But admitting that all these doctrines have been definitely proved, as the Hedonists claim they have, is the science going to profit as much as they thought by it? Somebody has remarked that mathematics is a mere mill that grinds whatever is brought to it. The important question is, What is the corn like? In this case it consists of a mass of abstractions—a number of individuals actuated by the same selfish motives, alike in what they desire to get and are willing to give,[1143] the assumed ubiquity of capital and labour, facility for substitution, etc. It is possible enough that the flour coming from the mill may not prove very nutritious. When ground out the result would at any rate be as unlike reality as the new society outlined by Fourier, the Saint-Simonians, or the anarchists, and its realisation quite as improbable, unless we presuppose an equally miraculous revolution. The Hedonists frankly recognise this, and in this respect they show themselves superior to the Classical economists, who when they talk of free competition believe that it actually exists.[1144]
But however sceptical they are about the possibility of ever realising all this, they are somewhat emphatic about the virtues of the new method, and they are not exempt, perhaps, from a certain measure of dogmatic pride which irresistibly reminds one of the Utopian socialists. Could we not, for example, imagine Fourier writing in this strain: “What has already been accomplished is as nothing compared with what may be discovered” (by the application of the mathematical method);[1145] or “The new theories concerning cost of production have the same fundamental importance in political economy that the substitution of the Copernican for the Ptolemaic system has in astronomy”?[1146] We have already called attention to the comparison of Walras’s system with Newton’s Principia—all of which rather savours of enthusiasm outrunning judgment.
While recognising the very real services which the Mathematical and Austrian schools have rendered to the science, and admitting that they mark an era in the history of economics which can never be forgotten, we cannot do better than conclude with the advice of an economist who is himself an authority both in the Mathematical and Classical schools, and who is therefore well qualified to judge: “The most useful applications of mathematics to economics are those which are short and simple and which employ few symbols; and which aim at throwing a bright light on some small part of the great economic movement rather than at representing its endless complexities.”[1147]
CHAPTER II: THE THEORY OF RENT AND ITS APPLICATIONS
The revival of interest in Classical theories, of which mention was made in the last chapter, cannot be passed over without a special reference to the theory of rent. The theory of rent has always held a prominent place in economic science, especially during the earlier years of the nineteenth century, and the recent developments it has undergone are significant equally from a theoretical as from a practical standpoint.
Theoretically it has been shown that the concept rent, which for a long time was supposed to be indissolubly bound up with a particular economic phenomenon, namely, the revenue of landed proprietors, is capable of several applications and extensions, some of which might throw considerable light into more than one obscure corner of the economic world. Particularly does it seem applicable to a kind of revenue of which we hardly heard mention until recently—that is, the profits of the entrepreneur as distinct from the interest of the capitalist.
Practically also it is very important. Rent is “unearned increment” par excellence. In other words, it is a revenue for which the receiver has ostensibly done nothing. One can well imagine what fruitful ground for socialistic theories this must be! And, as a matter of fact, all systems of land nationalisation or of socialisation of rent—and they are by no means few in number—trace descent from the old Ricardian theory.
What we propose to do in this chapter is to examine the doctrine of rent in its twofold aspect, inquiring in the first place what developments it has recently undergone as a scientific theory, and, secondly, how it is proposed to apply this theory with a view to reforming society. The chief aim in view is, of course, to glean some knowledge of recent theories, but to do this we shall often find ourselves obliged to follow the stream backward towards its source in Mill or Ricardo, for in many cases it is the only way of appreciating the development of ideas.