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general death-rate are declining,1 the birth-rate is declining still more rapidly. And this is not due to increasing abstention from marriage; it is not even due to increasing postponement of marriage, to which Malthus chiefly pinned his hopes of improvement, but rather to the deliberate regulation of the size of families, a factor hardly dreamed of in his philosophy.

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§6. Of other writers falling within this period, the most notable is J. B. Say, whose Traité d'Economie Politique appeared in 1803. His discussion of the theory of value, which has been highly praised," he regarded only as a necessary preliminary to a discussion of the proportions in which the product of industry is distributed among different individuals. But this latter discussion he never attempted. The difficulties involved in it are not, at first sight, overwhelming, but they have proved sufficient to baffle not only Say, but other eminent economists, including Ricardo and Sidgwick, both of whom formally admitted the importance of this branch of economic theory.

1 Or were, before the outbreak of war in 1914.

In Book I., Ch. II. (2nd edition) of his Essay he refers only to deliberate prevention of births by the unmarried. The weakness of Malthus' arguments does not, of course, disprove the existence of a danger of over-population in the modern world. Compare Keynes, Economic Consequences of the Peace, pp. 8 ff.

• Compare Cassel, op. cit., pp. 25-7.

• "Comment et dans quelles proportions s'opère entre les membres de la société la distribution de la chose produite" (Traité, II., p. 2).

CHAPTER IV.

THIRD PERIOD: 1817-1848.

§1. Rigidly, our third period dates from the publication of Ricardo's Principles of Political Economy and Taxation in 1817. We may, however, notice in passing a group of thinkers who fall partly within this, and partly within the preceding, period. These are the Communists and Socialists of the early nineteenth century, the most prominent of whom were St. Simon, Fourier and Robert Owen. From the spectacle of the French Revolution, which had terrified the milder sort of reformers, these men derived a belief in the possibility of large reconstructions of human society. It is unnecessary here to consider in detail either St. Simon's project of State Socialism or the schemes of Fourier and Owen for voluntary and local associations of producers. It is interesting, however, to notice that St. Simon recognised existing laws of inheritance as a force strongly consolidating the present order. But, in his scheme for reorganising production by "the union of all instruments of labour in a social fund, which shall be exploited by association," the abolition of inheritance is only a trivial and necessary part of a larger whole. It was left for Mill to suggest that the objects of Socialists might be largely attained by changes in the law of inheritance.

St. Simon favoured a distribution "to each according

1 For a bibliography of these writers, see Haney, History of Economic Thought, pp. 332-4, and for a good, but brief, account of their opinions, Kirkup, History of Socialism, Chs. II. and IV.

2 Kirkup, op. cit., p. 28.

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to his work"; Fourier, on the other hand, a fancy distribution, under which a comfortable minimum income would be secured to every person, including women, and children more than five years old, and the residue would then be divided between labour, capital and "talent" in the ratio of 5: 4:3

The early Socialists are important in the development of economic thought, because they perceived clearly that institutions, which man has created, man may also change. It has been said that they "lacked a true historical sense of institutional development "; but they lacked also that narrowness of forward vision which is apt to accompany the "historical sense." They assumed, no doubt, an unreasonably large and rapid change in average human nature. But their ideas helped, in time, to correct those of economists who, since they regarded both contemporary institutions and contemporary human nature as immutable, were blind to almost every possibility of economic improvement.

The early Socialists exerted a healthy, though gradual, influence on later writers and, in particular, on Mill. But both in outlook and in method they provide the strongest possible contrast to Ricardo.

§2. If the early Socialists were inclined to regard all men as industrious and unselfish idealists, Ricardo, as Marshall has remarked, was inclined to envisage mankind as wholly composed of city men. And the latter error is hardly less profound than the former.

The argument of Ricardo's Principles is both involved and acute, but it is his persistent habit, which Marshall and others have been at much pains to excuse, to use simple words ambiguously and not to qualify propositions, which, when stated without qualification, are obviously untrue. It is, therefore, difficult to read this

1 Haney, op. cit., p. 343 .

book either with patience or with the full appreciation, which, in the judgment of its most ingenious interpreters, it deserves.

"Political Economy you think is an enquiry into the nature and causes of wealth," says Ricardo in a letter to Malthus, "I think it should rather be called an enquiry into the laws which determine the division of the produce of industry amongst the classes who concur in its formation."

In his Principles, therefore, Ricardo deals chiefly with various problems of distribution. The Preface opens thus:-"The produce of the earth-all that is derived from its surface by the united application of labour, machinery and capital, is divided among three classes of the community, namely, the proprietor of the land, the owner of the stock or capital necessary for its cultivation, and the labourers by whose industry it is cultivated. But in different stages of society, the proportions of the whole produce of the earth which will be allotted to each of these classes, under the names of rent, profit and wages, will be essentially different. To determine the

laws which regulate this distribution, is the principal problem in Political Economy." But, like J. B. Say, Ricardo, having stated this problem of proportionate shares and emphasised its importance, is mainly concerned, in what follows, with other matters.

Like Adam Smith, he seems to have regarded rent, profit and wages as constituting the incomes of three more or less separate classes of persons, but his treatment of the general relations of rent, profits and wages is full of irritating ambiguities. It is seldom clear whether he is dealing with rent per acre, profits per cent. and wages per head, or with aggregate rent, profits and wages, or with the proportions which these three aggregates bear

1 Quoted by Haney, op. cit., p. 234 • Works (McCulloch's edition), p. 5.

to the total produce. These ambiguities have been exposed in great detail by Professor Cannan,1 and are not worth further study here. It is worth mention, however, that Ricardo held, though on quite insufficient grounds, that" in an advancing state" the proportionate shares of rent and wages tend to rise, and that of profits to fall.

Defining rent as "that portion of the produce of the earth which is paid for the use of the original and indestructible powers of the soil," he argues that the rent of a given field is measured by the surplus of its produce over that obtainable with the same capital and labour from the poorest land in cultivation. This theory is too well known to need discussion here. It is primarily applicable to agricultural land, but may easily be generalised so as to apply to all land. It throws light upon the relative rents of different pieces of land, but not upon the absolute rent of any particular piece, when land in general is so scarce that all land yields some rent. Ricardo's deduction that " rent is not a component part of the price of commodities," is unhappily worded and has caused much barren controversy, though few would question his practical illustration that "corn is not high because a rent is paid, but a rent is paid because corn is high."4

His theory that wages are based upon a "natural price of labour," which varies with what later writers have called " conventional necessaries," is unsatisfactory, and his assumption that the numbers of the population tend to adjust themselves to changes in this "natural price" cannot, in the light of modern experience, be entertained.

His theory of profits is interesting as containing a

1 Theories of Production and Distribution, pp. 341 ff.

2 Works, p. 34.

• Ibid, p. 41.

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Ibid, p. 39.

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