THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 OF CALIFORNIA 
 
 LOS ANGELES
 
 HISTORY OF 
 POLITICAL ECONOMY
 
 AU right* rtitrvt*
 
 A HISTORY 
 
 OF 
 
 POLITICAL ECONOMY 
 
 if 
 
 JOHN KELLS INGRAM, LL.D. 
 
 FELLOW OF TRINITY COLLEGE, DUBLIN 
 
 itJ) preface 
 
 PKOF. E. J. JAMES, PH.D. 
 
 UNIVEBSITY OF PENNSYLVANIA 
 
 Neto fJork: 
 
 THE MACMILLAN COMPANY. 
 1902.
 
 COPYRIGHT, 1887, 
 
 BY 
 GEORGE W. DILLAWAY. 
 
 Press of J. J. Little & Co. 
 Astor Place, New York.
 
 PBEFACE. 
 
 IT is with great pleasure that I embrace the opportunity 
 afforded me by the publishers of Dr. Ingram's "History of 
 Political Economy " to commend the book to the attention of 
 the American public. Dr. Ingram needs no introduction to 
 our students of economics. His work in the Encyclopaedia 
 Britannica has attracted marked attention wherever earnest 
 thinkers are studying the social and economic problems of our 
 time, whether in Europe or America. The present treatise 
 deserves especial notice, as the first serious attempt by a pro- 
 perly qualified English writer to present a view of the progress 
 of economic thought. The works of M'Culloch and Twiss 
 on the same subject were of value only because there was 
 nothing else on the same topic. They testify eloquently to 
 the exceedingly primitive state of the history of economic 
 thought and policy which existed in their day. The work 
 of Blanqui, recently translated into English, is rather a 
 history of economic systems (and a poor one even as such) 
 than of economic theories and doctrines. Up to the time of 
 the appearance of the nineteenth volume of the Encyclopaedia 
 Britannica there was no essay on the subject in English 
 which could be considered a very valuable one. We now 
 Vave a treatise which will compare favourably with any work 
 of similar compass in any other language. 
 
 1381036
 
 vi PREFACE. 
 
 It seems appropriate in this connection to emphasise briefly 
 the importance of this service to our American schools and 
 colleges. In no country, except possibly France, has there 
 been such pure and unadulterated teaching of dogma in the 
 realm of economics as in America. The teaching of thi? 
 subject has been largely in the hands of clergymen or other 
 people whose specialties, so far as they have had any, have 
 lain in other directions. "When called upon to teach the 
 subject they have ordinarily taken some standard text-book 
 and taught it verbatim et literatim, adhering to the letter in 
 a manner which would have seemed ridiculous even to the 
 authors of the books, though they were oftentimes dogmatic 
 enough themselves. 
 
 The result was, of course, not merely superficiality, but an 
 extreme form of doctrinaireism and a priori-ism, which even 
 yet dominates to a large extent the public mind so far as this 
 troubles itself with economic principles at all. The great phe- 
 nomena of our modern industrial life do not allow themselves 
 to be subsumed under any such simple economic forms. The 
 result has been that in the case of those who really thought 
 about the subject at all, and who tried to bring their practical 
 ideas into harmony with the economic teaching which they 
 had received, the sentiment took strong hold and found 
 frequent expression that it is all very well to propound econo- 
 mic doctrines, and they may be true in theory, but they will 
 not work in practice. In the case of those who did not think 
 of the matter at all there would be found the grossest incon- 
 sistency between their professed economic doctrines and their 
 actual views of public policy and economic phenomena. 
 
 A change has recently taken place in the spirit and methods 
 of teaching the subject, so that now there is scarcely a leading 
 centre of college or university instruction in which the old
 
 PREFACE. vh 
 
 plan has not been considerably modified. This is a change 
 in the right direction, I believe, and whatever will hasten its 
 progress deserves serious attention. To this end nothing will 
 contribute more than a study of the history of the rise and 
 development of economic systems and economic thought. A 
 thoughtful study of the history of investigation and theories 
 has valuable results in any branch of human learning, but above 
 all in the field of moral, philosophical, and social science. 
 
 The first lesson borne in upon the serious student of eco- 
 nomic systems and economic thought is the essential relativity 
 of economic theories, at least of all such as have been hitherto 
 propounded. The dogmatist in the field of economics, the man 
 who never learned anything from history, regards the whole 
 past development of politics and theories as did Say, who 
 looked upon the history of the science as a record of absurd 
 and justly exploded opinions. But the man who studies them 
 carefully in order to find out what measure of truth was in 
 each form which prevailed and exercised a wide influence 
 finds the conviction gradually borne in upon him that econo- 
 mic systems and theories change with every great change in 
 industry and in man. The axioms and theorems which apply 
 to one form of society may have little or no application in 
 another form, and any attempt to make such application may 
 result in the most absurd conclusions. An explanation of the 
 phenomena of industrial life in such a community as ancient 
 Eome or mediaeval Europe will not serve as an explanation of 
 the life of to-day. Nor will a theory which is adequate to the 
 demands of an industrial state like England or America suit 
 such a country as India or Africa. It is not, therefore, a 
 science in which the laws and principles may be safely compared 
 with the laws and principles of physics and chemistry, which, 
 BO far as we know, are true in all times and placea In other
 
 tlii PREFACE. 
 
 words, the science of economics must be relative and progres- 
 sive, because the phenomena which form its subject-matter are 
 changing all the time, not merely from age to age, but from 
 country to country. 1 
 
 The view, therefore, expressed by Colonel Torrens over sixty 
 years ago is, at least in the sense in which he was think- 
 ing of it, an erroneous one. He wrote as follows : " In the 
 progress of the human mind a period of controversy amongst 
 the cultivators of any branch of science must necessarily 
 precede the period of unanimity. With respect to Political 
 Economy, the period of controversy is passing away, and that 
 of unanimity is rapidly approaching. Twenty years hence 
 there will scarcely be a doubt respecting any of its funda- 
 mental principles." Mill, writing twenty years later, thought 
 to formulate those principles on which everybody agreed, and 
 believed confidently that on several topics, like that of value, 
 for example, the last word had been spoken. Travers Twiss, 
 in his lectures at Oxford in 1846, said that, while it was true 
 that the simplest doctrines of the science were vigorously con- 
 troverted during the earlier part of the century, yet all the 
 great principles are now readily acquiesced in ; and he proposed 
 to show how this had been accomplished. His attitude was 
 significant. He proposed not to show the modicum of truth 
 which lay in each of the great systems of economic policy and 
 theory, but how they were all false, and how they had been 
 gradually superseded by the pure and unadulterated system of 
 truth as it existed in his day. 
 
 Less than fifteen years after Twiss had written these words 
 we find Professor Cairnes almost in despair over the prospects 
 
 1 The economic laws which may be discovered as the result ef a com- 
 plete comparative view of human history and development belong, of course 
 
 In A (\\fffrp.nt. rat.p.tmrv anil are ftasfrihfiri hv Dr. Inoram on D. 2Os. 
 
 iaa 
 
 different category, and are described by Dr. Ingram on p.
 
 PREFACE. it 
 
 of the science on account of the continued agitation against 
 what he is pleased to call its fundamental principles. He 
 says in his first lecture delivered before the University of 
 Dublin, in commenting upon Torrens' prophecy above quoted : 
 " Five-and-thirty years have passed since that unlucky pro- 
 phecy was uttered, and yet sudh questions as those respecting 
 the laws of population, of rent, of foreign trade, the effects of 
 different kinds of expenditure on distribution, the theory of 
 prices all fundamental in the science are still unsettled, and 
 must still be considered as ' open questions,' if that expression 
 may be applied to propositions which are still vehemently 
 debated, not merely by sciolists and smatterers who may 
 always be expected to wrangle, but by the professed cultivators 
 and recognised expounders of the science. So far from the 
 period of controversy having passed, it seems hardly yet to 
 have begun controversy, I mean, not merely respecting pro- 
 positions of secondary importance or the practical application 
 of scientific doctrines (for such controversy is only an evi- 
 dence of the vitality of the science, and is a necessary con- 
 dition of its progress), but controversy respecting fundamental 
 principles which lie at the root of its reasonings, and which 
 were regarded as settled when Colonel Torrens wrote." 
 
 In the preface to the published lectures Professor Cairnes 
 states it to be his purpose " to bring back the discussions of 
 Political Economy to those tests and standards which were 
 formerly considered the ultimate criteria of economic doctrine, 
 but which have been completely lost sight of in many modern 
 publications." Although he thus admits the existence of great 
 difference of opinion, yet he also shows that he is a stead- 
 fast believer in the ultimate truth of the old formulations, 
 and an apologetic tone runs through his remarks, as if he 
 needed to justify, to himself at least, his willingness to take
 
 X PREFACE. 
 
 any notice of a set of men who were so blind as to deny the 
 validity of the old system. 
 
 Now, as we have noted above, a study of the history of 
 economic systems and economic theories of society in its 
 various industrial stages, and of the explanations offered of 
 its industrial phenomena by contemporaneous writers, com- 
 pletely changes such a mental attitude. The student becomes 
 aware that every one of the great systems possessed some 
 truth, and no one has been elaborated which contains the 
 whole truth. He becomes aware of a still more important 
 fact, and that is, that owing to the continual changes in the 
 nature of the elements with which he has to deal, no uni- 
 versal system, no system which shall be valid in all times 
 and places, can at present, if indeed it ever can, be formu- 
 lated. We can formulate for our time and country, for our 
 type of society and industry, for our race and nation ; but 
 such a formulation, even though perfectly correct, would pro- 
 bably not hold for any other time or country or type at 
 race, though it would, of course, hold true of them to just the 
 extent to which they are similar to us and ours. As a result 
 of this conviction, when a problem presents itself, the eco- 
 nomist does not set out with a firm determination to force it 
 at any cost into the old moulds. He recognises that there 
 are probably new elements in the case which cannot be 
 brought within the old formulas without changing the prob- 
 lem to such an extent that its solution would be of no value, 
 since it would no longer correspond to the actual problem to 
 be solved. On the contrary, he devotes himself to a careful 
 study of all the elements in the case, and while seeking help 
 from all the solutions of other similar and dissimilar problems 
 of other times and countries, recognises that after all the exist- 
 ing problem is a new one, and that any attempt to apply the
 
 PREFACE. xi 
 
 cut and dried recipes of an a priori system san only result 
 in failure. 
 
 Now, it is this mental attitude a recognition of the value 
 of the services of the great thinkers of the past, combined 
 with an equally full recognition that they were but creatures 
 of their age, writing and thinking primarily for their time 
 and society, and were circumscribed by the same limitations 
 as hedged in their contemporaries in similar fields that every 
 economic thinker should strive to attain. Only in this way 
 can we do justice to the contributions of former thinkers, and 
 at the same time keep our minds open for the reception of 
 all new truth. 
 
 Of course, there is more or less of this spirit in all the 
 great writings on the subject of Political Economy. Mill, in 
 particular, deserves praise for admitting to a certain extent 
 the validity of the above view, but his knowledge of economic 
 history was not sufficient and his " historical sense " was not 
 sufficiently developed for him to come thoroughly under the 
 influence of this truth. In his discussion of the theory of 
 Distribution he acknowledged the justness of this conception, 
 but failed to carry it into the domain of Production. He thus 
 stamped himself as a believer in the existence of " natural 
 laws " in economics in the Ricardian sense of that term. 
 
 In developing this spirit a good text-book written from 
 such a point of view is a great aid. We are under special 
 obligations, therefore, to Dr. Ingram for the preparation of this 
 convenient hand-book. It is believed that its general intro- 
 duction into our college and university work would greatly 
 stimulate the careful study of economic thought and policy. 
 
 I may be pardoned one word in regard to the so-called 
 " New Political Economy." It is perhaps a matter of indif- 
 ference whether the change which has recently taken place in
 
 M PREFACE. 
 
 the tendencies and methods of economic thought be dignified 
 by a distinctive name or not. The important point is that 
 there has been a great change, and that the valuable work 
 in economics for the last twenty years has nearly all been 
 done by men who are distinctly under the influence of thia 
 new spirit, whether they profess themselves as adherents 
 of the new school or not. The term "Historical School" 
 has been employed to distinguish one set of writers and 
 thinkers connected with the movement. There is much 
 misunderstanding as to what these men have accomplished 
 in economics, and as to what they are trying to accomplish. 
 Their work is not limited, as many seem to think, to a study 
 of former writers on economics. Their object is the same as 
 that of previous investigators, viz., to find as far as possible 
 the laws underlying the industrial progress of human society. 
 They believe, however, that this can be done only by a care- 
 ful study of the origin and development of human society on 
 its industrial sides. The economic systems best adapted to 
 further the industrial interests of society must change with 
 every great change in social organisation, and with the gradual 
 change in the character of man himself which is the result 
 of advancing civilisation. It is believed that by a study of the 
 economic systems of successful societies a clue may be dis- 
 covered to a general law of industrial progress. By discovering 
 and studying the essential features of many different national 
 economies we may finally by comparison deduce (or, if you 
 like it better, induce) a general rule of economic development 
 which may form the basis of a general political economy. 
 
 Whether this view be just or not and we must admit, I 
 think, that the positive results in this particular direction are 
 not all that could be desired, since they have been such as 
 to lead some writers to give up any hope of ascertaining
 
 PREFACE. xiii 
 
 any general laws of economics yet the negative results have 
 been neither few nor unimportant. They have demonstrated 
 beyond a doubt that some of the so-called orthodox views 
 as to the " cosmopolitanism and perpetualism " of the natu- 
 ral laws of Political Economy were erroneous. What were 
 claimed to be fundamental principles of all economic theory 
 have been proved to hold good only in a certain form of 
 society which is to be found only on a very small portion of 
 the earth's surface, and not even there, in the purity pre- 
 supposed by the premises of this theory. 
 
 This is a real service ; since next to offering a theory which 
 will explain additional phenomena is the service which proves 
 beyond a doubt that the generally accepted one does not and 
 cannot explain known facts; for the result of such demon- 
 stration must be a quickened zeal in discovering the true 
 doctrine. The work of the so called Historical School has 
 thus far, then, been primarily critical and destructive, though 
 it has resulted in bringing to light an enormous amount of 
 material, which must be utilised by him who would construct 
 anew those places which have been torn down. To under- 
 stand their work fully and this is an essential thing for every 
 one who would comprehend the present tendencies in econo- 
 mics a study of the history of economic theory is necessary. 
 In this work no better guide is at present attainable for the 
 English student than this book of Dr. Ingrain's. 
 
 E. J. JAMES. 
 
 UVOTRSITY or PENNSYLVANIA, 
 PHILADELPHIA,
 
 BIBLIOGRAPHICAL NOTE. 
 
 THE reader is referred for fuller information to the following 
 books on the history of Political Economy, all of which have 
 been more or less, and some very largely, used in the prepara- 
 tion of the present work : 
 
 GENERAL HISTORIES. Sistoire de rficonomie Politlque en Europe 
 depuis les anciens jusqu' a no* jours, by Jerome Adolphe Blanqui (1837- 
 38) ; of which there is an English translation by Emily J. Leonard 
 (1880). Histoire de V Economic Politique, by Alban de Villeneuve- 
 Bargemont (Brussels, 1839; Paris, 1841); written from the Catholic 
 point of view. View of the Progress of Political Economy in Europe since 
 the Sixteenth Utntury, by Travers Twiss, D.C.L. (1847). Die geschichtliche 
 Entwickelung der National- Oekonomik und ihrer Literatur, by Julius 
 Kautz (ad ed. 1860) ; a valuable work marked by philosophical breadth, 
 and exhibiting the results of extensive research, but too declamatory in 
 style ; the book sadly wants an index. Kritische Geschichte der National- 
 Ckonomie und der Socialismus, by Emile Diihring (1871 ; 3d ed. 1879) ; 
 characterised by its author's usual sagacity, but also by his usual per- 
 verseness and depreciation of meritorious writers in his own field. Guida 
 olio studio dell' Economia Politico,, by Luigi Cossa (1876 and 1878 ; Eng. 
 trans. 1880). Geschichte der Nationalb'konomik, by H. Eisenhart (1881); 
 a vigorous and original sketch. And, lastly, a brief but excellent history 
 by H. von Scheel in the Handbuch der politischen Uekonomie (a great 
 encyclopaedia of economic knowledge in all its extent and applications) ; 
 edited by Gustav Schon berg (1882 ; 2d ed., enlarged and improved, 1886). 
 To these histories proper must be added The Literature of Political 
 Economy, by J. R. M'Culloch (1845), a book which might with advantage 
 be re-edited, supplemented where imperfect, and continued to our own 
 time. Some of the biographical and critical notices by Eugene Daire 
 and others in the Collection det principaux ficonomistes will also be found 
 useful, as well as the articles in the Dictionnaire de I' Economic Politiqvt 
 of Coquelin and Guillaumin (1852-53; 3d ed. 1864), which is justly 
 described by Jevons as " on the whole the best work of reference in the 
 literature of the science." 
 
 SPECIAL HISTORIES. Italy. Storia della Economia Pubblica in Italia, 
 otsia Epilogo critico degli Economisti Italiani, by Count Giuseppe Pecchifl
 
 BIBLIOGRAPHICAL NOTE. xv 
 
 (1829), intended as an appendix to Baron Custodi'g collection of th 
 Scrittori dassici Italiani di Economic, Politico,, 50 vols., comprising the 
 writings of Italian economists from 1582 to 1804. There is a French 
 translation of Pecchio's work by Leonard Gallois (1830). The book i 
 not without value, though often superficial and rhetorical. 
 
 Spain. Storia detta Economia Politico, in Espana (1863), by M. 
 Colmeiro ; rather a history of economy than of economics of policies 
 and institutions rather than of theories and literary works. 
 
 Germany. Geschichte der Nationalokonomik in Deutschland (1874)- by 
 Wilhelm Roscher ; a vast repertory of learning on its subject, with occa- 
 sional side-glances at other economic literatures. Die neuere National- 
 okonomie in ihren Hauptrichtungen, by Moritz Meyer (3d ed. 1882) : a 
 useful handbook dealing almost exclusively with recent German specula- 
 tion and policy. 
 
 England. Zur Getchichte der Englischen VoUatoirthschafttlehre, by W. 
 Roscher (185 1-52). 
 
 The reader is also advised to consult the articles of the Encyclopaedia 
 Britannica, ninth edition, which relate to the principal writers on 
 political economy, especially those on Petty, Quesnay, Turgot, Smith, 
 Say, and Ricardo. The present work, it should be stated, is for the most 
 part a reproduction of the article " Political Economy," which appeared 
 (1885) in yoL xix. of the Encyclopaedia Britannica. 
 
 J.K.I
 
 CONTENTS. 
 
 PAGE 
 
 PREFACE . v 
 
 BIBLIOGRAPHICAL NOTE xiv 
 
 CHAP. I. INTRODUCTORY 1 
 
 " II. ANCIENT TIMES 7 
 
 " III. THE MIDDLE AGES 34 
 
 '* IV. MODERN TIMES : Two FIRST PHASES . .. .32 
 
 " V. THIRD MODERN PHASE : SYSTEM OF NATURAL 
 
 LIBERTY 55 
 
 " VI. THE HISTORICAL SCHOOL 196 
 
 " VII. CONCLUSION ........ 240 
 
 INDEX 247
 
 OUTLINES 
 
 OF THE 
 
 HISTORY OF POLITICAL ECONOMY. 
 
 CHAPTER L 
 INTRODUCTORY. 
 
 IN the present condition of Political Economy, the production 
 of new dogmatic treatises on the subject does not appear to be 
 opportune. There are many works, accessible to every one, 
 in which, with more or less of variation in details, what 
 is known as the "orthodox" or "classical" system is ex- 
 pounded. But there exists in England and other countries wide- 
 spread dissatisfaction with that system, and much difference 
 of opinion with respect both to the method and the doctrines 
 of Economic Science. There is, in fact, good reason to 
 believe that this department of social theory has entered on 
 a transition stage, and is destined ere long to undergo a con- 
 siderable transformation. But the new body of thought 
 which will replace, or at leas; profoundly modify, the old, 
 has not yet been fully elaborated. The attitude of mind 
 which these circumstances seem to prescribe is that of pause 
 and retrospection. It is thought that our position will be 
 rendered clearer and our further progress facilitated by 
 tracing historically, and from a general point of view, tb.e
 
 a POLITICAL ECONOMY. 
 
 course of speculation regarding economic phenomena, and con- 
 templating the successive forms of opinion concerning them 
 in relation to the periods at which they were respectively 
 evolved. And this is the task undertaken in the following 
 pages. 
 
 Such a study is in harmony with the best intellectual 
 tendencies of our age, which is, more than anything else, 
 characterised by the universal supremacy of the historical 
 spirit. To such a degree has this spirit permeated all our 
 modes of thinking, that with respect to every branch of 
 knowledge, no less than with respect to every institution and 
 every form of human activity, we almost instinctively ask, 
 not merely what is its existing condition, but what were its 
 earliest discoverable germs, and what has been the course of 
 its development? The assertion of J. B. Say 1 that the 
 history of Political Economy is of little value, being for the 
 most part a record of absurd and justly exploded opinions, 
 belongs to a system of ideas already obsolete, and requires at 
 the present time no formal refutation. 2 It deserves notice 
 only as reminding us that we must discriminate between 
 history and antiquarianism : what from the first had no 
 significance it is mere pedantry to study now. We need 
 concern ourselves only with those modes of thinking which 
 have prevailed largely and seriously influenced practice in 
 the past, or in which we can discover the roots of the present 
 and the future. 
 
 When we thus place ourselves at the point of view of 
 history, it becomes unnecessary to discuss the definition of 
 Political Economy, or to enlarge on its method, at the outset. 
 It will suffice to conceive it as the theory of social wealth, 
 or to accept provisionally Say's definition, which makes it 
 
 1 " Que pourrions-nous gagner a recueillir des opinions absurdes, dea 
 doctrines de'crie'es et qui merilent de I'Stre ? II serait a la fois inutile 
 et fastidieux." tcvn. Pd. Pratique, IX me Partie. The "cependant" 
 which follows doea not really modify this judgment. 
 
 8 See Roscher's (jetchichtt dcr National-cekonomik in Ueuttchland, 
 Vorrede.
 
 INTRODUCTORY. 3 
 
 the science of the production, distribution, and consumption 
 of wealth. Any supplementary ideas which require to be 
 taken into account will be suggested in the progress of our 
 survey, and the determination of the proper method of economic 
 research will be treated as one of the principal results of 
 the historical evolution of the science. 
 
 The history of Political Economy must of course he dis- 
 tinguished from the economic history of mankind, or of any 
 separate portion of our race. The study of the succession of 
 economic facts themselves is one thing; the study of the 
 succession of theoretic ideas concerning the facts is another. 
 And it is with the latter alone that we are here directly 
 concerned. But these two branches of research, though dis- 
 tinct, yet stand in the closest relation to each other. The 
 rise and the form of economic doctrines have been largely 
 conditioned by the practical situation, needs, and tendencies 
 of the corresponding epochs. With each important social 
 change new economic questions have presented themselves; 
 and the theories prevailing in each period have owed much of 
 their influence to the fact that they seemed to offer solutions 
 of the urgent problems of the age. Again, every thinker, 
 however in some respects he may stand above or before his 
 contemporaries, is yet a child of his time, and cannot be 
 isolated from the social medium in which he lives and moves. 
 He will necessarily be affected by the circumstances which 
 surround him, and in particular by the practical exigencies of 
 which his fellows feel the strain. This connection of theory 
 with practice has its advantages and its dangers. It tends to 
 give a real and positive character to theoretic inquiry ; but it 
 may also be expected to produce exaggerations in doctrine, to 
 lend undue prominence to particular sides of the truth, and 
 to make transitory situations or temporary expedients be re- 
 garded as universally normal conditions. 
 
 There are other relations which we must not overlook in 
 tracing the progress of economic opinion. The several branches 
 of the science of society are so closely connected that the
 
 4 POLITICAL ECONOMY. 
 
 history of no one of them can with perfect rationality be 
 treated apart, though such a treatment is recommended indeed 
 necessitated by practical utility. The movement of economic 
 thought is constantly and powerfully affected by the prevalent 
 mode of thinking, and even the habitual tone of sentiment, 
 on social subjects generally. All the intellectual manifesta- 
 tions of a period in relation to human questions have a kindred 
 character, and bear a certain stamp of homogeneity, which is 
 vaguely present to our minds when we speak of the spirit of 
 the age. Social speculation again, and economic research as 
 one branch of it, is both through its philosophic method and 
 through its doctrine under the influence of the sciences which 
 in the order of development precede the social, especially of 
 the science of organic nature. 
 
 It is of the highest importance to bear in mind these several 
 relations of economic research both, to external circumstance 
 and to other spheres of contemporary thought, because by 
 keeping them in view we shall be led to form less absolute 
 and therefore juster estimates of the successive phases of 
 opinion. Instead of merely praising or blaming these accord- 
 ing to the degrees of their accordance with a predetermined 
 standard of doctrine, we shall view them as elements in an 
 ordered series, to be studied mainly with respect to their filia- 
 tion, their opportuneness, and their influences. We shall not 
 regard each new step in this theoretic development as implying 
 an unconditional negation of earlier views, which often had a 
 relative justification, resting, as they did, on a real, though 
 narrower, basis of experience, or assuming the existence of a 
 different social order. Nor shall we consider all the theoretic 
 positions now occupied as definitive ; for the practical system of 
 life which they tacitly assume is itself susceptible of change, 
 and destined, without doubt, more or less to undergo it. 
 Within the limits-of a sketch like the present these considera- 
 tions cannot be fully worked out ; but an effort will be made 
 to keep them in view, and to mark the relations here indicated, 
 wherever their influence is specially important or interesting.
 
 INTRODUCTORY. 5 
 
 The particular situation and tendencies of the several 
 thinkers whose names are associated with economic doctrines 
 have, of course, modified in a greater or less degree the spirit 
 or form of those doctrines. Their relation to special prede- 
 cessors, their native temperament, their early training, their 
 religious prepossessions and political partialities, have all had 
 their effects. To these we shall in some remarkable instances 
 direct attention ; but, in the main, they are, for our present 
 purpose, secondary and subordinate. The ensemble must pre- 
 ponderate over the individual ; and the constructors of theories 
 must be regarded as organs of a common intellectual and social 
 movement. 
 
 The history of economic inquiry is most naturally divided 
 into the three great periods of (i) the ancient, (2) the mediaeval, 
 and (3) the modern worlds. In the two former, this branch 
 of study could exist only in a rudimentary state, jt js evident 
 that for any considerable development of social theory-Two 
 conditions must be fulfilled. First, the phenomena must have 
 exhibited themselves on a sufficiently extended scale to supply 
 adequate matter for observation, and afford a satisfactory basis 
 for scientific generalisations ; and secondly, whilst the spectacle 
 is thus provided, the spectator must have been trained for his 
 task, and armed with the appropriate aids and instruments of 
 research, that is to say, there must have been such a previous 
 cultivation of the simpler sciences as will have both furnished 
 the necessary data of doctrine and prepared the proper methods 
 of investigation. Sociology requires to use for its purposes 
 theorems which belong to the domains of physics and biology, 
 and which it must borrow from their professors ; and, on the 
 logical side, the methods which it has to employ deductive, 
 observational, comparative must have been previously shaped 
 in the cultivation of mathematics and the study of the 
 inorganic world or of organisms less complex than the social 
 Hence it is plain that, though some laws or tendencies of 
 society must have been forced on men's attention in every age 
 by practical exigencies which could not be postponed, and
 
 6 POLITICAL ECONOMY. 
 
 though the questions thus raised must have received some 
 empirical solution, a really scientific sociology must be the 
 product of a very advanced stage of intellectual development. 
 And this is true of the economic, as of other branches of social 
 theory. We shall therefore content ourselves with a general 
 outline of the character of economic thought in antiquity and 
 the Middle Ages, and of the conditions which detern j ./ ed that 
 character.
 
 CHAPTER IL 
 
 ANCIENT TIMES. 
 
 THE earliest surviving expressions of thought on economic 
 subjects have come down to us from the Oriental theocracies. 
 The general spirit of the corresponding type of social life con- 
 sisted in taking imitation for the fundamental principle of 
 education, and consolidating nascent civilisation hy heredity 
 of the different functions and professions, or even by a system 
 of castes, hierarchically subordinated to each other according 
 to the nature of their respective offices, under the common 
 supreme direction of the sacerdotal caste. This last was 
 charged with the traditional stock of conceptions, and their 
 application for purposes of discipline. It sought to realise a 
 complete regulation of human life in all its departments on 
 the basis of this transmitted body of practical ideas. Con- 
 servation is the principal task of this social order, and its most 
 remarkable quality is stability, which tends to degenerate into 
 stagnation. But there can Jbe no doubt that the useful arts 
 were long, though slowly, progressive under this regime, from 
 which they were inherited by the later civilisations, the 
 system of classes or castes maintaining the degree of division 
 of labour which had been reached in those early periods. The 
 leading members of the corporations which presided over the 
 theocracies without doubt gave much earnest thought to the 
 conduct of industry, which, unlike war, did not imperil their 
 political pre-eminence by developing a rival class. But, con- 
 ceiving life as a whole, and making its regulation their primary 
 aim, they naturally considered most the social reactions which
 
 8 POLITICAL ECONOMY. 
 
 industry is fitted to exercise. The moral side of economics is 
 the one they habitually contemplate, or (what is not the same) 
 the economic side of morals. They abound in those warnings 
 against greed and the haste to be rich which religion and 
 philosophy have in all ages seen to be necessary. They insist 
 on honesty in mutual dealings, on just weights and measures, 
 on the faithful observance of contracts. They admonish against 
 the pride and arrogance apt to be generated by riches, against 
 undue prodigality and self-indulgence, and enforce the duties 
 of justice and beneficence towards servants and inferiors. 
 Whilst, in accordance with the theological spirit, the personal 
 acquisition of wealth is in general thesis represented as deter- 
 mined by divine wills, its dependence on individual diligence 
 and thrift is emphatically taught. There is indeed in the fully 
 developed theocratic systems a tendency to carry precept, 
 which there differs little from command, to an excessive degree 
 of minuteness, to prescribe in detail the time, the mode, and 
 the accompaniments of almost every act of every member of 
 the community. This system of exaggerated surveillance is 
 connected with the union, or rather confusion, of the spiritual 
 and temporal powers, whence it results that many parts of the 
 government of society are conducted by direct injunction or 
 restraint, which at a later stage are intrusted to general intel- 
 lectual and moral influences. 
 
 The practical economic enterprises of Greek and Roman 
 antiquity could not, even independently of any special adverse 
 influences, have competed in magnitude of scale or variety of 
 resource with those of modern times. (The unadvanced con- 
 dition of physical science prevented a large application of the 
 i less obvious natural powers to production, or the extensive 
 use of machinery, which has acquired such an immense 
 development as a factor in modern industry. J/ The imper- 
 fection of geographical knowledge and of the means of com- 
 <? 2- munication and transport were impediments to the growth 
 of foreign commerce, ] These obstacles arose necessarily out 
 of the mere immaturity of the industrial life of the periods in
 
 ANCIENT TIMES. 9 
 
 question. But more deeply rooted impediments to a vigorous 
 and expansive economic practical system existed in the char- 
 acteristic principles of the civilisation of antiquity. Some 
 writers have attempted to set aside the distinction between 
 the ancient and modern worlds as imaginary or unimportant, 
 and, whilst admitting the broad separation between ourselves 
 and the theocratic peoples of the East, to represent the Greeks 
 and Komans as standing on a substantially similar ground of 
 thought, feeling, and action with the Western populations of 
 our own time. But this is a serious error, arising from the 
 same too exclusive preoccupation with the cultivated classes 
 and with the mere speculative intellect which has often led 
 to an undue disparagement of the Middle Ages. There_ia 
 this essential difference between the spirit and life of ancient 
 and of modern communities, that the former were organised 
 for war, the latter during their whole history have increasingly 
 jended to be organised for industry, as their practical end and 
 aim. The profound influence of these differing conditions on 
 every form of human activity must never be overlooked or 
 forgotten. With the military constitution of ancient societies 
 the institution of slavery was essentially connected. Far from 
 being an excrescence on the contemporary system of life, as 
 it was in the modern West Indies or the United States of 
 America, it was so entirely in harmony with that life that the 
 most eminent thinkers regarded it as no less indispensable 
 than inevitable. It does, indeed, seem to have been a tem- 
 porary necessity, and on the whole, regard being had to what 
 might have taken its place, a relative good. But it was 
 attended with manifold evils. It led to the prevalence 
 amongst the citizen class of a contempt for industrial occupa- 
 tions ; every form of production, with a partial exception in 
 favour of agriculture, was branded as unworthy of a free man, 
 the only noble forms of activity being those directly con- 
 nected with public life, whether military or administrative. 
 Labour was degraded by the relegation of most departments 
 of it to the servile class, above whom the free artisans were
 
 io POLITICAL ECONOMY. 
 
 but little elevated in general esteem. The producers being 
 thus for the most part destitute of intellectual cultivation and 
 excluded from any share in civic ideas, interests, or efforts, 
 were unfitted in character as well as by position for the habits 
 of skilful combination and vigorous initiation which the prog- 
 ress of industry demands. To this must be added that the 
 comparative insecurity of life and property arising out of 
 military habits, and the consequent risks which attended 
 accumulation, were grave obstructions to the formation of 
 large capitals, and to the establishment of an effective system 
 of credit. These causes conspired with the undeveloped state 
 of knowledge and of social relations in giving to the economic 
 life of the ancients the limitation and monotony which con- 
 trast so strongly with the inexhaustible resource, the ceaseless 
 expansion, and the thousandfold variety of the same activities 
 in the modem world. It is, of course, absurd to expect in- 
 compatible qualities in any social system ; each system must 
 be estimated according to the work it has to do. Now the 
 historical vocation of the ancient civilisation was to be accom- 
 plished, not through industry, but through war, which was in 
 the end to create a condition of things admitting of its own 
 elimination and of the foundation of a regime based on pacific 
 activity. 
 
 THE GREEKS. 
 
 This office was, however, reserved for Rome, as the final 
 result of her system of conquest; the military activity of 
 Greece, though continuous, was incoherent and sterile, except 
 in the defence against Persia, and did not issue in the accom- 
 plishment of any such social mission. It was, doubtless, the 
 inadequacy of the warrior life, under these conditions, to 
 absorb the faculties of the race, that threw the energies of its 
 most eminent members into the channel of intellectual activity, 
 and produced a singularly rapid evolution of the aesthetic, 
 philosophic, and scientific germs transmitted by the theocratic 
 societies.
 
 ANCIENT TIMES. TI 
 
 In the Works and Days of Hesiod, we find an order ol 
 thinking in the economic sphere very similar to that of the 
 theocracies. With a recognition of the divine disposing power, 
 and traditional rules of sacerdotal origin, is combined practical 
 sagacity embodied in precept or proverbial saying. But the 
 development of abstract thought, beginning from the time of 
 Thales, soon gives to Greek culture its characteristic form, and 
 marks a new epoch in the intellectual history of mankind. 
 
 The movement was now begun, destined to mould the 
 whole future of humanity, which, gradually sapping the old 
 hereditary structure of theological convictions, tended to the 
 substitution of rational theories in every department of specu- 
 lation. The eminent Greek thinkers, while taking a deep 
 interest in the rise of positive science, and most of them study- 
 ing the only science that of geometry then assuming its 
 definitive character, were led by the social exigencies which 
 always powerfully affect great minds to study with special 
 care the nature of man and the conditions of his existence in 
 society. These studies were indeed essentially premature; a 
 long development of the inorganic and vital sciences was 
 necessary before sociology or morals could attain their normal 
 constitution. But by their prosecution amongst the Greeks 
 A noble intellectual activity was kept alive, and many of those 
 partial lights obtained for which mankind cannot afford to 
 wait. Economic inquiries, along with others, tended towards 
 rationality ; Plutus was dethroned, and terrestrial substituted 
 for supernatural agencies. But such inquiries, resting on no 
 sufficiently large basis of practical life, could not attain any 
 considerable results. The military constitution of society, and 
 the existence of slavery, which was related to it, leading, as 
 has been shown, to a low estimate of productive industry, 
 turned away the habitual attention of thinkers from that 
 domain. On the other hand, the absorption of citizens in the 
 life of the state, and their pre-occupation with party struggles, 
 brought questions relating to politics, properly so called, into 
 special prominence. The principal writers on social subjects
 
 12 POLITICAL ECONOMY. 
 
 are therefore almost exclusively occupied with the examination 
 and comparison of political constitutions, and with the search 
 after the education best adapted to train the citizen for public 
 functions. And we find, accordingly, in them no systematic or 
 adequate handling of economic questions, only some happy 
 ideas and striking partial anticipations of later research. 
 
 In their thinking on such questions, as on all sociological 
 subjects, the following general features are observable. 
 
 1. The individual is conceived as subordinated to the state, 
 through which alone his nature can be developed and com- 
 pleted, and to the maintenance and service of which all 
 his efforts must be directed. The great aim of all political 
 thought is the formation of good citizens ; every social ques- 
 tion is studied primarily from the ethical and educational 
 point of view. The citizen is not regarded as a producer, but 
 only as a possessor, of material wealth ; and this wealth is not 
 esteemed for its own sake or for the enjoyments it procures, 
 but for the higher moral and public aims to which it may be 
 made subservient. 
 
 2. The state, therefore, claims and exercises a controlling 
 And regulating authority over every sphere of social life, 
 including the economic, in order to bring individual action 
 into harmony with the good of the whole. 
 
 3. With these fundamental notions is combined a tendency 
 to attribute to institutions and to legislation an unlimited 
 efficacy, as if society had no spontaneous tendencies, but 
 would obey any external impulse, if impressed upon it with 
 sufficient force and continuity. 
 
 Every eminent social speculator had his ideal state, which 
 approximated to or diverged from the actual or possible, 
 according to the degree in which a sense of reality and a 
 positive habit of thinking characterised the author. 
 
 The most celebrated of these ideal systems is that of Plato. 
 In it the idea of the subordination of the individual to the 
 state appears in its most extreme form. Within that class of 
 the citizens of his republic who represent the highest type of
 
 ANCIENT TIMES. 13 
 
 life, community of property and of wives is established, as 
 the most effective means of suppressing the sense of private 
 interest, and consecrating the individual entirely to the public 
 service. It cannot perhaps be truly said that his scheme was 
 incapable of realisation in an ancient community favourably 
 situated for the purpose. But it would soon be broken to 
 pieces by the forces which would be developed in an industrial 
 society. It has, however, been the fruitful parent of modern 
 Utopias, specially attractive as it is to minds in which the 
 
 literary instinct is stronger than the scientific judgment, in 
 consequence of the freshness and brilliancy of Plato's exposi- 
 tion and the unrivalled charm of his style. Mixed wivh what 
 we should call the chimerical ideas in his work, there are 
 many striking and elevated moral conceptions, and, what is 
 more to our present purpose, some just economic analyses. In 
 particular, he gives a correct account of the division and com- 
 bination of employments, as they naturally arise in society. 
 The foundation of the social organisation he traces, perhaps, 
 too exclusively to economic grounds, not giving sufficient 
 weight to the disinterested social impulses in men which tend 
 to draw and bind them together. But he explains clearly how 
 the different wants and capacities of individuals demand and 
 give rise to mutual services, and how, by the restriction of 
 each to the sort of occupation to which, by his position, 
 abilities, and training, he is best adapted, everything needful 
 for the whole is more easily and better produced or effected. 
 In the spirit of all the ancient legislators he desires a self- 
 sufficing state, protected from unnecessary contacts with 
 foreign populations, which might tend to break down its 
 internal organisation or to deteriorate the national character. 
 Hence he discountenances foreign trade, and with this view 
 removes his ideal city to some distance from the sea. The 
 limits of its territory are rigidly fixed, and the population is f 
 restricted by the prohibition of early marriages, by Jhe ex- . 
 posure of infants, and by the maintenance of a determinate ^ 
 number of individual lots of land in the hands of the citizens
 
 14 POLITICAL ECONOMY. 
 
 who cultivate the soil. These precautions are inspired more 
 by political and moral motives than by the Maltliusian feai 
 of failure of subsistence. Plato aims, as far as possible, at 
 equality of property amongst the families of the community 
 which are engaged in the immediate prosecution of industry. 
 This last class, as distinguished from the governing and 
 military classes, he holds, according to the spirit of his age, in 
 but little esteem ; he regards their habitual occupations as 
 lending to the degradation of the mind and the enfeeblement 
 of the body, and rendering those who follow them unfit for 
 the higher duties of men and citizens. The lowest forms of 
 labour he would commit to foreigners and slaves. Again, in 
 the spirit of ancient theory, he wishes (Legg., v. 12) to banish 
 the precious metals, as far as practicable, from use in internal 
 commerce, and forbids the lending of money on interest, 
 leaving indeed to the free will of the debtor even the repay- 
 ment of the capital of the loan. All economic dealings he 
 subjects to active control on the part of the Government, not 
 merely to prevent violence and fraud, but to check the growth 
 of luxurious habits, and secure to the population of the state 
 a due supply of the necessaries and comforts of life. 
 
 Contrasted with the exaggerated idealism of Plato is the 
 somewhat limited but eminently practical genius of Xenophon. 
 In him the man of action predominates, but he has also a large 
 element of the speculative tendency and talent of the Greek. 
 His treatise entitled (Economicus is well worth reading for the 
 interesting and animated picture it presents of some aspects of 
 contemporary life, and is justly praised by Sismondi for the 
 spirit of mild philanthropy and tender piety which breathes 
 through it. But it scarcely passes beyond the bounds of 
 domestic economy, though within that limit its author 
 exhibits much sound sense and sagacity. His precepts for 
 the judicious conduct of private property do not concern us 
 here, nor his wise suggestions for the government of the 
 family and its dependants. Yet it is in this narrower sphere 
 and in general in the concrete domain that his chief excellence
 
 ANCIENT TIMES. 15 
 
 lies ; to economics in their wider aspects he does not con- 
 tribute much. He shares the ordinary preference of his fellow- 
 countrymen for agriculture over other employments, and is, 
 indeed, enthusiastic in his praises of it as developing patriotic 
 and religious feeling and a respect for property, as furnishing 
 the best preparation for military life, and as leaving sufficient 
 time and thought disposable to admit of considerable intel- 
 lectual and political activity. Yet his practical sense leads 
 him to attribute greater importance than most other Greek 
 writers tomanui'actures, and still more to trade, to enter more 
 largely on questions relating to their conditions and develop- 
 ment, and to bespeak for them the countenance and protection 
 of the state. Though his views on the nature of money are 
 vague, and in some respects erroneous, he sees that its export 
 in exchange for commodities will not impoverish the com- 
 munity. He also insists on the necessity, with a view to 
 a flourishing commerce with other countries, of peace, of a 
 courteous and respectful treatment of foreign traders, and of a 
 prompt and equitable decision of their legal suits. The insti- 
 tution of slavery he of course recognises and does not dis- 
 approve ; he even recommends, for the increase of the Attic 
 revenues, the hiring out of slaves by the state for labour in 
 the mines, after branding them to prevent their escape, the 
 number of slaves being constantly increased by fresh purchases 
 out of the gains of the enterprise. (De Vect., 3, 4.) 
 
 Almost the whole system of Greek ideas up to the time 
 of Aristotle is represented in his encyclopaedic construction. 
 Mathematical and astronomical science was largely developed 
 at a later stage, but in the field of social studies no higher 
 point was ever attained by the Greeks than is reached in the 
 writings of this great thinker. Both his gifts and his situa- 
 tion eminently favoured him in the treatment of these 
 subjects. He combined in rare measure a capacity for keen 
 observation with generalising power, and sobriety of judgment 
 with ardour for the public good. All that was original or 
 significant in the political life of Hellas had run its course
 
 16 POLITICAL ECONOMY. 
 
 before his time or under his own eyes, and he had thus a laiga 
 basis of varied experience on which to ground his conclusions. 
 Standing outside the actual movement of contemporary public 
 life, he occupied the position of thoughtful spectator and 
 impartial judge. He could not, indeed, for reasons already 
 stated, any more than other Greek speculators, attain a fully 
 normal attitude in these researches. Nor could he pass 
 beyond the sphere of what is now called statical sociology ; 
 the idea of laws of the historical development of social 
 phenomena he scarcely apprehended, except in some small 
 degree in relation to the succession of political forms. J3ut 
 there is to be found in his writings a remarkable body of 
 sound and valuable thoughts on the constitution and work- 
 ing of the social organism. The special notices of economic 
 subjects are neither so numerous nor so detailed as we should 
 desire. Like all the Greek thinkers, he recognises but one 
 doctrine of the state, under which ethics, politics proper, and 
 economics take their place as departments, bearing to each 
 other a very close relation, and having indeed their lines of 
 demarcation from each other not very distinctly marked. 
 When wealth comes under consideration, it is studied not as 
 an end in itself, but with a view to the higher elements and 
 ultimate aims of the collective life. 
 
 The origin of society he traces, not to economic necessities, 
 but to natural social impulses in the human constitution. 
 The nature of the social union, when thus established, being 
 determined by the partly spontaneous partly systematic com- 
 bination of diverse activities, he respects the independence of the 
 latter whilst seeking to effect their convergence. He therefore 
 opposes himself to the suppression of personal freedom and 
 initiative, and the excessive subordination of the individual to 
 the state, and rejects the community of property and wives 
 proposed by Plato for his governing class. The principle of 
 private property he regards as deeply rooted in man, and the 
 evils which are alleged to result from the corresponding social 
 ordinance he thinks ought really to be attributed either to the
 
 ANCIENT TIMES. 17 
 
 imperfections of our nature or to the vices of other public 
 institutions. Community of goods must, in his view, tend to 
 neglect of the common interest and to the disturbance of social 
 
 larmon 
 
 - 
 
 Of the several classes which provide for the different wants 
 cf the society, those who are occupied directly with its material 
 needs the immediate cultivators of the soil, the mechanics and 
 artificers are excluded from any share in the government of 
 the state, as being without the necessary leisure and cultivation, 
 and apt to be debased by the nature of their occupations. In 
 a celebrated passage he propounds a theory of slavery, in which 
 it is based on the universality of the relation between command 
 and obedience, and on the natural division by which the ruling 
 is marked off from the subject race. He regards the slave as 
 having no independent will, but as an " animated tool " in the 
 hands of his master ; and in his subjection to such control, if 
 only it be intelligent, Aristotle holds that the true well-being 
 of the inferior as well as of the superior is to be found. This 
 view, so shocking to our modern sentiment, is of course not 
 personal to Aristotle ; it is simply the theoretic presentation 
 of the facts of Greek life, in which the existence of a body of 
 citizens pursuing the higher culture and devoted to the tasks 
 of war and government was founded on the systematic degra- 
 dation of a wronged and despised class, excluded from all the 
 higher offices of human beings and sacrificed to the mainten- 
 ance of a special type of society. 1 
 
 The methods of economic acquisition are divided by Aristotle 
 into two, one of which has for its aim the appropriation of 
 natural products and their application to the material uses of / 
 the household ; under this head come hunting, fishing, cattle- 
 rearing, and agriculture. With this primary and ' natural " 
 method is, in some sense, contrasted the other to which 
 Aristotle gives the name of " chrematistic," in which an active 
 exchange of products goes on, and money conies into opera- 
 tion as its medium and regulator. A certain measure of this 
 " non-natural " method, as it may be termed in opposition to 
 
 B
 
 ig POLITICAL ECONOMY. 
 
 the preceding and simpler form of industrial life, is accepted 
 by Aristotle as a necessary extension of the latter, arising out 
 of increased activity of intercourse, and satisfying real wants. 
 But its development on the great scale, founded on the thirst 
 for enjoyment and the unlimited desire of gain, he condemns 
 as unworthy and corrupting. Though his views on this subject 
 appear to be principally based on moral grounds, there are 
 some indications of his having entertained the erroneous opinion 
 held by the physiocrats of the eighteenth century, that agri- 
 culture alone (with the kindred arts above joined with it) is 
 truly productive, whilst the other kinds of industry, which 
 either modify the products of nature or distribute them by 
 way of exchange, however convenient and useful they may be, 
 make no addition to the wealth of the community. 
 
 He rightly regards money as altogether different from wealth, 
 illustrating the difference by the story of Midas. And he 
 seems to have seen that money, though its use rests on a social 
 convention, must be composed of a material possessing an 
 independent value of its own. That his views on capital were 
 indistinct appears from his famous argument against interest 
 on loans, which is based on the idea that money is barren and 
 cannot produce money. 
 
 Like the other Greek social philosophers, Aristotle recom- 
 mends to the care of Governments the preservation of a due 
 proportion between the extent of the civic territory and its 
 population, and relies on ante-nuptial continence, late marriages, 
 and the prevention or destruction of births for the due limita- 
 tion of the number of citizens, the insufficiency of the latter 
 being dangerous to the independence and its superabundance 
 to the tranquillity and good order of the state. 
 
 THE ROMANS. 
 
 Notwithstanding the eminently practical, realistic, and utili- 
 tarian character of the Romans, there was no energetic exercise 
 of their powers in the economic field ; they developed no
 
 ANCIENT TIMES. 19 
 
 large and many-sided system of production and exchange. 
 Their historic mission was military and political, and the 
 national energies \vero mainly devoted to the public service 
 at home and in the field. To agriculture, indeed, much 
 attention was given from the earliest times, and on it was 
 founded the existence of the hardy population which won 
 the first steps in the march to universal dominion. But in 
 the course of their history the cultivation of the soil by a 
 native yeomanry gave place to the introduction, in great 
 numhers, of slave labourers acquired by their foreign con- 
 quests ; and for the small properties of the earlier period were 
 substituted the vast estates the latifundia which, in the 
 judgment of Pliny, were the ruin of Italy. 1 The industrial 
 arts and commerce (the latter, at least when not conducted on 
 a great scale) they regarded as ignoble pursuits, unworthy of 
 free citizens ; and this feeling of contempt was not merely a 
 prejudice of narrow or uninstrticted minds, but was shared by 
 Cicero and others among the most liberal spirits of the nation. 2 
 As might be expected from the want of speculative originality 
 among the Romans, there is little evidence of serious theoretic 
 inquiry on economic subjects. Their ideas on these as on 
 other social questions were for the most part borrowed from 
 the Greek thinkers. Such traces of economic thought as do 
 occur are to be found in (i) the philosophers, (2) the writers 
 de re rustica, and (3) the jurists. It must, however, be ad- 
 mitted that many of the passages in these authors referred to 
 by those who assert the claim of the Romans to a more pro- 
 minent place in the history of the science often contain only 
 obvious truths or vague generalities. 
 
 1 "Locis, quae nunc, vix seminario exiguo militum relicto, servitia 
 Romana ab solitudine vindicant." Liv. vi. 12. "Villarum infimta 
 spatia." Tac. Ann. iii. 53. 
 
 3 "Opifices omnes in sordida arte versantur; nee enim quidquam 
 ingenuum habere potest officina. " Cic. de Off. i. 42. " Mercatura, si 
 teuuis est, sordida putanda est : sin magna et copiosa, multa undique 
 apportans multisque sine vanitate impertiens, non est admodum vituper- 
 anda." Ibid. "Qusestusomnis Patribus indecorus visus est." Liv. xxi.63-
 
 20 POLITICAL ECONOMY. 
 
 In the philosophers, whom Cicero, Seneca, and the eldei 
 Pliny sufficiently represent (the last indeed being rather a 
 learned encyclopaedist or polyhistor than a philosopher), we 
 find a general consciousness of the decay of industry, the 
 relaxation of morals, and the growing spirit of self-indulgence 
 amongst their contemporaries, who are represented as deeply 
 tainted with the imported vices of the conquered nations. 
 This sentiment, hoth in these writers and in the poetry and 
 miscellaneous literature of their times, is accompanied by a 
 half-factitious enthusiasm for agriculture and an exaggerated 
 estimate of country life and of early Roman habits, which are 
 principally, no doubt, to be regarded as a form of protest 
 against existing abuses, and, from this point of view, remind 
 us of the declamations of Rousseau in a not dissimilar age. 
 But there is little of large or just thinking on the prevalent 
 economic evils and their proper remedies. Pliny, still further 
 in the spirit of Rousseau, is of opinion that the introduction 
 of gold as a medium of exchange was a thing to be deplored, 
 and that the age of barter was preferable to that of money. 
 He expresses views on the necessity of preventing the efflux 
 of money similar to those of the modern mercantile school 
 views which Cicero also, though not so clearly, appears to 
 have entertained. Cato, Varro, and Columella concern them- 
 selves more with the technical precepts of husbandry than 
 with the general conditions of industrial success and social 
 well-being. But the two last named have the great merit of 
 having seen and proclaimed the superior value of free to slave 
 labour, and Columella is convinced that to the use of the 
 latter the decline of the agricultural economy of the Romans 
 was in a great measure to be attributed. These three writers 
 agree in the belief that it was chiefly by the revival and reform 
 of agriculture that the threatening inroads of moral corruption 
 could be stayed, the old Roman virtues fostered, and the 
 foundations of the commonwealth strengthened. Their atti- 
 tude is thus similar to that of the French physiocrats invok- 
 ing the improvement and zealous pursuit of agriculture alike
 
 ANCIENT TIMES. 21 
 
 against the material evils and the social degeneracy of their 
 time. The question of the comparative merits of the large 
 and small systems of cultivation appears to have been much 
 discussed in the old Eoman, as in the modern European 
 world ; Columella is a decided advocate of the petite culture. 
 The jurists were led by the coincidence which sometimes 
 takes place between their point of view and that of economic 
 science to make certain classifications and establish some more 
 or less refined distinctions which the modern economists have 
 either adopted from them or used independently. They appear 
 also (though this has been disputed, Neri and Carli maintain- 
 ing the affirmative, Pagnini the negative) to have had correct 
 notions of the nature of money as having a value of its own, 
 determined by economic conditions, and incapable of being 
 impressed upon it by convention or arbitrarily altered by 
 public authority. But in general we find in these writers, as 
 might be expected, not so much the results of independent 
 thought as documents illustrating the facts of Eoman economic 
 life, and the historical policy of the nation with respect to 
 economic subjects. From the latter point of view they are 
 of much interest ; and by the information they supply as to 
 the course of legislation relating to property generally, to 
 sumptuary control, to the restrictions imposed on spendthrifts, 
 to slavery, to the encouragement of population, and the like, 
 they give us much clearer insight than we should otherwise 
 possess into influences long potent in the history of Eome and 
 of the Western world at large. But, as it is with the more 
 limited field of systematic thought on political economy that 
 we are here occupied, we cannot enter into these subjects. 
 One matter, however, ought to be adverted to, because it was 
 not only repeatedly dealt with by legislation, but is treated 
 more or less fully by all Eoman writers of note, namely, the 
 interest on money loans. The rate was fixed by the laws of 
 the Twelve Tables; but lending on interest was afterwards 
 (B.C. 341) entirely prohibited by the Genucian Law. In the 
 legislation of Justinian, rates were sanctioned varying from
 
 22 POLITICAL ECONOMY. 
 
 four to eight per cent, according to the nature of the case, the 
 latter heing fixed as the ordinary mercantile rate, whilst com- 
 pound interest was forbidden. The Eoman theorists, almost 
 without exception, disapprove of lending on interest altogether. 
 Cato, as Cicero tells us, thought it as had as murder (" Quid 
 fenerari ? Quid hominem occidere ? " De Off. ii. 25) ; and 
 Cicero, Seneca, Pliny, Columella all join in condemning it. 
 It is not difficult to see how in early states of society the 
 trade of money-lending becomes, and not unjustly, the object 
 of popular odium ; but that these writers, at a period when 
 commercial enterprise had made considerable progress, should 
 continue to reprobate it argues very imperfect or confused 
 ideas on the nature and functions of capital. It is probable 
 that practice took little heed either of these speculative ideas 
 or of legislation on the subject, which experience shows can 
 always be easily evaded. The traffic in money seems to have 
 gone on all through Eoman history, and the rate to have 
 fluctuated according to the condition of the market. 
 
 Looking back on the history of ancient economic specula- 
 tion, we see that, as might be anticipated a priori, the results 
 attained in that field by the Greek and Roman writers were 
 very scanty. As Diihring has well remarked, the questions 
 with which the science has to do were regarded by the alricient 
 thinkers rather from their political than their properly eco- 
 nomic side. This we have already pointed out with respect 
 to their treatment of the subject of population, and the same 
 may be seen in the case of the doctrine of the division of 
 labour, with which Plato and Aristotle are in some degree 
 occupied. They regard that principle as a basis of social 
 classification, or use it in showing that society is founded on 
 a spontaneous co-operation of diverse activities. From the 
 strictly economic point of view, there are three important 
 propositions which can be enunciated respecting that division : 
 (i) that its extension within any branch of production 
 makes the products cheaper; (2) that it is limited by the 
 extent of the market ; and (3) that it can be carried further
 
 ANCIENT TIMES. 23 
 
 in manufactures than in agriculture. But we shall look in 
 vain for these propositions in the ancient writers ; the first 
 alone might be inferred from their discussions of the subject. 
 It has been the tendency especially of German scholars to 
 magnify unduly the extent and value of the contributions of 
 antiquity to economic knowledge. The Greek and Roman 
 authors ought certainly not to be omitted in any account of 
 the evolution of this branch of study. But it must be kept 
 steadily in view that we find in them only first hints or rudi- 
 ments of general economic truths, and that the science is 
 essentially a modern one. We shall indeed see hereafter that 
 it could not have attained its definitive constitution before oui 
 own time.
 
 CHAPTER III. 
 THE MIDDLE AGES. 
 
 THE Middle Ages (400-1300 A.D.) form a period of great 
 significance in the economic, as in the general, history of 
 Europe. They represent a vast transition, in which the germs 
 of a new world were deposited, hut in which little was fully 
 elaborated. There is scarcely anything in the later movement 
 of European society which we do not find there, though 
 as yet, for the most part, crude and undeveloped. The 
 mediaeval period was the object of contemptuous depreciation 
 on the part of the liberal schools of the last century, prin- 
 cipally because it contributed so little to literature. But 
 there are things more important to mankind than literature ; 
 and the great men of the Middle Ages had enough to do in 
 other fields to occupy their utmost energies. The develop- 
 ment of the Catholic institutions and the gradual establishment 
 and maintenance of a settled order after the dissolution of the 
 Western empire absorbed the powers of the thinkers and 
 practical men of several centuries. The first mediaeval phase, 
 from the commencement of the fifth century to the end of the 
 seventh, was occupied with the painful and stormy struggle 
 towards the foundation of the new ecclesiastical and civil 
 system ; three more centuries were filled with the work of its 
 consolidation and defence against the assaults of nomad popula- 
 tions ; only in the final phase, during the eleventh, twelfth, and 
 thirteenth centuries, when the unity of the West was founded 
 by the collective action against impending Moslem invasion, did
 
 THE MIDDLE AGES. 25 
 
 it enjoy a sufficiently secure and stable existence to exhibit 
 its essential character and produce its noblest personal types. 
 The elaboration of feudalism was, indeed, in progress during 
 the whole period, showing itself in the decomposition of 
 power and the hierarchical subordination of its several grades, 
 the movement being only temporarily suspended in the second 
 phase by the salutary dictatorship of Charlemagne. But not 
 before the first century of the last phase was the feudal system 
 fully constituted. In like manner, only in the final phase 
 could the effort of Catholicism after a universal discipline be 
 carried out on the great scale an effort for ever admirable, 
 though necessarily on the whole unsuccessful. 
 
 No large or varied economic activity was possible under the 
 full ascendency of feudalism. That organisation, as has been 
 abundantly shown by philosophical historians, was indispens- 
 able for the preservation of order and for public defence, and 
 contributed important elements to general civilisation. But, 
 whilst recognising it as opportune and relatively beneficent, 
 we must not expect from it advantages inconsistent with its 
 essential nature and historical office. The class which pre- ^ 
 dominated in it was not sympathetic with industry, and held : . 
 the handicrafts in contempt, except those subservient to war J 
 or rural sports. The whole practical life of the society was , 
 founded on territorial property ; the wealth of the lord con- / 
 sisted in the produce of his lands and the dues paid to him in / 
 kind ; this wealth was spent in supporting a body of retainers 
 whose services were repaid by their maintenance. There 
 could be little room for manufactures, and less for commerce ; / 
 and agriculture was carried on with a view to the wants of j 
 the family, or at most of the immediate neighbourhood, not \ 
 to those of a wider market. The economy of the period was I 
 therefore simple, and, in the absence of special motors from/ 
 without, unprogressive. 
 
 In the latter portion of the Middle Ages several circum-^ 
 stances came into action which greatly modified these con- ( 
 ditions. The Crusades undoubtedly produced a powerful >
 
 26 POLITICAL ECONOMY. 
 
 / economic effect by transferring in many cases the possessions 
 
 of the feudal chiefs to the industrious classes, whilst by 
 *i 
 K bringing different nations and races into contact, by enlarging 
 
 3 the horizon and widening the conceptions of the populations, 
 'as well as by affording a special stimulus to navigation, they 
 tended to give a new activity to international trade. The 
 independence of the towns and the rising importance of the 
 burgher class supplied a counterpoise to the power of the land 
 aristocracy; and the strength of these new social elements 
 was increased by the corporate constitution given to the 
 urban industries, the police of the towns being also founded 
 on the trade guilds, as that of the country districts was on the 
 feudal relations. The increasing demand of the towns for the 
 products of agriculture gave to the prosecution of that art a 
 more extended and speculative character ; and this again led 
 to improved methods of transport and communication. But 
 the range of commercial enterprise continued everywhere 
 narrow, except in some favoured centres, such as the Italian 
 republics, in which, however, the growth of the normal habits 
 of industrial life was impeded or perverted by military ambi- 
 tion, which was not, in the case of those communities, checked 
 as it was elsewhere by the pressure of an aristocratic class. 
 
 Every great change of opinion on the destinies of man 
 and the guiding principles of conduct must react on the 
 sphere of material interests ; and the Catholic religion had__a 
 powerful influence on the economic life of the Middle Ages. 
 Christianity Inculcates, perhaps, no more effectively than the 
 older religions the special economic virtues of industry, thrift, 
 fidelity to engagements, obedience to rightful authority ; but 
 it brought out more forcibly and presented more persistently 
 the higher aims of life, and so produced a more elevated way 
 of viewing the different social relations. It purified domestic 
 life, a reform which has the most important economic results. 
 It taught the doctrine of fundamental human equality, 
 heightened the dignity of labour, and preached with quite 
 a new emphasis the obligations of love, compassion, and
 
 THE MIDDLE AGES. 27 
 
 forgiveness, and the claims of the poor. The constant pre- 
 sentation to the general mind and conscience of these ideas, 
 the dogmatic bases of which were scarcely as yet assailed by 
 scepticism, must have had a powerful effect in moralising life. 
 But to the influence of Christianity as a moral doctrine was 
 added that of the Church as an organisation, charged with 
 the application of the doctrine to men's daily transactions. 
 Besides the teachings of the sacred books, there was a mass 
 of ecclesiastical legislation providing specific prescriptions for 
 the conduct of the faithful. And this legislation dealt with 
 the economic as with other provinces of social activity. In 
 the Corpus Juris Ganonici, which condenses the result of 
 centuries of study and effort, along with much else is set out 
 what wejnay call the Catholic economic theory, if we under- 
 stand by theory, not a reasoned explanation of phenomena, 
 but a body of ideas leading to prescriptions for the guidance 
 of conduct. Life is here looked at from the point of view 
 of spiritual well-being ; the aim is to establish and maintain 
 amongst men a true kingdom of God. 
 
 The canonists are friendly to the notion of a community 
 of goods from the side of sentiment (" Dulcissima rerum 
 possessio communis est "), though they regard the distinction 
 of meum and tuum as an institution necessitated by the fallen 
 state of man. In cases of need the public authority is justified 
 in re-establishing pro hac vice the primitive community. The 
 care of the poor is not a matter of free choice ; the relief 
 of their necessities is debitum legate. Avaritia is idolatry ; 
 cupiditas, even when it does not grasp at what is another's, 
 is the root of all evil, and ought to be not merely regulated 
 but eradicated. Agriculture and handiwork are viewed as 
 legitimate modes of earning food and clothing ; but trade is 
 regarded with disfavour, because it was held almost certainly 
 to lead to fraud : of agriculture it was said, " Deo non dis- 
 plicet ; " but of the merchant, " Deo placere non potest." The 
 seller was bound to fix the price of his wares, not according 
 to the market rate, as determined by supply and demand,
 
 28 POLITICAL ECONOMY. 
 
 but according to their real value (justum pretium). He must 
 not conceal the faults of his merchandise, nor take advan- 
 tage of the need or ignorance of the buyer to obtain from 
 him more than the fair price. Interest on monev_jig_Jor- 
 bidden ; the prohibition of usury is, indeed, as Roscher says, 
 the centre of the whole canonistic system of economy, as 
 well as the foundation of a great part of the ecclesiastical 
 jurisdiction. The question whether a transaction was or was 
 not usurious turning mainly on the intentions of the parties, 
 the innocence or blameworthiness of dealings in which money 
 was lent became rightfully a subject of determination for the 
 Church, either by her casuists or in her courts. 1 
 
 The foregoing principles point towards a noble ideal, but by 
 their ascetic exaggeration they worked in some directions as 
 an impediment to industrial progress. Thus, whilst, with the 
 increase of production, a greater division of labour and a larger 
 employment of borrowed capital naturally followed, the laws 
 on usury tended to hinder this expansion. Hence they were 
 undermined by various exceptions, or evaded by fictitious 
 
 1 transactions. These laws were in fact dictated by, and adapted 
 
 to, early conditions to a state of society in which money 
 
 \loans were commonly sought either with a view to wasteful 
 
 pleasures or for the relief of such urgent distress as ought 
 
 jrather to have been the object of Christian beneficence. But 
 
 they were quite unsuited to a period in which capital was 
 
 y borrowed for the extension of enterprise and the employment 
 
 >. of labour. The absolute theological spirit in this, as in other 
 instances, could not admit the modification in rules of conduct 
 demanded by a new social situation; and vulgar good sense 
 better understood what were the fundamental conditions of 
 
 \ industrial life. 
 
 When the intellectual activity previously repressed by the 
 more urgent claims of social preoccupations tended to revive 
 towards the close of the mediaeval period, the want of 
 
 1 Roscher, Geachichte der N.O. in Deutsehland, pp. 5, sqq.
 
 THE MIDDLE AGES. yg 
 
 rational appreciation of the whole of human affairs was felt, 
 and was temporarily met by the adoption of the results of the 
 best Greek speculation. Hence we find in the writings of St. 
 Thomas Aquinas the political and economic doctrines of 
 Aristotle reproduced with a partial infusion of Christian 
 elements. His adherence to his master's point of view is 
 strikingly shown by the fact that he accepts (at least if he is 
 the author of the De Regimine Principum) l the Aristotelian 
 theory of slavery, though by the action of the forces of his 
 own time the last relics of that institution were being elimi- 
 nated from European society. 
 
 This great change the enfranchisement of the working 
 classes was the most important practical outcome of the 
 Middle Ages. The first step in this movement was the trans- 
 formation of slavery, properly so called, into serfdom. The 
 latter was, by its nature, a transitory condition. The serf was 
 bound to the soil, had fixed domestic relations, and partici- 
 pated in the religious life of the society ; and the tendency of 
 all his circumstances, as well as of the opinions and sentiments 
 of the time, was in the direction of liberation. This issue 
 was, indeed, not so speedily reached by the rural as by the 
 urban workman. Already in the second phase serfdom is \ 
 abolished in the cities and towns, whilst agricultural serfdom \ 
 does not anywhere disappear before the third. The latter 
 revolution is attributed by Adam Smith to the operation of 
 selfish interests, that of the proprietor on the one hand, who 
 discovered the superior productiveness of cultivation by free 
 tenants, and that of the sovereign on the other, who, jealous 
 of the great lords, encouraged the encroachments of the 
 villeins on their authority. But that the Church deserves a 
 chare of the merit seems beyond doubt moral impulses, as 
 often happens, conspiring with political and economic motives. 
 The serfs were treated best on the ecclesiastical estates, and 
 the members of the priesthood, both by their doctrine and by 
 
 1 On this question see Jourdain, " Philosophic de 8. Thomas," voL I, 
 pp. 141-9, and 400.
 
 30 POLITICAL ECONOMY. 
 
 their situation since the Northern conquests, were constituted 
 patrons and guardians of the oppressed or subject classes. 
 
 Out of the liberation of the serfs rose the first lineaments 
 of the hierarchical constitution of modern industry in the 
 separation between the entrepreneurs and the workers. The 
 personal enfranchisement of the latter, stimulating activity 
 and developing initiative, led to accumulations, which were 
 further promoted by the establishment . of order and good 
 government by the civic corporations which grew out of the 
 enfranchisement. Thus an active capitalist class came into 
 existence. It appeared first in commerce, the inhabitants of 
 the trading cities importing expensive luxuries from foreign 
 countries, or the improved manufactures of richer communities, 
 for which the great proprietors gladly exchanged the raw pro- 
 duce of their lands. In performing the office of carriers, too, 
 between different countries, these cities had an increasing field 
 for commercial enterprise. At a later period, as Adam Smith 
 has shown, commerce promoted the growth of manufactures, 
 which were either produced for foreign sale, or made from 
 foreign materials, or imitated from the work of foreign artificers. 
 But the first important development of handicrafts in modern 
 Europe belongs to the fourteenth and fifteenth centuries, and 
 the rise of manufacturing entrepreneurs is not conspicuous 
 within the Middle Ages properly so called. Agriculture, of 
 course, lags behind ; though the feudal lords tend to transform 
 themselves into directors of agricultural enterprise, their habits 
 and prejudices retard such a movement, and the advance of 
 rural industry proceeds slowly. It does, however, proceed, 
 partly by the stimulation arising from the desire to procure the 
 finer objects of manufacture imported from abroad or produced 
 by increased skill at home, partly by the expenditure on the 
 land of capital amassed in the prosecution of urban industries. 
 
 Some of the trade corporations in the cities appear to have 
 been of great antiquity ; but it was in the thirteenth century 
 that they rose to importance by being legally recognised and 
 regulated. These corporations have been much too absolutely
 
 THE MIDDLE AGES. 31 
 
 condemned by most of the economists, who insist on applying 
 to the Middle Ages the ideas of the eighteenth and nineteenth 
 centuries. They were, it is true, unfitted for modern times, 
 and it was necessary that they should disappear ; their exist- 
 ence indeed was quite unduly prolonged. But they were at 
 first in several respects highly beneficial. They were a valu- 
 able rallying-point for the new industrial forces, which were 
 strengthened by the rise of the esprit de corps which they 
 fostered. They improved technical skill by the precautions 
 which were taken for the solidity and finished execution of 
 the wares produced in each locality, and it was with a view 
 to the advancement of the industrial arts that St. Louis 
 undertook the better organisation of the trades of Paris. 
 The corporations also encouraged good moral habits through 
 the sort of spontaneous surveillance which they exercised, 
 and they tended to develop the social sentimert within the 
 limits of each profession, in times when a larger public spirit 
 could scarcely yet be looked for.
 
 CHAPTEK IV. 
 MODERN TIMES- FIRST AND SECOND PHASES. 
 
 THB close of the Middle Ages, as Comte has shown, must be 
 placed at the end, not of the fifteenth but of the thirteenth 
 century. The modern period, which then began, is filled by 
 a development exhibiting three successive phases, and issuing 
 in the state of things which characterises our own epoch. 
 
 I. During the fourteenth and fifteenth centuries the 
 Catholico-feudal system was breaking down by the mutual 
 conflicts of its own official members, whilst the constituent 
 elements of a new order were rising beneath it. On the 
 practical side the antagonists matched against each other were 
 the crown and the feudal chiefs ; and these rival powers sought 
 to strengthen themselves by forming alliances with the towns 
 and the industrial forces they represented. The movements 
 of this phase can scarcely be said to find an echo in any 
 contemporary economic literature. 
 
 II. In the second phase of the modern period, which opens 
 with the beginning of the sixteenth century, the spontaneous 
 collapse of the mediaeval structure is followed by a series of 
 systematic assaults which still further disorganise it. During 
 this phase the central temporal power, which has made a great 
 advance in stability and resources, lays hold of the rising 
 elements of manufactures and commerce, and seeks, whilst 
 satisfying the popular enthusiasm for their promotion, to use 
 them for political ends, and make them subserve its own 
 strength and splendour by furnishing the treasure necessary
 
 MODERN TIMES. 33 
 
 for military success. With this practical effort, and the social 
 tendencies on which it rests, the Mercantile school of political 
 economy, which then obtains a spontaneous ascendency, is in 
 closeTelation. Whilst partially succeeding in the policy we 
 have indicated, the European Governments yet on the whole 
 necessarily fail, their origin and nature disqualifying them for 
 the task of guiding the industrial movement ; and the dis- 
 credit of the spiritual power, with which most of them are 
 confederate, further weakens and undermines them. 
 
 III. In the last phase, which coincides approximately with the 
 eighteenth century, the tendency to a completely new system, 
 both temporal and spiritual, becomes decisively pronounced, 
 first in the philosophy and general literature of the period, 
 and then in the great French explosion. The universal 
 critical doctrine, which had been announced by the Protes- 
 tantism of the previous phase, and systematised in England 
 towards the close of that phase, is propagated and popularised, 
 especially by French writers. The spirit of individualism 
 inherent in the doctrine was eminently adapted to the wants 
 of the time, and the general favour with which the dogmas of 
 the social contract and laisser faire were received indicated a 
 just sentiment of the conditions proper to the contemporary 
 situation of European societies. So long as a new coherent 
 system of thought and life could not be introduced, what was 
 to be desired was a large and active development of personal 
 energy under no further control of the old social powers than 
 would suffice to prevent anarchy. Governments were there- 
 fore rightly called on to abandon any effective direction of the 
 social movement, and, as far as possible, to restrict their 
 intervention to the maintenance of material order. This 
 policy was, from its nature, of temporary application only ; 
 but the negative school, according to its ordinary spirit, 
 erected what was merely a transitory and exceptional necessity 
 into a permanent and normal law. The unanimous European 
 movement towards the liberation of effort, which sometimes 
 rose to the height of a public passion, had various sides, 
 
 o
 
 34 POLITICAL ECONOMY. 
 
 corresponding to the different aspects of thought and life j 
 and of the economic side the French physiocrats were the first 
 theoretic, representatives on the large scale, though the office 
 they undertook was, both in its destructive and organic pro- 
 vinces, more thoroughly and effectively done by Adam Smith, 
 who ought to be regarded as continuing and completing then 
 work. 
 
 It must be admitted that with the whole modern move- 
 ment serious moral evils were almost necessarily connected. 
 The general discipline which the Middle Ages had sought to 
 institute and had partially succeeded in establishing, though 
 on precarious bases, having broken down, the sentiment of 
 duty was weakened along with the spirit of ensemble which 
 is its natural ally, and individualism in doctrine tended to 
 encourage egoism in action. In the economic field this result 
 is specially conspicuous. National selfishness and private 
 cupidity increasingly dominate ; and the higher and lower 
 industrial classes tend to separation and even to mutual 
 hostility. The new elements science and industry which 
 were gradually acquiring ascendency bore indeed in their 
 bosom an ultimate discipline more efficacious and stable than 
 that which had been dissolved ; but the final synthesis was 
 long too remote, and too indeterminate in its nature, to be 
 seen through the dispersive and seemingly incoherent growth 
 of those elements. Now, however, that synthesis is becoming 
 appreciable ; and it is the effort towards it, and towards the 
 practical system to be founded on it, that gives its peculiar 
 character to the period in which we live. And to this spon- 
 taneous nisus of society corresponds, as we shall see, a new 
 form of economic doctrine, in which it tends to be absorbed 
 into general sociology and subordinated to morals. 
 
 It will be the object of the following pages to verify and 
 illustrate in detail the scheme here broadly indicated, and to 
 point out the manner in which the respective features of the 
 several successive modern phases find their counterpart and re- 
 flection in the historical development of economic speculation.
 
 MODERN TIMES: FIRST PHASE. 35 
 
 FIRST MODERN PHASE. 
 
 The first phase was marked, on the one hand, by the 
 spontaneous decomposition of the mediaeval system, and, 
 on the other, by the rise of several important elements of 
 the new order. The spiritual power became less apt as well 
 as less able to fulfil its moral office, and the social movement 
 was more and more left to the irregular impulses of individual 
 energy, often enlisted in the service of ambition and cupidity. 
 Strong governments were formed, which served to maintain 
 material order amidst the growing intellectual and moral 
 disorder. The universal admission of the commons as an 
 element in the political system showed the growing strength 
 of the industrial forces, as did also in another way the insur- 
 rections of the working classes. The decisive prevalence of 
 peaceful activity was indicated by the rise of the institution 
 of paid armies at first temporary, afterwards permanent 
 which prevented the interruption or distraction of labour by 
 devoting a determinate minority of the population to martial 
 operations and exercises. Manufactures became increasingly 
 important; and in this branch of industry the distinction 
 between the entrepreneur and the workers was first firmly 
 established, whilst fixed relations between these were made 
 possible by the restriction of military training and service 
 to a special profession. Navigation was facilitated by the 
 use of the mariner's compass. The art of printing showed 
 how the intellectual movement and the industrial develop- 
 ment were destined to be brought into relation with each 
 other and to work towards common ends. Public credit rose 
 in Florence, Venice, and Genoa long before Holland and 
 England attained any great financial importance. Just at 
 the close of the phase, the discovery of America and of the 
 new route to the East, whilst revolutionising the course of 
 trade, prepared the way for the establishment of colonies, 
 which contributed powerfully to the growing preponderance 
 of industrial life, and pointed to its ultimate universality.
 
 36 POLITICAL ECONOMY. 
 
 It is doubtless due to the equivocal nature of this stage, 
 standing between the mediaeval and the fully characterised 
 modern period, that on the theoretic side we find nothing 
 corresponding to such marvellous practical ferment and expan- 
 sion. The general political doctrine of Aquinas was retained, 
 with merely subordinate modifications. The only special 
 economic question which seems to have received particular 
 attention was that of the nature and functions of money, 
 the importance of which began to be felt as payments in 
 service or in kind were discontinued, and regular systems of 
 taxation began to be introduced. 
 
 Reseller, 1 and after him Wolowski, have called attention 
 to Nicole Oresme, who was teacher of Charles V., King of 
 France, and died Bishop of Lisieux in 1382. Roscher pro- 
 nounces him a great economist. 2 His Tractatus de Origine, 
 Natura, Jure, et Mutationibus Monetarum (reprinted by 
 Wolowski, 1864) contains a theory of money which is almost 
 entirely correct according to the views of the nineteenth century, 
 and is stated with such brevity, clearness, and simplicity of 
 language as show the work to be from the hand of a master. 
 
 SECOND MODERN PHASE: MERCANTILE SYSTEM. 
 
 Throughout the first modern phase the rise of the new 
 social forces had been essentially spontaneous ; in the second 
 "they became the object of systematic encouragement on the 
 part of Governments, which, now that the financial methods 
 of the Middle Ages no longer sufficed, could not further their 
 military and political ends by any other means than increased 
 taxation, implying augmented wealth of the community. 
 Industry thus became a permanent interest of European 
 Governments, and even tended to become the principal object 
 of their policy. In natural harmony with this state of facts, 
 
 1 Comptes rtndut de V Academic des Sciencei morales et politiquei, but 
 
 435. qq- 
 
 2 Oeschickte dtr N.O. in Deutschland, p. 25.
 
 SECOND MODERN PHASE. 37 
 
 the mercantile system arose and grew, attaining its highest 
 development about the middle of the seventeenth century. 
 
 The Mercantile doctrine, stated in its most extreme form, 
 makes wealth and money identical, and regards it therefore as 
 the great object of a community so to conduct its dealings 
 with other nations as to attract to itself the largest possible 
 share of the precious metals. Each country must seek to 
 export the utmost possible quantity of its own manufactures, 
 and to import as little as possible of those of other countries, 
 receiving the difference of the two values in gold and silver. 
 This difference is called the balance of trade, and the balance 
 is favourable when more money is received than is paid. 
 Governments must resort to all available expedients prohibi- 
 tion of, or high duties on, the importation of foreign wares, 
 bounties on the export of home manufactures, restrictions on 
 the export of the precious metals for the purpose of securing 
 such a balance. 
 
 But this statement of the doctrine, though current in the 
 text-books, does not represent correctly the views of all who 
 must be classed as belonging to the Mercantile school. Many 
 of the members of that school were much too clear-sighted to 
 entertain the belief, which the modern student feels difficulty 
 in supposing any class of thinkers to have professed, that 
 wealth consists exclusively of gold and silver. The mercan- 
 tilists may be best described, as Roscher 1 has remarked, not 
 by any deh'nite economic theorem which they held in common, 
 but by a set of theoretic tendencies, commonly found in com- 
 bination, though severally prevailing in different degrees in 
 different minds. These tendencies may be enumerated as 
 follows : (i) Towards over-estimating the importance of 
 possessing a large amount of the precious metals ; (2) towards 
 an undue exaltation (a) of foreign trade over domestic, and (&) 
 of the industry which works up materials over that which 
 provides them ; (3) towards attaching too high a value to a 
 dense population as an element of national strength ; and (4) 
 1 Geschichte der N.O. in Deutschland, p. 228, sqq.
 
 38 POLITICAL ECONOMY. 
 
 towards invoking the action of the state in furthering arti 
 ncially the attainment of the several ends thus proposed aa 
 desirable. 
 
 If we consider the contemporary position of affairs in Western 
 Europe, we shall have no difficulty in understanding how these 
 tendencies would inevitably arise. The discoveries in the 
 New World had led to a large development of the European 
 currencies. The old feudal economy, founded principally on 
 dealings in kind, had given way before the new "money 
 economy," and the dimensions of the latter were everywhere 
 expanding. Circulation was becoming more rapid, distant 
 communications more frequent, city life and movable property 
 more important. The mercantilists were impressed by the 
 fact that money is wealth sui generis, that it is at all times in 
 universal demand, and that it puts into the hands of its pos- 
 sessor the power of acquiring all other commodities. The 
 period, again, was marked by the formation of great states, with 
 powerful Governments at their head. These Governments 
 required men and money for the maintenance of permanent 
 armies, which, especially for the religious and Italian wars, 
 were kept up on a great scale. Court expenses, too, were 
 more lavish than ever before, and a larger number of civil 
 officials was employed. The royal domains and dues were 
 insufficient to meet these requirements, and taxation grew with 
 the demands of the monarchies. Statesmen saw that for their 
 own political ends industry must flourish. But manufactures 
 make possible a denser population and a higher total value of 
 exports than agriculture ; they open a less limited and more 
 promptly extensible field to enterprise. Hence they became 
 the object of special Governmental favour and patronage, 
 whilst agriculture fell comparatively into the background. 
 The growth of manufactures reacted on commerce, to which a 
 new and mighty arena had been opened by the establishment 
 of colonies. These were viewed simply as estates to be worked 
 for the advantage of the mother countries, and the aim of 
 statesmen was to make the colonial trade a new source of
 
 SECOND MODERN PHASE. 39 
 
 public revenue. Each nation, as a whole, working for its own 
 power, and the greater ones for predominance, they entered 
 into a competitive struggle in the economic no less than in the 
 political field, success in the former being indeed, by the rulers, 
 regarded as instrumental to pre-eminence in the latter. A 
 national economic interest came to exist, of whiih the Govern- 
 Tneht made itself the representative head. States became a 
 sovt of artificial hothouses for the rearing of urbaw industries. 
 Production was subjected to systematic regulation with the 
 object of securing the goodness and cheapness of the exported 
 articles, and so maintaining the place of the nation in foreign 
 markets. The industrial control was exercised, in part directly 
 by the state, but largely also through privileged corporations 
 and trading companies. High duties on imports were resorted 
 to, at first perhaps mainly~fbr revenue, but afterwards in the 
 interest of national production. Commercial treaties were a 
 principal object of diplomacy, the end in view being to exclude 
 the competition of other nations in foreign markets, whilst in 
 the home market as little room as possible was given for the 
 introduction of anything but raw materials from abroad. The 
 colonies were prohibited from trading with other European 
 nations than the parent country, to which they supplied either 
 the precious metals or raw produce purchased with home 
 manufactures. It is evident that what is known as the mer- 
 cantile doctrine was essentially the theoretic counterpart of the 
 practical activities of the time, and that nations and Govern- 
 ments were led to it, not by any form of scientific thought, 
 but by the force of outward circumstance, and the observation 
 >>f facts which lay on the surface. 
 
 And yet, if we regard the question from the highest point 
 df view of philosophic history, we must pronounce the uni- 
 versal enthusiasm of this second modern phase for manufac- 
 tures and commerce to have been essentially just, as leading 
 the nations into the main avenues of general social develop- 
 ment. If the thought of the period, instead of being impelled 
 by contemporary circumstances, could have been guided by
 
 40 POLITICAL ECONOMY. 
 
 sociological prevision, it must have entered with zeal upon the 
 same path which it empirically selected. The organisation of 
 agricultural industry could not at that period make any marked 
 progress, for the direction of its operations was still in the 
 hands of the feudal class, which could not in general really 
 learn the habits of industrial life, or place itself in sufficient 
 harmony with the workers on its domains. The industry of 
 the towns had to precede that of the country, and the latter 
 had to be developed mainly through the indirect action of the 
 former. And it is plain that it was in the life of the manu- 
 facturing proletariat, whose labours are necessarily the most 
 continuous and the most social, that a systematic discipline 
 could at a later period be first applied, to be afterwards ex- 
 tended to the rural populations. 
 
 That the efforts of Governments for the futherance of 
 manufactures and commerce were really effective towards that 
 end is admitted by Adam Smith, and cannot reasonably be 
 doubted, though free trade doctrinaires have often denied it. 
 Technical skill must have been promoted by their encourage- 
 ments ; whilst new forms of national production were fostered 
 by attracting workmen from other countries, and by lightening 
 the burden of taxation on struggling industries. Communica- 
 tion and transport by land and sea were more rapidly improved 
 with a view to facilitate traffic ; and, not the least important 
 effect, the social dignity of the industrial professions was 
 enhanced relatively to that of the classes before exclusively 
 dominant. 
 
 It has often been asked to whom the foundation of the 
 mercantile system, in the region whether of thought or of 
 practice, is to be attributed. But the question admits of no 
 absolute answer. That mode of conceiving economic facts 
 arises spontaneously in unscientific minds, and ideas suggested 
 by it are to be found in the Greek and Latin writers. The 
 policy which it dictates was, as we have shown, inspired by 
 the situation of the European nations at the opening of the 
 modern period. Such a policy had been already in some
 
 SECOND MODERN PHASE. 41 
 
 degree practised in the fourteenth and fifteenth centuries, thus 
 preceding any formal exposition or defence of its speculative 
 basis. At the commencement of the sixteenth century it began 
 to exercise a widely extended influence. Charles V. adopted 
 it, and his example contributed much to its predominance. 
 Henry VIII. and Elizabeth conformed their measures to it. 
 The leading states soon entered on a universal competition, in 
 which each power brought into play all its political and 
 financial resources for the purpose of securing to itself manu- 
 facturing and commercial preponderance. Through almost the 
 whole of the seventeenth century the prize, so far as commerce 
 was concerned, remained in the possession of Holland, Italy 
 having lost her former ascendency by the opening of the new 
 maritime routes, and by her political misfortunes, and Spain 
 and Germany being depressed by protracted wars and internal 
 dissensions. The admiring envy of Holland felt by English 
 politicians and economists appears in such writers as Raleigh, 
 Mun, Child, and Temple ; l and how strongly the same 
 spectacle acted on French policy is shown by a well-known 
 letter of Colbert to M. de Pomponne, 2 ambassador to the 
 Dutch States. Cromwell, by the Navigation Act, which 
 destroyed the carrying trade of Holland and founded the 
 English empire of the sea, and Colbert, by his whole economic 
 policy, domestic and international, were the chief practical 
 representatives of the mercantile system. From the latter 
 great statesman the Italian publicist Mengotti gave to that 
 system the name of Colbertismo ; but it would be an error to 
 consider the French minister as having absolutely accepted 
 its dogmas. He regarded his measures as temporary only, 
 and spoke of protective duties as crutches by the help of whict 
 manufacturers might learn to walk and then throw them away. 
 The policy of exclusions had been previously pursued by Sully, 
 partly with a view to the accumulation of a royal treasure, but 
 
 1 Roscher, Geschichte der N.O. in Deutschland, p. 227. 
 * Clement, Histoire de la vie et de V administration de Colbert (1846), 
 p. 134-
 
 4* POLITICAL ECONOMY. 
 
 chiefly from his special enthusiasm for agriculture, and hia 
 dislike of the introduction of foreign luxuries as detrimentaV 
 to the national character. Colbert's tariff of 1664 not merely 
 simplified but considerably reduced the existing duties ; the 
 tariff of 1667 indeed increased them, but that was really a 
 political measure directed against the Dutch. It seems certain 
 that France owed in a large measure to his policy the vast 
 development of trade and manufactures which so much 
 impressed the imagination of contemporary Europe, and of 
 which we hear so much from English writers of the time of 
 Petty. But this policy had also undeniably its dark side. 
 Industry was forced by such systematic regulation to follow 
 invariable courses, instead of adapting itself to changing 
 tastes and popular demand. NOT was it free to simplify the 
 processes of production, or to introduce increased division of 
 labour and improved appliances. Spontaneity, initiation, and 
 invention were repressed or discouraged, and thus ulterior 
 sacrificed in a great measure to immediate results. The more 
 enlightened statesmen, and Colbert in particular, endeavoured, 
 it is true, to minimise these disadvantages by procuring, often 
 at great expense, and communicating to the trades through 
 inspectors nominated by the Government, information respect- 
 ing improved processes employed elsewhere in the several 
 arts ; but this, though in some degree a real, was certainly on 
 the whole, and in the long run, an insufficient compensation. 
 
 We must not expect from the writers of this stage any 
 exposition of political economy as a whole ; the publications 
 which appeared were for the most part evoked by special 
 exigencies, and related to particular questions, usually of a 
 practical kind, which arose out of the great movements cf the 
 time. They were in fact of the ' nature of counsels to the 
 Governments of states, pointing out how best they might 
 develop the productive powers at their disposal and increase 
 the resources of their respective countries. They are con- 
 ceived (as List claims for them) strictly in the spirit of 
 national economy, and cosmopolitanism is essentially foreign
 
 SECOND MODERN PHASE. 43 
 
 to them. On these monographs the mercantile theory some- 
 times had little influence, the problems discussed not involving 
 its tenets. But it must in most cases be taken to be the 
 scheme of fundamental doctrine (so far as it was ever entitled 
 to such a description) which in the last resort underlies the 
 writer's conclusions. 
 
 The rise of prices following on the discovery of the Ameri- 
 can mines was one of the subjects which first attracted the 
 attention of theorists. This rise brought about a great and 
 gradually increasing disturbance of existing economic relations, 
 and so produced much perplexity and anxiety, which were all 
 the more felt because the cause of the change was not under- 
 stood. To this was added the loss and inconvenience arising 
 from the debasement of the currency often resorted to by 
 sovereigns as well as by republican states. Italy suffered 
 most from this latter abuse, which was multiplied by her 
 political divisions. It was this evil which called forth the 
 work of Count Gasparo Scaruffi (Discorso sopra le monete e 
 della vera proportions fra I'oro e I'argento, 1582). In this he 
 put forward the bold idea of a universal money, everywhere 
 identical in size, shape, composition, and designation. The 
 project was, of course, premature, and was not adopted even 
 by ths Italian princes to whom the author specially appealed ; 
 but the reform is one which, doubtless, the future will see 
 realised. Gian Donato Turbolo, master of the Neapolitan 
 "mint, in his Discorsi e Relazioni, 1629, protested against any 
 tampering with the currency. Another treatise relating to 
 the subject of money was that of the Florentine Bernardo 
 Davanzati, otherwise known as the able translator of Tacitus, 
 Lezioni delle Monete, 1588. It is a slight and somewhat 
 superficial production, only remarkable as written with con- 
 ciseness and elegance of style. 
 
 A French writer who dealt with the question of money, 
 but from a different point of view, was Jean Bod in. In his 
 Reponse aux paradoxes de M. Malestroit touchant I'enclierisse- 
 ment de toutea les choses et des moniiaies, 1568, and in his
 
 44 POLITICAL ECONOMY. 
 
 Discours sur le rehaussement et la diminution des monnaiee, 
 1578, he showed a more rational appreciation than many cf hia 
 contemporaries of the causes of the revolution in prices, and 
 the relation of the variations in money to the market values 
 of wares in general as well as to the wages of labour. He saw 
 that the amount of money in circulation did not constitute 
 the wealth of the community,, and that the prohibition of the 
 export of the precious metals was useless, because rendered 
 inoperative by the necessities of trade. Bodin is no incon- 
 siderable figure in the literary history of the epoch, and did 
 not confine his attention to economic problems ; in his Six 
 livres de la Repullique, about 1576, he studies the general 
 conditions of the prosperity and stability of states. In har- 
 mony with the conditions of his age, he approves of absolute 
 Governments as the most competent to ensure the security 
 and wellbeing of their subjects. He enters into an elaborate 
 defence of individual property against Plato and More, rather 
 perhaps because the scheme of his work required the treatment 
 of that theme than because it was practically urgent in his 
 day, when the excesses of the Anabaptists had produced a 
 strong feeling against communistic doctrines. He is under 
 the general influence of the mercantilist views, and approves 
 of energetic Governmental interference in industrial matters, 
 of high taxes on foreign manufactures and low duties on raw 
 materials and articles of food, and attaches great importance 
 to a dense population. But he is not a blind follower of the 
 system ; he wishes for unlimited freedom of trade in many 
 cases ; and he is in advance of his more eminent contemporary 
 Montaigne l in perceiving that the gain of one nation is not 
 necessarily the loss of another. To the public finances, which 
 he calls the sinews of the state, he devotes much attention, 
 and insists on the duties of the Government in respect to 
 the right adjustment of taxation. In general he deserves 
 the praise of steadily keeping in view the higher aims and 
 
 1 " II ne se faict aucun profit qu'au dommage d'autruy." Jb'isais, li v. 
 I, chap. 21.
 
 SECOND MODERN PHASE. 45 
 
 interests of society in connection with the regulation and 
 development of its material life. 
 
 Correct views as to the cause of the general rise of prices 
 are also put forward by the English writer, W. S. (William 
 Stafford), in his Briefe Conceipte of English Policy, published 
 in 1581, and dedicated to Queen Elizabeth. It is in the form 
 of a dialogue, and is written with liveliness and spirit. The 
 author seems to have been acquainted with the writings of 
 Bodin. He has just ideas as to the nature of money, and 
 fully understands the evils arising from a debased coinage. 
 He describes in detail the way in which the several interests 
 in the country had been affected by such debasement in 
 previous reigns, as well as by the change in the value of the 
 precious metals. The great popular grievance of his day, the 
 conversion of arable land into pasture, he attributes chiefly to 
 the restrictions on the export of corn, which he desires to see 
 abolished. But in regard to manufactures he is at the same 
 point of view with the later mercantilists, and proposes the 
 exclusion of all foreign wares which might as well be provided 
 at home, and the prohibition of the export of raw materials 
 intended to be worked up abroad. 
 
 Out of the question of money, too, arose the first remarkable 
 German production on political economy which had an original 
 national character and addressed the public in the native 
 tongue. Duke George of the Ernestine Saxon line was in- 
 clined (1530) to introduce a debasement of the currency. A 
 pamphlet, Gemeine Stymmen von der Milntze, was published 
 in opposition to this proceeding, under the auspices of the 
 Albertine branch, whose policy was sounder in the economic 
 sphere no less than in that of ecclesiastical affairs. A reply 
 appeared justifying the Ernestine project. This was followed 
 by a rejoinder from the Albertine side. The Ernestine pam- 
 phlet is described by Roscher as ill-written, obscure, inflated, 
 / and, as might be expected from the thesis it maintained, 
 sophistical. But it is interesting as containing a statement of 
 the fundamental principles of the mercantile system more than
 
 46 POLITICAL ECONOMY. 
 
 one hundred years before the publication of Mun's book, and 
 forty-six before that of Bodin's Six livres de la Republique. 
 The Albertine tracts, according to Koscher, exhibit such sound 
 views of the conditions and evidences of national wealth, of 
 the nature of money and trade, and of the rights and duties 
 of Governments in relation to economic action, that he regards 
 the unknown author as entitled to a place beside Raleigh and 
 the other English " colonial-theorists " of the end of the six- 
 teenth and beginning of the seventeenth century. 
 
 In connection with the same subject of money we meet the 
 great name of Copernicus. His treatise De monetce cudendce 
 ratione, 1526 (first printed in 1816), was written by order of 
 King Sigismund I., and is an exposition of the principles on 
 which it was proposed to reform the currency of the Prussian 
 provinces of Poland. It advocates unity of the monetary 
 system throughout the entire state, with strict integrity in the 
 quality of the coin, and the charge of a seigniorage sufficient 
 to cover the exper/ses of mintage. 
 
 Antonio Serra is regarded by some as the creator of modern 
 political economy. He was a native of Cosenza in Calabria. 
 His Breve Trattato delle cause che possono fare abbondare It 
 regni d'oro e d'argento dove non sono miniere, 1613, was 
 written during his imprisonment, which is believed to have 
 been due to his having taken part in the conspiracy of 
 Campanella for the liberation of Naples from the Spanish 
 yoke and the establishment of a republican government. This 
 work, long overlooked, was brought into notice in the follow- 
 ing century by Galiani and others. Its title alone would 
 sufficiently indicate that the author had adopted the principles 
 of the mercantile system, and in fact in this treatise the 
 essential doctrines of that system are expounded in a tolerably 
 formal and consecutive manner. He strongly insists on the 
 superiority of manufactures over agriculture as a source of 
 national wealth, and uses in support of this view the pros- 
 perity of Genoa, Florence, and Venice, as contrasted with the 
 depressed condition of Naples. With larger insight than
 
 SECOND MODERN PHASE. 47 
 
 many of the mercantilists exhibit, he points out the import- 
 ance, towards the acquisition, of wealth, not alone of favourable 
 external conditions, but of energetic character and industrious 
 habits in a population, as well as of a stable government and 
 a good administration of the laws, 
 
 The first systematic treatise on our science which proceeded 
 from a French author was the Traite de VEconomie Politique, 
 published by Montchre"tien de Watteville (or Yasteville) * in 
 1615. The use of the title, says Boscher, now for the first 
 time given to the science, was in itself an important service, 
 since even Bacon understood by " Economia " only the theory 
 of domestic management. The general tendencies and aims 
 of the period are seen in the fact that this treatise, notwith- 
 standing the comprehensive name it bears, does not deal with 
 agriculture at all, but only with the mechanical arts, navigation, 
 commerce, and public finance. The author is filled with the 
 then dominant enthusiasm for foreign trade and colonies. 
 He advocates the control by princes of the industry of their 
 subjects, and condemns the too great freedom, which, in his 
 opinion to their own detriment, the Governments of Spain, 
 Portugal, and Holland had given to trade. His book may 
 be regarded as a formal exposition of the principles of the 
 mercantile system for the use of Frenchmen. 
 
 A similar office was performed in England by Thomas Mun. 
 In his two works, A Discourse of Trade from England unto 
 the East Indies, 2nd ed., 1621, and especially in England's 
 Treasure by Foreign Trade, 1664 (posthumous), we have for 
 the first time a clear and systematic statement of the theory 
 of the balance of trade, as well as of the means by which, 
 according to the author's view, a favourable balance could be 
 secured for England. The great object of the economic policy 
 of a state, according to him, should be so to manage its export 
 
 1 Montehre'tien, having fomented the rebellion in Normandy in 1621, 
 was slain, with a few followers, by Claude Turgot, lord of Les Tourailles, 
 who belonged to the elder branch of the noble house from which the 
 great Turgot was descended.
 
 4 8 POLITICAL ECONOMY. 
 
 of manufactures, its direct and carrying trade, and its customi 
 duties, as to attract to itself money from abroad. Hewaa^ 
 however, opposed to the prohibition of the export of the 
 precious metals in exchange for foreign wares, but on the 
 ground, fully according with his general principles, that those 
 wares might afterwards be re-exported and might then bring 
 back more treasure than had been originally expended in their 
 purchase ; the first export of money might be, as he said, the 
 seed-time, of which the ultimate receipt of a larger amount 
 would be the harvest. 1 He saw, too, that it is inexpedient 
 to have too much money circulating in a country, as this 
 enhances the prices of commodities, and so makes them leas 
 saleable to foreigners, but he is favourable to the formation 
 and maintenance of a state treasure. 2 
 
 One of the most remarkable of the moderate mercantilists 
 was Sir Josiah Child (Brief Observations concerning Trade and 
 the Interest of Money, 1668, and A Neio Discourse of Trade, 
 1668 and 1690). He was one of those who held up Holland 
 as a model for the imitation of his fellow-countrymen. He 
 is strongly impressed with the importance for national wealth 
 and wellbeing of a low rate of interest, which he says is to 
 commerce and agriculture what the soul is to the body, and 
 which he held to be the " causa causans of all the other causes 
 of the riches of the Dutch people." Instead of regarding 
 such low rate as dependent on determinate conditions, which 
 should be allowed to evolve themselves spontaneously, he 
 thinks it should be created and maintained by public authority. 
 Child, whilst adhering to the doctrine of the balance of 
 trade, observes that a people cannot always sell to foreigners 
 
 1 On Mun's doctrines, see Smith's Wealth of Nations, Bk. iv. chap. i. 
 
 1 Writers of less importance who followed the same direction were 
 Sir Thomas Culpeper (A Tract against the High Kate of Usury t 1623, 
 and Useful Remark on High Interest, 1641), Sir Dudley Digges (Defence 
 of Trade, 1615), G. Malynes (Consuetude vel Lex Mercutoria, 1622), 
 E. Misselden (Circle of Commerce, 1623), Samuel Fortrey (England'i 
 Interest and Improvement, 1663 and 1673), and John Pollexfen (England 
 and India imontistent in their Manufactures, 1697).
 
 SECOND MODERN PHASE. 49 
 
 without ever buying from them, and denies that the export^ 
 of the precious metals is necessarily detrimental. He has the 
 ordinary mercantilist partiality for a numerous population. 
 He advocates the reservation hy the mother country of the 
 sole right of trade with her colonies, and, under certain 
 limitations, the formation of privileged trading companies. 
 A.s to the Navigation Act, he takes up a position not unlike 
 that afterwards occupied by Adam Smith, regarding that 
 measure much more favourably from the political than from 
 the economic point of view. It jvill be seen that he is some- 
 what eclectic in his opinions ; but he cannot properly be re- 
 garded, though some have attributed to him that character, as 
 a precursor of the free-trade school of the eighteenth century. 
 
 Two other eclectics may be here mentioned, in whom just 
 views are mingled with mercantilist prejudices Sir William 
 Temple and Charles Davenant. The former in his Observations 
 upon the United Provinces of the Netherlands, 1672, and his 
 Essay on the Trade of Ireland, 1673, nas man y excellent 
 remarks on fundamental economic principles, as on the func- 
 tions of labour and of saving in the production of national 
 wealth ; but he is infected with the errors of the theory of the 
 balance of trade. He follows the lead of Raleigh and Child 
 in urging his fellow-countrymen to imitate the example of the 
 Dutch in their economic policy advice which in his case was 
 founded on his observations during a lengthened residence in 
 Holland as ambassador to the States. Davenant in his Essay 
 on the East-India Trade, 1696-97, Essay on the Probable 
 Ways of making the People Gainers in the Balance of Trade, 
 1699, &c., also takes up an eclectic position, combining some 
 correct views on wealth and money with mercantilist notions 
 on trade, and recommending Governmental restrictions on 
 colonial commerce as strongly as he advocates freedom of 
 exchange at home. 
 
 JWhilst the mercantile system represented the prevalent form 
 of economic thought in the seventeenth century, and was alone 
 dominant in the region of practical statesmanship, there waa 
 
 " D
 
 POLITICAL ECONOMY. 
 
 growing up, side by side with it, a body of opinion, different 
 aiid indeed hostile in character, which was destined ultimately 
 to drive it from the field. The new ideas were first developed 
 in England, though it was in France that in the following 
 century they took hold of the public mind, and became a 
 power in politics. That they should first show themselves 
 here, and afterwards be extended, applied, and propagated 
 throughout Europe by French writers, belongs to the order 
 of things according to which the general negative doctrine in 
 morals and politics, undoubtedly of English origin, found its 
 chief home in France, and was thence diffused in widening 
 circles through the civilised world. In England this move- 
 ment of economic thought took the shape mainly of individual 
 criticism of the prevalent doctrines, founded on a truer analysis 
 of facts and conceptions ; in France it was penetrated with a 
 powerful social sentiment, furnished the creed of a party, and 
 inspired a protest against institutions and an urgent demand 
 for practical reform. 
 
 Eegarded from the theoretic side, the characteristic features 
 of the new direction were the following. The view of at least 
 the extreme mercantilists that national wealth depends on the 
 accumulation of the precious metals is proved to be false, and 
 the gifts of nature and the labour of man are shown to be its 
 real sources. The exaggerated estimate of the importance of 
 foreign commerce is reduced, and attention is once more turned 
 to agriculture and the conditions of its successful prosecution. 
 On the side of practical policy, a so-called favourable balance 
 of trade is seen not to be the true object of a nation's or a 
 statesman's efforts, but the procuring for the whole population 
 in the fullest measure the enjoyment of the necessaries and 
 conveniences of life. And what more than anything else 
 contrasts the new system with the old the elaborate appa- 
 ratus of prohibitions, protective duties, bounties, monopolies, 
 and privileged corporations, which the European Governments 
 had created in the supposed interests of manufactures and 
 trade, is denounced or deprecated as more an impediment than
 
 SECOND MODERN PHASE. 51 
 
 furtherance, and the freedom of industry is insisted on as 
 the one thing needful. This circle of ideas, of course, emerges 
 only gradually, and its earliest representatives in economic 
 literature in general apprehend it imperfectly and advocate it 
 with reserve ; but it rises steadily in importance, being more 
 and more favoured by the highest minds, and finding an in- 
 creasing body of supporters amongst the intelligent public. 
 
 Some occasional traits of an economic scheme in harmony 
 with these new tendencies are to be found in the De Cive 
 and Leviathan of Hobbes. But the efficacy of that great 
 thinker lay rather in the general philosophic field ; and by sys- 
 tematising, for the first time, the whole negative doctrine, he 
 gave a powerful impulse towards the demolition of the exist- 
 ing social order, which was destined, as we shall see, to have 
 momentous consequences in the economic no less than in the 
 strictly political department of things. 
 
 A writer of no such extended range, but of much sagacity 
 and good sense, was Sir William Petty, author of a number 
 of pieces containing germs of a sound economic doctrine. A 
 leading thought in his writings is that "labour is the father 
 and active principle of wealth, lands are the mother." He 
 divides a population into t\vo classes, the productive and the 
 unproductive, according as they are or are not occupied in 
 producing .useful material things. The value of any com- 
 modity depends, he says, anticipating Ricardo, on the amount 
 of labour necessary for its production. He is desirous of 
 obtaining a universal measure of value, and chooses as his 
 unit the average food of the cheapest kind required for a man's 
 daily sustenance. He understands the nature of the rent of 
 land as the excess of the price of its produce over the cost of 
 production. He disapproves of the attempt to fix by autho- 
 rity a maximum rate of interest, and is generally opposed to 
 Governmental interference with the course of industry. He 
 sees that a country requires for its exchanges a definite 
 quantity of money and may have too much of it, and con- 
 demns the prohibition of its exportation. He holds that one
 
 52 POLITICAL ECONOMY. 
 
 only of the precious metals must be the foundation of the 
 currency, the other circulating as an ordinary article of mer- 
 chandise. Petty's name is specially associated with the pro* 
 gress of statistics, with which he was much occupied, and 
 which he called hy the name of political arithmetic. Relying 
 on the results of such inquiries, he set himself strongly against 
 the opinion which was maintained by the author of Britannia 
 Languens (1680), Fortrey, Roger Coke, and other writers, that 
 the prosperity of England was on the decline. 
 
 The most thorough-going and emphatic assertion of the free- 
 trade doctrine against the system of prohibitions, which had 
 gained strength by the Revolution, was contained in Sir 
 Dudley North's Discourses upon Trade, 1691. He shows 
 that wealth may exist independently of gold or silver, its 
 source being human industry, applied either to the cultivation 
 of the soil or to manufactures. The precious metals, however, 
 arc one element of national wealth, and perform highly im- 
 portant offices. Money may exist in excess, as well as in 
 defect, in a country ; and the quantity of it required for the 
 purposes of trade will vary with circumstances ; its ebb and 
 flow will regulate themselves spontaneously. It is a mistake 
 to suppose that stagnation of trade arises from want of money ; 
 it must arise either from a glut of the home market, or from 
 a disturbance of foreign commerce, or from diminished con- 
 sumption caused by poverty. The export of money in the 
 /~ course of traffic, instead of diminishing, increases the national 
 wealth, trade being only an exchange of superfluities. Nation? 
 are economically related to the world just in the same way as 
 cities to the state or as families to the city. North emphasises 
 more than his predecessors the value of the home trade. With 
 respect to the interest of capital, he maintains that it depends, 
 like the price of any commodity, on the proportion of demand 
 and supply, and that a low rate is a result of the relative 
 increase of capital, and cannot be brought about by arbitrary 
 regulations, as had been proposed by Child and others. In 
 arguing the question of free trade, he urges that individual*
 
 SECOND MODERN PHASE. 53 
 
 often take their private interest as the measure of good and 
 evil, and would for its sake debar others from their equal right 
 of buying and selling, but that every advantage given to one 
 interest or branch of trade over another is injurious to the 
 public. No trade is unprofitable to the public; if it were, it 
 would be given up; when trades thrive, so does the public, 
 of which they form a part. Prices must determine themselves, 
 and cannot be fixed by law ; and all forcible interference with 
 them does harm instead of good. No people can become rich 
 by state regulations, only by peace, industry, freedom, and 
 unimpeded economic activity. It will be seen how closely 
 North's view of things approaches to that embodied some 
 eighty years later in Adam Smith's great work. 1 
 
 Locke is represented by Koscher as, along with Petty and 
 North, making up the "triumvirate" of eminent British 
 economists of this period who laid the foundations of a new 
 and more rational doctrine than that of the mercantilists. 
 But this view of his claims seems capable of being accepted 
 only with considerable deductions. His specially economic 
 writings are Considerations of the lowering of Interest and 
 raising the value of Money, 1691, and Further Considerations, 
 1695. Though Leibnitz declared with respect to these treatises 
 that nothing more solid or intelligent could be said on their 
 subject, it is difficult absolutely to adopt that verdict. Locke's 
 spirit of sober observation and patient analysis led him indeed 
 to some just conclusions ; and he is entitled to the credit of 
 having energetically resisted the debasement of the currency, 
 which was then recommended by some who were held to be 
 eminent practical authorities. But he falls into errors which 
 show that he had not by any means completely emancipated 
 himself from the ideas of the mercantile system. He attaches 
 far too much importance to money as such. He says expressly 
 that riches consist in a plenty of gold and silver, that is, as he 
 
 1 YetM. Eugene Daire asserts (CEuvresde Turgot, i. 322) that "Hume 
 et Tucker sont les deux premiers e"crivains qui se soient Sieve's, en Angle, 
 terre, au-dessua des theories da systemr mercantile."
 
 54 POLITICAL ECONOMY. 
 
 explains, in having more in proportion of those metals than 
 the rest of the world or than our neighbours. " In a country 
 not furnished with mines, there are but two ways of growing 
 rich, either conquest or commerce." Hence he accepts the 
 doctrine of the balance of trade. He shows that the rate of 
 interest can no more be fixed by law than the rent of houses 
 or the hire of ships, and opposes Child's demand for legisla- 
 tive interference with it. But he erroneously attributed the 
 fall of the rate which had taken place generally in Europe to 
 the increase of the quantity of gold and silver by the discovery 
 of the American mines. He sets too absolute a value on a 
 numerous population, in this point agreeing with Petty. On 
 wages he observes that the rate must be such as to cover the 
 indispensable wants of the labourer; when the price of sub- 
 sistence rise?, wages must rise in a like ratio, or the working 
 population must come on the poor rates. The fall of the rent 
 of land he regards as a sure sign of the decline of national 
 wealth. " Taxes, however contrived, and out of whose hands 
 soever immediately taken, do, in a country where their great 
 fund is in land, for the most part terminate upon land." In 
 this last proposition we see a foreshadowing of the impdf 
 unique of the physiocrats. Whatever may have been Locke's 
 direct economic services, his principal importance, like that of 
 Hobbes, lies in his general philosophic and political principles, 
 which powerfully affected French and indeed European thought, 
 exciting a spirit of opposition to arbitrary power, and laying the 
 foundation of the doctrine developed in the Contrat Social. 1 
 
 1 Minor English writers who followed the new economic direction 
 were Lewis Roberts, Treasure of Traffick, 1641 ; Rice Vaughan, DixccurM 
 of Coin and Coinage, 1675 ; Nicholas Barbon, Discourse concerning (7cin> 
 ing the new money lighter, 1696, in which some of Locke's errors were 
 pointed out ; and the author of an anonymous book entitled Consider**- 
 tions on the East India Trade, 1701. Practical questions much debated 
 at this period were those connected with banking, on which a lengthened 
 controversy took place, S. Lamb, W. Potter, F. Cradocke, M. Lewis, 
 M. Godfrey, R. Murray, H. Chamberlen, and W. Paterson, founder of 
 the Bank of England (1694). producing many pamphlets on the subject { 
 and the management of the poor, which was treated by Locke, Sil 
 Matthew Hale, R. Haines, T. Firmin, and others.
 
 CHAPTER V. 
 
 THIRD MODERN PHASE: SYSTEM OF NATURAL 
 LIBERTY. 
 
 THE changes introduced during the third phase in the in- 
 ternal organisation of the industrial world were (i) the more 
 complete separation of banking from general commerce, and 
 the wider extension of its operations, especially through the 
 system of public credit; and (2) the great development of the 
 use of machinery in production. The latter did not become 
 very prominent during the first half of the eighteenth century. 
 Whilst tending to promote the dignity of the working classes by 
 relieving them from degrading and exhausting physical labour, 
 it widened the gulf between them and the capitalist employers. 
 It thus became plain that for the definitive constitution of in- 
 dustry a moral reform was the necessary preliminary condition. 
 With respect to the political relations of industry, a remark- 
 able inversion now showed itself. The systematic encourage- 
 ments which the European Governments had extended to it 
 in the preceding phase had been prompted by their desire to 
 use it as an instrument for achieving the military superiority 
 which was the great end of their policy. Now, on the con- 
 trary, the military spirit subordinated itselfto the industrial, 
 and the armies and the. diplomacy of governments were placed 
 at the service of commerce. The wars which filled a large 
 part of the eighteenth century were essentially Commercial 
 wars, arising out of the effort to sustain or extend the colonial 
 establishments founded in the previous phase, or to deprive 
 rival nations of the industrial advantages connected with the
 
 56 POLITICAL ECONOMY. 
 
 possession of such establishments. This change of attitude, 
 notwithstanding its deplorable tendency to foster international 
 enmities and jealousies, marked a real and important progress 
 by pointing to industrial activity as the one permanent 
 practical destination of modern societies. 
 
 But, whilst by this sort of action furthering the ascendency 
 of the new forces, the ruling powers, both in England and 
 France, betrayed the alarm they felt at the subversive ten- 
 dencies which appeared inherent in the modern movement by 
 taking up in their domestic policy an attitude of resistance. 
 Reaction became triumphant in France during the latter half 
 of the reign of Louis XIV. under the disastrous influence of 
 Madame de Maintenon. In England, after the transaction of 
 1688, by which the Government was consolidated on the 
 double basis of aristocratic power and official orthodoxy, the 
 state policy became not so much retrograde as stationary, 
 industrial conquest being put forward to satisfy the middle 
 class and wean it from the pursuit of a social renovation. 
 In both countries there was for some time a noticeable check 
 in the intellectual development, and Eoscher and others have 
 observed that, in economic studies particularly, the first three 
 decades of the eighteenth century were a period of general 
 stagnation, eclecticism for the most part taking the place of 
 originality. The movement was, however, soon to be resumed, 
 but with an altered and more formidable character. The 
 negative doctrine, which had risen and taken a definite form 
 in England, was diffused and popularised in France, where it 
 became evident, even before the decisive explosion, that the 
 only possible issue lay in a radical social transformation. 
 The partial schools of Voltaire and Rousseau in different ways 
 led up to a violent crisis, whilst taking little thought of the 
 conditions of a system which could replace the old ; but the 
 more complete and organic school, of which Diderot li the 
 best representative, looked through freedom to a thorough 
 reorganisation. Its constructive aim is shown by the design 
 of the Encydopedie, a project, however, which could have
 
 SYSTEM OF NATURAL LIBERTY. 57 
 
 only & temporary success, because no real synthesis was forth- 
 coming, and this joint production of minds often divergent 
 could possess no more than an external unity. It was with 
 this great school that the physiocrats were specially connected ; 
 and, in common with its other members, whilst pushing 
 towards an entire change of the existing system, they yet 
 would gladly have avoided political demolition through the 
 exercise of a royal dictatorship, or contemplated it only as the 
 necessary condition of a new and better order of things. But, 
 though marked off by such tendencies from the purely revo- 
 lutionary sects, their method and fundamental ideas were 
 negative, resting, as they did, essentially on the basis of the 
 jus naturae. We shall follow in detail these French develop- 
 ments in their special relation to economic science, and after- 
 wards notice the corresponding movements in other European 
 countries which showed themselves before the appearance of 
 Adam Smith, or were at least unaffected by his influence. 
 
 BEFORE ADAM SMITH. 
 France. 
 
 The more liberal, as well as more rational, principles put 
 forward by the English thinkers of the new type began, early 
 in the eighteenth century, to find an echo in France, where 
 the clearer and more vigorous intellects were prepared for 
 their reception by a sense of the great evils which exaggerated 
 mercantilism, serving as instrument of political ambition, had 
 produced in that country. The impoverished condition of 
 the agricultural population, the oppressive weight and unequal 
 imposition of taxation, and the unsound state of the public 
 finances had produced a general feeling of disquiet, and led 
 several distinguished writers to protest strongly against the 
 policy of Colbert and to demand a complete reform. 
 
 The most important amongst them was Pierre Boisguillebert, 
 whose whole life was devoted to these controversies. In his 
 statistical writings (Detail de la France sous le regne pres&at t
 
 58 POLITICAL ECONOMY. 
 
 1697 ; Factum de la France, 1707), he brings out in gloomy 
 colours the dark side of the age of Louis XIV., and in his 
 theoretic works (Traite de la nature et du commerce dea 
 grains; Dissertations sur la nature des richesses de V argent 
 et des tributs ; and Essai sur la rarete de I'argent) ha 
 appears as an earnest, even passionate, antagonist of the mer- 
 cantile school. He insists again and again on the fact that 
 national wealth does not consist in gold and silver, but io 
 useful things, foremost among which are the products of agri- 
 culture. He even goes so far as to speak of " argent criminel," 
 which from being the slave of trade, as it ought to be, had 
 become its tyrant. He sets the " genuinely French Sully " 
 far above the " Italianising Colbert," and condemns all arbi- 
 trary regulations affecting either foreign or internal commerce, 
 especially as regards the corn trade. National wealth does 
 not depend on Governments, whose interference does more 
 harm than good ; the natural laws of the economic order of 
 things cannot be violated or neglected with impunity ; the 
 interests of the several classes of society in a system of free- 
 dom are identical, and those of individuals coincide with that 
 of the state. A similar solidarity exists between different 
 nations ; in their economic dealings they are related to the 
 world as individual towns to a nation, and not merely plenty, 
 but peace and harmony, will result from their unfettered 
 intercourse. Men he divides into two classes those who do 
 nothing and enjoy everything, and those who labour from 
 morning to night often without earning a bare subsistence ; 
 the latter he would favour in every way. Here we catch the 
 "breath of popular sympathy which fills the social atmosphere of 
 the eighteenth century. He dwells with special emphasis on 
 the claims of agriculture, which had in France fallen into un- 
 merited neglect, and with a view to its improvement calls for 
 a reform in taxation. He would replace indirect taxes by 
 taxes on income, and would restore the payment of taxes in 
 kind, with the object of securing equality of burden and 
 eliminating every element of the arbitrary. He has some
 
 SYSTEM OF NATURAL LIBERTY. 59 
 
 interesting views of a general character : thus he approximates 
 to a correct conception of agricultural rent, and he points^ tp_ 
 the order in which human wants follow each other, those 
 of necessity, convenience, comfort, superfluity, and ostentation 
 succeeding in the order named, and ceasing in the inverse 
 order to be felt as wealth decreases. The depreciating tone 
 in which Voltaire speaks of Boisguillebert (Siecle de Louis 
 XIV., chap. 30) is certainly not justified ; he had a great 
 economic talent, and his writings contain important germs of 
 truth. But he appears to have exerted little influence, theo- 
 retical or practical, in his own time. 
 
 The same general line of thought was followed by Marshal 
 Vauhan (16331707) in his economic tracts, especially that 
 bearing the title of Projet d'une dixme Royale, 1707, which 
 was suppressed by the authorities, and lost for him. the favour 
 of his sovereign, but has added lustre to his name in the 
 judgment of posterity. He is deeply impressed with the 
 deplorable condition of the working classes of France in his 
 day. He urges that the aim of the Government should be 
 the welfare of all orders of the community ; that all are 
 entitled to like favour and furtherance ; that the often despised 
 and wronged lower class is the basis of the social organisation ; 
 that labour is the foundation of all wealth, and agriculture 
 the most important species of labour; that the most essential 
 condition of successful industry is freedom ; and that all un- 
 necessary or excessive restrictions on manufactures and com- 
 merce should be swept away. He protests in particular against 
 the inequalities of taxation, and the exemptions and privileges 
 enjoyed by the higher ranks. With the exception of some 
 duties on consumption he would abolish all the existing taxes, 
 and substitute for them a single tax on income and land, 
 impartially applied to all classes, which he describes under 
 the name of " Dixme Royale," that is to say, a tenth in kind 
 of all agricultural produce, and a tenth of money income 
 chargeable on manufacturers and traders. 1 
 
 1 An English translation of the Dixme Royale was published in 1 708.
 
 60 POLITICAL ECONOMY. 
 
 The liberal and humane spirit of Fenelon led him to aspira 
 after freedom of commerce with foreign nations, and to preach 
 the doctrine that the true superiority of one state over another 
 lies in the number indeed, but also in the morality, in- 
 telligence, and industrious habits of its population. The 
 Telemaque, in which these views were presented in an 
 attractive form, was welcomed and read amongst all ranks and 
 classes, and was thus an effective organ for the propagation of 
 opinion. 
 
 After these writers there is a marked blank in the field of 
 French economic thought, broken only by the Reflexions 
 Politiques sur les Finances et le Commerce (1738) of Dutot, 
 a pupil of Law, and the semi-mercantilist Essais Politiquet 
 eur le Commerce (1731) of Me'lon, till we come to the great 
 name of Montesquieu. The Esprit des Lois, so far as it 
 deals with economic subjects, is written upon the whole from 
 a point of view adverse to the mercantile system, especially in 
 his treatment of money, though in his observations on colonies 
 and elsewhere he falls in with the ideas of that system. His 
 immortal service, however, was not rendered by any special 
 research, but by his enforcement of the doctrine of natural 
 laws regulating social no less than physical phenomena. 
 There is no other thinker of importance on economic subjects 
 in France till the appearance of the physiocrats, which marks 
 an epoch in the history of the science. 
 
 The heads of the physiocratic school were Francois Quesnay 
 (1694-1774) and Jean Claude Marie Vincent, sieur de 
 Gournay (1712-1759). The principles of the school had 
 been put forward in 1755 by Richard Cantillon, a Fiench 
 merchant of Irish extraction (Essai sur la nature du Commerce 
 en general), whose biography Jevons has elucidated, 1 and 
 whom he regards as the true founder of political economy j 
 
 1 " Richard Cantillon and the Nationality of Political Economy," in 
 Contemporary Review, Jan. 1 88 1. Cantillon is qnoted in the Wealth Of 
 Nations, bk. i. chap. 8.
 
 SYSTEM OF NATURAL LIBERTY. 6. 
 
 but it was in the hands of Quesnay and Gournay l that they 
 acquired a systematic form, and became the creed of a united 
 group of thinkers and practical men, bent on carrying them 
 into action. The members of the group called themselves 
 " les ^conomistes," but it is more convenient, because unam- 
 biguous, to designate them by the name " physiocrates," 
 invented by Dupont de Nemours, who was one of their 
 number. In this name, intended to express the fundamental 
 idea of the school, much more is implied than the subjection 
 of the phenomena of the social, and in particular the economic, 
 world to fixed relations of co-existence and succession. This 
 is the positive doctrine which lies at the bottom of all true 
 science. But the law of nature referred to in the title of the 
 sect was something quite different. The theological dogma 
 which represented all the movements of the universe as 
 directed by divine wisdom and benevolence to the production 
 of the greatest possible sum of happiness had been trans- 
 formed in the hands of the metaphysicians into the conception 
 of a /MS naturae, a harmonious and beneficial code established 
 By the favourite entity of these thinkers, Nature, antecedent 
 to human institutions, and furnishing the model to which 
 they should be made to conform. This idea, which Buckle 
 apparently supposes to have been an invention of Hutcheson's, 
 had come down through Roman juridical theory from the 
 speculations of Greece. 2 It was taken in hand by the modern 
 negative school from Hobbes to Rousseau, and used as a power- 
 ful weapon of assault upon the existing order of society, with 
 which the "natural" order was perpetually contrasted as offer- 
 ing the perfect type from which fact had deplorably diverged. 
 The theory received different applications according to the 
 diversity of minds or circumstances. By some it was directed 
 against the artificial manners of the times, 'by others against 
 
 1 Gournay strongly recommended to his friends Cantillon's book M 
 "ouvrage excellent qu'on negligeait." Mimoires de Morettet, i. 38. 
 
 2 See Cliffe Leslie's Essays in Political and Moral Philosophy, p.
 
 62 POLITICAL ECONOMY. 
 
 contemporary political institutions ; it was specially employed 
 by the physiocrats in criticising the economic practice of 
 European Governments. 
 
 The general political doctrine is as follows. Society is 
 composed of a numher of individuals all having the same 
 natural rights. If all do not possess (as some members of the 
 negative school maintained) equal capacities, each can at least 
 best understand his own interest, and is led by nature to follow 
 it. The social union is really a contract between these 
 individuals, the object of which is the limitation of the 
 natural freedom of each, just so far as it is inconsistent with 
 the rights of the others. Government, though necessary, is a 
 necessary evil ; and the governing power appointed by consent 
 should be limited to the amount of interference absolutely 
 required to secure the fulfilment of the contract. In the 
 economic sphere, this implies the right of the individual to 
 such natural enjoyments as he can acquire by his labour. 
 That labour, therefore, should be undisturbed and unfettered ; 
 and its fruits should be guaranteed to the possessor ; in other 
 words, property should be sacred. Each citizen must be 
 allowed to make the most of his labour ; and therefore freedom 
 of exchange should be ensured, and competition in the market 
 should be unrestricted, no monopolies or privileges being 
 permitted to exist. 
 
 The physiocrats then proceed with the economic analysis as 
 follows. Only those labours are truly "productive" which 
 add to the quantity of raw materials available for the purposes 
 of man ; and the real annual addition to the wealth of the 
 community consists of the excess of the mass of agricultural 
 products (including, of course, minerals) over their cost of 
 production. On the amount of this "produit net" depends 
 the wellbeing of the community, and the possibility of its 
 advance in civilisation. The manufacturer merely gives a new 
 form to the materials extracted from the earth ; the higher 
 value of the object, after it has passed through his hands, only 
 represents the quantity of provisions and other materials used
 
 SYSTEM OF NATURAL LIBERTY. 63 
 
 and consumed in its elaboration. Commerce does nothing 
 more than transfer the wealth already existing from one hand 
 to another ; what the trading classes gain thereby is acquired 
 at the cost of the nation, and it is desirable that its amount 
 should be as small as possible. The occupations of the 
 manufacturer and merchant, as well as the liberal professions,^ 
 and every kind of personal service, are " useful " indeed, but 
 they are " sterile," drawing their income, not from any fund 
 which they themselves create, but from the superfluous 
 earnings of the agriculturist. Perfect freedom of trade not 
 only rests, as we have already seen, on the foundation of 
 natural right, but is also recommended by the consideration that 
 it makes the " produit ne/"," on which all wealth and general 
 progress depend, as large as possible. " Laissez faire, laissez 
 passer" should therefore be the motto of Governments. The 
 revenue of the state, which must be derived altogether from 
 this net product, ought to be raised in the most direct and 
 simplest way, namely, by a single impost of the nature of a 
 land tax. 
 
 The special doctrine relating to the exclusive productiveness of 
 agriculture arose out of a confusion between "value " on the one 
 hand and " matter and energy" on the other. Smith and others 
 have shown that the attempt to fix the character of " sterility " 
 on manufactures and commerce was founded in error. And 
 the proposal of a single impot territorial falls to the ground 
 with the doctrine on which it was based. But such influence 
 as the school exerted depended little, if at all, on these 
 peculiar tenets, which indeed some of its members did not 
 hold. The effective result of its teaching was mainly 
 destructive. It continued in a more systematic form the 
 efforts in favour of the freedom of industry already begun in 
 England and France. The essential historical office of the 
 physiocrats was to discredit radically the methods followed by 
 the European Governments in their dealings with industry. 
 For sucn criticism as theirs there was, indeed, ample room: 
 the policy of Colbert, which could be only temporarily useful,
 
 64 POLITICAL ECONOMY. 
 
 had been abusively extended and intensified ; Governmental 
 action had intruded itself into the minutest details of business, 
 and every process of manufacture and transaction of trade was 
 hampered by legislative restrictions. It was to be expected 
 that the reformers should, in the spirit of the negative philo- 
 sophy, exaggerate the vices of established systems ; and there 
 can be no doubt that they condemned too absolutely the 
 economic action of the state, both in principle and in its 
 historic manifestations, and pushed the " laissez faire " doctrine 
 beyond its just limits. But this was a necessary incident of 
 their connection with the revolutionary movement, of which 
 they really formed one wing. In the course of that movement, 
 the primitive social contract, the sovereignty of the people, 
 and other dogmas now seen to be untenable, were habitually 
 invoked in the region of politics proper, and had a transitory 
 utility as ready and effective instruments of warfare. And so 
 also in the economic sphere the doctrines of natural rights of 
 buying and selling, of the sufficiency of enlightened selfishness 
 as a guide in mutual dealings, of the certainty that each 
 member of the society will understand and follow his true 
 interests, and of the coincidence of those interests with the 
 public welfare, though they will not bear a dispassionate 
 examination, were temporarily useful as convenient and ser- 
 viceable weapons for the overthrow of the established order. 
 The tendency of the school was undoubtedly to consecrate the 
 spirit of individualism, and the state of non-government. But 
 this tendency, which may with justice be severely condemned 
 in economists of the present time, was then excusable because 
 inevitable. And, whilst it now impedes the work of recon- 
 struction which is for us the order of the day, it then aided 
 the process of social demolition, which was the necessary, 
 though deplorable, condition of a new organisation. 
 
 These conclusions as to the revolutionary tendencies of the 
 school are not at all affected by the fact that the form of 
 government preferred by Quesnay and some of his chief fol- 
 lowers was what they called a legal despotism, which should
 
 SYSTEM OF NATURAL LIBERTY. 5 
 
 embrace within itself both the legislative and the executive 
 function. The reason for this preference was that an en- 
 lightened central power could more promptly and efficaciously 
 introduce the policy they advocated than an assembly repre- 
 senting divergent opinions, and fettered by constitutional 
 checks and limitations. Turgot, as we know, used the absolute 
 power of the crown to carry into effect some of his measures 
 for the liberation of industry, though he ultimately failed 
 because unsustained by the requisite force of character in 
 Louis XVI. But what the physiocratic idea with respect to 
 the normal method of government was appears from Quesnay's 
 advice to the dauphin, that when he became king he should 
 " do nothing, but let the laws rule," the laws having been of 
 course first brought into conformity with thejiis naturae. The 
 partiality of the school for agriculture was in harmony with 
 the sentiment in favour of " nature " and primitive simplicity 
 which then showed itself in so many forms in France, especially 
 in combination with the revolutionary spirit, and of which 
 Rousseau was the most eloquent exponent. It was also asso- 
 ciated in these writers with a just indignation at the wretched 
 state in which the rural labourers of France had been left by 
 the scandalous neglect of the superior orders of society a 
 state of which the terrible picture drawn by La Bruyere is an 
 indestructible record. The members of the physiocratic group 
 were undoubtedly men of thorough uprightness, and inspired 
 with a sincere desire for the public good, especially for the 
 material and moral elevation of the working classes. Quesnay 
 was physician to Louis XV., and resided in the palace at 
 Versailles; but in the midst of that corrupt court he main- 
 tained his integrity, and spoke with manly frankness what he 
 believed to be the truth. And never did any statesman devote 
 himself with greater singleness of purpose or more earnest 
 endeavour to the service of his country than Turgot, who wag 
 the principal practical representative of the school. 
 
 The publications in which Quesnay expounded his system 
 were the following : Two articles, on " Ferrniers " and OB
 
 66 POLITICAL ECONOMY. 
 
 "Grains," in the Encydopedie of Diderot and D'Alemberl 
 (1756, 1757) ; a discourse on the law of nature in the Physio- 
 cratie of Dupont de Nemours (1768); Maximes generates de 
 gouvernement economique d'un royaume agricole (1758), and 
 the simultaneously published Tableau Economique avec son 
 explication, ou Exirait des Economies Royales de Sully (with 
 the celebrated motto "pauvres paysans, pauvre royaume; 
 pauvre royaume, pauvre roi"); Dialogue sur le commerce et 
 les travaux des artisans ; and other minor pieces. The Tableau 
 Economique, though on account of its dryness and abstract 
 form it met with little general favour, may be considered the 
 principal manifesto of the school. It was regarded by the 
 followers of Quesnay as entitled to a place amongst the fore- 
 most products of human wisdom, and is named by the elder 
 Mirabeau, in a passage quoted by Adam Smith, 1 as one of the 
 three great inventions which have contributed most to the 
 stability of political societies, the other two being those of 
 writing and of money. Its object was to exhibit by means of 
 certain formulas the way in which the products of agriculture, 
 which is the only source of wealth, would in a state of perfect 
 liberty be distributed among the several classes of the com 
 munity (namely, the productive classes of the proprietors and 
 cultivators of land, and the unproductive class composed of 
 manufacturers and merchants), and to represent by other for- 
 mulas the modes of distribution which take place under system? 
 of Governmental restraint and regulation, with the evil results 
 arising to the whole society from different degrees of such 
 violations of the natural order. It follows from Quesnay's 
 theoretic views that the one thing deserving the solicitude of 
 the practical economist and the statesman is the increase of 
 the net product; and he infers also what Smith afterwards 
 affirmed on not quite the same ground, that the interest of the 
 landowner is "strictly and inseparably connected with the 
 general interest of the society." * 
 
 * Wealth of Nation*, bk. iv. chap. 9. a Ibid. bk. i., chap. II.
 
 SYSTEM OF NATURAL LIBERTY. 67 
 
 M. de Gournay, as we have seen, was regarded as one of 
 the founders of the school, and appears to have exercised some 
 influence even upon the formation of Quesnay's own opinions. 
 With the exception of translations of Culpeper and Child, 1 
 Gournay wrote nothing hut memoirs addressed to ministers, 
 which have not seen the light ; but we have a full statement 
 of his views in the Bloge dedicated to his memory hy his 
 illustrious friend Turgot. Whilst Quesnay had spent his 
 youth aiaidst rural scenes, and had been early familiar with 
 the labours of the field, Gournay had been bred as a merchant, 
 and had passed from the counting-house to the office of inten- 
 dant of commerce. They thus approached the study of political 
 economy from different sides, and this diversity of their ante- 
 cedents may in part explain the amount of divergence which 
 existed between their views. Gournay softened the rigour 
 of Quesnay's system, and brought it nearer to the truth, by 
 rejecting what Smith calls its "capital error" the doctrine, 
 namely, of the unproductiveness of manufactures and com- 
 merce. He directed his efforts to the assertion and vindica- 
 tion of the principle of industrial liberty, and it was by him 
 that this principle was formulated in the phrase, since so often 
 heard for good and for evil, " Laissez faire et laissez passer." 
 One of the earliest aud most complete adherents of the physio- 
 cratic school, as well as an ardent and unwearied propagator 
 of its doctrines, was Victor Mirabeau, whose sincere and inde- 
 pendent, though somewhat perverse and whimsical, character 
 is familiar to English readers through Carlyle's essay on his 
 more celebrated son. He had expressed some physiocratic 
 views earlier than Quesnay, hut owned the latter for his spiritual 
 father, and adopted most of his opinions, the principal dif- 
 ference being that he was favourable to the petite as opposed 
 to the grande culture, which latter was ^referred by his 
 chief as giving, not indeed the largest gross, but the largest 
 
 1 Gonrnay's inspiration was, without doubt, largely English. "II 
 avait lu," says Morellet, " de bons livres Anglais d'Economie politkjue, 
 tels qne Petty, Davenant, Gee, Child, &c." Alemoires, i. 38.
 
 68 POLITICAL ECONOMY. 
 
 net product. Mirabeau's principal writings were Ami dei 
 Hommes, ou traite sur la population (1756, 1760), Thwrifi dt 
 Vimpot (1760), Les J&conomiques (1769), and Philosophic 
 rurale, ou Economic generate et politique de t Agriculture 
 (1763). The last of these was the earliest complete expositua 
 of the physiocratic system. Another earnest and persevering 
 apostle of the system was Dupont de Nemours (1739-1817), 
 known by his treatises De I'exportation et de ^importation de* 
 grains (1764), De I'origine et des progres d'une science nouvelle 
 (1767), Du commerce de la Compagnie des Indes (1767), and 
 especially by his more comprehensive work Physiocratie, ou 
 Constitution naturelle du gouvernement le plus avantageux au 
 genre humain (1768). The title of this work gave, as has 
 been already mentioned, a name to the school. Another 
 formal exposition of the system, to which Adam Smith refers 
 as the " most distinct and best connected account " of it, was 
 produced by Mercier-Lariviere, under the title L'Ordre naturel 
 et essentiel des societes politiques (1767), a title which is inte- 
 resting as embodying the idea of the jus naturae. Both he and 
 Dupont de Nemours professed to study human communities, 
 not only in relation to their economic, but also to their political 
 and general social aspects; but, notwithstanding these larger 
 pretensions, their views were commonly restricted in the main 
 to the economic sphere; at least material considerations" de- 
 cidedly preponderated in their inquiries, as was naively indi- 
 cated by Lariviere when he said, " Property, security, liberty 
 these comprise the whole social order ; the right of property is 
 a tree of which all the institutions of society are branches." 
 
 The most eminent member of the group was without doubt 
 AnrnTRobert Jacques Turgot (1727-1781). This is not the 
 place to speak of his noble practical activity, first as intendant 
 of Limoges, and afterwards for a brief period as finance 
 minister, or of the circumstances which led to his removal 
 from office, and the consequent failure of his efforts for the 
 salvation of France. His economic views are explained in 
 the introductions to his edicts and ordinances, in letters and
 
 SYSTEM OF NATURAL LIBERTY. 69 
 
 occasional papers, but especially in his Reflexions sur la forma- 
 tion et la distribution des richesses (1766). This is a con- 
 densed but eminently clear and attractive exposition of the 
 fundamental principles of political economy, as they were con- 
 ceived by the physiocrats. It embodies, indeed, the erroneous 
 no less than the sound doctrines of that school ; but several 
 subjects, especially the various forms of land-economy, the 
 different employments of capital, and the legitimacy of 
 interest, are handled in a generally just as well as striking 
 manner ; and the mode of presentation of the ideas, and the 
 luminous arrangement of the whole, are Turgot's own. The 
 treatise, which contains a surprising amount of matter in pro- 
 portion to its length, must always retain a place among the 
 classics of the science. 
 
 The physiocratic school never obtained much direct popular 
 influence, even in its native country, though it strongly 
 attracted many of the more gifted and earnest minds. Its 
 members, writing on dry subjects in an austere and often 
 heavy style, did not find acceptance with a public which 
 demanded before all things charm of manner in those who 
 addressed it. When Morellet, one of their number, entered 
 the lists with Galiani, it was seen how esprit and eloquence 
 could triumph over science, solid indeed, but clumsy in its 
 movements. 1 The physiocratic tenets, which were in fact 
 partially erroneous, were regarded by many as chimerical, and 
 were ridiculed in the contemporary literature, as, for example, 
 the impdt unique by Voltaire in his L'homme aux quarante 
 icus, which was directed in particular against Mercier- 
 Lariviere. It was justly objected to the group that they were 
 
 1 On Galiani's Dialogues, see page 72. Soon after the appearance of 
 this book Turgot wrote to Mile. Lespinasse "Je crois possible de 
 lui faire une tres bonne re"ponse ; mais cela demande bien de 1'art. Lea 
 ^conomistes sont trop confiants pour combattre contre un si adroit 
 ferrailleur. Pour 1'abbe 1 Morellet, il ne faut pas qu'il y pense." 
 Morellet's work was prohibited by the Controller-General Terray; 
 though printed in 1770, some months after Galiani's, it waa not 
 published till 1774.
 
 70 POLITICAL ECONOMY. 
 
 too absolute in their view of things ; they supposed, as Smith 
 remarks in speaking of Quesnay, that the body-politic could 
 thrive only under one precise regime, that, namely, which 
 they recommended, and thought their doctrines universally 
 and immediately applicable in practice. 1 They did not, as 
 theorists, sufficiently take into account national diversities, 2 
 or different stages in social development; nor aid they, as 
 politicians, adequately estimate the impediments which ignor- 
 ance, prejudice, and interested opposition present to enlightened 
 statesmanship. It is possible that Turgot himself, as Grimm 
 suggests, owed his failure in part to the too unbending rigour 
 of his policy and the absence of any attempt at conciliation. 
 Be this as it may, his defeat helped to impair the credit of his 
 principles, which were represented as having been tried and 
 found wanting. 
 
 The physiocratic system, after guiding in some degree 
 the policy of the Constituent Assembly, and awakening a 
 few echoes here and there in foreign countries, soon ceased 
 to exist as a living power ; but the good elements it com- 
 prised were not lost to mankind, being incorporated into the 
 Rounder and more complete construction of Adam Smith. 
 
 ITALY. 
 
 In Italy, as in the other European nations, there was little 
 activity in the economic field during the first half of the 
 eighteenth century. It was then, however, that a really 
 remarkable man appeared, the archdeacon Salustio Antonio 
 Bandini (1677-1760), author of the Discorso sulla Maremma 
 Sienese, written in 1737, but not published till 1775. The 
 
 1 Hume, in a letter to M orellet, 1 769, calls them " the set of men the 
 most chimerical and arrogant that now exist." He seems intentionally 
 to ignore Morellet's close connection with them. 
 
 2 Turgot said, " Quiconque n'oublie pas qu'il y a des e"tats politiques 
 se"pare"s les uns des autres et constitue's diversement, ne traitera jamaia 
 bien aucuue question d'Economie politique. " Letter to MUe. Ltspinasse, 
 1770.
 
 SYSTEM OF NATURAL LIBERTY. 71 
 
 object of the work was to raise the Maremma from the 
 wretched condition into which it had fallen through the 
 decay of agriculture. This decay he showed to be, at least 
 in part, the result of the wretched fiscal system which wae 
 in force ; and his book led to important reforms in Tuscany, 
 where his name is held in high honour. Not only by 
 Pecchio and other Italian writers, but by Reseller also, he 
 is alleged to have anticipated some leading doctrines of the 
 physiocrats, but this claim is disputed. There was a remarkable 
 renascence of economic studies in Italy during the latter half 
 of the century, partly due to French influence, and partly, it 
 would appear, to improved government in the northern states. 
 The movement at first followed the lines of the mercantile 
 school. Thus, in Antonio Broggia's Trattati dei tributi e delle 
 monete e del governo politico della societa (1743), and Girolamo 
 Belloni's Dissertazione sopra il commercio (1750), which seems 
 to have had a success and reputation much above its merits, 
 mercantilist tendencies decidedly preponderate. But the most 
 distinguished writer who represented that economic doctrine 
 in Italy in the last century was Antonio Genovesi, a Neapolitan 
 (1712-1769). He felt deeply the depressed intellectual and 
 moral state of his fellow-countrymen, and aspired after _a 
 revival of philosophy and reform of education as the first 
 condition of progress and wellbeing. With the object of pro- 
 tecting him from the theological persecutions which threatened 
 him on account of his advanced opinions, Bartolomeo Intieri, 
 of whom we shall hear again in relation to Galiani, founded 
 in 1755, expressly for Genovesi, a chair of commerce and 
 mechanics, one of the conditions of foundation being that it 
 should never be filled by a monk. This was the first pro- . 
 feiisorship of economics established in Europe ; the second wag ^ 
 founded at Stockholm in 1758, and the third in Lombardy 
 ten years later, for Beccaria. The fruit of the labours of 
 Genovesi in this chair was his Lezioni di commercio, ossia dt 
 economic/, civile (1769), which contained the first systematic 
 treatment of the whole subject which had appeared in Italy.
 
 7 POLITICAL ECONOMY. 
 
 As the model for Italian imitation he held up England, a 
 country for which, says Pecchio, he had a predilection almost 
 amdunting to fanaticism. He does not rise above the false 
 economic system which England then pursued ; but he rejects 
 some of the grosser errors of the school to which he belonged ; 
 he advocates the freedom of the corn trade, and deprecates 
 regulation of the interest on loans. In the spirit of his age, 
 he denounces the relics of mediaeval institutions, such as 
 entails and tenures in mortmain, as impediments to the 
 national prosperity. Ferdinando Galiani was another dis- 
 tinguished disciple of the mercantile school. Before he had 
 completed his twenty-first year he published a work on money 
 (Ddla tnoneta libri cinque, 1750), the principles of which are 
 supposed to have been dictated by two experienced practical 
 men, the Marquis Rinuccini and Bartolomeo Intieri, whose 
 name we have already met. But his reputation was made 
 by a book written in French and published in Paris, where 
 he was secretary of embassy, in 1770, namely, his Dialogues 
 sur le commerce des Hies. This work, by its light and pleasing 
 style, and the vivacious wit with which it abounded, delighted 
 Voltaire, who spoke of it as a book in the production of which 
 Plato and Moliere might have been combined ! 1 The author, 
 says Pecchio, treated his arid subject as Fontenelle did the 
 vortices of Descartes, or Algarotti the Newtonian system of 
 the world. The question at issue was that of the freedom of 
 the corn trade, then much agitated, and, in particular, the 
 policy of the royal edict of 1764, which permitted the ex- 
 portation of grain so long as the price had not arrived at a 
 certain height. The general principle he maintains is that 
 the best system in regard to this trade is to have no system, 
 "S countries differently circumstanced requiring, according to 
 ^him, different modes of treatment. This seems a lame and 
 impotent conclusion from the side of science; yet doubtless 
 
 1 So also Grimm : " C'est Platon avec la verve et lea gestei 
 d'Arlequin." Diderot called the book " module de dialogues qui restera 
 I *6ti dea lettrea de Pascal."
 
 SYSTEM OF NATURAL LIBERTY. 7$ 
 
 the physiocrats, with whom his controversy lay, prescribed 
 on this, as on other subjects, rules too rigid for the safe 
 guidance of statesmen, and Galiani may have rendered a 
 real service by protesting against their absolute solutions of 
 practical problems. He fell, however, into some of the most 
 serious errors of the mercantilists, holding, as indeed did also 
 Voltaire and even Verri, that one country cannot gain with- 
 out another losing, and in his earlier treatise going so far as to 
 defend the action of Governments in debasing the currency. 
 
 Amongst the Italian economists who were most under the 
 influence of the modern spirit, and in closest harmony with the 
 general movement which was impelling the Western nations 
 towards a new social order, Cesare Beccaria (1738-1794) holds 
 a foremost place. He is best known by his celebrated treatise 
 Dei delitti e delle pene, by which Voltaire said he had made 
 himself a benefactor of all Europe, and which, we are told, 
 has been translated into twenty-two languages. The Empress 
 Catherine having invited him to fix his residence at St. 
 Petersburg, the Austrian Government of Lombardy, in order 
 to keep him at home, established expressly for him a chair of 
 political economy ; and in his Elementi di economia pubblica 
 (1769-1771 ; not published, however, till 1804) are embodied 
 his teachings as professor. The work is unfinished : he had 
 divided the whole subject under the heads of agriculture, 
 manufactures, commerce, taxation, government ; but he has 
 treated adequately only the first two heads, and the last two 
 not at all, having been called to take part in the councils of the 
 state. He was in some degree under the influence of physio- 
 cratic ideas, and holds that agriculture is the only strictly 
 productive form of industry, whilst manufactures and artisans 
 are a sterile class. He was strongly opposed to monopolies 
 and privileges, and to corporations in arts and trades; in 
 general he warmly advocated internal industrial freedom, 
 though in regard to foreign commerce a protectionist. In the 
 special case of the corn trade he was not, any more than 
 Galiani, a partisan of absolute liberty. His exposition of
 
 74 POLITICAL ECONOMY. 
 
 economic principles is concise and sententious, and he often 
 states correctly the most important considerations relating to 
 his subject without adding the developments which would 
 be desirable to assist comprehension and strengthen convic- 
 tion. Thus on fixed capital (capitali fondatori), as distinct 
 from circulating (annui), in its application to agriculture, he 
 presents in a condensed form essentially the same explana- 
 tions as Turgot about the same time gave ; and on the division 
 of labour and the circumstances which cause different rates of 
 wages in different employments, he in substance comes near 
 to Smith, but without the fulness of illustration which is so 
 attractive a feature of the Wealth of Nations. Pietro Verri 
 (1728-1797), an intimate and life-long friend of Beccaria, waa 
 for twenty-five years one of the principal directors of the 
 administration of Lombardy, in which capacity he originated 
 many economic and other reforms. In his Riflessioni sulle 
 leggi vincolanti, principalmente nel commercio de' grani (written 
 in 1769, printed in 1796), he considers the question of the 
 regulation of the corn trade both historically and in the light 
 of theoretic principles, and arrives at the conclusion that 
 liberty is the best remedy against famine and against excessive 
 fluctuations of price. He is generally opposed to Govern- 
 mental interference with internal commerce, as well as to 
 trade corporations, and the attempts to limit prices or fix the 
 rate of interest, but is in favour of the protection of national 
 industry by a judiciously framed tariff. These views are 
 explained in his Meditazioni sulV economia politica (1771), an 
 elementary treatise on the science, which was receivevl with 
 favour, and translated into several foreign languages. A 
 primary principle with him is what he calls the augmenta- 
 tion of reproduction that is, in Smith's language, of " the 
 annual produce of the land and labour " of a nation ; and 
 by its tendency to promote or to restrict this augmentation, 
 he tests every enactment and institution. Accordingly, 
 unlike Beccaria, he prefers the petite to the grande culture, 
 as giving a larger total produce. In dealing with taxation,
 
 SYSTEM OF NATURAL LIBERTY. 75 
 
 he rejects the physiocratic proposal of a single impot terri- 
 torial. 1 Giovanni R. Carli (1720-1795), also an official pro- 
 moter of the reforms in the government of Austrian Lombardy, 
 besides learned and sound treatises on money, was author of 
 Ragionamenti sopra i bilanci economici delle nazioni, in which 
 he shows the falsify of the notion that a state gains or loses in 
 foreign commerce according to the so-called balance of trade. 
 In his letter to Pompeo JSTeri Sul liber o commercio de' grant 
 (1771), he takes np a position similar to that of Galiani, 
 regarding the question of the freedom of the corn trade as not 
 BO much a scientific as an administrative one, to be dealt with 
 differently under different local or other conditions. Reject- 
 ing the physiocratic doctrine of the exclusive productiveness 
 of agriculture, he illustrates in an interesting way the neces- 
 sity of various economic classes in a society, and the reflex 
 agency of manufactures in stimulating the cultivation of the 
 soil. Giambattista Vasco (1733-1796) wrote discourses on 
 several questions proposed by academies and sovereigns. In 
 these he condemns trade corporations and the attempts by 
 Governments to fix the price of bread and to limit the interest 
 on loans. In advocating the system of a peasant proprietary, 
 he suggests that the law should determine the minimum and 
 maximum portions of land which a citizen should be per- 
 mitted to possess. He also, with a view to prevent the undue 
 accumulation of property, proposes the abolition of the right 
 of Request, and the equal division of the inheritance amongst 
 the children of the deceased. Gaetano Filangieri (1752-1788), 
 one of the Italian writers of the last century whose names are 
 most widely known throughout Europe, devoted to economic 
 
 1 J. S. Mill, in his Principles, bk. i. chap. I, takes credit to his father 
 for having first illustrated and made prominent in relation to produc- 
 tion what he strangely calls "a fundamental principle of Political 
 Economy," namely, that "all that man does or can do with matter" is 
 to " move one thing to or from another " But this is clearly put forward 
 by Verri in his Meditazioni, sect. 3: "Accostare e separare sono gli 
 unici element! che 1'ingegno nmano ritrova analizzando 1'idea doll* 
 riproduzione."
 
 76 POLITICAL ECONOMY. 
 
 questions the second book of his Scienza della legislazione (5 
 vols., 17801785). Filled with reforming ardour and a j.'as- 
 sionate patriotism, he employed his vehement eloquence in 
 denouncing all the abuses of his time. Apparently without 
 any knowledge of Adam Smith, he insists on unlimited free- 
 dom of trade, calls for the abolition of the mediaeval institu- 
 tions which impeded production and national wellbeing, and 
 condemns the colonial system then followed by England, 
 Spain, and Holland. He prophecies, as Kaynal, Turgot, and 
 Genovesi had done before him, that all America would one 
 day be independent, a prediction which probably helped to 
 elicit Benjamin Franklin's tribute of admiration for his work. 
 Bather a propagator than a discoverer, he sometimes adopted 
 from others erroneous opinions, as, for example, when he 
 approves the impdt unique of the physiocrats. On the whole, 
 however, he represents the most advanced political and social 
 tendencies of his age ; whilst strongly contrasted with Beccaria 
 in temperament and style, he was a worthy labourer in the 
 same cause of national and universal progress. Ludovico 
 Kicci (1742-1799) was author of an able report Sulla riforma 
 degli istituti pii della cittct, di Modena (1787). He treated the 
 subject of poor relief and charitable institutions in so general 
 a way that the work possesses a universal and permanent in- 
 terest. He dwells on the evils of indiscriminate relief as 
 tending to increase the misery it seeks to remove, and as 
 lowering the moral character of a population. He exposes 
 especially the abuses connected with lying-in and foundling 
 hospitals. There is much in him which is akin to the views 
 of Malthus ; like him he is opposed to any state provision for 
 the destitute, who ought, he thinks, to be left to voluntary 
 private beneficence. Ferdinando Paoletti (1717-1801) was 
 an excellent and public-spirited priest, who did much for the 
 diffusion of intelligence amongst the agricultural population of 
 Tuscany, and for the lightening of the taxes which pressed 
 upon them. He corresponded with Mirabeau (" Friend of 
 Men "), and appears to hare accepted the physiocratic doc-
 
 SYSTEM OF NATURAL LIBERTY. 77 
 
 trines, at least in their general substance. He was author of 
 Pensieri sopra Vagricoltura (1769), and of I veri mezzi dt 
 render felici le societd. (1772); in the latter he advocates the 
 freedom of the corn trade. The tract II Colbertismo (1791) 
 by Count Francesco Mengotti is a vigorous protest against the 
 extreme policy of prohibition and protection, which may still 
 be read with interest. Mengotti also wrote (1791) a treatise 
 Del commercio de' Romani, directed mainly against the ex- 
 aggerations of Huet in his Histoire du commerce et de la 
 navigation des anciens (1716), and useful as marking the broad 
 difference between the ancient and modern civilisations. 
 
 Here lastly may be mentioned another Italian thinker who, 
 eminently original and even eccentric, cannot easily be classed 
 among his contemporaries, though some Continental writers 
 of our own century have exhibited similar modes of thought. 
 This was Giammaria Ortes (1713-1790). He is opposed to 
 the liberalist tendencies of his time, but does not espouse the 
 doctrines of the mercantile system, rejecting the theory of the 
 balance of trade, and demanding commercial freedom. It is 
 in the Middle Ages that he finds his social and economic 
 type. He advocates the maintenance of church property, is 
 averse to the ascendency of the money power, and has the 
 mediaeval dislike for interest on loans. He entertains the 
 singular idea that the wealth of communities is always and 
 everywhere in a fixed ratio to their population, the latter being 
 determined by the former. Poverty, therefore, necessarily 
 waits on wealth, and the rich, in becoming so, only gain what 
 the poor lose. Those who are interested in the improve- 
 ment of the condition of the people labour in vain, so long 
 as they direct their efforts to the increase of the sum 
 of the national wealth, which it is beyond their power 
 to alter, instead of to the distribution of that wealth, which 
 it is possible to modify. The true remedy for poverty lies 
 in mitigating the gain-pursuing propensities in the rich and 
 in men of business. Ortes studied in a separate work the 
 subject of population; he formulates its increase as "geo-
 
 78 POLITICAL ECONOMY. 
 
 metrical," but recognises that, as a limit is set to such increase 
 amongst the lower animals by mutual destruction, so is it in 
 the human species by " reason " f: he " prudential restraint " 
 of which Malthas afterwards made so much. He regards the 
 institution of celibacy as no less necessary and advantageous 
 than that of marriage. He enunciates what has since been 
 known as the " law of diminishing returns to agricultural iii- 
 dustry." He was careless as to the diffusion of his writings; and 
 hence they remained almost unknown till they were included 
 in the Custodi collection of Italian economists, when they 
 attracted much attention by the combined sagacity and way- 
 wardness which marked their author's intellectual character. 
 
 SPAIN. 
 
 The same breath of a new era which was in the air else- 
 where in Europe made itself felt also in Spain. 
 
 In the earlier part of the eighteenth century Geronimo 
 Ustariz had written his Teorica y Practica del Comercio 
 y Marina (1724; published, 1740; Eng. transl. by John 
 Kippax, 1751 ; French by Forbonnais, 1753), in which he 
 carries mercantile principles to their utmost extreme. 
 
 The reforming spirit of the latter half of the century was 
 best represented in that country by Pedro Ikodriguez, Count 
 of Campomanes (17231802). He pursued with ardour the 
 same studies and in some degree the same policy as his illus- 
 trious contemporary Turgot, without, however, having arrived 
 at so advanced a point of view. He was author of Respmsta 
 fiscal sobre abolir la tasa y establecer el comercio de granos 
 (1764), Discurso sobre el fomento de industria popolar (1774), 
 and Discurso sobre la education de los artesanos y su fomento 
 (1775^. By means of these writings, justly eulogised by 
 Robertson, 1 as well as by his personal efforts as minister, he 
 / sought to establish the freedom of the corn trade, to remove 
 the hindrances to industry arising from mediaeval survivals, 
 
 1 Hittory of America, note 193.
 
 SYSTEM OF NATURAL LIBERTY. 79 
 
 t'> ,-ive a large development to manufactures, and to liberate 
 agriculture from the odious burdens to which it was subject. 
 He saw that, notwithstanding the enlightened administration 
 of Charles III., Spain still suffered from the evil results of 
 ths blind confidence reposed by her people in her gold mines, 
 an 1 enforced the lesson that the real sources of the wealth and 
 power of his country must be sought, not in America, but in 
 her own industry. 
 
 In both Italy and Spain, as is well observed by Comte, 1 
 the impulse towards social change took principally the direc- 
 tion of economic reform, because the pressure exercised by 
 Governments prevented so large a measure of free speculation 
 in the fields of philosophy and general politics as was possible 
 in France. In Italy, it may be added, the traditions of the 
 great industrial past of the northern cities of that country 
 also tended to fix attention chiefly on the economic side of 
 public policy and legislation. 
 
 GERMANY. 
 
 We have seen that in Italy and England political economy 
 had its beginnings in the study of practical questions relating 
 chiefly to money or to foreign commerce. In Germany it 
 arose (as Eoscher has shown) out of the so-called cameralistic 
 sciences. Soon after the close of the Middle Ages there existed 
 in most German countries a council, known as the Kammer 
 (Lat. camera), which was occupied with the management of 
 the public domain and the guardianship of regal rights. The 
 Kmperor Maximilian found this institution existing in Bur- 
 gundy, and established, in imitation of it, aulic councils at 
 Innspruck and Vienna in 1498 and 1501. Not only finance 
 and taxation, but questions also of economic police, came to 
 be entrusted to these bodies. A special preparation became 
 necessary for their members, and chairs of cameralistic science 
 
 1 Philosophic Positive, voL v. p. 759.
 
 8o POLITICAL ECONOMY. 
 
 were founded in universities for the teaching of \\\e appro- 
 priate body of doctrine. One side of the instruction thus 
 given borrowed its materials from the sciences of external 
 nature, dealing, as it did, with forestry, mining, general 
 technology, and the like ; the other related to the conditions 
 of national prosperity as depending on human relations and 
 institutions ; and out of the latter, German political economy 
 was at first developed. 
 
 In no country had mercantilist views a stronger hold than 
 in Germany, though in none, in the period we are now con- 
 sidering, did the system of the balance of trade receive a less 
 extensive practical application. All the leading German 
 economists of the seventeenth century Bornitz, Besold, 
 Klock, Becher, Horneck, Seckendorf, and Schroder stand on 
 the common basis of the mercantile doctrine. And the same 
 may be said of the writers of the first half of the eighteenth 
 century in general, and notably of Justi (d. 1771), who was 
 the author of the first systematic German treatise on political 
 economy, a work which, from its currency as a text book, had 
 much effect on the formation of opinion. Only in Zincke 
 (1692-1769) do we find occasional expressions of a circle of 
 ideas at variance with the dominant system, and pointing in 
 the direction of industrial freedom. But these writers, except 
 from the national point of view, are unimportant, not having 
 exercised any influence on the general movement of European 
 thought. 
 
 The principles of the physiocratic system met with a 
 certain amount of favour in Germany. Karl Friedrich, Mar- 
 grave of Baden, wrote for the use of his sons an Abrege de 
 principes d' Economic Politique, 1772, which is in harmony 
 with the doctrines of that system. It possesses, however, 
 little scientific value. Schlettwein (i 731 1802) and Mauvillon 
 (1743-1794) were followers of the same school. Theodor 
 Schmalz (1764-1831), who is commonly named as "the last 
 of the physiocrats," may be here mentioned, though somewhat 
 out of the historic order. He compares Colbertism with the
 
 SYSTEM OF NATURAL LIBERTY. Si 
 
 Ptolemaic system, physiocratism with the Copernican. Adam 
 Smith he represents as the Tycho Brahe of political economy, 
 a man of eminent powers, who could not resist the force 
 of truth in the physiocrats, but partly could not divest himself 
 of rooted prejudices, and partly was ambitious of the fame 
 of a discoverer and a reconciler of divergent systems. Though 
 Smith was now "the fashion," Schmalz could not doubt that 
 Quesnay's doctrine was alone tr.ue, and would ere long be 
 triumphant everywhere. 
 
 Just before the appearance of Smith, as in England Steuart, 
 and in Italy Genovesi, so in Austria Sonnenfels (17331817), 
 the first distinguished economist of that country, sought to 
 present the mercantile system in a modified and more enlight- 
 ened form ; and his work (Grundsdtze der Polizei, Handlung, 
 und Finanz, 1765 ; 8th ed., 1822), exercised even during a 
 considerable part of the present century much influence on 
 opinion and on policy in Austria. 
 
 But the greatest German economist of the eighteenth cen- 
 tury was, in Reseller's opinion, Justus Mb'ser (1720-1794), the 
 author of Patriotische Phantasieen (17 74), a series of fragments, 
 which, Goethe nevertheless declares, form "ein wahrhaftes 
 Ganzes." The poet was much influenced by Mbser in his 
 youth, and has eulogised in the Dichtung und Wahrheit (Bk. 
 xiii.) his spirit, intellect, and character, and his thorough in- 
 sight into all that goes on in the social world. Whilst others 
 occupied themselves with larger and more .prominent public 
 affairs and transactions, Mb'ser observed and reproduced the 
 common daily life of his nation, and the thousand "little 
 things " which compose the texture of popular existence. He 
 has been compared to Franklin for the homeliness, verve, 
 and freshness of his writings. In opinions he is akin to 
 the Italian Ortes. He is opposed to the whole spirit of the 
 " Aufklarung," and to the liberal and rationalistic direction 
 of which Smith's work became afterwards the expression. He 
 IB not merely conservative but reactionary, manifesting a 
 preference for mediaeval institutions such as the trade guilds, 
 
 w
 
 82 POLITICAL ECONOMY. 
 
 and, like Carlyle in our own time, seeing advantages even in 
 serfdom, when compared with the sort of freedom enjoyed 
 by the modern drudge. He has a marked antipathy for the 
 growth, of the money power and of manufactures on the large 
 scale, and for the highly developed division of labour. He is 
 opposed to absolute private property in land, and would gladly 
 see revived such a system of restrictions as in the interest 
 of the state, the commune, and the family were imposed on 
 mediaeval ownership. In his wayward and caustic style, he 
 often criticises effectively the doctrinaire narrowness of his 
 contemporaries, throws out many striking ideas, and in parti- 
 cular sheds real light on the economic phenomena and general 
 social conditions of the Middle Agea 
 
 ADAM SMITH, WITH HIS IMMEDIATE PREDECESSORS 
 AND HIS FOLLOWERS. 
 
 England. 
 
 The stagnation in economic inquiry which showed itself in 
 England in the early part of the eighteenth century was not 
 broken by any notable manifestation before 1735, when Bishop 
 Berkeley put forward in his Querist, with much force and 
 point, views opposed to those of the mercantile school on 
 the nature of national wealth and the functions of money, 
 though not without an admixture of grave error. But soon 
 a more decisive advance was made. Whilst in France^ the 
 physiocrats were working after their own fashion towards the 
 construction of a definitive system of political economy, a 
 Scottish thinker of the first order was elucidating, in a series 
 of short but pregnant essays, some of the fundamental con- 
 ceptions of the science. What had been written on these 
 questions in the English language before his time had remained 
 almost altogether within the limits of the directly practical 
 sphere. With Locke, indeed, the general system of the modern 
 critical philosophy had come into relation with economic 
 inquiry, but only in a partial and indeterminate way. But
 
 SYSTEM OF NATURAL LIBERTY. 83 
 
 in Hume the most advanced form of this philosophy was 
 represented, and his appearance in the field of economics 
 decisively marks the tendency of the latter order of specula- 
 tion to place itself in connection with the largest and deepest 
 thought on human nature and general human history. Most 
 of the essays here referred to first appeared in 1752, in a 
 volume entitled Political Discourses, and the numher was 
 completed in the collection of Essays and Treatises on Several 
 Subjects, published in the following year. The most important 
 of them are those on Commerce, on Money, on Interest, and 
 on the Balance of Trade. Yet these should not be separated 
 from the rest, for, notwithstanding the unconnected form of 
 these little treatises, there runs through them a profound 
 unity of thought, so that they indeed compose in a certain 
 sense an economic system. They exhibit in full measure 
 Hume's wonderful acuteness and subtlety, which indeed some- 
 times dispose him to paradox, in combination with the breadth, 
 the absence of prejudice, and the social sympathies which so 
 eminently distinguish him ; and they offer, besides, the charm 
 of his easy and natural style and his rare power of lucid 
 exposition. 
 
 In the essay on money he refutes the mercantilist error, 
 which tended to confound it with wealth. "Men and com- 
 modities," he says, "are the real strength of any community." 
 " In the national stock of labour consists all real power and 
 riches." Money is only the oil which makes the movements 
 of the mechanism^ of commerce more smooth and easy. He *\ 
 shows that, from the domestic as distinguished from the I 
 international point of view, the absolute quantity of money, / 
 supposed as of fixed amount, in a country is of no consequence, \ 
 whilst an excessive quantity, larger, that is, than is required [ 
 for the interchange of commodities, may be injurious as raising j 
 prices and driving foreigners from the home markets. He 
 goes so far, in one or two places, as to assert that the value of 
 money is chiefly fictitious or conventional, a position which 
 cannot be defended ; but it must not be pressed against him,
 
 84 POLITICAL ECONOMY. 
 
 as he builds nothing on it. He lias some very ingenious 
 observations (since, however, questioned by J. S. Mill) on the 
 effects of the increase of money in a country in stimulating 
 industry during the interval which takes place before the 
 additional amount is sufficiently diffused to alter the whole 
 scale of prices. He shows that the fear of the money of an 
 industrious community being lost to it by passing into foreign 
 countries is groundless, and that, under a system of freedom, 
 the distribution of the precious metals which is adapted to the 
 requirements of trade will spontaneously establish itself. " In 
 short, a Government has great reason to preserve with care its 
 people and its manufactures ; its money it may safely trust to 
 the course of human affairs without fear or jealousy." 
 
 A very important service was rendered by his treatment 
 of the rate of interest. He exposes the erroneous idea often 
 entertained that it depends on the quantity of money in a 
 country, and shows that the reduction of it must in general 
 be the result of " the increase of industry and frugality, of 
 arts and commerce," so that it may serve as a barometer, its 
 lowness being an almost infallible sign of the flourishing 
 condition of a people. It may be observed in passing that in 
 the essay devoted to this subject he brings out a principle 
 of human nature which economists too often overlook, " the 
 constant and insatiable desire of the mind for exercise and 
 employment," and the consequent action of ennui in prompting 
 to exertion. 
 
 With respect to commerce, he points to its natural founda- 
 tion in what has since been called " the territorial division of 
 labour," and proves that the prosperity of one nation, instead 
 of being a hindrance, is a help to that of its neighbours. 
 ''Not only as a man, but as a British subject," he says, "I 
 pray for the flourishing commerce of Germany, Spain, Italy, 
 and even France itself." He condemns the "numberless bars, 
 obstructions, and imposts which all nations of Europe, and 
 none more than England, have put upon trade." Yet on the 
 question of protection to national industry he is not quite at
 
 SYSTEM OF NATURAL LIBERTY. 85 
 
 the free-trade point of view, for he approves of a tax on 
 German linen as encouraging home manufactures) and of a. 
 
 tax on brandy as increasing the sale of rurn and supporting 
 our southern colonies. Indeed it has been justly observed A 
 that there are in him several traces of a refined mercantilism, [ 
 and that he represents a state of opinion in which the transi- V 
 tion from the old to the new views is not yet completely j 
 effected. 
 
 We cannot do more than refer to the essay on taxes, in 
 which, amongst other things, he repudiates the imp&t unique 
 of the physiocrats, and to that on public credit, in which he 
 criticises the "new paradox that public encumbrances are 
 of themselves advantageous, independent of the necessity of 
 contracting them," and objects, perhaps too absolutely, to the 
 modern expedient of raising the money required for national 
 enterprises by way of loan, and so shifting our burdens upon 
 the shoulders of posterity. 
 
 Tlu> characteristics of Hume, which are most important in 
 the history of economic investigation, are (i) his practice of 
 bringing economic facts into connection with all the weighty 
 interests of social and political life, and (2) his tendency to 
 introduce the historical spirit into the study of those facts. 
 He admirably illustrates the mutual action of the several 
 branches of industry, and the influences of progress in the 
 arts of production and in commerce on general civilisation, 
 exhibits the striking contrasts of the ancient and modern 
 system of life (see especially the essay On the Populousness 
 of Ancient Nations), and considers almost every phenomenon 
 which comes under discussion in its relations to the con- 
 temporary stage of social development. It cannot be doubted 
 that Hume exercised a most important influence on Adam 
 Smith, who in the Wealth of Nations calls him " by far the 
 most illustrious philosopher and historian of the present age," 
 and who esteemed his character so highly that, after a friend- 
 ship of many years had been terminated by Hume's decease, 
 he declared him to have "approached as nearly to the ideal
 
 86 POLITICAL ECONOMY. 
 
 of a perfectly wise and virtuous man as perhaps the nature of 
 human frailty will permit." 
 
 Josiah Tucker, dt-fr of Gloucester (d. 1799), holds a dis- 
 tinguished place among the immediate predecessors of Smith. 
 Most of his numerous productions had direct reference to 
 contemporary questions, and, though marked by much sagacity 
 and penetration, are deficient in permanent interest. In some 
 of these he urged the impolicy of restrictions on the trade 
 of Ireland, advocated a union of that country with England, 
 and recommended the recognition of the independence of the 
 United States of America. The most important of his general 
 economic views are those relating to international commerce. 
 He is an ardent supporter of free-trade doctrines, which he 
 bases on the principles that there is between nations no 
 necessary antagonism, but rather a harmony, of interests, and 
 that their several local advantages and different aptitudes 
 naturally prompt them to exchange. He had not, however, 
 got quite clear of mercantilism, and favoured bounties on ex- 
 ported manufactures and the encouragement of population by 
 a tax on celibacy. Dupont, and after him Blanqui, represent 
 Tucker as a follower of the physiocrats, but there seems to be 
 no ground for this opinion except his agreement with them 
 on the subject of the freedom of trade. Turgot translated 
 into French (1755), under the title of Questions Importantes 
 sur le Commerce, a tract by Tucker on The Expediency of a 
 Law for the Naturalisation of Foreign Protestants. 
 
 In 1767 was published Sir James Steuart's Inquiry into the 
 Principles of Political Economy. This was one of the most 
 unfortunate of books. It was the most complete and syste- 
 matic survey of the science from the point of view of moderate 
 mercantilism which had appeared in England. Steuart was 
 a man of no ordinary abilities, and had prepared himself for 
 his task by long and serious study. But the time for the 
 mercantile doctrines was past, and the system of natural 
 liberty was in possession of an intellectual ascendency which 
 foreshadowed its political triumph. Nine years later the
 
 SYSTEM OF NATURAL LIBERTY. 87 
 
 Wealth of Nations was given to the world, a work as superior 
 to Steuart's in attractiveness of style as in scientific soundness. 
 Thus the latter was predestined to fail, and in fact never 
 exercised any considerable theoretic or practical influence. 
 Smith never quotes or mentions it ; being acquainted with 
 Steuart, whose conversation he said was better than his book, 
 he probably wished to keep clear of controversy with him. 1 
 The German economists have examined Steuart's treatise 
 more carefully than English writers have commonly done ; 
 and they recognise its high merits, especially in relation to the 
 theory of value and the subject of population. They have 
 also pointed out that, in the spirit of the best recent research, 
 he has dwelt on the special characters which distinguish the 
 economies proper to different nations and different grades in 
 social progress. 
 
 Coming now to the great name of Adam Smith (1723-1 790), 
 it is of the highest importance that we should rightly under- 
 stand his position and justly estimate his claims. It is plainly 
 contrary to fact to represent him, as some have done, as the 
 creator of political economy. The subject of social wealth 
 "had always in some degree, and increasingly in recent times, 
 engaged the attention of philosophic minds. The study had 
 even indisputably assumed a systematic character, and, from 
 being an assemblage of fragmentary disquisitions on particular 
 questions of national interest, had taken the form, notably 
 in Turgot's Reflexions, of an organised body of doctrine. The 
 truth is, that Smith took up the science when it was already 
 considerably advanced; and it was this very circumstance 
 which enabled him, by the production of a classical treatise, 
 to render most of his predecessors obsolete. But, whilst all 
 the economic labours of the preceding centuries prepared the 
 Way for him, they did not anticipate his work. His appear- 
 
 1 Smith says, in a letter to Pulteney ( 1772) " I have the same opinion 
 of Sir James Stewart's book that you have. Without once mentioning 
 it, I natter myself that any false principle in it will meet with a clear 
 and distinct confutation in mine."
 
 88 POLITICAL ECONOMY. 
 
 ance at an earlier stagb, :>r without those previous 
 would be inconceivable ; but he built, on the foundation 
 which had been laid by others, much of his own that was 
 precious and enduring. 
 
 Even those who do not fall into the error of making Smith 
 the creator of the science, often separate him too broadly from 
 Quesnay and his followers, and represent the history of modern 
 Economics as consisting of the successive rise and reign of 
 three doctrines the mercantile, the physiocratic, and the 
 Smithian. The last two are, it is true, at variance in some 
 even important respects. But it is evident, and Smith him- 
 self felt, that their agreements were much more fundamental 
 than their differences ; and, if we regard them as historical 
 forces, they must be considered as working towards identical 
 ends. They both urged society towards the abolition of the 
 previously prevailing industrial policy of European Govern- 
 ments ; and their arguments against that policy rested essenti- 
 ally on the same grounds. Whilst Smith's criticism was more 
 searching and complete, he also analysed more correctly than 
 the physiocrats some classes of economic phenomena, in par- 
 ticular dispelling the illusions into which they had fallen 
 with respect to the unproductive nature of manufactures and 
 commerce. Their school disappeared from the scientific field, 
 not merely because it met with a political check in the person 
 of Turgot, but because, as we have already said, the Wealth 
 of Nations absorbed into itself all that was valuable in their 
 teaching, whilst it continued more effectually the impulse 
 they had given to the necessary work of demolition. 
 
 The history of economic opinion in modern times, down 
 io the third decade of our own century, is, in fact, strictly 
 bipartite. The first stage is filled with the mercantile system, 
 which, as we have shown, was rather a practical policy than a 
 speculative doctrine, and which came into existence as the 
 spontaneous growth of social conditions acting on minds not 
 trained to scientific habits. The second stage is occupied 
 with the gradual rise and ultimate ascendency of anothei
 
 SYSTEM OF NATURAL LIBERTY. 89 
 
 system founded on the idea of the right of the individual to 
 an unimpeded sphere for the exercise of his economic activity. 
 "With the latter, which is best designated as the " system of 
 natural liberty," we ought to associate the memory of the 
 physiocrats as well as that of Smith, without, however, main 
 taining their services to have been equal to his. 
 
 The teaching of political economy was in the Scottish uni- N 
 versities associated with that of moral philosophy. Smith, as 
 we are told, conceived the entire subject he had to treat in 
 his public lectures as divisible into four heads, the first of 
 which was natural theology, the second ^thics. the third 
 jurisprudence ; whilst in the fourth "he examined those poli- 
 
 ^^^^^MMM^^^B A 
 
 tical regulations which are founded upon expediency, and 
 which are calculated to increase the riches, the power, and the 
 p^rosperity of a state." The last two branches of inquiry are 
 regarded as forming but a single body of doctrine in the well- 
 known passage of the Theory of Moral Sentiments in which 
 the author promises to give in another discourse " an account 
 of the general principles of law and government, and of the 
 different revolutions they have undergone in the different ages 
 and periods of society, not only in what concerns justice, but 
 in what concerns police, revenue, and arms, and whatever else 
 is the subject of law." This shows how little it was Smith's 
 habit to separate (except provisionally), in his conceptions 
 or his researches', the economic phenomena of society from 
 all the rest. The words above quoted have, indeed, been not 
 unjustly described as containing " an anticipation, wonderful 
 for his period, of general Sociology, both statical and dynami- 
 cal, an anticipation which becomes still more remarkable when 
 we learn from his literary executors that he had formed the 
 plan of a connected history of the liberal sciences and elegant 
 arts, which must have added to the branches of social study 
 already enumerated a view of the intellectual progress of 
 society." Though these large designs were never carried out 
 in their integrity, as indeed at that period they could not have 
 been adequately realised, it has resulted from them th*it, though
 
 90 POLITICAL ECONOMY. 
 
 economic phenomena form the special subject of the Wealth 
 of Nations, Smith yet incorporated into that work much that 
 relates to the other social aspects, incurring thereby the censure 
 of some of his followers, who insist with pedantic narrowness 
 on the strict isolation of the economic domain. 
 
 There has been much discussion on the question What is 
 the scientific method followed by Smith in his great work I 
 y By some it is considered to have been purely deductive, a 
 view which Buckle has perhaps carried to the greatest ex- 
 treme. He asserts that in Scotland the inductive method 
 was unknown, that the inductive philosophy exercised no 
 influence on Scottish thinkers ; and, though Smith spent 
 some of the most important years of his youth in England, 
 where the inductive method was supreme, and though he was 
 widely read in general philosophical literature, he yet thinks 
 he adopted the deductive method because it was habitually 
 followed in Scotland, and this though Buckle maintains 
 that it is the only appropriate, or even possible, method in 
 political economy, which surely would have been a sufficient 
 reason for choosing it. That the inductive spirit exercised 
 no influence on Scottish philosophers is certainly not true ; 
 as will be presently shown, Montesquieu, whose method is 
 essentially inductive, was in Smith's time studied with quite 
 peculiar care and regarded with special veneration by Smith's 
 ^fellow-countrymen. As to Smith himself, what may justly 
 be said of him is that the deductive bent was certainly not 
 the predominant character of his mind, nor did his great 
 excellence lie in the "dialectic skill "which Buckle ascribes 
 to him. "What strikes us most in his book is his wide and 
 keen observation of social facts, and his perpetual tendency 
 to dwell on these and elicit their significance, instead of 
 drawing conclusions from abstract principles by elaborate 
 chains of reasoning. It is this habit of his mind which 
 gives us, in reading him, so strong and abiding a sense of 
 being in contact with the realities of life. 
 
 That Smith does, however, largely employ the deductive 
 
 -
 
 SYSTEM OF NATURAL LIBERTY. 91 
 
 method is certain ; and that method is quite legitimate when 
 the premises from which the deduction sets out are known 
 universal facts of human nature and properties of external 
 objects. Whether this mode of proceeding will carry us far 
 may indeed well be doubted ; but its soundness cannot be 
 disputed. But there is another vicious species of deduction 
 which, as Cliffe Leslie has shown, seriously tainted the 
 philosophy of Smith, in which the premises are not facts 
 ascertained by observation, but the same a priori assumptions, 
 half theological half metaphysical, respecting a supposed 
 harmonious and beneficent natural order of things which 
 we found in the physiocrats, and which, as we saw, were 
 embodied in the name of that sect. In his view, Nature has 
 made provision for social wellbeing by the principle of the 
 human constitution which prompts every man to better his 
 condition : the individual aims only at his private gain, but 
 in doing so is " led by an invisible hand " to promote the 
 public good, which was no part of his intention ; human 
 institutions, by interfering with the action of this principle 
 in the name of the public interest, defeat their own end ; but, 
 when all systems of preference or restraint are taken away, 
 " the obvious and simple system of natural liberty establishes 
 itself of its own accord." This theory is, of course, not 
 explicitly presented by Smith as a foundation of his econo- 
 mic doctrines, but it is really the secret substratum on which 
 they rest. Yet, whilst such latent postulates warped his 
 view of things, they did not entirely determine his method. 
 His native bent towards the study of things as they are pre- 
 served him from extravagances into which many of his fol- 
 lowers have fallen. But besides this, as Leslie has pointed 
 out, the influence of Montesquieu tended to counterbalance 
 the theoretic prepossessions produced by the doctrine of the 
 jus naturce. That great thinker, though he could not, at his 
 period, understand the historical method which is truly ap- 
 propriate to sociological inquiry, yet founded his conclusions 
 on induction. It is true, as Comte has remarked, that hit
 
 92 POLITICAL ECONOMY. 
 
 accumulation of facts, borrowed from the most different 
 states of civilisation, and not subjected to philosophic criti- 
 cism, necessarily remained on the whole sterile, or at least 
 could not essentially advance the study of society much 
 beyond the point at which he found it. His merit, as we 
 have before mentioned, lay in the recognition of the subjection 
 of all social phenomena to natural laws, not in the discovery 
 of those laws. But this limitation was overlooked by the 
 philosophers of the time of Smith, who were much attracted 
 by the system he followed of tracing social facts to the special 
 circumstances, physical or moral, of the communities in which 
 they were observed. Leslie has shown that Lord Kaimes, 
 Dalrymple, and Millar contemporaries of Smith, and the 
 last his pupil were influenced by Montesquieu ; and he 
 might have added the more eminent name of Ferguson, whose 
 respect and admiration for the great Frenchman are expressed 
 in striking terms in his History of Civil Society, 1 We are 
 even informed that Smith himself in his later years was 
 occupied in preparing a commentary on the Esprit des Lois. 2 
 
 1 " When I recollect what the President Montesquieu has written, I 
 am at a loss to tell why I should treat of human affairs ; but I too am 
 instigated by my reflections and my sentiments ; and I may utter them 
 more to the comprehension of ordinary capacities, because I am more 
 on the level of ordinary men. . . . The reader should be referred to what 
 has been already delivered on the subject by this profound politician and 
 amiable moralist " (Part I. sect. 10). Hume speaks of Montesquieu as 
 an "illustrious writer," who "has established ... a system of political 
 knowledge, which abounds in ingenious and brilliant thoughts and is not 
 wanting in solidity " (Principles of Morals, sect. 3, and note). 
 
 2 The following paragraph appeared in the Moniteur Universel of 
 March II, 1790: "On pretend que le celebre M. Smith, connu si 
 avantageusement par son traite' des causes de la richesse des nations, 
 prepare et va mettre a 1'impression un examen critique de 1'Esprit des 
 Lois ; c'est le re'sultat de plusieurs anne'es de meditation, et Ton sait 
 assez ce qu'on a droit d'attenclre d'une tete comme celle de M. Smith. 
 Ce livre fera e'poque dans 1'histoire de la politique et de la philosophic , 
 tel est du moins le jugement qu'en portent des gens instruits qui en 
 connaissent des fragments dont ils ne parlent qu'avec an enthousiagma 
 du plus heureux augure."
 
 SYSTEM OF NATURAL LIBERTY. 93 
 
 He was thus affected by two different and incongruous systems 
 of thought, one setting out from an imaginary code of nature 
 intended for the benefit of man, and leading to an optimistic 
 view of the economic constitution founded on enlightened self- 
 interest ; the other following inductive processes, and seeking 
 to explain the several states in which human societies are 
 found existing, as results of circumstances or institutions 
 which have been in actual operation. And we find accordingly 
 in his great work a combination of these two modes of treat- 
 ment inductive inquiry on the one hand, and, on the other, 
 a priori speculation founded on the "Mature" hypothesis. 
 The latter vicious proceeding has in some of his followers 
 been greatly aggravated, while the countervailing spirit of 
 inductive investigation has fallen into the background, and 
 indeed the necessity or utility of any such investigation in 
 the economic field has been sometimes altogether denied. 
 
 Some have represented Smith's work as of so loose a 
 texture and so defective in arrangement that it may be justly 
 described as consisting of a series of monographs. But this 
 is certainly an exaggeration. The book, it is true, is not 
 framed on a rigid mould, nor is there any parade of systematic 
 divisions and subdivisions ; and this doubtless recommended 
 it to men of the world and of business, for whose instruction 
 it was, at least primarily, intended. But, as a body of exposi- 
 tion, it has the real and pervading unity which results from 
 a mode of thinking homogeneous throughout and the general 
 absence of such contradictions as would arise from an imper- 
 fect digestion of the subject. 
 
 Smith sets out from the thought that the annual labour of 
 a nation is the source from which it derives its supply of the 
 necessaries and conveniences of life. He does not of course 
 contemplate labour as the only factor in production ; but it 
 has been supposed that by emphasising it at the outset he at 
 once otrikes the note of difference between himself on the one 
 hand and both the mercantilists and the physiocrats on the 
 other. The improvement in the productiveness of laboui
 
 94 POLITICAL ECONOMY. 
 
 depends largely on its division ; and he proceeds accordingly 
 / to give his unrivalled exposition of that principle, of the 
 grounds on which it rests, and of its greater applicability to 
 manufactures than to agriculture, in consequence of which the 
 latter relatively Jags behind in the course of economic develop- 
 ment. 1 The origin of the division of labour he finds in the 
 propensity of human nature " to truck, barter, or exchange 
 one thing for another." He shows that a certain accumulation 
 of capital is a condition precedent of this division, and that 
 the degree to which it can be carried is dependent on the 
 extent of the market When the division of labour has been 
 established, each member of the society must have recourse 
 to the others for the supply of most of his wants ; a medium 
 of exchange is thus found to be necessary, and money comes 
 into use. The exchange of goods against each other or against 
 money gives rise to the notion of value. This word has two 
 meanings that of utility, and that of purchasing power ; the 
 one may be called value in use, the other value in exchange. 
 Merely mentioning the former, Smith goes on to study the 
 latter. What, he asks, is the measure of value ? what regu- 
 lates the amount of one thing which will be given for another ? 
 " Labour," Smith answers, " is the real measure of the ex- 
 changeable value of all commodities." " Equal quantities 
 of labour, at all times and places, are of equal value to the 
 labourer." 2 " Labour alone, therefore, never varying in its 
 own value, is alone the ultimate and real standard by which 
 the value of all commodities can at all times and places be 
 estimated and compared. It is their real price ; money is 
 their nominal price only." Money, however, is in men's 
 actual transactions the measure of value, as well as the vehicle 
 
 1 Smith takes no account in this place of the evils which may arise 
 from a highly developed division of labour. But see Bk. v. chap. i. 
 
 2 This sentence, which on close examination will be found to have no 
 definite intelligible sense, affords a good example of the way in which 
 metaphysical modes of thought obscure economic ideas. What is a 
 "quantity of labour," the kind of labour being undetermined? And 
 what is meant by the phrase " of equal value " I
 
 SYSTEM OF NATURAL LIBERTY. 95 
 
 of exchange ; and the precious metals are best suited for this 
 function, as varying little in their own value for periods of 
 moderate length ; for distant times, corn is a better standard 
 of comparison. In relation to the earliest social stage, we 
 need consider nothing but the amount of labour employed in 
 the production of an article as determining its exchange value ; 
 but in more advanced periods price is complex, and consists 
 in the most general case of three elements wages, profit, and 
 rent. Wages are the reward of labour. Profit arises as soon 
 as stock, being accumulated in the hands of one person, is 
 employed by him in setting others to work, and supplying 
 them with materials and subsistence, in order to make a gain 
 by what they produce. Rent arises as soon as the land of a 
 country has all become private property ; " the landlords, like 
 all other men, love to reap where they never sowed, and de- 
 mand a rent even for its natural produce." In every improved 
 society, then, these three elements enter more or less into the 
 price of the far greater part of commodities. There is in every 
 society or neighbourhood an ordinary or average rate of wages 
 and profit in every different employment of labour and stock, 
 regulated by principles to be explained hereafter, as also an 
 ordinary or average rate of rent. These may be called the 
 natural rates at the time when and the place where they pre- 
 vail ; and the natural price of a commodity is what is sufficient 
 to pay for the rent of the land, 1 the wages of the labour, and 
 the profit of the stock necessary for bringing the commodity 
 to market. The market price may rise above or fall below 
 the amount so fixed, being determined by the proportion 
 between the quantity brought to market and the demand of 
 those who are willing to pay the natural price. Towards the 
 natural price as a centre the market price, regulated by com- 
 petition, constantly gravitates. Some commodities, however, 
 are subject to a monopoly of production, whether from the 
 peciiliarities of a locality or from legal privilege : their price 
 
 1 Smith's expressions on this point are lax, as will be seen when we 
 come to examine the (so-called) Ricardian Theory of Bent.
 
 g6 POLITICAL ECONOMY. 
 
 is always the highest that can be got ; the natural price of 
 other commodities is the lowest which can be taken for any 
 length of time together. The three component parts or factors 
 of price vary with the circumstances of the society. The rate 
 of wages is determined by a " dispute " or struggle of opposite 
 interests between the employer and the workman. A minimum 
 rate is fixed by the condition that they must be at least suffi- 
 cient to enable a man and his wife to maintain themselves 
 and, in general, bring up a family. The excess above this 
 will depend on the circumstances of the country, and the con- 
 sequent demand for labour, wages being high when national 
 wealth is increasing, low when it is declining. The same 
 circumstances determine the variation of profits, but in an 
 opposite direction ; the increase of stock, which raises wages, 
 tending to lower profit through the mutual competition of 
 capitalists. " The whole of the advantages and disadvantages 
 of the different employments of labour and stock must, in the 
 same neighbourhood, be either perfectly equal or continually 
 tending to equality ; " if one had greatly the advantage over 
 the others, people would crowd into it, and the level would 
 soon be restored. Yet pecuniary wages and profits are very 
 different in different employments, either from certain cir- 
 cumstances affecting the employments, which recommend or 
 disparage them in men's notions, or from national policy, 
 " which nowhere leaves things at perfect liberty." Hero 
 follows Smith's admirable exposition of the causes which pro- 
 duce the inequalities in wages and profits just referred to. a 
 passage affording ample evidence of his habits of nice observa- 
 tion of the less obvious traits in human nature, and also of 
 the operation both of these and of social institutions on eco- 
 nomic facts. The rent of land conies next to be considered, 
 as the last of the three elements of price. Kent is a mono- 
 poly price, equal, not to what the landlord could afford to take, 
 but to what the farmer can afford to give. " Such parts only 
 of the produce of land can commonly be brought to market, 
 of which the ordinary price is sufficient to replace the stock
 
 SYSTEM OF NATURAL LIBERTY. 97 
 
 which must be employed in bringing them thither, togethel 
 with the ordinary profits. If the ordinary price is more tha* 
 this, the surplus part will naturally go to the rent of the land. 
 If it is not more, though the commodity may be brought to 
 market, it can afford no rent to the landlord. Whether the 
 price is or is not more depends on the demand." "Rent, 
 therefore, enters into the price of commodities in a different 
 way from wages and profits. High or low wages and profit 
 are the causes of high or low price ; high or low rent is the 
 effect of it." 
 
 Rent, wages, and profits, as they are the elements of price, 
 are also the constituents of income; and the three great 
 orders of every civilised society, from whose revenues that of 
 every other order is ultimately derived, are the landlords, the 
 labourers, and the capitalists. The relation of the interests 
 of these three classes to those of society at large is different. 
 The interest of the landlord always coincides with the general 
 interest : whatever promotes or obstructs the one has the same 
 effect on the other. So also does that of the labourer : when 
 the wealth of the nation is progressive, his wages are high ; 
 they are low when it is stationary or retrogressive. " The 
 interest of the third order has not the same connection with 
 the general interest of the society as that of the other two ; 
 ... it is always in some respects different from and opposite 
 to that of the public." 
 
 The subject of the second book is " the nature, accumulation, 
 and improvement of stock." A man's whole stock consists 
 of two portions that which is reserved for his immediate 
 consumption, and that which is employed so as to yield a 
 revenue to its owner. This latter, which is his " capital," is 
 divisible into the two classes of " fixed " and " circulating." 
 The first is such as yields a profit without passing into other 
 hands. The second consists of such goods, raised, manufac- 
 tured, or purchased, as are sold for a profit and replaced by 
 other goods ; this sort of capital is therefore constantly going 
 from and returning to the hands of its owner. The whole
 
 98 POLITICAL ECONOMY. 
 
 capital of a society falls under the same two heads. Its fixed 
 capital consists chiefly of (i) machines, (2) buildings which are 
 the means of procuring a revenue, (3) agricultural improve- 
 ments, and (4) the acquired and useful abilities of all members 
 of the society (since sometimes known as " personal capital "). 
 Its circulating capital is also composed of four parts (i) 
 money, (2) provisions in the hands of the dealers, (3) materials, 
 and (4) completed work in the hands of the manufacturer or 
 merchant. Next comes the distinction of the gross national 
 revenue from the net, the first being the whole produce of 
 the land and labour of a country, the second what remains 
 after deducting the expense of maintaining the fixed capital 
 of the country and that part of its circulating capital which 
 consists of money. Money, " the great wheel of circulation," 
 is altogether different from the goods which are circulated by 
 means of it ; it is a costly instrument by means of which all 
 that each individual receives is distributed to him ; and the 
 expenditure required, first to provide it, and afterwards to 
 maintain it, is a deduction from the net revenue of the society. 
 In development of this consideration, Smith goes on to explain 
 the gain to the community arising from the substitution of 
 paper money for that composed of the precious metals ; and 
 here occurs the remarkable illustration in which the use of gold 
 and silver money is compared to a highway on the ground, 
 that of paper money to a waggon-way through the air. In 
 proceeding to consider the accumulation of capital, he is led to 
 the distinction between productive and unproductive labour, 
 the former being that which is fixed or realised in a 
 particular object or vendible article, the latter that which is 
 not so realised. The former is exemplified in the labour of 
 the manufacturing workman, the latter in that of the menial 
 servant. A broad line of demarcation is thus drawn between 
 the labour which results in commodities or increased value 
 of commodities, and that which does no more than render 
 services : the former is productive, the latter unproductive. 
 " Productive " is by no means equivalent to " useful : " the
 
 SYSTEM OF NATURAL LIBERTY. 95 
 
 labours of the magistrate, the soldier, the churchman, lawyer, 
 and physician are, in Smith's sense, unproductive. Productive 
 labourers alone are employed out of capital ; unproductive 
 labourers, as well as those who do not labour at all, are all 
 maintained by revenue. In advancing industrial communities, 
 the portion of annual produce set apart as capital bears an 
 increasing proportion to that which is immediately destined to 
 constitute a revenue, either as rent or as profit. Parsimony 
 is the source of the increase of capital ; by augmenting the 
 fund devoted to the maintenance of productive hands, it puts 
 in motion an additional quantity of industry, which adds to 
 the value of the annual produce. What is annually saved is 
 as regularly consumed as what is spent, but by a different set 
 of persons, by productive labourers instead of idlers or unpro- 
 ductive labourers ; and the former reproduce with a profit 
 the value of their consumption. The prodigal, encroaching 
 on his capital, diminishes, as far as in him lies, the amount of 
 productive labour, and so the wealth of the country; nor is 
 this result affected by his expenditure being on home-made, 
 as distinct from foreign, commodities. Every prodigalj there- 
 fore, is a public enemy ; every frugal man a public benefactor. 
 The only mode of increasing the annual produce of the land 
 and labour is to increase either the number of productive 
 labourers or the productive powers of those labourers. Either 
 process will in general require additional capital, the former to 
 maintain the new labourers, the latter to provide improved 
 machinery or to enable the employer to introduce a more 
 complete division of labour. In what are commonly called 
 loans of money, it is not really the money, but the money's 
 worth, that the borrower wants ; and the lender really assigns 
 to him the right to a certain portion of the annual produce of 
 the land and labour of the country. As the general capital of 
 a country increases, so also does the particular portion of it 
 from which the possessors wish to derive a revenue without 
 being at the trouble of employing it themselves ; and, as the 
 quantity of stock thus available for loans is augmented, the
 
 TOO POLITICAL ECONOMY. 
 
 interest diminishes, not merely " from the general causes which 
 make the market price of things commonly diminish as theif 
 quantity increases," but because, with the increase of capital. 
 " it becomes gradually more and more difficult to find within 
 the country a profitable method of employing any new capital," 
 whence arises a competition between different capitals, and 
 a lowering of profits, which must diminish the price which 
 can be paid for the use of capital, or in other words the rate 
 of interest. It was formerly wrongly supposed, and even Locke 
 and Montesquieu did not escape this error, that the fall in the 
 value of the precious metals consequent on the discovery of 
 the American mines was the real cause of the permanent lower- 
 ing of the rate of interest in Europe. But this view, already 
 refuted by Hume, is easily seen to be erroneous. " In some 
 countries the interest of money has been prohibited by law. 
 But, as something can everywhere be made by the use of 
 money, something ought everywhere to be paid for the use of 
 it," and will in fact be paid for it ; and the prohibition will 
 only heighten the evil of usury by increasing the risk to the 
 lender. The legal rate should be a very little above the lowest 
 market rate ; sober people will then be preferred as borrowers 
 to prodigals and projectors, who at a higher legal rate would 
 have an advantage over them, being alone willing to offer that 
 higher rate. 1 
 
 As to the different employments of capital, the quantity of 
 productive labour put in motion by an equal amount varies 
 extremely according as that amount is employed (i) in the 
 improvement of lands, mines, or fisheries, (2) in manufactures, 
 (3) in wholesale or (4) retail trade. In agriculture " Nature 
 labours along with man," and not only the capital cf the 
 farmer is reproduced with his profits, but also the rent of the 
 landlord. It is therefore the employment of a given capital 
 which is most advantageous to society. Next in order come 
 manufactures; then wholesale trade first the home trade, 
 
 1 See p. 1 10, oii Beutbam.
 
 SYSTEM OF NATURAL LIBERTY. 101 
 
 secondly the foreign trade of consumption, last the carrying- 
 trade. All these employments of capital, however, are not 
 only advantageous, but necessary, and will introduce them- 
 selves in the due degree, if they are left to the spontaneous 
 action of individual enterprise. 
 
 These first two hooks contain Smith's general economic 
 scheme; and we have stated it as fully as was consistent 
 with the necessary brevity, because from this formulation of 
 doctrine the English classical school set out, and round it the 
 discussions of more recent times in different countries have 
 in a great measure revolved. Some of the criticisms of his 
 successors and their modifications of his doctrines will come 
 under our notice as we proceed. 
 
 The critical philosophers of the eighteenth century were 
 often destitute of the historical spirit, which was no part of the 
 endowment needed for their principal social office. But some 
 of the most eminent of them, especially in Scotland, showed a 
 marked capacity and predilection for historical studies. Smith 
 was amongst the latter ; Knies and others justly remark on 
 the masterly sketches of this kind which occur in the Wealth 
 of Nations. The longest and most elaborate of these occupies 
 the third book ; it is an account of the course followed by the 
 nations of modern Europe in the successive development of 
 the several forms of industry. It affords a curious example 
 of the effect of doctrinal prepossessions in obscuring the 
 results of historical inquiry. Whilst he correctly describes 
 the European movement of industry, and explains it as aris- 
 ing out of adequate social causes, he yet, in accordance with 
 the absolute principles which tainted his philosophy, protests 
 against it as involving an entire inversion of the "natural 
 order of things." First agriculture, then manufactures, lastly 
 foreign commerce; any other order jthan this he considers 
 " unnatural and retrograde." Hume, a more purely positive 
 thinker, simply sees the facts, accepts them, and classes them 
 under a general law. " It is a violent method," he says, " and 
 in most cases impracticable, to oblige the labourer to toil in
 
 ica POLITICAL ECONOMY. 
 
 order to raise from the land more than what subsists himself 
 and family. Furnish him with manufactures and commodities, 
 and he will do it of himself." ''If we consult history, we 
 shall find that, in most nations, foreign trade has preceded any 
 refinement in home manufactures, and given birth to domestic 
 luxury." 
 
 The fourth book is principally devoted to the elaborate 
 and exhaustive polemic against the mercantile system which 
 finally drove it from the field of science, and has exercised a 
 powerful influence on economic legislation. When protection 
 is now advocated, it is commonly on different grounds from 
 those which were in current use before the time of Smith. 
 He believed that to look for the restoration of freedom of 
 foreign trade in Great Britain would have been " as absurd 
 as to expect that an Oceana or Utopia should be established 
 in it ; " yet, mainly in consequence of his labours, that object 
 has been completely attained; and it has lately been said 
 with justice that free trade might have been more generally 
 accepted by other nations if the patient reasoning of Smith 
 had not been replaced by dogmatism. His teaching on the 
 subject is not altogether unqualified; but, on the whole, 
 with respect to exchanges of every kind, where economic 
 motives alone enter, his voice is in favour of freedom. He 
 has regard, however, to political as well as economic interests, 
 and on the ground that " defence is of much more importance 
 than opulence," pronounces the Navigation Act to have been 
 " perhaps the wisest of all the commercial regulations of 
 England." Whilst objecting to the prevention of the export 
 of wool, he proposes a tax on that export as somewhat less 
 injurious to the interest of growers than the prohibition, 
 whilst it would " afford a sufficient advantage " to the domestic 
 over the foreign manufacturer. This is, perhaps, his most 
 marked deviation from the rigour of principle ; it was doubt- 
 less a concession to popular opinion with a view to an attain- 
 able practical improvement. The wisdom of retaliation in 
 order to procure the repeal of high duties or prohibitions
 
 SYSTEM OF NATURAL LIBERTY. 103 
 
 imposed by foreign Governments depends, he says, altogether 
 on the likelihood of its success in effecting the object aimed 
 at, but he does not conceal his contempt for the practice of 
 such expedients. The restoration of freedom in any manu- 
 facture, when it has grown to considerable dimensions by 
 means of high duties, should, he thinks, from motives of 
 humanity, be brought about only by degrees and with cir- 
 cumspection, though the amount of evil which would be 
 caused by the immediate abolition of the duties is, in his 
 opinion, commonly exaggerated. The case in which J. S. 
 Mill would tolerate protection that, namely, in which an in- 
 dustry well adapted to a country is kept down by the acquired 
 ascendency of foreign producers is referred to by Smith ; 
 but he is opposed to the admission of this exception for 
 reasons which do not appear to be conclusive. 1 He is perhaps 
 scarcely consistent in approving the concession of tempo- 
 rary monopolies to joint-stock companies undertaking risky 
 enterprises " of which the public is afterwards to reap the 
 benefit." 2 
 
 He is less absolute in his doctrine of Governmental non- 
 interference when he comes to consider in his fifth book 
 the " expenses of the sovereign or the commonwealth." He 
 recognises as coming within the functions of the state the 
 erection and maintenance of those public institutions and 
 public works which, though advantageous to the society, 
 could not repay, and therefore must not be thrown upon, 
 
 1 It must, however, always be borne in mind that the adoption by a state 
 of this sort of protection is liable to three practical dangers : (l) of en- 
 couragement being procured through political influences for industries 
 which could never have an independent healthy life in the country ; (2) of 
 euch encouragement being continued beyond the term during which it 
 might be usefully given ; (3) of a retaliatory spirit of exclusion being 
 provoked in other communities. 
 
 2 Professor Bastable calls the author's attention to the interesting 
 fact that the proposal of an export duty on wool and the justification 
 ef a temporary monopoly to joint-stock companies both appear for tht 
 first time in the edition of 1 784.
 
 io 4 POLITICAL ECONOMY. 
 
 individuals or small groups of individuals. He remarks in 
 just historical spirit that the performance of these functions 
 requires very different degrees of expense in the different 
 periods of society. Besides the institutions and works in- 
 tended for public defence and the administration of justice, 
 and those required for facilitating the commerce of the society, 
 he considers those necessary for promoting the instruction of 
 the people. He thinks the public at large may with propriety 
 not only facilitate and encourage, but even impose upon 
 almost the whole body of the people, the acquisition in youth 
 of the most essential elements of education. He suggests 
 as the mode of enforcing this obligation the requirement 
 of submission to a test examination " before any one could 
 obtain the freedom in any corporation, or be allowed to set 
 up a trade in any village or town corporate." Similarly, he 
 is of opinion that some probation, even in the higher and 
 more difficult sciences, might be enforced as a condition of 
 exercising any liberal profession, or becoming a candidate for 
 any honourable office. The expense of the institutions for 
 religious instruction as well as for general education, he holds, 
 may without injustice be defrayed out of the funds of the whole 
 society, though he would apparently prefer that it should be 
 met by the voluntary contributions of those who think they 
 have occasion for such education or instruction. There is 
 much that is sound, as well as interesting and suggestive, in 
 this fifth book, in which he shows a political instinct and a 
 breadth of view by which he is favourably contrasted with the 
 Manchester school. But, if we may say so without disrespect 
 / to so great a man, there are traces in it of what is novr 
 called Philistinism a low view of the ends of art and poetry 
 which arose perhaps in part from personal defect, though 
 it was common enough in even the higher minds in his 
 century. There are also indications of a certain deadness t 
 the lofty aims and perennial importance of religion, which 
 was no doubt chiefly due to the influences of an age when 
 the critical spirit was doing an indispensable work, in the
 
 SYSTEM OF NATURAL LIBERTY. 105 
 
 performance of which the transitory was apt to be confounded 
 with the permanent. / 
 
 For the sake of considering as a whole Smith's view of the 
 functions of government, we have postponed noticing his treat- 
 ment of the physiocratic system, which occupies a part of his 
 fourth book. He had formed the acquaintance of Quesnay, 
 Turgot, and other members of their group during his sojourn 
 in France in 1765, and would, as he told Dugald Stewart, had 
 the patriarch of the school lived long enough, have dedicated 
 to him the Wealth of Nations. He declares that, with all its 
 imperfections, the system of Quesnay is " perhaps the nearest 
 approximation to the truth that had yet appeared on the sub- 
 ject of political economy." Yet he seems not to be adequately 
 conscious of the degree of coincidence between his own doc- 
 trines and those of the physiocrats. Dupont de Nemours 
 complained that he did not do Quesnay the justice of recognis- 
 ing him as his spiritual father. It is, however, alleged, on the 
 other side, that already in 1753 Smith had been teaching as 
 professor a body of economic doctrine the same in its broad 
 features with that contained in his great work. This is indeed 
 said by Stewart ; and, though he gives no evidence of it, it is 
 possibly quite true ; if so, Smith's doctrinal descent must be 
 traced rather from Hume than from the French school. The 
 principal error of this school, that, namely, of representing 
 agricultural labour as alone productive, he refutes in the fourth 
 book, though in a manner which has not always been con- 
 sidered effective. Traces of the influence of their mistaken 
 view appear to remain in his own work, as, for example, his 
 assertion that in agriculture nature labours along with man, 
 whilst in manufactures nature does nothing, man does all ; and 
 his distinction between productive and unproductive labour, 
 which was doubtless suggested by their use of those epithets, 
 and which is scarcely consistent with his recognition of 
 what is now called " personal capital." To the same source 
 M'Culloch and others refer the origin of Smith's view, which 
 they represent as an obvious error, that " individual advantage
 
 io6 . POLITICAL ECONOMY. 
 
 is not always a true test of the public advantageousness of dif 
 ferent employments." But that view is really quite correct, 
 as Professor Nicholson has clearly shown. 1 That the form 
 taken by the use of capital, profits being given, Is not indif- 
 ferent to the working class as a whole even Ricardo admitted j 
 and Cairnes, as we shall see, built on this consideration some 
 of the most far-reaching conclusions in his Leading Principles. 
 
 On Smith's theory of taxation in his fifth book it is not 
 necessstry for us to dwell. The well-known canons which 
 he lays down as prescribing the essentials of a good system 
 have been generally accepted. They have lately been severely 
 criticised by Professor Walker of whose objections, however, 
 there is only one which appears to be well founded. Smith 
 seems to favour the view that the contribution of the indi- 
 vidual to public expenses may be regarded as payment for 
 the services rendered to him by the state, and ought to be 
 proportional to the extent of those services. If he held this 
 opinion, which some of his expressions imply, lie was certainly 
 so far wrong in principle. / V>W.^ 
 
 We shall not be held to anticipate unduly if we remark 
 here on the way in which opinion, revolted by the aberrations 
 of some of Smith's successors, has tended to turn from the 
 disciples to the master. A strong sense of his compara- 
 tive freedom from the vicious tendencies of Ricardo and his 
 followers has recently prompted the suggestion that we ought 
 now to recur to Smith, and take up once more from him the 
 line of the economical succession. But notwithstanding his 
 indisputable superiority, and whilst fully recognising the great 
 services rendered by his immortal work, we must not forget 
 that, as has been already said, that work was, on the whole, 
 a product, though an exceptionally eminent one, of the negative 
 philosophy of the last century, resting largely in its ultimate 
 foundation on metaphysical bases. The mind of Smith waa 
 mainly occupied with the work of criticism so urgent in his 
 
 1 In the Introductory Essay to his edition of the Wealth of Nation*.
 
 SYSTEM OF NATURAL LIBERTY. 107 
 
 time ; his principal task was to discredit and overthrow the 
 economic system then prevalent, and to demonstrate the 
 radical unfitness of the existing European Governments to 
 direct the industrial movement. This office of his fell in 
 with, and formed a part of, the general work of demolition 
 carried on by the thinkers who gave to the eighteenth century 
 its characteristic tone. It is to his honour that, besides this 
 destructive operation, he contributed valuable elements to the 
 preparation of an organic system of thought and of life. In his 
 pecial domain he has not merely extinguished many errors 
 and prejudices, and cleared the ground for truth, but has left 
 us a permanent possession in the judicious analyses of economic 
 facts and ideas, the wise practical suggestions, and the luminous 
 indications of all kinds with which his work abounds. Be- 
 longing to the best philosophical school of his period, that 
 with which the names of Hume and Diderot are associated, 
 he tended strongly towards the positive point of view. But 
 it was not possible for him to attain it ; and the final and 
 fully normal treatment of the economic life of societies must 
 be constituted on other and more lasting foundations than 
 those which underlie his imposing construction. 
 
 It has been well said that of philosophic doctrines the saying 
 " By their fruits ye shall know them " is eminently true. And 
 it cannot be doubted that the germs of the vicious methods 
 and false or exaggerated theories of Smith's successors are to 
 be found in his own work, though his good sense and practical 
 bent prevented his following out his principles to their extreme 
 consequences. The objections of Hildebrand and others to 
 the entire historical development of doctrine which the Germans 
 designate as " Smithianismus " are regarded by those critics 
 as applicable, not merely to his school as a whole, but, though 
 in a less degree, to himself. The following are the most 
 important of these objections. It is said (j.) Smith's con- 
 ception of the social economy is essentially individualistic. 
 In this he falls in with the general character of the negative 
 philosophy of his age. That philosophy, in its most typical
 
 io8 - POLITICAL ECONOMY. 
 
 forms, even, denied the natural existence of the disinterested 
 affections, and explained the altruistic feelings as secondary 
 results of self-love. Smith, however, like Hume, rejected 
 these extreme views ; and hence it has been held that in tho 
 Wealth of Nations he consciously, though tacitly, abstracted 
 from the benevolent principles in human nature, and as a 
 logical artifice supposed an " economic man " actuated by purely 
 selfish motives. However this may be, he certainly places 
 himself habitually at the point of view of the individual, whom 
 he treats as a purely egoistic force, working uniformly in the 
 direction of private gain, without regard to the good of others 
 or of the community at large. (2.) He justifies this personal 
 attitude by its consequences, presenting the optimistic view 
 that the good of the community is best attained through 
 the free play of individual cupidities, provided only that the 
 law prevents the interference of one member of the society 
 with the self-seeking action of another. He assumes with 
 the negative school at large though he has passages which 
 are not in harmony with these propositions that every one 
 knows his true interest and will pursue it, and that the 
 economic advantage of the individual coincides with that of 
 the society. To this last conclusion he is secretly led, as we 
 have seen, by a priori theological ideas, and also by meta- 
 physical conceptions of a supposed system of nature, natural 
 right, and natural liberty. (3.) By this reduction of every 
 question to one of individual gain, he is led to a too exclusive 
 consideration of exchange value as distinct from wealth in 
 the proper sense. This, whilst lending a mechanical facility 
 in arriving at conclusions, gives a superficial character to 
 economic investigation, divorcing it from the physical and 
 biological sciences, excluding the question of real social 
 utility, leaving no room for a criticism of production, and 
 leading to a denial, like J. S. Mill's, of any economic doctrine 
 dealing with consumption in other words, with, the use of 
 wealth. (4.) In condemning the existing industrial policy, 
 lie tends too much towards a glorification of non-government
 
 SYSTEM OF NATURAL LIBERTY. 109 
 
 and a repudiation of all social intervention for the regulation 
 of economic life. (5.) He does not keep in view the moral 
 destination of our race, nor regard wealth as a means to the 
 higher ends of life, and thus incurs, not altogether unjustly, 
 the charge of materialism, in the wider sense of that word. 
 Lastly, (6.) his whole system is too absolute in its character; 
 it does not sufficiently recognise the fact that, in the language 
 of Hildebrantl, inan, as a member of society, is a child of 
 civilisation and a product of history, and that account ought 
 to be taken of the different stages of social development as 
 implying altered economic conditions and calling for altered 
 economic action, or even involving a modification of the actor. 
 Perhaps in all the respects here enumerated, certainly in some 
 of them, and notably in the last, Smith is less open to criticism 
 than most of the later English economists ; but it must, we 
 think, be admitted that to the general principles which lie at 
 the basis of his scheme the ultimate growth of these several 
 vicious tendencies is traceable. 
 
 Great expectations had been entertained respecting Smith's 
 work by competent judges before its publication, as is shown 
 by the language of Ferguson on the subject in his History oj 
 Civil Society. 1 That its merits received prompt recognition 
 is proved by the fact of six editions having been called for 
 within the fifteen years after its apjiearance. 2 From the year 
 
 1 " The public will probably soon be furnished with a theory of national 
 oeconomy, equal to what has ever appeared on any subject of science 
 whatever " (Pajt III. sect. 4). 
 
 2 Five editions of the Wealth of Nations appeared during the life of 
 the author: the second in 1779, the third in 1784, the fourth in 1786, 
 and the fifth in 1789. After the third edition Smith made no change in 
 the text. The principal editions containing matter added by other 
 economists are those by William Playfair, with notes, 1805 ; by David 
 Buchanan, with notes, 1814 ; by J. R. M'Culloch, with life of the author, 
 introductory discourse, notes, and supplemental dissertations. 1828 (also, 
 with numerous additions, 1839 ; since reprinted several times with fur- 
 ther additions) ; by the author of Enyland and America (Edward Gibbon 
 Wakefield), with a commentary, which, however, is not continued beyond 
 the second book, 1835-9 ; by James E. Thorold Rogers, Professor of
 
 no POLITICAL ECONOMY. 
 
 1783 it was more and more quoted in Parliament. Pitt was 
 greatly impressed by its reasonings ; Smith is reported to have 
 said that that Minister understood the book as well as himself. 
 Pulteney said in 1797 that Smith would persuade the then 
 living generation and would govern the next. 1 
 
 Smith's earliest critics were Bentham and Lauderdale, who, 
 though in general agreement with him, differed on special 
 points. Jeremy Bentham was author of a short treatise en- 
 titled A Manual of Political Economy and various eco- 
 nomic monographs, the most celebrated of which was his 
 Defence of Usury (1787). This contained (Letter xiii.) an 
 elaborate criticism of a passage in the Wealth of Nations, 
 already cited, in which Smith had approved of a legal maxi- 
 mum rate of interest fixed but a very little above the lowest 
 market rate, as tending to throw the capital of the country 
 into the hands of sober persons, as opposed to " prodigals and 
 projectors." Smith is said to have admitted that Bentham 
 had made out his case. He certainly argues it with great 
 ability ; 2 and the true doctrine no doubt is that, in a developed 
 industrial society, it is expedient to let the rate be fixed by 
 contract between the lender and the borrower, the law inter- 
 fering only in case of fraud. 
 
 Bentham's main significance does not belong to the economic 
 field. But, on the one hand, what is known as Benthamism 
 was undoubtedly, as Comte has said, 3 a derivative from poli- 
 tical economy, and in particular from the system of natural 
 
 political economy at Oxford, with biographical preface and a careful 
 verification of all Smith's quotations and references, 1869 (26. ed., l8So) ; 
 and by J. S. Nicholson, professor at Edinburgh, with notes referring to 
 sources of further information on the various topics handled in the text, 
 1884. There is a careful Abridgment by W. P. Emerton (2d ed., 1881), 
 founded on the earlier Analysis of Jeremiah Joyce (3d ed., 1821). 
 
 1 Parl. Hist., vol. xxxiii. p. 778. 
 
 2 It must be remembered, however, that the same doctrine had been 
 supported with no less ability as early as 1769 by Turgot in his Mtmoirt 
 tur lea prSts d' argent. 
 
 Lettret d' A. Comte d /. S. Mill, p. 4.
 
 SYSTEM OF NATURAL LIBERTY. in 
 
 liberty ; and, on the other, it promoted the temporary ascen- 
 dency of that system by extending to the whole of social and 
 moral theory the use of the principle of individual interest 
 and the method of deduction from that interest. This 
 alliance between political economy and the scheme of Beutham 
 is seen in the personal group of thinkers which formed itself 
 round him, thinkers most inaptly characterised by J. S. Mill 
 as " profound," but certainly possessed of much acuteness and 
 logical power, and tending, though vaguely, towards a positive 
 sociology, which, from their want of genuinely scientific culture 
 and their absolute modes of thought, they were incapable of 
 founding. 
 
 Lord Lauderdale, in his Inquiry into the Nature and Origin 
 of Public Wealth (1804), a book still worth reading, pointed 
 out curtain real weaknesses in Smith's account of value ami 
 the measure of value, and of the productivity of labour, and 
 threw additional light on several subjects, such as the true 
 mode of estimating the national income, and the reaction of 
 the distribution of wealth on its production. 
 
 Smith stood just at the beginning of a great industrial 
 revolution. The world of production and commerce in which 
 he lived was still, as Cliffe Leslie has said, a " very early " 
 and comparatively narrow one ; " the only steam-engine he 
 refers to is Newcomen's," and the cotton trade is mentioned 
 by him only once, and that incidentally. " Between the years \ 
 1760 and 1770," says Mr. Marshall, "Koebuck began to smelt J 
 iron by coal, Brindley connected the rising seats of manufao- / 
 vUres with the sea by canals, Wedgwood discovered the art of I 
 making earthenware cheaply and well, Hargreaves invented / 
 the spinning-jenny, Arkwright utilised Wyatt's and High's ( 
 inventions for spinning by rollers and applied water-power to \ 
 move them, and Watt invented the condensing steam-engine. J 
 Crompton's mule and Cartwright's power-loom came shortly/ 
 after." Out of this rapid evolution followed a vast expan- 
 sion of industry, but also many deplorable results, which, had 
 Smith been able to foresee them, might have made him a IBM 
 
 -
 
 H2 POLITICAL ECONOMY. 
 
 enthusiastic believer in the benefits to be wrought by the 
 mere liberation of effort, and a less vehement denouncer of 
 old institutions which in their day had given a partial pro- 
 tection to labour. Alongside of these evils of the new indus- 
 trial system, Socialism appeared as the alike inevitable and 
 indispensable expression of the protest of the working classes 
 and the aspiration after a better order of things ; and what we 
 now call " the social question," that inexorable problem of 
 modern life, rose into the place which it has ever since mnin- 
 tained. This question was first effectually brought before the 
 English mind by Thomas Robert Malthus (1766-1834), not, 
 however, under the impulse of revolutionary sympathies, but 
 in the interests of a conservative policy. 
 
 The first edition of the work which achieved this result 
 appeared anonymously in 1798 under the title An Essay 
 on the Principle of Population, as it affects the future im- 
 provement of Society, with remarks on the speculations oj 
 Mr. Godwin, M. Condorcet, and other writers. This book arose 
 out of certain private controversies of its author with his 
 father, Daniel Malthus, who had been a friend of Rousseau, 
 and was an ardent believer in the doctrine of human progress 
 as preached by Condorcet and other French thinkers and 
 by their English disciples. The most distinguished of the 
 latter was William Godwin, whose Enquiry concerning Political 
 Justice had been published in 1793. The views put forward 
 in that work had been restated by its author in the Enquirer 
 (1797), and it was on the essay in this volume entitled 
 " Avarice and Profusion " that the discussion between the 
 father and the son arose, " the general question of the future 
 improvement of society " being thus raised between them 
 the elder Malthus defending the doctrines of Godwin, and the 
 younger assailing them. The latter " sat down with an in- 
 tention of merely stating his thoughts on paper in a clearer 
 manner than he thought he could do in conversation/' and 
 the Essay on population was the result 
 
 The social scheme of Godwin was founded on the idea that
 
 SYSTEM OF NATURAL LIBERTY. 113 
 
 the evils of society arise from the vices of human institutions. 
 There is more than enough of wealth available for all, but it 
 is not equally shared : one has too much, another has little or 
 nothing. Let this wealth, as well as the labour of producing 
 it, be equally divided ; then every one will by moderate 
 exertion obtain sufficient for plain living ; there will be abun- 
 dant leisure, which will be spent in intellectual and moral 
 self-improvement; reason will determine human actions; 
 government and every kind of force will be unnecessary ; and, 
 in time, by the peaceful influence of truth, perfection and 
 happiness will be established on earth. To these glowing 
 anticipations Malthus opposes the facts of the necessity of 
 food and the tendency of mankind to increase up to the limit 
 of the available supply of it. In a state of universal physical 
 wellbeing, this tendency, which in real life is held in check 
 by the difficulty of procuring a subsistence, would operate 
 without restraint. Scarcity would follow the increase of num- 
 bers ; the leisure would soon cease to exist ; the old struggle 
 for life would recommence ; and inequality would reign once 
 more. If Godwin's ideal system, therefore, could be estab- 
 lished, the single force of the principle of population, Malthus 
 maintained, would suffice to break it down. 
 
 It will be seen that the essay was written with a polemical 
 object ; it was an occasional pamphlet directed against the 
 Utopias of the day, not at all a systematic treatise on popula- 
 tion suggested by a purely scientific interest. As a polemic, it 
 was decidedly successful ; it was no difficult task to dispose 
 of the scheme of equality propounded by Godwin. Already, 
 in 1761, Dr. Kobert Wallace had published a work (which 
 was used by Malthus in the composition of his essay) entitled 
 Various Prospects of Mankind, Nature, and Providence, in 
 which, after speaking of a community of goods as a remedy 
 for the ills of society, he confessed that he saw one fatal 
 objection to such a social organisation, namely, " the excessive 
 population that would ensue." With Condorcet's extrava- 
 gances, too, Malthus easily dealt. That eminent man, amidst
 
 114 POLITICAL ECONOMY. 
 
 the tempest of the French Revolution, had written, whilst in 
 hiding from his enemies, his Esquisse d'un tableau historique 
 de Tesprit humain. The general conception of this book 
 makes its appearance an epoch in the history of the rise of 
 sociology. In it, if we except some partial sketches by Turgot, 1 
 is for the first time explained the idea of a theory of social 
 dynamics founded on history ; and its author is on this ground 
 recognised by Comte as his principal immediate predecessor, 
 But in the execution of his great project Condorcet failed. 
 His negative metaphysics prevent his justly appreciating the 
 past, and he indulges, at the close of his work, in vague 
 hypotheses respecting the perfectibility of our race, and in 
 irrational expectations of an indefinite extension of the dura- 
 tion of human life. Malthus seems to have little sense of the 
 nobleness of Condorcet's attitude, and no appreciation of the 
 grandeur of his leading idea. But of his chimerical hopes he 
 is able to make short work ; his good sense, if somewhat 
 limited and prosaic, is at least effectual in detecting and 
 exposing utopias. 
 
 The project of a formal and detailed treatise on population 
 was an after-thought of Malthus. The essay in which he had 
 studied a hypothetic future led him to examine the effects 
 of the principle he had put forward on the past and present 
 state of society ; and he undertook an historical examination 
 of these effects, and sought to draw such inferences in 
 relation to the actual state of things as experience seemed to 
 warrant. The consequence of this was such a change in the 
 nature and composition of the essay as made it, in his own 
 language, "a new work." The book, so altered, appeared in 
 1803 under the title, An Essay on the Principle of Popu- 
 lation, or a View of its Past and Present Effects on Human 
 Happiness ; with an Enquiry into our prospects respecting the 
 future removal or mitigation of the evils which it occasions. 
 
 1 In his discourse at the Sorbonne (1750), Sur Its progrtt tuccessif t dt 
 humain.
 
 SYSTEM OF NATURAL LIBERTY. 115 
 
 In the original form of the essay he had spoken of no 
 checks to population but those which came under the head 
 either of vice or of misery. He now introduces the new 
 element of the preventive check supplied by what he calls 
 " moral restraint," and is thus enabled to " soften some of 
 the harshest conclusions " at which he had before arrived. 
 The treatise passed through six editions l in his lifetime, and 
 in all of them he introduced various additions and correc- 
 tions. That of 1817 is the last he fully revised, and presents 
 the text substantially as it has since been reprinted. 
 
 Notwithstanding the great development which he gave to 
 his work, and the almost unprecedented amount of discussion 
 to which it gave rise, it remains a matter of some difficulty to 
 discover what solid contribution he has made to our know- 
 ledge, nor is it easy to ascertain precisely what practical 
 precepts, not already familiar, he founded on his theoretic 
 principles. This twofold vagueness is well brought out in 
 his celebrated correspondence with Senior, in the course of 
 which it seems to be made apparent that his doctrine is new 
 not so much in its essence as in the phraseology in which it is 
 couched. He himself tells us that when, after the publication 
 of the original essay, the main argument of which he had 
 deduced from Hume, Wallace, Smith, and Price, he began to 
 inquire more closely into the subject, he found that "much 
 more had been done " upon it " than he had been aware of." 
 It had " been treated in such a manner by some of the French 
 economists, occasionally by Montesquieu, and, among our own 
 writers, by Dr. Franklin, Sir James Steuart, Mr. Arthur Young, 
 and Mr. Townsend, as to create a natural surprise that it 
 had not excited more of the public attention." " Much, 
 however," he thought, " remained yet to be done. The 
 comparison between the increase of population and food had 
 not, perhaps, been stated with sufficient force and precision," 
 and " few inquiries had been made into the various modes by 
 
 1 Their dates are 1798, 1803, 1806, 1807, 1817, 18261
 
 u6 POLITICAL ECONOMY. 
 
 which the level " between population and the means of 
 subsistence "is effected." The first desideratum here men- 
 tioned the want, namely, of an accurate statement of the 
 relation between the increase of population and food Malthus 
 doubtless supposed to have been supplied by the celebrated 
 proposition that " population increases in a geometrical, food 
 in an arithmetical ratio." This proposition, however, has been 
 conclusively shown to be erroneous, there being no such dif- 
 ference of law between the increase of man and that of the 
 organic beings which form his food. J. S. Mill is indignant 
 with those who criticise Malthus's formula, which he ground- 
 lessly describes as a mere " passing remark," because, as he 
 thinks, though erroneous, it sufficiently suggests what is true j 
 but it is surely important to detect unreal science, and to 
 test strictly the foundations of beliefs. When the formula 
 which we have cited is not used, other somewhat nebulous 
 expressions are frequently employed, as, for example, that 
 " population has a tendency to increase faster than food," a 
 sentence in which both are treated as if they were spontaneous 
 growths, and which, on account of the ambiguity of the word 
 "tendency," is admittedly consistent with the fact asserted 
 by Senior, that food tends to increase faster than population. 
 It must always have been perfectly well known that popula- 
 tion will probably (though not necessarily) increase with every 
 augmentation of the supply of subsistence, and may, in some 
 instances, inconveniently press upon, or even for a certain time 
 exceed, the number properly corresponding to that supply. 
 iJor could it ever have been doubted that war, disease, poverty 
 the last two often the consequences of vice are causes 
 which keep population down. In fact, the way in which 
 abundance, increase of numbers, want, increase of deaths, 
 succeed each other in the natural economy, when reason does 
 not intervene, had been fully explained by the Rev. Joseph 
 Townsend in his Dissertation on the Poor Laws (1786), 
 which was known to Malthus. Again, it is surely plain 
 enough that the apprehension by individuals of the evils of
 
 SYSTEM OF NATURAL LIBERTY. 117 
 
 poverty, or a sense of duty to their possible offspring, may 
 retard the increase of population, and has in all civilised 
 communities operated to a certain extent in that way. It is 
 only when such obvious truths are clothed in the technical 
 terminology of "positive" and "preventive checks" that 
 they appear novel and profound ; and yet they appear to con- 
 tain the whole message of Malthus to mankind. The labo- 
 rious apparatus of historical and statistical facts respecting 
 the several countries of the globe, adduced in the altered 
 form of the essay, though it contains a good deal that is 
 curious and interesting, establishes no general result which 
 was not previously well known, and is accordingly ignored 
 by James Mill and others, who rest the theory on facts patent 
 to universal observation. Indeed, as we have seen, the entire 
 historical inquiry was an after-thought of Malthus, who, 
 before entering on it, had already announced his fundamental 
 principle. 
 
 It would seem, then, that 'what has been ambitiously called 
 Malthus's theory of population, instead of being a great dis- 
 covery, as some have represented it, or a poisonous novelty, 
 as others have considered it, is no more than a formal enun- 
 ciation of obvious, though sometimes neglected, facts. The 
 pretentious language often applied to it by economists is 
 objectionable, as being apt to make us forget that the whole 
 subject with which it deals is as yet very imperfectly under- j 
 stood the causes which modify the force of the sexual 
 instinct, and those which lead to variations in fecundity, still t 
 awaiting a complete investigation. 1 
 
 It is the law of diminishing returns from land (of which 
 more will be said hereafter), involving as it does though 
 only hypothetical^ the prospect of a continuously increasing 
 difficulty in obtaining the necessary sustenance for all the 
 members of a society, that gives the principal importance to 
 population as an economic factor. It is, in fact, the conflu- 
 
 1 On this subject see the speculations of Mr. Herbert Spencer in nil 
 Principles of Biology, Part VI. chaps, xii. xiii
 
 ii8 POLITICAL ECONOMY. 
 
 ence of the Malthusian ideas with the theories of Ricardo, 
 especially with the corollaries which the latter, as we shall 
 see, deduced from the doctrine of rent (though these were 
 not accepted by Malthus), that has led to the introduction 
 of population as an element in the discussion of so many 
 economic questions in recent times. 
 
 Malthus had undoubtedly the great merit of having called 
 public attention in a striking and impressive way to a subject 
 which had neither theoretically nor practically been sufficiently 
 considered. But he and his followers appear to have greatly 
 exaggerated both the magnitude and the urgency of the 
 dangers to which they pointed. 1 In their conceptions a single 
 social imperfection assumed such portentous dimensions that 
 it seemed to overcloud the whole heaven and threaten the 
 world with ruin. This doubtless arose from his having at 
 first omitted altogether from his view of the question the 
 great counteracting agency of moral restraint. Because a 
 force exists, capable, if unchecked, of producing certain 
 results, it does not follow that those results are imminent or 
 even possible in the sphere of experience. A body thrown 
 from the hand would, under the single impulse of projection, 
 move for ever in a straight line ; but it would not be reason- 
 able to take special action for the prevention of this result, 
 ignoring the fact that it will be sufficiently counteracted by 
 the other forces which will come into play. And such other 
 forces exist in the case we are considering. If the inherent 
 energy of the principle of population (supposed everywhere 
 the same) is measured by the rate at which numbers increase 
 under the most favourable circumstances, surely the force of 
 less favourable circumstances, acting through prudential or 
 altruistic motives, is measured by the great difference between 
 this maximum rate and those which are observed to prevail in 
 most European countries. Under a rational system of insti- 
 
 i Malthus himself said : " It is probable that, having found the bow 
 bent too much one way, I was induced to bend it too much the other in 
 order to make it straight."
 
 SYSTEM OF NATURAL LIBERTY. iig 
 
 tutions, the adaptation of numbers to the means available for 
 their support is effected by the felt or anticipated pressure 
 of circumstances and the fear of social degradation, within a 
 tolerable degree of approximation to what is desirable. To 
 bring the result nearer to the just standard, a higher measure 
 of popular enlightenment and more serious habits of moral 
 reflection ought indeed to be encouraged. But it is the duty 
 of the individual to his actual or possible offspring, and not 
 any vague notions as to the pressure of the national population 
 on subsistence, that will be adequate to influence conduct 
 
 The only obligation on which Malthus insists is that of 
 abstinence from marriage so long as the necessary provision 
 for a family has not been acquired or cannot be reasonably 
 anticipated. The idea of post-nuptial continence, which has 
 since been put forward by J. S. Mill and others, is foreign to 
 his view. He even suggests that an allowance might be made 
 from the public funds for every child in a family beyond the 
 number of six, on the ground that, when a man marries, he 
 cannot tell how many children he shall have, and that the 
 relief from an unlooked-for distress afforded by such a grant 
 would not operate as an encouragement to marriage. The 
 duty of economic prudence in entering on the married state is 
 ' plain ; but in the case of working men the idea of a secured 
 provision must not be unduly pressed, and it must also be 
 remembered that the proper age for marriage in any class de- 
 pends on the duration of life in that class. Too early mar- 
 riages, however, are certainly not unfrequent, and they are 
 attended with other than material evils, so that possibly even 
 legal measures might with advantage be resorted to for pre- 
 venting them in all ranks by somewhat postponing the age 
 of full civil competence. On the other hand, however, the 
 Malthusians often speak too lightly of involuntary celibacy, 
 not recognising sufficiently that it is a deplorable necessity. 
 They do not adequately estimate the value of domestic life as 
 a school of the civic virtues, and the social importance (even 
 apart from personal happiness) of the mutual affective educa-
 
 120 POLITICAL ECONOMY. 
 
 tion arising from the relations of the sexes in a well-constituted 
 union. 
 
 Malthus further infers from his principles that states should 
 not artificially stimulate population, and in particular that 
 poor-laws should not he estahlished, and, where they exist, 
 should be abolished. The first part of this proposition cannot 
 be accepted as applying to every social phase, for it is evident 
 that in a case like that of ancient Rome, where continuous 
 conquest was the chief occupation of the national activity, or 
 in other periods when protracted wars threatened the inde- 
 pendence or security of nations, statesmen might wisely take 
 special action of the kind deprecated by Malthus. In relation 
 to modern industrial communities he is doubtless in general 
 right, though the promotion of immigration in new states is 
 similar in principle to the encouragement of population. The 
 question of poor-laws involves other considerations. The 
 English system of his day was, indeed, a vicious one, though 
 acting in some degree as a corrective of other evils in our 
 social institutions ; and efforts for its amendment tended to the 
 public good. But the proposal of abolition is one from which 
 statesmen have recoiled, and which general opinion has never 
 adopted. It is difficult to believe that the present system will 
 be permanent ; it is too mechanical and undiscriminating ; on 
 some sides too lax, it is often unduly rigorous in the treatment 
 of the worthy poor who are the victims of misfortune ; and, 
 in its ordinary modes of dealing with the young, it is open to 
 grave objection. But it would certainly be rash to abolish it ; 
 it is one of several institutions which will more wisely be 
 retained until the whole subject of the life of the working 
 classes has been more thoroughly, and also more sympatheti- 
 cally, studied. The position of Malthus with respect to the 
 relief of destitution is subject to this general criticism, that, 
 first proving too much, he then shrinks from the consequences 
 of his own logic. It follows from his arguments, and is indeed 
 explicitly stated in a celebrated passage of his original essay, 
 that he who has brought children into the world without
 
 SYSTEM OF NATURAL LIBERTY. 121 
 
 adequate provision for them should be left to the punishment 
 of Nature, that " it is a miserable ambition to wish to snatch 
 the rod from her hand," and to defeat the action of her laws, 
 which are the laws of God, and which " have, doomed him 
 and his family to suffer." Though his theory leads him to 
 this conclusion, he could not, as a Christian clergyman, main- 
 tain the doctrine that, seeing our brother in need, we ought 
 to shut up our bowels of compassion from him ; and thus he 
 is involved in the radical inconsequence of admitting the law- 
 fulness, if not the duty, of relieving distress in cases where he 
 yet must regard the act as doing mischief to society. Buckle, 
 who was imposed on by more than one of the exaggerations 
 of the economists, accepts the logical inference which Malthua 
 evaded. He alleges that the only ground on which we are 
 justified in relieving destitution is the essentially self-regard- 
 ing one, that by remaining deaf to the appeal of the sufferer we 
 should probably blunt the edge of our own finer sensibilities. 
 
 It can scarcely be doubted that the favour which was at 
 once accorded to the views of Malthus in certain circles was 
 due in part to an impression, very welcome to the higher ranks 
 of society, that they tended to relieve the rich and powerful 
 of responsibility for the condition of the working classes, by 
 showing that the latter had chiefly themselves to blame, and 
 not either the negligence of their superiors or the institutions 
 of the country. The application of his doctrines, too, made 
 by some of his successors had the effect of discouraging all 
 active effort for social improvement. Thus Chalmers " reviews 
 seriatim and gravely sets aside all the schemes usually pro- 
 posed for the amelioration of the economic condition of the 
 people" on the ground that an increase of comfort will lead 
 to an increase of numbers, and so the last state of things will 
 be worse than the first. 
 
 Malthus has in more recent times derived a certain degree 
 of reflected lustre from the rise and wide acceptance of the 
 Darwinian hypothesis. Its author himself, in tracing its 
 filiation, points to the phrase " struggle for existence " used by
 
 121 POLITICAL ECONOMY. 
 
 Malthus in relation to the social competition. Darwin believe* 
 that man has advanced to his present high condition through 
 such a struggle, consequent on his rapid multiplication. He 
 regards, it is true, the agency of this cause for the improve- 
 ment of our race as largely superseded by moral influences in 
 the more advanced social stages. Yet he considers it, even 
 in these stages, of so much importance towards that end, 
 that notwithstanding the individual suffering arising from 
 the struggle for life, he deprecates any great reduction in 
 the natural, by which he seems to mean the ordinary, rate of 
 increase. 
 
 There has been of late exhibited in some quarters a ten- 
 dency to apply the doctrine of the "survival of the fittest" 
 to human society in such a way as to intensify the harsher 
 features of Maltlms's exposition by encouraging the idea that 
 whatever cannot sustain itself is fated, and must be allowed, 
 to disappear. But what is repellent in this conception is 
 removed by a wider view of the influence of Humanity, aa 
 a disposing power, alike on vital and on social conditions. As 
 in the general animal domain the supremacy of man introduces 
 a new force consciously controlling and ultimately determining 
 the destinies of the subordinate species, so human providence 
 in the social sphere can intervene for the protection of the 
 weak, modifying by its deliberate action what would otherwise 
 be a mere contest of comparative strengths inspired by selfish 
 instincts. 1 
 
 David Ricardo (1772-1823) is essentially of the school of 
 Smith, whose doctrines he in the main accepts, whilst he 
 seeks to develop them, and to correct them in certain par- 
 
 1 The Essay on Population and the Inquiry into the Nature and Pro- 
 gressof Rent (i8i5), to be hereafter mentioned, are by far the most im- 
 portant contributions of Malthus to the science. He was also author of 
 Principles of Political Economy (1820), Definitions in Political Economy 
 (1827), and other minor pieces. On these less important writings of 
 Malthus, and on his personal history, see Malthus and his Work (i885), 
 by James Bonar, who has also edited (1888) Ricardo's Letters to Malthus,
 
 SYSTEM OF NATURAL LIBERTY. 123 
 
 ticulars. But his mode of treatment is very different from 
 Smith's. The latter aims at keeping close to the realities of _, 
 life as he finds them, at representing the conditions and ^ 
 relations of men and things as they are ; and, as Hume re- 
 marked on first reading his great work, his principles are 
 everywhere exemplified and illustrated with curious facts. 
 Quite unlike this is the way in which Ricardo proceeds. He \U> 
 moves in a world of abstractions. He sets out from more or 
 less arbitrary assumptions, reasons deductively from these, and 
 announces his conclusions as true, without allowing for the 
 partial unreality of the conditions assumed or confronting 
 his results with experience. When he seeks to illustrate his 
 doctrines, it is from hypothetical cases, his favourite device 
 being that of imagining two contracting savages, and consider- 
 ing how they would be likely to act. He does not explain 
 probably he had not systematically examined, perhaps was 
 not competent to examine the appropriate method of poli- 
 tical economy; and the theoretic defence of his mode of 
 proceeding was left to be elaborated by J. S. Mill and Cairnes. 
 But his example had a great effect in determining the practice 
 of his successors. There was something highly attractive to 
 the ambitious theorist in the sweeping march of logic which 
 seemed in Ricardo's hands to emulate the certainty and com- 
 prehensiveness of mathematical proof, and in the portable and 
 pregnant formulae which were so convenient in argument, and 
 gave a prompt, if often a more apparent than real, solution of 
 difficult problems. Whatever there was of false or narrow 
 in the fundamental positions of Smith had been in a great 
 degree corrected by his practical sense and strong instinct for 
 reality, but was brought out in its full dimensions and even 
 exaggerated in the abstract theorems of Ricardo and his 
 followers. 
 
 The dangers inherent in his method were aggravated by the 
 extreme looseness of his phraseology. Senior pronounces him 
 "the most incorrect writer who ever attained philosophical 
 eminence." His most ardent admirers find him fluctuating
 
 124 POLITICAL ECONOMY. 
 
 and uncertain in the use of words, and generally trace his 
 errors to a confusion between the ordinary employment of a 
 term and some special application of it which he has himself 
 devised. 
 
 The most complete exposition of his system is to be found 
 in his Principles of Political Economy and Taxation (1817). 
 This work is not a complete treatise on the science, but a 
 rather loosely connected series of disquisitions on value and 
 price, rent, wages and profits, taxes, trade, money and banking. 
 Yet, though the connection of the parts is loose, the same 
 fundamental ideas recur continually, and determine the 
 character of the entire scheme. 
 
 The principal problem to which he addresses himself in this 
 work is that of distribution, that is to say, the proportions 
 of the whole produce of the country which will be allotted to 
 the proprietor of land, to the capitalist, and to the labourer. 
 And it is important to observe that it is especially the varia- 
 tions in their respective portions which take place in the pro- 
 gress of society that he professes to study, one of the most 
 unhistorical of writers thus indicating a sense of the necessity 
 of a doctrine of economic dynamics a doctrine which, from 
 his point of view, it was impossible to supply. 
 
 The principle which he puts first in order, and which is 
 indeed the key to the whole, is this that the exchange_value 
 of any commodity the supply of which can be increased at will 
 is regulated, under a regime of free competition, by the labour 
 necessary for its production. Similar propositions are to be 
 found in the Wealth of Nations, not to speak of earlier English 
 writings. Smith had said that, " in the early and rude state 
 of society which precedes both the accumulation of stock and 
 the appropriation of land, the proportion between the quan- 
 tities of labour necessary for acquiring different objects seems 
 to be the only circumstance which can afford any rule for ex- 
 changing them with one another." But he wavers in his con- 
 ception, and present? as the measure of value sometimes the 
 quantity of labour necessary for the production of the object,
 
 SYSTEM OF NATURAL LIBERTY. 125 
 
 sometimes the quantity of labour which the object would com- 
 mand in the market, which would be identical only for a given 
 time and place. The theorem requires correction for a deve- 
 loped social system by the introduction of the consideration 
 of capital, and takes the form in which it is elsewhere quoted 
 from Malthus by Ricardo, that the real price of a commodity 
 " depends on the greater or less quantity of capital and labour 
 which must be employed to produce it." (The expression 
 " quantity of capital " is lax, the element of time being omitted, 
 but the meaning is obvious.) Ricardo, however, constantly 
 takes no notice of capital, mentioning labour alone in his state- 
 ment of this principle, and seeks to justify his practice by 
 treating capital as "accumulated labour;" but this artificial 
 way of viewing the facts obscures the nature of the co-opera- 
 tion of capital in production, and by keeping the necessity of 
 this co-operation out of sight has encouraged some socialistic 
 errors. Ricardo does not sufficiently distinguish between the 
 cause or determinant and the measure of value ; nor does he 
 carry back the principle of cost of production as regulator of 
 value to its foundation in the effect of that cost on the limita- 
 tion of supply. It is the " natural price " of a commodity that 
 is fixed by the theorem we have stated ; the market price will 
 be subject to accidental and temporary variations from this 
 standard, depending on changes in demand and supply ; but 
 the price will, permanently and in the long run, depend on 
 cost of production defined as above. On this basis Ricardo 
 goes on to explain the laws according to which the produce of 
 the land and the labour of the country is distributed amongst 
 the several classes which take part in production. 
 
 The theory of rent, with which he begins, though commonly 
 associated with his name, and though it certainly forms the 
 most vital part of his general economic scheme, was not really 
 his, nor did he lay claim to it. He distinctly states in the 
 preface to the Principles, that "in 1815 Mr Malthus, in his 
 Inquiry into the Nature and Progress of Rent, and a fellow of 
 University College, Oxford, in his Essay on the Application of
 
 126 POLITICAL ECONOMY. 
 
 Capital to Land, presented to the world, nearly at the sam 
 moment, the true doctrine of rent." The second writer here 
 referred to was Sir Edward West, afterwards a judgvj of the 
 supreme court of Bombay. Still earlier than the time of 
 Malthus and "West, as M'Culloch has pointed out, this doctrine 
 had been clearly conceived and fully stated by Dr. James 
 Anderson in his Enquiry into the Nature of Corn-Laws, pub- 
 lished at Edinburgh in 1777.* That this tract was unknown 
 to Malthus and West we have every reason to believe ; but 
 the theory is certainly as distinctly enunciated and as satis- 
 factorily supported in it as in their treatises ; and the whole 
 way in which it is put forward by Anderson strikingly re- 
 sembles the form in which it is presented by Eicardo. 
 
 The essence of the theory is that rent, being the price paid 
 by the cultivator to the owner of land for the use of its 
 productive powers, is equal to the excess of the price of the 
 produce of the land over the cost of produr.tion on that land. 
 With the increase of population, and therefore of demand for 
 food, inferior soils will be taken into cultivation ; and the 
 price of the entire supply necessary for the community will be 
 regulated by the cost of production of that portion of the 
 supply which is produced at the greatest expense. But for 
 the land which will barely repay the cost of cultivation no 
 rent will be paid. Hence the rent of any quality of land will 
 be equal to the difference between the cost of production on 
 that land and the cost of production of that produce which is 
 raised at the greatest expense. 
 
 / The doctrine is perhaps most easily apprehended by means 
 of the supposition here made of the coexistence in a country 
 of a series of soils of different degrees of fertility which are 
 successively taken into cultivation as population increases. 
 But it would be an error to believe, though Ricardo some- 
 times seems to imply it, that such difference is a necessary 
 
 1 Anderson's account of the origin of rent is reprinted in the Select 
 Collection of Scarce and Valuable Economical Tracts, edited or Lord 
 Over-stone by J. R. M'Culloch, 1859.
 
 SYSTEM OF NATURAL LIBERTY. 127 
 
 condition of the existence of rent. If all the land of a 
 country were of equal fertility, still if it were appropriated, 
 and if the price of the produce were more than an equivalent 
 for the labour and capital applied to its production, rent would 
 be paid. This imaginary case, however, after using it to clear \ 
 our conceptions, we may for the future leave out of account. 
 
 The price of produce being, as we have said, regulated by 
 the cost of production of that which pays no rent, it is evident 
 that " corn is not high, because a rent is paid, but a rent is 
 paid because corn is high," and that " no reduction would take 
 place in the price of corn although landlords should forego the 
 whole of their rent." Rent is, in fact, no determining element 
 of price; it is paid, indeed, out of the price, but the price 
 would be the same if no rent were paid, and the whole price 
 were retained by the cultivator. 
 
 It has often been doubted whether or not Adam Smith 
 held this theory of rent. Sometimes he uses language which 
 seems to imply it, and states propositions which, if developed, 
 would infallibly lead to it. Thus he says, in a passage 
 already quoted, " Such parts only of the produce of land can 
 commonly be brought to market of which the ordinary price 
 is sufficient to replace the stock which must be employed in 
 bringing them thither, together with its ordinary profits. If 
 the ordinary price is more than this, the surplus part of it 
 will naturally go to the rent of land. If it is not more, though 
 th > commodity can be brought to market, it can afford no rent 
 to the landlord. Whether the price is or is not more depends 
 on the demand." Again, in Smith's application of these con- 
 siderations to mines, "the whole principle of rent," Ricardo 
 tells us, " is admirably and perspicuously explained." But he 
 had formed the opinion that there is in fact no land which 
 does not afford a rent to the landlord ; and, strangely, he 
 seems not to have seen that this appearance might arise from 
 the aggregation into an economic whole of parcels of land 
 which can and others which cannot pay rent The truth, 
 indeed, is, that the fact, if it were a fact, that all the land
 
 128 POLITICAL ECONOMY. 
 
 in a country pays rent would be irrelevant as an argument 
 against the Andersonian theory, for it is the same thing in 
 substance if there be any capital employed on land already 
 cultivated which yields a return no more than equal to ordi- 
 nary profits. Such last-employed capital cannot afford rent 
 at the existing rate of profit, unless the price of produce 
 should rise. 
 
 The belief which some have entertained that Smith, notwith- 
 standing some vague or inaccurate expressions, really held the 
 Andersonian doctrine, can scarcely be maintained when we 
 remember that Hume, writing to him after having read for 
 the first time the Wealth of Nations, whilst expressing general 
 agreement with his opinions, said (apparently with reference 
 to Bk. I. chap, vii.), "I cannot think that the rent of farms 
 makes any part of the price of the produce, but that the price 
 is determined altogether by the quantity and the demand." 
 It is further noteworthy that a statement of the theory of 
 rent is given in the same volume, published in 1777, which 
 contains Anderson's polemic against Smith's objections to a 
 bounty on the exportation of corn ; this volume can hardly 
 have escaped Smith's notice, yet neither. by its contents nor 
 by Hume's letter was he led to modify what he had said in 
 his first edition on the subject of rent. 
 
 ; It must be remembered that not merely the unequal fertilities 
 of different soils will determine differences of rent ; the more 
 ' or less advantageous situation of a farm in relation to markets, 
 and therefore to roads and railways, will have a similar effect. 
 Comparative lowness of the cost of transit will enable the pro- 
 duce to be brought to market at a smaller expense, and will 
 thus increase the surplus which constitutes rent. This con- 
 sideration is indicated by Eicardo, though he does not give it 
 prominence, but dwells mainly on the comparative produc- 
 tiveness of soils. 
 
 Kent is defined by Ricardo as the price paid for the use of 
 "the original and indestructible powers of the soil." He thus 
 differentiates rent, as he uses the term, from what is popularly
 
 SYSTEM OF NATURAL LIBERTY. 129 
 
 designated by the word ; and, when it is to be taken in hia 
 sense, it is often qualified as the "true" or "economic" rent. 
 Part of what is paid to the landlord is often really profit on 
 his expenditure in preparing the farm for cultivation by the 
 tenant. But it is to be borne in mind that wherever such 
 improvements are " amalgamated with the land," and " add 
 permanently to its productive powers," the return for them 
 follows the laws, not of profit, but of rent. Hence it becomes 
 difficult, if not. impossible, in practice to discriminate with 
 any degree of accuracy the amount received by the landlord 
 "for the use of the original powers of the soil" from the 
 amount received by him as remuneration for his improve- 
 ments or those made by his predecessors. These have raised 
 the farm, as an instrument for producing food, from one class 
 of productiveness to a higher, and the case is the same as 
 if nature had originally placed the land in question in that 
 higher class. 
 
 Smith had treated it as the peculiar privilege of agriculture, 
 as compared with other forms of production, that in it " nature 
 labours along with man," and therefore, whilst the workmen 
 in manufactures occasion the reproduction merely of the capital 
 which employs them with its owner's profits, the agricultural 
 labourer occasions the reproduction, not only of the employer's 
 capital with profits, but also of the rent of the landlord. This 
 last he viewed as the free gift of nature which remained " after 
 deducting or compensating everything which can be regarded 
 as the work of man." Kicardo justly observes in reply that 
 " there is not a manufacture which can be mentioned in which 
 nature does not give her assistance to man." He then goes 
 on to quote from Buchanan the remark that "the notion of 
 agriculture yielding a produce and a rent in consequence, 
 because nature concurs with industry in the process of culti- 
 vation, is a mere fancy. It is not from the produce, but from 
 the price at which the produce is sold, that the rent is derived ; 
 and this price is got, not because nature assists in the pro- 
 duction, but because it is the price which suits the consump- 
 
 I
 
 130 POLITICAL ECONOMY. 
 
 tion to the supply." l There is no gain to the society at large 
 from the rise of rent; it is advantageous to the landlords 
 alone, and their interests are thus permanently in opposition 
 to those of all other classes. The rise of rent may be retarded, 
 or prevented, or even temporarily changed to a fall, by agricul- 
 tural improvements, such as the introduction of new manures 
 or of machines or of a better organisation of labour (though 
 there is not so much room for this last as in other branches 
 of production), or the opening of new sources of supply in 
 foreign countries ; but the tendency to a rise is constant so 
 long as the population increases. 
 
 The great importance of the theory of rent in Ricardo's 
 system arises from the fact that he makes the general eco- 
 nomic condition of the society to depend altogether on the 
 position in which agricultural exploitation stands. This will 
 be seen from the following statement of his theory of wages 
 and profits. The produce of every expenditure of labour and 
 capital being divided between the labourer and the capitalist, 
 in proportion as one obtains more the other will neces- 
 sarily obtain less. The productiveness of labour being given, 
 nothing can diminish profit but a rise of wages, or increase 
 it but a fall of wages. "Now the price of labour, being the 
 same as its cost of production, is determined by the price of 
 the commodities necessary for the support of the labourer. 
 The price of such manufactured articles as he requires has a 
 constant tendency to fall, principally by reason of the pro- 
 gressive application of the division of labour to their produc- 
 tion. But the cost of his maintenance essentially depends, 
 not on the price of those articles, but on that of his food; 
 and, as the production of food will in the progress of society 
 
 1 Senior, however, has pointed out that Smith is partly right ; whilst 
 it is true that rent is demanded because the productive powers of nature 
 are limited, and increased population requires a less remunerative ex- 
 penditure in order to obtain the necessary supply ; on the other hand, 
 it is the power which most land possesses of producing the subsistence 
 of more persons than are required for its cultivation that supplies the 
 fund out of which rent can be paid.
 
 SYSTEM OF NATURAL LIBERTY. 131 
 
 and of population require the sacrifice of more and more 
 labour, its price will rise ; money wages will consequently 
 rise, and with the rise of wages profits will fall. Thus it is 
 to the necessary gradual descent to inferior soils, or less pro- 
 ductive expenditure on the same soil, that the decrease in 
 the rate of profit which has historically taken place is to he 
 attributed (Smith ascribed this decrease to the competition of 
 capitalists, though in one place, Book I. chap, ix., 1 he had 
 a glimpse of the Eicardian view). This gravitation of profits 
 towards a minimum is happily checked at times by improve- 
 ments of the machinery employed in the production of neces- 
 saries, and especially by such discoveries in agriculture and 
 other causes as reduce the cost of the prime necessary of the 
 labourer; but here again the tendency is constant. Whilst 
 the capitalist thus loses, the labourer does not gain ; his 
 increased money wages only enable him to pay the increased 
 price of his necessaries, of which he will have no greater 
 and probably a less share than he had before. In fact,_the 
 labourer can never for any considerable time earn more than 
 what is required to enable the class to subsist in such a 
 degree of comfort as custom ha& made indispensable to them, 
 and to perpetuate their race without either increase or dimi- 
 nution. That is the " natural " price of labour and if 
 the market rate temporarily rises above it population will 
 be stimulated, and the rate of wages will again fall. Thus 
 whilst rent has a constant tendency to rise and profit to fall, 
 the rise or fall of wages will depend on the rate of increase 
 of the working classes. For the improvement of their con- 
 dition Ricardo thus has to fall back on the Malthusian remedy, 
 of the effective application of which he does not, however, 
 seem to have much expectation. The securities against a 
 
 1 "A* the colony increases, the profits of stock gradually diminish. 
 When the most fertile and best situated lands have been all occupied, 
 lesa profit can be made by the cultivation of what is inferior both in soil 
 and situation, and less interest can be afforded for the stock which U M 
 employed." The view in question had been anticipated by Weak
 
 I3 POLITICAL ECONOMY. 
 
 superabundant population to which he points are the gradual 
 abolition of the poor-laws for their amendment would not 
 content him and the development amongst the working 
 classes of a taste for greater comforts and enjoyments. 
 
 It will he seen that the socialists have somewhat exagge- 
 rated in announcing, as Ricardo's " iron law " of wages, their 
 absolute identity with the amount necessary to sustain the 
 existence of the labourer and enable him to continue the race. 
 He recognises the influence of a "standard of living" as limit- 
 ing the increase of the numbers of the working classes, and 
 so keeping their wages above the lowest point. But he also 
 holds that, in long-settled countries, in the ordinary course of 
 human affairs, and in the absence of special efforts restricting 
 the growth of population, the condition of the labourer will 
 decline as surely, and from the same causes, as that of the 
 landlord will be improved. 
 
 If we are asked whether this doctrine of rent, and the con- 
 sequences which Bicardo deduced from it, are true, we must 
 answer that they are hypothetically true in the most advanced 
 industrial communities, and there only (though they have 
 been rashly applied to the cases of India and Ireland), but 
 that even in those communities neither safe inference nor 
 sound action can be built upon them. As we shall see here- 
 after, the value of most of the theorems of the classical eco- 
 nomics is a good deal attenuated by the habitual assumptions 
 that we are dealing with " economic men," actuated by one 
 principle only ; that custom, as against competition, has no 
 existence ; that there is no such thing as combination ; that 
 there is equality of contract between the parties to each trans- 
 action, and that there is a definite universal rate of profit and 
 wages in a community; this last postulate implying (i) that 
 the capital embarked in any undertaking will pass at once to 
 another in which larger profits are for the time to be made ; 
 (2) that a labourer, whatever his local ties of feeling, family, 
 habit, or other engagements, will transfer himself immediately 
 to aay place where, or employment in which, for the time,
 
 SYSTEM OF NATURAL LIBERTY. 133 
 
 larger wages are to be earned than those he had previously 
 obtained ; 1 and (3) that both capitalists and labourers have 
 * perfect knowledge of the condition and prospects of industry 
 throughout the country, both in their own and other occupa- 
 tions. But in Ricardo's speculations on rent and its conse- 
 quences there is still more of abstraction. The influence of 
 emigration, which has assumed vast dimensions since his time, 
 is left out of account, and the amount of land at the disposal 
 of a community is supposed limited to its own territory, whilst 
 contemporary Europe is in fact largely fed by the western 
 States of America. He did not adequately appreciate the 
 degree in which the augmented productiveness of labour, 
 whether from increased intelligence, improved organisation, 
 introduction of machinery, or more rapid and cheaper com- 
 munication, steadily keeps down the cost of production. To 
 these influences must be added those of legal reforms in 
 tenure, and fairer conditions in contracts, which operate in 
 the same direction. As a result of all these causes, the pres- 
 sure anticipated by Ricardo is not felt, and the cry is of the 
 landlords over falling rents, not of the consumer over rising 
 prices. The entire conditions are in fact so altered that 
 Professor Nicholson, no enemy to the " orthodox " economics, 
 when recently conducting an inquiry into the present state of 
 the agricultural question, 2 pronounced the so-called Ricardian 
 theory of rent "too abstract to be of practical utility." 
 
 A particular economic subject on which Ricardo has thrown 
 a useful light is the nature of the advantages derived from 
 foreign commerce, and the conditions under which such com- 
 merce can go on. Whilst preceding writers had represented 
 those benefits as consisting in affording a vent for surplus 
 produce, or enabling a portion of the national capital to re- 
 place itself with a profit, he pointed out that they consist 
 
 1 Adam Smith says : "It appears evidently from experience that man 
 is, of all sorts of luggage, the most difficult to be transported " ( Wealth 
 of Nations, Bk. I. chap. viii. ). 
 
 J Tenant's Gain not Landlord's Loss (1883), p. 83.
 
 134 POLITICAL ECONOMY. 
 
 " simply and solely in this, that it enables each nation t 
 obtain, with a given amount of labour and capital, a greater 
 quantity of all commodities taken together." This is no doubt 
 the point of view at which we should habitually place our- 
 selves ; though the other forms of expression employed by his 
 predecessors, including Adam Smith, are sometimes useful as 
 representing real considerations affecting national production, 
 and need not be absolutely disused. Ricardo proceeds to 
 show that what determines the purchase of any commodity 
 from a foreign country is not the circumstance that it can be 
 produced there with less labour and capital than at home. 
 If we have a greater positive advantage in the production of 
 some other article than in that of the commodity in question, 
 even though we have an advantage in producing the latter, 
 it may be our interest to devote ourselves to the production 
 of that in which we have the greatest advantage, and to im- 
 port that in producing which we should have a less, though a 
 real, advantage. It is, in short, not absolute cost of produc- 
 tion, but comparative cost, which determines the interchange. 
 This remark is just and interesting, though an undue import- 
 ance seems to be attributed to it by J. S. Mill and Cairnes, 
 the latter of whom magniloquently describes it as " sounding 
 the depths " of the problem of international dealings, though, 
 as we shall see hereafter, he modifies it by the introduction 
 of certain considerations respecting the conditions of domestic 
 production. 
 
 For the nation as a whole, according to Kicardo, it is not 
 _ the gross produce of the land and labour, as Smith seems to 
 assert, that is of importance, but the net income the excess, 
 that is, of this produce over the cost of production, or, in 
 other words, the amount of its rent and its profits ; for the 
 wages of labour, not essentially exceeding the maintenance 
 of the labourers, are by him considered only as a part of the 
 " necessary expenses of production." Hence it follows, as he 
 himself in a characteristic and often-quoted passage says, that, 
 " provided the net real income of the nation be the same, it
 
 SYSTEM OF NATURAL LIBERTY. 135 
 
 is of no importance whether it consists of ten or twelve 
 millions of inhabitants. If five millions of men could pro- 
 duce as much food and clothing as was necessary for ten 
 millions, food and clothing for five millions would be the net 
 revenue. Would it be of any advantage to the country that to 
 produce this same net revenue seven millions of men should 
 be required, that is to say, that seven millions should be 
 employed to produce food and clothing sufficient for twelve 
 millions? The food and clothing of five millions would be 
 still the net revenue. The employing a greater number of 
 men would enable us neither to add a man to our army and 
 navy nor to contribute one guinea more in taxes." Industry 
 is here viewed, just as by the mercantilists, in relation to the 
 military and political power of the state, not to the maintenance 
 and improvement of human beings, as its end and aim. The 
 labourer, as Held has remarked, is regarded not as a member 
 of society, but as a means to the ends of society, on whose 
 sustenance a part of the gross income must be expended, as 
 another part must be spent on the sustenance of horses. We 
 may well ask, as Sismondi did in a personal interview with 
 Kicardo, "What! is wealth then everything? are men abso- 
 lutely nothing ?" 
 
 On the whole what seems to us true of Ricardo is this, that, 
 whilst he had remarkable powers, they were not the powers 
 best fitted for sociological research. Nature intended him 
 rather for a mathematician of the second order than for a 
 social philosopher. Nor had he the due previous preparation 
 for social studies ; for we must decline to accept Bagehot's 
 idea that, though " in no high sense an educated man," he 
 had a specially apt training for such studies in his practice as 
 an eminently successful dealer in stocks. The same writer 
 justly notices the " anxious penetration with which he follows 
 out rarefied minutiae." But he wanted breadth of survey, a 
 comprehensive view of human nature and human life, and 
 the strong social sympathies which, as the greatest minds have 
 recognised, are a most valuable aid in this department of study.
 
 136 POLITICAL ECONOMY. 
 
 On a subject like that of money, where a few elementary pro- 
 positions into which no moral ingredient enters have alone 
 to be kept in view, he was well adapted to succeed ; but in 
 the larger social field he is at fault. He had great deductive 
 readiness and skill (though his logical accuracy, as Mr. Sidg- 
 wick remarks, has been a good deal exaggerated). But in 
 human affairs phenomena are so complex, and piinciples so 
 constantly limit or even compensate one another, that rapidity 
 and daring in deduction may be the greatest of dangers, if 
 they are divorced from a wide and balanced appreciation of 
 facts. Dialectic ability is, no doubt, a valuable gift, but the 
 first condition for success in social investigation is to see 
 things as they are. 
 
 A sort of Eicardo-mythus for some time existed in eco- 
 nomic circles. It cannot be doubted that the exaggerated 
 estimate of his merits arose in part from a sense of the support 
 his system gave to the manufacturers and other capitalists in 
 their growing antagonism to the old aristocracy of landowners. 
 The same tendency, as well as his affinity to their too abstract 
 and unhistorical modes of thought, and their eudaemonistic 
 doctrines, recommended him to the Benthamite group, and 
 to the so-called Philosophical Radicals generally. Brougham 
 said he seemed to have dropped from the skies a singular 
 avatar, it must be owned. His real services in connection 
 with questions of currency and banking naturally created a 
 prepossession in favour of his more general views. But, 
 apart from those special subjects, it does not appear that, 
 either in the form of solid theoretic teaching or of valuable 
 practical guidance, he has really done much for the world, 
 whilst he admittedly misled opinion on several important 
 questions. De Quincey's presentation of him as a great 
 revealer of truth is now seen to be an extravagance. J. S. 
 Mill and others speak of his "superior lights "as compared 
 with those of Adam Smith ; but his work, as a contribution 
 to our knowledge of human society, will not bear a moment'* 
 comparison with the Wealth of Nations.
 
 SYSTEM OF NATURAL LIBERTY. 137 
 
 It is interesting to observe that Malthus, though the com- 
 bination of his doctrine of population with the principles of 
 Ricardo composed the creed for some time professed by all the 
 " orthodox " economists, did not himself accept the Ricardian 
 scheme. He prophesied that " the main part of the structure 
 would not stand." " The theory," he says, " takes a partial 
 view of the subject, like the system of the French economists ; 
 and, like that system, after having drawn into its vortex a 
 great number of very clever men, it will be unable to support 
 itself against the testimony of obvious facts, and the weight 
 of those theories which, though less simple and captivating, 
 are more just, on account of their embracing more of the causes 
 which are in actual operation in all economical results." 
 
 We saw that the foundations of Smith's doctrine in general 
 philosophy were unsound, and the ethical character of his 
 scheme in consequence injuriously affected ; but his method, 
 consisting in a judicious combination of induction and deduc- 
 tion, we found (so far as the statical study of economic laws 
 is concerned) little open to objection. Mainly through the 
 influence of Ricardo, economic method was perverted. The 
 science was led into the mistaken course of turning its back 
 on observation, and seeking to evolve the laws of phenomena 
 out of a few hasty generalisations by a play of logic. The 
 principal vices which have been in recent times not unjustly 
 attributed to the members of the " orthodox " school were all 
 encouraged by his example, namely, (i) the viciously abstract 
 character of the conceptions with which they deal, (2) the 
 abusive preponderance of deduction in their processes of re- 
 starch, and (3) the too absolute way in which their conclu- 
 sions are conceived and enunciated. 
 
 The works of Ricardo have been collected in one volume, 
 with a biographical notice, by J. R. M'Culloch (I846). 1 
 
 1 A sketch of Ricardo's personal history, and an account of his writ- 
 ings on monetary questions, which could not conveniently be introduced 
 here, will be found under his name in the Encyclopaedia ritanniea t 9th 
 edition.
 
 138 POLITICAL ECONOMY. 
 
 After Malthus and Ricardo, the first of whom had fixed 
 public attention irresistibly on certain aspects of society, and 
 the second had led economic research into new, if questionable, 
 paths, came a number of minor writers who were mainly their 
 expositors and commentators, and whom, accordingly, the 
 Germans, with allusion to Greek mythical history, designate 
 as the Epigoni. By them the doctrines of Smith and hi 
 earliest successors were thrown into more systematic shape, 
 limited and guarded so as to be less open to criticism, couched 
 in a more accurate terminology, modified in subordinate par- 
 ticulars, or applied to the solution of the practical questions 
 of their day. 
 
 James Mill's Elements (1821) deserves special notice, as 
 exhibiting the system of Ricardo with thorough-going rigour, 
 and with a compactness of presentation, and a skill in the 
 disposition of materials, which give to it in some degree the 
 character of a work of art. The a priori political economy 
 is here reduced to its simplest expression. J. R. M'Cullouh 
 (1779-1864), author of a number of laborious statistical and" 
 other compilations, criticised current economic legislation in 
 the Edinburgh Review from the point of view of the Ricardian 
 doctrine, taking up substantially the same theoretic position 
 as was occupied at a somewhat later period by the Manchester 
 school. He is altogether without originality, aud never 
 exhibits any philosophic elevation or breadth. His confident 
 dogmatism is often repellent ; he admitted in his later years 
 that he had been too fond of novel opinions, and defended 
 them with more heat and pertinacity than they deserved. It 
 is noticeable that, though often spoken of in his own time 
 both by those who agreed with his views, and those, like 
 Sismondi, who differed from them, as one of the lights of 
 the reigning school, his name is now tacitly dropped in the 
 writings of the members of that school. Whatever may have 
 been his partial usefulness in vindicating the policy of free 
 trade, it is at least plain that for the needs of our social future 
 he has nothing to olfer. Nassau William Senior (1790-1864),
 
 SYSTEM OF NATURAL LIBERTY. 139 
 
 who was professor of political economy in the university of 
 Oxford, published, besides a number of separate lectures, a 
 treatise on the science, which first appeared as an article in 
 the Encyclopaedia Metropolitana. He is a writer of a high 
 order of merit. He made considerable contributions to the 
 elucidation of economic principles, specially studying exact- 
 ness in nomenclature and strict accuracy in deduction. His N 
 explanations on cost of production and the way in which it 
 affects price, on rent, on the difference between rate of wages / 
 and price of labour, on the relation between profit and wages j 
 (with special reference to Ricardo's theorem on this subject, 
 which he corrects by the substitution of proportional for / 
 absolute amount), and on the distribution of the precious 
 metals between different countries, are particularly valuable./- 
 His new term " abstinence," invented to express the conduct 
 for which interest is the remuneration, was useful, though 
 not quite appropriate, because negative in meaning. It is on 
 the theory of wages that Senior is least satisfactory. j^e_ 
 makes the average rate in a country (which, we must main- 
 tain, is not a real quantity, though the rate in a given employ- 
 ment and neighbourhood is) to be expressed by the fraction 
 of which the numerator is the amount of the wages fund (an 
 unascertainable and indeed, except as actual total of wages 
 paid, imaginary sum) and the denominator the number of the 
 working population ; and from this he proceeds to draw the 
 most important and far-reaching consequences, though the 
 equation on which he founds his inferences conveys at most 
 only an arithmetical fact, which would be true of every case 
 of a division amongst individuals, and contains no economic 
 element whatever. The phrase " wages fund" originated in 
 gome expressions of Adam Smith l used only for the purpose 
 of illustration, and never intended to be rigorously interpreted; 
 
 1 Thus, in Wealth of Nations, Bk. I. chap, viii., we have the phrases 
 " the funds which are destined to the payment of wages," " the f uiuii 
 destined for employing industry " " the funds destined for the mainte- 
 nance of servants."
 
 I 4 o POLITICAL ECONOMY. 
 
 and we shall see that the doctrine has been repudiated bj 
 several members of what is regarded as the orthodox school 
 of political economy. As regards^jnethod, Senior makes the 
 science a purely dedmtive one, in which there is no room 
 for any other "facts than the four fundamental propositions 
 from which he undertakes to deduce all economic truth. And 
 he does not regard himself as arriving at hypothetic conclu- 
 sions ; his postulates and his inferences are alike conceived as 
 corresponding to actual phenomena. 1 Colonel, Robert Torrens 
 (1780-1864) was a prolific writer, partly on economic theory, 
 but principally on its applications to financial and commercial 
 policy. Almost the whole of the programme which was 
 carried out in legislation by Sir Eobert Peel had been laid 
 down in principle in the writings of Torrens. He gave sub- 
 stantially the same theory of foreign trade which was after- 
 wards stated by J. S. Mill in one of his Essays on Unsettled 
 Questions? He was an early and earnest advocate of the 
 repeal of the corn laws, but was not in favour of a general 
 system of absolute free trade, maintaining that it is expedient 
 to impose retaliatory duties to countervail similar duties im- 
 posed by foreign countries, and that a lowering of import 
 duties on the productions of countries retaining their hostile 
 tariffs would occasion an abstraction of the precious^jii e tals, 
 and a decline in prices, profits, and wages. His principal 
 writings of a general character were The Economist [i.e., 
 Physiocrat] Refuted, 1808; Essay on the Production oj 
 Wealth, 1821 ; Essay on the External Corn-trade (eulogised by 
 Kicardo), 3d ed., 1826 ; The Budget, a Series of Letters on 
 Financial, Commercial, and Colonial Policy, 1841-3. Harriot 
 Martineau (1802-1876) popularised the doctrines of Malthas 
 and Kicardo in her Illustrations of Political Economy (1832- 
 
 * See the last of his Four Introductory Lectures on Political Economy, 
 1852. 
 
 2 Mill, however, tells us in his Preface to those Essays that his own 
 views on that subject had been entertained and committed to writing 
 before the publication by Torrent) of similar opinion*.
 
 SYSTEM OF NATURAL LIBERTY. 141 
 
 34), a series of tales, in which there is much excellent descrip- 
 tion, but the effect of the narrative is often marred by the 
 somewhat ponderous disquisitions here and there thrown in, 
 usually in the form of dialogue. 
 
 Other writers who ought to be named in any history of the 
 science are Charles Babbage, On the Economy of Machinery 
 and Manufactures (1832), chiefly descriptive, but also in part 
 theoretic ; William Thomas Thornton, Overpopulation and its 
 Remedy (1846), A Plea for Peasant Proprietors (1848), On 
 Labour (1869 ; 2d ed., 1870) ; Herman Merivale, Lectures on 
 Colonisation and Colonies (18412; new ed., 1861); T. C. 
 Banfield, The Organisation of Industry Explained (1844; 2d 
 ed., 1848); and Edward Gibbon Wakefield, A View of the 
 Art of Colonisation (1849). Thomas Chalmers, well known in -4- 
 other fields of thought, was author of The Christian and Civic 
 Economy of Large Towns (182136), and On Political Eco- 
 nomy in Connection with the Moral State and Moral Prospects 
 of Society (1832); he strongly opposed any system of legai 
 charity, and, whilst justly insisting on the primary importance 
 of morality, industry, and thrift as conditions of popular well- 
 being, carried the Malthusian doctrines to excess. Nor was 
 Ireland without a share in the economic movement of the 
 period. 1 Whately, having been second Drummond professor -4 
 of political economy at Oxford (in succession to Senior), and 
 delivered in that capacity his Introductory Lectures (1831), 
 founded in 1832, when he went to Ireland as archbishop of 
 Dublin, a similar professorship in Trinity College, Dublin. 
 It was first held by Mountifort Longfield, afterwards Judge 
 of the Landed Estates Court, Ireland (d. 1884). He published 
 
 1 Samuel Crumpe, M.D., had published at Dublin in 1793 an Essay on 
 the Best Means of Providiny Employment for the People, which obtained 
 a prize offered by the Royal Irish Academy for the best dissertation on 
 that subject. Thia is a meritorious work, and contains a good state- 
 ment of some of the leading principles of Adam Smith. John Hely 
 Hutchinson's Commercial Restraints of Ireland (i779) i 8 important foi 
 the economic history of that country.
 
 142 POLITICAL ECONOMY. 
 
 lectures on the science generally (1834), on Poor Laws (1834), 
 . and on Commerce and Absenteeism (1835), which were marked 
 by independence of thought and sagacious observation. He 
 was laudably free from many of the exaggerations of his con- 
 temporaries; he said, in 1835, "in political economy we must 
 not abstract too much," and protested against the assumption 
 commonly made that " men are guided in all their conduct by 
 a prudent regard to their own interest." James A. Lawson 
 (afterwards Mr. Justice Lawson, d. 1887) also published 
 some lectures (1844), delivered from the same chair, which 
 may still be read with interest and profit; his discussion of 
 the question of population is especially good ; he also asserted 
 against Senior that the science is avide de faits, and that it 
 must reason about the world and mankind as they really are. 
 
 The most systematic and thorough-going of the earlier critics 
 of the Ricardian system was Richard Jones (1790-1855), pro- 
 fessor at Haileybury. Jones has received scant justice at the 
 hands of his successors. J. S. Mill, whilst using his work, 
 gave his merits but faint recognition. Even Roscher says 
 that he did not thoroughly understand Ricardo, without giving 
 any proof of that assertion, whilst he is silent as to the fact 
 that much of what has been preached by the German his- 
 torical school is found distinctly indicated in Jones's writings. 
 He has been sometimes represented as having rejected the 
 Andersonian doctrine of rent ; but such a statement is in- 
 correct. Attributing the doctrine to Malthus, he says that 
 \ that economist "showed satisfactorily that when land is culti- 
 \ vated by capitalists living on the profits of their stock, and 
 S able to move it at pleasure to other employments, the expense 
 ~Y\ of tilling the worst quality of land cultivated determines the 
 j average price of raw produce, while the difference of quality 
 ( of the superior lands measures the rents yielded by them." 
 What he really denied was the application of the doctrine to 
 all cases where rent is paid ; he pointed out in his Essay on 
 the Distribution of Wealth and on the Sources of Taxation, 
 1831, that, besides " farmers' rents," which, under the supposed
 
 SYSTEM OF NATURAL LIBERTY. 
 
 '43 
 
 conditions, conform to the above law, there aie " peasant 
 rents," paid everywhere through the most extended periods 
 of history, and still paid over by far the largest part of the 
 earth's surface, which are not so regulated. Peasant rents he 
 divided under the heads of (i) serf^(2) metayer, (3) ryot, and 
 (4) cottier rents, a classification afterwards adopted in sub- 
 stance by J. S. Mill ; and he showed that the contracts fixing 
 their amount were, at least in the first three classes, deter- 
 mined rather by custom than by competition. Passing to the 
 superstructure of theory erected by Ricardo on the doctrine of 
 rent which he had so unduly extended, Jones denied most of 
 the conclusions he had deduced, especially the following : 
 that the increase of farmers' rents is always contemporary i\ 
 with a decrease in the productive powers of agriculture, and 2- } 
 comes with loss and distress in its train ; that the jnterestsof 3 / 
 landlords are always and necessarily opposed to the interests / 
 of the state and of every other class of society; that the diminu- V 
 tion of the_ate^ of profits is exclusively dependent on the / 
 returns to the capital last employed on the land; and that 1 
 wages can, jie_only atthejsxpense of profits. J 
 
 The method followed by Jones is inductive; his conclu- 
 sions are founded on a wide observation of contemporary facts, 
 aided by the study of history. " If," he said, " we wish to 
 make ourselves acquainted with the economy and arrange- 
 ments by which the different nations of the earth produce and 
 distribute their revenues, I really know but of one way to 
 attain our object, and that is, to look and see. We must get 
 comprehensive views of facts, that we may arrive at principles 
 that are truly comprehensive. If we take a different method, 
 if we snatch at general principles, and content ourselves with 
 confined observations, two things will happen to us. First, 
 what we call general principles will often be found to have no 
 generality we shall set out with declaring propositions to be 
 universally true which, at every step of our further progress, 
 we shall be obliged to confess are frequently false ; and, 
 secondly, we shall miss a great mass of useful knowledge which
 
 144 POLITICAL ECONOMY. 
 
 those who advance to principles by a comprehensive examina 
 tion of facts necessarily meet with on their road." The world 
 he professed to study was not an imaginary world, inhabited 
 by abstract "economic men," but the real world with the 
 different forms which the ownership and cultivation of land, 
 and, in general, the conditions of production and distribution, 
 assume at different times and places. His recognition of such 
 different systems of life in communities occupying different 
 stages in the progress of civilisation led to his proposal of what 
 he called a " political economy of nations." This was a protest 
 against the practice of taking the exceptional state of facts 
 which exists, and is indeed only partially realised, in a small 
 corner of our planet as representing the uniform type of 
 human societies, and ignoring the effects of the early history 
 and special development of each community as influencing its 
 economic phenomena. 
 
 It is sometimes attempted to elude the necessity for a 
 wider range of study by alleging a universal tendency in the 
 social world to assume this now exceptional shape as its 
 normal and ultimate constitution. Even if this tendency 
 were real (which is only partially true, for the existing order 
 amongst ourselves cannot be regarded as entirely definitive), 
 it could not be admitted that the facts witnessed in out 
 civilisation and those exhibited in less advanced communities 
 are so approximate as to be capable of being represented by 
 the same formulae. As Whewell, in editing Jones's Remains, 
 1859, well observed, it is true in the physical world that "all 
 things tend to assume a form determined by the force of 
 gravity ; the hills tend to become plains, the waterfalls to eat 
 away their beds and disappear, the rivers to form lakes in 
 the valleys, the glaciers to pour down in cataracts." But are 
 we to treat these results as achieved, because forces are in 
 operation which may ultimately bring them about ? All human 
 questions are largely questions of time ; and the economic 
 phenomena which really belong to the several stages of the 
 human movement must be studied as they are, unless we are con-
 
 SYSTEM OF NATURAL LIBERTY. 145 
 
 tent to fall into grievous error both in our theoretic treatment of 
 them and in the solution of the practical problems they present. 
 
 Jones is remarkable for his freedom from exaggeration and 
 one-sided statement ; thus, whilst holding Malthus in, perhaps, 
 undue esteem, he declines to accept the proposition that atf) 
 increase of the means of subsistence is necessarily followed byA 
 an increase of population; and he maintains what is undoubtedly*] 
 true, that with the growth of population, in all well-governed 
 and prosperous states, the command over food, instead of 
 diminishing, increases. 
 
 Much of what he has left us a large part of which is un- 
 fortunately fragmentary is akin to the labours of Cliffe Leslie 
 at a later period. The latter, however, had the advantage of 
 acquaintance with the sociology of Comte, which gave him a 
 firmer grasp of method, as well as a wider view of the general 
 movement of society ; and, whilst the voice of Jones was but 
 little heard amidst the general applause accorded to Ricardo in 
 the economic world of his time, Leslie wrote when disillusion 
 had set in, and the current was beginning to turn in England 
 against the a priori economics. 
 
 Comte somewhere speaks of the "transient predilection" 
 for political economy which had shown itself generally in 
 western Europe. This phase of feeling was specially notice- 
 able in England from the third to the fifth decade of the 
 present century. "Up to the year 1818," said a writer in 
 the Westminster Review, " the science was scarcely known or 
 talked of beyond a small circle of philosophers ; and legislation, 
 so far from being in conformity with its principles, was daily 
 receding from them more and more." Mill has told us what 
 a change took place within a few years. " Political economy," 
 ho says, " had asserted itself with great vigour in public 
 affairs by the petition of the merchants of London for free 
 trade, drawn up in 1820 by Mr. Tooke and presented by 
 Mr. Alexander Baring, 1 and by the noble exertions of Ricardo 
 
 1 Afterwards Lord Ashburton. For this Petition, see M'Cullocb'f 
 
 I
 
 146 POLITICAL ECONOMY. 
 
 during the few years of his parliamentary life. Ilia writing^ 
 following up the impulse given by the bullion controversy, 
 and followed up in their turn by the expositions and com- 
 ments of my father and M'Culloch (whose writings in the 
 Edinburgh Review during those years were most valuable), had 
 drawn general attention to the subject, making at least partial 
 converts in the Cabinet itself ; and Huskisson, supported 
 by Canning, had commenced that gradual demolition of the 
 protective system which, one of their colleagues virtually 
 completed in 1846, though the last vestiges were only swept 
 away by Mr. Gladstone in 1860." Whilst the science was 
 thus attracting and fixing the attention of active minds, its 
 unsettled condition was freely admitted. The differences 
 of opinion among its professors were a frequent subject of 
 complaint. But it was confidently expected that these discre- 
 pancies would soon disappear, and Colonel Torrens predicted 
 that in twenty years there would scarcely " exist a doubt 
 respecting any of its more fundamental principles." " The 
 prosperity," says Mr. Sidgwick, " that followed on the aboli- 
 tion of the corn laws gave practical men a most impressive and 
 satisfying proof of the soundness of the abstract reasoning by 
 which the expediency of free trade had been inferred," and 
 when, in 1848, "a masterly expositor of thought had published 
 a skilful statement of the chief results of the controversies 
 of the preceding generation," with the due " explanations and 
 qualifications " of the reigning opinions, it was for some years 
 generally believed that political economy had " emerged from 
 the state of polemical discussion," at least on its leading doc- 
 trines, and that at length a sound construction had been erected 
 on permanent bases. 
 
 This expositor was John Stuart Mill (1806-73). He 
 exercised, without doubt, a greater influence in the field of 
 English economics than any other writer since Ricardo. 
 His systematic treatise has been, either directly or through 
 
 Literature of Political Economy, p. 57, or Senior's Lectures on the Tra*t~ 
 mission of the Previous Metals, &c., 2d ed. , p. 78.
 
 x 
 
 SYSTEM OF NATURAL LIBERTY. 147 
 
 manuals founded on it, especially that of Fawcett, the source 
 from which most of our contemporaries in these countries 
 have derived their knowledge of the science. But there are 
 other and deeper reasons, as we shall see, which make him, in 
 this as in other departments of knowledge, a specially interest- 
 ing and significant figure. 
 
 In 1844 he published five Essays on some Unsettled Ques- 
 tions of Political Economy, which had been written as early 
 as 1829 and 1830, but had, with the exception of the fifth, 
 remained in manuscript. In these essays is contained any 
 dogmatic contribution which he can be regarded as having 
 made to the science. The subject of the first is the laws 
 of interchange between nations. He shows that, when two 
 countries trade together in two commodities, the prices of the 
 commodities exchanged on both sides (which, as Kicardo had 
 proved, are not determined by cost of production) will adjust 
 themselves, through the play of reciprocal demand, in such a 
 way that the quantities required by each country of the article 
 which it imports from its neighbour shall be exactly sufficient 
 tc. payfor one another. This is the law which appears, with 
 some adcIeTTdevelopments, in his systematic treatise under 
 the name of the "equation of international demand." He 
 then discusses the division of the gains. The most important 
 practical conclusion (not, however, by any means an undis- 
 puted one) at which he arrives in this essay is, that the 
 relaxation of duties on foreign commodities, not operating as 
 protection but maintained solely for revenue, should be made 
 contingent on the adoption of some corresponding degree of 
 freedom of trade with England by thenation from which the 
 commodities are imported. In the second essay, on the in- 
 fluence of consumption on production, the most interesting 
 results arrived at are the propositions (i) that absenteeism 
 is a local, not a national, evil, and (2) that, whilst there 
 cannot be permanent excess of production, there may be a 
 temporary excess, not only of any one article, but of com- 
 modities generally, this last, however, not arising from over-
 
 148 POLITICAL ECONOMY. 
 
 production, but from a want of commercial confidence. Th 
 third essay relates to the use of the words " productive " and 
 " unproductive " as applied to labour, to consumption, and 
 to expenditure. The fourth deals with profits and interest, 
 especially explaining and so justifying Kicardo's theorem that 
 " profits depend on wages, rising as wages fall and falling as 
 wages rise." What Eicardo meant was that profits .lepend 
 on the cost of wages estimated in labour. Hence improve- 
 ments in the production of articles habitually consumed by 
 the labourer may increase profits without diminishing the real 
 remuneration of the labourer. The last essay is on the de- 
 finition and method of political economy, a subject later and 
 more maturely treated in the author's System of Logic. 
 
 In 1 848 Mill published his Principles of Political Economy, 
 with some of their Applications to Social Philosophy. This 
 title, though, as we shall see, open to criticism, indicated on 
 the part of the author a less narrow and formal conception of 
 the field of the science than had been common amongst his 
 predecessors. He aimed, in fact, at producing a work which 
 might replace in ordinary use the Wealth of Nations, which 
 in his opinion was " in many parts obsolete and in all im- 
 perfect." Adam Smith had invariably associated the general 
 principles of the subject with their applications, and in treat- 
 ing those applications had perpetually appealed to other and 
 often far larger considerations than pure political economy 
 affords. And in the same spirit Mill desired, whilst incor- 
 porating all the results arrived at in the special science by 
 Smith's successors, to exhibit purely economic phenomena in 
 relation to the most advanced conceptions of his own time 
 on the general philosophy of society, as Smith had done in 
 reference to the philosophy of the eighteenth century. 1 
 
 1 Curiously, in an otherwise well-executed Abridgment of Mill's work, 
 published in the United States (1886) by J. Laurence Laughlin, as a 
 text-book for colleges, all that " should properly be classed under the 
 head of Sociology " has been omitted, Mill's own conception being thus set 
 wide, and his book made to conform to the common type.
 
 SYSTEM OF NATURAL LIBERTY. 149 
 
 This design he certainly failed to realise. His book is 
 fai indeed from being a " modern Adam Smith." It is an 
 admirably lucid and even elegant exposition of the Ricardian 
 economics, the Malthusian theory being of course incorporated 
 with these, but, notwithstanding the introduction of many 
 minor novelties, it is, in its scientific substance, little or 
 nothing more. When Cliffe Leslie says that Mill so qualified 
 and amended the doctrines of Ricardo that the latter could 
 scarcely have recognised them, he certainly goes a great deal 
 too far : Senior really did more in that direction. Mill's 
 effort is usually to vindicate his master where others have 
 censured him, and to palliate his admitted laxities of expres- 
 sion. Already his profound esteem for Ricardo's services to 
 economics had been manifest in his Essays, where he says of 
 him, with some injustice to Smith, that, " having a science to 
 create," he could not " occupy himself with more than the 
 leading principles," and adds that " no one who has thoroughly 
 entered into his discoveries " will find any difficulty in work- 
 ing out " even the minutiae of the science." James Mill, too, 
 had been essentially an expounder of Ricardo ; and the son, 
 whilst greatly superior to his father in the attractiveness of 
 his expository style, is, in regard to his economic doctrine, 
 substantially at the same point of view. It is in their general 
 philosophical conceptions and their views of social aims and 
 ideals that the elder and younger Mill occupy quite different 
 positions in the line of progress. The latter could not, for 
 example, in his adult period have put forward as a theory of 
 government the shallow sophistries which the plain good sense 
 of Macaulay sufficed to expose in the writings of the former ; 
 and he had a nobleness of feeling which, in relation to the 
 higher social questions, raised him far above the ordinary 
 coarse utilitarianism of the Benthamites. 
 
 The larger and more philosophic spirit in which Mill dealt 
 with social subjects was undoubtedly in great measure due 
 to the influence of Comte, to whom, as Mr. Bain justly says, 
 he was under greater obligations than he himself was disposed
 
 150 POLITICAL ECONOMY. 
 
 to admit. Had he more completely undergone that influence, 
 we are sometimes tempted to think he might have wrought 
 the reform in economics which still remains to he achieved, 
 emancipating the science from the a priori system, and 
 founding a genuine theory of industrial life on observation 
 in the broadest sense. But probably the time was not ripe 
 for such a construction, and it is possible that Mill's native 
 intellectual defects might have made him unfit for the task, 
 for, as Koscher has said, " ein historischer Kopf war er nicht. ' 
 However this might have been, the effects of his early train- 
 ing, in which positive were largely alloyed with metaphysical 
 elements, sufficed in fact to prevent his attaining a perfectly 
 normal mental attitude. He never altogether overcame the 
 vicious direction which he had received from the teaching 
 of his father, and the influence of the Benthamite group in 
 which he was brought up. Hence it was that, according to 
 the striking expression of Eoscher, his whole view of life was 
 " zu wenig aus Einem Gusse." The incongruous mixture of 
 the narrow dogmas of his youthful period with the larger 
 ideas of a later stage gave a wavering and indeterminate 
 character to his entire philosophy. He is, on every side, 
 eminently " un-final ; " he represents tendencies to new forms 
 of opinion, and opens new vistas in various directions, but 
 founds scarcely anything, and remains indeed, so far as his 
 own position is concerned, not merely incomplete but inco- 
 herent. 1 It is, however, precisely this dubious position which 
 seems to us to give a special interest to his career, by fitting 
 him in a peculiar degree to prepare and facilitate transitions. 
 
 What he himself thought to be " the chief merit of his 
 treatise " was the marked distinction drawn between the 
 theory of production and that of distribution, the laws of 
 
 1 Mr. John Morley (" Mill on Religion," in Critical Miscellanies, 2d 
 ser., 1877) betrays something like consternation at finding in Mill's 
 posthumous writings statements of opinion distinctly at variance with 
 philosophic doctrines be had energetically maintained during his whole 
 life.
 
 SYSTEM OF NATURAL LIBERTY. 151 
 
 the former being based on unalterable natural facts, whilst 
 the course of distribution is modified from time to time 
 by the changing ordinances of society. This distinction, we 
 may remark, must not be too absolutely stated, for the 
 organisation of production changes with social growth, and, 
 as Lauderdale long ago showed, the nature of the distribution 
 in a community reacts on production. But there is a sub- 
 stantial truth in the distinction, and the recognition of it tends 
 to concentrate attention on the question How can, we im- 
 prove the existing distribution of wealth ? The study of this 
 problem led Mill, as he advanced in years, further and further 
 in the direction of socialism ; and, whilst to the end of his 
 life his book, however otherwise altered, continued to deduce 
 the Eicardian doctrines from the principle of enlightened 
 selfishness, he was looking forward to an order of things in 
 which synergy should be founded on sympathy. 
 
 The gradual modification of. his views in relation to the 
 economic constitution of society is set forth in his Auto- 
 biography. In his earlier days, he tells us, he "had seen 
 little further than the old school " (note this significant 
 title) "of political economy into the possibilities of funda- 
 mental improvement in social arrangements. Private pro- 
 perty, as now understood, and inheritance appeared the 
 dernier mot of legislation." The notion of proceeding to any 
 radical redress of the injustice "involved in the fact that 
 some are born to riches and the vast majority to poverty " 
 he had then reckoned chimerical But now his views were 
 such as would " class him decidedly under the general designa- 
 tion of socialist ; " he had been led to believe that the whole 
 contemporary framework of economic life was merely tem- 
 porary and provisional, and that a time would come when 
 " the division of the produce of labour, instead of depending, 
 as in so great a degree it now does, on the accident of birth, 
 would be made by concert on an acknowledged principle of 
 justice." "The social problem of the future" he considered 
 to be " how to unite the greatest individual liberty of action,"
 
 152 POLITICAL ECONOMY. 
 
 \vhich was often compromised in socialistic schemes, "with 
 a common ownership in the raw material of the globe, and 
 an equal participation in all the benefits of combined labour." 
 These ideas, he says, were scarcely indicated in the first edition 
 of the Political Economy, rather more clearly and fully in the 
 second, and quite unequivocally in the third, the French 
 Revolution of 1848 having made the public more open to the 
 reception of novelties in opinion. 
 
 Whilst thus looking forward to a new economic order, 
 he yet thinks its advent very remote, arid believes that the 
 inducements of private interest will in the meantime be in- 
 dispensable. 1 On the spiritual side he maintains a similar 
 attitude of expectancy. He anticipates the ultimate disap- 
 pearance of theism, and the substitution of a purely human 
 religion, but believes that the existing doctrine will long be 
 necessary as a stimulus and a control. He thus saps existing 
 foundations without providing anything to take their place, 
 and maintains the necessity of conserving for indefinite periods 
 what he has radically discredited. Nay, even whilst sowing 
 the seeds of change in the direction of a socialistic organisation 
 of society, he favours present or proximate arrangements which 
 would urge the industrial world towards other issues. The 
 system of peasant proprietorship of land is distinctly indi- 
 vidualistic in its whole tendency ; yet he extravagantly praises 
 it in the earlier part of his book, only receding from that 
 laudation when he comes to the chapter on the future of the 
 labouring classes. And the system of so-called co-operation in 
 production which he so warmly commended in the later edi- 
 tions of his work, and led some of his followers to preach as 
 the one thing needful, would inevitably strengthen the principle 
 of personal property, and, whilst professing at most to sub- 
 stitute the competition of associations for that of individuals, 
 would by no means exclude the latter. 
 
 The elevation of the working classes he bound up too 
 
 1 8e also his Chapters on Socialism, in Fortnightly Review, 1879.
 
 SYSTEM OF NATURAL LIBERTY. 153 
 
 exclusively with the Malthusian ethics, on which lie laid quite 
 an extravagant stress, though, as Mr. Bain has observed, it is 
 not easy to make out his exact views, any more than his 
 father's, on this subject. We have no reason to think that he 
 ever changed his opinion as to the necessity of a restriction on ' 
 population ; yet that element seems foreign to the socialistic 
 idea to which he increasingly leaned. It is at least difficult 
 to see how, apart from individual responsibility for the sup- 
 port of a family, what Malthus called moral restraint could 
 be adequately enforced. This difficulty is indeed the fatal 
 flaw which, in Malthus's own opinion, vitiated the scheme of 
 Godwin. 
 
 Mill's openness to new ideas and his enthusiasm for im- 
 provement cannot be too much admired. But there appears 
 to have been combined with these fine traits in his mental 
 constitution a certain want of practical sense, a failure to 
 recognise and acquiesce in the necessary conditions of human 
 life, and a craving for "better bread than can be made of 
 wheat." He entertained strangely exaggerated, or rather per- 
 verted, notions of the "subjection," the capacities, and the 
 rights of women. He encourages a spirit of revolt on the part 
 of working men against their perpetual condemnation, as a 
 class, to the lot of living by wages, without giving satisfactory 
 proof that this state of things is capable of change, and with- 
 out showing that such a lot, duly regulated by law and 
 morality, is inconsistent with their real happiness. He also 
 insists on the " independence " of the working class which, 
 according to him, fard, da se in such a way as to obscure, if 
 not to controvert, the truths that superior rank and wealth are 
 naturally invested with social power, and are bound in duty 
 to exercise it for the benefit of the community at large, and 
 especially of its less favoured members. And he attaches a 
 quite undue importance to mechanical and, indeed, illusory 
 expedients, such as the limitation of the power of bequest and 
 the confiscation of the " unearned increment " of rent. 
 
 With respeci to economic method also, he shifted his poo-
 
 154 POLITICAL ECONOMY. 
 
 tion ; yet to the end occupied uncertain ground. In the fifth 
 of his early essays he asserted that the method a priori is the 
 only mode of investigation in the social sciences, and that the 
 method a posteriori " is altogether inefficacious in those sciences, 
 as a means of arriving at any considerable body of valuable 
 truth," When he wrote his Logic, he had learned from 
 Comte that the a posteriori method in the form which he 
 chose to call "inverse deduction" was the only mode of 
 arriving at truth in general sociology ; and his admission of 
 this at once renders the essay obsolete. But, unwilling to 
 relinquish the a priori method of his youth, he tries to estab- 
 lish a distinction of two sorts of economic inquiry, one of 
 which, though not the other, can be handled by that method. 
 Sometimes he speaks of political economy as a department 
 " carved out of the general body of the science of society ; " 
 whilst on the other hand the title of his systematic work im- 
 plies a doubt whether political economy is a part of " social 
 philosophy'' at all, and not rather a study preparatory and 
 auxiliary to it. Thus, on the Idgical as well as the dogmatic 
 side, he halts between two opinions. Notwithstanding his 
 misgivings and even disclaimers, he yet remained, as to method, 
 a member of the old school, and never passed into the new or 
 " historical " school, to which the future belongs. 
 
 The question of economic method was also taken up by the 
 ablest of his disciples, John Elliott Cairnes (1824-75) who 
 devoted a volume to the subject (Logical Method of Political 
 Economy, 1857 ; ad ed., 1875). Professor Walker has spoken 
 of the method advocated by Cairnes as being different from 
 that put forward by Mill, and has even represented the former 
 as similar to, if not identical with, that of the German his- 
 torical school. But this is certainly an error. Cairnes, not- 
 withstanding some apparent vacillation of view and certain 
 concessions more formal than real, maintains the utmost rigour 
 of the deductive method ; he distinctly affirms that in political 
 economy there is no room for induction at all, " the economist 
 starting with a knowledge of ultimate causes," and being thus,
 
 SYSTEM OF NATURAL LIBERTY. 155 
 
 "at the outset of his enterprise, at the position which the 
 physicist only attains after ages of laborious research." He 
 does not, indeed, seem to be advanced beyond the point of 
 view of Senior, who professed to deduce all economic truth 
 from four elementary propositions. Whilst Mill in his Logic 
 represents verification as an essential part of the process of 
 demonstration of economic laws, Cairnes holds that, as they 
 " are not assertions respecting the character or sequence of 
 phenomena " (though what else can a scientific law be ?), " they 
 can neither be established nor refuted by statistical or docu- 
 mentary evidence." A proposition which affirms nothing re- 
 specting phenomena cannot be controlled by being confronted 
 with phenomena. Notwithstanding the unquestionable ability 
 of his book, it appears to mark, in some respects, a retro- 
 gression in methodology, and can for the future possess only 
 an historical interest. 
 
 Kegarded in that light, the labours of Mill and Cairnes on 
 the method of the science, though intrinsically unsound, had 
 an important negative effect. They let down the old political 
 economy from its traditional position, and reduced its extra- 
 vagant pretensions by two modifications of commonly accepted 
 views. First, whilst Eicardo had never doubted that in all 
 his reasonings he was dealing with human beings as they ' 
 actually exist, they showed that the science must be regarded 
 as a purely hypothetic one. Its deductions are based on 
 unreal, or at least one-sided, assumptions, the most essential of 
 which is that of the existence of the so-called " economicjtnan," 
 a being who is influenced by two motives only, that of ac- 
 quiring wealth and that of avoiding exertion ; and only so far 
 as the premises framed on this conception correspond with fact 
 ean the conclusions be depended on in practice. Senior in 
 vain protested against such a view of the science, which, as he 
 saw, compromised its social efficacy ; whilst Torrens, who had 
 previously combated the doctrines of Ricardo, hailed Mill's 
 new presentation of political economy as enabling him, whilst 
 in one sense rejecting those doctrines, in another sense to
 
 156 POLITICAL ECONOMY. 
 
 accept them. Secondly, beside economic science, it had often 
 been said, stands an economic art, the former ascertaining 
 truths respecting the laws of economic phenomena, the latter 
 prescribing the right kind of economic action ; and many had 
 assumed that, the former being given, the latter is also in our 
 possession that, in fact, we have only to convert theorems 
 into precepts, and the work is done. But Mill and Cairnes 
 made it plain that this statement could not be accepted, that 
 action can no more in the economic world than in any other 
 province of life be regulated by considerations borrowed from 
 one department of things only ; that economics can suggest 
 ideas which are to be kept in view, but that, standing alone, 
 it cannot direct conduct an office for which a wider prospect 
 of human affairs is required. This matter is best elucidated 
 by a reference to Comte's classification, or rather hierarchical 
 arrangement, of the sciences. Beginning with the least com- 
 plex, mathematics, we rise successively to astronomy, physics, 
 chemistry, thence to biology, and from it again to sociology. 
 In the course of this ascent we come upon all the great 
 laws which regulate the phenomena of the inorganic world, 
 of organised beings, and of society. A further step, however, 
 remains to be taken namely, to morals ; and at this point 
 the provinces of theory and practice tend to coincide, because 
 every element of conduct has to be considered in relation 
 to the general good. In the final synthesis all the previous 
 analyses have to be used as instrumental, in order to determine 
 how every real quality of things or men may be made to 
 converge to the welfare of Humanity. 
 
 Cairnes's most important economic publication was his last, 
 entitled Some Leading Principles of Political Economy newly 
 Expounded, 1874. In this work, which does not profess to 
 be a complete treatise on the science, he criticises and emends 
 the statements which preceding writers had given of some of 
 its principal doctrines, and treats elaborately of the limitations 
 with which they are to be understood, and the exceptions to 
 them which may be produced by special circumstances. Whilst
 
 SYSTEM OF NATURAL LIBERTY. 157 
 
 marked by great ability, it affords evidence of what has been 
 justly observed as a weakness in Cairnes's mental constitution 
 his " deficiency in intellectual sympathy," and consequent 
 frequent inability to see more than one side of a truth. 
 
 The three divisions of the book relate respectively to (i) 
 value, (2) labour and capital, and (3) international trade. In 
 the first he begins by elucidating the meaning of the word 
 " value/' and under this head controverts the view of Jevons 
 that the exchange value of anything depends entirely on its 
 utility, without, perhaps, distinctly apprehending what Jevons 
 meant by this proposition. On supply and demand he shows, 
 as Say had done before, that these, regarded as aggregates, are 
 not independent, but strictly connected and mutually depen- 
 dent phenomena identical, indeed, under a system of barter, 
 but, under a money system, conceivable as distinct. Supply 
 and demand with respect to particular commodities must be 
 understood to mean supply and demand at a given price ; and 
 thus we are introduced to the ideas of market price and normal 
 price (as, following Cherbuliez, he terms what Smith less 
 happily called natural price). Normal price again leads to the 
 consideration of cost of production, and here, against Mill and 
 others, he denies that profit and wages enter into cost of pro- 
 duction ; in other words, he asserts what Senior (whom he 
 does not name) had said before him, though he had not con- 
 sistently carried out the nomenclature, that cost of production 
 is the sum of labour and abstinence necessary to production, 
 wages and profits being the remuneration of sacrifice and 
 not elements of it. But, it may well be asked, How can an 
 amount of labour be added to an amount of abstinence ? Must 
 not wages and profits be taken as " measures of cost " ? By 
 adhering to the conception of " sacrifice," he exposes the 
 emptiness of the assertion that " dear labour is the great 
 obstacle to the extension of British trade " a sentence in 
 which " British trade " means capitalists' profits. At this 
 point we are introduced to a doctrine now first elaborated, 
 though there are indications of it in Mill, of whose theory of
 
 158 POLITICAL ECONOMY. 
 
 international values it is* in fact an extension. In foreign 
 trade cost of production, in Cairnes's sense, does not regu 
 late values, because it cannot perform that function except 
 under a re'gime of effective competition, and between different 
 countries effective competition does not exist. But, Cairnes asks, 
 to what extent does it exist in domestic industries? So far 
 as capital is concerned, he thinks the condition is sufficiently 
 fulfilled over the whole field a position, let it be said in 
 passing, which he does not seem to make out, if we consider 
 the practical immobility of most invested, as distinct from 
 disposable, capital. But in the case of labour the requisite 
 competition takes place only within certain social, or rather 
 industrial, strata. The world of industry may be divided into 
 a series of superposed groups, and these groups arc practically 
 " non-competing," the disposable labour in an}' one of them 
 being rarely capable of choosing its field in a higher. 1 The 
 law that cost of production determines price cannot, therefore, 
 be absolutely stated respecting domestic any more than respect- 
 ing international exchange ; as it fails for the latter univer- 
 sally, so it fails for the former as between non-competing 
 groups. The law that holds between these is similar to that 
 governing international values, which may be called the equa- 
 tion of reciprocal demand. Such a state of relative prices will 
 establish itself amongst the products of these groups as shall 
 enable that portion of the products of each group which is 
 applied to the purchase of the products of all other groups 
 to discharge its liabilities towards those other groups. The 
 reciprocal demand of the groups determines the " average 
 relative level" of prices within each group; whilst cost of 
 
 1 Economists are fond of comparing the rate of profit or wages in cne 
 nation (using this word in its economic sense) to a single fluid surface 
 which is continually disturbed by transient influences and continually 
 tending to recover its level. We must compare these rates in different 
 nations to reservoirs which, not communicating with each other, stand 
 always at different, though variable, levels. And the latter comparison 
 will apply also to the rates (at least of wages) in different economic 
 "groups," or strata, within the same community.
 
 SYSTEM OF NATURAL LIBERTY. 159 
 
 production regulates the distribution of price among the 
 individual products of each group. This theorem is perhaps 
 of no great practical value ; but the tendency of the whole 
 investigation is to attenuate the importance of cost of pro- 
 duction as a regulator of normal price, and so to show that 
 ye 4 - ^aother of the accepted doctrines of the science had been 
 propounded in too rigid and absolute a form. As to market 
 price, the formula by which Mill had defined it as the price 
 which equalises demand and supply Cairnes shows to be an 
 identical proposition, and he defines it as the price which 
 most advantageously adjusts the existing supply to the exist- 
 ing demand pending the coming forward of fresh supplies from 
 the sources of production. 
 
 His second part is chiefly remarkable for his defence of 
 what is known as the wages fund doctrine, to which we 
 adverted when speaking of Senior. Mill had given up this 
 doctrine, having been convinced by Thornton that it was 
 erroneous ; but Cairnes refused to follow his leader, who, as 
 he believes, ought not to have been convinced. 1 After having 
 given what is certainly a fallacious reply to Longe's criticism 
 of the expression "average rate of wages," he proceeds to 
 vindicate the doctrine in question by the consideration that, 
 the amount of a nation's wealth devoted at any time to the 
 payment of wages if the character of the national industries 
 and the methods of production employed remain the same 
 is in a definite relation to the amount of its general capital ; 
 the latter being given, the former is also given. In illus- 
 {fating his view of the subject, he insists on the principle 
 (true in the main, but too absolutely formulated by Mill) that 
 *' demand for commodities is not demand for labour." It is 
 not necessary here to follow his investigation, for his reason- 
 ing has not satisfied his successors, with the exception of 
 
 1 Jevons strangely says, in the Preface to his Theory of Political 
 Economy, 2d ed., that the wage fund doctrine "has been abandoned 
 by most English economists owing to the attacks," amongst others, "of 
 Cairnes." Cairnes was, in truth, a supporter of iho doctrine.
 
 I6o POLITICAL ECONOMY. 
 
 Fawcett, and the question of wages is now commonly treated 
 without reference to a supposed determinate wages fund. 
 Cairnes next studies trades-unionism in relation to wages, and 
 arrives in substance at the conclusion that the only way in 
 which it can affect their rate is by accelerating an advance which 
 must ultimately have taken place independently of its action. 
 He also takes occasion to refute Mr. (now Lord) Brassey'a 
 supposed law of a uniform cost of labour in every part of 
 the world. Turning to consider the material prospects of the 
 working classes, he examines the question of the changes 
 which may be expected in the amount and- partition of the 
 fund out of which abstinence and labour are remunerated. 
 He here enunciates the principle (which had been, however, 
 stated before him by Bicardo and Senior) that the increased 
 productiveness of industry will not affect either profit or wages 
 unless it cheapen the commodities which the labourer con- 
 sumes. These latter being mostly commodities of which raw 
 produce is the only or principal element, their cost of produc- 
 tion, notwithstanding improvements in knowledge and art, 
 will increase unless the numbers of the labouring class be 
 steadily kept in check ; and hence the possibility of elevating 
 the condition of the labourer is confined within very narrow 
 limits, if he continues to be a labourer only. The condition 
 of any substantial and permanent improvement in his lot is 
 that he should cease to be a mere labourer that profits should 
 be brought to reinforce the wages fund, which has a tendency, 
 in the course of industrial progress, to decline relatively to the 
 general capital of a country. And hence Cairnes abandon- 
 ing the purely theoretic attitude which he elsewhere represents 
 as the only proper one for the economist recommends the 
 system of so-called co-operation (that is, in fact, the abolition of 
 the large capitalist) as offering to the working classes "the sole 
 means of escape from a harsh and hopeless destiny," and puta 
 aside rather contemptuously the opposition of the Positivists 
 to this solution, which yet many besides the Positivists, as, 
 for example, Leslie and F. A. "Walker, regard as chimerical.
 
 SYSTEM OF NATURAL LIBERTY. 161 
 
 The third part is devoted mainly to an exposition of Ricardo's 
 doctrine of the conditions of international trade and Mill's 
 theory of international values. The former Cairnes modifies 
 by introducing his idea of the partial influence of reciprocal 
 demand, as distinguished from cost of production, on the regu- 
 lation of domestic prices, and founds on this rectification an 
 interesting account of the connection between the wages pre- 
 vailing in a country and the character and course of its ex- 
 ternal trade. He emends Mill's statement, which represented 
 the produce of a country as exchanging for that of other coun- 
 tries at such values " as are required in order that the whole 
 of her exports may exactly pay for the whole of her imports " 
 by substituting for the latter phrase the condition that each 
 country should by means of her exports discharge all her 
 foreign liabilities in other words, by introducing the consi- 
 deration of the balance of debts. This idea was not new ; 
 it had been indicated by John Leslie Foster as early as 1804,* 
 and was touched on by Mill himself ; but Cairnes expounds it 
 well ; and it is important as clearing away common misconcep- 
 tions, and sometimes removing groundless alarms. 2 Passing 
 to the question of free trade, he disposes of some often-repeated 
 protectionist arguments, and in particular refutes the American 
 allegation of the inability of the highly-paid labour of that 
 country to compete with the "pauper labour" of Europe. 
 He is not so successful in meeting the "political argument," 
 founded on the admitted importance for civilisation of develop- 
 ing diversified national industries ; and he meets only by one 
 of the highly questionable commonplaces of the doctrinaire 
 economists Mill's proposition that protection may foster nascent 
 industries really adapted to a country till they have struck 
 foot and are able to endure the stress of foreign competition. 
 
 We have dwelt at some length on this work of Cairnes, 
 aot only because it presents the latest forms of several accepted 
 
 1 In his Essay on the Principle of Commercial Exchanges. 
 1 On this whole subject see Professor C. F. Bastable'a Theory of Inter- 
 national Trade, 1887. 
 
 L
 
 162 POLITICAL ECONOMY. 
 
 economic doctrines, but also because it is, and, we believe, 
 will remain, the last important product of the old English 
 school. The author at the outset expresses the hope that it 
 will strengthen, and add consistence to, the scientific fabric 
 " built up by the labours of Adam Smith, Malthus, Ricardo, 
 and Mill." Whilst recognising with him the great merits 
 of Smith, and the real abilities and services of his three 
 successors here named, we cannot entertain the same opinion 
 as Cairnes respecting the permanence of the fabric they con- 
 structed. We hold that a new edifice is required, incorporating 
 indeed many of the materials of the old, but planned on dif- 
 ferent ideas and in some respects with a view to different ends 
 above all, resting on different philosophic foundations, and 
 having relation in its whole design to the more comprehensive 
 structure of which it will form but one department, namely, 
 the general science of society. 
 
 We shall hereafter have occasion to refer to Cairnes's Essays 
 in Political Economy, 1873. His Slave Power (1862) was the 
 most valuable work which appeared on the subject of the 
 great American conflict 
 
 FRANCE. 
 
 All the later European schools presuppose in part adopting, 
 in part criticising the work of the English economists from 
 Smith a to Ricardo and the Epigoni. The German school has 
 had in a greater degree than any other a movement of its own 
 
 1 The first French translation of the Wealth of Nations, by Blavet, 
 appeared in the Journal de V Agriculture, du Commerce, des Finances, et 
 des Arts, 177980 ; new editions of it were published in 1781, 1788, and 
 1800 ; it was also printed at Amsterdam in 1784. Smith himself recom- 
 mended it in his third edition of the original as excellent. In 1790 
 appeared the translation by Roucher, to which Condorcet had intended 
 to add notes, and in 1802 that by Count Germain Gamier, executed 
 during his exile in England, which is now considered the standard ver- 
 siou, and has been reproduced, with notes by Say, Sismondi, Blanqui, 
 &c. ( in the Collection des Principaux jZconomistet.
 
 SYSTEM OF NATURAL LIBERTY. 163 
 
 following, at least in its more recent period, an original 
 method, and tending to special and characteristic conclusions. 
 The French school, on the other hand, if we omit the 
 socialists, who do not here come under consideration, has 
 in the main reproduced the doctrines of the leading English 
 thinkers, stopping short, however, in general of the extremes 
 of Ricardo and his disciples. In the field of exposition the 
 French are unrivalled ; and in political economy they have 
 produced a series of more or less remarkable systematic trea- 
 tises, text books, and compendiums, at the head of which 
 stands the celebrated work of J. B. Say. But the number 
 of seminal minds which have appeared in French economic 
 literature of writers who have contributed important truths, 
 introduced improvements of method, or presented the phe- 
 nomena under new lights has not been large. Sismondi, 
 Dunoyer, and Bastiat will deserve our attention, as being the 
 most important of those who occupy independent positions 
 (whether permanently tenable or not), if we pass over for the 
 present the great philosophical renovation of Auguste Comte, 
 which comprehended actually or potentially all the branches 
 of sociological inquiry. Before estimating the labours of 
 Bastiat,- we shall find it desirable to examine the views of 
 Carey, the most renowned of American economists, with which 
 the latest teachings of the ingenious and eloquent Frenchman 
 are, up to a certain point, in remarkable agreement. Cournot, 
 too, must find a place among the French writers of this period, 
 as the chief representative of the conception of a mathematical 
 method in political economy. 
 
 Of Jean Baptiste Say (1767-1832) Eicardo says "He was 
 the first, or among the first, of Continental writers who justly 
 appreciated and applied the principles of Smith, and has 
 done more than all other Continental writers taken together 
 to recommend that enlightened and beneficial system to the 
 nations of Europe." The Wealth of Nations in the original 
 language was placed in Say's hands by Claviere, afterwards 
 minister, then director of the assurance society of which
 
 164 POLITICAL ECONOMY. 
 
 Say was a clerk ; and the book made a powerful impression 
 on him. Long afterwards, when Dupont de Nemours com- 
 plained of his injustice to the physiocrats, and claimed him as, 
 through Smith, a spiritual grandson of Quesnay and nephew 
 of Turgot, he replied that he had learned to read in the 
 writings of the mercantile school, had learned to think in those 
 of Quesnay and his followers, but that it was in Smith that 
 he had learned to seek the causes and the effects of social 
 phenomena in the nature of things, and to arrive at this last 
 by a scrupulous analysis. His Traite d'tfconomie Pulitique 
 (1803) was essentially founded on Smith's work, but he aimed 
 at arranging the materials in a more logical and instructive 
 order. 1 He has the French art of easy and lucid exposition, 
 though his facility sometimes degenerates into superficiality j 
 and hence his book became popular, both directly and through 
 translations obtained a wide circulation, and diffused rapidly 
 through the civilised world the doctrines of the master. Say's 
 knowledge of common life, says Roscher, was equal to Smith's; 
 but he falls far below him in living insight into larger political 
 phenomena, and he carefully eschews historical and philoso- 
 phical explanations. He is sometimes strangely shallow, aa 
 when he says that " the best tax is that smallest in amount.' 1 
 He appears not to have much claim to the position of an 
 original thinker in political economy. Kicardo, indeed, speaks 
 of him as having " enriched the science, by several discussions, 
 original, accurate, and profound." "What he had specially in 
 view in using these words was what is, perhaps rather pre- 
 tentiously, called Say's theorie des debouches, with his con- 
 nected disproof of the possibility of a universal glut. The_ 
 theory amounts simply to this, that buying is also selling, and 
 that it is by producing that we are enabled to purchase the 
 products of others. Several distinguished economists, especially 
 
 1 He grossly exaggerated Smith's faults of metho^ Thus he says 
 "L'ouvrage de Smith n'est qu'un assemblage confus.des principes le 
 plus sains de 1' Economic politique . . . sou livre eat un vaste chaoi 
 d'id5es justee " (Ditcevri Preliminaire).
 
 SYSTEM OF NATURAL LIBERTY. 165 
 
 Malthus and Sismondi, in consequence cliiefly of a misiuter-^ 
 pretation of the phenomena of commercial crises, maintained / 
 that there might be general over-supply or excess of all 
 commodities above the demand. This Say rightly denied. 
 A particular branch of production may, it must indeed be 
 admitted, exceed the existing capabilities of the market ; but, 
 if we remember that supply is demand, that commodities are 
 purchasing power, we cannot accept the doctrine of the possi- 
 bility of a universal glut without holding that we can have 
 too much of everything that " all men can be so fully 
 provided with the precise articles they desire as to afford no 
 market for each other's superfluities." Whatever services, 
 however, Say may have rendered by original ideas on those or 
 other subjects, his great merit is certainly that of a propa- 
 gandist and populariser. 
 
 The imperial police would not permit a second edition of 
 his work to be issued without the introduction of changes 
 which, with noble independence, he refused to make ; and 
 that edition did not therefore appear till 1814. Three other 
 editions were published during the life of the author in 1817, 
 1819, and 1826. In 1828 Say published a second treatise, 
 Cours complet d' Economic Politique pratique, which contained 
 the substance of his lectures at the Conservatoire des Arts et 
 Metiers and at the College de France. Whilst in his earlier 
 treatise he had kept within the narrow limits of strict econo- 
 mics, in his later work he enlarged the sphere of discussion, 
 introducing in particular many considerations respecting the 
 economic influence of social institutions. 
 
 Jean Charles L. Simonde de Sismondi (1773-1842), author 
 of the Histoire des Republiques Italiennes du moyen dge, 
 represents in the economic field a protest, founded mainly 
 on humanitarian sentiment, against the dominant doctrines. 
 He wrote first a treatise De la Richesse Oommerciale (1803), 
 in which he Allowed strictly the principles of Adam Smith. 
 But he af iei .vards came to regard these principles as insuffi- 
 cient and requiring modification. He contributed an article on
 
 166 POLITICAL ECONOMY. 
 
 political economy to the Edinburgh Encyclopaedia, in which 
 his new views were partially indicated. They were fully de- 
 veloped in his principal economic work, Nouveaux Principe* 
 d'jZconomie Politique, ou de la Richesse dans ses rapports avec 
 la Population (1819 ; 2d ed., 1827). This work, as he tells 
 us, was not received with favour by economists, a fact which 
 he explains by the consideration that he had " attacked an 
 orthodoxy an enterprise dangerous in philosophy as in reli- 
 gion." According to his view, the science, as commonly 
 understood, was too much of a mere chrematistic : it studied 
 too exclusively the means of increasing wealth, and not 
 sufficiently the use of this wealth for producing general 
 happiness. The practical system founded on it tended, as 
 he believed, not only to make the rich richer, but to make 
 the poor poorer and more dependent ; and he desired to fix 
 attention on the question of distribution as by far the most 
 important, especially in the social circumstances of recent 
 times. 
 
 The personal union in Sismondi of three nationalities, the 
 Italian, the French, and the Swiss, and his comprehensive 
 historical studies, gave him a special largeness of view ; and 
 he was filled with a noble sympathy for the suffering members 
 of society. He stands nearer to socialism than any other 
 French economist proper, but it is only in sentiment, not in 
 opinion, that he approximates to it ; he does not recommend 
 my socialistic scheme. On the contrary, he declares in a 
 memorable passage that, whilst he sees where justice lies, he 
 must confess himself unable to suggest the means of realising 
 it in practice ; the division of the fruits of industry between 
 those who are united in their production appears to him 
 vicious ; but it is, in his judgment, almost beyond human 
 power to conceive any system of property absolutely different 
 from that which is known to us by experience. He goes no 
 further than protesting, in view of the great evils which he 
 saw around him, against the doctrine of laisser faire, and 
 invoking, somewhat vaguely, the intervention of Governments
 
 SYSTEM OF NATURAL LIBERTY. 167 
 
 to " regulate the progress of wealth " and to protect the weaker 
 members of the community. 
 
 His frank confession of impotence, far wiser and more 
 honourable than the suggestion of precipitate and dangerous 
 remedies, or of a recurrence to outworn mediaeval institutions, 
 has not affected the reputation of the work. A prejudice was 
 indeed early created against it in consequence of its partial 
 harmony of tone, though, as we have seen, not of policy, with 
 socialism, which was then beginning to show its strength, as 
 well as by the rude way in which his descriptions of the 
 modern industrial system, especially as it existed in England, 
 disturbed the complacent optimism of some members of the 
 o-called orthodox school. These treated the book with ill- 
 disguised contempt, and Bastiat spoke of it as preaching an 
 economie politique cb rebours. But it has held its place in the 
 literature of the science, and is now even more interesting 
 than when it first appeared, because in our time there is a 
 more general disposition, instead of denying or glossing over 
 the serious evils of industrial society, to face and remove or at 
 least mitigate them. The laisser faire doctrine, too, has been 
 discredited in theory and abandoned in practice ; and we are 
 ready to admit Sismondi's view of the State as a power not 
 merely intrusted with the maintenance of pe-ice, but charged 
 also with the mission of extending the benefits of the social 
 union and of modern progress as widely as possible through 
 all classes of the community. Yet the impression which his 
 treatise leaves behind it is a discouraging one ; and this be- 
 cause he regards as essentially evil many things which seem 
 to be the necessary results of the development of industry. 
 The growth of a wealthy capitalist class and of manufacture 
 on the great scale, the rise of a vast body of workers who live 
 by their labour alone, the extended application of machines, 
 large landed properties cultivated with the aid of the most 
 advanced appliances all these he dislikes and deprecates ; 
 but they appear to be inevitable. The problem is, how to 
 regulate and moralise the system they imply ; but we must
 
 168 POLITICAL ECONOMY. 
 
 surely accept it in principle, unless we aim at a thorough 
 social revolution. Sismondi may be regarded as the precursor 
 of the German economists known under the inexact desig- 
 nation of " Socialists of the Chair ; " but their writings are 
 much more hopeful and inspiring. 
 
 To the subject of population he devotes special care, as of 
 great importance for the welfare of the working classes. So 
 far as agriculturists are concerned, he thinks the system of 
 what he calls patriarchal exploitation, where the cultivator ia 
 also proprietor, and is aided by his family in tilling the land 
 a law of equal division among the natural heirs being 
 apparently presupposed the one which is most efficacious in 
 preventing an undue increase of the population. The father 
 is, in such a case, able distinctly to estimate the resourcea 
 available for his children, and to determine the stage of sub- 
 division which would necessitate the descent of the family 
 from the material and social position it had previously occu- 
 pied. When children beyond this limit are born, they do not 
 marry, or they choose amongst their number one to continue 
 the race. This is the view which, adopted by J. S. Mill, 
 makes so great a figure in the too favourable presentation by 
 that writer of the system of peasant proprietors. 
 
 In no French economic writer is greater force or general 
 solidity of thought to be found than in Charles Dunoyer 
 (1786-1862), author of La Libert^ du Travail (1845; the 
 substance of the first volume had appeared under a different 
 title in 1825), honourably known for his integrity and inde- 
 pendence under the regime of the Restoration. What makes 
 him of special importance in the history of the science ia 
 his view of its philosophical constitution and method. With 
 respect to method, he strikes the keynote at the very outset 
 in the words " rechercher experimentalement," and in profes- 
 sing to build on " les donnees de 1'observation et de I'exp&ri- 
 ence." He shows a marked tendency to widen economics 
 into a general science of society, expressly describing political 
 economy as having for its province the whole order of things
 
 SYSTEM OF NATURAL LIBERTY. 169 
 
 which results from the exercise and development of the social '} 
 forces. This larger study is indeed better named Sociology ; 
 and economic studies are better regarded as forming one depart- 
 ment of it. But the essential circumstance is that, in Duncyer's 
 treatment of his great subject, the widest intellectual, moral, 
 and political considerations are inseparably combined with 
 purely economic ideas. It must not be supposed that by 
 liberty, in the title of his work, is meant merely freedom 
 from legal restraint or administrative interference ; he uses it 
 to express whatever tends to give increased efficiency to labour. 
 He is thus led to discuss all the causes of human progress, 
 and to exhibit them in their historical working. 
 
 Treating, in the first part, of the influence of external con- 
 ditions, of race, and of culture on liberty in this wider sense, 
 he proceeds to divide all productive effort into two great 
 classes, according as the action is exercised on things or on 
 men, and censures the economists for having restricted their 
 attention to the former. He studies in his second and third 
 parts respectively the conditions of the efficiency of these 
 two forms of human exertion. In treating of economic life, 
 strictly so called, he introduces his fourfold division of material 
 industry, in part adopted by J. S. Mill, as " (i) extractive, 
 (2) voituriere, (3) manufacturiere, (4) agricole," a division 
 which is useful for physical economics, but will always, when 
 the larger social aspect of things is considered, be inferior 
 to the more commonly accepted one into agricultural, manu- 
 facturing, and commercial industry, banking being supposed 
 as common president and regulator. Dunoyer, having in view 
 only action on material objects, relegates banking, as well as 
 commerce proper, to the separate head of exchange, which, 
 along with association and gratuitous transmission (whether 
 inter vivos or mortis causa), he classes apart as being, not :A- 
 dustries, in the same sense with the occupations named, but 
 yet functions essential to the social economy. The industries 
 which act on man he divides according as they occupy them- 
 selves with (i) the amelioration of our physical nature, ()
 
 170 POLITICAL ECONOMY. 
 
 the culture of our imagination and sentiments, (3) the edu 
 cation of our intelligence, and (4) the improvement of oui 
 moral habits ; and he proceeds accordingly to study the social 
 offices of the physician, the artist, the educator, and the priest. 
 | We meet in Dunoyer the ideas afterwards emphasised by 
 / Bastiat that the real subjects of human exchange are services ; 
 | that all value is due to human activity ; that the powers of 
 nature always render a gratuitous^assistance to the labour of 
 / noan ; and that the rent of land is really a form of interest on 
 invested capital. Though he had disclaimed the task of a 
 practical adviser in the often-quoted sentence " Je n'impose 
 rien ; je ne propose meine rien ; j'expose," he finds himself, 
 like all economists, unable to abstain from offering counsel. 
 And his policy is opposed to any state interference with in- 
 T dustry. Indeed he preaches in its extreme rigour the laisser 
 ^tfaire doctrine, which he maintains principally on the ground 
 that the spontaneous efforts of the individual for the improve- 
 ment of his condition, by developing foresight, energy, and 
 perseverance, are the most efficient means of social culture. 
 But he certainly goes too far when he represents the action 
 of Governments as normally always repressive and never 
 directive. He was doubtless led into this exaggeration by 
 his opposition to the artificial organisations of labour proposed 
 by so many of his contemporaries, against which he had to 
 vindicate the principle of competition ; but his criticism of 
 these schemes took, as Comte remarks, too absolute a character, 
 tending to the perpetual interdiction of a true systematisation 
 of industry. 1 
 
 AMERICA. 
 
 At this point it will be convenient to turn aside and notice 
 the doctrines of the American economist Carey. Not much 
 had been done before him in the science by citizens of the 
 United States. Benjamin Franklin, otherwise of world-wide 
 
 1 The French economists are continued on page 175.
 
 SYSTEM OF NATURAL LIBERTY. 171 
 
 renown, was author of a number of tracts, in most of which 
 he merely enforces practical lessons of industry and thrift, 
 but in some throws out interesting theoretic ideas. Thus, 
 fifty years before Smith, he suggested (as Petty, however, had 
 already done) human labour as the true measure of value 
 (Modest Inquiry into the Nature and Necessity of a Paper 
 Currency, 1721), and in his Observations concerning the In- 
 c^ase of Mankind (1751) he expresses views akin to those i*f 
 Malthus. Alexander Hamilton, secretary of the treasury, in 
 1791 presented in his official capacity to the House of Repre- 
 sentatives of the United States a Report on the measures by 
 which home manufactures could be promoted. 1 In this docu- 
 ment he gives a critical account of the theory of the subject, 
 represents Smith's system of free trade as possible in prac- 
 tice only if adopted by all nations simultaneously, ascribes 
 to manufactures a greater productiveness than to agriculture, 
 and seelfs to refute the objections against the development 
 of the former in America founded on the want of capital, the 
 high rate of wages, and the low price of land. The conclusion 
 at which he arrives is that for the creation of American manu- 
 factures a system of moderate protective duties was necessary, 
 and he proceeds to describe the particular features of such a 
 system. There is some reason to believe that the German 
 economist List, of whom we shall speak hereafter, was in- 
 fluenced by Hamilton's work, having, during his exile from 
 his native country, resided in the United States. 
 
 Henry Charles Carey (1793-1879), son of an American 
 citizen who had emigrated from Ireland, represents a reaction 
 against the dispiriting character which the Smithiau doctrines 
 had assumed in the hands of Malthus and Ricardo. His aim 
 was, whilst adhering to the individualistic economy, to place 
 it on a higher and surer basis, and fortify it against the 
 assaults of socialism, to which some of the Ricardian tenets 
 had exposed it. The most comprehensive as well as mature 
 exposition of his views is contained in his Principles of Social 
 
 1 Hamilton's Works, edited by H. C. Lodge, vol. iii. p. 294.
 
 I7 POLITICAL ECONOMY. 
 
 Science (1859). Inspired with the optimistic sentiment natural 
 t ) a young and rising nation with abundant undeveloped 
 resources and an unbounded outlook towards the future, 
 
 4, he seeks to show that there exists, independently of human 
 wills, a natural system of economic laws, which is essentially 
 beneficent, and of which the increasing prosperity of the 
 
 r whole community, and especially of the working classes, ia 
 / the spontaneous result, capable of being defeated only by 
 the ignorance or perversity of man resisting or impeding its 
 action. He rejects the Malthusian doctrine of population, 
 maintaining that numbers regulate themselves sufficiently in 
 every well-governed society, and that their pressure on sub- 
 sistence characterises the lower, not the more advanced, stages 
 of civilisation. He rightly denies the universal truth, for 
 all stages of cultivation, of the law of diminishing returns 
 from land. His fundamental theoretic position relates to the 
 antithesis of wealth and value. 
 
 Wealth had been by most economists confounded with the 
 sum of exchange values ; even Smith, though at first distin- 
 guishing them, afterwards allowed himself to fall into this 
 error. Kicardo had, indeed, pointed out the difference, but 
 only towards the end of his treatise, in the body of which value 
 alone is considered. The later English economists had tended 
 to regard their studies as conversant only with exchange ; so 
 far had this proceeded that Whately had proposed for the 
 science the name of Catallactics. When wealth is considered 
 as what it really is, the sum of useful products, we see that 
 it has its origin in external nature as supplying both materials 
 and physical forces, and in human labour as appropriating and 
 adapting those natural materials and forces. Nature gives 
 her assistance gratuitously ; labour is the sole foundation 
 of value. The less we can appropriate and employ natural 
 forces in any production the higher the value of the product, 
 but the less the addition to our wealth in proportion to the 
 labour expended. Wealth, in its true sense of the sum of 
 useful things, is the measure of the power we have acquired
 
 SYSTEM OF NATURAL LIBERTY. 173 
 
 over nature, whilst the value of an object expresses the 
 resistance of nature which labour has tp overcome in order 
 to produce the object. Wealth steadily increases in the 
 course of social progress ; the exchange value of objects, on 
 the other hand, decreases. Human intellect and faculty of 
 social combination secure increased command over natural 
 powers, and use them more largely in production, whilst less 
 labour is spent in achieving each result, and the value of the 
 product accordingly falls. The value of the article is not fixed 
 by its cost of production in the past ; what really determines 
 it is the cost which is necessary for its reproduction under the 
 present conditions of knowledge and skill. The dependence 
 of value on cost, so interpreted, Carey holds to be universally 
 true ; whilst Ricardo maintained it only with respect to objects 
 capable of indefinite multiplication, and in particular did not 
 regard it as applicable to the case of land. Kicardo saw in 
 the productive powers of land a free gift of nature which had 
 been monopolised by a certain number of persons, and which 
 became, with the increased demand for food, a larger and 
 larger value in the hands of its possessors. To this value, 
 however, as not being the result of labour, the owner, it might 
 be maintained, had no rightful claim ; he could not justly 
 demand a payment for what was done by the " original and 
 indestructible powers of the soil." But Carey held that land, 
 as we are concerned with it in industrial life, is really an 
 instrument of production which has been formed as such by 
 man, and that its value is due to the labour expended on it 
 in the past, though measured, not by the sum of that labour, 
 but by the labour necessary under existing conditions to bring 
 new land to the same stage of productiveness. He studies 
 the occupation and reclamation of land with peculiar advantage 
 as an American, for whom the traditions of first settlement 
 are living and fresh, and before whose eyes the process is 
 indeed still going on. The difficulties of adapting a primitive 
 soil to the work of yielding organic products for man's use 
 can be lightly estimated only by an inhabitant of a country
 
 174 POLITICAL ECONOMY. 
 
 long under cultivation. It is, in Carey's view T the overcoming 
 of tliese difficulties by arduous and continued effort that ontitles 
 ) the first occupier of land to his property in the soil. Its pre- 
 sent value forms a very small proportion of the cost expended 
 on it, because it represents only what would be required, with 
 the science and appliances of our time, to bring the land 
 from its primitive into its present state. Property in land is 
 therefore only a form of invested capital a quantity of labour 
 or the fruits of labour permanently incorporated with the soil ; 
 for which, like any other capitalist, the owner is compensated 
 by a share of the produce. He is not rewarded for what is 
 done by the powers of nature, and society is in no sense 
 defrauded by his sole possession. The so-called Ricardian 
 I theory of rent is a speculative fancy, contradicted by all 
 experience. Cultivation does not in fact, as that theory 
 supposes, begin with the best, and move downwards to the 
 poorer soils in the order of their inferiority. 1 The light and 
 dry higher lands are first cultivated ; and only when popula- 
 tion has become dense and capital has accumulated, are the 
 low-lying lands, with their greater fertility, but also with their 
 morasses, inundations, and miasmas, attacked and brought into 
 occupation. Rent, regarded as a proportion of the produce, 
 . sinks, like all interest on capital, in process of time, but, as an 
 absolute amount, increases. The share of the labourer increases, 
 both as a proportion and an absolute amount. Arid thus the 
 interests of these different social classes are in harmony. 
 
 But, Carey proceeds to say, in order that this harmonious 
 progress may be realised, what is taken from the land must 
 be given back to it. All the articles derived from it are 
 really separated parts of it, which must be restored on pain of 
 its exhaustion. Hence the producer and the consumer must 
 be close to each other ; the products must not be exported to 
 a foreign country in exchange for its manufactures, and thus 
 go to enrich as manure a foreign soil. In immediate exchange 
 
 1 It is, however, a mistake to suppose that the assumption of this 
 historical order of descent is essential to the theory in question.
 
 SYSTEM OF NATURAL LIBERTY. 175 
 
 value the landowner may gain by such exportation, but the 
 productive powers of the land will suffer. And thus Carey, 
 who had set out as an earnest advocate of free trade, arrives 
 at the doctrine of protection : the " co-ordinating power " in 
 society must intervene to prevent private advantage from 
 working public mischief. 1 He attributes his conversion on 
 the question to his observation of the effects of liberal and 
 protective tariffs respectively on American prosperity. This 
 observation, he says, threw him back on theory, and led him 
 to see that the intervention referred to might be necessary 
 to remove (as he phrases it) the obstacles to the progress 
 of younger communities created by the action of older and 
 wealthier nations. But it seems probable that the influence 
 of List's writings, added to his own deep-rooted and hereditary 
 jealousy and dislike of English predominance, had something 
 to do with his change of attitude. 
 
 The practical conclusion at which he thus arrived, though 
 it is by no means in contradiction to the doctrine of the 
 existence of natural economic laws, accords but ill with his 
 optimistic scheme ; and another economist, accepting his funda- 
 mental ideas, applied himself to remove the foreign accretion, 
 as he regarded it, and to preach the theory of spontaneous 
 social harmonies in relation with the practice of free trade as 
 its legitimate outcome. 2 
 
 FRANCE (Continued). 
 Frederic Bastiat (1801-1850), though not a profound 
 
 1 This argument seems scarcely met by Professor F. A. Walker, Political 
 Economy, 50-52. But perhaps he is right in thinking that Carey exagge- 
 rates the importance of the considerations on which it is founded. Mill 
 and Leslie remark that the transportation of agricultural products from 
 the western to the Atlantic States has the same effect as their export to 
 Europe, so far as this so-called " land-butchery ' is concerned ; besides, 
 tome manures are obtainable from abroad. 
 
 8 Other writings of Carey's besides his Somal Science are his Essay on 
 the Rate of Wages (1835) '> Principles of Political Economy (1838-1840); 
 Past, Present, and Future (1848) ; Unity of Law (1872).
 
 176 POLITICAL ECONOMY. 
 
 thinker, was a brilliant and popular writer on economic ques- 
 tions. Though he always had an inclination for such stuclies s 
 he was first impelled to the active propagation of his views 
 by his earnest sympathy with the English anti-corn-law agita- 
 tion. Naturally of an ardent temperament, he threw himself 
 with zeal into the free-trade controversy, through which he 
 hoped to influence French economic policy, and published in 
 1845 a history of the struggle under the title of Cobden et 
 la Ligue. In 184548 appeared his Sophismes Bconomiques 
 (Eng. trans, by P. J. Stirling, 1873), in which he exhibited 
 his best qualities of mind. Though Cairnes goes too far in 
 comparing this work with the Lettres Provinciates, it is cer- 
 tainly marked by much liveliness, point, and vigour. But to 
 expose the absurdities of the ordinary protectionism- was no 
 difficult task ; it is only in such a form as the policy assumed 
 in the scheme of List, as purely provisional and preparatory, 
 that it deserves and demands consideration. After the revolu- 
 tion of 1848, which for a time put an end to the free-trade 
 movement in France, the efforts of Bastiat were directed 
 against the socialists. Besides several minor pieces possessing 
 the same sort of merit as the Sophismes, he produced, with 
 a view to this controversy, his most ambitious as well as 
 characteristic work, the Harmonies ficonomiques (Eng. trans, 
 by P. J. Stirling, 1860). Only the first volume was published; 
 it appeared in 1850, and its author died in the same year. 
 Since then the notes and sketches which he had prepared as 
 materials towards the production of the second volume have 
 been given to the public in the collected edition of his 
 writings (by Paillottet, with Life by Fontenay, 7 vols.), and 
 we can thus gather what would have been the spirit and 
 substance of the later portions of the book. 
 
 It will always be historically interesting as the last incar- 
 nation of thorough-going economic optimism. This optimism, 
 recurring to its first origin, sets out from theological considera- 
 tions, and Bastiat is commended by his English translator for 
 treating political economy "in connection with final causes."
 
 SYSTEM OF NATURAL LIBERTY. 177 
 
 The spirit of the work is to represent "all principles, all 
 motives, all springs of action, all interests, as co-operating 
 towards a grand final result which humanity will never reach, 
 but to which it will always increasingly tend, namely, the 
 indefinite approximation of all classes towards a level, which 
 steadily rises, in other words, the equalisation of individuals 
 in the general amelioration." 
 
 What claimed to be novel and peculiar in his scheme was 
 principally his theory of value. Insisting on the idea that 
 value does not denote anything inherent in the objects to 
 which it is attributed, he endeavoured to show that it never 
 signifies anything but the ratio of two " services." This view 
 he develops with great Variety ted ielicity of illustration. 
 Only the mutual services of human beings, according to him, 
 possess value and can claim a retribution ; the assistance given 
 by nature to the work of production is always purely gratui- 
 tous, and never enters into price. Economic progress, as, for 
 example, the improvement and larger use of machinery, tends 
 perpetually to transfer more and more of the elements of 
 utility from the domain of property, and therefore of value, 
 into that of community, or of universal and unpurchased 
 enjoyment It will be observed that this theory is substanti- 
 ally identical with Carey's, which had been earlier propounded ; 
 and the latter author in so many words alleges it to have been 
 taken from him without acknowledgment. It has not perhaps 
 been sufficiently attended to that very similar views are found 
 in Dunoyer, of whose work Bastiat spoke as exercising a 
 powerful influence on " the restoration of the science," and 
 whom Fontenay, the biographer of Bastiat, tells us he recog- 
 nised as one of his misters, Charles Comte l being the other. 
 
 The mode which has just been explained of conceiving 
 industrial action and industrial progress is interesting and 
 
 1 Charles Comte (1782-1837) was son-in-law of J. B. Say. He waa 
 associated with Dunoyer in his political writings and, like him, distin- 
 guished for his honourable independence. He was author of the TraM 
 de Leyitlation, a meritorious and useful, but not a profound work.
 
 178 POLITICAL ECONOMY. 
 
 instructive so far as it is really applicable, but it was unduly 
 generalised. Cairnes has well pointed out that Bastiat's 
 theoretic soundness was injuriously affected by his habit of 
 studying doctrines with a direct view to contemporary social 
 and political controversies. He was thus predisposed to 
 accept views which appeared to lend a sanction to legitimate 
 and valuable institutions, and to reject those which seemed to 
 him to lead to dangerous consequences. His constant aim 
 is, as he himself expressed it, to " break the weapons " of 
 anti-social reasoners " in their hands," and this preoccupation 
 interferes with the single-minded effort towards the attainment 
 of scientific truth. The creation or adoption of his theory of 
 value was inspired by the wish to meet the socialistic criticism 
 of property in land ; for the exigencies of this controversy it 
 was desirable to be able to show that nothing is ever paid for 
 except personal effort. His view of rent was, therefore, so to 
 speak, foreordained, though it may have been suggested, aa 
 indeed the editor of his posthumous fragments admits, by the 
 writings of Carey. He held, with the American author, that 
 rent is purely the reward of the pains and expenditure of the 
 landlord or his predecessors in the process of converting the 
 natural soil into & farm by clearing, draining, fencing, and the 
 other species of permanent improvements. 1 He thus gets rid 
 of the (so-called) Ricardian doctrine, which was accepted by 
 the socialists, and by them used for the purpose of assailing 
 the institution of landed property, or, at least, of supporting a 
 claim of compensation to the community for the appropriation 
 of the land by the concession of the " right to labour." As 
 Cairnes has said, 2 " what Bastiat did was this : having been 
 at infinite pains to exclude gratuitous gifts of nature from the 
 possible elements of value, and pointedly identified " [rather, 
 associated] " the phenomenon with ' human effort ' as its 
 
 1 M. Leroy-Beaulieu maintains ( Essai sur la Repartition des Richessei, 
 2d ed., 1882) that this, though not strictly, is approximately true that 
 economic forms a very small part of actual rent. 
 
 8 Estays in Political Economy, p. 334.
 
 SYSTEM OF NATURAL LIBERTY. 179 
 
 exclusive source, he designates human effort by the term 
 ' service,' and then employs this term to admit as sources of 
 value those very gratuitous natural gifts the exclusion of 
 which in this capacity constituted the essence of his doctrine." 
 The justice of this criticism will be apparent to any one who 
 considers the way in which Bastiat treats the question of the 
 value of a diamond. That what is paid for in most cases of 
 human dealings is effort no one can dispute. But it is surely 
 a reductio ad dbsurdum of his theory of value, regarded as a 
 doctrine of universal application, to represent the price of a 
 diamond which has been accidentally found as remuneration 
 for the effort of the finder in appropriating and transmitting 
 it. And, with respect to land, whilst a large part of rent, in 
 the popular sense, must be explained as interest on capital, 
 it is plain that the native powers of the soil are capable of 
 appropriation, and that then a price can be demanded and will 
 be paid for their use. 
 
 Bastiat is weak on the philosophical side ; he is filled with 
 the ideas of theological teleology, and is led by these ideas to 
 form a priori opinions of what existing facts and laws must 
 necessarily be. And the jus naturae, which, like metaphysical 
 ideas generally, has its root in theology, is as much a postu- 
 late with him as with the physiocrats. Thus, in his essay 
 on Free Trade, he says : " Exchange is a natural right like 
 property. Every citizen who has created or acquired a product 
 ought to have the option of either applying it immediately to 
 his own use or ceding it to whosoever on the surface of the 
 globe consents to give him in exchange the object of his 
 desires." Something of the same sort had been said by 
 Turgot ; and in his time this way of regarding things was 
 excusable, and even provisionally useful; but in the middle 
 of the i Qth century it was time that it should be seen through 
 and abandoned. 
 
 Bastiat had a real enthusiasm for a science which he thought 
 destined to render great services to mankind, and he seems 
 to have believed intensely the doctrines which gave a special
 
 i8o POLITICAL ECONOMY. 
 
 colour to his teaching. If his optimistic exaggerations favoured 
 the propertied classes, they certainly were not prompted by 
 self-interest or servility. But they are exaggerations ; and, 
 amidst the modern conflicts of capital and labour, his per- 
 petual assertion of social harmonies is the cry of " peace, 
 peace," where there is no peace. The freedom of industry, 
 which he treated as a panacea, has undoubtedly brought with 
 it great benefits ; but a sufficient experience has shown that 
 it is inadequate to solve the social problem. How can the 
 advocates of economic revolution be met by assuring them 
 that everything in the natural economy is harmonious that, 
 in fact, all they seek for already exists ? A certain degree of 
 spontaneous harmony does indeed exist, for society could not 
 continue without it, but it is imperfect and precarious ; the 
 question is, How can we give to it the maximum of complete- 
 ness and stability ? 
 
 Augustin Cournot (18011877) appears to have been the 
 first l who, with a competent knowledge of both subjects, en- 
 deavoured, to apply mathematics to the treatment of economic 
 questions. His treatise entitled Recherches sur les Principes 
 Mathematiques de la Theorie des Richesses was published in 
 1838. He mentions in it only one previous enterprise of the 
 same kind (though there had in fact been others) that, 
 namely, of Nicolas Frangois Canard, whose book, published 
 in 1802, was crowned by the Institute, though "its principles 
 were radically false as well as erroneously applied." Not- 
 withstanding Cournot's just reputation as a writer on mathe- 
 matics, the Recherches made little impression. The truth 
 seems to be that his results are in some cases of little import- 
 ance, in others of questionable correctness, and that, in the 
 abstractions to which he has recourse in order to facilitate his 
 calculations, an essential part of the real conditions of the 
 problem is sometimes omitted. His pages abound in symbols 
 
 1 Hermann Heinrich Gossan's work, Entwickelung der Gesetze det 
 menschlichen VerTcehrs, so highly praised by Jevous, Theory of Pol. Meon., 
 ad ed., Pref., was published in 1854.
 
 SYSTEM OF NATURAL LIBERTY. 181 
 
 representing unknown functions, the form of the function 
 being left to be ascertained by observation of facts, which he 
 does not regard as a part of his task, or only some known 
 properties of the undetermined function being used as bases 
 for deduction. Jevons includes in his list of works in which 
 a mathematical treatment of economics is adopted a second 
 treatise which Cournot published in 1863, with the title 
 Principes de la Theorie des Richesses. But in reality, in th6 
 work so named, which is written with great ability, and con- 
 tains much forcible reasoning in opposition to the exaggera- 
 tions of the ordinary economists, the mathematical method is 
 abandoned, and there is not an algebraical formula in the book. 
 The author admits that the public has always shown a repug- 
 nance to the use of mathematical symbols in economic dis- 
 cussion, and, though he thinks they might be of service in 
 facilitating exposition, fixing the ideas, and suggesting further 
 developments, he acknowledges that a grave danger attends 
 their use. The danger, according to him, consists in the 
 probability that an undue value may be attached to the 
 abstract hypotheses from which the investigator sets out, and 
 which enable him to construct his formulae. And his practical 
 conclusion is that mathematical processes should be employed 
 only with great precaution, or even not employed at all if the 
 public judgment is against them, for "this judgment," he 
 says, " has its secret reasons, almost always more sure than 
 those which determine the opinions of individuals." It is an 
 obvious consideration that the acceptance of unsound or one- 
 sided abstract principles as the premises of argument does not 
 depend on the use of mathematical forms, though it is possible 
 that the employment of the latter may by association produce 
 an illusion in favour of the certainty of those premises. But 
 the great objection to the use of mathematics in economic 
 reasoning is that it is necessarily sterile. If we examine the 
 attempts which have been made to employ it, we shall find 
 that the fundamental conceptions on which the deductions 
 are made to rest are vague, indeed metaphysical, in their
 
 182 POLITICAL ECONOMY. 
 
 character. Units of animal or moral satisfaction, of utility, 
 and the like, are as foreign to positive science as a unit of 
 dormitive faculty would be ; and a unit of value, unless we 
 understand by value the quantity of one commodity exchange- 
 able under given conditions for another, is an equally indefinite 
 idea. Mathematics can indeed formulate ratios of exchange 
 when they have once been observed ; but it cannot by any 
 process of its own determine those ratios, for quantitative 
 conclusions imply quantitative premises, and these are want- 
 ing. There is then no future for this kind of study, and it 
 is only waste of intellectual power to pursue it. But the im- 
 portance of mathematics as an educational introduction to all 
 the higher orders of research is not affected by this conclusion. 
 The study of the physical medium, or environment, in which 
 economic phenomena take place, and by which they are 
 affected, requires mathematics as an instrument ; and nothing 
 can ever dispense with the didactic efficacy of that science, 
 as supplying the primordial type of rational investigation, 
 giving the lively sentiment of decisive proof, and disinclining 
 the mind to illusory conceptions and sophistical combinations. 
 And a knowledge of at least the fundamental principles of 
 mathematics is necessary to economists to keep them right in 
 their statements of doctrine, and prevent their enunciating 
 propositions which have no definite meaning. Even dis- 
 tinguished writers sometimes betray a serious deficiency in 
 this respect ; thus they assert that one quantity " varies in- 
 versely as " another, when what is meant is that the sum 
 (not the product) of the two is constant ; and they treat as 
 capable of numerical estimation the amount of an aggregate 
 of elements which, differing in kind, cannot be reduced to a 
 common standard. As an example of the latter error, it may 
 be mentioned that " quantity of labour," so often spoken of 
 by Kicardo, and in fact made the basis of his /stem, includes 
 such various species of exertion as will not admit of summa- 
 tion or comparison.
 
 SYSTEM OF NATURAL LIBERTY. 183 
 
 ITALY. 
 
 The first Italian translation of the Wealth of NaMont 
 appeared in 1780. The most distinguished Italian economist 
 of the period here dealt with was, however, no disciple of 
 Smith. This was Melchiorre Gioja, author, besides statisti- 
 cal and other writings, of a voluminous work entitled Nuovo 
 Prospetto delle Scienze Economiche (6 vols., 1815-17; the 
 work was never completed), intended to be an encyclopaedia 
 of all that had been taught by theorists, enacted by Govern- 
 ments, or effected by populations in the field of public and 
 private economy. It is a learned and able treatise, but so 
 overladen with quotations and tables as to repel rather than 
 attract readers. Gioja admired the practical economic system 
 of England, and enlarges on the advantages of territorial proper- 
 ties, manufactures, and mercantile enterprises on the large as 
 opposed to the small scale. He defends a restrictive policy, 
 and insists on the necessity of the action of the state as a 
 guiding, supervising, and regulating power in the industrial 
 world. But he is in full sympathy with the sentiment of his 
 age against ecclesiastical domination and other mediaeval 
 survivals. We can but very briefly notice Romagnosi (d. 
 1835), who, by his contributions to periodical literature, ami 
 by his personal teaching, greatly influenced the course of 
 economic thought in Italy ; Antonio Scialoja (Principii 
 d' Economia Sociale, 1840; and Carestia e Governo, 1853), 
 an able advocate of free trade (d. 1877); Luigi Cibrario, well 
 known as the author of Economia Politico, del media evo 
 (1839; 5th ed., 7861: French trans, by Barneaud, 1859), 
 which is in fact a view of the whole social system of that 
 period; Girolamo Boccardo (b. 1829; Trattato Teorico-pratico 
 di Economia Politica, 1853); the brilliant controversialist 
 Francesco Ferrara, professor at Turin from 1849 to 1858 (in 
 whose school most of the present Italian teachers of the science 
 were, directly or indirectly, educated), a partisan of the laisser 
 faire doctrine in its most extreme form, and an advocate of
 
 184 POLITICAL ECONOMV. 
 
 the peculiar opinions of Carey and Bastiat on the subject of 
 rent; and,, lastly, the Neapolitan minister Ludovico Bianchini 
 (Prindpii della Scienza del Ben Vivere Sociale, 1845 ai 'd 1855), 
 who is remarkable as having followed in some degree an 
 historical direction, and asserted the principle of relativity, 
 and who also dwelt on the relations of economics with morals, 
 by a due attention to which the Italian economists have, 
 indeed, in general been honourably distinguished. 
 
 SPAIN. 
 
 The Wealth of Nations was translated into Spanish by 
 Ortiz in 1794. It may perhaps have influenced Caspar de 
 Jovellanos, who in 1795 presented to the council of Castile 
 and printed in the same year his celebrated Informe de la 
 Sociedad Economica de Madrid en expedients de Ley Agraria, 
 which was a powerful plea for reform, especially in taxation 
 and the laws affecting agriculture, including those relating to 
 the systems of entail and mortmain. An English version of 
 this memoir is given in the translation (1809) of Laborde's 
 Spain, voL iv. 
 
 GERMANY. 
 
 Roscher observes that Smith did not at first produce much 
 impression in Germany. 1 He does not appear to have been 
 known to Frederick the Great ; he certainly exercised no in- 
 fluence on him. Nor did Joseph II. take notice of his work. 
 And of the minor German princes, Karl Friedrich of Baden, 
 as a physiocrat, would not be accessible to his doctrines. It 
 was otherwise in the generation whose principal activity be- 
 longs to the first decade of the igth century. The Prussian 
 statesmen who were grouped round Stein had been formed aa 
 
 1 The first German version of the Wealth of Nations was that by Johann 
 Friedrich Schiller, published 1776-78. The second, which is the first 
 good one, was by Christian Garve (1794, and again 1799 and 1810). A 
 bter one by C. W. Asher (1861) is highly commended.
 
 SYSTEM OF NATURAL LIBERTY. 185 
 
 economists by Smith, as had also Gentz, intellectually the 
 most important man of the Metternich regime in Austria. 
 
 The first German expositors of Smith who did more than 
 merely reproduce his opinions were Christian Jacob Kraus 
 (1753-1807), Georg Sartorius (1766-1828), and August Ferdi- 
 nand Luder(i 7 60-1 8 1 9). They contributed independent views 
 
 ^^^^^^^ "^ 
 
 from different standpoints, the first from that of the effect 
 of Smith's doctrine on practical government, the second from 
 that of its bearing on history, the third from that of its rela- 
 tion to statistics. Somewhat later came Gottlieb Hufeland 
 (i76o-i8i^)7^h ann Friedrich Eusebius Lotz (1771-1838,) 
 and Ludwig Heinrich von Jakob (1759-1827), who, whilst 
 essentially of the school of Smith, apply themselves to a re- 
 vision of the fundamental conceptions of the science. These 
 authors did not exert anything like the wide influence of 
 Say, partly on account of the less attractive form of their 
 writings, but chiefly because Germany had not then, like 
 France, a European audience. Julius von Soden (1754-1831) 
 is largely founded on Smith, whom, however, he criticises 
 with undue severity, especially in regard to his form and 
 arrangement ; the Wealth of Nations he describes as a series 
 of precious fragments, and censures Smith for the absence of 
 a comprehensive view of his whole subject, and also as one- 
 sidedly English in his tendencies. 
 
 The highest form of the Smithian doctrine in Germany 
 is represented by four distinguished names : Karl Heinrich 
 Eau (1792-1870), Friedrich Nebenius (1784-1857), Friedrich 
 Benedict Wilhelm Hermann (1795-1868), and Johann Hein- 
 rich von Thiinen (1783-1850). 
 
 Raja's characteristic is " erudite thoroughness." His Lehr- 
 buck (1826-32) is an encyclopaedia of all that up to his time 
 had appeared in Germany under the several heads of Volks- 
 wirthschaftslehre, Volkswirllischaftspolitik, and Finanzioissen- 
 schaft. His book is rich in statistical observations, and is 
 particularly instructive on the economic effects of different 
 geographical conditions. It is well adapted for the teaching
 
 186 POLITICAL ECONOMY. 
 
 of public servants whose duties are connected with economics, 
 and it has in fact been the source from which the German 
 official world down to the present time has derived its know- 
 ledge of the science. In his earlier period Eau had insisted on 
 the necessity of a reform of economic doctrine (An&ichten der 
 Volksmrthschaft, 1821), and had tended towards relativity 
 and the historical method; but he afterwards conceived the 
 mistaken notion that that method " only looked into the past 
 without studying the means of improving the present," and 
 became himself purely practical in the narrower sense of that 
 word. He has the merit of having given a separate treat- 
 ment of Unternehmergewinn, or " wages of management." The 
 Prussian minister Nebenius, who was largely instrumental 
 in the foundation of the Zollverein, was author of a highly 
 esteemed monograph on public credit (1820). The Staats- 
 loirthschaftliche Untersuclmngen (1832 ; 2d ed., 1870) of 
 Hermann do not form a regular system, but treat a series of 
 important special subjects. His rare technological knowledge 
 gave him a great advantage in dealing with some economic 
 questions. He reviewed the principal fundamental ideas of 
 the science with great thoroughness and acuteness. " His 
 strength," says Koscher, " lies in his clear, sharp, exhaustive 
 distinction between the several elements of a complex con- 
 ception, or the several steps comprehended in a complex act." 
 For keen analytical power his German brethren compare him 
 with Ricardo. But he avoids several one sided views of 
 the English economist. Thus he places public spirit beside 
 egoism as an economic motor, regards price as not measured 
 by labour only but as a product of several factors, and habi- 
 tually contemplates the consumption of the labourer, not as 
 a part of the cost of production to the capitalist, but as the 
 main practical end of economics. Von Thiinen is known 
 principally by his remarkable work entitled Der Isolirte Stoat 
 in Beziehung auf Landwirthschaft und Nationalokonomie 
 (1826; 2d ed., 1842). In this treatise, which is a classic in 
 the political economy of agriculture, there is a rare union of
 
 SYSTEM OF NATURAL LIBERTY. 18? 
 
 exact observation with creative imagination. With a view to 
 exhibit the natural development of agriculture, he imagines 
 a state, isolated from the rest of the world, circular in form 
 and of uniform fertility, without navigable rivers or canals, with 
 a single large city at its centre, which supplies it with manu- 
 factures and receives in exchange for them its food-products, 
 and proceeds to study the effect of distance from this central 
 market on the agricultural economy of the several concentric 
 spaces which compose the territory. The method, it will 
 be seen, is highly abstract, but, though it may not be fruit- 
 ful, it is quite legitimate. The author is under no illusion 
 blinding him to the unreality of the hypothetic case. The 
 supposition is necessary, in his view^ in order to separate 
 and consider apart one essential condition that, namely, of 
 situation with respect to the market. It was his intention 
 (imperfectly realised, however) to institute afterwards several 
 different hypotheses in relation to his isolated state, for the 
 purpose of similarly studying other conditions which in real 
 life are found in combination or conflict. The objection to 
 this method lies in the difficulty of the return from the 
 abstract study to the actual facts; and this is probably an 
 insuperable one in regard to most of its applications. The 
 investigation, however, leads to trustworthy conclusions as 
 to the conditions of the succession of different systems of land 
 economy. The book abounds in calculations relating to agri- 
 cultural expenditure and income, which diminish its interest 
 to the general reader, though they are considered valuable to 
 the specialist. They embody the results of the practical ex- 
 perience of the author on his estate of Tellow in Mecklenburg- 
 Schwerin. Von Thiinen was strongly impressed with the 
 danger of a violent conflict between the middle class and the 
 proletariate, and studied earnestly the question of wages, 
 which he was one of the first to regard habitually, not merely 
 as the price of the commodity labour, but as the means of 
 subsistence of the mass of the community. He arrived by 
 mathematical reasonings of some complexity at a formula
 
 188 POLITICAL ECONOMY. 
 
 which expresses the amount of " natural wages " as = 
 where a is the necessary expenditure of the labourer for 
 subsistence, and p is the product of his labour. To this 
 formula he attributed so much importance that he directed it 
 to be engraved on his tomb. It implies that wages ought to 
 rise with the amount of the product ; and this conclusion 
 led him to establish on his estate a system of participation by 
 the labourers in the profits of farming, of which some account 
 will be found in Mr. Sedley Taylor's Profit-sharing between 
 Capital and Labour (1884). Yon Thiinen deserves more 
 attention than he has received in England ; both as a man 
 and as a writer he was eminently interesting and original ; and 
 there is much in Der Isolirte Stoat and his other works that 
 is awakening and suggestive. 
 
 Roscher recognises what he calls a Germano-Russian 
 (deutsch-russische) school of political economy, represented 
 principally by Heinrich Storch (1766-1825). Mercantilist 
 principles had been preached by a native (" autochthonen ") 
 economist, Ivan Possoschkoff, in the time of Peter the Great. 
 The new ideas of the Smithian system were introduced into 
 Russia by Christian Von Schlb'zer (17741831) in his pro- 
 fessorial lectures and in his Anfangsgriinde der Staatswirth- 
 schaft, oder die Lehre von National-reichthume (18051807). 
 Storch was instructor in economic science of the future 
 emperor Nicholas and his brother the grand-duke Michael, 
 and the substance of his lessons to them is contained in his 
 Cours d'JZconomie Politique (1815). The translation of this 
 treatise into Russian was prevented by the censorship ; Rau 
 published a German version of it, with annotations, in 1819. 
 It is a work of a very high order of merit. The epithet 
 " deutsch-russisch " seems little applicable to Storch ; as 
 Roscher himself says, he follows mainly English and French 
 writers Say, Sismondi, Turgot, Bentham, Steuart, and Hume, 
 but, above all, Adam Smith. His personal position (and the 
 same is true of Schlozer) led him to consider economic 
 doctrines in connection with a stage of culture different from
 
 SYSTEM OF NATURAL LIBERTY. 189 
 
 that of the Western populations amongst which they had 
 been formulated ; this change of the point of view opened the 
 door to relativity, and helped to prepare the Historical method. 
 Storch's study of the economic and moral effects of serfdom 
 is regarded as especially valuable. The general subjects with 
 which he has particularly connected his name are (i) the 
 doctrine of immaterial commodities (or elements of national 
 prosperity), such as health, talent, morality, and the like ; 
 (2) the question of "productive" and "unproductive," as 
 characters of labour and of consumption, on which he dis- 
 agreed with Smith and may have furnished indications to 
 Dunoyer; and (3) the differences between the revenue of 
 nations and that of individuals, on which he follows Lauder- 
 dale and is opposed to Say. The latter economist having 
 published at Paris (1823) a new edition of Storch's Cours, 
 with criticisms sometimes offensive in tone, he published by 
 way of reply to some of Say's strictures what is considered 
 his ripest and scientifically most important work, Considera- 
 tions sur la nature du Revenu National (1824 ; translated into 
 German by the author himself, 1825). 
 
 A distinct note of opposition to the Smithian economics was 
 sounded in Germany by two writers, who, setting out from 
 somewhat different points of view, animated by different 
 sentiments, and favouring different practical systems, yet, so 
 far as their criticisms are concerned, arrive at similar con- 
 clusions ; we mean Adam Muller and Friedrich List. 
 
 Adam Muller (1779-1829) was undoubtedly a man of real 
 genius. In his principal work Elemente der Staatskunst 
 (1809), and his other writings, he represents a movement of 
 economic thought which was in relation with the (so-called) 
 Eomantic literature of the period. The reaction against 
 Smithianism of which he was the coryphaeus was founded 
 on an attachment to the principles and social system of the 
 Middle Ages. It is possible that the political and historical 
 ideas which inspire him, his repugnance to contemporary 
 liberalism, and his notions of regular organic development,
 
 igo POLITICAL ECONOMY. 
 
 especially in relation to England, were in some degree imbibed 
 from Edmund Burke, whose Reflections on the Revolution in 
 France had been translated into German by Friedrich Gentz, 
 the friend and teacher of Miiller. The association of his 
 criticisms with mediaeval prepossessions ought not to prevent 
 our recognising the elements of truth which they contain. 
 
 He protests against the doctrine of Smith and against 
 modern political economy in general on the ground that it 
 presents a mechanical, atomistic, and purely material con- 
 ception of society, that it reduces to nullity all moral forces 
 and ignores the necessity of a moral order, that it is at bottom 
 no more than a theory of private property and private interests, 
 and takes no account of the life of the people as a whole in 
 its national solidarity and historical continuity. Exclusive 
 attention, he complains, is devoted to the immediate production 
 of objects possessing exchange value and to the transitory 
 existence of individuals ; whilst to the maintenance of the 
 collective production for future generations, to intellectual 
 products, powers, possessions, and enjoyments, and to the 
 State with its higher tasks and aims, scarcely a thought is 
 given. The truth is that nations are specialised organisms 
 with distinct principles of life, having definite individualities 
 which determine the course of their historical development. 
 Each is through all time one whole ; and, as the present is 
 the heir of the past, it ought to keep before it constantly the 
 permanent good of the community in the future. The eco- 
 nomic existence of a people is only one side or province of 
 its entire activity, requiring to be kept in harmony with the 
 higher ends of society ; and the proper organ to effect this 
 reconciliation is the State, which, instead of being merely an 
 apparatus for the administration of justice, represents the 
 totality of the national life. The division of labour, Miiller 
 holds, is imperfectly developed by Smith, who makes it to 
 arise out of a native bent for truck or barter ; whilst its 
 dependence on capital on the labours and accumulations of 
 past generations is not duly emphasised, nor is the necessary
 
 SYSTEM OF NATURAL LIBERTY. 191 
 
 counterpoise and completion of the division of labour, in 
 the principle of the national combination of labour, properly 
 brought out. Smith recognises only material, not spiritual, 
 capital ; yet the latter, represented in every nation by language, 
 as the former by money, is a real national store of experience, 
 wisdom, good sense, and moral feeling, transmitted with in- 
 crease by each generation to its successor, and enables each 
 generation to produce immensely more than by its own unaided 
 powers it could possibly do. Again, the system of Smith 
 is one-sidedly British ; if it is innocuous on the soil of 
 England, it is because in her society the old foundations on 
 which the spiritual and material life of the people can securely 
 rest are preserved in the surviving spirit of feudalism and the 
 inner connection of the whole social system the national 
 capital of laws, manners, reputation, and credit, which has 
 been handed down in its integrity in consequence of the in- 
 sular position of the country. . For the continent of Europe 
 a quite different system is necessary, in which, in place of the 
 sum of the private wealth of individuals being viewed as the 
 primary object, the real wealth of the nation and the produc- 
 tion of national power shall be made to predominate, and along 
 with the division of labour its national union and concentra- 
 tion along with the physical, no less the intellectual and 
 moral, capital shall be embraced. In these leading traits of 
 Miiller's thought there is much which foreshadows the more 
 recent forms of German economic and sociological speculation, 
 especially those characteristic of the " Historical " school. 
 
 Another element of opposition was represented by Friedrich 
 List (1798-1846), a man of great intellectual vigour as well 
 as practical energy, and notable as having powerfully contri- 
 buted by his writings to the formation of the German Zull- 
 verein. His principal work is entitled Das Nationals System 
 der Politischen Oekonomie (1841 ; 6th ed., 1877 : Eng. trans., 
 1885). Though his practical conclusions were different from 
 Miiller's, he was largely influenced by the general mode of 
 thinking of that writer, and by his strictures on the doctrine
 
 192 POLITICAL ECONOMY. 
 
 of Smith. It was particularly against the cosmopolitan prin- 
 ciple in the modern economical system that he protested, and 
 against the absolute doctrine of free trade, which was in 
 harmony with that principle. He gave prominence to the 
 National idea, and insisted on the special requirements of 
 each nation according to its circumstances and especially to 
 the degree of its development. 
 
 He refuses to Smith's system the title of the industrial, 
 which he thinks more appropriate to the mercantile system, 
 and designates the former as " the exchange- value system." 
 He denies the parallelism asserted by Smith between the eco- 
 nomic conduct proper to an individual and to a nation, and 
 holds that the immediate private interest of the separate 
 members of the community will not lead to the highest good 
 of the whole. The nation is an existence, standing between 
 the individual and Humanity, and formed into a unity by its 
 language, manners, historical development, culture, and con* 
 stitution. This unity is the first condition of the security, 
 wellbeing, progress, and civilisation of the individual ; and 
 private economic interests, like all others, must be subordi- 
 nated to the maintenance, completion, and strengthening of 
 the nationality. The nation having a continuous life, its true 
 wealth consists and this is List's fundamental doctrine not 
 in the quantity of exchange- values which it possesses, but in 
 the full and many-sided development of its productive powers. 
 Its economic education, if we may so speak, is more important 
 than the immediate production of values, and it may be right 
 that the present generation should sacrifice its gain and enjoy- 
 ment to secure the strength and skill of the future. In the 
 sound and normal condition of a nation which has attained 
 economic maturity, the three productive powers of agriculture, 
 manufactures, and commerce should be alike developed. But 
 the two latter factors are superior in importance, as exercising 
 a more effective and fruitful influence on the whole culture 
 of the nation, as well as on its independence. Navigation, 
 railways, all higher technical arts, connect themselves specially
 
 SYSTEM OF NATURAL LIBERTY. 193 
 
 irith these factors ; whilst in a purely agricultural state there 
 is a tendency to stagnation, absence of enterprise, and the main- 
 tenance of antiquated prejudices. But for the growth of the 
 higher forms of industry all countries are not adapted only 
 those' of the temperate zones, whilst the torrid regions have 
 a natural monopoly in the production of certain raw materials ; 
 end thus between these two groups of countries a division of 
 labour and confederation of powers spontaneously takes place. 
 List then goes on to explain his theory of the stages of econo- 
 mic development through which the nations of the temperate 
 zone, which are furnished with all the necessary conditions, 
 naturally pass, in advancing to their normal economic state. 
 These are (i) pastoral life, (2) agriculture, (3) agriculture 
 united with manufactures; whilst in the final stage agriculture, 
 manufactures, and commerce are combined. The economic 
 task of the state is to bring into existence by legislative and 
 administrative action the conditions required for the progress 
 of the nation through these stages. Out of this view arises 
 List's scheme of industrial politics. Every nation, according 
 to him, should begin with free trade, stimulating and improv- 
 ing its agriculture by intercourse with richer and more culti- 
 vated nations, importing foreign manufactures and exporting 
 raw products. When it is economically so far advanced that 
 it can manufacture for itself, then a system of protection 
 should be employed to allow the home industries to develop 
 themselves fully, and save them from being overpowered in 
 their earlier efforts by the competition of more matured foreign 
 industries in the home market. When the national industriea 
 have grown strong enough no longer to dread this competi- 
 tion, then the highest stage of progress has been reached ; free 
 bade should again become the rule, and the nation be thus 
 thoroughly incorporated with the universal industrial union. 
 In List's time, according to his view, Spain, Portugal, and 
 Naples were purely agricultural countries; Germany and the 
 United States of North America had arrived at the second 
 tage, their manufactures being in process of development- 
 
 M
 
 194 POLITICAL ECONOMY. 
 
 France was near the boundary of the third or highest stage, 
 which England alone had reached. For England, therefore, 
 as well as for the agricultural countries first-named, free trade 
 was the right economic policy, but not for Germany or America. 
 What a nation loses for a time in exchange-values during the 
 protective period she much more than gains in the long run 
 in productive power, the temporary expenditure being strictly 
 analogous, when we place ourselves at the point of view of 
 the life of the nation, to the cost of the industrial education 
 of the individual. The practical conclusion which List drew 
 for his own country was that she needed for her economic pro- 
 gress an extended and conveniently bounded territory reaching 
 to the sea-coast both on north and south, and a vigorous ex- 
 pansion of manufactures and commerce, and that the way to 
 the latter lay through judicious protective legislation with a 
 customs union comprising all German lands, and a German 
 marine with a Navigation Act. The national German spirit, 
 striving after independence and power through union, and the 
 national industry, awaking from its lethargy and eager to 
 recover lost ground, were favourable to the success of List's 
 book, and it produced a great sensation. He ably represented 
 the tendencies and demands of his time in his own country ; 
 his work had the effect of fixing the attention, not merely of 
 the speculative and official classes, but of practical men gene- 
 rally, on questions of Political Economy ; and he had without 
 doubt an important influence on German industrial policy. 
 So far as science is concerned, the emphasis he laid on the 
 relative historical study of stages of civilisation as affecting 
 economic questions, and his protest against absolute formulas, 
 had a certain value ; and the preponderance given to the 
 national development over the immediate gains of individuals 
 was sound in principle ; though his doctrine was, both on its 
 public and private sides, too much of a mere chrematistic, 
 and tended in fact to set up a new form of mercantilism, 
 rather than to aid the contemporary effort towards social 
 reform.
 
 SYSTEM OF NATURAL LIBERTY. 195 
 
 Most of the writers at home or abroad hitherto mentioned 
 continued the traditions of the school of Smith, only develop- 
 ing his doctrine in particular directions, sometimes not without 
 one-sidedness or exaggeration, or correcting minor rrors into 
 which he had fallen, or seeking to give to tne exposition of 
 his principles more of order and lucidity. Some assailed the 
 abuse of abstraction by Smith's successors, objected to the con- 
 clusions of Kicardo and his followers their non-accordance with 
 the actual facts of human life, or protested against the anti- 
 social consequences which seemed to result from the application 
 of the (so-called) orthodox formulas. A few challenged Smith's 
 fundamental ideas, and insisted on the necessity of altering the 
 basis of general philosophy on which his economics ultimately 
 rest. But, notwithstanding various premonitory indications, 
 nothing substantial, at least nothing effective, was done, within 
 the field we have as yet surveyed, towards the establishment 
 of a really new order of thinking, or new mode of proceeding, 
 in this branch of inquiry. Now, however, we have to describe 
 a great and growing movement, which has already considerably 
 changed the whole character of the study in the conceptions 
 of many, and which promises to exercise a still more potent 
 influence in the future. We mean the rise of the Historical 
 School, which we regard as marking the third epoch in the 
 modern development of economic science.
 
 CHAPTER VI. 
 THE HISTORICAL SCHOOL. 
 
 THE negative movement which filled the eighteenth century 
 had for its watchword on the economic side the liberation of 
 industrial effort from both feudal survivals and Governmental 
 fetters. But in all the aspects of that movement, the economic 
 as well as the rest, the process of demolition was historically 
 only the necessary preliminary condition of a total renova- 
 tion, towards which Western Europe was energetically tending, 
 though with but an indistinct conception of its precise nature. 
 The disorganisation of the body of opinion which underlay the 
 old system outran the progress towards the establishment of 
 new principles adequate to form a guidance in the future. The 
 critical philosophy which had wrought the disorganisation 
 could only repeat its formulas of absolute liberty, but was 
 powerless for reconstruction. And hence there was seen 
 throughout the West, after the French explosion, the remark- 
 able spectacle of a continuous oscillation between the tendency 
 to recur to outworn ideas and a vague impulse towards a new 
 order in social thought and life, this impulse often taking an 
 anarchical character. 
 
 From this state of oscillation, which has given to our 
 century its equivocal and transitional aspect, the only possible 
 issue was in the foundation of a scientific social doctrine which 
 should supply a basis for the gradual convergence of opinion 
 on human questions. The foundation of such a doctrine is the 
 immortal service for which the world is indebted to Auguste 
 Comte (1798-1857).
 
 THE HISTORICAL SCHOOL. 197 
 
 The leading features of Sociology, as he conceived it, are 
 the following: (i) it is essentially one science, in which all 
 the elements of a social state are studied in their relations and 
 mutual actions ; (2) it includes a dynamical as well as a statical 
 theory of society ; (3) it thus eliminates the absolute, substi- 
 tuting for an imagined fixity the conception of ordered change ; 
 (4) its principal method, though others are not excluded, is 
 that of historical comparison ; (5) it is pervaded by moral 
 ideas, by notions of social duty, as opposed to the individual 
 rights which were derived as corollaries from the jus natures ; 
 and (6) in its spirit and practical consequences it tends to the 
 realisation of all the great ends which compose " the popular 
 cause " ; yet (7) it aims at this through peaceful means, re- 
 placing revolution by evolution. 1 The several characteristics 
 we have enumerated are not independent ; they may be shown 
 to be vitally connected with each other. Several of these 
 features must now be more fully described; the others will 
 meet us before the close of the present survey. 
 
 In the masterly exposition of sociological method which is 
 contained in the fourth volume of the Philosophic Positive 
 (i839), 2 Comte marks out the broad division between social 
 statics and social dynamics the former studying the laws of 
 social coexistence, the latter those of social development. The 
 fundamental principle of the former is the general consensus 
 
 1 It would be a grave error to suppose that the subjection of social 
 phenomena to natural laws affords any encouragement to a spirit of fatal- 
 istic quietism. On the contrary, it is the existence of such laws that is 
 the necessary basis of all systematic action for the improvement either 
 of our condition or of our nature, as may be seen by considering the 
 parallel case of hygienic and therapeutic agencies. And, since the dif- 
 ferent orders of phenomena are more modifiable in proportion to their 
 greater complexity, the social field admits of more extensive and effica- 
 cious human intervention than the inorganic or vital domain. In rela- 
 tion to the dynamical side of Sociology, whilst the direction and essential 
 character of the evolution are predetermined, its rate and secondary 
 features are capable of modification. 
 
 2 He had already in 1822 stated his fundamental principles in an 
 opuscule which is reproduced in the Appendix to his Politiqut Positive.
 
 198 POLITICAL ECONOMY. 
 
 between the several social organs and functions, which, without 
 unduly pressing a useful analogy, we may regard as resembling 
 that which exists between the several organs and functions of 
 an animal body. The study of dynamical is different from, 
 and necessarily subordinated to, that of statical sociology, pro- 
 gress being in fact the development of order, just as the study 
 of evolution in biology is different from, and subordinated to, 
 that of the structures and functions which are exhibited by 
 evolution as they exist at the several points of an ascending 
 scale. The laws of social coexistence and movement are as 
 much subjects for observation as the corresponding phenomena 
 in the life of an individual organism. For the study of 
 development in particular, a modification of the comparative 
 method familiar to biologists will be the appropriate mode of 
 research. The several successive stages of society will have 
 to be systematically compared, in order to discover their laws 
 of sequence, and to determine the filiation of their charac- 
 teristic features. 
 
 Though we must take care that both in our statical and 
 dynamical studies we do not ignore or contradict the funda- 
 mental properties of human nature, the project of deducing 
 either species of laws fr<3m those properties independently 
 of direct observation is one which cannot be realised. 
 Neither the general structure of human society nor the 
 march of its development could be so predicted. This is 
 especially evident with respect to dynamical laws, because, in 
 the passage of society from one phase to another, the pre- 
 ponderating agency is the accumulated influence of past 
 generations, which is much too complex to be investigated 
 deductively a conclusion which it is important to keep 
 steadily before us now that some of the (so-called) anthro- 
 pologists are seeking to make the science of society a mere 
 annex and derivative of biology. The principles of biology 
 unquestionably lie at the foundation of the social science, but 
 the latter has, and must always have, a field of research and 
 a method of inquiry peculiar to itself. The field is history in
 
 THE HISTORICAL SCHOOL. 199 
 
 the largest sense, including contemporary fact ; and the prin- 
 cipal, though not exclusive, method is, as we have said, that 
 process of sociological comparison which is most conveniently 
 called "the historical method." 
 
 These general principles affect the economic no less than 
 other branches of social speculation ; and with respect to that 
 department of inquiry they lead to important results. They 
 show that the idea of forming a true theory of the economic 
 frame and working of society apart from its other sides is 
 illusory. Such study is indeed provisionally indispensable, 
 but no rational theory of the economic organs and functions 
 of society can be constructed if they are considered as isolated 
 from the rest. In other words, a separate economic science 
 is, strictly speaking, an impossibility, as representing only 
 one portion of a complex organism, all whose parts and their 
 actions are in a constant relation of correspondence and 
 reciprocal modification. Hence, too, it will follow that, 
 whatever useful indications may be derived from our general 
 knowledge of individual human nature, the economic structure 
 of society and its mode of development cannot be deductively 
 foreseen, but must be ascertained by direct historical investi- 
 gation. We have said " its mode of development " ; for it is 
 obvious that, as of every social element, so of the economic 
 factor in human affairs, there must be a dynamical doctrine, 
 a theory of the successive phases of the economic condition ol 
 society ; yet in the accepted systems this was a desideratum, 
 nothing but some partial and fragmentary notions on this 
 whole side of the subject being yet extant. 1 And, further, 
 the economic structure and working of one historic stage 
 being different from those of another, we must abandon the 
 idea of an absolute system possessing universal validity, and 
 substitute that of a series of such systems, in which, however, 
 
 1 Under the influence of these views of Comte, J. S. Mill attempted 
 in Book IV. of his Political Economy a treatment of Economic Dynamics ; 
 but that appears to us one of the least satisfactory portions of hut 
 work.
 
 200 POLITICAL ECONOMY. 
 
 the succession is not at all arbitrary, but is itself regulated 
 by law. 
 
 Though Comte's enterprise was a constructive one, his aim 
 being the foundation of a scientific theory of society, he could 
 not avoid criticising the labours of those who before him ha.l 
 treated several branches of social inquiry. Amongst them the 
 economists were necessarily considered ; and he urged or im- 
 plied, in various places of his above-named work, as well as 
 of his Politique Positive, objections to their general ideas and 
 methods of procedure essentially the same with those which 
 we stated in speaking of Ricardo and his followers. J. S. 
 Mill shows himself much irritated by these comments, and 
 remarks on them as showing "how extremely superficial M. 
 Conite " (whom he yet regards as a thinker quite comparable 
 with Descartes and Leibnitz) " could sometimes be," an un- 
 fortunate observation, which he would scarcely have made 
 if he could have foreseen the subsequent march of Euro- 
 pean thought, and the large degree in which the main points 
 of Comte's criticism have been accepted or independently 
 reproduced. 
 
 GERMANY. 
 
 The second manifestation of this new movement in economic 
 science was the appearance of the German historical school 
 The views of this school do not appear to have arisen, like 
 Comte's theory of sociological method, out of general philo- 
 sophic ideas ; they seem rather to have been suggested by an 
 extension to the economic field of the conceptions of the his- 
 torical school of jurisprudence of which Savigny was the most 
 eminent representative. The juristic system is not a fixed 
 social phenomenon, but is variable from one stage in the 
 progress of society to another ; it is in vital relation with 
 the other coexistent social factors ; and what is, in the jural 
 sphere, adapted to one period of development, is often unfit 
 for another. These ideas were seen to be applicable to the
 
 THE HISTORICAL SCHOOL. 201 
 
 economic system also; the relative point of view was thus 
 reached, and the absolute attitude was found to be untenable. 
 Cosmopolitanism in theory, or the assumption of a system 
 equally true of every country, and what has been called per- 
 petualism, or the assumption of a system applicable to every 
 social stage, were alike discredited. And so the German 
 historical school appears to have taken its rise. 
 
 Omitting preparatory indications and undeveloped germs 
 of doctrine, we must trace the origin of the school to Wilhelm 
 Roscher. Its fundamental principles are stated, though with 
 some hesitation, and with an unfortunate contrast of the his- 
 torical with the " philosophical " method, 1 in his Grundriss 
 zu Vorlemngen uber die Staatswirthschaft nach geschiclitlicher 
 Methods (1843). The following are the leading heads in- 
 sisted on in the preface to that work. 
 
 "The historical method exhibits itself not merely in the 
 external form of a treatment of phenomena according to their 
 chronological succession, but in the following fundamental 
 ideas, (i.) The aim is to represent what nations have thought, 
 willed, and discovered in the economic field, what they have 
 striven after and attained, and why they have attained it. 
 (2.) A people is not merely the mass of individuals now 
 living ; it will not suffice to observe contemporary facts. (3.) 
 All the peoples of whom we can learn anything must be 
 studied and compared from the economic point of view, 
 especially the ancient peoples, whose development lies before 
 us in its totality. (4.) We must not simply praise or blame 
 economic institutions ; few of them have been salutary or 
 detrimental to all peoples and at all stages of culture ; rather 
 it is a principal task of science to show how and why, out 
 of what was once reasonable and beneficent, the unwise and 
 inexpedient has often gradually arisen." Of the principles 
 enunciated in this paraphrase of Reseller's words a portion 
 
 1 This phraseology was probably borrowed from the controversy on 
 the method of jurisprudence between Thibaut on the one band and 
 Suvigny and Hugo on the other.
 
 202 POLITICAL ECONOMY. 
 
 of the third alone seems open to objection ; the economy ol 
 ancient peoples is not a more important subject of study than 
 that of the moderns; indeed, the question of the relative im- 
 portance of the two is one that ought not to be raised. For 
 the essential condition of all sound sociological inquiry is the 
 comparative consideration of the entire series of the most 
 complete evolution known to history that, namely, of the 
 group of nations forming what is known as the Occidental 
 Commonwealth, or, more briefly, "the West." The reasons 
 for choosing this social series, and for provisionally restricting 
 our studies almost altogether to it, have been stated with 
 unanswerable force by Comte in the Philosophic Positive. 
 Greece and Rome are, indeed, elements in the series ; but it 
 is the development as a whole, not any special portions of it, 
 that Sociology must keep in view in order to determine the 
 laws of the movement, just as, in the study of biological 
 evolution, no one stage of an organism can be considered as of 
 preponderating importance, the entire succession of changes 
 being the object of research. Of Roscher's further eminent 
 services we shall speak hereafter ; he is now mentioned only 
 in relation to the origin of the new school. 
 
 In 1848 Bruno Hildebrand published the first volume of a 
 work, which, though he lived for many years after (d. 1878), 
 he never continued, entitled Die NationaloTconomie der Gegen- 
 wart und Zukunft. Hildebrand was a thinker of a really 
 high order; it may be doubted whether amongst German 
 economists there has been any endowed with a more profound 
 and searching intellect. He is quite free from the wordiness 
 and obscurity which too often characterise German writers, 
 and traces broad outlines with a sure and powerful hand. His 
 book contains a masterly criticism of the economic systems 
 which preceded, or belonged to, his time, including those of 
 Smith, Miiller, List, and the socialists. But it is interesting 
 to us at present mainly from the general position he takes up, 
 and his conception of the real nature of political economy. 
 The object of his work, he tells us, is to open a way in the
 
 THE HISTORICAL SCHOOL. 203 
 
 economic domain to a thorough historical direction and method, 
 and to transform the science into a doctrine of the laws of the 
 economic development of nations. It is interesting to observe 
 that the type which he sets before him in his proposed reform 
 of political economy is not that of historical jurisprudence, 
 but of the science of language as it has been reconstructed in 
 the present century, a selection which indicates the compara- 
 tive method as the one which he considered appropriate. In 
 both sciences we have the presence of an ordered variation in 
 time, and the consequent substitution of the relative for the 
 absolute. 
 
 In 1853 appeared the work of Karl Knies, entitled Die 
 Politische Oekonomie vom Standpunkte der geschichtliclien 
 Methods. This is an elaborate exposition and defence of the 
 historical method in its application to economic science, and is 
 the most systematic and complete manifesto of the new school, 
 at least on the logical side. The fundamental propositions 
 are that the economic constitution of society at any epoch 
 on the one hand, and on the other the contemporary theoretic 
 conception of economic science, are results of a definite his- 
 torical development; that they are both in vital connection 
 with the whole social organism of the period, having grown 
 up along with it and under the same conditions of time, place, 
 and nationality ; that the economic system must therefore be 
 regarded as passing through a series of phases correlative with 
 the successive stages of civilisation, and can at no point of 
 this movement be considered to have attained an entirely 
 definitive form; that no more the present than,any previous 
 economic organisation of society is to be regarded as absolutely 
 good and right, but only as a phase in a continuous historical 
 evolution ; and that in like manner the now prevalent economic 
 doctrine is not to be viewed as complete and final, but only as 
 representing a certain stage in the unfolding or progressive 
 manifestation of the truth. 
 
 The theme of the book is handled with, perhaps, an undue 
 degree of expansion and detail. The author exhibits much
 
 *>4 POLITICAL ECONOMY. 
 
 sagacity as well as learning, and criticises effectively the errors, 
 inconsistencies, and exaggerations of his predecessors. But in 
 characterising and vindicating the historical method he has 
 added nothing to Comte. A second edition of his treatise was 
 published in 1883, and in this he makes the singular confes- 
 sion that, when he wrote in 1852, the Philosophic Positive, 
 the six volumes of which had appeared from 1830 to 1842, 
 was entirely unknown to him and, he adds, probably to all 
 German economists. This is not to the credit of their open- 
 mindedness or literary vigilance, if we remember that Mill 
 was already in correspondence with Comte in 1841, and that 
 his eulogistic notice of him in the Logic appeared in 1843. 
 When, however, Knies at a later period examined Comte's 
 work, he was, he tells us, surprised at finding in it so many 
 anticipations of, or "parallelisms" with, his own conclusions. 
 And well he might; for all that is really valuable in his 
 methodology is to be found in Comte, applied on a larger 
 scale, and designed with the broad and commanding power 
 which marks the dii majores of philosophy. 
 
 There are two points which seem to be open to criticism in 
 the position taken by some German economists of the historical 
 school. 
 
 i. Knies and some other writers, in maintaining the principle 
 of relativity in economic theory, appear not to preserve the due 
 balance in one particular. The two forms of absolutism in 
 doctrine, cosmopolitanism and what Knies calls perpetualism, 
 he seems to place on exactly the same footing; in other words, 
 he considers- the error of overlooking varieties of local ciicum- 
 stances and nationality to be quite as serious as that of neglect- 
 ing differences in the stage of historical development. But 
 this is certainly not so. In every branch of Sociology the 
 latter is much the graver error, vitiating radically, wherever 
 it is found, the whole of our investigations. If we ignore the 
 fact, or mistake the direction, of the social movement, we are 
 wrong in the most fundamental point of all a point, too, 
 which is involved in every question. But the variations de-
 
 THE HISTORICAL SCHOOL. 205 
 
 pending on difference of race, as affecting bodily and mental 
 endowment, or on diversity of external situation, are secondary 
 phenomena only ; they must be postponed in studying the 
 general theory of social development, and taken into account 
 afterwards when we come to examine the modifications in the 
 character of the development arising out of peculiar conditions. 
 And, though the physical nature of a territory is a condition 
 which is likely to operate with special force on economic phe- 
 nomena, it is rather on the technical forms and comparative 
 extension of the several branches of industry that it will act 
 than on the social conduct of each branch, or the co-ordination 
 and relative action of all, which latter are the proper subjects 
 of the inquiries of the economist. 
 
 2. Some members of the school appear, in their anxiety to 
 assert the relativity of the science, to fall into the error of 
 denying economic laws altogether; they are at least unwilling 
 to speak of "natural laws" in relation to the economic world. 
 From a too exclusive consideration of law in the inorganic 
 sphere, they regard this phraseology as binding them to the 
 notion of fixity and of an invariable system of practical 
 economy. But, if we turn our attention rather to the organic 
 sciences, which are more kindred to the social, we shall see 
 that the term "natural law" carries with it no such implica- 
 tion. As we have more than once indicated, an essential part 
 of the idea of life is that of development, in other words, of 
 "ordered change." And that such a development takes place 
 in the constitution and working of society in all its elements 
 is a fact which cannot be doubted, and which these writers 
 themselves emphatically assert. That there exist between the 
 several social elements such relations as make the change of 
 one element involve or determine the change of another is 
 equally plain ; and why the name of natural laws should be 
 denied to such constant relations of coexistence and succession 
 it is not easy to see. These laws, being universal, admit of 
 the construction of an abstract theory of economic develop- 
 ment ; whilst a part of the German historical school tends to
 
 206 POLITICAL ECONOMY. 
 
 substitute for such a theory a mere description of different 
 national economies, introducing prematurely as we hav 
 pointed out the action of special territorial or ethnological 
 conditions, instead of reserving this as the ground of later 
 modifications, in concrete cases, of the primary general laws 
 deduced from a study of the common human evolution. 
 
 To the three writers above named, Roscher, Hildebrand, 
 and Knies, the foundation of the German historical school of 
 political economy belongs. It does not appear that Roscher 
 in his own subsequent labours has been much under the in- 
 fluence of the method which he has in so many places admir- 
 ably characterised. In his System der Voiles wirthschaft (vol. i., 
 Grundlagen der Nationalokonomie, 1854; 1 6th ed., 1883 : Eng. 
 transl. by J. J. Lalor, 1878; vol. ii., N. 0. des Ackerbaues, 1860; 
 loth ed., 1882 ; vol. iii., N. 0. des Handels und Gewerbfleisses, 
 4th ed., 1883) the dogmatic and the historical matter are rather 
 juxtaposed than vitally combined. It is true that he has most 
 usefully applied his vast learning to special historical studies, 
 in relation especially to the progress of the science itself. Hia 
 treatise Ueber das Verhdltniss der Nationdldkonomie zum dag- 
 sischen Alterthume (1849), n ^ s ^ur Gtschiclde der Englischen 
 Volkswirthschaftslehre (Leipsic, 1851-2), and, above all, that 
 marvellous monument of erudition and industry, his Geschichte 
 der National-Oekonomik in Deutschland (1874), to which lie 
 is said to have devoted fifteen years of study, are among the 
 most valuable extant works of this kind, though the last by 
 its accumulation of detail is unfitted for general study out- 
 side of Germany itself. Several interesting and useful mono- 
 graphs are collected in his Ansichten der Volkswirtliscliaft vom 
 gescMchtlichen Standpunkte (3d ed., 1878). His systematic 
 treatise, too, above referred to, abounds in historical notices 
 of the rise and development of the several doctrines of the 
 science. But it cannot be alleged that he has done much 
 towards the transformation of political economy which his 
 earliest labours seemed to announce ; and Cossa appears to 
 be right in saying that his dogmatic work has not effected
 
 THE HISTORICAL SCHOOL. 207 
 
 any substantial modification of the principles of Hermann 
 and Rau. 
 
 The historical method has exhibited its essential features 
 more fully in the hands of the younger generation of scientific 
 economists in Germany, amongst whom may be reckoned 
 Lujo Brentano, Adolf Held, Erwin Nasse, Gustav Schmoller, 
 II. Rosier, Albert Schaffle, Hans von Scheel, Gustav Schon- 
 l>erg, and Adolf Wagner. Besides the general principle of an 
 historical treatment of the science, the leading ideas which 
 have been most strongly insisted on by this school are the 
 following. I. The necessity of accentuating the moral element 
 in economic study. This consideration has been urged with 
 special emphasis by Schmoller in his Grundfragen (1875) and 
 by Schaffle in his Das gesellschaftliche System der mensclilichen 
 Wirthschaft ($& ed., 1873). G. Kries (d. 1858) appears also 
 to have handled the subject well in a review of J. S. Mill 
 According to the most advanced organs of the school, three 
 principles of organisation are at work in practical economy ; 
 and, corresponding with these, there are three different systems 
 or spheres of activity. The latter are (i) private economy ; 
 (2) the compulsory public economy ; (3) the " caritative * 
 sphere. In the first alone personal interest predominates ; in 
 the second the general interest of the society ; in the third the 
 benevolent impulses. Even in the first, however, the action 
 of private interest cannot be unlimited ; not to speak here of 
 the intervention of the public power, the excesses and abuses 
 of the fundamental principle in this department must be 
 checked and controlled by an economic morality, which can 
 never be left out of account in theory any more than in 
 practical applications. In the third region above named, moral 
 influences are of course supreme. II. The close relation which 
 necessarily exists between economics and jurisprudence. This 
 has been brought out by L. von Stein and H. Rosier, but ia 
 most systematically established by Wagner who is, without 
 doubt, one of the most eminent of living German economists 
 especially in his Grundleyung, now forming part of th
 
 208 POLITICAL ECONOMY. 
 
 comprehensive Lehrbuch der politischen Oekonomie published 
 by him and Professor Nasse jointly. The doctrine of the 
 jus naturae, on which the physiocrats, as we have seen, reared 
 their economic structure, has lost its hold on belief, and the 
 old a priori and absolute conceptions of personal freedom and 
 property have given way along with it. It is seen that the 
 economic position of the individual, instead of depending 
 merely on so-called natural rights or even on his natural 
 powers, is conditioned by the contemporary juristic system, 
 which is itself an historical product. The above-named con- 
 ceptions, therefore, half economic half juristic, of freedom 
 and property require a fresh examination. It is principally 
 from this point of view that Wagner approaches economic 
 studies. The point, as he says, on which all turns is the old 
 question of the relation of the individual to the community. 
 Whoever with the older juristic and political philosophy and 
 national economy places the individual in the centre comes 
 necessarily to the untenable results which, in the economic 
 field, the physiocratic and Smithian school of free competition 
 has set up. Wagner on the contrary investigates, before 
 anything else, the conditions of the economic life of the com- 
 munity, and, in subordination to this, determines the sphere 
 of the economic freedom of the individual. IIL A different 
 conception of the functions of the State from that entertained 
 by the school of Smith. The latter school has in general 
 followed the view of Rousseau and Kant that the sole office of 
 the state is the protection of the members of the community 
 from violence and fraud. This doctrine, which was in harmony 
 with those of the jus naturae and the social contract, waa 
 temporarily useful for the demolition of the old economic 
 system with its complicated apparatus of fetters and restric- 
 tions. But it could not stand against a rational historical 
 criticism, and still less against the growing practical demands 
 of modern civilisation. In fact, the abolition of the impolitic 
 and discredited system of European Governments, by bringing 
 to the surface the evils arising from unlimited competition.
 
 THE HISTORICAL SCHOOL. 209 
 
 irresistibly demonstrated the necessity of public action accord- 
 ing to new and more enlightened methods. The German 
 historical school recognises the State as not merely an insti- 
 tution for the maintenance of order, but as the organ of the 
 nation for all ends which cannot be adequately effected by 
 voluntary individual effort. Whenever social aims can be 
 attained only or most advantageously through its action, that 
 action is justified. 1 The cases in which it can properly inter- 
 fere must be determined separately on their own merits and 
 in relation to the stage of national development. It ought 
 certainly to promote intellectual and aesthetic culture. It 
 ought to enforce provisions for public health and regulations 
 for the proper conduct of production and transport. It ought 
 to protect the weaker members of society, especially women, 
 children, the aged, and the destitute, at least in the absence 
 of family maintenance and guardianship. It ought to secure 
 the labourer against the worst consequences of personal injury 
 not due to his own negligence, to assist through legal recogni- 
 tion and supervision the efforts of the working classes for joint 
 no less than individual self-help, and to guarantee the safety 
 of their earnings, when intrusted to its care. 
 
 A special influence which has worked on this more recent 
 group is that of theoretic socialism; we shall see hereafter 
 that socialism as a party organisation has also affected their 
 practical politics. With such writers as St. Simon, Fourier, 
 and Proudhon, Lassalle, Marx, Engels, Mario, and Kodbertus 
 (who, notwithstanding a recent denial, seems rightly described 
 as a socialist) we do not deal in the present treatise ; but we 
 must recognise them as having powerfully stimulated the 
 younger German economists (in the strict sense of this last 
 word). They have even modified the scientific conclusions 
 of the latter, especially through criticism of the so-called 
 orthodox system. Sch'affle and Wagner may be especially 
 named as having given a large space and a respectful attention 
 
 1 It will in each case be necessary to examine whether the action can 
 belt be taken by the central, or by the local, government. 
 
 O
 
 2io POLITICAL ECONOMY. 
 
 to their arguments. In particular, the important consideration, 
 to which we have already referred, that the economic position 
 of the individual depends on the existing legal system, and 
 notably on the existing organisation of property, was first 
 insisted on by the socialists. They had also pointed out that 
 the present institutions of society in relation to property, in- 
 heritance, contract, and the like, are (to use Lassalle's phrase) 
 "historical categories which have changed, and are subject 
 to further change," whilst in the orthodox economy they are 
 generally assumed as a fixed order of things on the basis of 
 which the individual creates his own position. J. S. Mill, 
 as we have seen, called attention to the fact of the distribution 
 of wealth depending, unlike its production, not on natural 
 laws alone, but on the ordinances of society, but it is some 
 of the German economists of the younger historical school 
 who have most strongly emphasised this view. To rectify 
 and complete the conception, however, we must bear in mind 
 that those ordinances themselves are not arbitrarily change- 
 able, but are conditioned by the stage of general social 
 development. 
 
 In economic politics these writers have taken up a position 
 between the German free-trade (or, as it is sometimes with 
 questionable propriety called, the Manchester) party and the 
 democratic socialists. The latter invoke the omnipotence of 
 the State to transform radically and immediately the present 
 economic constitution of society in the interest of the pro- 
 letariate. The free-traders seek to minimise state action for 
 any end except that of maintaining public order, and securing 
 the safety and freedom of the individual. The members of 
 the school of which we are now speaking, when intervening 
 in the discussion of practical questions, have occupied an inter- 
 mediate standpoint. They are opposed alike to social revolu- 
 tion and to rigid laisser faire. Whilst rejecting the socialistic 
 programme, they call for the intervention of the State in 
 accordance with the theoretic principles already mentioned, 
 for the purpose of mitigating the pressure of the modern
 
 211 
 
 industrial system on its weaker members, and extending in 
 greater measure to the working classes the benefits of advanc- 
 ing civilisation. Schaffle in his Capitalismus und Socidlismus 
 (1870; now absorbed into a larger work), Wagner in his Rede 
 iiber die sociale Frage (1871), and Schdnberg in his Arbeit- 
 sdmter: eine Aufgabe des deutschen Reichs (1871) advocated 
 this policy in relation to the question of the labourer. These 
 expressions of opinion, with which most of the German 
 professors of political economy sympathised, were violently 
 assailed by the organs of the free-trade party, who found in 
 them " a new form of socialism." Out of this arose a lively 
 controversy ; and the necessity of a closer union and a prac- 
 tical political organisation being felt amongst the partisans of 
 the new direction, a congress was held at Eisenach in October 
 1872, for the consideration of "the social question." It was 
 attended by almost all the professors of economic science in 
 the German universities, by representatives of the several 
 political parties, by leaders of the working men, and by some 
 of the large capitalists. At this meeting the principles above 
 explained were formulated. Those who adopted them obtained 
 from their opponents the appellation of " Katheder-Socialisten," 
 or " socialists of the (professorial) chair," a nickname invented 
 by H. B. Oppenheim, and which those to whom it was applied 
 were not unwilling to accept. Since 1873 ^is g r up has been 
 united in the " Verein fiir Socialpolitik," in which, as the con- 
 troversy became mitigated, free-traders also have taken part. 
 Within the Verein a division has shown itself. The left wing 
 has favoured a systematic gradual modification of the law of 
 property in such a direction as would tend to the fulfilment 
 of the socialistic aspirations, so far as these are legitimate, 
 whilst the majority advocate reform through state action on the 
 basis of existing jural institutions. Schaffle goes so far as to 
 maintain that the present " capitalistic" regime will be replaced 
 by a socialistic organisation ; but, like J. S. Mill, he adjourns 
 this change to a more or less remote future, and expects it 
 as the result of a natural development, or process of " social
 
 212 POLITICAL ECONOMY. 
 
 election ; " l he repudiates any immediate or violent revolution, 
 and rejects any system of life which would set up " abstract 
 equality " against the claims of individual service and merit. 
 
 The further the investigations of the German historical 
 school have been carried, in the several lines of inquiry it has 
 opened, the more clearly it has .come to light that the one 
 thing needful is not merely a reform of political economy, but 
 its fusion in a complete science of society. This is the view 
 long since insisted on by Auguste Comte ; and its justness 
 is daily becoming more apparent. The best economists of 
 Germany now tend strongly in this direction. Schaffle, who 
 is largely under the influence of Comte and Herbert Spencer, 
 has actually attempted the enterprise of widening economic 
 into social studies. In his most important work, which had 
 been prepared by previous publications, Ban und Leben des 
 gocialen Korpers (187578; new ed., 1881^, he proposes to 
 give a comprehensive plan of an anatomy, physiology, and 
 psychology of human society. He considers social processes 
 as analogous to those of organic bodies; and, sound and 
 suggestive as the idea of this analogy, already used by Comtt., 
 undoubtedly is, he carries it, perhaps, to an undue degree of 
 detail and elaboration. The same conception is adopted by 
 P. von Lilienfeld in his Gedariken iiber die Socialwissenschaft 
 der Zukunft (1873-79). A tendency to the fusion of economic 
 science in Sociology is also found in Adolph Samter'sSozial-lehre 
 (1875) though the economic aspect of society is there speci- 
 ally studied and in Schmoller's treatise Ueber einige Grund- 
 fragen des Rechts und der Volkswirthschaftslehre (1875) ; and 
 the necessity of such a transformation is energetically asserted 
 by H. von Scheel in the preface to his German version (1879) 
 of an English tract 1 On the present Position and Prospects of 
 Political Economy. 
 
 1 This should be remembered by readers of M. Leroy-Beaulieu's work 
 on Collectivism (1884), in which he treats Schaffle as the principal theo- 
 retic representative of that form of socialism. 
 
 2 By the present writer ; being an Address to the Section of Economic 
 Science and Statistics of the British Association at its meeting in Dublin 
 in 1878.
 
 THE HISTORICAL SCHOOL. 213 
 
 The name "Realistic," which has sometimes been given 
 to the historical school, especially in its more recent form, 
 appears to be injudiciously chosen. It is intended to mark 
 the contrast with the "abstract" complexion of the orthodox 
 economics. But the error of these economics lies, not in the 
 use, but in the abuse of abstraction. All science implies 
 abstraction, seeking, as it does, for unity in variety ; the 
 question in every branch is as to the right constitution of the 
 abstract theory in relation to the concrete facts. Nor is the 
 new school quite correctly distinguished as " inductive." 
 Deduction doubtless unduly preponderates in the investiga- 
 tions of the older economists; but it must be remembered 
 that it is a legitimate process, when it sets out, not from a 
 priori assumptions, but from proved generalisations. And 
 the appropriate method of economics, as of all sociology, is 
 not so much induction as the specialised form of induction 
 known as comparison, especially the comparative study of 
 " social series " (to use Mill's phrase), which is properly desig- 
 nated as the " historical " method. If the denominations here 
 criticised were allowed to prevail, there would be a danger 
 'of the school assuming an unscientific character. It might 
 occupy itself too exclusively with statistical inquiry, and 
 forget in the detailed examination of particular provinces of 
 economic life the necessity of large philosophic ideas and of a 
 systematic co-ordination of principles. So long as economics 
 remain a separate branch of study, and until they are absorbed 
 into Sociology, the thinkers who follow the new direction will 
 do wisely in retaking their original designation of the his- 
 torical school. 
 
 The members of this and the other German schools have pro- 
 duced many valuable works besides those which there has been 
 occasion to mention above. Ample notices of their contribu- 
 tions to the several brandies of the science (including its appli- 
 cations) will be found dispersed through Wagner and Nasse's 
 Lehrbuch and the comprehensive Handbuch edited by Schon- 
 berg. The following list, which does not pretend to approach to
 
 214 POLITICAL ECONOMY. 
 
 completeness, is given for the purpose of directing the student 
 to a certain number of books which ought not to be over- 
 looked in the study of the subjects to which they respectively 
 refer : 
 
 Knies, Die Eiseribahnen und Hire Wirkunyen (1853), Der Telegraph 
 (1857), Geld und Credit (1873-76-79) ; Rosier, Zur Kritik der Lehre vom 
 Arbeitslohn, (1861) ; Schmoller, Zur Geschichte der deutschen Kleinge- 
 werbe im 19 Jahrh. (1870) ; Schaffle, Theorie der ausschliessenden Absatz- 
 verhdltnisse (1867), Quintesscnz des Socialismus (6th ed., 1878), Grundsatze 
 der Steuerpolitik 1 1 880) ; Nasse, Mittelalterliche Feldgemeinschaft in Engla nd, 
 (1869) ; Brentano, On the History and Development of Gilds, prefixed to 
 Toulmin Smith's English Gilds (1870), Die Arbeitergilden der Gegcnwart 
 (1871-72), Das Arbeitsverhdltniss gemass dem heutiyen Rrcht (1877), Die 
 Arbeitsversicherung gemass der heutigen Wirthschaftsordnung (1879), 
 Der Arbeitsversicherungszwang (1881); Held (born 1844, accidentally 
 drowned in the Lake of Thun, 1880), Die Kinkommensteuer (1872), Die 
 deutsche Arbeiterpresse der Gegenwart (1873), Sozialismus, Sozialdemok- 
 ratie und Sozialpolitik (1878), Grwndriss fur Vorlcswigen iiber National- 
 okonomie (2d ed., 1878) ; Zwei Bilcher zur socialen Geschichte Englands 
 (posthumously published, 1881) ; Von Scheel (born 1839), Die Theorie 
 der socialen Frage (1871), Unsere social-politischen Parteien (1878). To 
 these may be added L. von Stein, Die Verwaltungslehre (1876-79), Lehr- 
 buch der Finanzwissen>ichaft (4th ed., 1878). E. Diihring is the ablest 
 of the few German followers of Carey ; we have already mentioned (Bibl. ' 
 Note) his History of the Science. To the Russian-German school 
 belongs the work of T. von Bernhardi, which is written from the histori- 
 cal point of view, Versuch einer Kritik der Griinde wdche fur grosses und 
 kleines Grundeiyenthum angefiihrt werden 1848. The free-trade school of 
 Germany is recognised as having rendered great practical services in that 
 country, especially by its systematic warfare against antiquated privileges 
 and restrictions. Cobden has furnished the model of its political action, 
 whilst, on the side of theory, it is founded chiefly on Say and Bastiat. 
 The members of this school whose names have been most frequently 
 heard by the English public are those of J. Prince Smith (d. 1874), who 
 may be regarded as having been its head ; H. von Treitschke, author of 
 Der Socialismus und seine Conner, 1875 (directed against the Katheder- 
 Sucialisteu) ; V. Bohmert, who has advocated the participation of work- 
 men in profits (Die Gewinnbetheiligung, 1878)1 A. Emminghaus, author 
 of Das Armenwesen vn Europaischen Staaten, 1870, part of which has 
 been translated in E. B. Eastwick's Poor Relief in Different Parts of 
 Europe, 1873 ; and J. H. Schultze-Delitzsch, well known as the founder of 
 the German popular banks, and a strenuous supporter of the system of 
 " co-operation. " The socialist writers, as has been already mentioned, are
 
 THE HISTORICAL SCHOOL. 215 
 
 not included in the present historical survey, nor do we in general notice 
 writings of the economists (properly so called) having relation to the 
 history of socialism or the controversy with it. 1 
 
 The movement which created the new school in Germany, 
 with the developments which have grown out of it, have 
 without doubt given to that country at the present time the 
 primacy in economic studies. German influence has been felt in 
 the modification of opinion in other countries most strongly, 
 perhaps, in Italy, and least so in France. In England it has 
 been steadily making way, though retarded by the insular 
 indifference to the currents of foreign thought which has 
 eminently marked our dominant school. Alongside of the 
 influence thus exerted, a general distaste for the " orthodox " 
 system has been spontaneously growing, partly from a sus- 
 picion that its method was unsound, partly from a profound 
 dissatisfaction with the practice it inspired, and the detected 
 hollowness of the policy of mere laisser faire. Hence every- 
 where a mode of thinking and a species of research have shown 
 themselves, and come into favour, which are in harmony with 
 the systematic conceptions of the historical economists. Thus 
 a dualism has established itself in the economic world, a 
 younger school advancing towards predominance, whilst the 
 old school still defends its position, though its adherents tend 
 more and more to modify their attitude and to admit the 
 value of the new lights. 
 
 ITALY. 
 
 It is to be regretted that but little is known in England 
 and America of the writings of the recent Italian economists. 
 
 1 The most important economic work which has appeared in Germany 
 since the above paragraph was written is undoubtedly the System der 
 Nationaloekonomie of G. Cohn, of which vol. i. (1885) only has yet been 
 published. A movement of reaction in favour of the older school is 
 represented by C. Menger ( Untcrsuchungen ilber die Methode der Social- 
 vnssenschaften, 1883), H. Dietzel (Beitrage zur Methode der Wirthschaftt- 
 wissenchaft, 1884), and E. Sax (Das Wesen und die Aufgabe der National' 
 oekonomie, 1884, and Grundleyung der theoretischenStaatttcirthachaft, 1887)1
 
 216 POLITICAL ECONOMY. 
 
 Luigi Cossa's Ouida, which was translated at the suggestion 
 of Jevons. 1 has given us some notion of the character and 
 importance of their labours. The urgency of questions of 
 finance in Italy since its political renascence has turned their 
 researches for the most part into practical channels, and they 
 have produced numerous monographs on statistical and ad- 
 ministrative questions. But they have also dealt ahly with 
 the general doctrines of the science. Cossa pronounces Angelo 
 Messedaglia (b. 1820), professor at Padua, to be the foremost 
 of contemporary Italian economists ; he has written on public 
 loans (1850) and on population (1858), and is regarded aa 
 a master of the subjects of money and credit. His pupil 
 Fedele Lampertico (b. 1833) * s author of many writings, 
 among which the most systematic and complete is his Economia 
 del popoli e degli stati (1874-1 884). Marco Minghetti ( 1 8 1 8- 
 1886), distinguished as a minister, was author, besides other 
 writings, of Economia pubbUca e le sue attinenze colla morale 
 e col diritto (1859). Luigi Luzzati, also known as an able 
 administrator, has by several publications sought to prepare 
 the way for reforms. The Sicilians Vito Cusumano and 
 Giuseppe Kicca Salerno have produced excellent works : the 
 former on the history of political economy in the Middle Ages 
 (1876), and the economic schools of Germany in their rela- 
 tion to the social question (1875); the latter on the theories 
 of capital, wages, and public loans (1877-8-9). G. Toniolo, 
 E. Nazzani, and A. Loria have also ably discussed the theories 
 of rent and profit, as well as some of the most important 
 practical questions of the day. Cossa, to whom we are in- 
 debted for most of these particulars, is himself author of 
 several works which have established for him a high reputa- 
 tion, as his Scienza delle Finanze (1875 ; 4th ed., 1887), an< i 
 his Primi Elementi di Economia Politica (1875; 8th ed., 
 1888), which latter has been translated into several European 
 languages. 
 
 1 Guide to the Study of Political Economy, 1880. See also the Eiblio. 
 graphical matter in his Primi Elementi di E. P., vol. i , 8th ed, 1888.
 
 THE HISTORICAL SCHOOL. 217 
 
 Of greater interest than such an imperfect catalogue of 
 writers is the fact of the appearance in Italy of the economic 
 dualism to which we have referred as characterising our time. 
 There also the two schools the old or so-called orthodox and 
 the new or historical with their respective modified forms, 
 are found face to face. Cossa tells us that the instructors 
 of the younger economists in northern Italy were publicly 
 denounced in 1874 as Germanists, socialists, and corrupters 
 of the Italian youth. In reply to this charge Luzzati, Lam- 
 pertico, and Scialoja convoked in Milan the first congress 
 of economists (1875) with the object of proclaiming their 
 resistance to the idea which was sought to be imposed on 
 them " that the science was born and died with Adam Smith 
 and his commentators." M. lmile de Laveleye's interesting 
 Lettres d' Italic (1878-79) throw light on the state of eco- 
 nomic studies in that country in still more recent years. Min- 
 ghetti, presiding at the banquet at which M. de Laveleye 
 was entertained by his Italian brethren, spoke of the "two 
 tendencies " which had manifested themselves, and implied his 
 own inclination to the new views. Carlo Ferraris, a pupil of 
 Wagner, follows the same direction. Formal expositions and 
 defences of the historical method have been produced by 
 Schiattarella (Del metodo in Economia Sociale, 1875) and 
 Cognetti de Martiis (Delle attinenze tra V Economia Socials 
 e la Storia, 1865). A large measure of acceptance has also 
 been given to the historical method in learned and judicious 
 monographs by Ricca Salerno (see especially his essay Del 
 metodo in Econ. Pol., 1878). Luzzati and Forti for some time 
 edited a periodical, the Giornale degli Economisti, which was 
 the organ of the new school, but which, when Cossa wrote, 
 had ceased to appear. Cossa himself, whilst refusing his 
 adhesion to this school on the ground that it reduces political 
 economy to a mere narrative of facts, an observation which, 
 we must be permitted to say, betrays an entire misconception 
 of its true principles, admits that it has been most useful 
 in several ways, and especially as having given the signal for
 
 218 POLITICAL ECONOMY. 
 
 a salutary, though, as he thinks, an excessive, reaction against 
 the doctrinaire exaggerations of the older theorists. 
 
 FKANCE. 
 
 In France the historical school has not made so strong an 
 impression, partly, no doubt, because the extreme doctrines 
 of the Ricardian system never obtained much hold there. It 
 was by his recognition of its freedom from those exaggerations 
 that Jevons was led to declare that " the truth is with the 
 French school," whilst he pronounced our English economists 
 to have been "living in a fool's paradise." National preju- 
 dice may also have contributed to the result referred to, the 
 ordinary Frenchman being at present disposed to ask whether 
 any good thing can come out of Germany. But, as we have 
 shown, the philosophic doctrines on which the whole proceed- 
 ing of the historical school is founded were first enunciated 
 by a great French thinker, to whose splendid services most 
 of his fellow-countrymen are singularly dead. Perhaps 
 another determining cause is to be looked for in official 
 influences, which in France, by their action on the higher 
 education, impede the free movement of independent con- 
 viction, as was seen notably in the temporary e"clat they gave 
 on the wider philosophic stage to the shallow eclecticism of 
 Cousin. The tendency to the historical point of view has 
 appeared in France, as elsewhere ; but it has shown itself 
 not so much in modifying general doctrine as in leading to 
 a more careful study of the economic opinions and institutions 
 of the past. 
 
 Much useful work has been done by Frenchmen (with 
 whom Belgians may here be associated) in the history of 
 political economy, regarded either as a body of theory or as 
 a system or series of systems of policy. Blanqui's history 
 (1837-38) is not, indeed, entitled to a very high rank, but it 
 was serviceable as a first general draught. That of Villeneuve- 
 Bargemont (1839) was also interesting and useful, ae present*
 
 THE HISTORICAL SCHOOL. 219 
 
 ing the Catholic view of the development and tendencies oi 
 the science. C. Perm's Les doctrines economiques depuis un 
 siecle (1880) is written from the same point of view. A 
 number of valuable monographs on particular statesmen or 
 thinkers has also been produced by Frenchmen, as, for 
 example, that of A. Batbie on Turgot (Turgot Philosophe, 
 Economists, et Administrates, 1861); of A. Neymarck on 
 the same statesman (Turgot et ses doctrines, 1885) ; of Pierre 
 Clement on Colbert (Histoire de Colbert et de son Administra- 
 tion, 2d ed., 1875); of H. Baudrillart on Bodin (/. Bodin et 
 son Temps ; Tableau des Theories politiques et des Idees econo- 
 miques au 16* siecle, 1853); of L^once de Lavergne on the 
 physiocrats (Les ficonomistes Francais du 18* sidcle^ 1870). 
 Works, too, of real importance have been produced on parti- 
 cular aspects of the industrial development, as those of L. de 
 Lavergne on the rural economy of France (1857), and of 
 England, Scotland, and Ireland (1854). The treatise of M. 
 de Laveleye, De la Propriety et de ses formes primitives (1874 ; 
 Eng. trans, by G. K. Marriott, 1878), is specially worthy of 
 notice, not merely for its array of facts respecting the early 
 forms of property, but because it co-operates strongly with the 
 tendency of the new school to regard each stage of economic 
 life from the relative point of view, as resulting from an his- 
 toric past, harmonising with the entire body of contemporary 
 social conditions, and bearing in its bosom the germs of a 
 future, predetermined in its essential character, though modifi- 
 able in its secondary dispositions. 
 
 M. de Laveleye has done much to call attention to the 
 general principles of the historical school, acting in this way 
 most usefully as an interpreter between Germany and France. 
 But he appears in his most recent manifesto (Les Lois natu- 
 relles et lobjet de I'jZconomie Politique, 1883) to separate him- 
 self from the best members of that school, and to fall into 
 positive error, when he refuses to economics the character of 
 a true science (or department of a science) as distinguished 
 from an art, and denies the existence of economic laws or
 
 220 POLITICAL ECONOMY. 
 
 tendencies independent of individual wills. Such a denial 
 seems to involve that of social laws generally, which is a sin- 
 gularly retrograde attitude for a thinker of our time to take 
 up, and one which cannot be excused since the appearance of 
 the Philosophie Positive. The use of the metaphysical phrase 
 "necessary laws" obscures the question; it suffices to speak 
 of laws which do in fact prevail. M. de Laveleye relies on 
 morals as supplying a parallel case, where we deal, not with 
 natural laws, but with " imperative prescriptions," as if these 
 prescriptions did not imply, as their basis, observed coexist- 
 ences and sequences, and as if there were no such thing as 
 moral evolution. He seems to be as far from the right point 
 of view in one direction as his opponents of the old school in 
 another. All that his arguments have really any tendency to 
 prove is the proposition, undoubtedly a true one, that economic 
 facts cannot be explained by a theory which leaves out of 
 account the other social aspects, arid therefore that our studies 
 and expositions of economic phenomena must be kept in close 
 relation with the conclusions of the larger science of society. 
 
 We cannot do more than notice in a general way some of 
 the expository treatises of which there has been an almost 
 continuous series from the time of Say downwards, or indeed 
 from the date of Germain Garnier's Abrege des Principes de 
 V Economic Politique (1796). That of Destutt de Tracy forms 
 a portion of his Elements d'Ideologie (1823). Droz brought 
 out especially the relations of economics to morals and of 
 wealth to human happiness (Economie Politique, 1829). Pelle- 
 grino Rossi, an Italian, formed, however, as an economist by 
 studies in Switzerland, professing the science in Paris, and 
 writing in French (Court d' Economic Politique, 1838-54), 
 gave in classic form an exposition of the doctrines of Say, 
 Malthus, and Eicardo. Michel Chevalier (1806-1879), speci- 
 ally known in England by his tract, translated by Cobden, on 
 the fall in the value of gold (La Baisse d?0r, 1858), gives in 
 his Gours d Economie Politique (1845-50) particularly valu- 
 able matter on the most recent industrial phenomena, and
 
 THE HISTORICAL SCHOOL. 221 
 
 on money and the production of the precious metals. Henri 
 Baudrillart, author of Lea Rapports de la Morale et de 
 t 'Economic Politique (1860 ; 2d ed., 1883), and of Histoire du 
 Luxe (1878), published in 1857 a Manuel d'J^conomie Politique 
 (3d ed., 1872), which Cossa calls an " admirable compendium." 
 Joseph Gamier (Traite de VBconomie Politique, 1860 ; 8th ed., 
 1880) in some respects follows Dunoyer. J. G. Courcelle- 
 Seneuil, the translator of J. S. Mill, whom Prof. F. A. Walker 
 calls " perhaps the ablest economist writing in the French 
 language since J. B. Say," besides a Traite theorique et 
 pratique des operations de Banque and Theorie des Enterprises 
 Industrielles (1856), wrote a Traite d' Economic Politique 
 (1858-59; 2d ed., 1867), which is held in much esteem. 
 Finally, the Genevese, Antoine FJise Cherbuliez (d. 1869), 
 was author of what Cossa pronounces to be the best treatise 
 on the science in the French language (Precis de la Science 
 JJlconomique, 1862). L. Walras, in Elements d'^Jconomie 
 Politique pure (1874-77), and Theorie Mathematique de la 
 Richesse Sociale (1883), has followed the example of Cournot 
 n attempting a mathematical treatment of the subject 
 
 ENGLAND. 
 
 Sacrificing the strict chronological order of the history of 
 economics to deeper considerations, we have already spoken of 
 Cairnes, describing him as the last original English writer who 
 was an adherent of the old school pure and simple. Both in 
 method and doctrine he was essentially Ricardian ; though 
 professing and really feeling profound respect for Mill, he 
 was disposed to go behind him and attach himself rather to 
 their common master. Mr. Sidgwick is doubtless right in be- 
 lieving that his Leading Principles did much to shake " the 
 unique prestige which Mill's exposition had enjoyed for nearly 
 half a generation," and in this, as in some other ways, Cairnes 
 may have been a dissolving force, and tended towards radical 
 change ; but, if he exercised this influence, he did so uucon-
 
 S22 POLITICAL ECONOMY. 
 
 aciously and involuntarily. Many influences had, however, 
 for some time been silently sapping the foundations of the old 
 system. The students of Comte had seen that its method was 
 an erroneous one. The elevated moral teaching of Carlyle 
 had disgusted the best minds with the low maxims of the 
 Manchester school. Ruskin had not merely protested against 
 the egoistic spirit of the prevalent doctrine, but had pointed 
 to some of its real weaknesses as a scientific theory. 1 It began 
 to be felt, and even its warmest partisans sometimes admitted. 
 that it had done all the work, mainly a destructive one, of 
 which it was capable. Cairnes himself declared that, whilst 
 most educated people believed it doomed to sterility for the 
 future, some energetic minds thought it likely to be a positive 
 obstruction in the way of useful reform. Miss Martineau, 
 who had in earlier life been a thorough Ricardian, came to 
 think that political economy, as it had been elaborated by her 
 contemporaries, was, strictly speaking, no science at all, and 
 must undergo such essential change that future generations 
 would owe little to it beyond the establishment of the exist- 
 ence of general laws in one department of human affairs. 2 The 
 instinctive repugnance of the working classes had continued, 
 in spite of the efforts of their superiors to recommend its 
 lessons to them efforts which were perhaps not unfrequently 
 dictated rather by class interest than by public spirit. All 
 the symptoms boded impending change, but they were visible 
 rather in general literature and in the atmosphere of social 
 opinion than within the economic circle. 3 But when it be- 
 came known that a great movement had taken place, especially 
 in Germany, on new and more hopeful lines, the English econo- 
 mists themselves began to recognise the necessity of a reform 
 
 1 The remarkable book Money and Morals, by John Lalor, 1852, wag 
 written partly under the influence of Carlyle. There is a good mono- 
 graph entitled John Ruskin, Economist, by P. Geddes, 1884. 
 
 2 See her Autobiography, 2d ed., vol. ii. p. 244. 
 
 1 A vigorous attack on the received system was made by David Syme 
 IB his Outlines of an Industrial Science, 1876.
 
 THE HISTORICAL SCHOOL. 223 
 
 and even to further its advent. The principal agencies of this 
 kind, in marshalling the way to a renovation of the science, 
 have heen those of Bagehot, Leslie, and Jevong, the first 
 limiting the sphere of the dominant system, while seeking to 
 conserve it within narrower bounds ; the second directly assail- 
 ing it and setting up the new method as the rival and destined 
 successor of the old ; and the third acknowledging the collapse 
 of the hitherto reigning dynasty, proclaiming the necessity of 
 an altered re'gime, and admitting the younger claimant as joint 
 possessor in the future. Thus, in England too, the dualism 
 which exists on the Continent has been established ; and there 
 is reason to expect that here more speedily and decisively than 
 in France or Italy the historical school will displace its an- 
 tagonist. It is certainly in England next after Germany that 
 the preaching of the new views has been most vigorously and 
 effectively begun. 
 
 Walter Bagehot (1826-1877) was author of an excellent 
 work on the English money market and the circumstance 
 which have determined its peculiar character (Lombard Street 
 1873 ; 7th ed., 1878), and of several monographs on particular 
 monetary questions, which his practical experience, combined 
 with his scientific habits of thought, eminently fitted him to 
 handle. On the general principles of economics he wrote 
 some highly important essays collected in Economic Studies 
 (edited by K. H. Hutton, 1880), the object of which was to 
 show that the traditional system of political economy the 
 system of Ricardo and J. S. Mill rested on certain funda- 
 mental assumptions, which, instead of being universally true in 
 fact, were only realised within very narrow limits of time and 
 space. Instead of being applicable to all states of society, 
 it holds only in relation to those "in which commerce has 
 largely developed, and where it has taken the form of develop- 
 ment, or something like the form, which it has taken in 
 England." It is "the science of business such as business 
 is in large and trading communities an analysis of the great 
 commerce by which England has become rich." But more
 
 224 POLITICAL ECONOMY. 
 
 than this it is not ; it will not explain the economic life of 
 earlier times, nor even of other communities in our own time ; 
 and for the latter reason it has remained insular ; it has never 
 been fully accepted in other countries as it has been at home. 
 It is, in fact, a sort of ready reckoner, enabling us to calculate 
 roughly what will happen under given conditions in Lombard 
 Street, on the Stock Exchange, and in the great markets of 
 the world. It is a " convenient series of deductions from 
 assumed axioms which are never quite true, which in many 
 times and countries would be utterly imtrue, but which are 
 sufficiently near to the principal conditions of the modern " 
 English " world to make it useful to consider them by 
 themselves." 
 
 Mill and Cairnes had already shown that the science they 
 taught was a hypothetic one, in the sense that it dealt not with 
 real but with imaginary men " economic men " who were 
 conceived as simply " money-making animals." But Bagehot 
 went further : he showed what those writers, though they 
 may have indicated, had not clearly brought out, 1 that the 
 world in which these men were supposed to act is also "a 
 very limited and peculiar world." What marks off this 
 special world, he tells us, is the promptness of transfer of 
 capital and labour from one employment to another, as deter- 
 mined by differences in the remuneration of those several 
 employments a promptness about the actual existence of 
 which in the contemporary English world he fluctuates a good 
 deal, but which on the whole he recognises as substantially 
 realised. 
 
 Bagehot described himself as "the last man of the ante- 
 Mill period," having learned his economics from Ricardo; 
 and the latter writer he appears to have to the end greatly 
 over-estimated. But he lived long enough to gain some know- 
 ledge of the historical method, and with it he had " no quarrej 
 but rather much sympathy." "Rightly conceived," he said, 
 
 1 Jones, whose writings were apparently unknown to Bagehot, bad, 
 s we have Been, in some degree anticipated him in this exposition.
 
 THE HISTORICAL SCHOOL. 225 
 
 "it is no rival to the abstract method rightly conceived." 
 We will not stop to criticise a second time the term " abstract 
 method " here applied to that of the old school, or to insist 
 on the truth that all science is necessarily abstract, the only 
 question that can arise being as to the just degree of abstraction, 
 or, in general, as to the right constitution of the relation between 
 the abstract and the concrete. It is more apposite to remark 
 that Bagehot's view of the reconciliation of the two methods 
 is quite different from that of most " orthodox " economists. 
 They commonly treat the historical method with a sort of 
 patronising toleration as affording useful exemplifications or 
 illustrations of their theorems. But, according to him, the 
 two methods are applicable in quite different fields. For what 
 he calls the " abstract " method he reserves the narrow, but 
 most immediately interesting, province of modern advanced 
 industrial life, and hands over to the historical the economic 
 phenomena of all the human past and all the rest of the 
 human present. He himself exhibits much capacity for such 
 historical research, and in particular has thrown real light 
 on the less-noticed economic and social effects of the institu- 
 tion of money, and on the creation of capital in the earlier 
 stages of society. But his principal efficacy has been in 
 reducing, by the considerations we have mentioned, still 
 further than his predecessors had done, our conceptions of 
 the work which the a priori metho'dcan do. He in fact 
 dispelled the idea that it can ever supply the branch of general 
 Sociology which deals with wealth. As to the relations of 
 economics to the other sides of Sociology, he holds that the 
 " abstract " science rightly ignores them. It does not consider 
 the differences of human wants, or the social results of their 
 several gratifications, except so far as these affect the pro- 
 duction of wealth. In its view " a pot of beer and a picture 
 a book of religion and a pack of cards are equally worthy 
 of regard." It therefore leaves the ground open for a science 
 which will, on the one hand, study wealth as a social fact in 
 all its successive forms and phases, and, on the other, will 
 
 p
 
 2*6 POLITICAL ECONOMY. 
 
 regard it in its true light as an instrument for the conservation 
 and evolution moral as well as material of human societies. 
 Though it will involve a slight digression, it is desirable 
 here to notice a further attenuation of the functions of the 
 deductive method, which is well pointed out in Mr. Sidgwick's 
 recent remarkable work on political economy. He observes 
 that, whilst J. S. Mill declares that the method a priori is the 
 true method of the science, and that " it has been so under- 
 stood and taught by all its most distinguished teachers," he 
 yet himself in the treatment of production followed an in- 
 ductive method (or at least one essentially different from the 
 deductive), obtaining his results by "merely analysing and 
 systematising our common empirical knowledge of the facts of 
 industry." To explain this characteristic inconsistency, Mr. 
 Sidgwick suggests that Mill, in making his general statement 
 as to method, had in contemplation only the statics of distri- 
 bution and exchange. And in this latter field Mr. Sidgwick 
 holds that the a priori method, if it be pursued with caution, 
 if the simplified premises be well devised and the conclusions 
 " modified by a rough conjectural allowance " for the elements 
 omitted in the premises, is not, for the case of a developed 
 industrial society, " essentially false or misleading. " Its con- 
 clusions are hypothetically valid, though "its utility as a 
 means of interpreting and explaining concrete facts depends 
 on its being used with as full a knowledge as possible of the 
 results of observation and induction." We do not think this 
 statement need be objected to, though we should prefer to 
 regard deduction from hypothesis as a useful occasional logical 
 artifice, and, as such, perfectly legitimate in this as in other 
 fields of inquiry, rather than as the main form of method iu 
 any department of economics. Mr. Sidgwick, by his limita- 
 tion of deduction in distributional questions to "a state of 
 things taken as the type to which civilised society generally 
 appioximates," seems to agree with Bagehot that for times 
 and places which do not correspond to this type the historical 
 method must be used a method which, be it observed, does
 
 THE HISTORICAL SCHOOL. 227 
 
 not exclude, but positively implies, "reflective analysis" of 
 the facts, and their interpretation from " the motives of human 
 agents " as well as from other determining conditions. In the 
 dynamical study of wealth of the changes in its distribution 
 no less than its production Mr. Sidgwick admits that the 
 method a priori "can occupy but a very subordinate place." 
 We should say that here also, though to a less extent, as a logi- 
 cal artifice it may sometimes be useful, though the hypotheses 
 assumed ought not to be the same that are adapted to a mature 
 industrial stage. But the essential organ must be the historical 
 method, studying comparatively the different phases of social 
 evolution. 
 
 Connected with the theory of modern industry is one sub- 
 ject which Bagehot treated, though only in an incidental way, 
 much more satisfactorily than his predecessors, namely, the 
 function of the entrepreneur, who in Mill and Cairnes is 
 scarcely recognised except as the owner of capital. It is quite 
 singular how little, in the Leading Principles of the latter, 
 his active co-operation is taken into account. Bagehot objects 
 to the phrase "wages of superintendence," commonly used to 
 express his " reward," as suggesting altogether erroneous ideas 
 of the nature of his work, and well describes the large and 
 varied range of his activity and usefulness, and the rare com- 
 bination of gifts and acquirements which go to make up the 
 perfection of his equipment. It can scarcely be doubted that 
 a foregone conclusion in favour of the system of (so-called) co- 
 operation has sometimes led economists to keep these important 
 considerations in the background. They have been brought 
 into due prominence of late in the treatises of Profs. Marshall 
 and F. A. Walker, who, however, have scarcely made clear, and 
 certainly have not justified, the principle on which the amount 
 of the remuneration of the entrepreneur is determined. 
 
 We have seen that Jones had in his dogmatic teaching 
 anticipated in some degree the attitude of the new school ; 
 important works had also been produced, notably by Thomas 
 Tooke and William Newmarch (History of Prices, 1838-1857),
 
 2*8 POLITICAL ECONOMY. 
 
 and by James E. Thorold Kogers (History of Agricultm 5 and 
 Prices in England, 1866-82), l on the course of English econo- 
 mic history. But the first systematic statement by an English 
 writer of the philosophic foundation of the historical method, 
 as the appropriate organ of economic research, is to be found 
 in an essay by T. E. Cliffe Leslie (printed in the Dublin 
 University periodical, Hermathena, 1876 ; since included in his 
 Essays Moral and Political, 1879). This essay was the most 
 important publication on the logical aspect of economic science 
 which had appeared since Mill's essay in his Unsettled Ques- 
 tions ; though Cairnes had expanded and illustrated the views 
 of Mill, he had really added little to their substance. Leslie 
 takes up a position directly opposed to theirs. He criticises 
 with much force and verve the principles and practice of the 
 " orthodox " school. Those who are acquainted with what 
 has been written on this subject by Knies and other Germans 
 will appreciate the freshness and originality of Leslie's treat- 
 ment. He points out the loose and vague character of the 
 principle to which the classical economists profess to trace 
 back all the phenomena with which they deal namely, the 
 "desire of wealth." This phrase really stands for a variety of 
 wants, desires, and sentiments, widely different in their nature 
 and economic effects, and undergoing important changes (as, 
 indeed, the component elements of wealth itself also do) in 
 the several successive stages of the social movement. The 
 truth is that there are many different economic motors, altru- 
 istic as well as egoistic ; and they cannot all be lumped to- 
 gether by such a coarse generalisation. The a priori and 
 purely deductive method cannot yield an explanation of the 
 causes which regulate either the nature or the amount of 
 wealth, nor of the varieties of distribution in different social 
 systems, as, for example, in those of France and England. 
 "The whole economy of every nation is the result of a long 
 evolution in which there has been both continuity and change, 
 
 i Mr. Rogers has since continued this work, and has also published 
 The First Nine Years f the Bank of England, 1887.
 
 THE HISTORICAL SCHOOL. 229 
 
 and of winch the economical side is only a particular aspect. 
 And the laws of which it is the result must be sought in 
 history and the general laws of society and social evolution." 
 The intellectual, moral, legal, political, and economic sides 
 of social progress are indissolubly connected. Thus, juridical 
 facts relating to property, occupation, and trade, thrown up by 
 the social movement, are also economic facts. And, more 
 generally, " the economic condition of English " or any other 
 " society at this day is the outcome of the entire movement 
 which has evolved the political constitution, the structure of 
 the family, the forms of religion, the learned professions, the 
 arts and sciences, the state of agriculture, manufactures, and 
 commerce." To understand existing economic relations we 
 must trace their historical evolution ; and " the philosophical 
 method of political economy must be one which expounds that 
 evolution." This essay was a distinct challenge addressed to 
 the ideas of the old school on method, and, though its conclu- 
 sions have been protested against, the arguments on which they 
 are founded have never been answered. 
 
 With respect to the dogmatic generalisations of the " ortho- 
 dox" economists, Leslie thought some of them were false, and 
 all of them required careful limitation. Early in his career 
 he had shown the hollowness of the wage-fund theory, though 
 he was not the first to repudiate it. 1 The doctrine of an 
 average rate of wages and an average rate of profits he rejected 
 except under the restrictions stated by Adam Smith, which 
 imply a " simple and almost stationary condition " of the 
 industrial world. He thought the glib assumption of an 
 average rate of wages, as well as of a wage-fund, had done 
 much harm " by hiding the real rates of wages, the real causes 
 which govern them, and the real sources from which wages 
 proceed." The facts, which he laboriously collected, he found 
 
 1 That service was due to F. D. Longe (Refutation of the Wage-Fund 
 Theory of Modern Political Economy, 1866). Leslie's treatment of the 
 subject was contained in an article of Fraser't Magazine for July 1868, 
 reprinted as an appendix to his Land-Systems and Industrial Economy 
 of Ireland, England, and Continental Countries, 18701
 
 2jo POLITICAL ECONOMY. 
 
 to be everywhere against the theory. In every country there 
 is really " a great number of rates ; and the real problem is, 
 What are the causes which produce these different rates?" 
 As to profits, he denies that there are any means of knowing 
 the gains and prospects of all the investments of capital, and 
 declares it to be a mere fiction that any capitalist surveys the 
 whole field. Bagehot, as we saw, gave up the doctrine of a 
 national level of wages and profits except in the peculiar case 
 of an industrial society of the contemporary English type ; 
 Leslie denies it even for such a society. With this doctrine, 
 that of cost of production as determining price collapses, and 
 the principle emerges that it is not cost of production, but 
 demand and supply, on, which domestic, no less than inter- 
 national, values depend, though this formula will require 
 much interpretation before it can be used safely and with 
 advantage. Thus Leslie extends to the whole of the national 
 industry the partial negation of the older dogma introduced 
 by Cairnes through the idea of non-competing groups. He 
 does not, of course, dispute the real operation of cost of pro- 
 duction on price in the limited area within which rates of 
 profit and wages are determinate and known ; but he main- 
 tains that its action oh the large scale is too remote and un- 
 certain to justify our treating it as regulator of price. Now, 
 if this be so, the entire edifice which Kicardo reared on the 
 basis of the identity of cost of production and price, with its 
 apparent but unreal simplicity, symmetry, and completeness, 
 disappears ; and the ground is cleared for the new structure 
 which must take its place. Leslie predicts that, if political 
 economy, under that name, does not bend itself to the task of 
 rearing such a structure, the office will speedily be taken out 
 of its hands by Sociology. 
 
 Leslie was a successful student of several special economic 
 subjects of agricultural economy, of taxation, of the distribu- 
 tion of the precious metals and the history of prices, and, as 
 has been indicated, of the movements of wages. But it is 
 in relation to the method and fundamental doctrines of the
 
 THE HISTORICAL SCHOOL. 231 
 
 science that he did the most important, because the most 
 opportune and needful work. And, though his course was 
 closed too early for the interests of knowledge, and much of 
 what he produced was merely occasional and fragmentary, his 
 services will be found to have been greater than those of 
 many who have left behind them more systematic, elaborate, 
 and pretentious writings. 
 
 One of the most original of recent English writers on Poli- 
 tical Economy was W. Stanley Jevons (1835-1882). The 
 combination which he presented of a predilection and aptitude 
 for exact statistical inquiry with sagacity and ingenuity in the 
 interpretation of the results was such as might remind us of 
 Petty. He tended strongly to bring economics into close re- 
 lation with physical science. He made a marked impression 
 on the public mind by his attempt to take stock of our re- 
 sources in the article of coal. His -idea of a relation between 
 the recurrences of commercial crises and the period of the sun- 
 spots gave evidence of a fertile and bold scientific imagination, 
 though he cannot be said to have succeeded in establishing 
 such a relation. He was author of an excellent treatise on 
 Money and the Mechanism of Exchange (1875), an( ^ f various 
 essays on currency and finance, which have been collected 
 since his death, and contain vigorous discussions on subjects 
 of this nature, as on bimetallism (with a decided tendency in 
 favour of the single gold standard), and several valuable sug^ 
 gestions, as with respect to the most perfect system of currency, 
 domestic and international, and in particular the extension oi 
 the paper currency in England to smaller amounts. He pro- 
 posed in other writings (collected in Methods of Social Reform, 
 1883) a variety of measures, only partly economic in their 
 character, directed especially to the elevation of the working 
 classes, one of the most important being in relation to the 
 conditions of the labour of married women in factories. This 
 was one of several instances in which he repudiated the laisser 
 jfaire principle, which indeed, in his book on The State in 
 Relation to Labour (1882), he refuted in the clearest and
 
 232 POLITICAL ECONOMY. 
 
 most convincing way, without changing the position he had 
 always maintained as an advocate of free trade. Towards the 
 end of his career, which was prematurely terminated, he was 
 more and more throwing off "the incubus of metaphysical 
 ideas and expressions " which still impeded the recognition or 
 confused the appreciation of social facts. He was, in his own 
 words, ever more distinctly coming to the conclusion "that 
 the only hope of attaining a true system of economics is to 
 fling aside, once and for ever, the mazy and preposterous as- 
 sumptions of the Ricardian school." With respect to method, 
 though he declares it to be his aim to " investigate inductively 
 the intricate phenomena of trade and industry," his views had 
 not perhaps assumed a definitive shape. The editor of some of 
 his remains declines to undertake the determination of his 
 exact position with respect to the historical school. The 
 fullest indications we possess on that subject are to be found 
 in a lecture of 1876, On the Future of Political Economy, He 
 saw the importance and necessity in economics of historical 
 investigation, a line of study which he himself was led by 
 native bent to prosecute in some directions. But he scarcely 
 apprehended the full meaning of the historical method, which 
 he erroneously contrasted with the "theoretical," and appa- 
 rently supposed to be concerned only with verifying and illus- 
 trating certain abstract doctrines resting on independent bases. 
 Hence, whilst he declared himself in favour of " thorough re- 
 form and reconstruction," he sought to preserve the a priori 
 mode of proceeding alongside of, and concurrently with, the 
 historical. Political economy, in fact, he thought was breaking 
 up and falling into several, probably into many, different 
 branches of inquiry, prominent amongst which would be the 
 "theory" as it had descended from his best predecessors, 
 especially those of the French school, whilst another would 
 be the " historical study," as it was followed in England by 
 Jones, Kogers, and others, and as it had been proclaimed in 
 general principle by his contemporary Clifle Leslie. This waa 
 on* of those eclectic views which have no permanent validity,
 
 THE HISTORICAL SCHOOL. 233 
 
 but are useful in facilitating a transition. The two methods 
 will doubtless for a time coexist, but the historical will inevi- 
 tably supplant its rival. What Jevons meant as the " theory " 
 he wished to treat by mathematical methods (see his Theory of 
 Political Economy, 1871 ; 2ded., 1879). This project had, as 
 we have seen, been entertained and partially carried into effect 
 by others before him, though he unduly multiplies the number 
 of such earlier essays when, for example, he mentions Ricardo 
 and J. S. Mill as writing mathematically because they some- 
 times illustrated the meaning of their propositions by dealing 
 with definite arithmetical quantities. Such illustrations, of 
 which a specimen is supplied by Mill's treatment of the sub- 
 ject of international trade, have really nothing to do with the 
 use of mathematics as an instrument for economic research, 
 or even for the co-ordination of economic truths. We have 
 already, in speaking of Cournot, explained why, as it seems 
 to us, the application of mathematics in the higher sense to 
 economics must necessarily fail, and we do not think that it 
 succeeded in Jevons's hands. His conception of " final utility " 
 is ingenious. But it is no more than a mode of presenting 
 the notion of price in the case of commodities homogeneous in 
 quality and admitting of increase by infinitesimal additions ; 
 and the expectation of being able by means of it to subject 
 economic doctrine to a mathematical method will be found 
 illusory. He offers 1 as the result of a hundred pages of 
 mathematical reasoning what he calls a "curious conclusion," 2 
 in which " the keystone of the whole theory of exchange and 
 of the principal problems of economics lies." This is the pro- 
 position that "the ratio of exchange of any two commodities 
 will be the reciprocal of the ratio of the final degrees of utility 
 of the quantities of commodity available for consumption after 
 the exchange is completed." Now as long as we remain in 
 the region of the metaphysical entities termed utilities, this 
 theorem is unverifiable and indeed unintelligible, because we 
 
 1 Theory of Political Economy, 2d ed., p. 103. 
 ' Fortnightly Review for November 1876, p. 6 If*
 
 234 POLITICAL ECONOMY. 
 
 have no means of estimating quantitatively the mental impres- 
 sion of final, or any other, utility. But when we translate it 
 into the language of real life, measuring the " utility " of any- 
 thing to a man by what he will give for it, the proposition is 
 at once seen to be a truism. What Jevons calls " final utility '' 
 being simply the price per unit of quantity, the theorem states 
 that, in an act of exchange, the product of the quantity of the 
 commodity given by its price per unit of quantity (estimated 
 in a third article) is the same as the corresponding product for 
 the commodity received a truth so obvious as to require no 
 application of the higher mathematics to discover it. If we 
 cannot look for results more substantial than this, there is not 
 much encouragement to pursue such researches, which will in 
 fact never be anything more than academic playthings, and 
 which involve the very real evil of restoring the " metaphysical 
 ideas and expressions " previously discarded. The reputation 
 of Jevons as an acute and vigorous thinker, inspired with 
 noble popular sympathies, is sufficiently established. But the 
 attempt to represent him, in spite of himself, as a follower and 
 continuator of Kicardo, and as one of the principal authors of 
 the development of economic theory (meaning by " theory " 
 the old a priori doctrine) can only lower him in estimation by 
 placing his services on grounds which will not bear criticism. 
 His name will survive in connection, not with new theoretical 
 constructions, but with his treatment of practical problems, 
 his fresh and lively expositions, and, as we have shown, his 
 energetic tendency to a renovation of economic method. 
 
 Arnold Toynbee (1852-1883), who left behind him a 
 beautiful memory, filled as he was with the love of truth and 
 an ardent and active zeal for the public good, was author of 
 some fragmentary or unfinished pieces, which yet well deserve 
 attention both for their intrinsic merit and as indicating the 
 present drift of all the highest natures, especially amongst our 
 younger men, in the treatment of .economic questions. 1 He 
 
 1 See his Lecturet on the Industrial Revolution in England, with Memoir 
 by the Master of Balliol, 1884 ; ad ed., 1887.
 
 THE HISTORICAL SCHOOL. 235 
 
 had a belief in the organising power of democracy which it 
 is not easy to share, and some strange ideas due to youthful 
 enthusiasm, such as, for example, that Mazzini is "the true 
 teacher of our age;" and he fluctuates considerably in his 
 opinion of the Ricardian political economy, in one place 
 declaring it to be a detected " intellectual imposture," whilst 
 elsewhere, apparently under the influence of Bagehot, he 
 speaks of it as having been in recent times " only corrected, 
 re-stated, and put into the proper relation to the science of 
 life," meaning apparently, by this last, general sociology. He 
 saw, however, that our great help in the future must come, as 
 much had already come, from the historical method, to which 
 in his own researches he gave preponderant weight. Its true 
 character, too, he understood better than many even of those 
 who have commended it ; for he perceived that it not merely 
 explains the action of special local or temporary conditions or 
 economic phenomena, but seeks, by comparing the stages o> 
 social development in different countries and times, to " dis- 
 cover laws of universal application." If, as we are told, there 
 exists at Oxford a rising group of men who occupy a position 
 in regard to economic thought substantially identical with that 
 of Toynbee, the fact is one of good omen for the future of the 
 science. 
 
 AMERICA. 
 
 For a long time, as we have already observed, little was done 
 by America in the field of Economics. The most obvious 
 explanation of this fact, which holds with respect to philo- 
 sophical studies generally, is the absorption of the energies 
 of the nation in practical pursuits. Further reasons are 
 suggested in two instructive Essays one by Professor Charles 
 F. Dunbar in the North American Review, 1876, the other by 
 Cliffo Leslie in the Fortnightly Review for October 1880. 
 
 We have already referred to the Report on Manufactures 
 by Alexander Hamilton ; and the memorial drawn up by 
 Albert Gallatin (1832), and presented to Congress from the
 
 236 POLITICAL ECONOMY. 
 
 Philadelphia Convention in favour of Tariff reform, deserves 
 to be mentioned as an able statement of the arguments against 
 protection. Three editions of the Wealth of Nations appeared 
 in America, in 1789, 1811, and 1818, and Ricardo's principal 
 work was reprinted there in 1819. The treatises of Daniel 
 Raymond (1820), Thomas Cooper (1826), Willard Phillips 
 (1828), Francis Wayland (1837), and Henry Vethake (1838) 
 made known the principles arrived at by Adam Smith and some 
 of his successors. Rae, a Scotchman settled in Canada, pub- 
 lished (1834) a book entitled New Principles of Political 
 Economy, which has been highly praised by J. S. Mill (bk. i. 
 chap. 1 1), especially for its treatment of the causes which deter- 
 mine the accumulation of capital. The principal works which 
 afterwards appeared down to the time of the Civil War were 
 Francis Bo wen's Principles of Political Economy, 1856, after- 
 wards entitled American Political Economy, 1870 ; John Bas- 
 com's Political Economy, 1859 ; and Stephen ColwelFs Ways 
 and Means of Payment, 1859. In the period including and 
 following the war appeared Amasa Walker's Science of Wealth, 
 1866; 1 8th ed., 1883, and A L. Peny's Elements of Political 
 Economy, 1866. A. Walker and Perry are free-traders ; Perry 
 is a disciple of Bastiat. Of Carey we have" already spoken at 
 some length ; his American followers are E. Peshine Smith 
 (A Manual of Political Economy, 1853), William Elder 
 (Questions of the Day, 1871), and Robert E. Thompson 
 (Social Science, 1875). The name of no American economist 
 stands higher than that of General Francis A. Walker (son 
 of Amasa Walker), author of special works on the Wages 
 Question (1876) and on Money (1878), as well as of an 
 excellent general treatise on Political Economy (1883 ; 2d ed. 
 1887). The principal works on American economic history 
 are those of A. S. Bolles, entitled Industrial History of Hie 
 United States (1878), and Financial History of the United 
 States, 1774-1885, published in 1879 an( ^ ^ a ^ er years. 
 
 The deeper and more comprehensive study of the subject 
 which has of late years prevailed in America, added to
 
 THE HISTORICAL SCHOOL, 237 
 
 influences from abroad, has given rise, there also, to a division 
 of economists into two schools an old and a new similar 
 to those which we have found confronting each other else- 
 where. A meeting was held at Saratoga in September 1885, 
 at which a society was founded, called the American Eco- 
 nomic Association. The object of this movement was to 
 oppose the idea that the field of economic research was 
 closed, and to promote a larger and more fruitful study of 
 economic questions. The same spirit has led to the estab- 
 lishment of the Quarterly Journal of Economics, published 
 at Boston for Harvard University, which promises to do 
 excellent work. The first article in this Journal is by 
 C. F. Dunbar, whose review of a Century of American Poli- 
 tical Economy we have already noticed ; and in this article 
 he sets out, in the interest of conciliation, the tendencies 
 of the two schools. 
 
 This division of opinion has been manifested in a striking 
 way by a discussion on the method and fundamental princi- 
 ples of Economics, which was conducted in the pages of the 
 periodical entitled Science, and has since been reproduced in 
 a separate form (Science Economic Discussion, New York, 
 1886). In this controversy the views of the new school were 
 expounded and advocated with great ability. The true nature 
 of economic method, the relativity both of economic institu- 
 tions and of economic thought, arising from their dependence 
 on varying social conditions, the close connection of economic 
 doctrine with contemporary jurisprudence, the necessity of 
 keeping economics in harmony with social ethics, and the 
 importance of a study of consumption (denied by J. S. Mill 
 and others) were all exhibited with remarkable clearness and 
 force. 1 There is every reason to believe with Leslie that 
 
 1 The contributors on the side of the new school were Dr. Edwin 
 R. A. Seligman, Professor E. J. James, Professor Richard T. Ely, 
 Henry C. Adams, Richmond Mayo Smith, and Simon N. Patten. The 
 representatives of the old school were Professor Simon Newcoinb, 
 F. W. Taussig, and Arthur T. Hadley.
 
 t3 POLITICAL ECONOMY. 
 
 America will take an active part both in bringing to light 
 the economic problems of the future and in working out 
 their solution. 
 
 Contemporary English Economists. 
 
 It is no part of our plan to pass judgment on the works ol 
 contemporary English authors, a judgment which could not 
 in general be final, and which would be subject to the imputa- 
 tion of bias in a greater degree than estimates of living writers 
 in foreign countries. But, for the information of the student, 
 some opinions may be expressed which scarcely any competent 
 person would dispute. The best brief exposition of political 
 economy, substantially in accordance with Mill's treatise, is to 
 be found in Fawcett's Manual (6th ed., 1884). But those who 
 admit in part the claims of the new school will prefer Mr. and 
 Mrs. Marshall's Economics of Industry (2d ed., 1881). Better, 
 in some respects, than either is the Political Economy oi 
 the American writer, Francis A. Walker, to which we have 
 already referred. Other meritorious works are J. E. T Eogers's 
 Manual of Political Economy, 1870; John Macdonell's Sur- 
 vey of Political Economy, 1871 ; and John L. Shad well's 
 System of Political Economy, 1877. Professor W. E. Hearn's 
 Plutology (1864) contains one of the ablest extant treatment? 
 of the subject of production. Mr. Goschen's is the best work 
 on the foreign exchanges (loth ed., 1879). Mr. Macleod, 
 though his general economic scheme has met with no accept- 
 ance, is recognised as supplying much that is useful on the sub- 
 ject of banking. Professor Rogers's Six Centuries of Work and 
 Wages (1884) is the most trustworthy book on the economic 
 history of England during the period with which he deals. 
 W. Cunningham's Growth of English Industry and Commerce 
 (1882) is instructive on the mercantile system. Dr. W. 
 Neilson Hancock has shown in a multitude of papers a most 
 extensive and accurate knowledge of the social economy oi 
 Ireland,
 
 THE HISTORICAL SCHOOL. 239 
 
 We cannot here overlook a work like that of Mr. Sidgwick 
 (1883), to which we have already referred on a special point. 
 It is impossible not to respect and admire the conscientious 
 and penetrating criticism which he applies to the a priori 
 system of economics in its most mature form. But it is open 
 to question whether the task was wisely undertaken. It 
 cannot be permanently our business to go on amending and 
 limiting the Ricardian doctrines, and asking by what special 
 interpretations of phrases or additional qualifications they may 
 still be admitted as having a certain value. The time for a 
 new construction has arrived ; and it is to this, or at least to 
 the study of its conditions, that competent thinkers with the 
 due scientific preparation should now devote themselves. It 
 is to be feared that Mr. Sidgwick's treatise, instead of, as 
 he hopes, " eliminating unnecessary controversy," will tend to 
 revive the steriles contestations and oiseuses disputes de mots, 
 which Comte censured in the earlier economists. It is in- 
 teresting to observe that the part of the work which is, and 
 has been recognised as, the most valuable is that in which, 
 shaking off the fictions of the old school, he examines inde- 
 pendently by the light of observation and analysis the question 
 of the industrial action of Governments.
 
 CHAPTER VII 
 
 CONCLUSION. 
 
 LET us briefly consider in conclusion, by the light of the 
 preceding historical survey, what appear to be the steps in 
 the direction of a renovation of economic science which are 
 now at once practicable and urgent. 
 
 I. Economic investigation has hitherto fallen for the most 
 part into the hands of lawyers and men of letters, not into 
 those of a genuinely scientific class. Nor have its cultivators 
 in general had that sound preparation in the sciences of 
 inorganic and vital nature which is necessary whether as 
 supplying bases of doctrine or as furnishing lessons of method. 
 Their education has usually been of a metaphysical kind. 
 Hence political economy has retained much of the form and 
 spirit which belonged to it in the seventeenth and eighteenth 
 centuries, instead of advancing with the times, and assuming 
 a truly positive character. It is homogeneous with the school 
 logic, with the abstract unhistorical jurisprudence, with the 
 a priori ethics and politics, and other similar antiquated sys- 
 tems of thought ; and it will be found that those who insist 
 most strongly on the maintenance of its traditional character 
 have derived their habitual mental pabulum from those regions 
 of obsolete speculation. We can thus understand the attitude 
 of true men of science towards this branch of study, which 
 they regard with ill-disguised contempt, and to whose pro- 
 fessors they either refuse or very reluctantly concede a place 
 in theii brotherhood.
 
 CONCLUSION. 241 
 
 The radical vice of this unscientific character of political 
 economy seems to lie in the too individual and subjective 
 aspect under which it has been treated. Wealth having been 
 conceived as what satisfies desires, the definitely determi liable 
 qualities possessed by some objects of supplying physical 
 energy, and improving the physiological constitution, are left 
 out of account. Everything is gauged by the standard of sub- 
 jective notions and desires. All desires are viewed as equally 
 legitimate, and all that satisfies our desires as equally wealth. 
 Value being regarded as the result of a purely mental appre- 
 ciation, the social value of things in the sense of their objec- 
 tive utility, which is often scientifically measurable, is passed 
 over, and ratio of exchange is exclusively considered. The 
 truth is, that at the bottom of all economic investigation 
 must lie the idea of the destination of wealth for the mainte- 
 nance and evolution of a society. And, if we overlook this, 
 our economics will become a play of logic or a manual for 
 the market, rather than a contribution to social science; 
 whilst wearing an air of completeness, they will be in truth 
 one-sided and superficial. Economic science is something 
 far larger than the Catallactics to which some have wished 
 to reduce it. A special merit of the physiocrats seems to 
 have lain in their vague perception of the close relation of 
 their study to that of external nature ; and, so far, we must 
 recur to their point of view, basing our economics on physics 
 and biology as developed in our own time. 1 Further, the 
 science must be cleared of all the theologico-metaphysical 
 elements or tendencies which still encumber and deform it 
 Teleology and optimism on the one hand, and the jargon of 
 "natural liberty" and "indefeasible rights" on the other, 
 must be finally abandoned. 
 
 Nor can we assume as universal premises, from which 
 economic truths can be deductively derived, the convenient 
 
 1 This aspect of the subject has been ably treated in papers contributed 
 to the Proceedings of the Royal Society of Edinburgh on several occasions 
 during and since 1881 by Mr. P. Geddes, well known as a biologist.
 
 142 POLITICAL ECONOMY. 
 
 formulas which have been habitually employed, such as that 
 all men desire wealth and dislike exertion. These vague 
 propositions, which profess to anticipate and supersede social 
 experience, and which necessarily introduce the absolute where 
 relativity should reign, must be laid aside. The laws of 
 wealth (to reverse a phrase of Buckle's) must be inferred from 
 the facts of wealth, not from the postulate of human selfish- 
 ness. We must bend ourselves to a serious direct study of 
 the way in which society has actually addressed itself and now 
 addresses itself to its own conservation and evolution through 
 the supply of its material wants. What organs it has developed 
 for this purpose, how they operate, how they are affected by 
 the medium in which they act and by the coexistent organs 
 directed to other ends, how in their turn they react on those 
 latter, how they and their functions are progressively modi- 
 fied in process of time these problems, whether statical or 
 dynamical, are all questions of fact, as capable of being studied 
 through observation and history as the nature and progress 
 of human language or religion, or any other group of social 
 phenomena Such study will of course require a continued 
 " reflective analysis " of the results of observation ; and, whilst 
 eliminating all premature assumptions, we shall use ascertained 
 truths respecting human nature as guides in the inquiry and 
 aids towards the interpretation of facts. And the employment 
 of deliberately instituted hypotheses will be legitimate, but 
 only as an occasional logical artifice. 
 
 II. Economics must be constantly regarded as forming only 
 one department of the larger science of Sociology, in vital 
 connection with its other departments, and with the moral syn 
 thesis which is the crown of the whole intellectual system. 
 We have already sufficiently explained the philosophical 
 grounds for the conclusion that the economic phenomena of 
 society cannot be isolated, except provisionally, from the rest, 
 that, in fact, all the primary social elements should be habi- 
 tually regarded with respect to their mutual dependence and 
 reciprocal actions. Especially must we keep in view the high
 
 CONCLUSION. 343 
 
 moral issues to which the economic movement is subservient, 
 and in the absence of which it could never in any great degree 
 attract the interest or fix the attention either of eminent 
 thinkers or of right-minded men. The individual point of 
 view will have to be subordinated to the social ; each agent 
 will have to be regarded as an organ of the society to which 
 he belongs and of the larger society of the race. The con- 
 sideration of interests, as George Eliot has well said, must 
 give place to that of functions. The old doctrine of right, 
 which lay at the basis of the system of " natural liberty," has 
 done its temporary work ; a doctrine of duty will have to be 
 substituted, fixing on positive grounds the nature of the social 
 co-operation of each class and each member of the community, 
 and the rules which must regulate its just and beneficial 
 exercise. 
 
 Turning now from the question of the theoretic constitu- 
 tion of economics, and viewing the science with respect to its 
 influence on public policy, we need not at the present day 
 waste words in repudiating the idea that "non-government" 
 in the economic sphere is the normal order of things. The 
 laisser faire doctrine, coming down to us from the system of 
 natural liberty, was long the great watchword of economic 
 orthodoxy. It had a special acceptance and persistence in 
 England in consequence of the political struggle for the 
 repeal of the corn laws, which made economic discussion in 
 this country turn almost altogether on free trade a state of 
 things which was continued by the effort to procure a modifi- 
 cation of the protective policy of foreign nations. But it has 
 now for some time lost the sacrosanct character with which 
 it was formerly invested. This is a result not so much of 
 scientific thought as of the pressure of practical needs a cause 
 which has modified the successive forms of economic opinion 
 more than theorists are willing to acknowledge. Social exi- 
 gencies will force the hands of statesmen, whatever their 
 attachment to abstract formulas ; and politicians have practi- 
 cally turned their backs on laisser faire. The State has with
 
 244 POLITICAL ECONOMY. 
 
 excellent effect proceeded a considerable way in the direction 
 of controlling, for ends of social equity or public utility, the 
 operations of individual interest. The economists themselves 
 have for the most part been converted on the question; 
 amongst theorists Mr. Herbert Spencer finds himself almost 
 a vox clamantie in deserto in protesting against what he 
 calls the " new slavery " of Governmental interference. He 
 will protest in vain, so far as he seeks to rehabilitate the 
 old absolute doctrine of the economic passivity of the State. 
 But it is certainly possible that even by virtue of the 
 force of the reaction against that doctrine there may be an 
 excessive or precipitate tendency in the opposite direction. 
 With the course of production or exchange considered in 
 itself there will probably be in England little disposition 
 to meddle. But the dangers and inconveniences which arise 
 from the unsettled condition of the world of labour will 
 doubtless from time to time here, as elsewhere, prompt to 
 premature attempts at regulation. Apart, however, from the 
 removal of evils which threaten the public peace, and from 
 temporary palliations to ease off social pressure, the right 
 policy of the State in this sphere will for the present be one 
 of abstention. It is indeed certain that industrial society 
 will not permanently remain without a systematic organisa- 
 tion. The mere conflict of private interests will never pro- 
 duce a well-ordered commonwealth of labour. Freiheit ist 
 keine Losung. Freedom is for society, as for the individual, 
 the necessary condition precedent of the solution of practical 
 problems, both as allowing natural forces to develop themselves 
 and as exhibiting their spontaneous tendencies ; but it is not 
 in itself the solution. Whilst, however, an organisation of 
 the industrial world may with certainty be expected to arise 
 in process of time, it would be a great error to attempt to 
 improvise one. We are now in a period of transition. Our 
 ruling powers have still an equivocal character ; they are not 
 in real harmony with industrial life, and are in all respects 
 imperfectly imbued with the modern spirit. Besides, the
 
 CONCLUSION. 245 
 
 conditions of the new order are not yet sufficiently understood. 
 The institutions of the future must be founded on sentiments 
 and habits, and these must be the slow growth of thought 
 and experience. The solution, indeed, must be at all times 
 largely a moral one ; it is the spiritual rather than the tem- 
 poral power that is the natural agency for redressing or 
 mitigating most of the evils associated with industrial life. 1 
 In fact, if there is a tendency and we may admit that such 
 a tendency is real or imminent to push the State towards an 
 extension of the normal limits of its action for the maintenance 
 of social equity, this is doubtless in some measure due to the 
 fact that the growing dissidence on religious questions in the 
 most advanced communities has weakened the authority of 
 the Churches, and deprived their influence of social universality. 
 What is now most urgent is not legislative interference on 
 any large scale with the industrial relations, but the formation, 
 in both the higher and lower regions of the industrial world, 
 of profound convictions as to social duties, and some more 
 effective mode than at present exists of diffusing, maintaining, 
 and applying those convictions. This is a subject into which 
 we cannot enter here. But it may at least be said that the 
 only parties in contemporary public life which seem rightly 
 to conceive or adequately to appreciate the necessities of the 
 situation are those that aim, on the one hand, at the restora- 
 tion of the old spiritual power, or, on the other, at the forma- 
 tion of a new one. And this leads to the conclusion that 
 there is one sort of Governmental interference which the 
 advocates of laisaer faire have not always discountenanced, 
 and which yet, more than any other, tends to prevent the 
 gradual and peaceful rise of a new industrial and social 
 
 1 The neglect of this consideration, and the consequent undue exalta- 
 tion of State action, which, though quite legitimate, is altogether in- 
 sufficient, appears to be the principal danger to which the contemporary 
 German school of economists is exposed. When Schmoller says, " The 
 State is the grandest existing ethical institution for the education of the 
 human race," he transfers to it the functions of the Church. The educa- 
 tional action of the State must be, in the main, only indirect.
 
 246 POLITICAL ECONOMY. 
 
 system, namely, the interference with spiritual liberty by 
 setting up official types of philosophical doctrine, and imposing 
 restrictions on the expression and discussion of opinions. 
 
 It will be seen that our principal conclusion respecting 
 economic action harmonises with that relating to the theoretic 
 study of economic phenomena. For, as we held that the 
 latter could not be successfully pursued except as a duly 
 subordinated branch of the wider science of Sociology, so in 
 practical human affairs we believe that no partial synthesis is 
 possible, but that an economic reorganisation of society implies 
 a universal renovation, intellectual and moral no less than 
 material. The industrial reformation for which western 
 Europe groans and travails, and the advent of which is in- 
 dicated by so many symptoms (though it will come only as 
 the fruit of faithful and sustained effort), will be no isolated 
 fact, but will form part of an applied art of life, modifying 
 our whole environment, affecting our whole culture, and 
 regulating our whole conduct in a word, directing all our 
 resources to the one great end of the conservation and de- 
 velopment of Humanity.
 
 INDEX. 
 
 ANDERSON, 126 
 Aristotle, 15, zy, aa, 09 
 
 B ABB AGE, I^ I 
 
 Bacon, 47 
 
 Baden, Karl Friedrich von, 80 
 
 Bagehot, 135, 223-227 
 
 Bain, 149, 153 
 
 Bandini, 70 
 
 Banfield, 141 
 
 Bnstahle, 103, 161 
 
 Bastiat, 167, 170, 175-180 
 
 Batbie, 219 
 
 Baudrillart, 219, 221 
 
 Beccaria, 71, 73, 74 
 
 Belloni, 71 
 
 Bentham, no, in 
 
 Bernbardi, 214 
 
 Berkeley, 82 
 
 Biauchiui, 184 
 
 Blanqui, xiv., 86, 218 
 
 Bocoardo, 183 
 
 Bodin, 43, 44, 46 
 
 Bohmert, von, 214 
 
 BoisguUlebert, 57, 59 
 
 Bolles, 236 
 
 Bonar, 122 
 
 Bowen, 236 
 
 Brassey, 160 
 
 Breutano, 207, 214 
 
 Broggia, 71 
 
 Buchanan, 109, 129 
 
 Buckle, 61, 90, 242 
 
 Burke, 190 
 
 CAIRNKS, 106, 123, 134, 54-162, 
 
 178, 224 
 Campanella, 46 
 Campomanes, 78 
 Canning, 146 
 Cantillon, 60, 61 
 
 Carey, 171-175 
 
 Carli, 21, 75 
 
 Carlyle, 67, 8a 
 
 Cato, 20, 22 
 
 Chalmers, 121, 141 
 
 Charles V., 41 
 
 Cherbuliez, 157, 221 
 
 Chevalier, 220 
 
 Child, 41, 48, 49, 52, 54, 6f 
 
 Cibrario, 183 
 
 Cicero, 19, 20, 22 
 
 Clement, 41, 219 
 
 Coguetti de Hartiis, 217 
 
 Cohn, 215 
 
 Coke, 52 
 
 Colbert, 41, 42, 57, 63 
 
 Colmeiro, xv. 
 
 Columella, 20, 21, 22 
 
 Comte, Auguste, 196-200, and patsim 
 
 Comte, Charles, 177 
 
 Condorcet, 112-114 
 
 Copernicus, 46 
 
 Coquelin et Guillaumin, xiv. 
 
 Cossa, xiv., 216. 217 
 
 Courcelle-Seneuil, 221 
 
 Couruot, 180-182 
 
 Cousin, 218 
 
 Cromwell, 41 
 
 Crumpe, 141 
 
 Culpeper, 48, 67 
 
 Cunningham, 238 
 
 Custodi, xv., 78 
 
 Cusumano, 216 
 
 DAIRK, xiv., 53 
 D'Alembert, 66 
 Dalrymple, 92 
 Darwin, 121 
 Daviinzati, 43 
 Davenant, 49, 67 
 De Quincey, 136 
 Diderot, 56, 66, 107
 
 INDEX. 
 
 Dietzel, axs 
 
 Digges, 48 
 
 Droz, 220 
 
 Dub ring, xiv., 22, 214 
 
 Dunbar, 235, 237 
 
 Dunoyer, 168-170 
 
 Dupont de Nemours, 61, 66, 68, 86, 
 
 105, 164 
 Dutot, 60 
 
 ElSENHART, xiv. 
 
 Eliot, George, 243 
 Elizabeth, Queen, 41 
 Emerton, no 
 Emminghaus, 214 
 
 FAWCETT, 147, 160, 238 
 Feuelon, 60 
 Ferguson, 92, 109 
 Ferrara, 183 
 Ferraris, 217 
 Filangieri, 75 
 Fontenay, 176, 177 
 Forbonnais, 78 
 Forti, 217 
 Fortrey, 48, 52 
 Foster, 161 
 Franklin, 76, 81, 115, 170 
 
 GALIANI, 46, 69, 72, 73. 75 
 
 Garnier, Germain, 162, 22C 
 
 Gamier, Joseph, 221 
 
 Garve, 184 
 
 Geddes, 222, 241 
 
 Gee, 67 
 
 Genovesi, 71, 76, 81 
 
 Gentz, 185, 190 
 
 Gioja, 183 
 
 Gladstone, 146 
 
 Godwin, 112, 113 
 
 Goethe, 81 . 
 
 Goschen, 238 
 
 Gossen, 180 
 
 Gournay, 60, 61, 66, 67 
 
 Grimm, 70, 72 
 
 HAMILTON, 171 
 Hancock, 238 
 Hearn, 238 
 Held, 135, 207, 214 
 Henry VIH., 41 
 Hermann, 185, 186 
 Hesiod, ii 
 Hildebrand, 107, 202 
 Hobbes, 51, 54, 61 
 
 Huet, 77 
 
 Hufeland, 185 
 
 Hugo, 201 
 
 Hume, 53, 70, 83, 85, 100, roi, 135, 
 
 107, 108, 115, 123, 128 
 Huskisson, 146 
 Hutcheson, 61 
 Hutchinson, 141 
 
 INTIEHI, 71, 72 
 
 JAKOB, von, 185 
 
 Jevons, 60, 159, 180, 331-434 
 
 Jones, 142-145, 224 
 
 Jourdain, 29 
 
 Jovellanos, 184 
 
 Joyce, no 
 
 Justi, 80 
 
 Justinian, az 
 
 KAIMES, 92 
 
 Kautz, xiv. 
 
 Knies, 101, 203-205, 914 
 
 Kraus, 185 
 
 Kries, 207 
 
 LA BBDYiRE, 65 
 
 Lalor, 222 
 
 Lampertico, 216, 217 
 
 Lassalle, 210 
 
 Lauderdale, no, in, 151 
 
 Laughlin, 148 
 
 Laveleye, De, 217, 219, 220 
 
 Lavergne, 219 
 
 Law, 60 
 
 Lawson, 142 
 
 Leibnitz, 53 
 
 Leroy-Beaulieu, 178, 212 
 
 Leslie, T. E. Cliffe, 6r, 91, 90, III, 
 
 149, 160, 175, 228-231 
 Lilienfield, 212 
 List, 171, 175, 176, 191-194 
 Livy, 19 
 
 Locke, 53, 54, 82, 100 
 Longe, 159, 229 
 Longtield, 141 
 Loria, 216 
 Lotz, 185 
 Luder, 185 
 Luzzati, 216, 317 
 
 MACAULAT, 149 
 
 M'Culloch, xiv., 105, 109, ia6, 13^ 
 146
 
 INDEX. 
 
 249 
 
 Macdonell, 938 
 
 Macleod, 238 
 
 Males troit, 43 
 
 Malthus, 76, 78, 1 12-122, 125, 137, 
 
 142 
 
 Malynes, 48 
 
 Marshal], Alfred, in, 227, 238 
 Marshall, Mary P., 238 
 Martineau, Harriet, 140, 233 
 Melon, 60 
 Menger, 215 
 Mengotti, 41, 77 
 Mercier-Lariviere, 68, 69 
 Merivale, 141 
 Messediiglia, 216 
 Meyer, xv. 
 
 Mill, James, 117, 138, 149 
 Mill, John Stuart, 146-154, and 
 
 passim 
 Millar, 92 
 Minghetti, 216 
 Mirabeau, 66-68, 76 
 Misselden, 48 
 Moser, 81 
 Montaigne, 44 
 Montcln etien, 47 
 Montesquieu, 60, 90-92, I.TX 11=; 
 More, 44 
 Morellet, 69, 70 
 Morley, 150 
 Miiller, 189-191 
 Mun, 41, 46, 47 
 
 NASSB, 207, 208, 914 
 Nazzani, 216 
 Nebenius, 185 
 Neri, 21, 75 
 Newmarch, 237 
 Neyraarck, 219 
 Nicholson, 106, no, 133 
 North, 52, S3 
 
 OPPKNHEIM, an 
 Oresme, 36 
 Ortes, 77, 81 
 
 PAGNINI, 21 
 Paillottet, 176 
 Paoletti, 76 
 Pecchio, xiv., 71, 78 
 Peel, 140 
 Perin, 219 
 
 Petty, Si, S3, 67 
 Pitt, no 
 
 Plato, 12-14, 32, 44 
 Way fair, iog 
 
 Pliny, 19, 20 
 Pollexfen, 48 
 Price, 115 
 Prince-Smith, 214 
 Pulteney, no 
 
 QUESNAY, 60, 61, 64-67, 70, 88, 105 
 
 RAE. 236 
 
 Raleigh, 41, 49 
 
 Rau, 185 
 
 Raynal, 76 
 
 Ricanlo, 106, 122-137, J 43 *4S 
 
 Ricca-Salerno, 216, 217 
 
 Ricci, 76 
 
 Rinuccini, 72 
 
 Robertson, 78 
 
 Rogers, 109, 228, 238 
 
 Romagnosi, 183 
 
 Roscher, xiv., 201, 202, 206, and 
 
 passim 
 
 Rosier, 207, 214 
 Rossi, 220 
 
 Rousseau, 20, 56, 6l 
 Ruskiu, 223 
 
 SAMTER, 313 
 
 Sartorius, 185 
 
 Savigny, 200, 201 
 
 Say, J. B., 2, 163-165, 189 
 
 Sax, 215 
 
 Scaruffi, 43 
 
 Schiiffle, 207, 209, 211, 212, 214 
 
 Sell eel, von, xiv., 207, 212, 214 
 
 Schiattarella, 217 
 
 Schlozer, 188 
 
 Schmalz, 80 
 
 Schmoller, 207, 214, 245 
 
 Schonberg, xiv., 207, 211, 213 
 
 Schulze-Delitzsch, 214 
 
 Scialoja, 183 
 
 Seneca, 20, 22 
 
 Senior, 115, 116, 123, 130, 138-140 
 
 Serra, 46 
 
 Shad well, 238 
 
 Sidgwick, 146, 221, 226, 239 
 
 Sismondi, 14, 135, 165-168 
 
 Smith, Adam, 87-110, and pauim 
 
 Soden, 185 
 
 Sonnenfels, 81 
 
 Spencer, 117, 212 
 
 Stafford, 45 
 
 Stein, von, 207, 214 
 
 Steuart, 81, 86, 87, 115 
 
 Stewart^ 105 
 
 Stirling, 176
 
 INDEX. 
 
 Storoh, 188, 189 
 Syme, 233 
 
 TAOITOS, 19 
 
 Taylor, 188 
 
 Temple, 41, 49 
 
 Terray, 69 
 
 Thomas Aquinas, St., 29 
 
 Thornton, "W. T., 141, 159 
 
 Thiinen, von, 185, 186-188 
 
 Tooke, 145, 227 
 
 Torrens, 140, 146 
 
 Townsend, 115, 116 
 
 Toy n bee, 234 
 
 Tracy, 220 
 
 Treitschke, von, 214 
 
 Tucker, 53, 86 
 
 Turbolo, 43 
 
 
 Twiss, 
 
 DSTABU, 78 
 
 VABBO, ao 
 
 Vasco, 75 
 Vauban, 59 
 Jerri, 73, 74, 75 
 Villeneuve-Bargemont, iiy. 
 Voltaire, 56, 59, 69, 73 
 
 WAGNER, 207-209, 211 
 Wakefield, 109, 141 
 Walker, Amasa, 236 
 Walker, Francis A., 106, 154, 
 
 Wallace, iia, nc 
 
 Trr i ** 
 
 Walras, 221 
 West, 126, 131 
 Whately, 141, 173 
 Whewell, 144 
 Wolowski, 36 
 
 XBNOPHOW, 14 
 Tooso, 115 
 
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