A History of Economic Doctrines / from the time of the physiocrats to the present day

by Charles Gide; Charles Rist

We have already noticed that the conception of the “natural order” underwent considerable modification during the period which intervened between the writings of the Physiocrats and the appearance of the Wealth of Nations. The Physiocrats regarded the “order” as one that was to be realised, and the science of political economy as essentially normative. For Smith it was a self-realising order. This spontaneity of the economic world is analogous to the vitality of the human body, and is capable of triumphing over the artificial barriers which Governments may erect against its progress. Practical political economy is based upon a knowledge of the economic constitution of society, and its sole aim is to give advice to statesmen. According to Say, this definition concedes too much to practice. Political economy, as he thinks, is just the science of this “spontaneous economic constitution,” or, as he puts it in 1814, it is a study of the laws which govern wealth.[263] It is, as the title of his book suggests, simply an exposition of the production, distribution, and consumption of wealth. It must be distinguished from politics, with which it has been too frequently confused, and also from statistics, which is a simple description of particular facts and not a science of co-ordinate principles at all.

Political economy in Say’s hands became a purely theoretical and descriptive science. The rôle of the economist, like that of the savant, is not to give advice, but simply to observe, to analyse, and to describe. “He must be content to remain an impartial spectator,” he writes to Malthus in 1820. “What we owe to the public is to tell them how and why such and such a fact is the consequence of another. Whether the conclusion be welcomed or rejected, it is enough that the economist should have demonstrated its cause; but he must give no advice.”[264]

In this way Say broke with the long tradition which, stretching from the days of the Canonists and the Cameralists to those of the Mercantilists and the Physiocrats, had treated political economy as a practical art and a guide for statesmen and administrators. Smith had already tried to approach economic phenomena as a scientist, but there was always something of the reformer in his attitude. Say’s only desire was to be a mere student; the healing art had no attraction for him, and so he inaugurates the true scientific method. He, moreover, instituted a comparison between this science and physics rather than between it and natural history, and in this respect also he differed from Smith, for whom the social body was essentially a living thing. Without actually employing the term “social physics,” he continually suggests it by his repeated comparison with Newtonian physics. The principles of the science, like the laws of physics, are not the work of men. They are derived from the very nature of things. They are not established; they are discovered. They govern even legislators and princes, and one never violates them with impunity.[265] Like the laws of gravity, they are not confined within the frontiers of any one country, and the limits of State administration, which are all-important for the student of politics, are mere accidents for the economist.[266] Political economy is accordingly based on the model of an exact science, with laws that are universal. Like physics, it is not so much concerned with the accumulation of particular facts as with the formulation of a few general principles from which a chain of consequences of greater or smaller length may be drawn according to circumstances.

A delight in uniformity,[267] love of universality, and contempt for isolated facts, these are the marks of the savant. But the same qualities in men of less breadth of view may easily become deformed and result in faults of indifference or of dogmatism, or even contempt for all facts. And are these very faults not produced by the stress which he lays upon these principles? Was not political economy placed in a vulnerable position for the attacks of Sismondi, of List, of the Historical school, and of the Christian Socialists by this very work of Say? In his radical separation of politics and economics, in avoiding the “practical” leanings of Adam Smith, he has succeeded in giving the science a greater degree of harmony. But it also acquired a certain frigidity which his less gifted successors have mistaken for banality or crudity. Rightly or wrongly, the responsibility is ascribed to Say.

(3) We have just seen the influence which the progress of the physical sciences had upon Say’s conception of political economy; but he was also much influenced by the progress of industry. Between 1776, the date of the appearance of the Wealth of Nations, and the year 1803, when Say’s treatise appeared, the Industrial Revolution had taken place. This is a fact of considerable importance for the history of economic ideas.

When Say visited England a little before 1789, he found machine production already in full swing there. In France at the same date manufactures were only just beginning. They increased rapidly under the Empire, and the progress after 1815 became enormous. Chaptal in his work De l’Industrie française reckons that in 1819 there were 220 factories in existence, with 922,200 spindles consuming 13 million kilograms of raw cotton. This, however, only represented a fifth of the English production, which twenty years later was quadrupled. Other industries were developing in a similar way. Everybody was convinced that the future must be along those lines—an indefinite future it is true, but it was to be one of wealth, work, and well-being. The rising generation was intoxicated at the prospect. The most eloquent exposition of this debauchery will be found in Saint-Simonism.

Say did not escape the infection. While Smith gives agriculture the premier place, Say accords the laurels to manufactures. For many years industrial problems had been predominant in political economy, and the first official course of lectures given by Say himself at the Conservatoire des Arts et Métiers was entitled “A Course of Lectures on Industrial Economy.”

In that hierarchy of activities which Smith had drawn up according to the varying degree of utility each possessed for the nation, Smith had placed agriculture first. Say preserved the order, but placed alongside of agriculture “all capital employed in utilising any of the productive forces of nature. An ingenious machine may produce more than the equivalent of the interest on the capital it has cost to produce, and society enjoys the benefit in lower prices.”[268] This sentence is not found in the edition of 1803, and appears only in the second edition. Say in the meantime had been managing his factory at Auchy-les-Hesdins, and he had profited by his experience. This question of machinery, which was merely touched on by Smith in a short passage, finds a larger place in every successive edition of Say’s work. The general adoption of machinery by manufacturers both in England and France frequently incited the workers to riot. Say does not fail to demonstrate its advantages. At first he admits that the Government might mitigate the resulting evils by confining the employment of machinery at the outset to certain districts where labour is scarce or is employed in other branches of production.[269] But by the beginning of the fifth edition he changed his advice and declared that such intervention involved interference with the inventor’s property,[270] admitting only that the Government might set up works of public utility in order to employ those men who are thrown out of employment on account of the introduction of machinery.

The influence of these same circumstances must be accounted responsible for the stress which is laid by Say upon the rôle of an individual whom Smith had not even defined, but one who is henceforth to remain an important personage in the economic world, namely, the entrepreneur. At the beginning of the nineteenth century the principal agent of economic progress was the industrious, active, well-informed individual, either an ingenious inventor, a progressive agriculturist, or an experienced business man. This type became quite common in every country where mechanical production and increasing markets became the rule. It is he rather than the capitalist properly so called, the landed proprietor, or the workman, who is “almost always passive,” who directs production and superintends the distribution of wealth. “The power of industrial entrepreneurs exercises a most notable influence upon the distribution of wealth,” says Say. “In the same kind of industry one entrepreneur who is judicious, active, methodical, and willing makes his fortune, while another who is devoid of these qualities or who meets with very different circumstances would be ruined.”[271] Is it not the master spinner of Auchy-les-Hesdins who is speaking here? We are easily convinced of this if we compare the edition of 1803 with that of 1814, and we can trace the gradual growth and development of this conception with every successive edition of the work.