Four Introductory Lectures on Political Economy

by Nassau William Senior

I have said that the hypothetical treatment of the science, if unnecessary, is undesirable. It appears to me to be open to three great objections. In the first place it is obviously unattractive. No one listens to an exposition of what might be the state of things under given but unreal conditions, with the interest with which he hears a statement of what is actually taking place.

In the second place, a writer who starts from arbitrarily assumed premises, is in danger of forgetting, from time to time, their unsubstantial foundation, and of arguing as if they were true. This has been the source of much error in Ricardo. He assumed the land of every country to be of different degrees of fertility, and rent to be the value of the difference between the fertility of the best and of the worst land in cultivation. The remainder of the produce he divided into profit and wages. He assumed that wages naturally amount to neither more nor less than the amount of commodities which nature or habit has rendered necessary to maintain the labourer and his family in health and strength. He assumed that, in the progress of population and wealth, worse and worse soils are constantly resorted to, and that agricultural labour, therefore, becomes less and less proportionately productive; and he inferred that the share of the produce of land taken by the landlord and by the labourer must constantly increase, and the share taken by the capitalist constantly diminish.

This was a logical inference, and would consequently have been true in fact, if the assumed premises had been true. The fact is, however, that almost every one of them is false. It is not true that rent depends on the difference in fertility of the different portions of land in cultivation. It might exist if the whole territory of a country were of uniform quality. It is not true that the labourer always receives precisely the necessaries, or even what custom leads him to consider the necessaries, of life. In civilised countries he almost always receives much more; in barbarous countries he from time to time obtains less. It is not true that as wealth and population advance, agricultural labour becomes less and less proportionately productive. The corn now raised with the greatest labour in England is raised with less labour than that which was raised with the least labour three hundred years ago, or than that which is now raised with the least labour in Poland. It is not true that the share of the produce taken by the capitalist is least in the richest countries. Those are the countries in which it generally is the greatest. Mr. Ricardo was certainly justified in assuming his premises, provided that he was always aware, and always kept in mind, that they were merely assumed. This, however, he seems sometimes not to know, and sometimes he forgets. Thus he states, as an actual fact, that in an improving country, the difficulty of obtaining raw produce constantly increases. He states as a real fact, that a tax on wages falls not on the labourer but on the capitalist.

He affirms that tithes occasion a proportionate increase in the price of corn, and a proportionate increase of wages, and therefore are a tax on the capitalist, not on the landlord. Positions both of which depend on an assumed fixed amount of wages.

A third objection to reasoning on hypothesis is its liability to error, either from illogical inference, or from the omission of some element necessarily incident to the supposed case. When a writer takes his premises from observation and consciousness, and infers from them what he supposes to be real facts, if he have committed any grave error, it generally leads him to some startling conclusion. He is thus warned of the probable existence of an unfounded premise, or of an illogical inference, and if he be wise, tries back until he has detected his mistake. But the strangeness of the results of an hypothesis, gives no warning. We expect them to differ from what we observe, and lose, therefore, this incidental means of testing the correctness of our reasoning.

An illustration of this may be found in the eminently ingenious and eminently erroneous work of Colonel Torrens, called “The Budget.” Colonel Torrens supposes the commercial world to consist of only two countries, equal in wealth and civilisation, which he calls England and Cuba. He supposes that England has peculiar advantages for the production of woollens, and Cuba for that of sugar, and that the cloth of the one, and the sugar of the other, are freely exchanged in proportion to the labour which each has cost. He then supposes Cuba to impose a duty on English cloth, which would of course, to a certain extent, prevent its importation; and he states that the consequence would be, that England would have to send money to Cuba for sugar, until the exportation of money had impoverished England, and its importation had enriched Cuba.

Now if Colonel Torrens, instead of hypothetical, had taken real cases, if he had inquired, for instance, into the results of the prohibitive system of France, and had come to the conclusion that that system increases her wealth, the strangeness of such a result would have led him to suspect an error in his facts or in his reasoning. But the strangeness of the result of an imaginary case did not rouse his suspicion. The fact is, that his hypothetical argument is erroneous; and the error consists in his not having taken into account an element essentially incident to his supposed case, namely, the influence of commercial restrictions on the efficiency of labour. If he had taken this element into account, he would have found that Cuba, by her prohibitive system, would diminish the productive power of her labour, and consequently would find it her interest to import from England commodities which she previously produced at home; so that the ultimate result would probably be, rather an export of gold from Cuba than from England.

Colonel Torrens’s book always reminds me of the suit of clothes which the Laputa tailor cut on hypothetical data. Unfortunately, however, for the credit of the Laputa artist, Gulliver tried them on, and the error which had slipped into the calculation showed itself in every form of misfit. Happily for Colonel Torrens, and happily for ourselves, we have not tried on his theory.

But though the objections against founding the science on hypothesis seem to me decisive, I do not give up hypothetical illustrations. Such illustrations not only make abstract reasonings more easily intelligible, they often expose their errors. Conclusions which appeared to be correct, when the vague terms of capital and labour, profit and wages, were used, are often found to be erroneous, when an hypothetical example embodies these abstractions, and endeavours to show the moral and physical processes by which the supposed result would be obtained. The absence of such illustrations is one of the great defects of Adam Smith. Perhaps this very defect contributed to the popularity of his work. Such illustrations, however useful, always give an appearance of stiffness and pedantry. The careless reader or hearer neglects them, and the real student is annoyed at having to learn the dramatis personæ of an imaginary case. But if Smith had used them, he would probably have avoided some errors, and have preserved his successors from many more. His example in this and in some other respects, introduced a loose, popular mode of treating Political Economy, which has mainly retarded its progress.

It may be remarked, that I have as yet used the word wealth, without defining it. I have done so, because I employ it in its popular sense, and because the ideas usually attached to that word appear to me to be sufficiently precise, to prevent any danger of my hearers misunderstanding it. Having now, however, completed the introduction to the science of Political Economy, having marked out its province, and stated the mode in which I intend to treat it, I think it advisable formally to define the term which expresses its subject matter. And this for two reasons. First, because, in a scientific work, every technical term ought to be defined; and, secondly, because that term has been employed by many of those who have preceded me, in senses differing from that which I adopt.