ments, and the maintenance of monarchical armies, and increased need for money in State finance. A circumstance not adverted to by Roscher, which doubtless contributed to the growth of the Mercantile system, was the revolution in prices, and in international trade, consequent on the influx of American gold and silver, which really placed the countries with a small stock of money and a low range of prices at a disadvantage. They bought dear and sold cheap in the foreign market. The system was thus not so irrational in its objects as many modern writers have supposed; but its history is chiefly important, in the point of view with which we are concerned, as illustrative of the connexion between economic theories and surrounding phenomena and conditions of thought.

The first period in Roscher's division, is, as already said, classed by him as theological and humanistic. In the second period German political economy in his view disengaged itself finally from both theology and jurisprudence, and became an independent science. It is, however, a fact of no small importance to a right understanding of economic history, and to a due appreciation of the authority of some of the economic doctrines of our own day, that economic philosophy was so far from emancipating itself in the seventeenth century completely and finally from theological and juridical theories, that the system not only of the French Physiocrates, but also of Adam Smith, whose Wealth of Nations had a prodigious influence over Germany, was in great part built on an ancient juridical theory in a modern theological form, and penetrated by a theological spirit. Roscher's third period, which reaches down to the present day, begins with the introduction of the system of the Physiocrates into Germany, where he says it influenced only some individual minds, adding that in England it could gain almost no ground. But the influence of the Wealth of Nations both in Germany and elsewhere was so great that the whole of political economy might be divided into two parts-before and since Adam Smith; the first part being a prelude, and the second a sequel (in the way either of continuation or opposition) to him.' The system of the Physiocrates had doubtless some peculiar features, traccable to its country and parentage, the study of

which throws much light on the causes which have shaped economic ideas, and forms an instructive chapter in the general history of philosophy. Nevertheless its main foundation was essentially the same as that on which Adam Smith's political economy rested. Roscher himself, along with other eminent German economists, has drawn attention to the connexion between both systems and the idea of a Law of Nature, which eighteenth century philosophy had derived from Roman jurisprudence. What they seem to have overlooked is that both with the Physiocrates, and with Adam Smith, the Law of Nature distinctly assumed a theological form. The simple, harmonious, and beneficent order of nature which human laws should leave undisturbed and only protect, became of divine institution, and Nature in short became Providence. Dupont de Nemours, who invented the name Physiocratie, to signify the reign of natural law, says in the dedication of the system to the sovereigns of the world, Vous y reconnaîtrez la source de vos droits, la base et l'étendue de votre autorité, qui n'a et ne peut avoir de borne que celle imposée par Dieu même.' In Adam Smith's lectures on moral philosophy, political economy formed one part of a course of which natural theology was another part, and the real ground of his confidence in the beneficial economy resulting from the undisturbed play of individual interest, is expressly stated in the Wealth of Nations, as well as in his Theory of Moral Sentiments, to be the guidance of Providence. 'Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own gain, and he is in this as in many other cases led by an invisible hand to promote an end which was no part of his intention.** The process of specialization which has differentiated one branch of secular knowledge after another from theology had not reached political economy in Adam Smith's age, nor with many of his successors. Scientifically regarded, the theory of Malthus was fatal to the assumption of a beneficent tendency of the natural desires of mankind, but it did not prevent Archbishop Whately from

* Wealth of Nations, Book iv. chap. ii.

*

finding in political economy the strongest evidences of natural theology; and the harmony of a beneficent economy of nature with the theism of modern times unquestionably contributed, though often by an unperceived connexion, to the success which the political economy of Adam Smith and the system of laissez faire met with in Germany as well as England. The principal merit of Adam Smith's economic philosophy has been generally overlooked. He combines the historical method of Montesquieu with the theory of Natural Law, and although that theory together with his theological system gave a bias to his inductive study of the real order of social progress, he has a true title to be regarded as the founder of the historical method in political economy, in the sense at least of having been the first to apply it. In Germany, it is true, this method has been of indigenous and more recent growth, having been transferred from other branches of German historical science, especially in relation to law. And as Adam Smith's system has been generally associated only with that portion of it which is based on natural law, the historical school of German economists have for the most part assumed an attitude of antagonism to what they call Smithianismus.

The last chapter of Roscher's history describes the tenets and methods of the different schools and parties which the economic and political condition of Germany on the one hand, and the progress of science on the other, have evolved during the last thirty years. Dr. Roscher does not exclude even socialism from a place in his history, his object being to portray all the principal phases of German thought on the subject of the production and distribution of wealth. Two conditions concurred to stimulate economic inquiry and discussion in Germany in recent years: the material progress of the country in population, production, trade, and means of communication, presenting new economic phenomena and raising new problems, especially in relation to the working classes; and the great contemporary progress of the sciences of observation, especially history. Political causes, too, have had a

American political economy to this day is theistical, and its principles drawn in great measure from assumptions respecting the method of divine government.

share in producing a diversity of economical creed. Roscher distinguishes five different groups, designated as free traders, socialists, reactionary conservative economists, officials, and the historical or 'realistic' school. Of these five groups, two, however (the reactionary' and the 'official' economists), may be left out of consideration here-the former as insignificant in number, and the latter as distinguishable only in reference to the subjects on which they write, and the special knowledge they bring to bear on them. We need concern ourselves only with the free-trade school-sometimes called, by way of reproach, the Manchester party,-the socialists, or socialist-democrats (socialdemokraten), and the realistic or historical school. The free traders, under the leadership of Prince Smith, Michaelis, and Julius Faucher, formed some years ago an association, called the German Economic Congress (Volkswirthschaftlicher Congress), and all German economists are agreed that they rendered great service to Germany by their strenuous exertions for industrial and commercial liberty. Roscher, too, refuses to stigmatise them with the name, 'Manchester party,' on account of their patriotism; but he objects to their economic theory, which was that of Bastiat and the old English laissez-faire school, as too abstract, too optimist, and too regardless of history and reality. But many of the younger members are broader in their creed, and by no means opposed to the historical or realistic method of economic inquiry. The socialists or socialdemocrats, of whom Karl Marx and the late Ferdinand Lassalle may be taken as the exponents, aim both at political revolution and at the abolition of private property in land and capital; and Roscher points out that they are even more unhistorical in their method, and more given to misleading abstractions-for example, the argument that capital is accumulated labour, and labour therefore should have all its produce-than the extremest of the elder free traders. Signor Pozzoni signally errs in classing, in a recent article in this Review, the realistic German school with the socialists. The realistic school, which has its chief strength in the universities, is no other than the historical school, which Signor Pozzoni classes apart; and the Association for Social Politics (Verein für Social-politik) which its members

have formed, and which, by a play on words, led to the nickname of Katheder-Socialisten, now includes some of the Economic Congress, or free-trade party, along with Government officials, merchants, and manufacturers, as well as professors and working men. The true meaning of the term 'realistic' is sufficiently explained by Roscher's words :—' The direction of the political economy now prevailing at our universities is with reason called realistic. It aims at taking men as they really are, influenced by various and withal other than economic motives, and belonging to a particular nation, State, and period of history.' Man, in the eyes of the historical or realistic school, is not merely an exchanging animal,' as Archbishop Whately defined him, with a single unvarying interest, removed from all the real conditions of time and place -a personification of an abstraction; he is the actual human being such as history and surrounding circumstances have made him, with all his wants, passions, and infirmities. The economists of this school investigate the actual economy of society and its causes, and are not content to infer the distribution of wealth from the possible tendencies of undisturbed pecuniary interest. Such a practical investigation cannot be without practical fruit, but its chief aim is light. And it is needless to say what a boundless field of instruction the study of the cconomic progress and condition of society on this method opens up. Among the works which it has recently produced in Germany may be mentioned Roscher's Nationalökonomik des Ackerbaues, Schmoller's Geschichte der deutschen Kleingewerbe, Brentano's Arbeitergilden der Gegenwart, and Nasse's wellknown Essay on the Agricultural Community of the Middle Ages in England. Nor has the historical method been unproductive in England. A great part of the Wealth of Nations belongs to it; and to it we owe Malthus's treatise on Population, Tooke's History of Prices, and Thorold Rogers's History of Agriculture and Prices. Sir Henry Maine's works on Ancient Law, Village Communities in the East and West, and the Early History of Institutions, not only afford models of the historical method, but actually belong to economic as well as to legal history, and exemplify the nature and extent of the