This is a system of doctrine that takes various names and forms, and is presented in turn as political, national, pure, or mathematical Economy; it is a system of doctrines which, although not without precedents in antiquity, has been gradually formed, especially in recent centuries, and is now in fullest flower. A saying of Hegel is often recorded, not without satisfaction, for even in his time he praised Economy as "a science that does much honour to thought, because it extracts the laws from a mass of accidentally."[1]
Has it the same object as our Philosophy of economy? If the reply be in the affirmative, how does it ever arrive at concepts altogether different? Or is it an empirical science, and if so, from what source does it derive the rigour and absoluteness by which it is removed from all empiricism and formulates truths of universal character? Two strict sciences with the same object are inconceivable; and yet as it seems, there must here be precisely two: hence the perplexity and disorientation that the affirmation of a Philosophy of economy must and does produce.
Unreality of the laws and concepts of economic science.
If the economic actions of man be considered, in their uncontaminated and undiminished reality, with an eye free from all prejudice, it is never possible to establish even a single one of the concepts and laws of economic science. Every individual is different at every moment of his life: he wills always in a new and different way, not comparable with the other modes of his or of others' willing. If A spent seven soldi to buy a loaf of bread yesterday, and to-day he spend the same amount in making the same purchase, the seven soldi of to-day are not for this reason those of yesterday, nor is the bread the same as that of yesterday, nor the want that A satisfies to-day the same as that of yesterday, nor is the effort that his action costs him identical with that of yesterday. If the individual B also spend seven soldi for a loaf of bread, the action of B is different from that of A, as that of the A of to-day was different from that of yesterday. If we lead the economist on to this ground of reality (or rather to the side of this Heraclitean river, in which it is not possible to dip the same hands twice in the same water), he will feel himself impotent, for he will not find any point of support for the edification of any of his theories.—The value of a piece of goods (says a theorem of Economy) depends upon the quantity of it and of all the other goods that are upon the market.—But what does "goods" mean? Bread, for example, or wine? In reality, abstract bread and wine do not exist, but a given piece of bread, a given glass of wine, with a given individual who will give a treasure or nothing in order to eat the one or to drink the other, according to the conditions in which he finds himself.—Any sort of enjoyment, when protracted, decreases and finally becomes extinguished.—That is the law of Gossen, one of the foundation—stones of economic theory. But what are these enjoyments that are protracted, decrease, and end by becoming extinguished? In reality there exist only actions, which assume different positions at every moment, owing to the continual changing of surrounding reality, in which the volitional individual operates. The difference is qualitative, not quantitative: if the individual A eat the bread that he has bought for seven soldi, when swallowing the second or the tenth or the last mouthful, he has a pleasure, not inferior to that which he had when swallowing the first, but different: the last was not less necessary for him, in its way, than the first; otherwise he would have remained unsatisfied in his normal want, in his habit, or in his caprice.—The economic man seeks the maximum of satisfaction with the least effort.—That is the very principle of Economy, but neither does this principle correspond with reality, most simple and general though it be. The individual A disputes for an-hour, in order to save two soldi in the purchase of an object, for which he has been asked ten lire, thus attaining the maximum satisfaction for himself with the least means that is naturally at his disposal on that occasion. The individual B, making boast of his magnificence, lights his cigarette with a banknote of a hundred lire, thus likewise attaining for himself the greatest satisfaction to which he aspired, with the least means that he possessed, namely, by burning that paper money. But if this be so, we have here a question, not of greatest and least, but of individual ends and of relative means adopted, or (owing to the unity of means and ends already noted), of actions individually different.
Economic Science founded upon empirical concepts, but not empirical or descriptive.
Certainly, it is quite possible to abstract in a greater or less measure from the infinite variety of actions and to construct a series of types or concepts of classes and of empirical laws, thus rendering uniform the formless, within certain limits. Thus is obtained the concept of bread and of the consumption of bread, and of the various portions of bread and of other objects, for which a portion of bread can be exchanged, and so on. In this way are full philosophico-historical reality and the method of logical necessity and of realistic observation of facts abandoned for a feigned reality and for a method of arbitrary choice, which, as we know, has its good reasons for existing in the human spirit, and does great service by the swift recall and easy control of the requisite knowledge. And if Economy consisted in the establishment of a series of laws and examples in the above sense (or when understood in this way), it would join the number of the descriptive disciplines; and in that case there would be no necessity for us to speak of it further, for it would suffice to refer back to what has already been said of the relations of the Philosophy of the practical with practical Description, classes, rules, and casuistic. But economic Science is not descriptive, and is not developed according to the following formula: goods are divided into the classes a, b, c, d, e, etc., and the class a is exchanged with the class b in the proportion of I to 3, the class b with the class c in the proportion of I to 5, etc. In such a formula is always understood the up and down, the for the most part, and the very nearly: the classes with their ups and downs are as stated; the exchanges take place for the most part in the proportions stated; if things are to-day very nearly thus, to-morrow they will be so very nearly, in a different way.
On the contrary, the propositions of the Science of Economy are rigorous and necessary. "Granted that soils of different degrees of fertility are cultivated, their possessors will all obtain, besides the absolute rent, a differential rent, with the exception of the possessor of the least fertile soil" (Ricardo's law). "Bad money drives out good" (Gresham's law). Now, it is not conceivable in any case that soils of different fertility, all of them cultivated, should not give a differential rent. It will be said that the State can confiscate the differential rent, or that the possessor, owing to his bad cultivation or to his bad administration, may lose it; but the proposition does not remain less sound on this account. Nor is it possible that, when an unchangeable paper money is in circulation, gold coins should also circulate indifferently and on a par with it, when the total of the money in circulation lowers the value of the monetary unit beneath the metallic value of the better money. A madman who might be in possession of a hoard of gold pieces at the time of the circulation of the declining paper money (which causes poverty) would perhaps give it in exchange for the inferior money; but the wise man will keep it in his safe. The economic proposition expresses the rational necessity, not the madness, which is irrational. Those propositions, like all the others of economic science, are therefore certainly not descriptions, but theorems.
Their mathematical nature.
The denomination "theorems" makes us think at once of the mathematical disciplines, among which alone can economic Science find a place. The propositions of that science being excluded from philosophical, historical, or naturalistic science, there remains nothing that they can be, save mathematical. Yes, they are mathematical, but not pure mathematics, for in that case they would be nothing but arithmetic, algebra, or the calculus, that is, they would belong to the kind of mathematical disciplines called applied, because they introduce into the paradigms of the calculus certain data taken from reality, that is to say, taken from without the purely numerical conception. Economic Science, then, is a mathematic applied to the concept of human action and to its sub-species. It does not inquire what human action is; but having posited certain concepts of action, it creates formulæ for the prompt recognition of the necessary connections.
Its principles; their character of arbitrary postulates and definitions. Their utility.