² Address to the Social and Political Education League, 29th March, 1892.

THE SPHERE OF POLITICAL ECONOMY.

There seem to be at present many conflicting views as to the nature of Political Economy. There is a popular impression that Political Economy, or, at any rate, the so-called "classical" doctrine, the doctrine which was made most definite by Ricardo, and accepted with modifications by J. S. Mill, is altogether exploded. Their main doctrines, it is suggested, were little better than mares' nests, and we may set aside their pretensions to have founded an exact science. What, then, is to come in its place? Are we simply to admit that there is no certainty about economical problems, and to fall back upon mere empiricism? Everything,—shall we say?—is to be regarded as an open question. That is, perhaps, a common impression in the popular mind. Yet, on the other hand, we may find some very able thinkers applying mathematical formulæ to economics; and that seems to suppose, that within a certain region they obtain results comparable in precision and accuracy to those of the great physical sciences. The topic is a very wide one; and it would be presumptuous in me to speak dogmatically. I wish, however, to suggest certain considerations which may, perhaps, be worth taking into account; and, as I must speak briefly, I must not attempt to supply all the necessary qualifications. I can only attempt to indicate what seems to me to be the correct point of view, and apologise if I appear to speak too dogmatically, simply because I cannot waste time by expressions of diffidence, by reference to probable criticisms, or even by a full statement of my own reasons.

A full exposition would have to define the sphere of Political Economy by describing its data and its methods. What do we assume, and how do we reason? A complete answer to these questions would indicate the limits within which we can hope for valid conclusions. I will first refer, briefly, to a common statement of one theory advocated by the old-fashioned or classical school. Economic doctrine, they have said, supposes a certain process of abstraction. We have to do with what has been called the "economic man". He is not, happily, the real man. He is an imaginary being, whose sole principle of action is to buy in the cheapest and sell in the dearest market: a man, more briefly, who always prefers a guinea—even a dirty guinea—to a pound of the cleanest. Economists reply to the remonstrances of those who deny the existence of such a monster, by adding that they do not for a moment suppose that men in general, or even tradesmen or stockbrokers, are in reality such beings,—mere money-making machines, stripped bare of all generous or altruistic sentiment—but simply that, as a matter of fact, most people do, ceteris paribus, prefer a guinea to a pound; and that so large a part of our industrial activity is carried on from motives of this kind, that we may obtain a fair approximation to the actual course of affairs by considering them as the sole motives. We shall not go wrong, for example, in financial questions, by assuming that the sole motive of speculators in the Stock Exchange is the desire to make money. Now, it is possible, perhaps, to justify this way of putting the case, by certain qualifications. I think, however, that, if strictly interpreted, it is apt to cover a serious fallacy. The "economic man" theory, we may say, assumes too much in one direction, and too little in another. It assumes too much if it is understood as implying that the desire for wealth is a purely selfish desire. A man may desire to make money in order simply to gratify his own sensual appetites. But he may also desire to be independent; and that may include a desire to do his part in the work of society, and probably does include some desire to relieve others of a burden. The wish to be self-supporting is not necessarily or purely "selfish". And obviously, too, one great motive in all such occupations is the desire to support a family, and one main inducement to saving is the desire to support it after your own death. Remove such motives, and half the impulses to regular industrial energy of all kinds would be destroyed. We must, therefore, give our "economic man" credit for motives referring to many interests besides those which he buttons into his own waistcoat. And therefore, too, as I have said, the assumption is insufficient. The very conception of economic science supposes all that is supposed, in the growth of a settled order of society. The purest type of the "economic man," as he is sometimes described, would be realised in the lowest savage, as sometimes described, who is absolutely selfish, who knocks his child on the head because it cries, and eats his aged parent if he cannot find a supply of roots. But such a being could only form herds, not societies. Political Economy only becomes conceivable when we suppose certain institutions to have been developed. It assumes, obviously, and in the first place, the institution of property; it becomes applicable, with less qualification, in proportion to the growth of the corresponding sentiments; it takes for granted all that highly elaborate set of instincts which induce me, when I want something, to produce an equivalent in exchange for it, instead of going out to take it by force. The more thorough the respect for property, the more applicable are rules of economics; and that respect implies a long training in that sense of other people's rights, which, unfortunately, is by no means so perfect as might be desired.

It follows, then, that the economist really assumes more—and rightly assumes more—than he sometimes claims. He assumes what Adam Smith assumed at the opening of his great treatise: that is, the division of labour. But the division of labour implies the organisation of society. It implies that one man is growing corn while another is digging gold, because each is confident that he will be able to exchange the products of his own labour for the products of the other man's labour. This, of course, implies settled order, respect for contracts, the preservation of peace, and the abolition of force throughout the area occupied by the society. And this, again, is only possible in so far as certain political and ecclesiastical and military institutions have been definitely constructed. The economic assumption is really an assumption—not of a certain psychological condition of the average man, but—of the existence of a certain social mechanism. A complete science would clear up fully a problem which must occur often to all of us: How do you account for London? How is it that four or five millions of people manage to subsist on an area of a few square miles, which itself produces nothing? that other millions all over the world are engaged in providing for their wants? that food and clothes and fuel, in sufficient quantities to preserve life, are being distributed with tolerable regularity to each unit in this vast and apparently chaotic crowd? and that, somehow or other, we struggle on, well or ill, by the help of a gigantic commissariat, performing functions incomparably more complex than were ever needed for military purposes? The answer supposes that there is, as a matter of fact, a great industrial organisation which discharges the various functions of producing, exchanging, distributing, and so forth; and that its mutual relations are just as capable of being investigated and stated as the relations between different parts of an army. The men and officers do not wear uniforms; they are not explicitly drilled or subject to a definite code of discipline; and their rates of pay are not settled by any central authority. But there are capitalists, "undertakers" and labourers, merchants and retail dealers and contractors, and so forth, just as certainly as there are generals and privates, horse, foot, and artillery; and their mutual relations are equally definable. The economist has to explain the working of this industrial mechanism; and the thought may sometimes occur to us, that it is strange that he should find the task so difficult. Since we ourselves have made, or at any rate constitute, the mechanism, why should it be so puzzling to find out what it is? We are cooperating in a systematic production and distribution of wealth, and we surely ought not to find any impenetrable mystery in discovering what it is that we are doing every day of our lives. Certain economists writing within this century have often been credited with the discovery of the true theory of rent, or, which is equally good for my purpose, of starting a false theory. Yet landowners and agents had been letting farms and houses for generations; and surely they ought to have known what it was that they were themselves doing. One explanation of the difficulty is, that whereas an army is constituted by certain regulations of a central authority, the industrial army has grown up unconsciously and spontaneously. Its multitudinous members have only looked each at his own little circle; the labourer only thinks of his wages, and the capitalist of his profits, without considering his relations to the whole system of which he forms a part. The peasant drives his plough for wages, and buys his tea as if the tea fell like manna from the skies, without thinking of the curious relation into which he is thus brought with the natives of another hemisphere. The order which results from all these independent activities appeared to the older economists as an illustration of the doctrine of Final Causes. Providence had so ordered things that each man, by pursuing his own interests, pursued the interests of all. To a later school it appears rather as an illustration of the doctrine by which organisms are constructed through the struggle for existence and the survival of the fittest. In either case, it seems as though the mechanism were made rather for us than by us; that it is the product of conditions which we cannot control, instead of being an arrangement put together by conscious volitions. And, therefore, when the economist shows us what in fact are the existing arrangements and their mutual relations, he appears to be making a discovery of a scientific fact as much as if he were describing the anatomy of some newly-discovered animal or plant.

The real assumption of the economist therefore is, as I think, simply the existence of a certain industrial organisation, which has a real existence as much as an army or a church; and there is no reason why his description should not be as accurate as the complexity of the facts allows. He is giving us the anatomy of society considered as a huge mechanism for producing and distributing wealth, and he makes an abstraction only in the sense that he is considering one set of facts at a time. The military writer would describe the constitution of an army without going into the psychological or political conditions which are of course implied, and without considering the soldiers in any other relations than those implied in their military services. In the same way, the economist describes the army of industry, and classifies its constituent parts. In order to explain their mutual relations, he has to make certain further assumptions, of which it would be rash to attempt a precise summary. He assumes as a fact, what has of course always been known, that scarcity implies dearness and plenty cheapness; that commodities flow to the markets where they will fetch the highest prices; that there is a certain gravitation towards equalisation of profits among capitalists, and of wages among labourers; so that capital or labour will flow towards the employments in which they will secure the highest reward. He endeavours to give the greatest accuracy to such formulæ, of which nobody, so far as I know, denies a certain approximate truth. So long as they hold good, his inferences, if logically drawn, will also hold good. They take for granted certain psychological facts, such as are implied in all statements about human nature. But the economist, as an economist, is content to take them for granted without investigating the ultimate psychological laws upon which they depend. Those laws, or rather their results, are a part of his primary data, although he may go so far into psychological problems as to try to state them more accurately. The selfishness or unselfishness of the economic man has to be considered by the psychologist or by the moralist; but the economist has only to consider their conclusions so far as they affect the facts. So long as it is true, for example, that scarcity causes dearness, that profits attract capital, that demand and supply tend to equalise each other, and so forth, his reasonings are justified; and the further questions of the ethical and psychological implications of these facts must be treated by a different science. The question of the play of economic forces thus generally reduces itself to a problem which may be thus stated: What are the conditions of industrial equilibrium? How must prices, rates of wages, and profit be related in order that the various classes concerned may receive such proportions of produce as are compatible with the maintenance of the existing system of organisation? If any specified change occurs, if production becomes easier or more difficult, if a tax be imposed, or a regulation of any kind affects previous conditions, what changes will be necessary to restore the equilibrium? These are the main problems of Political Economy. To solve, or attempt to solve them, we have to describe accurately the existing mechanism, and to suppose that it will regulate itself on the assumption which I have indicated as to demand and supply, the flow of capital and labour, and so forth. To go beyond these assumptions, and to justify them by psychological and other considerations, may be and is a most interesting task, but it takes us beyond the sphere of Economics proper.

I must here diverge for a little, to notice the view of the school of economists which seems to regard scientific accuracy as attainable by a different path. Jevons, its most distinguished leader in England, says roundly, that political science must be a "mathematical science," because "it deals throughout with quantities"; and we have been since provided with a number of formulæ, corresponding to this doctrine. The obvious general reply would be, that Political Economy cannot be an exact science because it also deals throughout with human desires. The objection is not simply that our data are too vague. That objection, as Jevons says, would, perhaps, apply to meteorology, of which nobody doubts that it is capable of being made an exact science. But why does nobody doubt that meteorology might become an exact science? Because we are convinced that all the data which would be needed are expressible in precise terms of time and space; we have to do with volumes, and masses, and weights, and forces which can be exactly measured by lines; and, in short, with things which could be exactly measured and counted. The data are, at present, insufficiently known, and possibly the problems which would result might be too complex for our powers of calculation. Still, if we could once get the data, we could express all relevant considerations by precise figures and numbers.

Now, is this true of economic science? Within certain limits, it is apparently true: Ricardo used mathematical formulæ, though he kept to arithmetic, instead of algebra. When Malthus spoke of arithmetical and geometrical ratios, the statement, true or false, was, of course, capable of precise numerical expression, so soon as the ratios were assigned. So there was the famous formula proving a relation between the number of quarters of corn produced by a given harvest, and the number of shillings that would be given for a quarter of corn. If, again, we took the number of marriages corresponding to a given price of corn, we should obtain a formula connecting the number of marriages with the number of quarters of corn produced. The utility of statistics, of course, depends upon the fact that we do empirically discover some tolerably constant and simple numerical formulæ. Such statistical statements are useful, indeed, not only in economical, but in other inquiries, which are clearly beyond the reach of mathematics. The proportion of criminals in a given population, the number of suicides, or of illegitimate births, may throw some light upon judicial and political, and even religious or ethical problems. Nor are such formulæ useless simply because empirical. The law of gravitation, for example, is empirical. Nobody knows the cause of the observed tendency of bodies to gravitate to each other, and therefore no one can say how far the law which represents the tendency must be universal. Still, the fact that, so far as we have observed, it is invariably verified, and that calculations founded upon it enable us to bring a vast variety of phenomena under a single rule, is quite enough to justify astronomical calculation.

If, therefore, we could find a mathematical formula which was, as a matter of fact, verifiable in economical problems about prices, and so forth, we should rightly apply to mathematicians to help us with their methods. But, not only do we not find any such simple relations, but we can see conclusive reasons for being sure that we can never find them. Take, for example, the case of the number of marriages under given conditions. I need hardly say that it is impossible for the ablest mathematician to calculate whether the individual A will marry the individual B. But, by taking averages, and so eliminating individual eccentricities, he might discover that, in a given country and at a given time, a rise of prices will diminish marriages in certain proportion. Our knowledge of human nature is sufficient to make that highly probable. But our knowledge also shows that such a change will act differently in different cases: there will be one formula for France, and another for England; one for Lancashire, and another for Cornwall; one for the rich, and another for the poor; and both the total wealth of a country and its distribution will affect the rule. Differences of national temperament, of political and social constitution, of religion and ecclesiastical organisation, will all have an effect; and, therefore, a formula true here and now must, in all probability, fail altogether elsewhere. The formula is, in the mathematical phrase, a function of so many independent variables, that it must be complex beyond all conception, if it takes them all into account; while it must yet be necessarily inaccurate if it does not take them into account. But, besides this, the conditions upon which the law obviously depends are not themselves capable of being accurately defined, and still less of being numerically stated. Ingenious thinkers have, indeed, tried to apply mathematical formulæ to psychology; but they have not got very far; and it may, I think, be assumed, without further argument, that while you have to deal both with psychological and sociological elements, with human desires, and with those desires modified by social relations, it is impossible to find any data which can be mathematically stated. There is no arithmetical measure of the forces of love, or hunger, or avarice, by which (among others) the whole problem is worked out.

It seems to me, therefore, that we must accept the alternative which is only mentioned to be repudiated by Jevons, namely, that Political Economy, if not a "mathematical science," must be part of sociology. I should say that it clearly is so; for if we wish to investigate the cause of any of the phenomena concerned, and not simply to tabulate from observations, we are at once concerned with the social structure and with the underlying psychology. The mathematical methods are quite in their place when dealing with statistics. The rise and fall of prices, and so forth, can be stated precisely in figures; and, whenever we can discover some approximation to a mathematical law (as in the cases I have noticed) we may work out the results. If, for example, the price of a commodity under certain conditions bears a certain relation to its scarcity, we can discover the one fact when the other fact is given, remembering only that our conclusions are not more certain than our premisses, and that the observed law depends upon unknown and most imperfectly knowable conditions. Such results, again, may be very useful in various ways, as illustrative of the way in which certain laws will work if they hold good; and, again, as testing many of our general theories. If you have argued that the price of gold or silver cannot be fixed, the fact that it has been fixed under certain conditions will of course lead to a revision of your arguments. But I cannot help thinking that it is an illusion to suppose that such methods can justify the assertion that the science as a whole is "mathematical". Nothing, indeed, is easier than to speak as if you had got a mathematical theory. Let x mean the desire for marriage and y the fear of want, then the number of marriages is a function of x and y, and I can express this by symbols as well as by ordinary words. But there is no magic about the use of symbols. Mathematical inquiries are not fruitful because symbols are used, but because the symbols represent something absolutely precise and assignable. The highest mathematical inquiries are simply ingenious methods of counting; and till you have got something precise to count, they can take you no further. I cannot help thinking that this fallacy imposes upon some modern reasoners; that they assume that they have got the data because they have put together the formulæ which would be useful if they had the data; and, in short, that you can get more out of a mill than you put into it; or, in other words, that more conclusions than really follow can be got out of premisses, simply because you show what would follow if you had the required knowledge. When the attempt is made, as it seems to me to be made sometimes, to deduce economical laws from some law of human desire—as from the simple theorem that equal increments of a commodity imply diminishing amounts of utility—I should reply not only that the numerical data are vaguely defined and incapable of being accurately stated, but that the attempt must be illusory because the conclusions are not determinable from the premisses. The economic laws do not follow from any simple rule about human desires, because they vary according to the varying constitution of human society; and any conclusion which you could obtain would be necessarily confined to the abstract man of whom the law is supposed to hold good. Every such method, therefore, if it could be successful, could only lead to conclusions about human desire in general, and could throw no light upon the special problems of political economy, which essentially depend upon varying industrial organisation.

I will not, however, go further. You must either, I hold, limit Political Economy to the field of statistical inquiry, or admit that, as a part of sociology, it deals with questions altogether beyond the reach of mathematics. Like physiology, it is concerned with results capable of numerical statement. The number of beats of the pulse, or the number of degrees of temperature of the body, are important data in physiological problems. They may be counted, and may give rise to mathematically expressible formulæ. But the fact does not excuse us from considering the physical conditions of the organs which are in some way correlated with these observed phenomena; and, in the case of Political Economy, we have to do with the social structure, which is dependent upon forces altogether incapable of precise numerical estimates. That, at least, is my view; and I shall apply it to illustrate one remark, which must, I think, have often occurred to us. Political Economy, that is, often appears to have a negative rather than a positive value. It is exceedingly potent—so, at least, I think—in dispersing certain popular fallacies; but it fails when we regard it as a science which can give us positive concrete "laws". The general reason is, I should say, that although its first principles may be true descriptions of facts, and any denial of them, or any inconsistent applications of them, may lead us into error, they are yet far from sufficient descriptions. They omit some considerations which are relevant in any concrete case; and the facts which they describe are so complex that, even when we look at them consistently and follow the right clue, we cannot solve the complicated problems which occur. It may be worth while to insist a little upon this, and to apply it to one or two peculiar problems.

Let me start from the ordinary analogy. Economic inquiry, I have suggested, describes a certain existing mechanism, which exists as really as the physical structure described by an anatomist. The industrial organism has, of course, many properties of which the economist, as such, does not take account. The labourer has affections, and imaginations, and opinions outside of his occupation as labourer; he belongs to a state, a church, a family, and so forth, which affect his whole life, including his industrial life. Is it therefore impossible to consider the industrial organisation separately? Not more impossible, I should reply, than to apply the same method in regard to the individual body. Were I to regard my stomach simply as a bag into which I put my food, I should learn very little about the process of digestion. Still, it is such a bag, and it is important to know where it is, and what are its purely mechanical relations to other parts of the body. My arms and legs are levers, and I can calculate the pressure necessary to support a weight on the hand, as though my bones and muscles were made of iron and whipcord. I am a piece of mechanism, though I am more, and all the principles of simple mechanics apply to my actions, though they do not, by themselves, suffice to explain the actions. The discovery of the circulation of the blood explained, as I understand, my structure as a hydraulic apparatus; and it was of vast importance, even though it told us nothing directly of the other processes necessarily involved. In this case, therefore, we have an instance of the way in which a set of perfectly true propositions may, so to speak, be imbedded in a larger theory, and may be of the highest importance, though they are not by themselves sufficient to solve any concrete problem. We cannot, that is, deduce the physiological principles from the mechanical principles, although they are throughout implied. But those principles are not the less true and useful in the detection of fallacies. They may enable us to show that an argument supposes facts which do not exist; or, perhaps, that it is, at any rate, inconsistent because it assumes one structure in its premisses, and another in its conclusions.

I state this by way of illustration: but the value of the remark may be best tested by applying it to some economical doctrines. Let us take, for example, the famous argument of Adam Smith against what he called the mercantile theory. That theory, according to him, supposed that the wealth of nations, like the wealth of an individual, was in proportion to the amount of money in their possession. He insisted upon the theory that money, as it is useful solely for exchange, cannot be, in itself, wealth; that its absolute amount is a matter of indifference, because if every coin in existence were halved or doubled, it would discharge precisely the same function; and he inferred that the doctrine which tested the advantages of foreign commerce by the balance of trade or the net return of money, was altogether illusory. His theory is expounded in every elementary treatise on the subject. It may be urged that it was a mere truism, and therefore useless; or, again, that it does not enable us to deduce a complete theory of the functions of money. In regard to the first statement, I should reply that, although Smith probably misrepresented some of his antagonists, the fallacy which he exposed was not only current at the time, but is still constantly cropping up in modern controversies. So long as arguments are put forward which implicitly involve an erroneous, because self-contradictory, conception of the true functions of money, it is essential to keep in mind these first principles, however obvious they may be in an abstract statement. Euclid's axioms are useful because they are self-evident; and so long as people make mistakes in geometry, it will be necessary to expose their blundering by bringing out the contradictions involved. As Hobbes observed, people would dispute even geometrical axioms if they had an interest in doing so; and, certainly, they are ready to dispute the plainest doctrines about money. The other remark, that we cannot deduce a complete theory from the axiom is, of course, true. Thus, for example, although the doctrine may be unimpeachable, there is a difficulty in applying it to the facts. As gold has other uses besides its use as money, its value is not regulated exclusively by the principle assigned; as other things, again, such as bank-notes and cheques, discharge some of the functions of money, we have all manner of difficult problems as to what money precisely is, and how the most elementary principles will apply to the concrete facts. A very shrewd economist once remarked, listening to a metaphysical argument, "If there had been any money to be made out of it, we should have solved that question in the city long ago". Yet, there is surely money to be made out of a correct theory of the currency; and people in the city do not seem to have arrived at a complete agreement. In fact, such controversies illustrate the extreme difficulty which arises out of the complexity of the phenomena, even where the economic assumption of the action of purely money-loving activity is most nearly verified. The moral is, I fancy, that while inaccurate conclusions are extremely difficult, we can only hope to approach them by a firm grasp of the first principles revealed in the simplest cases.

Even in such a case, we have also to notice how we have to make allowance for the intrusion of other than purely economic cases. The doctrine just noticed is, of course, closely connected with the theory of free trade. The free trade argument is, I should mention, perfectly conclusive in a negative sense. It demonstrates, that is, the fallacy which lurks in the popular argument for protection. That argument belongs to the commonest class of economic fallacies, which consists in looking at one particular result without considering the necessary implications. The great advantage of any rational theory is, that it forces us to look upon the industrial mechanism as a whole, and to trace out the correlative changes involved in any particular operation. It disposes of the theories which virtually propose to improve our supply of water by pouring a cup out of one vessel into another; and such theories have had considerable success in economy. So far, in short, as a protectionist really maintains that the advantage consists in accumulating money, without asking what will be the effect upon the value of money, or that it consists in telling people to make for themselves what they could get on better terms by producing something to exchange for it, his arguments may be conclusively shown to be contradictory. Such arguments, at least, cannot be worth considering. But, to say nothing of cases which may be put by an ingenious disputant in which this may not quite apply, we have to consider reasons which may be extra-economical. When it is suggested, for example, that the economic disadvantage is a fair price for political independence; or, on the other hand, that the stimulus of competition is actually good for the trade affected; or, again, that protection tends naturally to corruption; we have arguments which, good or bad, are outside the sphere of economics proper. To answer them we have to enter the field of political or ethical inquiry, where we have to take leave of tangible facts and precise measures.

This is a more prominent element as we approach the more human side (if I may so call it) of Political Economy. Consider, for example, the doctrine which made so profound an impression upon the old school—Malthus's theory of population. It was summed up in the famous—though admittedly inaccurate—phrase, that population had a tendency to increase in a geometrical ratio, while the means of subsistence increased only in an arithmetical ratio. The food available for each unit would therefore diminish as the population increased. The so-called law obviously states only a possibility. It describes a "tendency," or, in other words, only describes what would happen under certain, admittedly variable, conditions. It showed how, in a limited area and with the efficiency of industry remaining unaltered, the necessary limits upon the numbers of the population would come into play. If, then, the law were taken, or in so far as it was taken, to assert that, in point of fact, the population must always be increasing in civilised countries to the stage at which the lowest class would be at starvation level, it was certainly erroneous. There are cases in which statesmen are alarmed by the failure of population to show its old elasticity, and beginning to revert to the view that an increased rate is desirable. It cannot be said to be even necessarily true that in all cases an increased population implies, of necessity, increased difficulty of support. There are countries which are inadequately peopled, and where greater numbers would be able to support themselves more efficiently because they could adopt a more elaborate organisation. Nor can it be said with certainty that some pressure may not, within limits, be favourable to ultimate progress by stimulating the energies of the people. In a purely stationary state people might be too content with a certain stage of comfort to develop their resources and attain a permanently higher stage. Whatever the importance of such qualifications of the principle, there is a most important conclusion to be drawn. Malthus or his more rigid followers summed up their teaching by one practical moral. The essential condition of progress was, according to them, the discouragement of early marriages. If, they held, people could only be persuaded not to produce families until they had an adequate prospect of supporting their families, everything would go right. We shall not, I imagine, be inclined to dispute the proposition, that a certain degree of prudence and foresight is a quality of enormous value; and that such a quality will manifest itself by greater caution in taking the most important step in life. What such reasoners do not appear to have appreciated was, the immense complexity and difficulty of the demand which they were making. They seem to have fancied that it was possible simply to add another clause—the clause "Thou shalt not marry"—to the accepted code of morals; and that, as soon as the evil consequences of the condemned behaviour were understood,—properly expounded, for example, in little manuals for the use of school children,—obedience to the new regulation would spontaneously follow. What they did not see, or did not fully appreciate, was the enormous series of other things—religious, moral, and intellectual—which are necessarily implied in altering the relation of the strongest human passion to the general constitution, and the impossibility of bringing home such an alteration, either by an act of legislation or by pointing out the bearing of a particular set of prudential considerations. Political Economy might be a very good thing; but its expositors were certainly too apt to think that it could by itself at once become a new gospel for mankind. Should we then infer from such criticisms that the doctrine of Malthus was false, or was of no importance? Nothing would be further from my opinion. I hold, on the contrary, that it was of the highest importance, because it drew attention to a fact, the recognition of which was essential to all sound reasoning on social questions. The fact is, that population is not to be treated as a fixed quantity, but as capable of rapid expansion; and that this elasticity may at any moment require consideration, and does in fact give the explanation of many important phenomena. The main fact which gave importance to Malthus's writings was the rapid and enormous increase of pauperism during the first quarter of this century. The charitable and sentimental writers of the day were alarmed, but proposed to meet the evil by a reckless increase of charity, either of the official or the private variety. Pitt, we know, declared (though he qualified the statement) that to be the father of a large family should be a source of honour, not of obloquy; and the measures adopted under the influence of such notions did in fact tend to diminish all sense of responsibility, encouraged people to rely upon the parish for the support of their children, and brought about a state of things which alarmed all intelligent observers. The greatest check to the evil was given by the new Poor-law, adopted under the influence of the principles advocated by Malthus and his friends. His achievement, then, was not that he laid down any absolutely correct scientific truth, or even said anything which had not been more or less said by many judicious people before his time; but that he encouraged the application of a more systematic method of reasoning upon the great problem of the time. Instead of simply giving way to the first kindly impulse, abolishing a hardship here and distributing alms elsewhere, he substantially argued that society formed a complex organism, whose diseases should be considered physiologically, their causes explained, and the appropriate remedies considered in all their bearings. We must not ask simply whether we were giving a loaf to this or that starving man, or indulge in à priori reasoning as to the right of every human being to be supported by others; but treat the question as a physician should treat a disease, and consider whether, on the whole, the new regulations would increase or diminish the causes of the existing evils. He did not, therefore, so much proclaim a new truth, as induce reformers to place themselves at a new and a more rational point of view. The so-called law of population which he announced might be in various ways inaccurate, but the announcement made it necessary for rational thinkers to take constantly into account considerations which are essential in any satisfactory treatment of the great problems. If it were right to consider pauperism as a gulf of fixed dimensions, we might hope to fill it by simply taking a sufficient quantity of wealth from the richer classes. If, as Malthus urged, this process had a tendency to enlarge the dimensions of the gulf itself, it was obvious that the whole problem required a more elaborate treatment. By impressing people with this truth, and by showing how, in a great variety of cases, the elasticity of the population was a most important factor in determining the condition of the people, Malthus did a great service, and introduced a more systematic and scientific method of discussing the immensely important questions involved.

I will very briefly try to indicate one further application of economic principles. A critical point in the modern development of the study was marked by Mill's abandonment of the so-called "wage fund theory". That doctrine is now generally mentioned with contempt, as the most conspicuous instance of an entirely exploded theory. It is often said that it is either a falsity, or a barren truism. I am not about to argue the point, observing only that some very eminent Economists consider that it was rather inadequate than fallacious; and that to me it has always seemed that the theory which has really been confuted is not so much a theory which was ever actually held by Economists, as a formula into which they blundered when they tried to give a quasi-scientific definition of their meaning. It is common enough for people to argue sensibly, when the explicit statements of their argument may be altogether erroneous. At any rate, I think it has been a misfortune that a good phrase has been discredited; and that Mill's assailants, in exposing the errors of that particular theory of a "wage fund," seemed to imply that the whole conception of a "wage fund" was a mistake. For the result has been, that the popular mind seems to regard the amount spent in wages as an arbitrary quantity; as something which, as Malthus put it, might be fixed at pleasure by her Majesty's justices of the peace. Because the law was inaccurately stated, it is assumed that there is no law at all, and that the share of the labourers in the total product of industry might be fixed without reference to the effect of a change upon the general organisation. Now, if the wage fund means the share which, under existing circumstances, actually goes to the class dependent upon wages, it is of the highest importance to discover how that share is actually determined; and it does not even follow that a doctrine which is in some sense a truism may not be a highly important doctrine. One of the ablest of the old Economists, Nassan Senior, after laying down his version of the theory, observes that it is "so nearly self-evident" that if Political Economy were a new science, it might be taken for granted. But he proceeds to enumerate seven different opinions, some of them held by many people, and others by writers of authority, with which it is inconsistent. And, without following his arguments, this statement suggests what I take to be a really relevant defence of his reasons. At the time when the theory was first formulated, there were many current doctrines which were self-contradictory, and which could, therefore, best be met by the assertion of a truism. When the peace of 1815 brought distress instead of plenty, some people, such as Southey, thought it a sufficient explanation to say that the manufacturer had lost his best customer, because the Government wanted fewer guns and less powder. They chose to overlook the obvious fact that a customer who pays for his goods by taking money out of the pockets of the seller, is not an unmixed blessing. Then, there was the theory of general "gluts," and of what is still denounced as over-production. The best cure for commercial distress would be, as one disputant asserted, to burn all the goods in our warehouses. It was necessary to point out that this theory (when stated in superficial terms) regarded superabundance of wealth as the cause of universal poverty. Another common theory was the evil effect of manufacturers in displacing work. The excellent Robert Owen stated it as an appalling fact, that the cotton manufacture supplanted the labour of a hundred (perhaps it was two hundred) millions of men. He seems to assume that, if the machinery had not been there, there would still have been wages for the hundred millions. The curious confusion, indeed, which leads us to speak of men wanting work, when what we really mean is that they want wages, shows the tenacity of an old fallacy. Mandeville argued long ago that the fire of London was a blessing, because it set at work so many carpenters, plumbers, and glaziers. The Protestant Reformation had done less good than the invention of hooped petticoats, which had provided employment for so many milliners. I shall not insult you by exposing fallacies; and yet, so long as they survive, they have to be met by truisms. While people are proposing to lengthen their blankets by cutting off one end to sew upon the other, one has to point out that the total length remains constant. Now, I fancy that, in point of fact, these fallacies are often to be found in modern times. I read, the other day, in the papers, an argument, adduced by some advocate, on behalf of the Eight Hours Bill. He wished, he said, to make labour dear, and would therefore make it scarce. This apparently leads to the conclusion that the less people work the more they will get, which I take to be a fallacy. So, to mention nothing else, it is still apparently a common argument in favour of protection in America, that the native labourer requires to be supported against the pauperised labour of Europe. Americans in general are to be made richer by paying higher prices, and by being forced to produce commodities which they could get with less labour employed on the production of other things in exchange. I will not go further; for I think that no one who reads the common arguments can be in want of sufficient illustrations of popular fallacies. This, I say, is some justification for dwelling upon the contrary truisms. I admit, indeed, that even these fallacies may apply to particular cases in which they may represent partial truths; and I also agree that, as sometimes stated, the wage fund theory was not only a truism, but a fruitless truism. It was, however, as I believe, an attempt to generalise a very pertinent and important doctrine, as to the way in which the actual competition in which labourers and employers are involved, actually operates. If so, it requires rather modification than indiscriminate denunciation; and it is, I believe, so treated by the best modern Economists.

I consider, then, that the Economists were virtually attempting to describe systematically the main relations of the industrial mechanism. They showed what were the main functions which it, in fact, discharges. Their theory was sufficient to expose many errors, especially those which arise from looking solely at one part of a complex process, and neglecting the implied reactions. It enabled them to point out the inconsistencies and actual contradictions involved in many popular arguments, which are still very far from being destroyed. Their main error—apart from any particular logical slips—was, namely, that when they had laid down certain principles which belong properly to the prolegomena of the science, and which are very useful when regarded as providing logical tests of valid reasoning, they imagined that they had done a great deal more, and that the desired science was actually constituted. They laid down three or four primary axioms, such as the doctrine that men desire wealth, and fancied that the whole theory could be deduced from them. This, if what I have said be true, was really to misunderstand what they were really doing. It was to suppose that you could obtain a description of social phenomena without examining the actual structure of society; and was as erroneous as to suppose that you could deduce physiological truths from a few general propositions about the mechanical relations of the skeleton. Such criticisms have been made by the historical school of Economists; and I, at least, can fully accept their general view. I quite agree that the old assumptions of the older school were frequently unjustifiable; nor can I deny that they laid them down with a tone of superlative dogmatism, which was apt to be very offensive, and which was not justified by their position. Moreover, I entirely agree that the progress of economic science, and of all other moral sciences, requires a historical basis; and that we should make a very great blunder if we thought that the creation of an economic man would justify us in dispensing with an investigation of concrete facts, both of the present day and of earlier stages of industrial evolution. But to this there is an obvious qualification. What do we mean by investigating facts? It seems to be a very simple rule, but it leads us at once to great difficulties. So, as Mill and later writers have very rightly asked, how are we to settle even the most obvious questions in inquiries where, for obvious reasons, we cannot make experiments, and where we have not such a set of facts as would spontaneously give us the truths which we might seek by experiment? Take, as Mill suggested, such a question as free trade. We cannot get two countries alike in all else, and differing only in respect to their adoption or rejection of a protective tariff. Anything like a thoroughgoing system of free trade has been tried in England alone; and the commercial prosperity of the country since its adoption has been affected by innumerable conditions, so that it is altogether impossible to isolate the results which are to be attributed to the negative condition of the absence of protection. Briefly, the result is that the phenomena with which we have to deal are so complex, and our power of arranging them so as to unravel the complexity is so limited, that the direct method of observation breaks down altogether. Mill confessed the necessity of applying a different method, which he described with great ability, and which substantially amounts to the method of the older Economists. If, with some writers of the historical school, we admit the objections which apply to this method, we seem to be reduced to a hopeless state of uncertainty. A treatise on Political Economy becomes nothing but a miscellaneous collection of facts, with no definite clue or uniform method of reasoning. I must beg, in conclusion, to indicate what, so far as I can guess, seems to be the view suggested in presence of this difficulty.

If I am asked whether Political Economy, understood, for example, as Mill understood it, is to be regarded as a science, I should have to admit that I could not simply reply, Yes. To say nothing of any errors in his logic, I should say that I do not believe that it gives us sufficient guidance even in regard to economic phenomena. We could not, that is, deduce from the laws accepted by Economists the necessary working of any given measure—say, the effect of protection or free trade, or, still more, the making of a poor-law system. Such problems involve elements of which the Economist, purely as an Economist, is an incompetent judge; and the further we get from those questions in which purely economical considerations are dominant, towards those in which other factors become relevant,—from questions as to currency, for example, to questions as to the relations of capitalists and labourers,—the greater the inadequacy of our methods. But I also hold that Political Economists may rightly claim a certain scientific character for their speculations. If their ultimate aim is to frame a science of economics which shall be part of the science—not yet constituted—of sociology, then I should say that what they have really done—so far as they have reasoned accurately—has been to frame an essential part of the prolegomena to such a science. The "laws" which they have tried to formulate are not laws which, even if established, would enable us to predict the results of any given action; but they are laws which would have to be taken into account in attempting any such prediction. And this is so, I think, because the laws are descriptions—within limits accurate descriptions—of actually existing facts as to the social mechanism. They are not mere abstract hypotheses, in the sense sometimes attached to that phrase; but accounts of the plan upon which the industrial arrangements of civilised countries are, as a matter of fact, constructed. Such a classification and systematic account of facts is, as I should suggest, absolutely necessary for any sound historical method. Facts are not simply things lying about, which anybody can pick up and describe for the mere pains of collecting them. We cannot even see a fact without reflection and observation and judgment; and to arrange them in an order which shall be both systematic and fruitful, to look at them from that point of view in which we can detect the general underlying principles, is, in all cases, an essential process before we can begin to apply a truly historical method. Anything, it is said, may be proved by facts; and that is painfully true until we have the right method of what has been called "colligating" facts. The Catholic and the Protestant, the Conservative and the Radical, the Individualist and the Socialist, have equal facility in proving their own doctrines with arguments, which habitually begin, "All history shows". Printers should be instructed always to strike out that phrase as an erratum; and to substitute, "I choose to take for granted". In order to judge between them we have to come to some conclusion as to what is the right method of conceiving of history, and probably to try many methods before reaching that which arranges the shifting and complicated chaos of phenomena in something like an intelligible order. A first step and a necessary basis, as I believe, for all the more complex inquiries will have to be found by disentangling the various orders of laws (if I may so speak), and considering by themselves those laws of industrial growth which are nearest to the physical sciences in certain respects, and which, within certain limits, can be considered apart, inasmuch as they represent the working of forces which are comparatively independent of forces of a higher order. What I should say for Political Economists is that they have done a good deal in this direction; that they have explained, and, I suppose, with considerable accuracy, what is the actual nature of the industrial mechanism; that they have explained fairly its working in certain cases where the economic are practically also the sole or dominant motives; and that they have thus laid down certain truths which require attention even when we take into account the play of other more complex and, as we generally say, higher motives. We may indeed hope and believe that society will ultimately be constituted upon a different system; and that for the organisation which has spontaneously and unconsciously developed itself, another will be substituted which will correspond more closely to some principles of justice, and give freer scope for the full development of the human faculties. That is a very large question: I only say that, in any case, all genuine progress consists in a development of institutions already existing, and therefore that a full understanding of the working of the present system is essential to a rational consideration of possible improvements. The Socialist may look forward to a time—let us hope that it may come soon!—when nobody will have any grievances. But his schemes will be the better adapted for the realisation of his hopes in proportion as he has fully understood what is the part played by each factor of the existing system; what is its function, and how that function may be more efficiently discharged by any substitute. Only upon that condition can he avoid the common error of inventing some scheme which is in sociology what schemes for perpetual motion are in mechanics; plans for making everything go right by condemning some existing portion of the system without fully understanding how it has come into existence, and what is the part which it plays in the whole. I think myself that a study of the good old orthodox system of Political Economy is useful in this sense, even where it is wrong; because at least it does give a system, and therefore forces its opponents to present an alternative system, instead of simply cutting a hole in the shoe when it pinches, or striking out the driving wheel because it happens to creak unpleasantly. And I think so the more because I cannot but observe that whenever a real economic question presents itself, it has to be argued on pretty much the old principles, unless we take the heroic method of discarding argument altogether. I should be the last to deny that the old Political Economy requires careful revision and modification, and equally slow to deny that the limits of its applicability require to be carefully defined. But, with these qualifications, I say, with equal conviction, that it does lay down principles which require study and consideration, for the simple reason that they assert the existence of facts which are relevant and important in all the most vitally interesting problems of to-day.