Part 3

Unquestionably the political economist has much to do with matter. The phenomena attending the production of material wealth occupy a great part of his attention; and these depend mainly on the laws of matter. The efficacy of machinery, the diminishing productiveness, under certain circumstances, of successive applications of capital to land, and the fecundity and longevity of the human species, are all important premises in Political Economy, and all are laws of matter. But the political economist dwells on them only with reference to the mental phenomena which they serve to explain; he considers them as among the motives to the accumulation of capital, as among the sources of rent, as among the regulators of profit, and as among the causes which promote or retard the pressure of population on subsistence. If the main subject of his studies were the physical phenomena attending the production of wealth, a system of Political Economy must contain a treatise on mechanics, on navigation, on agriculture, on chemistry--in fact, on the subjects of almost all the physical sciences and arts, for there are few of those arts or sciences which are not subservient to wealth. All these details, however, the political economist avoids, or uses a few of them sparingly for the purpose of illustration. He does not attempt to state the mechanical and chemical laws which enable the steam engine to perform its miracles--he passes them by as laws of matter; but he explains, as fully as his knowledge will allow, the motives which induce the mechanist to erect the steam engine, and the labourer to work it. And these are laws of mind. He leaves to the geologist to explain the laws of matter which occasion the formation of coal, to the chemist to distinguish its component elements, to the engineer to state the means by which it is extracted, and to the teachers of many hundred different arts to point out the uses to which it may be applied. What he reserves to himself is to explain the laws of mind under which the owner of the soil allows his pastures to be laid waste, and the minerals which they cover to be abstracted; under which the capitalist employs, in sinking shafts and piercing galleries, funds which might be devoted to his own immediate enjoyment; under which the miner encounters the toils and the dangers of his hazardous and laborious occupation; and the laws, also laws of mind, which decide in what proportions the produce, or the value of the produce, is divided between the three classes by whose concurrence it has been obtained. When he uses as his premises, as he often must do, facts supplied by physical science, he does not attempt to account for them; he is satisfied with stating their existence. If he has to prove it, he looks for his proofs, so far as he can, in the human mind. Thus the economist need not explain why it is that labour cannot be applied to a given extent of land to an indefinite amount with a proportionate return. He has done enough when he has proved that such is the fact; and he proves this by showing, on the principles of human nature, that, if it were otherwise, no land except that which is most fertile, and best situated, would be cultivated. All the technical terms, therefore, of Political Economy, represent either purely mental ideas, such as _demand_, _utility_, _value_, and _abstinence_, or objects which, though some of them may be material, are considered by the political economist so far only as they are the results or the causes of certain affections of the human mind, such as _wealth_, _capital_, _rent_, _wages_, and _profits_.

In the next Lecture I shall consider the first of the two remaining questions,--namely, whether Political Economy may be better treated as a science or as an art.

LECTURE III.

REASONS FOR TREATING POLITICAL ECONOMY AS A SCIENCE.

In the following Lecture I shall consider whether Political Economy may be better treated as a science or as an art.

If Political Economy is to be treated as a science, it may be defined as “the science which states the laws regulating the production and distribution of wealth, so far as they depend on the action of the human mind.”

If it be treated as an art, it may be defined as “the art which points out the institutions and habits most conducive to the production and accumulation of wealth.” Or if the teacher venture to take a wider view, as “the art which points out the institutions and habits most conducive to that production, accumulation, and distribution of wealth, which is most favourable to the happiness of mankind.”

According to the law which I have already mentioned, as regulating the progress of knowledge, Political Economy, when, in the 17th century, it first attracted notice as a subject of separate study, was treated as an art. At that time human happiness was considered as dependent chiefly on wealth, and wealth, as I have previously remarked, was supposed to consist of gold and silver. The object which the political economist proposed to himself and to his reader, was the accumulation within his own country of the utmost possible amount of the precious metals. The questions which now agitate society, as to the distribution of wealth, were unregarded. All that was aimed at, was its acquisition and retention in a metallic form. As respects the countries possessing native deposits of the precious metals, the means of effecting this were supposed to be obvious and easy. They had only to promote the extraction of silver from mines, and that of gold from auriferous sands, and to prohibit the exportation of either. This was the policy of Spain and Portugal. The countries not possessing a native supply, could obtain it only by what was called a favourable balance of trade, that is to say, by exporting to a value exceeding that of their imports, and receiving the difference in money. And the money so acquired, they were taught to retain, by prohibiting its exportation. The prevailing opinion shows itself in the preamble of the 5 Rich. II. stat. 1. cap. 2., one among the many statutes and proclamations by which this prohibition was for centuries enforced. “For the great mischief which this realm suffereth, and long hath done, for that gold and silver are carried out of the realm, so that, in effect, there is none thereof left, which thing, if it should longer be suffered, would shortly be the destruction of the same realm, which God prohibit;” and the statute proceeds to forbid such exportation on pain of forfeiture. The merchants, however, who were necessarily the first to test the effects of this prohibition, found it inconvenient. Some trades, particularly those with the East, could be carried on only by the constant exportation of gold or silver, and in all others it was occasionally useful. They did not venture to attack the theory that the prosperity of a country depends on its accumulation of money. Few of them, probably, doubted its truth. But they maintained that the means by which the legislature endeavoured to promote this excellent result, in fact defeated it. “Allow us,” they said, “to send out silver to Asia, and we will bring back silks and calicos, not for our own consumption, which of course would be a loss, but to sell on the Continent for more silver than they cost, and we shall add annually to the national treasure.” This was assented to, and after more than four centuries of prohibition, the export of bullion was allowed by the 15 Car. II. cap. 17. “Forasmuch,” says the act, “as several considerable foreign trades cannot be conveniently driven without the species of money and bullion, and that it is found, by experience, that the species of money and bullion are carried in greatest abundance, as to a common market, to such places as give free liberty of exporting the same, _and the better to keep in and increase the current coins of this kingdom_, be it enacted, that it shall be lawful to export all sorts of foreign coin and bullion, first entering the same at the custom-house.”

The art of Political Economy now became more complex. Its object, indeed, was a very simple one, merely to increase the current coin of the country; but this was to be effected, not by restraining every trade which carried out bullion, but only those which carried out more than they brought in. But how were such trades to be detected? A test was supposed to be applied, by ascertaining whether their imports were intended for home consumption, or for re-exportation. In the former case, the trade, whether profitable or not to the merchant, was obviously mischievous to the country.

In the second case the trade, if profitable to the merchant, must also benefit the country, as it would receive more money than it sent out. “It is not,” says Sir James Stewart[B], “by the importation of foreign commodities, and by the exportation of gold and silver, that a nation becomes poor; it is by consuming those commodities when imported. The moment the consumption begins, the balance turns. Nations which trade to India by sending out gold and silver for a return of superfluities of a most consumable nature, the consumption of which they prohibit at home, do not spend their own specie, but that of their neighbours, who purchase the returns of it for their own consumption. Consequently a nation may become immensely rich by the constant exportation of specie and importation of consumable commodities. But she would do well to beware not to resemble the milliner who took it into her head to wear the fine laces which she used to make up for her customers. While a favourable balance is preserved upon foreign trade, a nation grows richer daily; and when one nation grows richer, others must be growing poorer.”

[B] An Inquiry into the Principles of Political Economy, book ii. ch. xxix. pp. 418, 419, and 422.

Sir James Stewart’s work was published in 1767, and as he says that it was the work of eighteen years, it must have been written between that year and the year 1749. Though he calls Political Economy a science, he treats it as an art, and has the merit of having first given to it limits clearly separating it from the other moral and political arts. “Its object is,” he says, “to secure a certain fund of subsistence for all the inhabitants, to obviate every circumstance which may render it precarious, to provide every thing necessary for supplying the wants of the society, and to employ the inhabitants in such a manner as naturally to create reciprocal relations and dependencies between them, so as to make their several interests lead them to supply one another with their reciprocal wants.”[C] This agrees with my second proposal, namely, to define Political Economy as “the art which points out the institutions and habits most conducive to the production and accumulation of wealth.” As incidental to the art, he was forced to examine the science, and a considerable portion of his work consists of inquiries into the laws which regulate the production and distribution of wealth. The extracts which I have read, show that he did not escape the prevalent errors of his times. And these errors were so grave, as to render the practical portion of his treatise not merely useless for its intended purposes, but positively injurious. A legislator following his precepts, would waste the wealth of the richest country, and destroy the diligence of the most industrious. But the scientific part of the work, particularly the chapters on population, and on the influence of taxation on wages, contains truths of great importance, which were unknown to his contemporaries, and cannot be said to be generally recognised even now.

[C] Book I. Introduction.

Among the contemporaries of Stewart were the French Economists, or, as they have lately been called, the Physiocrats, forming the school founded by Quesnay. With the exception, however, of Turgot, they wrote on the whole art of government. Their works, indeed, contain treatises on Political Economy according to my third proposed definition, that is to say, “on the institutions and habits most conducive to that production, accumulation, and distribution of wealth, which is most favourable to the happiness of mankind;” but they contain much more. Quesnay and his followers lived in a country subject to political institutions, of which many were mischievous, more were imperfect, and all were unsettled. That the existing system of government was bad, every one acknowledged. The economists believed that they had discovered why it was bad. They believed that they had discovered that agriculture is the only source of wealth, and rent the only legitimate source of public revenue. And they proposed, therefore, to substitute for the innumerable taxes on importation, on exportation, on transit, on production, on sale, on consumption, and on the person of man, which then formed the fiscal system of France, a single tax on the rent of land. So far their precepts were founded on the science of Political Economy. But when they proposed the separation of legislative and judicial functions, and required the whole legislative power to center in an absolute hereditary monarch, they drew their premises from other branches of mental science. I have said that Turgot was an exception; and it is remarkable, that the only man among the disciples of Quesnay who was actually practising Political Economy as an art, is the only one who treated its principles as a science. His “Réflexions sur la Formation, et la Distribution des Richesses,” published in 1771, is a purely scientific treatise. It contains not a word of precept; and might have been written by an ascetic, who believed wealth to be an evil.

We now come to Adam Smith, the founder of modern Political Economy, whether it be treated as a science or as an art. He considered it as an art. “Political Economy,” he says, in the introduction to the fourth book, “proposes two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or, more properly, to enable them to provide such a revenue or subsistence for themselves; and, secondly, to supply the state or common weal with a revenue sufficient for the public service. It proposes to enrich both the people and the sovereign.” The principal purpose of his work was to show the erroneousness of the means by which political economists had proposed to attain these two great objects. And in the then state of knowledge, this could be done only by proving that many of them mistook the nature of wealth, and all of them the laws according to which it is produced and distributed. The scientific portion of his work is merely an introduction to that which is practical.

Of the five books into which the work is divided, it occupies only the first and second. The third is an historical sketch of the progress of national opulence. The fourth, the longest in the whole work, considers the direct interferences by which governments have attempted to lead or force their subjects to become rich; and decides, “that every system which endeavours, either by extraordinary encouragements, to draw towards a particular species of industry a greater share of the capital of the society than would naturally go to it, or, by extraordinary restraints, to force from a particular species of industry some share of the capital which would otherwise be employed in it, is in reality subversive of the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and greatness; and diminishes, instead of increasing, the real value of the annual produce of its land and labour.”

“All systems,” he adds, “either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. According to that system, the sovereign has only three duties to attend to: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain.”

The fifth book, which points out the means by which the duties of the sovereign may best be performed, and the necessary public revenue provided, is, in fact, a treatise on the art of government. It treats of the subsidiary arts of war, of jurisprudence, and of education. It considers the advantages and disadvantages of religious endowments, and even the details of the opposed systems of patronage and popular election, and of equality and inequality of benefices. It considers at great length the modes and effects of taxation and of public loans, and concludes by an elaborate plan for diminishing the taxation of Great Britain, by requiring all the British dependencies, of which Ireland and North America then formed part, to contribute directly to the imperial treasury.

I have often doubted whether we ought not to wish that Adam Smith had published his fifth book as a separate treatise with an appropriate title. It is by far the most amusing and the easiest portion of the “Wealth of Nations,” and must have attracted many readers whom the abstractions of the first and second books, if they had formed a separate work, would have repelled. On the other hand, the including by so great an authority, in one treatise, and under one name, many subjects belonging to different arts, has certainly contributed to the indistinct views as to the nature and subjects of Political Economy, which appear still to prevail.

The English writers who have succeeded Adam Smith, have generally set out by defining Political Economy as a science, and proceeded to treat it as an art.

Thus Mr. M‘Culloch states, as the proper subjects of Political Economy, “the laws which regulate the production, accumulation, distribution, and consumption of the articles or products possessing exchangeable value.” Political Economy, then, is a science. But he goes on to say, that “the object of Political Economy is to point out the means by which the industry of man may be rendered most productive of wealth, the circumstances most favourable to its accumulation, and the mode in which it may be most advantageously consumed.” So defined, Political Economy is an art,--a branch, in fact the principal branch, of the art of government.

Mr. James Mill says that he has in view merely to ascertain the laws of production, distribution, and consumption. His treatise, therefore, ought to be merely scientific. But when he says that Political Economy ought to be to the state what domestic economy is to the family, and that its object is to ascertain the means of multiplying the objects of desire, and to frame a system of rules for applying them with the greatest advantage to that end, he turns it into an art.

Mr. Ricardo is, however, an exception. His great work is little less scientific than that of Turgot. His abstinence from precept, and even from illustrations drawn from real life, is the more remarkable, as the subject of his treatise is distribution, the most practical branch of Political Economy, and taxation, the most practical branch of distribution.

The modern economists of France, Germany, Spain, Italy, and America, so far as I am acquainted with their works, all treat Political Economy as an art.

Many of them complain of what they call the abstractions of the English school, and others accuse it of narrow views, and of an exclusive attention to wealth; criticisms which must arise from an opinion that Political Economy is a branch of the art of government, and that its business is to influence the conduct of a statesman, rather than to extend the knowledge of a philosopher.

It appears, from this hasty sketch, that the term Political Economy has not yet acquired a definite meaning, and that, whichever of the three definitions I adopt, I shall be free from the accusation of having unduly extended or narrowed the field of inquiry which the statute founding this professorship has laid open to me.

There is much in favour of the third definition, that which defines Political Economy as the art which teaches what production, distribution, accumulation, and consumption of wealth is most conducive to the happiness of mankind, and what are the habits and institutions most favourable to that production, distribution, accumulation, and consumption.

It raises the political economist to a commanding eminence. The most extensive, though perhaps not the most important, portion of human nature, lies within his horizon.

The possession of wealth is the great object of human desire, its production is the great purpose of human exertion. The modes and the degree in which it is distributed, accumulated, and consumed, occasion the principal differences between nations. The philosopher who could teach such an art, would stand at the head of the benefactors of mankind.

But the subject is too vast for a single treatise, or indeed for a single mind. This will be evident if we consider the extent of one of its subordinate branches, the limits to be assigned to posthumous power. On the death of a proprietor, ought his property to revert to the state, as it does in Turkey, or to go to his children, as it does in France, or to be subject to his disposition by deed or by will? If it be subjected to his disposition, ought he to have merely the power of appointing his immediate successors, or of entailing it for one generation, or for two, or for ever? Is it advisable that he should have the power, not only of appointing a successor to his property, but of directing how that successor shall employ it? And ought such a power to be unlimited, or to be confined to certain purposes, or within a certain period? Ought the laws of succession and of testamentary power to be the same as respects land and movables, or to differ totally, or in any, or what, particulars? Ought these questions to be resolved differently in an old country and in a colony, in a monarchy, in an aristocracy, and in a republic? If Political Economy be a branch of the art of government, these inquiries form a branch, though a very small one, of Political Economy.

But there is scarcely any one of them which it would not require a long treatise to answer satisfactorily. How many, for instance, are the considerations which must be attended to in a discussion as to the propriety of enabling individuals to found permanent institutions for the purposes of religion, of education, and of charity, and as to the period for which they ought to be allowed to govern them from the grave?

It is almost impossible to overrate the importance of the art of government. With the exception, perhaps, of morality, it is the most useful of the mental arts; but, with no exception whatever, it is the most extensive. Too much attention cannot be given to it; but that attention should be subdivided. Too many minds cannot be employed on it, but each should select a single province; and the narrower the province, of course the more completely is it likely to be mastered.

My second definition, that which defines Political Economy as the art which teaches what are the institutions and habits most favourable to the production and accumulation of wealth, is not liable to similar objections. It opens a field of inquiry, positively indeed wide, but comparatively narrow. The object proposed by the political economist is no longer human happiness, but the attainment of one of the means of human happiness, wealth.