of bequest, 254, 255 ; restraint of popu- lation, 255; rent, 423. Franciscan Friars, 430. Frazer, J. G., 270 N. Freedom: maximum, 16, 38,233,255; v. organisation, 428-434 ; of bequest, 252, 253 ; limitations to, 254, 255 ; of alienation, 293, 294; industrial and modern land-ownership, Book II. Ch. VIII. ; growth of, 357 seq., 415, 416. (See also Contract.) Freeholder protected by Magna Charta, 202. Free-labour, displaces slavery and serf- dom, 226. Free sale of tenant right, 319 seq. French land law : its free trade princi- ple, 314, 315 ; and improvements, 318. Fund, savings, 200. GARNIER, Mr., 289N, 306N. Gaskell, Dr., 370 N. Gavel-kind in Kent, 294 N. General level of prices, see Prices. General wages, normal rate of, 336- 339. (See also Wages.) Geological formation, 71. Germany, 303, 311. Giffen, R., 47 note 2, 89, 120N, 210N, 214, 215, 216. Gift inter vivos, a form of contract, L'41 . Gifts of nature : limited and unlimited, 68, 69, 92, 93 ; appropriation and ex- change of, 70; are they capital? 92-94 ; and results of labour, 92, 93. Gilbert's Act (1782), 376. Gilman, N., 83 N. Godwin, 175. Gold, appreciation of, 215, 419. Gomme, 162 N. Goschen, G. J., 40 N. Government: Bentham on, 246 ; inter- ference, relation of Political Econ- omy to, 14 ; reaction in favour of, 16, 224-226, 231, 253; and judical rents, 315-318 ; tends relatively to decrease, 415, 427 seq. Great Britain : relative decrease of agricultural population, 141 ; at- tempt to establish small farms criti- cised, 146; tendency of Acts of Parliament, ib. ; purchase of small farms in, 149, 209, 210, 260, 310. " Great Family " in Russia, 274. Greece, 79, 311, 358. Green, J. R., 203 N. Grenoble, glove industry of, 130. Grierson, 135 N. Gross, Dr., 362 N. Gross: produce, 130-141; profit, 388 seq. ; income, 433. Grote, G., 392 N. Ground rent, 410, 415 N. Guardians of the poor, 376. Guilds : rise and decay of, 11 ; powers annulled and transferred, 226, 227, 269 ; craft, 362-365 ; and trade unions, 386 ; decay of, 431. Gulliver's Travels, 337 N. HABIT, 269, 324. Happiness, maximum, 16, 24, 232, 233. Harmony : of interests of labourer and employer, 331-333; in nature of profits, 388, 389. Hedonistic Calculus, 52. Hedonometer, 53, 62. Held, A., 31 N, 93. Henry VII., 114. Henry VIII. forbids exportation of horses and metals, 115. Hereditary trades in India, 280. Hewins, 366N. INDEX. 441 Hire of land, contracts for, Book II. Ch. IX. Historical method, 19,226-229, 230, 236, L'7:;, 279, 281, .371 seq., 389-3112. History, economic, 111, 20, '-"JS; origins of, 236 ; and economic Utopias, Book II. Ch. XV. Hoblu-s. 2:>. Holland : natural advantages and wealth of, 66, 71 ; pauper colonies of, 84 ; influence of foreign trade on growth of wealth, 200, 209. Hours of labour, 77, 120. Houses, accumulation of capital in, 211. Howell, 361 N, 382 N, 383 N, 385 N, 386. Human element in wealth, 11, 23, 30. Hungary, 245. Hunter, Sir W., 196 N. Hypothec, law of, 418. IOK.VL economic distribution, 231-234. Ideas, production, appropriation, and exchange of, 40-44, 4i. Imagination and economic Utopias, 4 '-'6 seq. Immaterial utilities: are they Capital? !C>, 96, 112 ; localisation of, 117 ; pro- duction on a large scale, 123. Immigration to the towns, 421. Impotent poor, 372 seq. Improvements: in agriculture, 69, 170, 172, 418; in methods of production, lf>2 seq., 155, 156 seq., 170; in means of communication, 170, 172, 421; in land, 258, 260, 261, 311 ; compensa- tion for, 318 seq. Improver, should owner be ? 257, 258. Inappropriate conceptions, 12, 16, 325. Income : and capital, 195) ; various species of, treated as cases of value or price, 229. Income-tax assessments as basis of es- timate of natural wealth, 214, 215. Inconvertible notes, 327. Increasing return, law of, 151, 153, 154, 157, 159, 171-174. Index numbers presuppose the opera- tion of general causes, 337, 338. Individual enterprise, fettered by the Hii'r, 278. (See also Freedom.) Individualism, Socialism and, 24, 408- 4.'U. Inductive method, 19, 174, 175, 177, 178, 184, 185, 221. Industrial: anarchy, 16; revolution, 124, 153; the modern system, r_".t. 201 ; systems, 226, 227 ; freedom and modern land-ownership, Book II. Ch. VIII. ; groups, 348. Industries: protection to native, 114- 116; displacement of, 117. Industry: is limited by Capital, 98- 100; localisation of, 114-117; con- centration of, 122-124: progress of English, 122; contrast between agri- culture and manufactures, 151 ; mas- ter-spring of, 188; security essential, 203 seq.; English, 238; freedom of contract its life-blood, 241 ; incen- tives to, lessened by limitation of power of bequest, 254 ; land not the result of, 256, 257 ; but its most valu- able qualities are, 257. India, 99; trade with, 133; congested areas, 195; village communities, 279, 280, 288 ; usury in, 342. Indians on the St. Lawrence, 205. Inequalities in distribution of wealth, 221, 242, 332; the result of free- dom, 255; and of habit, 269; social- ist view of existing regime, 427. Infanticide may lead to increase of population, 185. "Inferior" land: varies with agricul- tural regime, 161-163; when rent means, 163, 169. Inheritance, 230, 241, Book II. Ch. III., 294; feudal, 295. Insurance : against old age, 193 ; socie- ties, 201 ; rates of, effect of low rate of interest, 210; against risk, 393, 396-399. Intellectual ability and efficiency of labour, 80. Intensive and extensive, see Cultiva- tion. Intensity of labour, 75, 326, 331. Intention of owner, Capital or not, 94. Interdependence of production and dis- tribution, 81 seq., 219, 238. Interest: change in public opinion on, 87, 226 ; effects of rate of, on accu- mulation, 209, 210, 393, 394; nega- tive rate, 211, 392; rate determined by contract, 242; received on all kinds of capital, 258; owner does nothing, ib. ; tends to be separated from wages and profits, ib. ; low after a crisis, 343 ; pure, 389, 396 ; loan interest and usury, 389-392; loan and profit, 392, 393; mini mum rate of, 393, 394 ; in what sense tendency to equality, 394, 395; distinct from 442 INDEX. rent, 403; and profits, 408; and wages of superintendence, 433. Interests : conflict of, between labourer and employer, 329-331, 332, 333 ; har- mony of, 331-333. Intestacy, 251-253, 294. Invention : through division of labour, 109-111 ; increments of, ib., 121 ; fore- cast of future, 173. Ireland: undue sub-division of land, 145; effect of land legislation, 150; congested areas, 195; potato famine, 196 ; land improvement, 260 ; tenant right extended, 261; run-rig system, 273, 312; its logical outcome, 323; Adam Smith and union with Great Britain, 323; agriculture, 418, 422. Italy, 69, 79. JACQUERIE, the, in France (1358), 381, 382. Jamieson, G. Auldjo, 308. Japan, 99. Java, village communities in, 280. Jevons : final and total utility, 7 ; utility a balance of pleasure and pain, 25; calculus of utility, 49, 52 ; Marshall's criticism of, 65; labour painful, 72 y ; state railways, 135 s ; index numbers, 333 y. Jews : London money market traced to, 117; in Russia, 209, 260, 311, 390 N. (See also Usury.) Job, 213. John, King, 301. Johnson, Dr., on primogeniture, 254, 255. Joint products, and law of diminishing returns, 166. Joint-stock banks, 123; companies, 131-137. Judicial rents, 315-318, 320. Jurisprudence: a social science, 12; conceptions of analytical, 223. Just: expectations, 252; price, 430. Justice : interpretation of, 252 ; natural, 256, 263 ; an end in itself, 266. Justices and relief of poor, 376 seq. Justinian, 359. KAIMES, Lord, 129 N. K;il i n. the Swedish traveller, 161 N. Kay, Joseph, 309 v. Keynes, Dr., 20x, 26 N. Kinds of produce. 139, 146, 147, 165 seq., 418, 420. Kleinwachter, 46 N. Knies, 87 N, 88, 89, 91. LABOUR : is it essential to wealth, C, 7 ; M'Culloch's definition of, 8; sub- jective point of view, ib.; quantity of, ib.; disutility, ib. ; a mark of economic utilities, :_'<>, 27, '_'!'; a requisite of production, 33: quantity of, (52; organisation of, 6i>, !'4, 117; nature aids, 67, 68; of occupation, 68, 93, Book I. Ch. V. ; is all capital the result of, , 123, 153; condition of, and small farms, 148; its share of the net produce, 199; free, 226; wages the price paid for use of, 229, o_'4, :;_'."> : as a basis of private property, 238-240: only de- rivative qualities of land the result of, 256, 257; regarded as a commod- ity, 324, 325, 342; wages the real reward of, 325-327 ; real cost of, 328, 329, 331, 388; quantity and condi- tions of, affected by law and cus- tom, 330, 331, 357 ; wages the net re- ward of, 357; relations of employers and employed in contracting for, 357, 383; profits as dependent on cost of, 388, 389, 403. (See also Degradation and Efficiency.) Labourer, modern, the true counter- part of medifeval slave, 258. Labourer's rent, 351. I Labourers, statutes of, 365, 366. Labour-rate, system of outdoor relief, 378. Labour-saving machinery, mental ef- fect of, 120. Laisser-faire, 225, 226. Lambert, 362 N, 363. Land: as agent of production, 33, 200, 229, 234, 403; immediate effect of agricultural improvements, 69; in- cluded in national capital, 93 ; capital value of, ib., 138 seq.; peculiar nature of property in, 141, 142: ad- vantages of large farms as regards, 142; unduly subdivided, 145: and law of, diminishing return, Book I. Ch. V.; private property in, its economic justification, Book II. Ch. IV.; evolution of ownership and oc- cupation in, Book II. Chs. VI., Vlf., VIII., see also Book II. Ch. IV. (Contracts for the Hire of Land) ; economic peculiarities of, 403-405, 409; economic rent of agricultural. 404-409; superior. 405: differential advantage gives rise to rent, ib. ; all INDEX. 443 may yield rent, 40T> ; monopoly of, 409, 410; alternative uses of, 411; rent paid for original qualities of, 41.'!. (See also Cultivators, Im- provements, Tenure, Transfer.) Land-hunger, 315, .".lii. Land-laws, changes in, and the decay of feudalism, :305, :MM;. Land-lord: tenant system, its advan- tages, 259-262, 310 fi-q., 418; French law as to, 314; are they on an equal footing, 315 *'///<. Management: of production, 124, 128; joint-stock, 134, 135; wages of, 389. Mandeville, 105 x. Manor, mediaeval, 68, 69, 107, 275, 276, 282 seq. Manufactures, 66, 67, 124 seq., 151, 153, 154, 172, 211, 379, 380, 450, 456. Manufacturing, wider than factory system, 45* >. Margin of cultivation : recession of, 69 ; land on, 155, 406 ; extension of, 161, 162. Marginal : utility, 51, 53 seq., 55-57, 63 seq.; land, 155; dose, 155, 164; re- turn, 155, 164. Mark, the, 286, 287. Market, extent of, 112, 113. Marriage, 180; early, 182, 185, 193. Marsh, 69 N. Marshall, Prof. Alfred, 25 x, 26 x, 50 N, 63, 85, 94, 95 N, 103 N, 108, 114 N, 129, 155 x, 172, 229 N, 325 x, 331, 333 N, 384 x, 390, 399 N, 411, 414. Marshall's Treatise on Landed Prop- erty (1804), 281. Marx, Karl, 103 x, 105 x, 129, 198, 370, 389 N. Masters and Servants, legislation with respect to, 365-369. Material Capital : methods of estimat- ing its increase, 213-216. Mathematics in Political Economy, 8, 19. Manrer, Von, 286. Mediaeval Period: economic progress in, 107, 108; economic system, 114- 117; custom in, 269; English towns in, 295. Mental: Capital, 38, 39, 95; evils of division of labour, 118-120. Mercantile System, 5. 444 INDEX. Metayer, 89, 203, 239, 303. Methods: of Political Economy, 18-20; of estimating growth of Capital, 213-216. Middle Ages: people governed by cus- tom, 269; effects of primogeniture modified by custom, 294; exclusive- ness of towns, 295 ; Christian Social- ism, 430. Migration, effects of its abandonment in Russia, 276. Military tenures, 291-295. Mill, J. S. : what is wealth, 5, 6 ; value, 8, 10, 17; liberty, 24, 25; economic utility, 29, 51 ; measure of value, 60; labour as measuring utility, 61 ; Nature's part in produc- tion, 67, 77 ; Capital productive, 89, 90, 91, 95, 96-97; four propositions on Capital, 98-103, 100 w, 104, 122 N, 140-141, 142, 151. 152 x, 154, 158, 160, 164, 169, 170; dread of population, 180, 187, 188, 197 ; security, 203, 205, 207 N, 220-222, 223-226, 229-231, 235, 238. 239 ; on inheritance, 250 ; bequest, 251, 252, 255; property in land, 256- 259; prescription, 265; competition and custom, 269, 270; wages fund theory, 332, 339-341, 344, 346. 354, 355; analysis of profits, 388, 389; minimum interest, 393, 395 ; security, 397 N; machinery of distribution, 415 ; effect of his views on distribu- tion, 428. Mineral wealth, 66, 71. Mines, rent of, 410. Minimum : wages, 349 seq. ; tendency of profits to, 389 ; rate of interest, 393*69- Mir, the Russian, 273-279. Mitchell, Sir A., 39 N, 78 N, 110 N, 178 N. Mobility : of labour, 121, 201, 345, 355 ; of distribution, 225. Mohammedan law, 279. Mommsen, 82, 209 N. Monasteries: hospitality of, 41, 42; dissolution of the, 374. Money, 28, 29; measuring growth of wealth, 199, 212, 213; variations iu purchasing power, 327 ; factor in economic progress, 300-305. Monopoly: of regulated companies, 132; of East India Company, 133, 134 ; post-office, 135, 136, 203 ; of land, 315, 316 ; monopoly rent, 409, 410. Monotony of work, 118-120. Montfort, Simon de, 114. Moore's Life of Byron, 369 s. Moral : sciences include Political Economy, 10; individual or social, 12; ideals not economic laws, 14; philosophy, relation of, to Political Economy, 24, 25, 52 x; capital, 38, 39; activities and efficiency of labour, 80, 81 ; restraint, 181 seq. ; reflections of Adam Smith, 231, _'.!_'. Morality, productive power, 39 ; com- mon sense and sovereignty, 25: discussions on, 231; v. Bentham's doctrine of security, 245, 24(5, 253, 263, 264 ; development of public, 2G5. Morcellement , 14:2-145. More, Sir T., 42(5. Morgan, Osborue, 308. 'Morier, R. B. D., 312 N. I Morley, John, 76. Mortgages, evils of, 209, 260, 311. ! Motive power, economy of, 130. Motives: economic, 24, 25; which in- duce people to save, 201 seq. (See also Self-interest.) Mountain scenery, access to, 2(52, 263. Mulhall, 214. Muscovite communities, 275 seq. NASSE, Prof., 281. Nation, meaning of term, 338, 339. National: production, natural con- stituents in, 66, 70 seq. ; capital, 93; whether subject to law of diminish- ing return or of increasing return, 174 ; increase of wealth, 213-216 ; land the most important item, 404. Natural: liberty, 16, 232, 233, 387; theology optimistic, 16, 332; condi- tions influence system of cultivation, 146; price, 152 N; rate of wages, 333-336. Nature, Book I. Ch. IV. ; appeal to, m Navigation, increments of invention in, 111. Necessaries, 55, 63, 65, 195, 349, 351. (See also Comfort, standard of.) Negative: utility, 8, 74, 81 (see Disu- tility) ; return, 157; interest, 211, 392,393. Neighlxmrhood, employments in same, 355. 'Net: advantage, 74 ; produce, 138-141, 199; wages, 194; advantages of industrial groups, 354, 355 ; reward of labour, 357 ; interest, 394 ; rent, 411. INDEX. 445 Netherlands, 144. Nicholls, Sir George, 84, 227 N, 361 N, 363 N, 3(55 N, 368 N, 372 N seq. Nominal wages, 32(5, 337, 344; in any employment, 353. Normal wages: the term explained, 333, 3,'54 ; rate of general wages, 336- 339, 355. Northumberland : sheep farming, 147 ; family earnings, 328. OBJECTIVE and subjective standpoints, 48, 325, 326, 328, 33(5, 388. Occupation, 44, 45; labour of, 08,93; not ownership, 257. (See also Ap- propriation.) Occupations, immense variety of, 33, 127. Oncken, 37 N. Open-field system, 35, 36, 112, 238, 282, 28& Opinion : an economic force, 15, 234 ; modifies laws, 237, 256; danger of preconceived, 424 seq. Optional element in economic laws, 17, 221-228. Organisation of industry, 1(5, 37, 66, i 94, 117, 124, 125, 201, 210, 241, 2(5(5, ! 346; socialism and, 427 seq. ; indi- vidual liberty, 428-434. Original qualities of land, private property in, 256, 257. Out-door relief: judicial rent may be a mode of, 316 ; abuses of, 377-1381. Over-population, Mill's exaggerated dread of, 164, 169, 171. Overseers of poor, 376. Owen, R. D., 370 N. Ownership, private, in land, 256-267 ; and occupation of land affected by custom, 272 seq. ; restrictions under feudalism, 293-295; modern, Book II. Ch. VIII. ; ethics of, 404. (See also Land and Tenure.) PAIN, pleasure and, 24, 25. Palgrave's Dictionary of Political Economy, 51 N, 87 N, 283 N. Parochial Boards of Scotland, 84. Partaaeforce'e, 145. Passy, M., 148, 150, 162 x. Pastoral produce and law of diminish- ing returns, 165. Patria jioti xt: physical facts important in, 11, Book I. Ch. II. ; act of, when com- pleted, 37, 219 ; and consumption, 48- 51 ; improvements in methods, 69, 152 seq., 155, 156 seq., 170, 172; pro- duction capital, 88-90, 92 ; on a large and on a small scale, 112, 113, 117 seq., Book I. Ch. VIII.; security and exchange important in, 113; in agri- culture, Book I. Ch. IX., 157 seq.; rendered possible by rise in prices, 195; influenced by distribution. 21!i, 238 ; organisation for, taken as guid- ing principle of distribution, 231 seq., 255; feudal organisation for, 290 seq. ; socialist view of existing sys- tem, 427; state control of, 432 seq. (See also Cultivation.) Productive : agents (see Agents) ; power, 39 ; unit of, 172, 199, 213 (nee also Book I. Chs. VII. and X.); powers, apportionment of, 'Jlit; or- ganisation taken as guiding princi- ple of distribution, 231 seq., 255; efficiency of, the end of security, 246. Productive and unproductive: con- sumption, 48-51 ; labour, Book I. Ch. II. 213. Productiveness of industry, 171 ; will probably increase markedly in agri- culture, 173, 174. Profits: influence of rates on size of farms, 147, 148; origin of, 198; their relation to real net produce, 199; price paid for use of capital, 229; on rate depends supply of Capital, 343, Book II. Ch. XIII.; distinct from rent, 402, 403; differential, is rent, 406; exceptional, is rent, 406, 407; effect of application of Capital beyond marginal limit, 407, 408; and interest, 408; profit-rent, 410, 415; quasi-rent is profit, 414. Profit-sharing, 83. Progress of society: from status to contract, 38, 230, 300, 325; how ar- rested, 39; self-interest the main- spring, 81-86; from inheritain-r to bequest, 249; from blood-relation- ship to individual free loin, '_'.">! ; marked by disintegration of family, Hi. ; and of village community, e.g., in Russia, 277, 278; in England and INDEX. 447 India, 285, 289; and of kindred cus- toms, 2*9: money the chief factor in, :0-3Q5, 433; marked also by dif- ferentiation of tenure and ownership of land, 312, 313; competition the great agency of, 429-434; socialists would reverse this, 4:'.:;. Property and economic utility, 2;. :.-:, 419. QUALITY : of wine and law of dimin- ishing return, 166; of population, 187 ; of land varies, 405. Quantity of labour (subjective), 8, 62; explained. 7.">-7.">; causes of varia- tions in. 75-7S, :wi, 330, 336; Trade Unions and, 383. Qwosj-rent : use of term misleading, 412: differential profits for a time, 413; conjunctur profits, 414. Quesnay, 140. RACE qualities, influence on efficiency, 78, 79. Rack-rent, 311,316,319. Raw produce and manufactures, re- marks on division of wealth into, 174. Real cost of labour, 328-331, 388, 420. Real wages, elements of, 326-328, 330, 337, 344, 383. Reciprocal: demand, 347, 348, 396; exchange of services of productive agents, 229. Regulated companies, 132. Relative wages, Book II. Ch. XI. Relief (a feudal payment), 2H">. Relief of the poor, see Poor Relief and Outdoor Relief. Rent: consumer's, 57-65; gross pro- duce and, 140; and cost of produc- tion, 62, 63; in what sense it may render land inferior, 163; its share of net produce, 199; price paid for use of land, 229; produce rents, 302; labour rents, ib. ; under free trade, 314, 315; fair or judicial, 315-318; labourer's rent, 351 ; economic rent, Book II. Ch. XIV. ; monopoly rent, 409,410; . Socialism : value of discussions on, 16, 234, 241; r. individualism, 24, 426- 4,'>4 ; crude forms neglect higher forms of labour, 400. Socialistic : interpretation of industrial development, 129, 131 ; Mill's criti- cism of schemes, 221, 226. Socialists: their ridicule of "absti- nence," 198; hostility to freedom of contract, 242; their clamour for abolition of money, 300, 301. Societies, primitive, 34-36, 227. (Cf. Custom, Village Communities.) Sociology, general, relation of political economy to, 13. Soil: "original and indestructible powers " of, 92, 256, 403, 412 ; quality of, affects system of cultivation, 147 ; recourse to inferior, 405 seq. (See also Law of Diminishing Return, Rent.) South Sea Bubble, 134. Sovereignty, the theory of, 222, 223; its application to the distribution of wealth, 223-228. Spain, 69, 200. Specialisation : of capital, 97, 108 seq.; of skill, 108 seq., 122; of localities, 114 seq. " Speenhamland Act of Parliament," 377. Spender, 368 X. Standard : of comfort or wretchedness, see Comfort, Wretchedness ; of value, see Purchasing power. Starvation, the world within a year of, 211. State: credit, proposals for extension of, 176; management of the land contrasted with landlord and tenant system, 259-262; socialism v. indi- vidual liberty, 426-434. State, the : and the standard of com- fort, 192; its weakness in matters affecting distribution of wealth, 224- 226, 228; its economic claim as re- gards inheritance, 250; its duty in cases of intestacy, 251-253; and in- dustrial organisation, 42(i-434. Statical form of laws of diminishing and of increasing return, 152, 153, 167. Status, movement from, to contract, see Contract. Stewart, Dugald, 104, 108, 122, 176. Stewart, Sir James, 85, 86, 101, 102. Stoic principles, 252. Strikes, 17, 344, 384, 385. 450 INDEX. Stubbs, 202, 290 N, 291 N, 292, 296 N, 297 N, 298, 301 N, 302 N, 372 N. Subjective and objective standpoints, 48, 49 ; in re wages, 325, 326, 328, 336 ; in re profits, 388. Subsidiary industries, 116; counteract tendency to concentration, 130. Subsistence, means of, 169 ; population and, 179-196 passim, 349. Succession duties, effect of very heavy, 253. Sumptuary laws, 366, 367. Sunk capital, 97. Superficial appearance of country, 71. Superintendence, wages of, 388, 392, 399, 400, 433. (Cf. Management.) Supply : exceptional conditions of, 167 ; and demand, adjustment of, 201 ; as conditions of contract, 242 ; as de- termining price of labour, 324, 325, 342, 354, 355 ; and rent, 405, 40(5, 407, 411. Surplus, annual, 199. Survival of the fittest, 177, 178. Survivals : of village communities, 280 seq. ; of old laws and customs, 307; socialism and, 427. Sustaining capital, 97. Sutherland, county of, 145, 158. Swift, 426. Switzerland, the Allmends of, 280. Syria, 202. TACITUS, 404 N. Task-wages, 329. Taxation, 92, 213, 214; excessive, 238, 253 N. Taxes, 267. Taylor, Cooke, 46 N, 120 N, 123, 125, 126, 361 N, 370 N. Taylor, Canon Isaac, 36 N, 282. Tenant farmers, 239, 310, 418. (See also Landlord and Tenant.) Tenant right, 319 seq. Tenure of land : customary, 226 ; in village communities, Book II. Ch. VI.; feudal, 291-295; obligations in- cident to, 305 ; germs of freedom of contract present in early, 324. Terrace cultivation, 36 ; origin of, 162 ; in Syria, 202. "Things," wealth implies something more than, 23. " Things in general," 2.">. Towns : immigration to, 119, 120, 421 ; manorial, overlordship of, 295-25)7 ; communal responsibility, 297 ; fixa- tion of payments and purchase of privileges, 304, 305 ; increase of, raises rent, 415. Trade Unions, 16; and wages, 341, 383-385 ; their nature and aims, 82, 383 ; mutual assurance societies, 385, 386; evil tendencies, 386, 387; a power for good, 432. Traditional ideas and rules v. specu- lative theories, 224. Transfer of land : influence of simpli- fied system in creating small prop- erties, 149; many difficulties in England traced to feudalism, 293; origin of secrecy in, 305; difficulties of, 307-309. Transport, a species of production, 37, 46. Tribal community : in west of Britain and Ireland, 287, 288; land free to, 404. Truck system, 240 N, 368, 369. Trusts: to evade succession duties, 253; to evade incidents of feudal tenures, 305. Turgot, 88, 157. Turkey, 202. Tylor, 34 N. ULSTER, divided ownership and tenant right, 260, 261. Unearned increment, 92. Unit of productive power, 172. United Kingdom: money-market, 33, 49; property in land, 141; rural de- population of, 187 ; operation of positive checks in, 188; foreign trade and growth of wealth, 200; decennial increase of wealth, 214, 215; foreign competition, 261 ; ownership of land in, 312; new fetters on land owner- ship, 313; regulations in favour of workers, 371 ; interest on capital, 433. United States: public domain, 44, 45, 261 ; rate of increase of population, INDEX. 451 182 N; census of national wealth, 214; contrast with English farms, 282 ; abolition of slavery in, 359. Unproductive, see Productive. Usury: Mediaeval Church condemna- tion of, 41, 87, 92, 209, 260 ; in Russia and Germany, 311 ; Tudor Parlia- ments and, 389-392, 396, Utilitarianism, 7, 23, 233,237, 255. Utility, 7, 9, Book I. Ch. I.; total and tinal or marginal, 31, 53 seq. ; pro- duction in terms of, 32, 37, 45, 48 ; im- material, 38; consumption in terms of, 49; destruction of, 50; special and general, ib. ; can it be measured in terms of price, 51, 55-60; law of diminishing, 54; as measured by labour, 61 seq., 63 seq. ; limited and unlimited, 68; material and imma- terial, 95; maximum, 232; wages , as, 326 ; profits as, 388. Utopias, 15, 228, 241, Book II. Ch. XV. VAGABONDS, 372 seq. Value, exchangeable: as prerequisite of wealth, 6, 8; emphasised in ex- change, 10; a distincti% r e mark of economic utilities, 26, 27, 28, 29; of ideas, 40 seq., 46; theory of, 162; money value as measuring growth of wealth, 213-216; recent use of term, 229 ; relative values and gen- eral prices, 419. Variations in distribution, historical examples, 226-2'_'!. Verney, Lady, 143, 144, 145. Vested interests, protection of, 117. Village communities, 120, 257; custom and, Book II. Chap. VI., 302. Villein, 83, 119, 202, 203; in mediaeval manor, 283-285; emancipation of, 302, 303. Vineyards, as illustrating law of di- minishing return, 165, 166. Vinogradoff, Paul, 273 N, 281 N, 283 N, 285 N. Virgate, or villein holding, 284, 285. Voluntary associations of employers and employed, 226. WAGE capital, 97. Wages: relative and small farming, 148 ; low wages ascribed by Mill to over- population, 164, 169; an im- provement in net wages tends to raise standard of comfort, 194; as price of labour, 229, Book II. Ch. X.; relative, Book II. Ch. XI.; effects of law, custom, and combina- tion on, Book II. Ch. XII.; of management or superintendence, 388, 389, 392, 393, 399, 400, 433; ethics of, 391 ; rent and wages, 410 ; tend to follow course of prices, 419; socialists and "necessary" wages, 427. Wages-fund theory, 98, 339-343 ; criti- cism of, 343-345; omitted elements, 346; combined with produce theory, 346,347. Waiting substituted for abstinence, 390, 391. Wakefield, 104. Wales, 147. Walker, Prof., 28 N, 44, 45, 79 N, 161 N, 326 N, 368 N, 369 N, 399 N. Wants, new, and new luxuries, coun- teract tendency to concentration of labour and capital, 131. Water, 71. Wealth of Nations, see Adam Smith. Wealth: popular conception of, 5; economic conception of, 6-10; con- ceptions involved in Mill's definition, 7-9; human element in, 11,23; ma- terial and immaterial economic utilities, 30, 31, 32, 33; production of material, 32-37; not creation, 32, 37; production of personal or immate- rial, 37-44, 219; and worth, 207, 208; and common sense morality, 208; distribution of national, 208; of nations, estimate of its growth, 213 seq. ; use of such estimates, 216 ; how divided for consumption, 219; land the most important item, 404. Wheat: production of, in England, 155, 157; recently contracted, 162, 163; rate of increase, 180 N; fall in price, 187, 420, 422, 423. Will to save, 201 seq. William the Conqueror, 114, 263, 298, 299. Williams, Price, 196 N. Williams's Real Property, 272 N. Wool, English, cause of recent fall in price, 166. Work : pleasure of, 73 ; strain of, 78 ; connection of reward with, 239; lia- bilities for extra, 328 ; wages as the payment of, 328, 329; amount of, how measured, 329; conditions of, affected bylaw and custom, 330, 331, 357. 452 INDEX. Working classes, economic progress of : how estimated, 330, 337 ; has their condition been ameliorated? 331; Mill's view of, based on wages-fund theory, 341 ; after Black Death, ib. Wretchedness, standard of, 190 seq. (See also Comfort.) Wright's Roman, Celt, Saxon, 46 N. XENOPHON, 108 N. YEOMANRY: decay of, 141; origin of English, 303. Young, Arthur, 139, 145 N, 196, 319 N. ZEMINDARS, 279. WORKS BY THE SAME AUTHOR. Social Institutions of the United States. REPRINTED FROM "THE AMERICAN COMMONWEALTH." i2mo. Cloth. M.OO. The Holy Roman Empire. Eighth Edition, revised and enlarged. Crown 8vo. $1.00. Library Edition. 8vo. $3.50. The Saturday Review says : " It exactly supplies a want. . . . We know of no writer who has so thoroughly grasped the real nature of the mediaeval empire, and its relations alike to earlier and later times." Transcaucasia and Ararat. BEING NOTES OF A VACATION TOUR IN THE AUTUMN OF 1876. With Map and View of Mount Ararat. Third Edition. Crown 8vo. $2.50. The Times says : " He has produced a very interesting volume, full of informa- tion. ... In Professor Bryce's bold ascent of Ararat alone, when Kurds and Cossacks alike deserted him, we have a feat of mountain climbing which in itself proves him to be no unworthy member of the Alpine Club. This alone would render the book well worth reading, quite apart from the store of information con- tained in it." The AthencEum says : " Mr. Bryce has written a lively and at the same time instructive description of the tour he made in and about the Caucasus. When so well informed a jurist travels into regions seldom visited, and even walks up a mountain so rarely scaled as Ararat, he is justified in thinking that the impressions he brings home are worthy of being communicated to the world at large." MACMILLAN & CO., 112 FOURTH AVENUE, NEW YORK. 1 HISTORY OF THE NEW WORLD CALLED AMERICA. By EDWARD JOHN PAYNE, FELLOW OF UNIVERSITY COLLEGE, OXFORD. Vol. I. I2mo. $3.00. " Leads the student in a novel direction. . . . The elucidation of the subject surpasses in thoroughness and clearness anything of the kind we have ever read before." N. Y. Times. " He has produced a volume of extraordinary interest, not more remarkable for its learning and force than for the extreme freshness of the point of view." N. Y. Times (second notice). "... A work that promises to be of very unusual interest and value. Mr. Payne has taken up his important theme in an original and suggestive manner; and he is in the way to arrive at conclusions of great moment. The succeeding volumes of his narrative will undoubtedly be looked for with no little impatience." Boston Beacon. "... The discussion of these ingenious theories does not fall within our province. We cannot, however, refrain from commending the painstaking thor- oughness of the author's researches." Chicago Tribune. "We have before us the first instalment of the most comprehensive and, there- fore, the most ambitious History of America that has ever been projected. In a series of volumes which, if we may judge from the limited space covered by the book now issued, will be a long one, the author, Mr. Edward John Payne, a Fellow of University College, Oxford, has undertaken to present a well-ordered and artistic digest of the results of a scientific study of the annals of the New World from its discovery to the present day." New York Sun (first notice). " We have here the first volume of a history of this continent which promises to cover a broad field, and to be more unique and interesting than any previous American history. It is refreshing to find, amid the deluge of ' Columbus ' litera- ture and histories which the approaching celebration is producing, such a learned, dispassionate, far-sighted opening volume of a history that bids fair to set all others in the background." St. Louis Republican. " To the exhaustive scientific and ethnical detail displayed in this first volume of what promises to be a most important work columns of review would fail to do justice ; but it may be said that in beauty, dignity, and forcefulness of style the book is extraordinary. It enriches a theme still unworn, and makes the pursuit of it a pleasure higher than a pastime." St. Paul Pioneer Press. MACMILLAN & CO., 112 FOURTH AVENUE, NEW YORK. 2 MACMILLAN & Co.'s LIST OF BOOKS ON HISTORY /> POLITICAL ECONOMY. ABDY (Judge). Feudalism : a Series of Lectures delivered at Gresham College. By J. T. ABDY, LL.D. lamo. $2.00. ADAMS and CUNNINGHAM.-The Swiss Confederation. With Map. 8vo. $4.00. ANSON. WORKS BY SIR WILLIAM R. ANSON, D.C.L. The Law and Custom of the Constitution. Clarendon Press Series. Part I. Parliament. 8vo. 2.75. Part II. The Crown. 8vo. $3.50. Principles of English Law of Contract, and of Agency in its Relation to Contract. Fifth Edition, revised. Clarendon Press Series. 8vo. $2.60. ARISTOTLE. On tha Athenian Constitution. Translated, with Introduction and Notes, by F. G. K.ENYON, M.A., Fellow of Magdalen College, Oxford. On handmade paper, bound in buckram. Post 8vo. 1.10. Large-paper Edition. Large I2mo. $3.25. BASTABLE. Public Finance. By C. F. BASTABLE, Professor of Political Econ- omy at Trinity College, Dublin. 8vo. $4.00. - -- f ngei mercial Bulletin. BEDE'S (VENERABLE) Ecclesiastical History of England. Together with the ANGLO-SAXON CHRONICLE. With Illustrative Notes, a Short Life of Bede, Analysis of the History, and an Index and a Map of Anglo-Saxon England. Edited by J. A. GILES, D.C.L. $1.50. BENTHAM. An Introduction to the Principles of Morals and Legislation. Clarendon Press Series. $1.75. A Fragment on Government. By JEREMY BENTHAM. Edited, with an Intro- duction, by F. C. MONTAGUE, M.A., Late Fellow of Oriel College. 8vo. $2.00. BERNARD (M.). Four Lectures on Subjects Connected with Diplomacy. 8vo. $2.50. BIRKBECK (W. L.) . Historical Sketch of the Distribution of Land in Eng- land. $1.50. 3 BLAIR'S Chronological Tables, Revised and Enlarged. Comprehending the Chronology and History of the World, from the Earliest Times to the Russian Treaty of Peace, April, 1856. By J. WlLLOUGHBY Ross. $3.50. Index of Dates. Comprehending the Principal Facts in the Chronology and History of the World, from the Earliest to the Present Time, alphabetically arranged ; being a complete Inde^ to Bohn's enlarged Edition of Blair's Chronological Tables. By J. W. ROSSE. 2 vols. Each $1.50. BLUNTSCHLI (B. H.). The Theory of the State. English Translation by R. LODGE, M.A. New Edition. $3.00. BOHM-BAWERK. Capital and Interest. A Critical History of Economical Theory. By EUGEN V. BOHM-BAWERK, Professor of Political Economy in the University of Innsbruck. Translated, with a Preface and Analysis, by WILLIAM SMART, Lecturer on Political Economy in Queen Margaret College, Glasgow. 8vo. 4.00. " We have read the volume with increasing interest from the first page to the last. Although it consists almost wholly of destructive criticism, it is very necessary work. We recall nothing of the kind equal to it. Even though he may not have said the last word on the par- ticular subject of his inquiry, he has said enough to fix his place in the front rank of the world's economists." Evening Post. The Positive Theory of Capital. By EUGEN V. BOHM-BAWERK, author of " Capital and Interest," etc. Translated by WILLIAM SMART, Lecturer on Political Economy in Queen Margaret College, Glasgow. 8vo. $4.00. BONAR (J.). Malthus and his Work. 8vo. $4.00. BOND (J. J.). A Handy Book of Rules and Tables for verifying Dates with the Christian Era, etc. Giving an account of the Chief Eras and Systems used by various Nations; with easy Methods for determining the Corresponding Dates. $1.50. BOOTH. Life and Labour of the People in London. Edited by CHARLES BOOTH. I2mo. 4 vols. Each $1.50. Vol. I. East Central and South London. Vol. II. Streets and Population classified. Vol. III. Blocks of Buildings, Schools, and Immigration. Vol. IV. East London Industries. " A really interesting as well as a very valuable work, and it is issued at a wonderfully low price." Athenaum. A Picture of Pauperism, A Picture; and The Endowment of Old Age, An Argument. By CHARLES BOOTH. 121110. $1.25. BOUTMY. The English Constitution. By E. BOUTMY, author of " Studies in Constitutional Law." Translated from the French by Mrs. EADEN. With Preface by Sir FREDERICK POLLOCK, Bart. i2mo. $1.75. Studies in Constitutional Law. France, England, United States. By EMILE BOUTMY. Translated from the second French Edition by E. M. DlCEY, with an Introduction by A. V. DICEY. iamo. $1.75. " A volume which, though scarcely more than a sketch, shows a singular insight in avoid- ing the errors usually made by French writers in discussing the political order in England and the United States. M. Boutmy, indeed, deserves to be named with honour as, after Mr. Bryce, one of the most sagacious students of American institutions now living." Literary World. BOWES (A.). A Practical Synopsis of English History ; or, A General Sum- mary of Dates and Events. For the use of Schools. By ARTHUR BOWES. New Edition (the Qth), revised. 8vo. 30 cents. BRACTON'S NOTE BOOK. A Collection of Cases decided in the King's Court during the Reign of Henry the Third. Edited by F. W. MAH LAND. 3 vols. 8vo. 24.00. BRIGHT. WORKS BY THE RIGHT HON. JOHN BRIGHT, M.P. Speeches on Questions of Public Policy. Edited by Prof. THOROLD ROGERS. Second Edition. 2 vols. 8vo. $6.00. Author's Popular Edition. Globe 8vo. 1.25. Public Addresses. 8vo. 2.50. BRIGHT (VV. BRIGHT, D.D.). Chapters of Early English Church History. Second Edition. 8vo. $3.00. BRYCE. WORKS BY JAMES BRYCE, M.P., D.C.L. The Holy Roman Empire. Eighth Edition, revised and enlarged, izmo. $1.00. Library Edition. 8vo. $3.50. The American Commonwealth. 2 vols. Large 12010. Third Edition. Re- vised throughout. Price $3.50, net. " His work rises at once to an eminent place among studies of great nations and their insti- tutions. It is, so far as America goes, a work unique in scope, spirit, and knowledge. There is nothing like it anywhere extant, nothing that approaches it. . . . Without exaggera- tion it may be called the most considerable and gratifying tribute that has yet been bestowed upon us by an Englishman, and perhaps by even England herself. . . . One despairs in an attempt to give in a single newspaper article an adequate account of a work so infused with knowledge and sparkling with suggestion. . . . Every thoughtful American will read it, and will long hold in grateful remembrance its author's name." *few York Times. Social Institutions of the United States. Reprinted from "The American Commonwealth." lamo. Cloth, $1.00. BUCKLAND (A.). Our National Institutions. A Short Sketch. i8mo. 30 cents. BUCKLEY (A. B.). History of England for Beginners. With additions by Dr. R. H. LABBERTON. With maps. Globe 8vo. 1.00. A Primer of English History. By ARABELLA BUCKLEY, author of " History of England for Beginners." i8mo. 35 cents. BURKE. Letters, Tracts, and Speeches on Irish Affairs. Edited by MATTHEW ARNOLD. i2mo. 2.00. Select Works. Edited with Notes by E. J. PAYNE. Clarendon Press Series. Vol. I. Thoughts on the Present Discontent : the Two Speeches on America. i6mo. $1.10. Vol. II. Reflections on the French Revolution. i6mo. $1.25. Vol. III. On the Proposals for Peace with the Regicide Directory of France. i6mo. $1.25. Reflections on the French Revolution. Edited by F. G. SELBY, MA. English Classics Series. i6mo. $1.00. BURKE'S Works. 6 vols. Each jgr.oo. Vol. I. Vindication of Natural Society ; Essay on the Sublime and Beautiful, and Various Political Miscellanies. Vol. II. Reflections on the French Revolution; Letters relating to the Bristol Election ; Speech on Fox's East India Bill, etc. 5 BURKE'S Works. Continued. Vol. 1 1 1. Appeal from the New to the Old Whigs ; on the Nabob of Arcot's Debts ; the Catholic Claims, etc. Vol. IV. Report on the Affairs of India, and Articles of Charge against Warren Hastings. Vol. V. Conclusion of the Articles of Charge against Warren Hastings ; Political Letters on the American War ; On a Regicide Peace, to the Empress of Russia. Vol. VI. Miscellaneous Speeches ; Letters and Fragments ; Abridg- ments of English History, etc. With a general Index. Essay on the Sublime and Beautiful. With Short Memoirs. Separately. 50 cents. Speeches on the Impeachment of Warren Hastings ; and Letters. With Index. 2 vols. (forming vols. 7 and 8 of the complete works). Each $1.00. Life. By Sir J. PRIOR. With a Portrait after Reynolds. $1.00. BURNET. History of the Reformation of the Church of England. A New Edition. Carefully Revised by N. POCOCK, M.A. 7 vols. 8vo. $7.50. History of James the n., with additional Notes. 8vo. $2.50. BURY (J. B.). A History of the Later Roman Empire from Arcadius to Irene, A.D. 395-800. 2 vols. 8vo. $6.00. CAIRNES (J. E.). Political Essays. 8vo. $2.50. CANNAN (E.). Elementary Political Economy. i6mo. Stiff cover. 25 cents. CHRONICLES OF THE CRUSADES. Contemporary Narratives of the Crusade of Richard Coeur de Lion, by RICHARD OF DEVIZES and GEOFFRY DE VlN- SAUF; and of the Crusade of Saint Louis, by Lord JOHN DE JOINVILLE. With Short Notes, an Index, and an Illuminated Frontispiece copied from an old MS. $1.50. CHRONICON. Galfridi le Baker de Swynebroke. Edited with Notes by E. M. THOMPSON, LL.D. 410. $5.25. CLARENDON. History of the Rebellion and Civil Wars in England. By EDWARD, EARL OF CLARENDON. Also his Life. Royal 8vo. $5.50. History of the Rebellion and Civil Wars in England. To which are sub- joined the Notes of Bishop WARBURTON. 7 vols. Medium 8vo. $12.50. History of the Rebellion, Book VI. Edited by THOMAS ARNOLD. Clarendon Press Series. i6mo. Jjir.io. Life, including a continuation of his History. 2 vols. Medium 8vo. $5.50. The History of the Rebellion and Civil Wars in England, begun in the year 1641 by EDWARD, EARL OF CLARENDON. Re-edited from a fresh collection of the original MS. in the Bodleian Library, with Marginal Dates and Occasional Notes, by W. DUNN MACRAY, M.A. 6 vols. $n.oo. Characters and Episodes of the Great Rebellion. Edited with Notes by G. D. BOYLE. $2.00. CLARKE (C. B.). Speculations from Political Economy. gi.oo. 6 CLINTON. Fasti Hellenic!. The Civil and Literary Chronology of Greece. Vol. I. From the LVIth to the CXXIIId Olympiad. Third Edition. 410. 59-00. Vol. II. From the CXXIVth Olympiad to the Death of Augustus. Second Edition. 410. $8.00. Epitome of the Hellenici. 8vo. $1.75. Fasti Romani. The Civil and Literary Chronology of Rome and Constantinople. 2 vols. 410. $10.50. Epitome of the Fasti Romani. 8vo. $1.75. COBDEN (R.). Speeches on Questions of Public Policy. Edited by JOHN BRIGHT, M.P., and J. E. THOROLD ROGERS. Globe 8vo. $1.25. CONDE'S History of the Dominion of the Arabs in Spain. Translated from the Spanish by Mrs. FOSTER. With Engraving of Abderahmen Ben Moavia, and Index. 3 vols. Each $1.00. COSSA (D. L.). Guide to the Study of Political Economy. With Preface by W. STANLEY JEVONS, F.R.S. Reprinting. COXE'S Memoirs of the Duke of Marlborough. With his Original Corre- spondence, collected from the family records at Blenheim. Edited by W. COXE, M.A., F.R.S. Revised Edition by JOHN WADE. With Portraits of the Duke and Duchess (after Kneller),and Prince Eugene (after Schupper). With Index. 3 vols. Each gi.oo. An Atlas of the plans of Marlborough's campaigns. 410. $3.50. History of the House of Austria. From the Foundation of the Monarchy by Rhodolph of Hapsburgh to the Death of Leopold II., 1218-1792. By Archd'n COXE. Together with a Continuation from the Accession of Francis I. to the Revolution of 1848. To which is added Genesis, or Details of the late Austrian Revolution (translated from the German). With Portraits of Maximilian, Rhodolph, Maria Theresa, and Francis Joseph. 4 vols. With Indexes. Each $1.00. CUNNINGHAM (J.). The Growth of the Church in its Organization and Institutions. $2.75. CUNNINGHAM. The Growth of English Industry and Commerce. By the Rev. W. CUNNINGHAM, B.D. New Edition. 8vo. $4.00. The Growth of English Industry and Commerce in Modern Times. 8vo. #4-50. DE LOLME on the Constitution of England, or an Account of the English Government, in which it is compared both with the Republican form of Government and the other Monarchies of Europe. Edited, with Life of the Author and Notes, by JOHN MACGREGOR. $1.00. DICEY. WORKS BY A. V. DICEY, B.C.L. Letters Introductory to the Study of the Law of the Constitution. New Edition. 8vo. $3.50. The Privy Council. i2mo. $1.00. Letters on Unionist Delusions. i6mo. 60 cents. 7 DIGBY (K. E.). An Introduction to the History of the Law of Real Prop- erty, with Original Authorities. Third Edition. Clarendon Press Series. 8vo. $2.75. DILKE (Sir C. W.). Greater Britain. A Record of Travel. (America, Australia, India.) 121110. $2.00. Problems of Greater Britain. With Maps, i vol. Large i2mo, uniform with Bryce's " American Commonwealth." $4.00. English Edition. 2 vols. 8vo. $12.00. DILKE (Sir C. W.) and WILKINSON (S.) . Imperial Defence. By the Right Hon. Sir CHARLES W. DlLKE, Bart., author of "Greater Britain," and " Problems of Greater Britain," and SPENSER WILKINSON, author of" Citizen Soldiers," and " The Brain of an Army." I2mo. $1.25. DONISTHORPE. Individualism: A System of Politics. By WORDSWORTH DONISTHORPE, Barrister-at-Law, author of " Principles of Plutology," etc. DYER (T. H.). History of Modern Europe, from the taking of Constantinople to the Establishment of the German Empire, A.D. 1453-1871. By the late Dr. T. H. DYER. A New Edition. 5 vols. $14.00. The History of the Kings of Rome, with a Prefatory Dissertation on the Sources and Evidence of Early Roman History. 8vo. $4.50. EARLE (JOHN, M.A.) and PLUMMER (CHARLES, M.A.). Two of the Saxon Chronicles. A Parallel Revised Text, with Notes, etc. Vol. I., Text, Appen- dices, and Glossary. 8vo. $2.75. ECONOMICS. The Quarterly Journal of Economics. Single numbers, 50 cents. Annual subscription, $2.00. ECONOMIC JOURNAL (THE). The Journal of the British Economic Associa- tion. Edited by Professor F. Y. EDGEWORTH. Published quarterly. Annual subscription, $5.00. ELLIS (A. R.). Sylvestra: Studies of Manners in England from 177010 1800. By ANNIE RAINE ELLIS, author of " Marie," " Mariette," etc. 2 vols. i2mo. $6.00. " A quaint and charming record of English university, cathedral, provincial, and metro- politan life in the last century." Blackwood's Magazine. ENGLISH CITIZEN SERIES (THE). Edited by HENRY CRAIK, M.A. i2mo. Each volume, $1.00. Central Government. By H. D. TRAILL, D.C.L. The Electorate and the Legislature. By SPENCER WALPOLE. Local Government. By M. D. CHALMERS. Justice and Police. By F. W. MAITLAND. The National Budget : the National Debt, Taxes, and Rates. By A. J. WILSON. The State and Education. By HENRY CRAIK, M.A., LL.D. The Poor Law. By T. W. FOWLE, M.A. The State and the Church. By Hon. ARTHUR ELLIOT, M.P. The State in its Relation to Trade. By Sir T. H. FARRER, Bart Colonies and Dependencies. By J. S. COTTON and E. J. PAYNE. The Land Laws. By F. POLLOCK. 8 ENGLISH CITIZEN SERIES. Continued. The State in Relation to Labor. By W. STANLEY JEVONS, LL.D., M.A., F.R.S. Foreign Relations. By SPEXCER WALPOLE. The Punishment and Prevention of Crime. By Sir EDMUND F. Du CANE. The National Defences. By Lieut.-Col. MAURICE, R.A. In Preparation. EVELYN'S Diary and Correspondence, with the Private Correspondence of Charles I. and Sir Edward Nicholas, and between Sir Edward Hyde (after- wards Earl of Clarendon) and Sir Richard Browne. Edited from the Original MSS. at Wotton by W. BRAY, F.A.S. With Index (115 pages) and 45 Engrav- ings. 4 vols. Each $1.50. FA WCETT. WORKS BY THE LATE RT. HON. HENRY FAWCETT, M.P., F.R.S. Manual of Political Economy. Sixth Edition. Revised, with a Chapter " On State Socialism and Nationalization of the Land," and an Index. 121110. $2.60. Free-Trade and Protection. An Enquiry into the Causes which have retarded the general adoption of Free Trade since its introduction into England. Sixth Edition. I2mo. $1.25. Speeches on some Current Political Questions. 8vo. $3.00. Essays and Lectures on Political and Social Subjects. 8vo. $3.00. FAWCETT (MRS.). Political Economy for Beginners, with Questions. Sixth Edition. i8mo. 75 cents. FINLAY (GEORGE). History of Greece. From its Conquest by the Romans to the present time, B.C. 146 to A.D. 1864. A New Edition, revised throughout. Edited by H. F. TOZER, M.A. 7 vols. 8vo. $17.50. FLORENCE OF WORCESTER'S Chronicle, with the Two Continuations : com- prising Annals of English History, from the Departure of the Romans to the Reign of Edward I. Translated from the Latin, with Notes, by THOMAS FORRESTER, M.A. With Index. $1.50. FORTESCUE (J.). The Gouvernance of England, otherwise called the Differ- ence between an Absolute and a Limited Monarchy. Edited, with Notes, by C. PLUMMER, M.A. 8vo. $3.25. FRAMJI (D.). History of the Parsis. Including their Manners, Customs, Religion, and Present Position. With Illustrations. 2 vols. 8vo. $15.00. FREEMAN. WORKS BY E. A. FREEMAN, D.C.L., LL.D., Professor of History in the University of Oxford. A New Volume of Miscellaneous Essays. 8vo. In the Press. History of the Cathedral Church of Wells. i2mo. $1.25. Old English History. With Maps. New Edition, revised. i6mo. $1.50. Historical Essays. First Series. Fourth Edition. 8vo. $3.00. Second Series. Third Edition. With additional Essays. 8vo. $3.00. Third Series. 8vo. $3.00. Fourth Series. 8vo. $3.50. The Growth of the English Constitution from the Earliest Times. Fourth Edition. iamo. $1.75. Comparative Politics. Lectures. To which is added " The Unity of History." 8vo. $3.50. 9 FREEMAN'S Works. Continued. Subject and Neighbour Lands of Venice. With Illustrations. 12010. $2.50. English Towns and Districts. A Series of Addresses and Essays. 8vo. $3.00. History of the Norman Conquest of England. English Edition. Six vols. 8vo. $27.00. Vols. I. -I I. together. Third Edition. $9.00. Vol. III. Second Edition. $5.25. Vol. IV. Second Edition. $5.25. Vol.V. #5.25. Vol. VI. Index. 8vo. $2.75. A Short History of the Norman Conquest of England. Second Edition. Clarendon Press Series. i6mo. 60 cents. William the Conqueror. English Statesmen Series. lamo. Paper covers, 50 cents. Cloth limp, 60 cents. Cloth uncut, 75 cents. The Reign of William Rufus and the Accession of Henry the First. 2 vols. 8vo. $8.00. A History of Sicily from the Earliest Times. Vol. I. The Native Nations : The Phoenician and Greek Settlements. Vol. II. From the Beginning of Greek Settlements to the Beginning of Athenian Intervention. The two vols., with numerous Maps, 8vo, $10.00. Vol. III. The Athenian and Carthaginian Expeditions. 8vo. $6.00. Greater Greece and Greater Britain, and George Washington, the Expander of England. Two Lectures. i2mo. $1.00. The Methods of Historical Study. A Course of Lectures. 8vo. $2.50. The Office of the Historical Professor. i2mo. 75 cents. History of Federal Government in Greece and Italy. With a general Intro- duction. New Edition. Edited by J. B. BURY, M.A., Fellow of Trinity College, Dublin. Extra I2mo. In the Press. The Chief Periods of European History. Six Lectures read in the University of Oxford. 8vo. $2.50. Four Oxford Lectures. Fifty Years of European History. Teutonic Conquest of Gaul and Britain. 8vo. $1.25. FRIEDMANN (P.). Anne Boleyn. A Chapter of English History, 1527-36. 2 vols. 8vo. $8.00. FULLER'S Church History of Britain. Edited by J. S. BREWER, M.A. 6 vols. 8vo. $10.00. FYFE. Annals of our Time. By H. HAMILTON FYFE. A Record of Events Social and Political, Home and Foreign. Vol. III., Part I. From the Date of the 5oth Anniversary of the Accession of Queen Victoria, to the end of the year 1890. 8vo. $1.25. Part II., 1891. $1.25. GARDINER (S. R.). The Constitutional Documents of the Puritan Revolu- tion, 1628-1660. i2ino. $2.25. GEORGE (H. B.). Genealogical Tables Blustrative of Modern History. Second Edition, enlarged. Clarendon Press Series. Small 410. $3.00. GIBB and SKELTON. Relics of the Royal House of Stuart. Drawings in Color by W. GlBB; Letterpress by JOHN SKELTON. Folio. Three-quarters levant morocco. $50.00. 10 GIBBINS. The History of Commerce in Europe. By H. DE B. GIBBINS, M.A. With Maps. I2mo. 90 cents. GIBBON'S Decline and Fall of the Roman Empire. Complete and Unabridged, with Variorum Notes; including, in addition to the author's own, those of Guizot, Wenck, Niebuhr, Hugo, Neander, and other scholars. Edited by an English Churchman. 7 vols. With copious Index and 2 Maps and a Portrait of Gibbon. Each vol. $1.00. GILBART. The History, Principles, and Practice of Banking. By the Late J. W. GlLBART, F.R.S., formerly Director and General Manager of the Lon- don and Westminster Bank. New Edition, revised by A. S. MICHIE. With Portrait of Gilbart. 2 vols. $3.00. " Mr. Michie has executed his difficult task in an unusually complete and satisfactory manner." The Times. " Mr. Michie has met a real want by editing the present volumes." Economist. " Thp.-work of the editor has been done with the utmost care." Standard. 1 . The Growth of Capital. By ROBERT GIFFEN, LL.D., F.S.S. Con- tents: Introduction. The Valuation of 1885. The Recent Progress. Distribution between England, Scotland, and Ireland. Historical Retro- spect. Accumulations of Capital in Foreign Countries. The Use of National Values. In i vol. 8vo. $2.00. " A very valuable contribution to a branch of economic and political knowledge which has hitherto been too much neglected." Saturday Review. " Mr. Giflen's calculations cannot fail to be of the highest value to the politician and the economist." National Observer. Essays in Finance. FIRST SERIES: The Cost of the Franco-German War of 1870-71. Depreciation of Gold since 1848. The Liquidations of 1873-76. Depression of Trade greater in Raw Material Producing Countries than Manufacturing Countries. Foreign Competition. Excess of Imports. Recent Accumulations of Capital. Depreciation of Silver. Mr. Gladstone's Work in Finance. Taxes on Land. Reduction of the National Debt. Taxation and Representation of Ireland. Bimetallism. Fall of Prices of Commodities in Recent Years. Fifth Edition, revised. 8vo. $3.00. " It is impossible to read a page of these essays without being struck by the careful and conscientious character of the work displayed in them. We feel that we are dealing with a man who is giving us the fruit of honest labor. Every problem he attacks is fairly considered on every side." The Times. f SECOND SERIES : Containing: Trade Depression. Gold Supply, the Rate of Discount and Prices. The Effects on Trade of the Supply of Coinage. Bank Reserves. Foreign Trade of the United States. The Use of Import and Export Statistics. Foreign Manufacturers and English Trade. The Utility of Common Statistics. General Uses of Statistical Knowledge. Progress of the Working Classes in the Last Half-century. Third Edition. 8vo. $4.00. The Case Against Bi-Metallism. $2.00. GIRALDUS CAMBRENSIS 1 Historical Works. Containing his Topography of Ireland, and History of the Conquest of Ireland, translated by TH. FORESTER, M.A. Itinerary through Wales, and Description of Wales, translated by Sir R. COLT HOARE. With Index. Revised Edition, edited by THOMAS WRIGHT, MA., F.S.A. $1.50. 11 GOSCHEN (G. J.). Reports and Speeches on Local Taxation. 8vo. $2.00. GRAMMONTS' (Count) Memoirs of the Court of Charles II., with the Boscobel Tracts, etc. New and Revised Edition, gi.oo. GREEN. WORKS BY JOHN RICHARD GREEN, M.A., LL.D. A Short History of the English People. New Edition, with Maps, Tables, and an Analysis by C. W. A. TAIT, M.A. i2mo. $2.25. Also in four parts. With the corresponding portion of the Analysis bound with each part. I2mo. Each 75 cents. The four parts, in box, $3.00. History of the English People. In 4 vols. 8vo. Each $6.50. The Making of England. With Maps. 8vo. $6.50. The Conquest of England. With Maps and Portraits. 8vo. $6.50. Stray Studies from England and Italy. 12010. $2.50. GREEN (Mrs. J. R.). The English Town in the Fifteenth Century. 2 vols. 8vo. Shortly. GRESWELL (W. PARR). History of the Dominion of Canada. i2mo. $2.00. GROSS. The Gild Merchant. A Contribution to British Municipal History by CHARLES GROSS, Professor of History, Harvard University. 2 vols. 8vo. 56.00. " These two volumes, in fine, with their apparatus of notes, bibliography, glossary, and index form a monograph of the highest value, and exhibit the modern critical study of institutions at its best. Dr. Gross is eminently sober and cautious, he has no vagaries, his position is based on and defended by contemporary documents, and he demands the same vigorous proofs from others." Nation. GUEST (E.). Origines Celticae (A Fragment), and other Contributions to the History of Britain. With Maps. 2 vols. 8vo. $9.00. GUEST (M. J.). Lectures on the History of England. With Maps. Third Edition. 12010. $1.50. GUIZOT'S History of the Origin of Representative Government in Europe. Translated by A. R. SCOBLE. With Index. $1.00. History of the English Revolution, of 1640. From the Accession of Charles I. to his Death. With a Preliminary Essay on its Causes and Success. Trans- lated by WILLIAM HAZLITT. With Portrait of Charles (after Vandyke). With Index. $1.00. History of Civilization, from the Fall of the Roman Empire to the French Revolution. Translated by WILLIAM HAZHTT. With Portraits of Guizot, Charlemagne (after Meissonier), and Louis IX. 3 vols. With Index. Each $1.00. " Among the books and essays, and all sorts of topics, from metaphysics to heraldry, which I read at this time, two left indelible impressions on my mind. One was Guizot's " History of Civilization." Professor HUXLEY, in the Nineteenth Century. H ADD AN and STUBBS. Councils and Ecclesiastical Documents, relating to Great Britain and Ireland. Edited after Spelman and Wilkins. Vol. I. 8vo. $5.25. Vol. II., Part I. 8vo. $2.75. Vol. II., Part II. Stiff Covers. 90 cents. Vol. III. 8vo. #5.25. 12 HALL (HUBERT). Court Life under the Plantagenets (Reign of Henry the Second). Colored Plates and Fac-similes. 8vo. $4.00. Society in the Elizabethan Age. With Eight Colored and other Plates. Revised and Enlarged. 8vo. $3.00. " Students of the Elizabethan period may well rejoice in the recent addition to their libraries of Mr. Hubert Hall's highly interesting and most useful work." JOHN W. HALES, in the Academy. HARWOOD. WORKS BY GEORGE HARWOOD, M.A. Disestablishment ; or, A Defence of the Principle of a National Church. 8vo. $2.50. The Coming Democracy. 12010. $1.50. HENRY OF HUNTINGDON'S History of the English, from the Roman In- vasion to the Accession of Henry II. ; with the Acts of King Stephen, and The Letter to Walter. Translated and Edited by T. FORESTER, MA. With Frontispiece of Baldwin and Stephen's Barons, copied from a MS. in the British Museum. $1.50. HERVEY. Dark Days in Chile. An Account of the Revolution of 1891. By MAURICE H. HERVEY, Special Correspondent of the Times. With 15 full- page Illustrations. 8vo. $3.00. HIBBERT. The Influence and Development of English Gilds as Illustrated by the History of the Craft Gilds of Shrewsbury. By FRANCIS AIDAN HIBBERT, B.A. 75 cents. HILL (OCTAVIA) . Homes of the London Poor. 12010. Paper, 40 cents. HILL (FLORENCE DAVENPORT). Children of the State. Edited by FANNY FOWKE. Second Edition, enlarged. 12010. $1.75. Select Historical Documents of the Middle Ages. Translated and Edited by ERNEST HENDERSON. i2mo. Cloth, $1.50. HODGKIN. Italy and her Invaders, A.D. 376-535. By T. HODGKIN. Illus- trated with Plates and Maps. 4 vols. 8vo. Sold Separately. Vols. I. (2 parts) and II. 8vo. $12.50. Vols. III. and IV. 8vo. $9.00. The Dynasty of Theodosius; or, Eighty Years' Struggle with the Barbarians. HOLE (C.). Genealogical Stemma of the Kings of England and France. On a Sheet. 30 cents. A Brief Biographical Dictionary. Second Edition. i8mo. $1.25. HOLLAND. WORKS BY THOMAS ERSKINE HOLLAND, D.C.L. The Elements of Jurisprudence. Fourth Edition. 8vo. Clarendon Press Series. $2.50. The European Concert in the Eastern Question. A Collection of Treaties and other Public Acts. With Notes. 8vo. $3.25. HOOPER. The Campaign of Sedan: The Downfall of the Second Empire, August-September, 1870. By GEORGE HOOPER. With General Map and Six Plans of Battle. 8vo. $4.00. Waterloo : The Downfall of the First Napoleon. A History of the Campaign of 1815. By GEORGE HOOPER. With Maps and Plans. New Edition, revised. gi.oo. 13 HORTON (S. DANA). The Silver Pound and England's Monetary Policy since the Restoration. 8vo. $4.00. Silver in Europe. i2mo. $1.50. " A work of original historical investigation, and, considering the dryness of the subject to all but experts, written in a style remarkably interesting, and even picturesque, as well as vigorous." Westminster Review. " The most authoritative book on the subject ever written." London Graphic. The Duke of Wellington's Plan, and other Papers. 8vo. In the Press. HOWELL. The Conflicts of Capital and Labor. Historically and Economi- cally Considered. Being a History and a Review of the Trade Unions of Great Britain, showing their Origin, Progress, Constitution, and Objects in their Varied Political, Social, Economical, and Industrial Aspects. By GEORGE HOWELL, M.P., author of " The Handy Book of the Labor Laws," etc. I2mo. $2.50. "There is certainly a mass of information within its pages which no one wrestling with the labor problems of to-day can afford to ignore." Christian at Work. " Written with thorough knowledge and striking candor." Chicago Times. " Able and thorough ... it will be useful and even necessary to all special students of the subject everywhere." Critic. HOZIER. WORKS BY CAPTAIN H. M. HOZIER. The Seven Weeks' War : its Antecedents and its Incidents. With Maps. I2mo. $2.00. The Invasions of England. A History of the Past, with Lessons for the Future. 2 vols. 8vo. $8.00. HUGHES (T.). Alfred the Great. i2mo. $1.00. HUNGARY : Its History and Revolution. Together with a copious Memoir of Kossuth from new and authentic sources. With Index and Portrait of Kos- suth. $1.00. INGRAM (J. K.). A History of Political Economy. With Preface by Prof. E. J. JAMES, Ph.D. New Edition. i2mo. $1.50. INGRAM (T. D.). A History of the Legislative Union of Great Britain and Ireland. 8vo. $3.00. Two Chapters of Irish History. I. The Irish Parliament of James I. II. The Alleged Violation of the Treaty of Limerick. 8vo. $2.00. IRVING (J.). Annals of Our Time. A Diurnal of Events from the Accession of Queen Victoria to the Peace of Versailles, February, 1871. New Edition, revised. 8vo. Half-bound. $5.00. Supplement. From February, 1871, to March, 1874. 8vo. $1.25. Supplement. From March, 1874, to July, 1878. 8vo. $1.25. Supplement. 1878-1887. 8vo. $2.75. Vol. II. 1871-1887. 8vo. $5.00. JAMES (W.). The British in India. 8vo. $4.00. JAMES (G. P. R.). History of the Life of Richard Coaur de Lion, King of England. With Index and Portraits of Richard and Philip Augustus. 2 vols. Each $1.00. The Life and Times of Louis XIV. With Index and Portraits of Louis XIV. (after Mignard) and Mazarin. 2 vols. Each $1.00. 14 JENKS (EDWARD). The Constitutional Experiments of the Commonwealth. A Study of the Years 1649-1660. Thirlwall Dissertation. 12010. 90 cents. JENKS. The Government of Victoria (Australia). By EDWARD JENKS, M.A., Professor of Law in the University of Melbourne. 8vo. $4.00. JENNINGS (Rev. A. C.). Chronological Tables. A Synchronistic Arrangement of the Events of Ancient History. 8vo. $1.25. JEPHSON. The Platform, Its Rise and Progress. By HENRY JEPHSON. 2 vols. lamo. $4-oo. " Dr. Henry Jephson has struck a new vein in political history, and has worked it cer- tainly with diligence, and we think his readers will say with success. He claims that among the great political agencies the Platform has hitherto been overlooked. His remarks have an interest for all communities under parliamentary or elective government. ... A very useful as well as a very interesting addition to political literature." Washington Post. " Mr. Jephson is undoubtedly the first writer to treat the Platform systematically and to study it in its historical development and constitutional bearing. . . . The interest and im- portance of the book are great, and its merits conspicuous. . . . The historical facts and their sequence are well displayed, and Mr. Jephson's industry and research are worthy of high commendation." Times. " The nature of this work scarcely suggests sufficiently the scope of these noble volumes. They comprise the history of every notable political movement in this country from the acces- sion of George III. downwards to within the last ten years. This history takes its colour 'pool Mercury. JESSE'S Memoirs of the Court of England during the Reign of the Stuarts, including the Protectorate. 3 vols. Each $1.50. With Index and 42 Por- traits. Memoirs of the Pretenders and their Adherents. $1.50. Index and Por- traits of Prince James and Princess Louisa; J. Butler, Duke of Ormond; Prince Charles Edward ; Flora Macdonald ; H. Stuart, Cardinal York. (After Kneller, Wageman, and others.) JEVONS. WORKS BY W. STANLEY JEVONS, LL.D.. F.R.S. The Theory of Political Economy. Second Edition, with New Preface, etc. Svo. 2.50. Investigations in Currency and Finance. Edited, with an Introduction, by H. S. FOXWELL, M.A. Illustrated by 20 Diagrams. Svo. #7.50. Methods of Social Reform. Svo. 3.00. The State in Relation to Labour. English Citizen Series. i2mo. gr.oo. Letters and Journal. Edited by his Wife. Svo. $4.00. KEYNES. The Scope and Method of Political Economy. By JOHN NEVILLE KEYNES, M.A. i2mo. $2.25. KILLEN (W. D.). Ecclesiastical History of Ireland, from the Earliest Date to the Present Time. 2 vols. Svo. $9.00. KIRKUP. A History of Socialism. By THOMAS KIRKUP. I2mo. Cloth, $2.00. KITCHTN (G. W.). A History of France. With Maps, Plans, etc. 3 vols. Clarendon Press Series. I2mo. Each, $2.60. Vol. I. Down to the Year 1453. Vol. II. From 1453-1624. Vol. III. From 1624-1793. 15 LAMARTINE'S History of the Girondists, or Personal Memoirs of the Patriots of the French Revolution, from Unpublished Sources. Translated by H. T. RYDE. With Index and Portraits (after Raffet) of Robespierre, Madame Roland, and Charlotte Corday. 3 vols. Each $1.00. History of the Restoration of Monarchy in France (a sequel to his History of the Girondists). With Index and Portraits of Lamartine, Talleyrand, Lafayette, Ney, and Louis XVIII. 4 vols. Each $1.00. History of the French Revolution of 1848. With Index and Frontispiece, containing Portraits of Lamartine, Ledru Rollin, Dupont de 1'Eure, Arago, Louis Blanc, and Cremieux. 1.00. LANG (R. H.). Cyprus: Its History, its Present Resources, and Future Prospects. \Vith Illustrations. 8vo. $3.00. LAPPENBERG'S History of England under the Anglo-Saxon Kings. Trans- lated by the late B. THORPE, F.S.A. New Edition, revised by E. C. OTTE. 2 vols. Each Si.oo. " Notwithstanding the number of Histories of this Period which have been published since 1834 . . . the solid merits of this work still keep it in use; it is one of the books that no student of the period can afford to overlook." Nation. LEGGE (A. O.). The Growth of the Temporal Power of the Papacy. I2mo. $2.00. LEWIS. An Essay on the Government of Dependencies. By Sir GEORGE CORNEWALL LEWIS, K.C.B. Edited, with an Introduction, by C. P. LUCAS, B.A. 8vo. $3.50. LODGE'S Portraits of Illustrious Personages of Great Britain, with Bio- graphical and Historical Memoirs. 240 Portraits engraved on Steel, with the respective Biographies unabridged. Complete in 8 vols. Each $1.50. LONG (G.).~ The Decline of the Roman Republic. 5 vols. 8vo. $7.50. Vol. I. Destruction of Carthage to End of Jugurthine War. Vol. II. To Death of Sertorius. Vol. III. Third Mithridatic War, Catiline Conspiracy, and Consulship of C. Julius Cassar. Vol. IV. Gallic Campaigns and Events in Rome. Vol. V. Invasion of Italy to Caesar's Death. LYTE. History of the University of Oxford. From the Earliest Times to the Revival of Learning. By H. C. MAXWELL LYTE. 8vo. $5.00. MACHIAVELLPS History of Florence, and of the Affairs of Italy from the Earliest Times to the Death of Lorenzo the Magnificent : together with the Prince, Savonarola, various Historical Tracts, and a Memoir of Machiavelli. Index and Portrait. $1.00. MACKENZIE. An Introduction to Social Philosophy. By JOHN S. MAC- KENZIE, M.A., B.A., Assistant Lecturer on Philosophy in Owens College, Manchester, formerly Examiner in Philosophy in the University of Glasgow. 8vo. $2.60. "... This ideal depends upon three elements individual culture, the subjugation of nature, and social organization ; and true progress must include progress in all three. The details of this progress are worked out in a suggestive and interesting manner, and the whole discussion is marked with scholarship as well as good sense." Independent. 16 MAGNA CARTA. A careful Reprint. Edited by \V. STUBBS. 4(0. Paper, 25 cents. MAHAFFY. Problems in Greek History. By J. P. MAHAFFY, M.A., D.D. I2mo. $2.50. MAITLAND (F. W.). Pleas of the Crown, for the County of Gloucester. 8vo. 2.50. MALTHUS and his Work. By JAMES BONAR, M.A. 8vo. $4.00. MARKBY (W.). Elements of Law. Considered with reference to Principles of General Jurisprudence. Third Edition. Clarendon Press Series. 8vo. $3.00. MARRIOTT (J. A. R). The Makers of Modern Italy: Mazzini, Cavour, Garibaldi. Three Lectures delivered at Oxford. I2tno. 60 cents. MARSHALL. WORKS BY ALFRED MARSHALL, M.A., Professor of Political Economy in the University of Cambridge ; Fellow of St. John's College, Cam- bridge. Elements of the Economics of Industry. Globe 8vo, being Vol I. of Elements of Economics, Si.oo. Principles of Economics. Vol. I.. Second Edition, Revised. 8vo. $3.00. MARTEL (C.). Military Italy. $3.00. MATERIALISM, Ancient and Modern. By a late Fellow of Trinity College, Cambridge. 75 cents. MARTINEAU'S (HARRIET) History of England, from 1800-1815. With New Index (containing upwards of 1700 references). Si.oo. This is a reprint of the work published under the title "AN INTRODUCTION TO THE HISTORY OF THE THIRTY YEARS' PEACE." History of the Thirty Years' Peace, A.D. 1815-46. With New and Copious Index (containing upwards of 4000 references). 4 vols. Each $1.00. MATTHEW PARIS'S English History, from the year 1235 to I2 73- Translated from the Latin by Rev. J. A. GILES. D.C.L. With General Index to Matthew Paris and Roger of Wendover, and Engraving of Matthew Paris. 3 vols. Each $ 1.50. See also Roger of Wendover. MATTHEW OF WESTMINSTER'S Flowers of History, especially such as relate to the affairs of Britain, from the beginning of the World to A.D. 1307. Translated by C. D. YONGE. With Index. 2 vols. Each $1.50. MAXWELL (W. H.). History of the Irish Rebellion in 1798. By W. H. MAXWELL. With Portraits and Etchings on Steel by GEORGE CRUIKSHANK. I3th Edition. $2.00. MENZEL'S History of Germany, from the Earliest Period to a recent date. With Index and Portraits of Charlemagne (after Meissonier), Charles V. (after Holbein), and Prince Metternich (after Lawrence). 3 vols. Each $1.00. MICHELET. Modern History. Translated by M. C. M. SIMPSON, with con- tinuation. i6mo. Si.io. MIGNET'S History of the French Revolution, from 1789 to 1814. With Index and Portrait of Napoleon as First Consul. $1.00. 17 MILNER. England in Egypt. By ALFRED MILKER, late Under Secretary of Finance in Egypt. 8vo. $5.00. " A more diffuse and elaborate work would not have been so useful as this volume, which is conspicuous for lucidity and orderliness of treatment and exposition. The literary style is also distinctly better than it would have been if it had been overlaid with a veneering of finish. His book is an important contribution to the literature of a subject which, from the dawn of history, has never ceased to interest mankind." Af. Y. Tribune. MONTGOMERY (W. E.). The History of Land Tenure in Ireland. 8vo. $3.00. MONTELIUS (O.). The Civilization of Sweden in Heathen Times. Trans- lated from the Second Swedish Edition by Rev. F. H. WOODS, B.D. With Map and 205 Illustrations. 8vo. $4.00. MORE'S History of King Richard III. Edited, with Notes, by J. R. LUMBY. Pitt Press Series. i6mo. 90 cents. Utopia. With Notes by the Rev. Professor LUMBY, D.D. Pitt Press Series. i6mo. 90 cents. MUNRO (J. E. C.). The Constitution of Canada. 8vo. $2.60. NAPOLEON I. History of. By P. LANFREY. A Translation made with the sanction of the Author. New and cheaper Edition. 4 vols. $9.00. NEILSON. Trial by Combat. A History of the Judicial Duel. By GEORGE NEILSON. 2.00. NICHOL. WORKS BY JOHN NICHOL, M.A., LL.D. Tables of European History, Literature, and Art, A.D. 200-1888, and of American History, Literature, and Art. Fourth Edition. Enlarged. $2.25. Tables of Ancient Literature and History, B.C. ISOO-A.D. 200. 410. $1.50. NORGATE. England under the Angevin Kings. By KATE NORGATE. With Maps and Plans. 2 vols. 8vo, gilt tops, in box. $5.00. NUGENT'S (Lord) Memorials of Hampden, his Party and Times. With a Memoir of the Author, Copious Index, an Autograph Letter, and Portraits of Hampden ; John Pym ; Archbishop Abbott ; Fielding, Earl of Denbigh ; Marquis of Argyle; Marquis of Montrose; Oliver Cromwell; G. Sackville, Earl Dorset; Greville, Lord Brooke; W. Harvey, M.D. ; Sir B. Grenvil; Blanche Somerset. (After Vandyke and others.) $1.50. OCKLEY (S.). History of the Saracens, and their Conquests in Syria, Persia, and Egypt. Comprising the Lives of Mohammed and his Successors to the Death of Abdalmelik, the Eleventh Caliph. By SIMON OCKLEY, B.D., Pro- fessor of Arabic in the University of Cambridge. Sixth Edition. With Portrait of Mohammed. $1.00. ORDERICUS VITALIS' Ecclesiastical History of England and Normandy. Translated with Notes, the Introduction of Guizot, and the Critical Notice of M. Delille, by T. FORESTER, M.A. To which is added the Chronicle of St. Evroult. With very copious General and Chronological Indexes. 4 vols. Each $1.50. PALGRAVE (Sir F.). History of Normandy and of England. Completing the History to the Death of William Rufus. 4 vols. 8vo. $30.00. PALGRAVE (R. F. D.). The, House of Commons. Illustrations of its History and Practice. New Edition. |i.oo. 18 PALGRAVE (R. H. I.). Dictionary of Political Economy. 8vo. Parts I .-IV. now ready. (To be completed in Twelve Parts.) $1.00 each Part. PARKIN. Imperial Federation. By G. R. PARKIN. 121110. $1.25. PARNELL. The War of the Succession in Spain during the Reign of Queen Anne, 1702-1711. Based on Original Manuscripts and Contemporary Records. By Col. the Hon. ARTHUR PARNELL, R.E. With Map. etc. 8vo. 34.00. " Infinitely the best military description of it to be found in any of the tongues of Europe." Mr. W. O'CONNOR MORRIS, in the Academy. " A solid history of the war." Spectator. PAULI (Dr. R.). Life of Alfred the Great. Translated from the German. To which is appended Alfred's Anglo-Saxon Version of Orosius. With a literal translation interpaged, Notes, and an Anglo-Saxon Grammar and Glos- sary, by B. THORPE. With Woodcut Frontispiece. 1.50. PAYNE (E.J.). History of the New World called America. By EDWARD JOHN PAYNE, Fellow of University College. 8vo. Vol. I. $3.00. " Leads the student in a novel direction. . . . The elucidation of the subject surpasses in thoroughness and clearness anything of the kind we have ever read before." N. Y. Times. " He has produced a volume of extraordinary interest, not more remarkable for its learning and force than for the extreme freshness of the point of view." N'. Y. Times (second notice). PEPYS 1 Diary and Correspondence. Deciphered by the Rev. J. SMITH, MA., from the original Shorthand MS. in the Pepysian Library. Edited, with a short Life and Notes, by RICHARD, Lord BRAYBROOKE. 4 vols. Each $1.50. With Appendix and additional Letters, an Index, and 31 Engravings. PETER (C.). Chronological Tables of Greek History. Translated by G. CHAWNER. 410. $3.00. PHILIP DE COMMINES, Memoirs of. Containing the Histories of Louis XI. and Charles VIII., Kings of France, and Charles the Bold, Duke of Burgundy. Together with the Scandalous Chronicle, or Secret History of Louis XL, by JEAN DE TROVES. Translated from the French and Edited, with a Life of De Commines and Notes, by ANDREW R. SCOBLE. With Index and Portraits of Charles the Bold and Louis IX. 2 vols. Each JSi.oo. PUKE (WARBURTON). The Barren Ground of Northern Canada. 8vo. 2.00. PLATO. The Republic. Translated into English, with an Analysis and Intro- duction, by B. JOWETT, M.A. New Edition. 8vo. $3.25. Half roan, gilt top. $4.00. The Republic. Translated into English, with Notes, by J. LL. DAVIES, M.A., and D. J. VAUGHAN, M.A. Golden Treasury Series. i8mo. $1.00. The Dialogues of Plato. Translated into English, with Analyses and Introduc- tions, by B. JOWETT, M.A., Master of Balliol College. Third Edition, revised and corrected throughout, with Additions. 5 vols. $20.00. Also in half calf, $40.00; and half morocco, $45.00. " Here Plato talks in all his grave and playful amplitude. Here we feel his grace, his humor, his dramatic power, his fondness for the mere act of utterance, his combination of passionate Hellenism and cosmopolitanism, his luminous insight into common things, his world-scorning moralities, his suggestion everywhere of meanings deeper than he cares to express. All this Professor Jowett has rendered. No other English translation from the Greek, except our English Bible, has brought over so fully the riches of its original." Tkt Nation. 19 POLITICAL CYCLOPAEDIA. A Dictionary of Political, Constitutional, Statis- tical, and Forensic Knowledge ; forming a Work of Reference on subjects of Civil Administration, Political Economy, Finance, and Social Relations, etc. 4 vols. Each $1.00. POLLOCK. WORKS BY SIR FREDERICK POLLOCK, Barrister-at-Law, M.A. An Introduction to the History of the Science of Politics. Oxf. i2mo. 75 cents. Oxford Lectures, and other Discourses. 8vo. $2.50. POOLE (R. L.). A History of the Huguenots of the Dispersion at the Recall of the Edict of Nantes. $2.00. PRICE (L. R. D.). Industrial Peace: Its Advantages, Methods, and Diffi- culties. With Preface by A. MARSHALL. 8vo. $1.50. PRICHARD (I. T.). The Administration of India. From 1859 to 1868. 2 vols. 8vo. $6.00. PRIDEAUX. Connection of Sacred and Profane History. 2 vols. 8vo. $2.50. RALEIGH (T.). Elementary Politics. i6mo. Stiff cover. 25 cents. RALEIGH (Sir W.). A Biography. By WILLIAM STEBBING, MA. With a Frontispiece. $2.60. RANKE (LEOPOLD). A History of England, principally in the Seventeenth Century. Translated under the superintendence of G. W. KITCHIN, M.A., and C. W. BOASE, M.A. 6 vols. 8vo. $16.00. History of the Latin and Teutonic Nations, 1494-1514. Translated by P. A. ASHWORTH. ^i.oo. History of the Popes, their Church, and State, and especially of their conflicts with Protestantism in the i6th and iyth centuries. Translated by E. FOSTER. With Portraits of Julius II. (after Raphael), Innocent X. (after Velasquez) , and Clement VII. (after Titian). 3 vols. Each $1.00. History of Servia and the Servian Revolution. With an account of the Insur- rection in Bosnia. Translated by Mrs. K.ERR. To which is added, The Slave Provinces of Turkey, from the French of CYPRIEN ROBERT, and other sources. $1.00. RECORDS OF THE REFORMATION. The Divorce, 1527-1533. Collected and arranged by N. POCOCK, M.A. 2 vols. 8vo. $9.00. REEVES. The Finding of Wineland the Good. The History of the Icelandic Discovery of America. Edited and Translated from the earliest records by ARTHUR MIDDLETON REEVES. With Phototype Plates of the Vellum MSS. of the Sagas. 410. Bound in half vellum. $11.00. " The importance of Mr. Reeves' extremely scholarly volume is at once apparent. The historians and students of America have now before them, in fac-simile, all the evidence on which the claim rests that America was discovered long before the day of Columbus by Icelanders colonizing Greenland." Literary World. " All students whose inquiries lead them in this direction will be thankful for the sources of information here laid open to them. . . . He has prefixed seven well-written introductory chapters, and has added a profusion of notes elucidating as far as possible every point of difficulty." Critic, RICARDO. Letters of David Ricardo to Robert Malthus. 1810-1823. Edited by J. BONAR, M.A. 8vo. $2.75. On the Principles of Political Economy and Taxation. Edited by E. C. K. CONNER, M.A. $1.50. RICHEY (A. G.). The Irish Land Laws. $1.25. 20 ROGER DE HOVEDEN'S Annals of English History, comprising the History of England and of other Countries of Europe from A.D. 732 to A.D. 1201. Translated from the Latin, with Notes and Index, by H. T. RlLEY, B.A. 2 VOlS. $I.5O. ROGER OF WENDOVER'S Flowers of History, comprising the History of England from the Descent of the Saxons to A.D. 1235, formerly ascribed to Matthew Paris. Translated from the Latin, with short Notes and Index, by J. A. GII.KS, D.C.L. 2 vols. Each $1.50. ROGERS. WORKS BY JAMES E. THOROLD ROGERS, M.P. Cobden and Political Opinion. $3.00. Historical Gleanings. A Series of Sketches. $1.50. Second Series. $1.75. Protests of the Lords, including those which have been expunged, from 1624 to 1874. With Historical Introductions. 3 vols. 8vo. $10.50. History of Agriculture and Prices in England, A.D. 1259-1793. Vols. I. and II. (1259-1400). 8vo. $10.50. Vols. III. and IV. (1401-1582). 8vo. $12.50. Vols. V. and VI. (1583-1702). 8vo. $12.50. The First Nine Years of the Bank of England. 8vo. $1.75. A Manual of Political Economy for the Use of Schools. Third Editio'n. Clarendon Press Series. i6mo. $1.10. ROUTLEDGE (J.). Popular Progress in England. Chapters in the History of Popular Progress. 8vo. $5.00. RUSSELL (Sir CHARLES). The Opening Speech for the Defence. Delivered before the Special Commission appointed to Inquire into the Charges and Allegations against Irish Members and others. Carefully revised by the author. 8vo. Cheap edition, paper covers, 75 cents. New Views on Ireland; or, Irish Land Grievances and Remedies. $1.00. RUSSIA, History of, from the earliest Period. Compiled from the most authentic sources, including Karamsin, Tooke, and Segur, by WALTER K. KELLY. With Index and Portraits of Catherine, Nicholas, and Menschikoff. 2 vols. Each $1.00. SCOTTISH NATIONAL MEMORIALS. With 30 full-page Plates and nearly 300 Illustrations in the Text. 410. $18.00. SCRATCHLEY (Sir PETER). Australian Defences and New Guinea. With an Introductory Memoir. 8vo. $4.00. SCRUTTON. Land in Fetters ; or, the History and Policy of the Laws re- straining the Alienation and Settlement of Land in England. By T. E. SCRUTTON, M.A. 8vo. $2.00. SEELEY (J. R.). The Expansion of England. Lectures. $1.50. SELBORNE (Earl). A Defence of the Church of England against Disestab- lishment. 82.25. Ancient Facts and Fictions concerning Churches and Tithes. $2.25. SHUCKBURGH (EVELYN S., M.A.). A School History of Rome. With Maps and Plans. I2ino. In the Press. SHUCKFORD'S Sacred and Profane History Connected (in continuation of Prideaux). 2 vols. 8vo. $2.50. 21 SM SIDGWICK. WORKS BY HENRY SIDGWICK, Professor of Moral Philosophy in the University of Cambridge. The Principles of Political Economy. Second Edition, revised. 8vo. 4.00. The Elements of Politics. 8vo. 4.00. "... But aside from controverted matters, the book is of the highest merit as con- taining a profound, exhaustive, and systematic examination of the whole field of politics." Evening Post. " Prof. Sidgwick has conferred a lasting benefit upon the political world by this noble work." Public Opinion. SIMPSON (W.). An Epitome of the History of the Christian Church. New Edition, revised. $1.00. SIX OLD ENGLISH CHRONICLES: viz., Asser's Life of Alfred and the Chroni- cles of Ethelwerd, Gildas, Nennius, Geoffrey of Monmouth, and Richard of Cirencester. Edited, with Notes and Index, by J. A. GILES, D.C.L. With Portrait of Alfred. #1.50. : ART. An Introduction to the Theory of Value. By WILLIAM SMART. I 2111 1). $1.25. SMITH (ADAM). The Wealth of Nations. An Inquiry into the Nature and Causes of. Edited by E. BELFORT BAX. 2 vols. $2.00. New Edition. Notes by J. E. THOROLD ROGERS, M.A. 2 vols. 8vo. $5.25. SMITH. WORKS BY GOLDWIN SMITH, D.C.L. The Conduct of England to Ireland. An Address. 8vo. Paper. 15 cents. Three English Statesmen. A Course of Lectures on the Political History of England. $1.50. Canada and the Canadian Question. With Map. Demy 8vo. $2.00. The United States. An Outline of Political History. 1492-1871. 32.00. SMYTH'S (Professor) Lectures on Modern History; from the Irruption of the Northern Nations to the close of the American Revolution. With Index. 2 vols. Each $1.00. STATESMAN'S Year-Book, The. Statistical and Historical Annual of the States of the Civilized World. Edited by J. SCOTT KELTIE. Revised after official returns. Current volume, 1893. $3.00. Back volumes, those remaining in print, $3.00 each. " Is much the best book of its kind that is published; it should be in all general and school libraries, as well as owned by every one who has occasion to know of the government, popu- lation, resources, etc., of any nation in the world." N. Y. Herald. "The 'Statesman's Year-Book' is, and will remain as long as it is in competent hands, the king of books of reference; the best not only of this country, but all countries; not only the best for some purposes, but for most purposes for which books of reference are required; on the whole, a perfect work." Athenceum. " The clearest and truest picture that has ever been presented of the real Government of Great Britain." Review of Reviews. STEPHEN (J. K.) International Law and International Relations. $1.50. STRICKLAND ( AGNES). Lives of the Queens of England, from the Norman Conquest to the Reign of Queen Anne. By AGNES STRICKLAND. Library Edition. With Portraits, Autographs, and Vignettes. 8 vols. 8vo. $16.00. Abridged Edition for the use of Schools and Families. Large I2mo. $1.75. Lives of the Queens of England, from the Norman Conquest. From Official Records and other authentic Documents, public and private. Revised Edition. With Portraits of Matilda of Flanders ; Elizabeth Woodville; Elizabeth; Anne of Denmark; Mary of Modena ; Mary II. With Index. 6 vols. Each $1.50. 22 STRICKLAND. Continued. Life of Mary Queen of Scots. With Index and Two Portraits of Mary 2 vols. Each 5 I -S- Lives of the Tudor and Stuart Princesses, i vol. With Portraits. $1.50. STUART, Relics of the Royal House of. Illustrated by a series of 40 Plates in Colors, drawn from Relics of the Stuarts by WILLIAM GIBB. With an Intro- duction by JOHN SKELTOX, C.B., LL.D., and Descriptive Notes by W. ST. JOHN HOPE, Secretary of the Society of Antiquaries. Limited Edition. Royal 4to. % levant morocco, gilt edges. $50.00. STUBBS. WORKS BY WILLIAM STUBBS, D.D., Lord Bishop of Chester. The Constitutional History of England, in its Origin and Development. Library Edition. 3 vols. 8vo. $12.00. Student's Edition. Clarendon Press Series. 3 vols. I2mo. Each $2.60. Select Charters and other Illustrations of English Constitutional History, from the Earliest Times to the Reign of Edward I. $2.25. Magna Carta. A careful Reprint. 410. Paper. 25 cents. The Study of Mediaeval and Modern History and Kindred Subjects. 2.25. Registrum Sacrum Anglicanum. An attempt to exhibit the course of Episcopal Succession in England. Small 410. $2.25. STUBBS (C. W.). Village Politics: Addresses and Sermons on the Labor Question. i6mo. $1.25. SYDNEY. England and the English in the Eighteenth Century. Chapters in the Social History of the Times. By WILLIAM CONNOR SYDNEY, F.R.S. 2 vols. I2mo. $5.00. " A readable and valuable contribution to the literature of the subject." Evening Post. ' The work embodies a mass of information about the manners and customs of the English tion, and gives a vivid picture of our great-grandfathers in their habit as they lived. The style of the author is clean-cut and accurate, and the typographical execution admirable." Epoch, N. y. Social Life in England. From the Restoration to the Revolution, 1660-1690. By WILLIAM CONNOR SYDNEY, author of " England and the English in the Eighteenth Century." I2mo. Cloth. $2.50. " He has succeeded in delineating the every-day life of the time in a singularly graphic manner." Critic. TAIT (C. W. A.). Analysis of English History. New Edition, revised to correspond with the latest edition of Green's " Short History of the English People." $1.10. THE AL (G. McCALL). History of South Africa. 5 vols. 8vo. $20.00. THOMPSON (GEO. C.). Public Opinion and Lord Beaconsfield. 2 vols. 8vo. JSio.oo. THOMPSON (HERBERT M., M.A.). The Theory of Wages, and its Applica- tion to the Eight-Hour Question, and other Labor Problems. I2mo. |>i.oo. THIERRY'S History of the Conquest of England by the Normans : its Causes, and its Consequences in England, Scotland, Ireland, and the Continent. Translated from the yth Paris Edition by WILLIAM HAZLITT. With short Memoir of Thierry, Index, and Portraits of Thierry and William the Conqueror, a vols. Each 1.00. 23 TWELVE ENGLISH STATESMEN. Price per volume : Paper covers, 50 cents. Cloth, flexible, 60 cents ; cloth, uncut edges, 75 cents. William the Conqueror. By EDWARD A. FREEMAN, D.C.L. Ready. Henry H. By Mrs. J. R. GREEN. Ready. Edward I. By F. YORK POWELL. Henry VII. By JAMES GAIRDNER. Ready. Cardinal Wolsey. By Professor M. CREIGHTON. Ready. Elizabeth. By Professor E. S. BEESLY. Ready. Oliver Cromwell. By FREDERIC HARRISON. Ready. William HI. By H. D. TRAILL. Ready. Walpole. By JOHN MORLEY. Ready. Chatham. By JOHN MORLEY. Pitt. By Lord ROSEBERRY. Ready. Peel. By J. R. THURSFIELD. Ready. VINOGRADOFF. Villainage in England. Essays in English Mediaeval History by PAUL VINOGRADOFF, Professor in the University of Moscow. 8vo. $4.00. VON SAMSON-HIMMELSTIERN A. Russia under Alexander HI. and in the preceding Period. Translated from the German of H. Von Samson-Himmel- stierna by J. MORRISON, M.A. Edited, with Explanatory Notes and an Introduction, by FELIX VOLKHOVSKY. 8vo. $3.00. WHEELER. WORKS BY J. TALBOYS WHEELER. India under British Rule, from the Foundation of the East India Com- pany. 8vo. $3.50. A Short History of India. Embodying the History of the Three Frontier States of Afghanistan, Nepaul, and Burma. With Maps. $3.50. College History of India, Asiatic and European. $1.00. Primer of Indian History, Asiatic and European. i8mo. 35 cents. WILLIAM OF MALMESBURY'S Chronicle of the Kings of England, from the Earliest Period to the Reign of King Stephen. Translated by Rev. J. SHARPE. Edited, with Notes and Index, by J. A. GILES, D.C.L. With Frontispiece. $1.50. WINGATE. Madhiism and the Egyptian Soudan. Being an Account of the Rise and Progress of Mahdiism, and of subsequent events in the Soudan to the present time. By Major F. R. WlNGATE, R.A., D.S.O., Assistant Adjutant- General for Intelligence, Egyptian Army. With 10 Maps and Numerous Plans. 8vo. $10.00. Compiled from official sources, and likely to be regarded as the final account of the campaign which ended in the death of General Gordon. The fullest possible details are given as to the fall of Khartoum. " As a contribution to military literature it will probably occupy a distinguished place as one of the most masterly works' of its kind. Major Wingate's account of the siege and fall of Khartoum is as complete as it is ever likely to be made. The real character of Mahdiism, too, stands out clearly." Daily Telegraph. " Most excellent and comprehensive ; it supplies an admirable history of the Soudan insurrection." Sir SAMUEL BAKER, in the Anti-yacobin. MACMILLAN & CO., 112 FOURTH AVENUE, NEW YORK. 24 Ge /7 oOv - - - - 1. T A r *tf ~ v* / i t '}+*' ^, / rt ++ t ' t ' j&tfi ' Y s/ SMS . ' * /^ UC Southern Regonal Utxary FaciW A 000 525 426 3