cent., and rent per acre. Dissatisfaction with economic contrasts gradually gives way to dissatisfaction with traditional economic theory. "Our enquirer goes home in a rage, and will attend the professor's lectures no more. Can we wonder?" "I do not think," he continues, that anyone will have the hardihood to assert that the exclusion from expositions of economic theory of any consideration of the causes which determine the division of the whole income between labour and property and the division of property's share between individual proprietors has been deliberate. I know of no economist who has asserted that the consideration of these matters is not a proper part of the theory of distribution." An orthodox economist would rather say, either that the traditional doctrine answers all the questions here suggested, or that no general theory concerning them can be constructed, or, again, that they are unimportant and not worth answering. But none of these defences will stand. Professor Cannan then proceeds, in the course of twelve pages, to sketch in barest outline the new theory which he considers to be required. No attempt will be made here to condense the argument of these twelve pages, the main points in which will be dealt with at later stages of the present volume. It is sufficient to notice that new ground is broken and that particular stress is laid upon the influence of inherited wealth.3 Everyone knows that, in all except the newest countries, the inequality in the amounts of property which " 1 Before these words were written Professor J. B. Clark, as we have already seen, had had the hardihood to assert this, and Sir Sydney Chapman came very near to asserting it a few years later. * In Parts III. and IV. below. ' In his Elementary Political Economy, published in 1888, Professor Cannan had long before insisted that "if saving were the only means by which individuals could obtain property, colossal fortunes would be almost unknown and very large fortunes would be much rarer than they are (p. 100). " individuals have received by way of bequest and inheritance is by far the most potent cause of inequality in the actual distribution of property. Reflection further suggests that the comparative potency of this cause is likely to grow, rather than to diminish, in the future. For as time goes on, the savings of each generation of men must come to bear a smaller and smaller proportion to the property which has come down to them from previous generations." Professor Cannan points out that attempts are sometimes made to support existing inequalities, and in particular the hereditary principle in distribution, on purely ethical grounds. He holds that such attempts ought not, and are in fact unlikely, to succeed. "The true defence of the inequalities of the distribution of income is the relative and partial defence afforded by purely economic considerations." Great inequality involves a great waste of economic welfare, but it is for the present a necessary evil. Yet " there are many good reasons to suppose that it is greater than is necessary, and for hope, at any rate, that it may in the course of time be largely reduced, if not altogether abolished, without any appreciable injury, and perhaps even with advantage, to production." But "in order to be able to judge correctly whether particular plans for reducing the inequality are desirable or not, we must have a theory as to the causes of inequality." Such a theory would have both scientific value and practical utility. But it has still to be created. How great has been the influence of this article on the Division of Income is an interesting speculation. But that it has been considerable, especially in America, is clear. Professor Cannan's attitude towards Socialism is characteristic of his general attitude. He points out that, in England at any rate, modern economists are far less hostile to Socialism in general than were their prede cessors of the classical school. "This change is due in great measure to the doctrine of marginal utility, which stamps as economical many things which could formerly be recommended only on 'sentimental' or non-economic grounds."1 And thus, so far as distribution is concerned, "the economist of the present day finds himself in considerable sympathy with socialist aspiration." But he has also to consider the question of production. Even here, however, the old-fashioned arguments against Socialism-the universal need for the stimulus of economic self-interest, the unchangeability of human nature, the danger of over-population, and so forth-are far from being conclusive. To the modern economist, therefore, “ the question is one of organisation. Could production be as well arranged in a Socialist system" as it is now? "Would the organisation meet the consumers' wants as accurately?" That is to say, the question is entirely relative to time, place, and special circumstances. "Nobody thinks that Wessex could have had a socialist organisation of production with advantage thirteen hundred years ago, and none but fanatics think that Great Britain could with advantage establish socialist arrangements at the present moment." But "modern economics contains nothing to show that gradual change may not eventually, in a distant future, evolve some form of organisation which at that time will work well and better than the unconscious organisation" of the present day. Each change which is made or proposed should be considered on its merits, a bad change should not be supported because it appears to tend towards, nor a good change opposed because it appears to tend away from, either the Socialist or the Individualist ideal. For neither of these ideals can be unconditionally defended. 1 This and the following quotations are from Theories of Production and Distribution, pp. 405-7. Compare Economic Outlook, pp. 53-86. CHAPTER VIII SEVENTH PERIOD: 1911-1918. §1. Professor Taussig's Principles of Economics, published in two volumes in 1911, contains no large, new ideas, though full of originality in points of detail and illustration. Nevertheless it may well be regarded as marking the beginning of a new period in the development of economic theory. It covers a wide field and has been welcomed by many as the most satisfactory general textbook yet produced. Criticisms on important points have been few. Professor Taussig has succeeded in exhibiting a large and stable body of theory, on the substance of which practically all modern economists are in agreement, and in showing that little scope remains for profitable controversy over most of the central doctrines of economic science. His theory of distribution is the orthodox modern theory, modified and elaborated so as to meet the most recent criticism. The theory of value, which naturally precedes it, is treated adequately, but not, as in some modern books, at disproportionate length. It occupies nine chapters out of the seventy, into which these two volumes are divided. In developing the theory of distribution, Professor Taussig declines to adopt the phraseology of Professor Clark and others, who impute specific productivity to the various factors of production. He makes it clear that in his opinion this question is little more than a verbal one. But his conclusion, which conforms with 1 Op. cit., II., pp. 7–8. commonsense, is that only labour can reasonably be called "productive." Neither land nor capital is an independent factor of production, and no separate or specific productivity can in reality be attributed to them. "Labour applied in some ways, through the use of tools, yields more than labour applied in other ways; in this sense only is there a productivity of capital. Labour on some land yields more than labour applied on other land; in this sense only is there a productivity of land."" Again" there is no separate product of the tool on the one hand, or of the labour using the tool on the other; there is a joint product We may disengage the causes determining why and how the labourers who use and make the tools get wages, from the causes determining why and how the owner of the tools gets interest; but we can disengage no concretely separable product of labour and capital." We can, however, usefully speak of the "marginal net products of the various factors, provided that we do not attempt to read too much into this phrase. For the rest, Professor Taussig gives a clear exposition of the causes which determine interest, rent, wages, and business profits, the differences of earnings in different occupations, and the growth of population. It is in no respect strikingly original, but it is on the whole the best and most up-to-date statement, at moderate length, of this great body of fundamentally important doctrine. He winds up his theory of distribution with an excellent, though short, chapter on Inequality and Its Causes. He points out that "the overshadowing fact in the distribution of property and income is inequality," and that "the causes of inequality are reducible to two-inborn differences in gifts, and the maintenance of acquired 1 Ibid, II., p. 58. 3 Ibid, II., p. 238. Ibid, II., pp. 197-8. |