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

by Various

When we come to exclusively modern questions, there is no reason or necessity for a fundamental change of method. We cannot suppose that there occurred, at or about the commencement of the 19th century, a breach of The investigation of modern questions. historical continuity of such a character that institutions, customs, laws and social conventions were suddenly swept away, the bonds of society loosened, and the state and people of England dissolved into an aggregate of competing individuals. The adoption of machinery gradually revolutionized the methods of production; but in the first instance only certain industries were affected, and those not at the same time or in the same degree; old laws grown obsolete were repealed, but other laws affecting wage-earners and employers took their place, more complicated and elaborate than the Elizabethan code. Trade unions, so far from disappearing, were legalized, gathered strength from the changes in industrial organization, and nowhere became so powerful as in the most progressive industries; while other forms of combination appeared, incomparably stronger, for good or evil, than those of earlier times. But while we recognize these facts, we must not suppose that we have to study the action of men as though they were all enrolled in organized associations, or covered by stringent laws which were always obeyed. There has never been in the history of English industry such licence as we find in certain directions in the earlier part of the 19th century.

It is not in the decay of combination and monopoly or in the growth of competition that we must look for the distinctive characteristics of modern problems. A 17th-century monopoly was a very weak and ineffective instrument compared The distinctive features of modern problems. with a modern syndicate; the Statute of Apprenticeship was certainly not so widely enforced as the “common rules” of trade unions; and many of the regulations of past times, which look so complicated to modern eyes, were conditions of free enterprise rather than restraints upon it. It is due to the influence of the laisser faire doctrine that we regard law and regulation as a restraint on liberty. As a maxim for guidance in public affairs, laisser faire was genuinely relevant at the end of the 18th and the beginning of the 19th century, when the Statute Book was cumbered with vexatious and obsolete laws. As an explanation of what has taken place in later years, or of the actual economic life of the present day, it is ludicrously inadequate. Competition, in the sense in which the word is still used in many economic works, is merely a special case of the struggle for survival, and, from its limitation, does not go far towards explaining the actual working of modern institutions. To buy in the cheapest market and sell in the dearest; to secure cheapness by lowering the expenses of production; to adopt the less expensive rather than the more expensive method of obtaining a given result—these and other maxims are as old as human society. Competition, in the Darwinian sense, is characteristic not only of modern industrial states, but of all living organisms; and in the narrower sense of the “higgling of the market” is found on the Stock Exchange, in the markets of old towns, in medieval fairs and Oriental bazaars. In modern countries it takes myriads of forms, from the sweating of parasitic trades to the organization of scientific research. Economic motives, again, are as varied as the forms of competition, and their development is coeval with that of human society. They have to be interpreted in every age in relation to the state of society, the other motives or ideals with which they are associated, the kind of action they inspire, and the means through which they operate. Apparently the same economic motives have led in the same age and in the same nation to monopoly and individual enterprise, protection and free trade, law and anarchy. In our own time they have inspired both the formation of trade combinations and attempts to break them up, hostility to all forms of state interference and a belief in collectivism.

The conditions which are peculiar to the modern world are the large numbers we have to deal with, the vast and fairly homogeneous areas in which justice is administered and property secured, and the enormously increased facilities for transport and communication. These conditions are of course not independent of each other, and they have brought in their train many consequences, some good and some bad. But they supply the bases for that general theory which, as we have seen, is indispensable in economic investigation. From the standpoint of general theory economic movements assume an impersonal character and economic forces operate like the forces of nature. Although economic motives have become more complex, they have just as much and no more to do with general economic reasoning and analysis than the causes of death with the normal expectation of life, or domestic ideals with the birth-rate. So far as we have anything to do with psychology at all, it is the psychology of crowds and not of individuals which we have to consider. If we study the economy of a village, the idiosyncrasies of every individual in it are of importance. If the village is replaced by a large area, inhabited by millions, with modern facilities of communication, it is a matter of observation and experience that for the purposes of general reasoning the idiosyncrasies of individuals may be neglected. Whether such large numbers have the character of the “economic man” of the early economists matters very little. All the assumptions we require are furnished by observation of people in the mass and the larger generalizations of statistics. Thus we can construct a kind of envelope of theory, which, by careful testing as we proceed, can be made to indicate in a general manner the reactions of one part of the activities of the economic world upon the others, and the interdependence of the several parts. From its very nature this general theory can never correspond strictly to the actual life and movement of any given state. It is useful and necessary, and plays somewhat the same part in economic investigation as ton-mile statistics do in the administration of a railway. To express in any language or to illustrate by any images, from a purely objective standpoint, the infinitely complicated movements of the actual world, is a task far beyond human capacity.

With the aid of this general theory the methods we have sketched in relation to historical problems apply with greater force to the special problems of modern times, and are rewarded with results more accurate, more fruitful, Application to modern problems. more relevant to difficulties which all civilized nations have to face, than those of historical research. To many minds the interest and usefulness of economics depend entirely on the application of these methods, for it is the actual working of economic institutions about which the statesman, the publicist, the business man and the artisan wish to know. Under the conditions we have described, many of the most interesting problems of our own time, when they are once defined, resolve themselves into statistical inquiries. But in most cases such an inquiry cannot be successfully carried out by a mere statistician. Definite economic problems can very rarely be dealt with by merely quantitative methods. In the tabulation and interpretation of statistical evidence, as in its collection, it is scarcely possible to overrate the importance of wide knowledge and experience. There is another very important instrument of investigation which can be used in our own time, but cannot be employed in historical research. Historical documents, however detailed, rarely show all the factors we have to deal with or fully explain a given situation. No sane person would suppose that the minutes of a modern legislative body explain the steps by which legislation has been passed, or the issues really involved. The ostensible cause of a modern labour dispute is frequently not the real or the most important cause. In modern problems we can watch the economic machine actually at work, cross-examine our witnesses, see that delicate interplay of passions and interests which cannot be set down or described in a document, and acquire a certain sense of touch in relation to the questions at issue which manuscripts and records cannot impart. We can therefore substitute sound diagnosis for guesswork more frequently in modern than in historical problems.

What then, it may be asked, becomes of the “old Political Economy”? Of what possible use are the works of the so-called classical writers, except in relation to the history of economics and the practical influence of theory in past times? If we take the mere popular view of what is meant by the “old Political Economy,” that is, that a generation or so ago economics was comprised in a neatly rounded set of general propositions, The “old political economy.” universally accepted, which could be set forth in a text-book and learnt like the multiplication table, it is not incumbent on the present generation to define its attitude at all. In this sense of the words, there was no faith delivered to our fathers which we are under any obligation to guard or even explain. If by the “old Political Economy” we mean the methods and conclusions of certain great writers, who stood head and shoulders above their contemporaries and determined the general character of economic science, we are still under no obligation to define the attitude of the present generation with regard to them. The fact that Adam Smith, with the meagre materials of the 18th century at his disposal, saw his way to important generalizations which later research has established on a firm basis, may enhance greatly the reputation of Adam Smith, but does not strengthen the generalizations. They stand or fall by the strength of the evidence for or against them. In the history of economics or the biography of Ricardo it is of interest to show that he anticipated later writers, or that his analysis bears the test of modern criticism; but no economist is under any obligation to defend Ricardo’s reputation, nor is the fact that a doctrine is included in his works to be taken as a demonstration of its truth. The appeal to authority cannot be permitted in economics any more than in chemistry, physics or astronomy. But the cases stated above suggest more or less false issues. There has been no revolution in economic science, and is not likely to be any. The question we have really to determine is how we can make the best use of the accumulated knowledge of past generations, and to do that we must look more closely into the economic science of the 19th century.

Any one who has taken the trouble to trace the history of one of the modern schools of economists, or of any branch of economic science, knows how difficult it is to say when it began. “Anticipations” of method and doctrine can generally be found by the diligent investigator in the economic literature of his own or a foreign country. So that cross-sections of the stream of economic thought will reveal the existence, at different times, in varying proportions and at different stages of development, of most of the modern “schools.” Again, the classification of an economic bibliography at once shows how varied has been the character of economic investigation, ranging from the most abstract speculation on the one hand to almost technical studies of particular trades on the other. Of the great army of writers who flourished in the first half of the 19th century some were closely identified with the utilitarian school, and the majority were influenced in a greater or less degree by the prevailing ideas of that school. Others, however, were hostile to it. In many works, such as those of a statistical or historical character, there are frequently to be found passages which could have been written in no other period, but are only of the nature of ejaculations and do not affect the argument. In stating the position of economics during this time we cannot ignore all writers, except these who belonged to one group, however eminent that group may have been, simply because they did not represent the dominant ideas of the period, and exercised no immediate and direct influence on the movement of economic thought. We must include the pioneers of the historical school, the economic historians, the socialists, the statisticians, and others whose contributions to economics are now appreciated, and without whose labours the science as we know it now would have been impossible. If we take this broadly historical view of the progress of economics, it is obvious that even in England there was no general agreement, during the 19th century, as to the methods most appropriate to economic investigation.

Suppose, now, we ignore the writers who were inaugurating new methods, investigating special problems or laboriously collecting facts, and concentrate attention on the dominant school, with its long series of writers from Adam Smith to John Stuart Mill. It is the work of these writers which people have in mind when they speak of the “old Political Economy.” There are several quite distinct questions we can ask with regard to them. That they must be studied closely by every one who wishes to follow the history of economics goes without saying. That they must be studied by the economic historian is equally clear, owing to their practical influence and the fact that they furnished the theoretical bases of much of the economic policy of the 19th century. This is true whether their method is good or bad, whether their conclusions are true or false. It is not so easy to determine their relevance and usefulness in relation to distinctively modern problems, or to indicate within what limits their work is of permanent value, and we can only deal with these questions in their more general aspects.

It must be clear to every observer that the economists of the classical period, with the one exception of Adam Smith, will speedily share the fate of nearly all scientific writers. They will be forgotten, and their books will not be read. Adams Smith’s Wealth of Nations, if it has ever been, has long ceased to be a scientific text-book. Whether a modern economist accepts his views or not is of no importance. There is probably not a single chapter in the Wealth of Nations which would be thoroughly endorsed by any living economist. But the reputation of the book and its author is quite independent of considerations of this kind. The Wealth of Nations is one of the great books of the world, many of the sayings of which are likely to be more frequently quoted in the future than they have been in the 19th century. Malthus is already an author whose name is probably more widely known than that of any other economist, but whose works are rarely read, and studied only by a small proportion of the few people who write books on the history of economic theory. Of economic students, many are unaware of the fact that he wrote any other book than the Essay on the Principle of Population, and what is of permanent importance in that work is contained in the generalization which it suggested to Darwin. Moreover, modern economists, while accepting in the main the general tenor of Malthus’s theory of population, would not agree with his statement of it. Like Malthus, Ricardo owes his reputation very largely to the theory associated with his name, though it has long ceased to be stated precisely in the terms he employed. But there are very few people in the world who have made a careful study of his works; and although his theory of rent has a wide and increasing application in economics, it is not comparable in general scientific importance with Malthus’s theory of population. It is already impossible to take J.S. Mill’s Principles of Political Economy as a text-book. Important as it was for thirty or forty years, it will soon be as little read as M’Culloch’s Principles. For the rest of the economists of this period, it is difficult to see how they can escape oblivion. When the generation whose economic training was based upon J.S. Mill has died out, the relevance of the “old Political Economy” is not likely to be a question of any interest to ordinary educated men and women, or even to the great mass of economic students.

The explanation of this decay of interest does not lie upon the surface. It is frequently supposed that the influence of the “old Political Economy” has been gradually undermined by the attacks of the historical school. But great as the achievements of this school have been, it has not developed any scientific machinery which can take the place of theory in economic investigation. If our view is correct that, broadly speaking, the two ways of regarding economic questions are complementary rather than mutually exclusive, there does not seem to be any reason why the growth of the historical school should have been destructive of the “old Political Economy” if it had been well founded. The use of the historical method has, in fact, raised more reputations than it has destroyed, because by keeping carefully in view the conditions in which economic works have been written, it has shown that many theories hastily condemned as unsound by a priori critics had much to be said for them at the time when they were propounded. This observation is true not only of old-world writers like the Mercantilists, but also of Ricardian economics. No one is concerned to prove that the Ricardian economics applies to the manorial system, and it is generally supposed at any rate that the world has been approximating more and more nearly during the last century to the conditions assumed in most of the reasoning of that school. On the principles we have explained, therefore, the Ricardian economics should supply just that body of general theory which is required in the investigation of modern economic problems, and the reputation of at any rate the leading writers should be as great as ever. It would be of immense advantage from a scientific point of view if this could be taken for granted, if for a time the work of the classical economists could be considered final so far as it goes, and for the purposes of investigation regarded as the theoretical counterpart of the modern industrial system. This assumption, however, has been made quite impossible, not by the historical school, but by the criticism and analysis of economists in the direct line of the Ricardian succession.

Modern economic criticism and analysis has destroyed the authority of the “old Political Economy” as a scientific system. The assumptions, the definitions, the reasoning, the conclusions of the classical writers have been ruthlessly overhauled. Defects in their arguments have been exposed to view by those who are most concerned to defend their reputation. Writers with none of the prejudices of the historical school, but with the cold and remorseless regard for logic of the purely objective critic, have pointed out serious inconsistencies here, the omission of important factors there, until very little of the “old Political Economy” is left unscathed. In fact, there never was a scientific system at all. What was mistaken for it was fashioned in the heat of controversy by men whose interests were practical rather than scientific, who could not write correct English, and revealed in their reasoning the usual fallacies of the merely practical man. So the “old Political Economy” lies shattered. It is useless to suppose that this destructive criticism from within can be neutralized by generously sprinkling the pages of the classical writers with interpretation clauses. This may serve to show that the ideals of our youth were not without justification; but the younger generation, which does not care about our ideals, and looks to the future rather than the past, will not read annotated editions of old books, however eminent their authors. If the Ricardian school of economists had been merely philosophers, or even a group like the French physiocrats, this state of things might be regarded with equanimity. We might assume that criticism and analysis had separated the wheat from the chaff in their writings, that everything of permanent value had probably been preserved and incorporated in the works of later economists. But the character of much of their work makes this assumption impossible. It is, in fact, quite true that many of them were more interested in practical aims than in the Ricardo’s limitations. advancement of economic science. We may talk of the assumptions implicitly involved in Ricardo’s works. In reality we do not know what those assumptions were; we only know what assumptions we should make in order to reach the same conclusions, and they may be very different from “the mind of Ricardo.” Ricardo’s works, in fact, do not explain a theoretical system, but contain the matured reflections, more or less closely reasoned, of a man of great mental power looking out on the world as it appeared to a business man experienced in affairs. The conclusions of such a work are of wider significance than the assumptions we attribute to the author would warrant. They are not expressed in terms which satisfy our canons of scientific accuracy. Dissected sentence by sentence, the book may be shown to be a mass of inconsistencies. If it has the misfortune to be systematized by an enthusiastic but dull and incompetent disciple, it may appear even absurd. But after all the misinterpretation of contemporaries and the destructive criticism of later times, the book as a whole leaves upon us an impression of peculiar strength and charm, and imparts a sense of the relations of things truer, because less mechanical, than the laboured reasoning of smaller men. Such is the character of much of the work of Ricardo and some of his contemporaries. We think that the decay of interest in these writers involves a real loss, and that students of modern problems may do worse than read Ricardo and his school. Some of the criticism of their works, necessary and useful as it has been, will probably be corrected later on by that breadth of view and sense of proportion which has enabled us to appreciate justly the achievements of lesser men in more remote times. But rehabilitation in accordance with the canons of historical justice will not restore the lost influence of the Ricardian school. Their achievements in the 19th century will be fully acknowledged, but the relevance of their work to the problems of the 20th century will be admitted less than at the present time.