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64 Mr. Bagehot.

since Mr. Lowe afBrmed that ' political economy belongs to no
nation, is of no country, and no power can change it.' Mr.
Bao-ehot, on the contrary, emphatically limited the application
of the postulates of the a priori and deductive method to England
at its present commercial stage. And within this limit he further
circumscribed and qualified what he termed ' the fundamental
principle of English political economy,' by assuming only * that
there is a tendency, a tendency limited and contracted, but still
a tendency, to an equality of profits through commerce.' Thus
circumscribed, the principle can no longer serve as a foundation
for the superstructure erected upon it, which is built on tha
assumption that the tendency is so effectual, and so arithmetically
true and exact in its operation, that every shilling of cost to
which every producer is put by any special tax or burden is
nicely recovered, with neither more nor less than ordinary profit
in the market. Besides the essays referred to, and the numerous
articles which he wrote in the ' Economist,' Mr. Bagehot contri-
buted to economic literature an excellent work on banking and
the money-market, under the title of ' Lombard Street.' He was
the author, also, of a work entitled 'Physics and Politics,' which
embodies a series of ingenious, though rather fragmentary, essays
on the natural history of political society.

The work which displays in the highest degree both the
original powers and some of the peculiar characteristics of Mr.
Bagehot's mind is his ' English Constitution,' which is unques-
tionably entitled to a place among English political classics. It
is not without a tinge of cynicism, but it undoubtedly brings
to light principles overlooked in all previous works on the Con-
stitution, and which must be admitted by the disciples of Mr.
Mill as qualifying to some extent the doctrines of that great
writer's 'Representative Grovernment.' One of the curious prac-
tical contradictions which, as Mr. Bagehot has pointed out, th&
political history of England gives to political theory is, that
the £10 householders, who, under the Eeform Act of 1832,
formed the bulk of the constituency, were, above all classes, the
one most hardly treated in the imposition of taxes ; so little did
representation secure especial care for their interests.



Mr. Bagehot 65

Although of the Liberal party, Mr. Bagehot was, by disposition
and cast of thought, what, for want of a more appropriate word,
we must call an aristocrat in political opinion and feeling — a
Whig, not a Radical. In his ' English Constitution' he speaks of
the order of nobility as useful, not only for what it creates, but
for what it prevents, and in particular as preventing the absolute
rule of gold, 'the natural idol of the Anglo-Saxon,' who is
' always trying to make money,' and who ' bows down before a
great heap, and sneers as he passes a little heap.' If Mr.
Bagehot did not himself bow down before the great heap, he
was a little disposed to sneer at the little heap. Thus in ' Lom-
bard Street,' speaking of the democratic structure of English
commerce as preventing a long duration of families of great
merchant princes, he says ' they are pushed out, so to say, by
tlie dirty crowd of little men.' And in the discussions which
arose out of the agitation for a reform of the Irish law of land-
lord and tenant, he could not conceal his scorn for little farms
and little properties in land, such as form the main foundation
of the prosperity of France.

Mr. Bagehot unsuccessfully sought at one time a seat in
Parliament, but with all his political sagacity, knowledge, and
talent, he was scarcely qualified to make a considerable figure
in the House of Commons ; for, although he might have made
an administrator of a high order in a public office, he remarkably
exemplified the essential difference between the qualifications
of a writer and those of a speaker. The position that actually
fell to him in life was the one he was best fitted for, and it was
one really more honourable and more useful than that of many
eminent members of Parliament.



VIII.

JEVONS' ' THEOEY OF POLITICAL ECONOMY.'*

The higli reputation of the author, and the unsettled state of
opinion with respect to both the limits and the method of poli-
tical economy, make it the duty of every economist to master the
doctrines of this work ; and that can be done only by careful
study of the book itself. A reviewer limited to a few dozen
sentences can at best only assist a reader to form a judgment on
some of its main topics. The princij)al questions it raises are,
whether political economy should be confined within the limits
that Mr. Jevons assigns to it, and whether the method which he
applies to the solution of the problems within those limits is
legitimate and adequate. On both questions our own opinion
differs from that of Mr. Jevons ; but, with respect to the first,
the difference, though important, is one mainly of classification
and naming. For Mr. Jevons fully concurs in the necessity of
historical induction to ascertain the economic phenomena of
society and their laws, but would set it apart as a branch of the
general science of society under the name of ' economic sociology,'
confining the term ' political economy' — or, as he prefers to call
it, ' economics' — to a theory deduced from known facts, axioms,
or assumptions, respecting the conduct dictated by personal
interest, such as, ' that every person will choose the greater
apparent good, that human wants are more or less quickly satis-
fied, and that prolonged labour becomes more and more painful.'
The theory of population, accordingly, though pronounced by
Mr. Jevons ' as scientific in form as consonant with facts,'
forms, in his view, ' no part of the direct problem of economics,'



The Academy, July 26, 1879.



Jevons' ' Theory of Political Economy.^ 67

and is not discussed in his present work. The majority of the
most eminent economists of all schools — including Mr. Senior,
who attempted to make political economy purely deductive, and
whom Mr. Jevons estimates highly — are, it need hardly be said,
against so narrow a limitation of the province of the science,
and Mr. Jevons gives only the following reason for it : — ' The
problem of economics may be stated thus : given a certain popu-
lation, with various needs and powers of production, in possession
of certain lands and other sources of material ; required the
mode of employing their labour which will maximise the utility
of the produce.' He adds, that * it is an inversion of the prob-
lem to treat labour as a varying quantity, when we originally
start with labour as the first element of production, and aim at
its most economical employment.' The answer seems to be
that land, like labour, is a primary element of production, and
the area in cultivation and the productiveness of that area are
both varying quantities. Were labour, moreover, not a varying
quantity — as it is, because population is so — inferior soils and
costlier methods of cultivation would not have been resorted to,
and rent, to which Mr. Jevons gives a high place in economics,
would not have arisen. But if, for these reasons, the laws of
population come properly within the pale, political economy is
clearly not limited to an assemblage of deductions or calculations
from self-interest. Nor can any other natural laws, directly
and deeply affecting the amount and distribution of wealth, be
in consistency excluded. Admit the theory of population, and
all that Mr. Jevons classes apart, under the name of economic
sociology, has a logical title to a place within the domain of
political economy.

Since Mr. Jevons, however, is an advocate, not an opponent,
of the most extensive historical and inductive investigation, it is,
as we have said, maiuly a question of naming and classification,
whether the term ' political economy' or ' economics' should
be confined to a narrower field. But the question follows —
Within that narrower field can we proceed, as Mr. Jevons
contends, not only by simple deduction, but by mathematical
process ? ' There can be,' he says, ' but two classes of sciences —

F 2



68 Jevons' ' Theory of Political Economy.''

those whicli are simply logical, and those which, besides being-
logical, are also mathematical. If there be any science which
determines merely whether a thing be or not, whether an event
will or will not happen, it must be a purely logical science ; but
if the thing may be greater or less, or the event may happen
sooner or later, nearer or farther, quantitative notions enter, and
the science must be mathematical in nature, by whatever name
we call it.' Nevertheless, it can hardly be contended that Adam
Smith's reasoning respecting the nature and causes of the wealth
of nations is in its essence, and ought to be in actual form,
mathematical ; or that the process by which his main propositions
are established is anything more than logical. We might add
that they rest in good part on inductive, and not simply on
deductive, logic ; but the question before us is whether mathe-
matical methods could properly be applied to their demonstration.
That wealth consists, not of money only, but of all the necessaries
and conveniences of life supplied by labour, land, and capital ;
that man's natural wants are the strongest incentives to industry ;
that the best assistance a government can give to the augmenta-
tion of national opulence is the maintenance of perfect liberty
and security ; that the division of labour is the great natural
organization for the multiplication of the products of industry ;
that it is limited by the extent of the market ; and that the
number of persons employed in production depends in a great
measure upon the amount of capital and the modes of its
employment — these are' the chief propositions worked out in the
' Wealth of Nations,' and it can hardly be said that mathe-
matical symbols or methods could fitly be used in tlieir proof.
We need not controvert Mr. Jevons' proposition that * pleasure,
pain, labour, utility, value, wealth, money, capital, are all notions
admitting of quantity ; nay, the whole of our actions in industry
and trade depend upon comparing quantities of advantage or
disadvantage.* But the very reference which Mr. Jevons
proceeds to make to morals militates against the assumption
that ' political economy must be mathematical, simply because it
deals with quantities,' and that ' wherever the things treated
are capable of being greater or less, there the laws and relations



Jevons' ^ Theory of Political Economy^ 69

must be mathematical.' The author instances Bentham's utili-
tarian theory, according to which we are to sum up the pleasures
on one side and the pains on the other, in order to determine
whether an action is good or bad. Comparing the good and
evil, the pleasiu'es and pains, consequent on two courses of con-
duct, we may form a rational judgment that the advantages of
one of them preponderate, that its benefits are greater, its
injurious results, if any, less ; but it by no means follows that
we can measure mathematically the greater or less, or that the
application of the differential calculus would be appropriate or
possible in the matter. We do not go the length of saying that
there are no economic questions to which mathematical calculation
could be fairly applied. The precious metals, for instance, move
so easily between adjacent countries, that the variations of the
foreign exchanges might perhaps be mathematically treated.
But the immense inequalities in wages and profits, and the
extraordinary fluctuations of prices under the uncertain influence
of credit and speculation, are enough to baflle any attempt to
apply the calculus to questions of value in general.

Were the application of mathematical processes and symbols
to all economic reasoning, however, possible, it does not follow
that it would be expedient. Bastiat's conception of the main
problem of political economy was not very different from that of
Mr. Jevons, who says, that ' to satisfy our wants to the utmost,
with the least effort — to procure the greatest amount of what is
desirable at the expense of the least that is undesirable — is the
problem of economics.' Suppose that Bastiat could have put
his ' Sophismes Economiques' into a mathematical form, with
symbols for words, and equations for syllogisms and epigrams,
would not political economy and the world have suffered a heavy
loss by his doing so ? The ' Times' might be printed in short-
hand, and much ink and paper thereby saved, but would it
conduce to the enlightenment of the public to make that
economy ? We regret that so much of Mr. Jevons' own
reasoning is put into a mathematical form, because it is one
unintelligible or unattractive to many students of considerable
intellectual power and attainments. On the other hand, we not



70 Jevons' ' Theory of Political Economy.''

only concede that a mathematical shape might have been given
to a great part of Ricardo's system, but we regret that it ever
received any other, because his theory of value, wages, profits,
and taxation is misleading and mischievous. Assume that the
products of equal quantities of labour and abstinence are neces-
sarily of equal value and price, and that exertions and sacrifices
of different kinds are commensurable, and a number of mathe-
matical equations and calculations can be based on those
assumptions. But since the basis is false, the more the
superstructure is hidden the better ; and we should be glad to
see it obscured, in every treatise in which it is put forward, by
a liberal use of the calculus. Taking utility in the sense in
which Mr. Jevons uses the word, we should acquiesce in his
' general law that the degree of utility varies with the quantity
of commodity, and ultimately decreases as that quantity in-
creases.' Yet, in one case only are the variations of utility and
value, consequent on variations in the quantity of commodity,
susceptible of mathematical measurement and calculation. The
purchasing power or value of currency is inversely as its quantity,
because there is an unlimited demand for it ; but the variations
in the value of other commodities bear no regular ratio to their
quantity. Davenant's estimate, to which Mr. Jevons refers,
that a defect of one-tenth in the harvest raises the price of corn
three-tenths, and that a defect of one- half more than quadruples
its price, is useful as an illustration, and made a rough, though
only a rough, approximation to truth, so long as little corn came
from abroad. Now the supjDly comes from the harvests of the
world, and a defect of one-tenth in our own harvest might be
followed by a fall instead of a rise in the price of grain. Could
we even get accurate statistics of the harvests of the world, it
would be found that its price is affected by so many other
conditions that it bears no constant mathematical ratio to the
amount of supply.

On the other hand, the stress which Mr. Jevons lays on the
relation between value and quantity of supply seems to us to
afford an answer to an objection which Mr. Cairnes has made
to the proposition for which Mr. Jevons contends, that ' value



Jevons* ^ Theory of Political Economy. ^ 71

depends on utility.' When Mr. Cairnes asks whether commo-
dities are exchanged for each other simply in proportion as they
are useful, we should reply in the affirmative, if by usefulness is
meant, what Mr. Jevons and most other economists mean by
it, the power of satisfying any human desire. If, in a siege or
a famine, a loaf is refused in exchange for a large diamond, it is
because the loaf is more desired or more useful ; if, in ordinary
times, a large diamond would not be given for a thousand loaves,
the reason is that the diamond is preferred, or has greater utility
in the economist's sense. It may, indeed, be urged that the com-
parative usefulness of diamonds and loaves, in the two cases,
gives only the proximate cause of their relative value in exchange,
and that the ulterior cause is comparative limitation of supply.
A loaf contains as much nourishment in a time of jplenty as in
a famine ; but in the former case no particular loaf is much
wanted, or has any particular utility, while in a famine every
loaf has a utility proportionate to the amount of food it contains.
Mr. Jevons' proposition is in substantial accordance with the
generally accepted doctrine that value depends mainly on limita-
tion of supply. It depends, however, also, on other conditions,
which defy all mathematical powers of calculation. Given the
supply of a commodity, the urgency of the desire for it, and the
amount of the funds in the hands of the persons desirous to
purchase it, its price is still indeterminate. It will vary, accord-
ing as buyers and sellers combine or compete, according to the
activity of credit and speculation, and according to other con-
ditions which are subject to no ascertainable laws.

A proposition laid down by Mr. Jevons, in which we fully
concur, is, ' that economics must be founded on a full and ac-
curate investigation of the conditions of utility, and to under-
stand this element we must examine the wants and desires of
man.' An urgent desideratum in political economy is certainly
the substitution of a true theory of what Mr. Jevons terms
' the laws of human wants ' for vague abstractions, such as the
love of wealth and the aversion to labour. But wide historical
investigation must precede the construction of the true theory.
The authors to whom Mr. Jevons refers have made some instruc-



72 Jevons' * Theory of Political Economy.''

tive suggestions respecting the subordination and successions of
human wants ; but they seem not to have perceived that these
wants vary under different surrounding conditions and in dif-
ferent states of society. The order which the evolution of human
wants follows is one of the inquiries that await a rising historical
and inductive school of economists, which happily has no oppo-
sition to encounter from Mr. Jevons. But with respect to the
deductive method, Mr. Jevons does not quite fairly represent
the view of that school when he says, ' I disagree altogether
with my friend, Mr. Leslie ; he is in favour of simple deletion ;
I am for thorough reform and reconstruction.' We are, it is
true, for deletion of the deductive method of Eicardo : that is
to say, of deduction from unverified assumptions respecting
* natural values, natural wages, and natural profits.' But we
are not against deduction in the sense of inference from true
generalizations and principles, though we regard the urgent
work of the present as induction, and view long trains of deduc-
tion with suspicion.

We have been able to touch only a few of the problems
discussed in Mr. Jevons' treatise. It is one which requires a
considerable intellectual effort on the part of the reader, but the
effort will bring its reward, even where it may not end in entire
assent to the views of the eminent author.



IX.

MARSHALL'S ' ECONOMICS OF INDUSTRY.'*

An eminent scholar lately said to the writer that he preferred
the old kind of review, which simply told what a book contained.
The preference is intelligible on the part of a man who likes to
know the gist of every new book, and to judge for himself of
its soundness. The system would save readers both money and
time. For threepence they might get the pith of a number of
new works in a weekly review. Yet there are objections to
this definition of the province of the reviewer. The editor of a
famous journal, who knew his public well, used to tell a new
writer, when sending him a book, that he wanted an original
article on the subject, not a mere review. Competent critics,
indeed, would not be content to write summaries — a business
which could be done by mere drudges. Nor is it quite fair to
an author to sell a little compendium of his work. Even a
reader may sometimes object. The novel-reader, as well as the
novelist, has no such enemy as the reviewer who tells the whole
story in a few words. We shall, therefore, not attempt to
summarise the contents of Mr. and Mrs. Marshall's work. Mr.
Marshall has been known for several years, though less widely
than if his pen had been more active, as one of the most accom-
plished and learned economists in England ; and Mrs. Marshall
bore a high reputation as lecturer at Newnham Hall, Cambridge.
The theory of the economics of industry, set forth by two such
authors, is not to be compressed into a few columns, to say
nothing of the right and duty of criticism.

The book before us makes greater changes in economic

* The Academy, November 8, 1879.



74 MarshaWs ^Economics of Industry.^

metliod and doctrine, compared with previous text-books, than
might be perceived at first sight ; for they are made without
sound of trumpet, and for the most part without controversy.
Sometimes, indeed, they seem to us made without sufficient
warning to call the student's attention. Still, the authors have,
in their statement of general principles, adhered to the main
lines of the economic system hitherto generally followed in
England. Like a lecturer, the writer of a text-book ought to
put the reader in possession of the system hitherto in vogue,
and may find it necessary to begm with propositions which h&
afterwards subjects to such qualifications, exceptions, and
limitations, that they turn out to be mere introductory obser-
vations and provisional assumptions ; though, unfortunately, it
is the custom, in political economy, to dignify preliminary
generalities of this sort with the title of laws.

One characteristic merit of Mr. and Mrs. Marshall's work is-
that they do not make use of provisional doctrines or generaliza-
tions, of the class just referred to, as premisses from which
trains of deduction can be made, but as starting-points for the
investigation of actual phenomena, and the ascertainment of
the presence and operation of their actual causes and conditions.
Thus, the ' theory of normal value,' — a term, indeed, the
appropriateness of which we shall have to question — which
assumes the equalization of wages and of profits, and the
conformity of prices with the expenses of production, is only
used by the authors ' as the starting-point from which we must
set out to explore all the various irregularities and unevennesses
of market values.' A provisional assumption that competition
tends to equalize the earnings of labour in the same trade in
different localities may, for example, lead to the discovery of
the causes of their actual inequalities. Suppose agricultural
wages more than fifty per cent, lower in Dorsetshire than in
Yorkshire, the inference from the assumption would be that
there are obstacles to the migration of labourers, and the causes
determining the actual marl et rates in the two counties might
be thence ascertained. The discussion of local variations of
value, of market fluctuations, and of the influence of trade



MarslialVs ^Economics of Industry^ 75

-unions on wages, in Mr. and Mrs. Marshall's book, is admirable,
and, among other results, ought finally to dispose of the doctrine
of the wages fund. ' The whole net annual income of the
country,' say the authors, ' consists of all those commodities
and conveniences of life which are produced during the year,
after replacing the auxiliary capital that is consumed or worn
out during the year. This net annual income is divided into
— firstly, earnings of all kind of work, including business
management ; secondly, interest on capital ; thirdly, rent
obtained for the use of land or any other property that is
artificially limited ; fourthly, taxes paid to the State.' The
first remark which this passage suggests is, that the authors
appear to include, like Mr. Senior and most German economists,
not only material commodities, but services and utilities which
bear a price in the market, in the wealth of a nation ; and
accordingly the definition of wealth in their first chapter ought
to be enlarged. Much thin sophistry has been expended by
some English economists on an attempt to exclude services and
the conveniences of life, when not, to use Adam Smith's phrase,
fixed in some material and vendible commodity, from the ca-
tegory of wealth, although useful, limited in supply, exchange-
able for commodities, and not to be had without purchase. The
consequence is, that a fundamental change is overlooked which
takes place in the real revenue and wealth of a nation as civili-



Online LibraryT. E. Cliffe (Thomas Edward Cliffe) LeslieEssays in political economy → online text (page 7 of 41)