present law of inheritance in England, it is no answer to debate its origin. What is required in each case is, not a historical disquisition, but a direct study of the effects of given causes. The historical method is a very bad substitute for the analytical; or rather it is no substitute at all. "A history," as Maitland says, "however interesting, is not a reason." All this is obvious, but in practice sometimes disregarded.1 §2. None the less, it is important to attempt some survey of the historical development of those parts of modern economic theory which are relevant to the subject-matter of this book. For only after such a survey can the modern student realise clearly the precise questions, which economists in the past have attempted to answer. Only then can he form his own judgment as to how far their answers are correct and complete, and, hence, as to the extent and nature of the work, which awaits economists of the present generation. Such a survey discloses two sorts of bias, to which many economists in the past have been prone, and against which the modern economist should be on his guard. In the first place, even the most abstract thinkers tend to be unduly influenced by the transitory economic conditions of their own time, and to mistake these for things permanent and unchangeable. The opinions of Ricardo concerning rent and of Malthus concerning population illustrate this tendency.2 . 1 Morley (On Compromise, pp. 30-31) has clearly shown how abuse of the historical method enervates opinion. For, according to this method, opinions are counted rather as phenomena to be explained than as matters of truth and falsehood. . In the last century (ie., the eighteenth) men asked of a belief or a story: Is it true? We now ask: How did men come to take it for true? The devotees of the current method are more concerned with the pedigree and genealogical connections of a custom or an idea than with its own proper goodness or badness, its strength or weakness." 2 Professor Nitti, in his Popolazione e il Sistema Sociale, has admirably shown that many divergent doctrines of population, originating in a number of different countries, have this defect in common. In the second place, even the most original thinkers are apt to be somewhat imitative in choosing their special lines of work. Each generation of economists tends to devote excessive attention to the doctrines of those, upon whose writings or oral teaching they have themselves been brought up. "I will not go so far as to say that English economists have lived by taking in one another's washing," a distinguished living economist is reported to have said, "but it is certainly true that they have spent a vast amount of time is mangling one another's theories." Now we may be reasonably sure, if without undue disrespect the analogy may be employed, that, though the passage of a large flock of sheep through a gap in a hedge undoubtedly tends to enlarge that gap, yet, if some of the animals were adventurous and original enough to charge the hedge at other points, more light would shine through it in the long run. §3. A study of the development of economic thought concerning the distribution of income involves, of course, a study of successive periods of economic writing, and the most obvious method of procedure is a chronological classification, which assumes that the new ideas contained in any book began to influence thought from the date of that book's publication. Generally speaking, indeed, this is the only practicable method, but it is not ideal. For, whereas the influence of some new ideas, especially at Universities, begins to make itself felt before they are published, the influence of others, though considerable in the long run, does not become so till long after publication. But a chronological classification seems to indicate with sufficient accuracy the main drift of economic thought, and is consequently adopted in what follows. 1 Another distinguished living economist has suggested to me that the "historical method," as applied to economic theory," is not a mere recital of obsolete opinions, but a revelation of the rottenness of existing opinions made by showing how they are only the obviously absurd opinions of a previous age dressed up in cunning disguises." We have next to decide what periods are most appropriate for our purpose. Six books stand out as convenient landmarks, namely Adam Smith's Wealth of Nations, Ricardo's Principles, Mill's Principles, Jevons' Theory, Marshall's Principles and Taussig's Principles. We thus obtain seven periods; (1) Before Adam Smith, up to 1776; (5) Jevons to Marshall, 1871-1890 ; (7) Taussig onwards, since 1911. We shall now consider these periods successively, but shall only be able to touch lightly on many important points, since it is necessary to be reasonably brief. CHAPTER II. FIRST PERIOD: BEFORE 1776. §1. This period, though lengthy from the point of view of the geologist or the general historian, need not detain us long. The state of economic science before Adam Smith has been compared to that of astronomy before Copernicus. In neither case was there much to show.1 The beginnings of modern economic literature may be traced to the seventeenth century writings of the Mercantilists in England and of the Cameralists in Germany. These writers attempted, without much success, to determine the relation of foreign trade to the aggregate wealth of a State. But "the Mercantilists appear to have had no theory of wages or rent. They were more or less unsystematic pamphleteers, and their ends concerned production rather than distribution." The problem of the causes which determine the division of a given product between different persons or classes does not seem to have presented itself to their minds. It is not till the appearance in the eighteenth century of Cantillon and the Physiocrats, that we find the first glimmerings of a theory of distribution. Cantillon's Essai sur la Nature du Commerce, published in 1755, has been described by Jevons as "the veritable cradle of Political Economy," and contains, in addition to other 1 Though, as Professor Haney points out, economic thought in its simplest form must have always existed, wherever thinking beings sought to gain a living." (History of Economic Thought, p. 15). Haney, op. cit., p. 103. 1 Principles of Economics and other Papers, p. 182. Cantillon appears, in the light of Jevons' researches, as a most interesting figure. D interesting matter which is not here relevant, an intelligent discussion of the causes of differences in wages in different occupations. Cantillon appears to have been the first writer to take account of influences, other than actual rates of pay, which help to determine the comparative attractiveness of different occupations. The Tableau Economique of the Physiocrat Quesnay, published in 1756, foreshadows subsequent theories of distribution between factors of production. Quesnay held the curious view that only agriculture enriches a nation. All merchants, artisans and professional men,the whole community, in fact, except farmers and the labourers employed by them-he dismisses, quaintly and comprehensively, as "la classe stérile." More important was the work of Turgot, whose Réflexions sur la Formation et la Distribution des Richesses were published in 1770. This book was written primarily to edify two young Chinamen who were his pupils. Though somewhat influenced by Quesnay, much of Turgot's reasoning is both correct and original. He discusses the causes of inequality in the distribution, as between individuals, of landed property, dwelling upon the effects of inheritance and the way in which these vary with the size of individual families. He also touches, but throws little light, upon the problem of the distribution of the produce of agricultural land between cultivators and owners." The most valuable portion of his book is that which deals with the nature of interest and the causes which determine the "The first systematic Treatise on Economics was probably written by a banker of Spanish name, born from an Irish family of the County Kerry, bred we know not where, carrying on business in Paris, but clearly murdered in Albemarle Street. The Treatise except that it was once mistakenly quoted by Adam Smith, has remained to the present day unknown or entirely misinterpreted in England" (Ibid, p. 183). The present day" refers here to 1881. 1 See the introduction to the English translation of this work in Professor Ashley's Economic Classics series. 2 Op. cit., § 12. " 3 Ibid, § 14. |