T. E. Cliffe (Thomas Edward Cliffe) Leslie.

Essays in political economy online

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legal system as its background ; but the more general proposition
may be advanced that every successive phase of social progress
presents inseparably connected phenomena to the observation of
the economist, the jurist, the mental, the moral, and the
political pbilosopher. The same institutions — marriage, the
Family, landed property, for example — may be regarded from
a moral, a legal, a political, or an economical point of view.

176 On the Philosophical Method of Political Economy.

Both an intellectual and a moral evolution is visible in the suc-
cessive modes of satisfying human wants — by hunting and can-
nibalism ; by the domestication of animals, with slavery instead
of the slaughter of captured enemies; by agriculture, with
serfdom gradually superseding slavery ; and by free industry
and commerce, instead of conquest and piracy. And it may be
affirmed that the means by whicli wealth is acquired in suc-
cessive states of society are subject to regular laws of social
evolution, as a whole, although only in the earlier stages is
their operation easily traced. Slavery would exist in England
at this day but for the co-operation of moral and political,
with what are specially termed economical, causes. The suc-
cessive evolution of the hunting, pastoral, agricultural and
commercial states is intimately connected with ' the movement
from status to contract,' to employ Sir Henry Maine's appro-
priate formula ; one which affords striking evidence of the
indissoluble nature of the connexion between the moral, intel-
lectual, legal, political and economical phases of social progress.
Sir H. Maine has considered it chiefly in its legal aspects, but it
is easily shown to involve the other aspects referred to. To
that primitive state in which there are no individual rights, in
which the legal position of every one — law then appearing in
the embryo form of usage — is determined by blood, birth, and
sex, there is a corresponding polity, that is to say, a rude tribal
organization, not without analogy to that of a herd of wild
animals ; and there is a correlative economic structure, limiting
individual possession to certain articles of personal use, recog-
nising no property in land, making sex and age the sole basis
of division of labour, and leading to no exchanges between
individuals. The moral condition is of a corresponding type.
Communism in women is one of its original features ; another
is an entire absence of the feeling of individual responsibility.
Tribes and groups of kinsfolk collectively are responsible for

The intellectual state is strictly analogous. There is no
mental individuality, no originality, or invention ; all think as
well as act and live alike. The savage is a savage in his intel-

On the Philosophical Method of Political Economy. 177

lectual development and ideas, as in his morals, his institutions,
and his economy. The movement from status to contract, on
the other hand, evolves not only individual property from
communal ownership, and rights hased on individual agreement
fi-om the transactions of whole communities of families, but also
individual responsibility and individuality of thought and
invention. It is likewise inseparably connected with a political
development, with the gradual growth of a central government,
and the substitution of the control of the State for that of the
family or kindred. Every institution relating to property,
occupation and trade, evolved by this movement, is an economic
as much as a legal phenomenon. Changes in the law of
succession, the growth of the testamentary power, the alien-
ability of land, its liability for debt, are economical, as well as
juridical facts; they involve changes in the economical structure
of society, and in the amount and distribution of wealth. And
every successive intellectual discovery, every new employment
of the mental energy, has its part in determining the economical
condition of the nation. A priori political economy has sought
to deduce the laws which govern the directions of human
energies, the division of employments, the modes of production,
and the nature, amount, and distribution of wealth, from an
assumption respecting the course of conduct prompted by
individual interest ; but the conclusion which the study of
society makes every day more irresistible is, that the germ
from which the existing economy of every nation has been
evolved is not the individual, still less the mere personification
of an abstraction, but the primitive community — a community
one in blood, property, thought, moral responsibility, and
manner of life ; and that individual interest itself, and the
desires, aims, and pursuits of every man and woman in the
nation have been moulded by, and received their direction and
form from, the history of that community.

Both the desires of which wealth of different kinds is the
object, and those which compete with them, are in every nation
the results of its historical career and state of civilization.

178 On the PJiUosophical Method of Political Economy.

What are called economical forces are not only connected, but
identical, with forces which are also moral and intellectual.
The desires which govern the production, accumulation, distri-
bution, and consumption of wealth are passions, appetites,
affections, moral and religious sentiments, family feelings,
sesthetical tastes, and intellectual wants. The changes which
Roman wealth underwent after the conquest of Asia Minor
represent moral changes ; the new desires of wealth which
became dominant were gluttony, sensuality, cruelty, and
ostentation. These moral changes, again, were inseparably
connected with the political history of Rome, and they had
intellectual aspects which the author of the ' Dialogus de
Oratoribus ' has vividly portrayed. Allusion was made in an
earlier page to the passion for jewels which distinguishes tlie
men of the East from the men of the West, and this form of
the desire of wealth has sprung mainly from the absence for
many ages of the conditions essential to general prosperity,
economic progress, and the accumulation of wealth in really
useful forms. Where insecurity has long prevailed, not only
are those aims and distinctions which take the place, with the
growth of civilization, of personal display, prevented from
emerging, but a desire is generated for the kinds of wealth
which contain great value in a durable and portable form, and
are easily hidden, easily removed in flight, and nothing the
worse for being buried for months or years. The wealth of
England at this day, it should be observed, although dissimilar
in some essential respects to that of Asia, ancient Rome, and
mediaeval Europe, displays also features of resemblance, alike to
oriental, to classical, and to mediseval wealth — for example, in
architecture, both ecclesiastical and civil, in the structure of
landed property and the associations surrounding it, and in the
surviving passion in women for jewellery — which are, in fact,
historical features. Our wealth is historical wealth, has been
made what it is by historical causes, and preserves visible traces
of its history. How long a history lies [behind the feelings
with which land is regarded, and its price in the market, as well

0)1 the Flidosopldcal Method of Political Economy. 179

■asbeliiud its existiug distributiou I Oar whole uational economy
is a historical structure, and in no other manner to be explained
or accounted for.

Hecent apologists for the a priori and abstract method of
economic reasoning feel themselves constrained to confine its
application to the most advanced stage of commercial society ;
they seem even prepared to concede its inapplicability to every
country save England, and to confine it to the latest development
of English economy. The position which they take up seems
to be, that the social evolution, already referred to as a move-
ment from status to contract, issues in an economy to whicli the
assumptions and deductions of abstract theory respecting the
tendencies of individual interest fit. In modern England, they
say, there is such a commercial pursuit of gain, and such a
consequent choice of occupations, as to effect a distribution of
the produce of industry to which the doctrines of Eicardo
respecting wages, profits, prices, and rents may be fairly applied.
They thus abandon at once the claim formerly made on behalf of
political economy to the character of a universal science founded
on invariable laws of nature. * Political Economy,' said Mr. Lowe
only six years ago, ' belongs to no nation ; it is of no country :
it is founded on the attributes of the human mind, and no
power can change it.' It is now restricted by Mr. Bagehot to
^ a single kind of society — a society of grown-up competitive
commerce, such as we have in England.'* The economic
society which we behold in England, and which is the result of
the social evolution referred to, is, however, one which displays
on every side the influence of tradition, custom, law, political
institutions, religion and moral sentiment ; it is one in which the
State, the Family, and even the Church, are powerful elements
directly and indirectly, and in which the pursuits of individuals,
the nature and value of different kinds of wealth, the structure
of trades and professions, are incapable of explanation apart
from history. It is one in which, as Mr. Bagehot himself has
remarked, 'there are city families, and university and legal

* Economic Studies, p. 17
K 2

180 On the Fhilomiiliical Method of Political Economy.

families — families where a special kind of taste and knowledge
are passed on in each generation by tradition ' ; and in which
the system even of banking and the money market is the product
of a peculiar history. Not even looking exclusively to the
purely commercial side of the English economical structure ; not
even as a mere analysis of ' business ' or * commerce/ in the
narrowest sense, is the abstract theory which used to claim rank
as a Science of Wealth able to hold its ground. It is, in fact,
as inapplicable to the most advanced stage of commerce as to that
primitive state of nature from which Ricardo deduced it by a
process which deserves a high place in the history of fallacies,
and which was not present to Mr. Mill's mind when arguing
that ' no political economists pretend that the laws of wages,
profits, values, prices, and the like, set down in their treatises
would be strictly true, or many of them true at all, in the
savage state.'* The principal foundation of Eicardo's theory
of value, prices, wages, and profits, is the assumption that
* in the early stage of society the exchangeable value of
commodities depends almost exclusively on the comparative
quantity of labour expended on each. Among a nation of
hunters, for example, it is natural that what is usually the
produce of two days', or two hours', labour should be worth
double of what is usually the produce of one day's or one hour's,
labour.'t The minor premiss in his syllogism is the assumption
that it is ' natural ' that in a tribe of savages things should
exchange in proportion to the labour required to produce them ;
the major premiss is, that what is natural in the earliest must
be natural in the most advanced state of society. The minor
involves a petitio principii, and one entirely at variance with
fact, for savages work only by fits, and have no measures of
labour and sacrifice. The produce of the chase is determined
largely by chance. Such exchanges as take place are of the

* Auguste Comte and Positivism. By J. S. Mill, p. 81.

t ' That this is really the foundation of the exchangeable value of all things^
he continues, ' excepting those which cannot be increased by human industry, is
a doctrine of the utmost importance in Political Economy.' — liicardo's ff'orks,,
Ed. M'Cullocb, p. 10.

On the Fldlosopliical Metliod of Political Economy. 181

•special products of different localities, and between groups or
communities, not individuals. If any exchanges took place
between individuals within the community, they would obviously
1)8 governed, not by cost of production, but like the exchange
between Esau and Jacob, by the urgency of the respective needs
of the parties. The major premiss, on the other hand, involves
the fallacy of undistributed middle, the two states of society
being entirely dissimilar. Thrown into a form less unfavourable
to Ricardo's conclusion than the one he has himself given to it,
his argument is, that in a small and stationary community — in
which employments are few and simple, and every man knows
all his neighbours' affairs, how much they make, how they
make it, and can transfer himself to any more gainful employ-
ment than his own — the values of commodities and the earnings
•of individuals depend on labour and sacrifice ; and therefore, in
a great commercial nation in which there is an infinite sub-
division of labour, an immense and ever-increasing variety of
occupations, incessant change in the modes of production and
in the channels of trade, constant fluctuations in speculation,
credit and values, and in which each man has enough to do to
mind his own business — wages, profits, and prices, and the
■distribution of the gains of production, are determined by the
same principle, namely, the labour and sacrifice undergone by
producers. It is the conclusion thus arrived at by Ricardo
which Mr. Bagehot sets forth as the first fundamental as-
sumption of abstract political economy, applied to advanced
commercial society, though with an exception with respect to one
sex which illustrates its essential weakness. ' The assumption,'
lie says, ' which I shall take is that which is perhaps oftener
made in our economical reasonings than any other, namely, that
labour (masculine labour, I mean) and capital circulate within
the limits of a nation from employment to employment, leaving
that in which the remuneration is smaller, and going to that
in which it is greater. No assumption can be better founded, as
respects such a country as England, in such an economical state
as our present one.' It is an assumption equally ill-founded
with respect to both the extremes of economical progress, the

] 82 On the PMlosopMcal Metliod of Political Economy.

earliest and the most advanced; — to the former, because there
is no regular labour, no calculation of gain, and no exchange
between individuals ; to the second, because each of a vast
multiplicity of occupations needs unremitting attention, and
exchanges are infinitely numerous, and subject to perpetual
variations in the conditions affecting them. Ricardo ignored
both the homogeneousness of primitive, and the heterogeneous-
ness of advanced, society ; Mr. Bagehot ignores the infinite
heterogeneousness of the latter. The assumption really made-
its only approach to truth in the intermediate economical stage
to which Adam Smith expressly limited it, when he restricted
it to well-known and long-established employments, in the
same neighbourhood, undisturbed by speculation or other
causes of fluctuation, and between which there is perfect
facility of migration* — in other words, to a small and stationary
world of trade. Consider the complexity of the causes which,
in the modern commercial world, affect the price of a single
commodity, and judge of the possibility of estimating the
relative profit to be made by the manufacture and sale of every
article. The following passage, written by one of the most
eminent living philosophers, with no reference to political
economy, will enable the reader to form some conception of the
demand which the abstract economic assumption makes on his
faith : — ' The extreme complexity of social actions, and the
transcendent difficulty which hence arises, of counting on special
results, will be still better seen if we enumerate the factors
which determine one single phenomenon, the price of a
commodity — say cotton. A manufacturer of calicoes has to
decide whether he will increase his stock of raw material, at its
current price. Before doing this, he must ascertain, as well as
he can, the following data : — Whether the stocks of calicoes in

* In order that this equality may take place in the whole of the advantages and
disadvantages of the different employments of labour and stock, three things
are requisite, even where there is the most perfect freedom. First, the employ-
ments must be well known and long established in the neighbourhood ; secondly,
they must be in their ordinary or natural state ; and thirdly, they must be the
sole or principal employments of those who occupy them. — Wealth of jSliiionsy
J3ook i., c. 10.

On the Philosojphical Method of Political Economij. 183

the hands of manufacturers and wholesalers at home are large
or small ; whether by recent prices retailers have been led to
lay in stocks or not ; whether the colonial and foreign markets
are glutted or otherwise ; and what is now, and is likely to be,
the production of calico by foreign manufacturers. Having
formed some idea of the probable demand for calico, he has to
ask what other manufacturers have done and are doing as
buyers of cotton — whether they have been waiting for the price
to fall, or have been buying in anticipation of a rise. From
cotton-brokers' circulars he has to judge what is the state of
speculation at Liverpool — whether the stocks there are large or
small, and whether many or few cargoes are on their way. The
stocks and prices at New Orleans and other cotton ports have
also to be taken note of ; and then there come questions respect-
ing forthcoming crops in the States, in India, in Egypt, and
elsewhere. Here are sufficiently numerous factors ; but these are
by no means all. The consumption of calico, and therefore the
consumption of cotton, and the price, depend in part on the sup-
plies and prices of other textile products. . . . Surely the factors
are now all enumerated ? By no means. There is the estimate
of mercantile opinion. The views of buyers and sellers respect-
ing future prices, never more than approximations to the truth,
often diverge from it widely. . . . Nor has he got to the end
of the matter when he has considered all these things. He has
still to ask, what are the general mercantile conditions of the
country, and what the immediate future of the money market
will be, since the course of speculation in every commodity
must be affected by the rate of discount. See, then, the
enormous complication of causes which determine so simple a
thing as the rise or fall of a farthing per pound in cotton some
months hence.'* To admit the assumption on which the
abstract doctrine of the equality of profits rests — and on which,
again, the doctrine of indirect taxation is based — one must be
prepared to admit that men in business are able to make, and
do make, similar calculations respecting every other commodity,

* The Study of Sociology. By Herbert Spencer, pp. 18-19.

184 On the PJiilosophical Method of Political Economy.

and tlius are enabled to estimate the relative profits of different

The only verification adduced in support of the assumption
is, that capital and labour desert employments known to be
comparatively unremunerative for those which are known to
yield better returns. Even this proposition is far from being
universally true, and, if it proved the conclusion, would prove
that the migration of labour from Europe to America must long
ago have equalized European and American wages. Mr. Mill,
in stating the doctrine, has granted that individual profits
depend, among other things, ' on the accidents of personal
connexion, and even on chance,' adding, ' that equal capitals
give equal profits, as a general maxim of trade, would be as
false as that equal age or size gives equal bodily strength, or
that equal reading or experience gives equal knowledge.' He
supposed, however, that bankers and other dealers in money, by
lending it to the more profitable trades, put the various employ-
ments of capital * on such a footing as to hold out, not equal
profits, but equal expectations of profit.' In like manner, Mr.
Bagehot argues that ' the capital of the country is by the
lending capitalists transmitted where it is most wanted.' If
individual profits vary to the extent which Mr. Mill admitted,
since there are no means of knowing what individual profits
really are, it is hard to imagine how bankers and bill brokers
can gauge the existing profits of different trades, and still
harder to imagine how they can foreknow them. How much
they really know of the matter has been recently exemplified by
the transactions of banks and bill brokers in the cases of Messrs.
Overend and Gurney, and Messrs. Collie and Co.* Mr. Bagehot
himself, writing on the money market and joint-stock banks,
has observed : ' The old private banks in former times used to
lend much to private individuals ; the banker formed his judg-

* On the failure of these firms a commercial writer observes : ' The nation
entrusted most of its floating capital to the bill-brokers, and the public found that
they had no check on their indiscretion. . . . Bankers took the bills as security
because bill-brokers did, and hardly stopped to test the bills or to study their
nature.' — The Rationale of Market Fluctuations, pp. 52-3.

0)1 the Philosojjhical Method of Fotittcal Economy. 185

Tnent of the discretion, the sense, and the solvency of those to
"whom he lent. And when London was by comparison a small
city, and when by comparison everyone stuck to his proper
business, this practice might have been safe. But now that
London is enormous, and that no one can watch anyone, such
a trade would be disastrous; it would hardly be safe in a coun-
try town.'*

If there is one lesson which the history of trade and the
money market in the last ten years ought to have brought home
to us more clearly than another, it is that both the lending and
the borrowing capitalists, both bankers and traders, are singularly
ill-informed and short-sighted with respect even to the con-
dition and prospects of their own business. The Deputy
Governor of the Bank of England told a meeting of Turkish
bondholders, a few months ago, that he had gone into these
bonds largely himself, and had advised others to do so. A man
of business, of considerable experience, had asked my own opinion,
as an economist, of that very security, and afterwards complained
that I had dissuaded him from a good investment.

Such is the stability of the main proposition of abstract
political economy. The nature of the superstructure built on
it may be judged from the doctrine that all special taxes on
production fall, not on the producer, but on consumers, the
former receiving the tax with ' average ' profit on its advance ;
although, in fact, the producer may make no profit, may never
sell the articles taxed, may even bo driven from the trade and
ruined by the impost, as the last load which breaks the back of
the camel, for taxation has notoriously contributed to drive
the smaller capitalists from several branches of business — for
example, distilling and brewing. I must leave it to physicists,
geologists, and naturalists, to judge of the analogy for which Mr.
Bagehot contends, of reasoning of this kind to the processes by
which their sciences have been built up ; nor may I attempt to
pass judgment on the sufficiency of the method which Mr.
JDarwin, in particular, has followed. But when it is urged that

* Lombard-street. By "Walter Bagehot. 6th ed., p. 251.

186 On the Philosophical Method of Political Economy.

the abstract economist, like Mr. Darwin, reasons deductively
from ' one vera causa,'* the rejoinder is obvious that the ' desire
of wealth,' which in abstract political economy occupies the place
of gravitation in astronomy, and of natural selection in Mr.
Darwin's theory, so far from being a vera causa, is an abstraction,
confounding a great variety of different and heterogeneous
motives, which have been mistaken for a single homogeneous
force ; and that Mr. Darwin's hypothesis was based on many
previous inductions, and followed by minute and elaborate
verification, for which the sole substitute in political economy
has been an ignoratio elenchi. Mr. Cairnes, indeed, emphasizes
in italics the proposition that * the economist starts with a
knowledge of ultimate causes ; f adding : ' He is already, at the
outset of his enterprise, in the position which the physicist only

Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 17 of 41)