1902 Encyclopedia > Political Economy (Economics) > Political Economy - Third Modern Phase (cont) - Adam Smith, etc. - England (cont.)

Political Economy
(Part 10)


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

England (cont.)

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

James Mill’s Elements (1821) deserves special notice, as exhibiting the system of Ricardo with a thorough-going rigour, a compactness of presentation, and a skill in the disposition of materials, which give to it in some degree the character of a work of art. The a priori political economy is here reduced to its simplest expression. J. R. M ‘Culloch (1789-1864), author of a number of laborious statistical and other compilations, criticized current economic legislation in the Edinburgh Review from the point of view of the Ricardian doctrine, taking up substantially the same theoretic position as was occupied at a somewhat later period by the Manchester school. He is altogether without originality, and never exhibits any philosophic elevation or breadth. His confident dogmatism is often repellent ; he admitted in his later years that he had been too fond of novel opinions, and defended them with more heat and pertinacity than they deserved. It is noticeable that, though often spoken of in his own time both by those who agreed with his views, and those, like Sismondi, who differed from them, as one of the lights of the reigning school, his name is now tacitly dropped in the writings of the members of that school. Whatever may have been his partial usefulness in vindicating the policy of free trade, it is at least plain that for the needs of our social future he has nothing to offer. Nassau William Senior (1790-1864), who was professor of political economy in the university of Oxford, published, besides a number of separate lectures, a treatise on the science, which first appeared as an article in the Encyclopedia Metropolitana. He is a writer of a high order of merit. He made considerable contributions to the elucidation of economic principles, specially studying exactness in nomenclature and strict accuracy in deduction. His explanations on cost of production and the way in which it affects price, on rent, on the difference between rate of wages and price of labour, on the relation between profit and wages (with special reference to Ricardo’s theorem on this subject, which he corrects by the substitution of proportional for absolute amount), and on the distribution of he 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 average rate in a country (which, we must maintain, is not a real quantity, though the rate in a given employment and neighbourhood is) to be expressed by the fraction of which the numerous 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 some expressions of Adam Smith used only for the purpose of illustration, and never intended to be rigorously interpreted ; and we shall see that the doctrine has been repudiated by several members of what is regarded as the orthodox school of political economy. As regards method, Senior makes the science a purely deductive one, in which there is no room for any other "facts" than the four fundamental propositions from which he undertakes to deduce all economic truth. And he does not regard himself as arriving at hypothetic conclusions ; his postulates and his inferences are alike conceived as corresponding to actual phenomena. 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 he programme which was carried out in legislation by Sir Robert Peel had been laid down in principle in the writings of Torrens. He gave substantially the same theory of foreign trade which was afterwards stated by J. S. Mill in one of his Essays on Unsettled Questions. He was an early an earnest advocate of the repeal of the corn laws, but was not in favour of a general system of absolute free trade, maintaining that it is expedient to impose retaliatory duties to countervail similar duties imposed by foreign countries, and that a lowering of import duties on the productions of countries retaining their hostile tariffs would occasions an abstraction of the precious metals, and a decline in prices, profits, and wages. His principal writings of a general character were—The Economist [i.e., Physiocrat] refuted, 1808 ; Essay on the Production of Wealth, 1821 ; Essay on the External Corn-trade (eulogized by Ricardo), 1827 ; The Budget, a Series of Letters on Financial, Commercial, and Colonial Policy, 1841-3. Harriet Martineau (1802-1876) popularized the doctrines of Malthus and Ricardo in her Illustrations of Political Economy (1832-34), a series of tales, in which there is much excellent description, but the effect 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 Machines and Manufactures (1832), chiefly descriptive, but also in part theoretic ; William Thomas Thornton, Overpopulation and its Remedy (1846), A Plan for Peasant Proprietors (1848), On Labour (1869) ; 2d ed., 1870) ;Herman Merivale, Lectures on Colonization and Colonies, (1841-2 ; new ed., 1861) ; T. C. Banifield, The Organization of Industry explained (1844 ; 2d ed., 1848) ; and Edward Gibbon Wakefield, A Vice of the Art of Colonization, 1849. Thomas Chalmers, well known in other fields of thought, was author of The Christian and Civic Economy of Large Towns (1821-36), and On Political Economy in Connexion with the Moral State and Moral Prospect of Society (1832) ; he strongly opposed any system of legal charity, and, whilst justly insisting on the primary importance of morality, industry, and thrift as conditions of popular wellbeing, carried the Malthusian doctrines to excess. Nor was Ireland without a share in the movement of the period. Whately, having been second Drummond professor of political economy at Oxford (in succession to Senior), founded (1832), when he went to Ireland as archbishop of Dublin, a similar professorship in Trinity College, Dublin. It was first held by Mountifort Longfield, afterwards judge of the Landed Estates Court, Ireland (d. 1884). He published lectures on the science generally (1834), on Poor Laws (1834), and on Commerce and Absenteeism (1835), which were marked by independence of thought and sagacious observation. He was laudably free from many of the exaggerations of his contemporaries ; he said, in 1835, "in political economy we must not abstract too much," and protested against the assumption too often made that "men are guided in all their conduct by a prudent regard to their own interest." James A. Lawson (now Justice Lawson) 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 contemporary critic of the Ricardian system was Richard Jones (1790-1855), professor at Haileybury. Jones has received scant justice at the hands of his successors. J. S. Mill, whilst using his work gave his merits but faint recognition. Even Roscher says that he did not thoroughly understand Ricardo, without giving any proof of that assertion, whilst he is silent as to the fact that much of what has been preached by the German historical school is found distinctly indicated in Jones’s writings. He has been sometimes represented as having rejected the Andersonian doctrine of rent ; but such a statement is incorrect. Attributing the doctrine to Malthus, he says that that economist "showed satisfactorily that, when land is cultivated by capitalists living on the profits of their stock, and able to move it at pleasure to other employments, the expense of tilling the worst quality of land cultivated determines the average price of raw produce, while the difference of a quality on 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 "farmer’rents," which, under the supposed conditions, conform to the above law, there are "peasant rents,’ paid everywhere through the most extended periods of history, and still paid over by far largest part of the earth’s surface, which are not so regulated. Peasant rents he divided under the heads of (1) serf, (2) métayer, (3) ryot, and (4) cottier rents, a classification afterwards adopted in substance by J. S. Mill ; and he showed that the contracts fixing their amount were, at least in the first three classes, determined rather by custom than by competition. Passing to the superstructure of theory erected by Ricardo on the doctrine of rent which he had so unduly extended, Jones denied most of the conclusions he had deduced, especially the following:—that the increase of farmer’s rents is always contemporary with a decrease in the productive powers of agriculture, and comes with loss an distress in its train ; that the interests of landlords are always and necessarily opposed to the interests of the state and of every other class of society ; that the diminution of the rate of profits is exclusively dependent on the returns to the capital last employed on the land ; and that wages can rise only at the expense of profits.

The method followed by Jones is inductive ; his conclusions are founded on a wide observation of contemporary facts, aided by the study of history. "If," he said, "we wish to make ourselves acquainted with the economy and arrangements by which the different nations of the earth produce and distribute their revenues, I really know 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 those who advance to principles by a comprehensive examination of facts necessarily meet with on their road." The world he professed to study was not an imaginary world, inhabited by abstract "economic men," but the real world with the different forms which the ownership and cultivation of land, and, in general, the conditions of production and distribution, assume at different times and places. His recognition of such different systems of life in communities occupying different stages in the progress of civilization 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 realized, in a small corner of our planet as representing the uniform type of human societies, and ignoring the effects of the early history and special development of each community as influencing its economic phenomena.

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

Jones is remarkable for his freedom from exaggeration and one-sided statement ; thus, whilst holding Malthus in, perhaps undue esteem, he declined to accept the proposition that an increase of the means of subsistence is necessarily followed by an increase of population ;an 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, increase.

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

Comte somewhere speaks of the "transient predilection" for political economy which had shown itself generally in western Europe. This phase of feeling was specially noticeable in England from the third to the fifth decade of the present century. "Up to the year 1818," said a writer in the Wéstminster Review, "the science was scarcely known or talked of beyond a small circle of philosophers ; and legislation, so far from being in conformity with its principles, was daily receding from them more and more." Mill has told us what a change took place within a few years. "Political economy," he says, "had asserted itself with great vigour in public affairs by the petition of the merchants of London for free trade, drawn up in 1820 by Mr Tooke and presented by Mr Alexander Baring, and by the noble exertions of Ricardo during the few years of his parliamentary life. His writings, following up the impulse given by the bullion controversy, and followed up in their turn by the expositions and comments of my father and M ‘Culloch (whose writings in the Edinburgh Review during those years were most valuable), had drawn general attention to the subject, making at least partial converts in the cabinet itself ; and Huskisson, supported by Canning, had commenced that gradual demolition of the protective system which one of their colleagues 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 were a frequent subject of complaint. But it was confidently expected that these discrepancies would soon disappear, and Colonel Torrens predicted that in twenty years there would scarcely "exist a doubt respecting any of its more fundamental principles." "The prosperity of he 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 doctrines, it was for some years generally believed that political economy had "emerged from the state of polemical discussion," at least on its leading doctrines, and that at length a sound construction had been erected on permanent bases.

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

In 1844 he published five Essays on some Unsettled Questions of Political Economy, which had been written as early as 1829 and 1830, but had, with the exception of the fifth, remained in manuscript. In these essays is contained any dogmatic contribution which he can be regarded as having made to the science. The subject of the first is the laws of interchange between nations. He shows that, when two countries trade together in two commodities, the prices of the commodities exchanged on both sides (which, as Ricardo had proved, are not determined by cost of production) will adjust themselves in such a way that the quantities required by each country of the article which it imports from his neighbour shall be exactly sufficient to pay for one another. This is the law which appears, with some added developments, in his systematic treatise under the name of the "equation of international demand." The most important practical conclusion (not, however, by any means an undisputed one) at which he arrives in this essay is, that the relaxation of duties on foreign commodities, not operating as protection but maintained solely for revenue, should be made contingent on the adoption of some corresponding degree of freedom of trade with England by the nation from which the commodities are imported. In the second essay, on the influence of consumption on production, the most interesting results arrived at are the propositions—(1) that absenteeism is a local, not a national, evil and (2) that, whilst there cannot be permanent excess of production, there may be a temporary excess, not only of any one article, but of commodities generally,—this last, however, not arising from over-production, but from a want of commercial confidence. The third essay relates to the use of the words "productive" and "unproductive" as applied to labour, to consumption, and to expenditure. The fourth deals with profits and interest, especially explaining and so justifying Ricardo’s theorem that "profits depend on wages, rising as wages fall and falling as wages rise." What Ricardo meant was that profits depend on the cost of wages estimated in labour. Hence improvements in the production of articles habitually consumed by the labourer may increase profits without diminishing the real remuneration of the labourer. The last essay is on the definition and method of political economy, a subject afterwards more maturely treated in the author’s System of Logic.

In 1848 Mill published his Principles of Political Economy, with some of their Applications to Social Philosophy. This title, though, as we shall see, open to criticism indicated on the part of the author a less narrow and formal conception of the field of the science than had been common amongst his predecessors. He aimed, in fact, at producing a work which might replace in ordinary use the Wealth of Nations, which in his opinions was "in many parts obsolete and in all imperfect." Adam Smith had invariably association the general principles of the subject with their applications, and in treating 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 incorporating all the result 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 in the general philosophy of society, as Smith had done in reference to the philosophy of his century.

This design he certainly failed to realize. His book is very far indeed from being a "modern Adam Smith." It is an admirably lucid and even elegant exposition of the Ricardian economics, the Malthusian theory being of course incorporated with these, but, notwithstanding the introduction of many minor novelties, it is, in its scientific substance, little or nothing more. When Cliffe Leslie says that Mill so qualified amended the doctrines of Ricardo that the latter could scarcely have recognized them, he certainly goes a great deal too far ; Senior really did more in that direction. Mill’s effort is usually to vindicate his master where others have censured him, and to palliate his admitted laxities of expression. Already his profound esteem for Ricardo’s services to economics had been manifest in his Essays, where he says of him, with some injustice to Smith, that, "having a science to create," he could not "occupy himself with more than the leading principles," and adds that "no one who has thoroughly entered into his discoveries" will find any difficulty in working out "even the minutiae of the science." James Mill, too, had been essentially an expounder of Ricardo ;and the son, whilst greatly superior to his father in the attractiveness of his expository style, is, in regard to his economic doctrine, substantially at the same point of view. It is 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 the plain good sense of Macaulay sufficed to expose in the writings of the former ; and he had a nobleness of feeling which in the 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 suject 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 to admit. Had he more completely undergone that influence, we are sometimes tempted to think he might have wrought the reform in economics which still remains to be achieved, emancipating the science from the a priori system, and founding a genuine theory of industrial life on observation in the broadcast sense. But probably the time was not ripe for such a construction, and it is possible that Mill’s native intellectual defects might have made him unfit for the task, for, as Roscher has said, "ein historischer Kopf war er nicht." However this might have been, the effects of his early training, in which positive were largely alloyed with metaphysical elements, sufficed in fact to prevent his attaining a perfectly normal mental attitude. He never altogether overcame the vicious direction which he had received from the teaching of his father, and the influence of the Benthamite group in which he was brought up. Hence it was that, according to the striking expression of Roscher, his whole view of life was "zu wenig aus Einem Gusse." The incongrous mixture of the narrow dogmas of his youthful period with the larger ideas of a later stage gave a wavering an indeterminate character to his entire philosophy. He is, on every side, eminently "un-final" ; he represents tendencies to new forms of opinions, and opens new vistas in various directions, but founds scarcely anything, and remains indeed, so far as his own positions is concerned, not merely incomplete but incoherent. It is, however, precisely this dubious position which seems to us to give a special interest to his career, by fitting him in a peculiar degree to prepare and facilitate transitions.

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

The gradual modification of his views in relation to the economic constitution of society is set forth in his 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 fundamental improvement in social arrangement. Private property, as now understood, and inheritance appeared the dernier mot of legislation." The notion of proceeding to any radical redress of the injustice "involved in the fact that some are born to riches and the vast majority to poverty" he had then reckoned chimerical. But now his views were such as would "class him decidedly under the general designation of socialist" ; he had come to believe that the whole contemporary framework of economic life was merely temporary and provisional, and that a time would come when "the division of the produce of labour, instead of depending, as in so great a degree it now does, on the accident of birth, would be made by concert on an acknowledged principle of justice." "the social problem of the future" he considered to be "how to unite the greatest individual liberty of action," which was often compromised in socialitic 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 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, as he says, made the public more open to the reception of novelists in opinion.

Whilst thus looking forward to a new economic order, he yet thinks its advent very remote, band believes that the inducements of private interest will in the meantime be indispensable. On the spiritual side he maintains a similar attitude of expectancy. He anticipated the ultimate disappearance of theism, and the substitution of a purely human region, 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 organization of society, he favours present or proximate arrangement which would urge the industrial world towards other issues. The system of peasant proprietorship of land is distinctly individualistic in its whole tendency ; yet he extravagantly praises it in the earlier part of his book, only receding from that laudation when he comes to the chapter on the future of the labouring classes. And the system of socalled cooperation in production which he so warmly commended in the later editions of his work, and led some of his followers to preach as the one thing needful, would inevitably strengthen the principle of personal property, and, whilst professing at most to substitute the competition of associations for that of individuals, would by no means exclude the latter.

The elevation of the working classes he bound up too exclusively with the Malthusian ethics, on which he laid quite an extravagant stress, though, as 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 least difficult to see how, apart from individual responsibility for the support of a family, what Malthus called moral restraint could be enforced. This difficulty is indeed the fatal flaw which, in Malthu’s own opinion, vitiated the scheme of Godwin.

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

With respect to economic method also, he shifted his position ; yet to the end occupied uncertain ground. In the fifth of his early essays he asserted that the method a priori is the only mode of investigation in the social sciences, and that the method a posteriori " is altogether inefficacious in those sciences, as a means of arriving at any considerable body of valuable truth." When he wrote his Logic, he had learned from Comte that the a posteriori method—in the form which he chose to call "inverse deduction"—was the only mode of arriving at truth in general sociology; and his admission of this at once renders the essay obsolete. But, unwilling to relinquish the a priori method of his youth, he tries to establish a distinction of two sorts of economic inquiry, one of which, though not the other, can be handled by the method. Sometimes he speaks of political economy as a department whilst on the other hand the title of his systematic work implies a doubt whether political economy is a part of "social philosophy" at all, and not rather a study pre paratory and auxiliary to it. Thus, on the logical as well as the dogmatic side, he halts between two opinions. Notwithstanding his misgivings an 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 ; 2d ed., 1875). Prof. Walker has lately spoken of the method advocated by Cairnes as different from that put forward by Mill, and has even represented the former as similar to, if not identical with, that of the German historical school. But this is certainly an error. Cairnes, notwithstanding some apparent vacillation of view and certain concessions more formal than real, maintains the utmost rigour of the deductive method ; he distinctly affirms that in political economy there is no room for induction at all, "the economist starting with a knowledge of ultimate causes," and being thus, "at the outset of his enterprise, at the position which the physicist only attains after ages of laborious research." He does not, indeed, seem to be advanced beyond the point of view of Senior, who professed to deduce all economic truth from four elementary propositions. Whilst Mill in his Logic represents verification as an essential part of the process of demonstration of economic laws, Cairnes holds that, as they "are not assertions respecting the character or sequence of phenomena" (though what else can a scientific law be?). "they can neither be established nor refuted by statistical or documentary evidence." A proposition which affirms nothing respecting phenomena cannot be controlled by being confronted with phenomena. Notwithstanding the unquestionable ability of his book, it appears to mark, in some respects, a retrogression in methodology, and can for the future possess only an historical interest.

Regarded in that light, the labours of Mill and Cairness on the method of the science , though intrinsically unsound, had an important negative effect. They let down the old political economy from its traditional position, and reduced its extravagant pretensions by two modifications of commonly accepted views. First, whilst Ricardo had never doubted that in all his reasonings he was dealing with human being 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 "economic man," a being who is influenced by two motives only, that of acquiring wealth and that of avoiding exertion ; and only so far as the premises framed on this conception correspond with fact can the conclusions be depended on in practice. Senior in vain protested against such a view of tho science, which, as he saw, compromised its social efficacy ; whilst Torrens, who previously combated the doctrines of Ricardo, hailed Mill’s new presentation of political economy as enabling him, whilst in one sense rejecting those doctrines, in another sense to accept them. Secondly, beside economic science, it had often been said, stands an economic art,—the former ascertaining truths respecting the laws of economic phenomena, the latter prescribing the right kind of economic action ; and many hand assumed that, the former being given, the later 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 that 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 science. Beginning with the least complex, mathematics, we rise successively to astronomy, physics, chemistry, thence to biology, and from it again to sociology. In the course of this ascent we come upon all the great laws which regulate the phenomena of the inorganic world, of organized beings, and of society. A further step, however, remains to be taken—namely, to morals ; and at this point theory and practice tend to coincide, because every element of conduct has to be considered in relations to t he 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 criticizes and emends the statements which preceding writers had given of some of its principal doctrines, and treats elaborately of the limitations with which they are to be understood, and the exceptions to them which may be produced by special circumstances. Whilst marked by great ability, it affords evidence of what has been justly observed as a weakness in Cairnes’s mental constitution—his "deficiency in intellectual sympathy," and consequent frequent inability to see ore than one side of a truth.

The three divisions of the book relate respectively to (1) 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 naturally depended 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 production ; in other words, he asserts what Senior (whom he does not name) had said before him, though he had not consistently carried out the nomenclature, that cost of production is the sum of labour and abstinence necessary to production, wages and profits being the remuneration of sacrifice and not elements of it. But, it may well be asked, How can an amount of labour be added to an amount of abstinence? Must not wages and profits be taken as "measures of cost?" By adhering to the conception of "sacrifice," he expose the emptiness of the assertion that "dear labour is the great obstacle tot he extension of British trade."—a sentence in which "British trade "means capitalists’ profits. At this point we are introduced to a doctrine now first elaborated, though there are indications of it in Mill, of whose theory of international values it is in fact an extension. In foreign trade cost of production, in Cairnes’s sense, does not regulate values, because it cannot perform that function except under régime 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 the case of labour the requisite competition takes place only within certain social, or rather industrial, strata. The world of industry may be divided into a series of superposed groups, and these groups are practically "non-competing," the disposable labour in any one of them being rarely capable of choosing its field in a higher. The law that cost of production determines price cannot, therefore, be absolutely stated respecting domestic any more than respecting international exchange ; as it fails for the latter universally, so it fails for the former as between non-competing grpoups. The law that holds between these is similar to that governing international values, which may be called the equation of reciprocal demand. Such a state of relative prices will establish 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. The reciprocal demand of the groups determines the "average relative level" of prices within each group ; whilst cost of production regulates the distribution of price among the individual products of each group. This theorem is perhaps of no great practical value ; but the tendency of the whole investigation is to attenuate the importance of cost of production as a regulator of normal price, and so to show that yet another of the accepted doctrines of the science had been propounded in too rigid and absolute a form. As to market price, the formula by which Mill had defined it as the price which equalized demand and supply Cairnes shows to be an identical proposition, and he defines it as the price which most advantageously adjusts the existing supply to the existing demand pending the coming forward of fresh supplies from the sources of production.

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

The third part is devoted mainly to an exposition of Ricardo’s doctrine of the conditions of international trade and Mill’s theory of international values. The former Cairnes modifies by introducing his idea of the partial influence of reciprocal demand as distinguished from cost of production, on the regulation of domestic prices, and founds on this rectification an interesting account of the connexion between the wages prevailing in a country and the character and course of its external trade. He emends Mill’s statement, which represented the produce of a country as exchanging for that of other countries at such values "as are required in order that the whole of her exports may exactly pay for the whole of her imports" by substituting for the latter phase the condition that each country should by means of her exports discharge all her foreign liabilities—in other words, by introducing the consideration of the balance of debts. This idea was not new ; it had been indicated by J. L. Foster a early as 1804, and was touched on by Mill himself ; but he expounds it well ; and it is important as clearing away common misconceptions, and sometimes removing groundless alarms. 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 "politcal argument," founded on the admitted importance for civilization of developing diversified national industries ; and he meets only by one of the highly questionable commonplaces of the doctrinaire economists Mills proposition that protection may foster nascent industries really adapted to a country till they have struck root and are able to endure the stress of foreign competition.

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

We have already had 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 greatest American conflict.

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