Encyclopaedia Britannica, 11th Edition, "Echinoderma" to "Edward, prince of Wales" / Volume 8, Slice 10

by Various

In the earliest times for which we have abundant material the economic life of England had already reached in certain directions a high degree of complexity. Even in the rural districts, manorial records reveal the existence of a great variety of classes and groups of persons engaged in the performance of economic functions. The lord of the manor with his officials and retainers, the peasantry bound to him by ties of personal dependence and mutual rights and obligations, constituted a little world, in which we can watch the play of motives and passions not so dissimilar as we are sometimes led to believe Ancient and modern conditions in England. from those of the great modern world. In many a country district the gradations of social rank were more continuous, the opportunities of intercourse more frequent, and the capacity for organization greater than in modern times. The manorial accounts were kept with precision and detail, and we are told that a skilled official could estimate to the utmost farthing the value of the services due from the villein to his lord. The manor was indeed self-sufficient and independent in the sense that it could furnish everything required by the majority of the inhabitants, and that over the greater part of rural England production was not carried on with a view to a distant market. But in the earliest times the manor was subjected to external influences of great importance. Vast areas of the country were in fact under the single control of a territorial lord or an ecclesiastical foundation. Every manor composing these great fiefs was likely to be affected by the policy or the character of the administration of the feudal lord, and he, again, by the policy or the difficulties, the strength or the weakness, of the central government. Foreign trade and foreign intercourse were undeveloped, but their influence was in historical times never entirely absent, while the influence of Roman law and the Christian Church constantly tended to modify the manorial organization. In the towns the division of labour had proceeded much further than in the rural districts, and there were in existence organized bodies, such as the Gild Merchant and the crafts, whose functions were primarily economic. But one of the most striking characteristics of town life in the middle ages was the manner in which municipal and industrial privileges and responsibilities were interwoven. In modern times the artisan, however well trained, efficient and painstaking he may be, does not, in virtue of these qualities, enjoy any municipal or political privileges. By means of his trade union, co-operative society or club he may gain some experience in the management of men and business, and in so far as the want of a sufficient income does not constitute an insuperable difficulty, he may share in the public life of the country. But in his character as artisan he enjoys no municipal or political privileges. In the middle ages this differentiation of the industrial, municipal and political life had not taken place, and in order to understand the working of at first sight purely economic regulations it is necessary to make a close study of the functions of local government. But this, after all, does not carry us very far. From the very nature of the records in which we study the town life of the middle ages, it follows that we obtain from them only a one-sided view. No one knows what proportion of the industrial population was included in the organized gilds, or how complete was the control exercised by these bodies over their members. Elaborate regulations were in force, but no one knows how elastic they were in practice. Medieval Englishmen were particularly apt to put their aspirations into a legal form, and then rest satisfied with their achievement. The number of regulations is scarcely to be regarded as a test of their administrative success. Further, as the country became more consolidated and the central government extended its authority over economic affairs, new regulations came into force, new organs of government appeared, which were sometimes in conflict, sometimes in harmony, with the existing system, and it becomes for a time far more difficult to obtain a clear view of the actual working of economic institutions. Thus the study of the economic life of the middle ages is one of the most complicated subjects which can engage the attention of man. It is impossible to carry the process of isolation very far. The different threads of social activity are so closely interwoven that we cannot follow any one for very long without forming wrong impressions, and it becomes necessary to turn back and study others which seemed at first sight unrelated to the subject of our investigations. Under an apparently uniform and stable system of social regulation there was much variation and movement, the significance of which it is impossible to estimate. Materials for forming such an estimate no doubt exist, but before doing so we have to study in infinite detail a vast number of separate manors, municipalities or other separate economic areas. This involves great industry on the part of many scientific workers. Meanwhile we can illustrate the economic life of the middle ages, describe its main features, indicate the more important measures of public policy and draw attention to some of the main lines of development.

It is only as we approach more modern times that the conditions of economic study are realized and economic science, as we understand it, becomes possible. Those conditions are: (i.) the life of the state or other community Conditions of economic science. or communities we are studying must be so differentiated that we can isolate those functions which are wholly or predominantly economic. The “separation of employments” is not only a condition of economic efficiency; it was necessary before we could have an economic science. (ii.) We must be in a position so far to understand and estimate the character and motives of different classes and groups in these communities that we can rightly interpret their action. This condition cannot be realized without great difficulty, for “economic motives” are very different in different periods, nations and classes, and even for short periods of time in the same country are modified by the influence of other motives of an entirely different order. In studying the economic history of the 18th century, for example, it is not enough to assume with Defoe that “gain is the design of merchandise.” We have to be saturated, as it were, with 18th-century influences, so that we can realize the conditions in which industry and trade were carried on, before we can rightly explain the course of development. In our own day labour disputes, to take another example, can scarcely ever be resolved into a question of merely pecuniary gain or loss. The significance of the amount of money involved varies greatly for different trades, and can only be understood by reference to the character and habits of the people concerned. But questions of sentiment, shop-feeling and trade customs invariably play an important part. (iii.) Economics can never lead to anything but hypothetical results unless we not only realize that we must “take account of” other than the purely economic factors, but also give due weight and significance to these factors. No explanation of the industrial situation in Germany, for example, would be intelligible or satisfactory even from the economic point of view which ignored the significance of the political conditions which Germans have to deal with. So, again, it is impossible to make a useful comparative estimate of the advantages and disadvantages of the transport systems of England, the United States and Germany, unless we keep constantly in view the very different geographical, military and political conditions which these systems have to satisfy. (iv.) Sufficient information must be available to enable us to test the validity of our hypotheses and conclusions. Whatever “method” of economic investigation we employ, we must at every stage see how far our reasoning is borne out by the actual experience of life. This obvious condition of scientific inquiry is very far from being completely realized even at the present time. It implies the existence of a well-trained class engaged in the work of collecting information, and much organization both by the state and private bodies. These four conditions can be reduced to two. The community we are studying must have reached such a stage of development that its economic functions and those immediately cognate to them form a well-defined group, and adequate means must be available so that we can, as it were, watch the performance of these functions and test our hypotheses and conclusions by observation and experience.

It is easy to understand, therefore, why we trace the beginnings of economics, so far as England is concerned, in the 16th century, and why the application of strict scientific tests in this subject of human study has become possible only in comparatively recent times. Medieval economics was little more than a casuistical system of elaborate and somewhat artificial rules of conduct. From the close of the middle ages until the middle of the 18th century thousands of pamphlets and other works on economic questions were published, but the vast majority of the writers have little or no scientific importance. Their works frequently contain information given nowhere else, and throw much light on the state of opinion in the age in which they wrote. It is also possible to find in them many anticipations of the views of the economists of later times; but such statements were as a rule generated merely by the heat of controversy on some measure or event of practical importance, and when the controversy died down were seldom regarded or incorporated in a scientific system. Trade bias, personal impressions and guesswork took the place of scientific method. This was inevitable in the absence of trustworthy information on an adequate scale, and from the immediately practical aims of the writers. But from the end of the 17th century economics has been definitely recognized as a subject of scientific study.

In modern times the conditions which have made economic science possible have also made it necessary. While it is impossible to give a strictly economic interpretation of the earlier history of nations, economic interests Necessity of economic science. so govern the life and determine the policy of modern states that other forces, like those of religion and politics, seem to play only a subsidiary part, modifying here and there the view which is taken of particular questions, but not changing in any important degree the general course of their development. This may be, in the historical sense, merely a passing phase of human progress, due to the rapid extension of the industrial revolution to all the civilized and many of the uncivilized nations of the world, bringing in its train the consolidation of large areas, a similarity of conditions within them, and amongst peoples and governments a great increase in the strength of economic motives. When the world has settled down to the new conditions, if it ever does so, we may be confronted with problems similar to those which our forefathers had to solve. But, for the time, if we know the economic interests of nations, classes and individuals, we can tell with more accuracy than ever before how in the long run they will act. Public policy therefore requires the closest possible study of the economic forces which are moulding the destinies of the great nations of the world. In most civilized countries except England this is recognized, and adequate provision is made for the study of economic science. But the subject is not only of immediate concern to the state in its corporate and public capacity. The neglect of it in the domain of private business can now only lead to disastrous results. To quote from a useful work (National Education: a Symposium, 1901), “the commercial supremacy of England was due to a variety of causes, of which superior intelligence, in the ordinary business sense, was not the most important. Her insular position, continuity of political development and freedom from domestic broils played an important part in bringing about a steady and continuous growth of industry and manufactures for several generations before the modern era. The great wars of the 18th and the beginning of the 19th century, which arrested the growth of continental nations, gave England the control of the markets of the world. When peace was restored, England enjoyed something in the nature of a monopoly. The competition of France ceased for a time to be an important factor. What is now the German empire was a mere congeries of small states, waging perpetual tariff wars upon each other. In the old Prussian provinces alone there were fifty-three different customs frontiers, and German manufactures could not develop until the growth of the Zollverein brought with it commercial consolidation, internal freedom and greater homogeneity of economic conditions. The industries of the United States were in their infancy. Thus the productive power of England was unrivalled, and her manufactures and business men, under a régime rapidly approximating to complete freedom of trade, could reap the full advantages to be derived from the possession of great national resources and production by machinery. Commercial supremacy required not so much highly trained intelligence amongst manufacturers and merchants as keen business instinct and a certain rude energy. In the last generation all that has changed, and the change is of a permanent character. The struggle of the future must inevitably be between a number of great nations, more or less equally well equipped, carrying on production by the same general methods, each one trying to strengthen its industrial and commercial position by the adoption of the most highly developed machinery, and all the methods suggested by scientific research, policy or experience. Under these conditions, it is no longer possible for the individual merchant, or for small groups of merchants, to acquaint themselves, by personal experience alone, with more than a fractional part of the causes which affect the business in which they are engaged. The spread of the modern industrial system has brought with it the modern state, with its millions of consumers, its vast area, its innumerable activities, its complicated code of industrial and commercial law. At the same time, the revolution in the means of transport and communication has destroyed, or is tending to destroy, local markets, and closely interwoven all the business of the world. Events in the most distant countries, industrial and commercial movements at first sight unrelated to the concerns of the individual merchant, now exert a direct and immediate influence upon his interests. The technical training of the factory or the office, the experience of business, the discharge of practical duties, necessary as they are, do not infallibly open the mind to the large issues of the modern business world, and can never confer the detailed acquaintance with facts and principles which lie outside the daily routine of the individual, but are none the less of vital importance.” Economics, therefore, under modern conditions, is not only a subject which may usefully occupy the attention of a leisured class of scientific men. It should form part of the training of educated men of all classes, on grounds of public policy and administrative and business efficiency.

The relations between economics and other sciences cannot be stated in a very general form. They vary for different periods, and are not the same for all branches of economics. There is no subject of human study which Relations between economics and other sciences. may not be at some time or other of economic significance, and anything which affects the character, the ideals or the environment of man may make it necessary to modify our assumptions and our reasoning with regard to his conduct in economic affairs. But if the economist, while studying one side of man’s activities, must also cultivate all other branches of human learning, it is obvious that no substantial progress can be made. The economist frankly assumes the reality of the existing world and takes men as they are, or as they have been if he is studying past times. His assumptions are based upon ordinary observation and experience, and are usually accurate in proportion to his practical shrewdness and sagacity, so that he is not interested in the speculative flights of philosophy, except in so far as they influence or have influenced conduct. In times past, and to a less extent in our own day, philosophical conceptions have formed the basis of great systems of politics and economics. The historical relations between philosophy and economics are of great importance in tracing the development of the latter, and have done much to determine its present form. But the modern conception of society or the state owes more to biology than philosophy, and actual research has destroyed more frequently than it has justified the assumptions of the older philosophical school. Experimental psychology may in course of time have an important bearing on economics, but the older science cannot be said to be of much significance except in its historical aspects. Ethics is in much the same position. That is, it is possible to conceive of an ethical science which would extend considerably our knowledge of economic affairs, but no important new principle or original discovery, relevant to economic investigation, has come from that quarter in recent years, and at present ethics has more to learn from economics than the latter has from ethics. It is in the adaptation of biological conceptions and methods, in the positive contributions of jurisprudence, law and history, in the rigorous application, where possible, of quantitative tests, that the explanation of the present position of economics is to be found. Mathematics has influenced the form and the terminology of the science, and has sometimes been useful in analysis; but mathematical methods of reasoning, in their application to economics, while possessing a certain fascination, are of very doubtful utility.

There is no method of investigation which is peculiarly economic or of which economics has the monopoly. In every age economists have applied the methods ordinarily in use amongst scientific men. There would probably Method of economic investigation. have been no controversy at all on this subject but for the fact that economics was elaborated into systematic form, and made the basis of practical measures of the greatest importance, long before the remarkable development in the 19th century of historical research, experimental science and biology. The application of the a priori method in economics was an accident, due to its association with other subjects and the general backwardness of other sciences rather than any exceptional and peculiar character in the subject-matter of the science itself. The methods applied to economics in the 18th and the early part of the 19th century were no more invented with a special view to that subject than the principles of early railway legislation, in the domain of practical policy, were devised with a special view to what was then a new means of transport. As a matter of fact, discussions of method and the criticism of hypotheses and assumptions are very rarely found in early economic works. It is only by reference to the prevailing ideas in philosophy and politics that we can discover what was in the minds of their authors. The growth of a science is much like the growth of a constitution. It proceeds by adaptation and precedent. The scientific and historical movement of the 19th century was revolutionary in character. When it began to affect economics, many people were afraid that the whole fabric of science would be destroyed and the practical gains it had achieved, jeopardized. These fears were justified, in so far as those who entertained them shut their eyes to everything new and assumed an attitude of no compromise. Where the newer methods were assimilated, the position of economics was strengthened and its practical utility increased. General discussion of method, however, is rarely profitable. In all branches of economics, even in what is called the pure theory, there is an implied reference to certain historical or existing conditions of a more or less definite character; to the established order of an organized state or other community, at a stage of development which in its main features can be recognized. In all economic investigation assumptions must be made, but we must see that they are legitimate in view of the actual life and character of the community or communities which are the subject of investigation. In common with other sciences, economics makes use of “abstractions”; but if for some problems we employ symbolic processes of reasoning, we must keep clearly in view the limits of their significance, and neither endow the symbols with attributes they can never possess, nor lose sight of the realities behind them. Every hypothesis must be tested by an appeal to the facts of life, and modified or abandoned if it will not bear examination, unless we are convinced on genuine evidence that it may for a time be employed as a useful approximation, without prejudice to the later stages of the investigation we are conducting.

We shall best illustrate the character and method of economic reasoning by examples, and for that purpose let us take first of all a purely historical problem, namely, the effect on the wage-earners of the wages clauses of the Statute of An illustration of economic method. Apprenticeship (1563). It is at once obvious that we are dealing not with an abstract scheme of regulation in a hypothetical world, but with an act of parliament nominally in force for two hundred and fifty years, and applicable to a great variety of trades whose organization and history can be ascertained. The conclusions we reach may or may not modify any opinions we have formed as to the manner in which wages are determined under modern conditions. For the time being such opinions are irrelevant to the question we are investigating, and the less they are in our minds the better. There is no reason why we should apply to this particular act a different method of inquiry from that we should apply to any other of the numerous acts, of more or less economic importance, passed in the same session of parliament. The first step is to see whether there is a prima facie case for inquiry, for many acts of parliament have been passed which have never come into operation at all, or have been administered only for a short time on too limited a scale to have important or lasting results. The justices were authorized to fix wages at the Easter quarter sessions. Did they exercise their powers? To answer this question we must collect the wages assessments sanctioned by the magistrates. This is a perfectly simple and straightforward operation, involving nothing more than familiarity with records and industry in going through them. Without having recourse to any elaborate process of economic reasoning, by confining our attention to one simple question, namely, what happened, we can establish conclusions of the greatest interest to economic historians and, further, define the problem we have to investigate. We can show, for example: (1) that the Statute of Apprenticeship did not stand alone; it was one of a long series of similar measures, beginning more than two centuries before, which in their turn join on to the municipal and gild regulations of the middle ages; one of an important group of statutes, more or less closely interwoven throughout their history, administered by local authorities whose functions had grown largely in connexion with this legislation and the gradual differentiation of the trades and callings to which it related. (2) That wages were regulated with much greater frequency during the reigns of Elizabeth, James I. and Charles I. than at any later period. (3) That they were regulated in some counties and not in others. (4) That in the counties and towns where they were regulated the action of the magistrates was in general spasmodic, and rarely continuous for a long series of years. (5) That the magistrates used their powers sometimes to raise wages, sometimes to force them down. (6) That the local variations of wages and prices were what we should call excessive, so that the standard of comfort in one district was very different from that of others. (7) That the wages assessments group themselves round certain short periods, coincident in many instances with high prices, increase of poverty, and other causes of exceptional action. (8) That what we may call, with the above limitations, the effective period of the act terminates with the outbreak of the Civil War. (9) That subsequent to that period organic changes in the industries affected, coupled with the incompetence of parliament to adapt the old legislation to new conditions, and the growing acceptance of the doctrine of laissez faire, brought about a general disuse of the statute, though isolated attempts to enforce it were made and new acts applicable to certain trades were passed in the 18th century. (10) For more than one hundred years before the repeal of the act, trade unions and other forms of voluntary association amongst wage-earners, combinations amongst employers, collective agreements, customary regulations, were established in many of the important trades of the country. But these conclusions, after all, suggest more difficulties than they remove, for they show that our inquiry, instead of presenting certain well-marked features which can be readily dealt with, has to be split up into a number of highly specialized studies: the investigation of rates of wages, prices and the standard of comfort in different localities, bye-industries, regularity of employment, the organization of particular trades, the economic functions of local authorities, apprenticeship and a host of other subjects. Moreover, all these subjects hang together, so that it seems impossible to come to a decision about one of them without knowing all about the others.

It is a comparatively simple thing to state the question to which we want an answer, but extremely difficult to define the exact nature of the evidence which will constitute a good answer; easy enough to say we must try hypothesis after hypothesis, and test each one by an appeal to the facts, but a man may easily spend his life in this sort of thing and still leave to his descendants nothing more than a legacy of rejected hypotheses. Every volume of records we look through contains a mass of detailed information on the economic life of England in the period we are studying. How much of it is relevant to the subject of inquiry? What is to be the principle of selection? How shall we determine the relative weight and importance of different kinds of relevant evidence? As in modern problems, so in those of past times, a man requires for success qualities quite distinct from those conferred by merely academic training and the use of scientific methods. A correct sense of proportion and the faculty of seizing upon the dominant factors in an historical problem are the result partly of the possession of certain natural gifts in which many individuals and some nations are conspicuously wanting, partly of general knowledge of the working of the economic and political institutions of the period we are studying, partly of what takes the place of practical experience in relation to modern problems, namely, detailed acquaintance with different kinds of original sources and the historical imagination by which we can realize the life and the ideals of past generations. These qualities are required all the more because, in order to make any further progress with such an inquiry as we have suggested, we have deliberately to make use of abstraction as an instrument of investigation.

Let us see how this will work out. Suppose we have selected one of the numerous subsidiary problems suggested by the general inquiry, and obtained such full and complete information about one particular industry that we The plan of a general theory. can tabulate the wages of the workers for a long series of years. We may do the same for other industries, some of them coming under the Statute of Apprenticeship, others not. If all the industries belong to one economic area over which, so far as we can tell from general statistics of wages and prices, and other information, fairly homogeneous conditions prevailed, we may be able to reach some useful conclusions as to the operation of the act. But it would be absurd to suppose that we could reach those conclusions by simple reference to the trades themselves. We cannot assume that the fluctuations in wages were due to the action or inaction of magistrates without the most careful examination of the other influences affecting the trades. In economic affairs the argument post hoc propter hoc never leads to the whole truth, and is frequently quite misleading. We cannot suppose that the policy of the Merchant Adventurers’ Company had nothing to do with the woollen industry; that the export trade in woollen cloth was quite independent of the foreign exchanges and international trade relations in those times; that the effect on wages of the state of the currency, the influx of new silver, the character of the harvests, and many other influences can be conveniently ignored. In studying, therefore, such an apparently simple question as the effect of an act of parliament on wages in a small group of trades we want a general theory which we can use as a kind of index of the factors we have to consider.

Assuming that we have in our minds this safeguard against loose thinking and neglect of important factors, the investigation of the special problems arising out of the general inquiry resolves itself into a careful definition of each Difficulties due to want of evidence. problem we wish to deal with, and the collection, tabulation and interpretation of the evidence. In most cases the interpretation of the facts is far from obvious, and we have to try several hypotheses before we reach one which will bear the strain of a critical examination in the light of further evidence. But at this stage in historical investigation it is generally the want of evidence of a sufficiently complete and continuous character, rather than difficulties of method, which forces us to leave the problem unsolved. It is, for instance, practically impossible to obtain reliable evidence as to the regularity of employment in any industry in the 17th century, and the best approximations and devices we can invent are very poor substitutes for what we really want. For this reason guesswork must continue to play an important part in economic history. But every genuine attempt to overcome its difficulties brings us into closer touch with the period we are examining; and though we may not be able to throw our conclusions into the form of large generalizations, we shall get to know something of the operation of the forces which determined the economic future of England; understand more clearly than our forefathers did, for we have more information than they could command, and a fuller appreciation of the issues, the broad features of English development, and be in a position to judge fairly well of the measures they adopted in their time. By comparing England with other countries we may be able in the distant future to reach conclusions of some generality as to the laws of growth, maturity and decay of industrial nations. But like the early statisticians of the 17th century, economic historians are the “beginners of an art not yet polished, which time may bring to more perfection.”