Principles Of Political Economy
by William Roscher
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It would be falsified if it absorbed the individual; if it destroyed the most powerful motive-force by drying up the abundant source of activity; if it attacked moral energy by enervating responsibility; if it extended the circle of results obtained to such an extent that scarcely any one should feel the rebound.

The evil produced by egotism, that sad travesty of personal interest, appears under a form quite as formidable when the general interest takes the form of communism. The cooeperation of personal interest and of the general interest is always necessary, both for individual profit and social advantage. There is as much danger in annihilating the individual as in exalting him. History furnishes us with memorable examples of this. It does not allow us to go astray in the narrow ways of a peevish and jealous personality, nor to lose ourselves in the vague labyrinth of a chimerical and false communism. The latter would destroy what constitutes the power and dignity of man. It would wipe out the most prominent features of his noble nature, by destroying the support of energy and activity and the food of moral force.


But, we are told, Political Economy is only the science of selfishness; Adam Smith is the prophet of individualism; grow rich per fas et nefas is its ultimate teaching. Such a judgment is evidence of much levity and little enlightenment. How could the man who conceived the study of human interests on so large a scale, the philosopher who acknowledged Hutcheson as his master and gave his ideas a still more expansive character, be the apostle of egotism; and how can the science which he founded be its gospel? There is here an error of fact and a defect of appreciation. Hutcheson had based moral philosophy on the feeling which, according to him, engendered all the other virtues, on benevolence, which is disinterested, busied with the welfare of others, with the public weal and the general interest. Adam Smith went further, and sought to base it on a still more energetic feeling, on sympathy.

The first sentence of his Theory of the Moral Sentiments, which is a full resume of his theory, is as follows: "How selfish soever man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it." And this is no empty declaration on his part. It is the thought which of all in his book is nearest to his heart; and hence he energetically assails those philosophers who look upon self-love and the refinements of self-love as the universal cause of all our sentiments, and seek to explain sympathy by self-love.

La Rochefoucauld, Mandeville and Helvetius never met with a more determined or energetic adversary. Nowhere have the sweet and amiable virtues, such as ingenuous condescension, indulgent humanity, and the respectable and severe virtues, such as disinterestedness and self-control which subject our movements to the requirements of the dignity of our nature, been better understood or interpreted. Adam Smith is the philosopher of sympathy.(46) His theory triumphs over the cowardly and shameful egotism which concentrates the moral life of the individual in himself, and separates it from the life of the human race of the outre stoicism which refuses the aid of sentiment to reason.(47) According to him, the law of private morals is sympathy; the law of natural jurisprudence, justice; the law of the production of wealth, free labor. But while he defended this principle with energy, he did not become guilty of a real recantation by worshiping the idol he had just overthrown. He would have been culpable of the strangest of all contradictions if he had made the vice which he had just lacerated the very pivot of another part of his teaching.

We regret that this essay, which has already very much exceeded the limits we assigned it in the beginning, will not permit us to reproduce here Knies' beautiful demonstration, in which he so learnedly and eloquently vindicates Adam Smith from this strange imputation, thereby placing Political Economy on its true basis, the basis of morals, by removing in a decisive way, all pretext of error and all means of subterfuge. This part is one of the best features in his most excellent work on "Political Economy, from the historical Point of View." We shall return to this matter.


What is there that political economists have not been charged with? They have been accused, above all, of a cold heartedness and cruelty, and the sentence passed on them has been resumed in these words: "Political Economy has no bowels!" Indeed, the representative of the science, who has been most attacked and who has been held up as a picture of impassible insensibility; on whom have been heaped the most bloody outrages, is Malthus. Let us hear him. He tells us in his work on Political Economy, that if a country had no other means to grow rich, except by seeking for success in the struggle with other countries, at the cost of a reduction of the wages of labor, he would unhesitatingly say: Away with such riches; that it is much to be desired that the working classes should be well remunerated, and this for a reason much more important than all the considerations relating to wealth; that is, the happiness of the great mass of society. And he goes on to say, that he knows nothing more detestable than the idea of knowingly condemning the laboring classes to cover themselves with rags, to lodge in wretched huts, to enable us to sell a few more stuffs and calicoes to foreign countries. Certain it is, that no defender, however determined, of the laboring classes, has said anything stronger or more deeply felt. The reason is, that nothing was more foreign to Malthus' ideas than the systematic rigidity of mathematical theories of wealth; that, a minister of the Gospel, he had meditated on its high precepts. His whole doctrine is based on the moral idea. "He was profoundly convinced that there are principles in Political Economy which are true only in as far as they are restricted within certain limits. He saw the principal difficulty of the science in the frequent combination of complicated causes, in the action and reaction of causes on one another, and in the necessity of setting limits or making exceptions to a great number of important propositions." Here we are ever brought back to the undulating ground of living science, instead of having to follow the rectilineal way traced out by the dead letter. We are always driven back, whatever may be pretended to the contrary, to the realities of which history alone possesses the secret. The idea of wealth cannot absorb everything when there is question of judging and enlightening men. To do this, it is necessary to know the various phases of social housekeeping, what nations have thought of economic interests which have never ceased to interest them greatly, what they have attempted and what they have attained.

Hence, we must turn over the leaves of the book of the past, and study its economic aspect, as we have studied its political and literary aspect. We must follow living nations through their divers periods of development, and fathom the causes of the destruction of those that are dead. When we are dealing with the comparative study of the economic destinies of nations, our investigations are limited to a small number of individual nations—a further reason not to omit any, and above all, to scrutinize, as an anatomist would with his scalpel, the principle of life of those which are no more. We may, by accounting to ourselves for the immense variety of phenomena which are brought to light by the application of principles to facts, and in which nothing is absolute or permanent, in which, on the contrary, everything is relative and successive, acquire that sureness of touch and correctness of vision which are among the most valuable conquests of science.

It would be a mistake to suppose that theory simplifies practical solutions. Far from providing us with a sort of formulary, it teaches us to put our finger on a number of difficulties. It brings to the surface the many aspects and fertile and varied considerations, the examination of which is the mission of the real statesman and legislator. In this way, the action of thought and the power of the moral idea are revealed with most eclat. Man ceases to be an inert element, and manifests himself as a sensible being, and the sublime thought of Pascal: "Humanity is like one man who lives and learns always," is verified by the result. The wish to violently abdicate the past, it would be vain and rash to attempt to realize. The lessons it transmits to us are as instructive as the picture it unrolls before our eyes is attractive. We have no longer but to see and hear, to be cured of the most generous impatience with what is, and to retreat from the most perilous attempts.


The unvarying testimony of ages affirms the continued and gradual amelioration of man by individual energy and moral thought.(48) Want and suffering have urged him forward. Foresight, labor, sacrifice and virtue have in part redeemed him. No right has been lessened or usurped, and every step in civilization has been a step in the way of freedom. Instead of making the latter responsible for a material and moral wretchedness which it is called upon to cure, we may prove, that, in proportion as real liberty and legal guarantees increase, evil diminishes.

We do not desire to yield to a convenient optimism, and deny the sufferings which weigh only too heavily on the world. We are far from having reached the end assigned to our efforts; but let not the hope we entertain of further progress blind us to that which has already been accomplished. This latter shows us that we are on the right road, and that we have not done unwisely in giving free rein to the human faculties. Sudden changes are made only in theaters. In the real world, the march of progress is slow and laborious. It may be accelerated by a happy hit; but it would be vain to try to hurry it.

Man still suffers. No one desires to deny the evil, but only to estimate its extent. Yet it cannot be gainsaid that its fatal empire is narrowing instead of enlarging. Especially is it the progress accomplished in the higher regions of intellect and of the feelings which here exerts its beneficent influence. On our moral greatness depends our material power. The elevation or debasement of character, the energy or debility of the will—such is the first source of good or evil. The world, a Chalmers rightly says, is so constituted that we should be materially happy if we were morally good.

Industrial progress helps, we have said, towards moral perfection. It is not the source of that perfection, but its instrument; for ignorance and misery, its habitual attendants, are poor advisers. Political Economy shows how the goods of this world are multiplied. It shows how modest comfort may become more and more general, and thus an impetus be given to all noble virtues without awakening a blind passion for riches. It teaches moderation instead of exciting covetousness, nor does it come in conflict with the sublime words of Saint Augustine: "The family of men, living by faith, use the goods of the earth as strangers here, not to be captivated by them or turned away by them from the goal to which they tend, which is God, but to find in them a support which, far from aggravating, lightens the burthen of this perishable body which weighs down the soul."


Looked at from below, all things diverge. Looked at from above, all things run into one another and combine with one another. It is one of the great merits of the historical method, that it raises the point of observation and gives the observer the support of tradition and good sense, that master of life; that it prevents a divorce between different branches of knowledge of the same order, which constitute but one intellectual family, which there is no question of confounding, and which it would be dangerous to isolate.

Aristotle, that universal genius, had discovered Political Economy, and it was the historical method which revealed it to him. Be it added, that the great philosopher had seen but one phase of the science, chrematistics, and that his ideas here bear the impress of the age in which he lived. Aristotle, however, distinguished this science from all others and from domestic economy, which is so akin to it. Doubtless, he did not found the modern study of Political Economy, but his powerful intellect gave him a presentiment of it.

The honor of producing at once, Adam Smith, Quesnay and Turgot belongs to the eighteenth century. It was in the course of philosophy at Glasgow that this study found a definite place. The illustrious founder of the science of Political Economy did not contemplate dissolving the ancient alliance between it and the moral sciences, history, philosophy, jurisprudence, belles-lettres—all of which he had explored and studied profoundly. Let those whose ambition it is to walk, even at a distance, in the footsteps of Adam Smith, not forget what was the cradle of the noble study to which they have devoted their intellects.



Chapter I.

Fundamental Ideas.

Section I.


The starting point, as well as the object-point of our science is Man.(49)

Every man has numberless wants, physical and intellectual.(50)(51) Wants are either necessaries, decencies (Anstandsbeduerfnisse) or luxuries. The non-satisfaction of necessary wants causes disease or death; that of the wants of decency endangers one's social position.(52) The much greater number, and the longer continuance of his wants are among the most striking differences between man and the brute:(53) wants such as clothing, fuel,(54) tools, and those resulting from his much longer period of infancy; which last, together with other causes, has contributed so largely to make marriage necessary and universal. While the lower animals have no wants, but necessities, and while their aggregate-want, even in the longest series of generations, admits of no qualitative increase, the circle of man's wants is susceptible of indefinite extension.(55) And, indeed, every advance in culture made by man finds expression in an increase in the number and in the keenness of his rational wants. No man who distinguishes himself in anything, but feels spurred thereto by a peculiar want; and this want is both the cause and the effect of the power which is peculiar to him. No one but the poet feels the want of poetizing; no one but the philosopher, of philosophizing. In every particular, intellectual or physical, in which the man is in advance of the child, he experiences new wants unknown to the child. Our education consists, for the most part, in awakening wants and providing for their satisfaction.

Goods are anything which can be used, whether directly or indirectly, for the satisfaction of any true(56) or legitimate human want,(57) and whose utility, for this purpose, is recognized. Hence, the idea goods is an essentially relative one. Every change in man's wants, or knowledge, is accompanied by a rapid, corresponding change, either in the limits of the circle(58) of goods, or in their relative importance. Thus, the tobacco plant has, probably, existed thousands of years. It became goods, however, only from the time that man recognized its use for smoking, snuffing etc., and experienced the want of it for these purposes. In a similar way, the limestone of the Solenhofen quarries has become goods, of considerable importance, only since the invention of lithography; decaying bones, only since that of bone-dust manure; caoutchouc since about 1825, and gutta-percha, only since 1844. On the other hand, charms,(59) philters, and even relics, since the decay of faith in their efficacy, have lost the quality of goods. If the aggregate income of all mankind were, by some sudden revolution, to be equally divided among all, diamonds, for instance, would greatly decline in value, for the reason that it is dependent, in great part, on the wants generated by vanity, or by the desire of outshining others. Beer, tobacco etc., would rise in the scale as goods, because the circle of those to whose wants they minister would have been very greatly extended. On the whole, advancement in civilization has uniformly the effect, of itself, to increase the quantity and number of goods, the wants and knowledge of men being thereby increased. We should reach the ideal here, if all men experienced only true or legitimate wants, but these completely; if they could see their way, clearly, to the satisfaction of them, and find the means of satisfying them with just the amount of effort most conducive to their physico-intellectual development.(60)

Section II.

Goods.—Economic Goods.

By economy (Wirthschaft=husbandry or housekeeping), we mean the systematized activity of man, to satisfy his need (Bedarf=requisite) of external goods.(61) This treatise is concerned only with economic goods (ends or means of economy).(62) The greater the advance of civilization or human culture, the less apt are men to pursue the satisfaction of their wants, isolated from their fellows, or, in other words, to carry on their economies or husbandries apart from one another. The more numerous the wants of men, and the more different in kind their faculties are, the more natural does exchange(63) become. Since all goods derive their character as goods from the fact that they are destined to satisfy human wants, the very possibility of exchange must greatly increase the possibility of things to become goods. Think of the machinist, whose products are used only by the astronomer, while the latter is never in a way to manufacture them for himself. (Hufeland.) Commerce is the series of combinations, created by the interchange of services: "a living net of relations, which wants and services are ever weaving and unweaving." (Hermann.) As a rule, with an advance in civilization, there is an increase in the number of goods, which become economic goods, and in the number of economic goods which become commercial goods (objects or means promotive of commerce).(64) But this is to be considered a real advancement only to the extent that that which is obtained is superior to that which was possessed before, in consequence of the specialization of callings or the greater division of labor ( 48 ff.). When a little street Arab exacts money from a stranger for pointing out the way, we rightly censure him; but no one would find it improper if he should first fit himself to play the part of a guide, and then live by his calling.(65)

Section III.

Goods.—The Three Classes Of Goods.

All economic goods are divided into three classes:

A. Persons or personal services. It is entirely repugnant to the feeling of humanity to regard a man's person in its entirety as an instrument intended to satisfy the wants of another.(66) Yet this happens wherever slavery exists; in its coarsest form, in cannibalism. Among civilized nations, we can speak, under this head, only of individual services or capabilities of persons; or, indeed, of the aggregate of the services rendered by them during a time determined at pleasure, or a short time.(67)

B. Things, both moveable and immovable.(68)

C. Relations to persons or things which may frequently be estimated just as accurately as material goods. (The res incorporales of the Roman law.) I need only mention what is called good-will, which freely, and to the advantage of customers themselves, but still with a limited amount of certainty, attaches to certain localities, and for which tavern-keepers, sometimes, as in theaters, depots and clubs, pay so enormous a rent.(69) When a newspaper is sold, the purchaser frequently buys nothing but the existing relations between his colaborers, subscribers etc. No small part of the value of a good business firm consists in the confidence with which it inspires all who deal with it, thus sparing them a world of care and trouble.(70) A general may be of incalculable value to an army which he has himself helped organize. In another, or in the service of a country not his own, he might be entirely valueless, incapable of accomplishing anything.(71) With the progress of civilization, as man becomes more social, the number of valuable relations increases, while that of legalized monopolies is wont to decrease. (Schaeffle.)(72)

Section IV.

Of Value.—Value In Use.

The economic value of goods is the importance they possess for the purposes of man, considered as engaged in economy (housekeeping, husbandry.(73))

Looked at from the point of view of the person who wishes to employ them in his use directly, doubtless the oldest point of view, value appears first as value in use; and here, according to the difference of subjective purposes it is intended to subserve, we may speak of production value or enjoyment-value; and of this last, in turn, as utilization-value, or consumption-value. The value in use of goods, is greater in proportion as the number of wants they are calculated to satisfy are more general and more urgent, and in proportion as they are gratified by them more fully, surely, durably, easily and pleasantly.(74) Hence, it is seldom possible to find an accurate mathematical expression of the relation which exists between the value in use of different goods.(75) Thus, it is possible to estimate the nutritive power of different kinds of goods, the value of wheat or of hay for instance, but not the goodness or quality of their taste, of the attractiveness of their appearance, etc.

But, the more men become used to comparing the aggregate of human wants, and the aggregate of the goods which minister to the satisfaction of these wants, as if they were two great wholes, gradually shading each into the other, the more does the value in use of the different kinds of goods assume, for purposes of social rating or estimation, a fungible character.(76) If a new kind of goods be produced or discovered, which satisfies the same wants in a more complete manner than another, the latter, although it has suffered no change, generally loses in the value put upon it, especially if the new goods can be produced in any desired quantity. An instance of this is the change effected in the value of the dyers weed, woad, by the introduction of indigo.

Things present in quantities greater than the amount necessary to supply the want they satisfy, preserve their full value in use, to the limit of that want, after which they are simply an element of possible future value, dependent on an increase of the want; but they have no value for present use.(77)

The economic valuation of goods, however, is by no means exhausted, so far as the isolated individual housekeeper is concerned, by the mere establishing of its value in use. As the systematic effort of every rational individual in his household management is directed towards the obtaining, by a minimum of sacrifice of pleasure and energy, a maximum satisfaction of his wants, even an Adam or a Crusoe is, in his economy, compelled to estimate not only what the goods to be acquired accomplish (value in use) but also what they will cost—cost-value. Even the most indispensable kind of goods, for instance atmospheric air, is considered to have no value, when it can be obtained in sufficient quantity, without any sacrifice whatever.(78)

Section V.

Value.—Value In Exchange.

The value in exchange of goods, or the quality which makes them exchangeable against other goods, is based on a combination of their value in use with their cost-value, such as men in their intercourse with one another will make.(79) Without value in use, value in exchange(80) is unthinkable.

But there are many, and even indispensable goods which are not at all susceptible of being exchanged; for instance, the light and heat of the sun, the open sea etc.(81) Other goods, although capable of being exchanged, have no value in exchange, because they exist in superabundance, and may be obtained by everyone, without trouble and without reward; for instance, drinking-water in most places, ice in winter, and wood in the primeval forest.(82) Moreover, the idea of such "free goods" is in great part relative. The water of a river may, for drinking purposes, be "free" goods, and yet, for purposes of irrigation, have great value in exchange. (John Stuart Mill).

But, goods, to obtain value in exchange, must, in addition to their value in use, a value which must be recognized(83) by a certain number of persons, at least, have the capacity of becoming the exclusive property of some one individual, and therefore of being alienated or transferred; and this alienation or transfer must be desired because of the difficulty to become possessed of them in any other way.(84)

Section VI.

Value.—Alleged Contradiction Between Value In Use And Value In Exchange.

Recent, and especially socialistic,(85) writers have alluded to the great "contradiction" between value in use and value in exchange. This contradiction, however, vanishes when the above idea of economy, and the two sides or aspects, which economic value presents, are kept steadily in view. It is said, for instance, that a pound of gold has a much greater value in exchange than a pound of iron; while the value in use of iron, is incomparably greater than that of gold. I question this latter statement. True it is, that the need of iron is much more universal and urgent than the need of gold. On the other hand, a pound of gold yields satisfaction to the want of that metal, much greater than is yielded by a pound of iron, to the want of iron. We may speak of a contradiction between value in use and value in exchange, at the farthest, only in case the existing quantity of an article in trade, which can be done without, is not estimated correspondingly lower than the whole existing supply of a thing which is indispensable. But this is a case which cannot often occur. When, for instance, wheat is very dear, as in years of scarcity, people prefer to pay a very high price for it rather than to dispense, even in part, with its use; and so of all the necessaries of life. As people progress in economic culture, they become more expert in adapting the value in exchange of related goods, not only to their cost-value, but also to their value in use.(86)(87)

The lower the state of a nation's economy, the more isolated men live from one another, the greater is the prominence given by them to value in use, as compared with value in exchange, a fact which makes a valuation of resources, which shall be universally applicable, a more difficult matter.(88)(89)(90)

Section VII.

Resources Or Means (Vermoegen).

Resources, or means, in the sense in which we here use the term, are the aggregate of economic goods owned by a physical or legal person, after deduction is made of the person's debts, and all valuable and rightful claims have been added.(91) Hence, there are private resources, corporative resources, municipal resources, etc., state resources, national resources and the world's resources. In estimating the resources of a whole people, it is, of course, necessary to make deduction of the debts due by the individual members of the nation to their fellow countrymen.

Section VIII.

Valuation Of Resources.

It has often been made a question, whether the valuation of resources should be based on the value in use, or the value in exchange of their constituent parts.(92) The latter has, of course, no interest, except in so far as we are concerned with the possibility of obtaining the control of part of the resources, or means, of another, by the surrender of a part of one's own goods. In estimating the value of private resources, which require to be made continually an object of trade, this point is, of course, of the greatest importance. If certain of their component elements, lands, for instance, belonging to a fidei commissum, are incapable of entering immediately into the market, at least the revenue they yield is measured by its value in exchange.

It is quite otherwise, even with the resources of a whole nation. Such resources are, evidently, much more independent, and have much less need of being exchanged against their equals, than private resources. The foreign commerce, of the greatest and most advanced nations, has, hitherto, been but a small quota of their internal commerce.(93) A valuation, therefore, based on value in exchange, however interesting it might be to enable us to determine how property is shared by the different classes and persons that compose the nation, would afford but little information concerning the absolute amount of the national wealth. This, of course, applies in a much higher degree to the resources of the whole world.

If, now, we were to estimate the resources of an entire people, or even of the world, by summing up the value in exchange of their several component parts, many very important elements would be left out of the account entirely; as for instance, harbors, navigable streams, numberless relations which have, indeed, no value in exchange whatever, but which are of the highest importance, because promotive of the economy of the nation. The same may be said of made roads of every description, the politico-economical value of which may be much greater than the value in exchange of their stock, than their cost of production etc. The increase of the value in exchange of any of the branches of the resources of a physical or legal person contributes towards really enriching the nation or the world, only in case that the increased value in exchange is based on an increased utility in quality or quantity. Should an earthquake suddenly dry up a number of our springs, and thus give value in exchange to the drinking water from the remaining ones, we should, indeed, witness the introduction of a new object into the list of exchangeable goods; the owners of springs would be able to command a larger portion of the national resources, but at the expense of the rest of the population; and the whole country would have become poorer in goods by the catastrophe. Even the value in exchange of the national resources would not be increased; for all other goods, which, hitherto, as compared with water, had an unlimited capacity for exchange, would lose just as much of that capacity as water had gained, as compared with them.(94) On the other hand, if a new mineral spring should be discovered, the great value in use of the water of which gave it value in exchange, the resources of the nation would be really increased, not only in point of utility, but in exchange value; for no other goods, formerly known, would, in consequence of the discovery, lose in their exchange power.(95)

Section IX.


The possession of large and also of potentially lasting resources; objectively, such resources themselves, we call wealth. But it must be large in a two-fold sense; large as compared with the rational wants of its possessor, and large, also, as compared with the resources of other people, especially with the resources of those in the same condition of life. To be called rich, it is not enough "to have a sufficiency," (the individual side); it is necessary to have more than others.(96) If all men were possessed of a great deal, but all of an exactly equal amount, each would be compelled, it may be conjectured, to be his own chimney-sweep, his own scavenger and "boot-black." And how could anyone, then, be properly called wealthy? This is the social side of the idea of wealth.(97) Hence, a person, with the same resources, might be very wealthy in a provincial town, while, in the capital, he could enjoy only moderate comfort.(98)

Section X.

Wealth.—Signs Of National Wealth.

We should have a very imperfect idea of the wealth of a people ( 8) if we should estimate it at the value in exchange of the sum(99)-total of the component parts of the national resources. By the following signs, however, an approximative notion of the value in use of the resources of a nation may be obtained:

A. When, even the lower classes, who compose everywhere the greatest portion of the people, are comfortable, in a condition worthy of human beings. Thus, C. Dupin is surprised at the great quantities of meat, butter, cheese and tea entered on the accounts of the poor-houses in England, and the great care taken to have these of the best quality.(100) A good symptom of such a state of things is a high average duration of human life, especially when there is a relatively large number of births. ( 246.)

B. When a considerable outlay, devoted to the satisfaction of the more refined wants, is voluntarily made, and by those only possessed of a proper economic sense. Thus, in England, the various mission, bible, and tract societies had, in 1841, an aggregate income of L630,000. The expeditions in search of Franklin cost over a million pounds sterling. The state outlay also belongs to this category, provided, that taxes are collected and loans obtained, without any noticeable oppression. The sum of 20,000,000 pounds sterling, voted, in 1833, by the British Parliament for the abolition of slavery, is one of the happiest signs of the national wealth of England.(101)

C. A large number of valuable buildings, and permanent improvements; for instance, roads of every description, works for purposes of irrigation and drainage. Thus, in London, from September, 1843, to September, 1845, there were constructed squares and streets with an aggregate length of 11.1 geographical miles. The number of newly built houses in London, between 1843 and 1847, was nearly 27,000. And so, in England and Wales there are 492 geographical miles of navigable canals, while their navigable rivers are estimated to have a length of only 449 miles. The number of miles of railroad, in the British Empire, in 1865, was 2,897 geographical miles, and they cost 459 million of pounds; in 1870, it was 3,270 geographical miles, at an aggregate cost of 650 millions sterling.

D. The frequent occurrence of heavy commercial payments, which finds expression especially in the magnitude and costliness of the most usual medium of exchange. Thus, all payments are made in England in paper (for sums of at least five pounds sterling) or in gold coin. Silver is used only as small change, like copper in most other countries. (Infra, 118, seq.)(102)

E. Frequent loans to foreign nations. Hence, Storch divides all countries into borrowing or poor countries, loaning or rich countries, and independent countries which hold a middle place between the two former.(103)

Section XI.

Of Economy (Husbandry).

All normal economy(104) (husbandry) aims at securing a maximum of personal advantage with a minimum of cost or outlay.(105) And there are always two intellectual incentives at the foundation of this economy. There is, first, self-interest, the positive manifestation of which is the effort to acquire as much of the world's goods as possible, and the negative expression of which, the effort to lose as little of them as possible—acquisitiveness—saving. Self-interest, losing its moral, and assuming a guilty, character, degenerates into egotism; acquisitiveness, into covetousness; and the disposition to save, into avarice—the solipsismus of Kant. The incentive to ameliorate one's condition is common to all men, no matter how varied the form or different the intensity of its manifestation. It guides us all from the cradle to the grave. It may be restricted within certain limits, but never entirely extinguished. It is, in the domain of economy, what the instinct of self-preservation is to our physical existence, a powerful principle of creation, preservation and of renewed life (I. Thessal., 4, 11, seq.).(106) Then there is the incentive of the demand of God's voice within us, the voice of conscience, whether we call it, in philosophic outline "the adumbration of the ideas of equity, right, benevolence, of perfection and inner freedom," or, framing our lives in accordance with them, the striving after the Kingdom of God.(107) It matters not, how much the image of God may have been disfigured in most men, there is no one in whom the longing for it has so far disappeared as to leave no trace behind. This puts bounds to our self-interest, and transmutes it into an earthly means to enable us to approximate to an eternal ideal.

As, in the structure of the world, the apparently opposing tendencies of the centrifugal and centripetal forces produce the harmony of the spheres, so, in the social life of man, self-interest and conscience produce in him the feeling for the common good.(108) This sentiment of the common interest is the foundation on which rise in successive gradation, the life of the family, of the community, of the nation and of humanity, the last of which should be coincident with the life of the Church. It, alone, can realize the kingdom of heaven on earth. Through this sentiment alone can religion be made active and moral. Only through it, can self-interest be made really sure and always to the purpose. Even the most calculating mind must acknowledge, that numberless institutions, relations etc., are useful and even necessary to many individuals, which can be established or maintained only from a sense of the general welfare, for the reason that no one individual could make the sacrifice required to establish or maintain them. And so, since commerce has wrought the interests of all men into one great piece of net-work, the best means of obtaining wherewith to satisfy our own wants is to help others satisfy theirs. Self-interest causes every one to choose the course in life in which he shall meet with the least competition and the most abundant patronage; in other words, that which answers to the most pressing and least satisfied want of the community. As a rule, the physician who cures the greatest number of patients with the greatest skill, and the manufacturer who produces the best goods cheapest, will grow to be the richest. It is, moreover, easy to see that, according as the circle of common interests grows smaller, it approximates to self-interest; and to "the Kingdom of God"(109) as it grows larger. And yet, all these circles respectively condition one another. Cosmopolitanism or church-zeal, without love of country; patriotism, without fidelity to the community in which one lives, or love of one's family, are more than suspicious. The reverse is also true. This is a chief connecting link between the great apparent opposites.(110)(111)

Section XII.

Economy.—Grades Of Economy.

Thanks to this feeling for the common weal, the eternal and destructive war—the bellum omnium contra omnes—which an unscrupulous self-interest would not fail to generate among men engaged in the isolated prosecution of their own economic interests, ceases in the higher, well-ordered organization(112) of society. On it are based the various forms of economy in common: family-economy, corporation or association-economy, municipal economy, and national economy.(113) And these forms of economy in common are so essentially the condition and complement of individual economy, that the latter, without them, could either not be maintained at all, or, at least, only in the very lowest stage of civilization.

Although the higher science of Political Economy has, nearly always, been conceived(114) as treating of the aggregate national activity of a people, there have been many, recently, who consider Political Economy as no real whole, but only as a mere abstraction. This is true, especially of many unconditional free-trade theorizers, partly from a repugnance toward the governmental guardianship of private businesses or economy. It is true, also, of certain philosophers who consider the idea, "the people," as merely nominal.(115) There are, however, two things necessary to warrant us to call a thing made up of a number of parts, one real whole: the parts and the whole must have a reciprocal action upon one another, and the whole, as such, must have a demonstrable action of its own. (Drobisch.) In this sense, "the people" is, unquestionably, a reality, and not alone the individuals who constitute the "people." Besides, it is truly said that all husbandry or economy supposes a will ("systematized activity" etc., supra, 2). Such a will is ascribed to individuals, to legal persons, to the state, but not, however, to "the people," as a whole. But this will need not be an entirely conscious one, as is plain from the case of the less gifted and less cultured individuals engaged in household economy. The systemization in the public economy of a people finds its clearest expression in economic laws, and in the institutions of the state. But it finds expression, also, without the intervention of the state, in the laws established by use, and by the opinions of jurists or courts, in community of speech, of customs and tastes etc.: things which have an important economic meaning, which depend on the common nature of the land, of race and history, and which influence the state, at least as much as they are influenced by it.(116)(117)

The most that can be said, at present, so far as an economy of mankind, or a world-economy, is concerned, is, that it may be shown that important preparations have been made for it. We are approaching more nearly to it by the ways of the more and more cosmopolitan character of science, the increasing international cooeperation of labor, the improvement in the means of transportation, growing emigration, the greater love of peace, and the greater toleration of nations etc.

Section XIII.

Political Economy.—The Economic Organism.

The idea conveyed by the word organism, is doubtless, one of the most obscure of all ideas; and I am so far from desiring to explain(118) by that idea, the meaning of public or national economy, that I would only use the word organism as the shortest and most familiar expression of a number of problems, which it is the purpose of the following investigation to solve.

There are two points, especially, of importance here. In the motion of any machine, it is possible to distinguish with the utmost accuracy, between the cause and the effect of the motion: the blowing of the wind, for instance, is simply and purely, the cause of the friction of the mill-stones in a wind-mill, and is not in the least influenced or conditioned by the latter. But, in the public economy of every people, patient thought soon shows the observer, that the most important simultaneous events or phenomena mutually condition one another. Thus, a flourishing state of agriculture is impossible without flourishing industries; but, conversely, the prosperity of the latter supposes the prosperity of the former, as a condition precedent. It is as in the human body. The motions of respiration are produced by the action of the spinal cord; and the spinal cord, in turn, continues to work only through the blood, that is, by the help of respiration. In all cases like this, we are forced, when accounting for phenomena, to move about in a circle, unless we admit the existence of an organic life, of which every individual fact is only the manifestation.(119)(120)

It is, also, undeniable, that human insight into the operation and utility of a machine must always precede the existence of the machine itself. This human insight is parent to the plan, and the plan, in turn, is parent to the machine. The very reverse of this is true in the case of organisms, those "divine machines" as Leibnitz called them. Men had digested food and reproduced their kind, thousands of years before physiologists had attained to a true theory of digestion or reproduction. I do not, indeed, by any means, pretend, that the public economy of nations is governed by natural necessity, in the same degree, as for instance, the human body. We shall find, however, that the minute arbitrary variations usual here and there in the course of its development, generally compensate for one another, in accordance with the law of large numbers. Here, too, we find harmonies, frequently of wonderful beauty, which existed long before any one dreamt of them; innumerable natural laws,(121) whose operation does not depend on their recognition by individuals, and, over which, only he can obtain power who has learned to obey them. (Bacon)(122)(123)(124) But it should never be lost sight of, that the natural laws governing the public economy of a people, like those of the human mind, are distinguished in one very essential point from those of the material world. They have to do with free rational beings, who, because they are thus free and rational, are responsible to God and their conscience, and constitute in their aggregate a species capable of progress.

Section XIV.

Origin Of A Nation's Economy.

The public economy of a people has its origin simultaneously with the people. It is neither the invention of man nor the revelation of God. It is the natural product of the faculties and propensities which make man man.(125) Just as it may be shown, that the family which lives isolated from all others, contains, in itself, the germs of all political organization,(126) so may it be demonstrated, that every independent household management contains the germs of all politico-economical activity. The public economy of a nation grows with the nation. With the nation, it blooms and ripens. Its season of blossoming and of maturity is the period of its greatest strength, and, at the same time, of the most perfect development of all its more important organs.(127) In respect to it, the economic endeavors of any epoch may be said to be represented by two great parties, the one progressive, the other, conservative. The former would hasten the period of the nation's richest and most varied development, the latter postpone its departure as long as possible; and hence it comes, that a people's economic decline is sometimes taken for progress, by the former class, and their progress for decline, by the latter. As a rule, the union and equilibrium of these parties are wont to be the greatest at the period of maturity, because, then, intelligence and the spirit of sacrifice for the common good are most general.(128)

Finally, the public economy of a nation declines with the people. (Infra, 263 ff.)

Section XV.

Diseases Of The Social Organism.

If the public economy of a people be an organism, we must expect to find that the perturbations, which affect it, present some analogies to the diseases of the body physical. We may, therefore, hope to learn much that may be of use in practice, from the tried methods of medicine.(129) In the diseases of the body economic, it is necessary to distinguish accurately, between the nature of the disease and its external symptoms, although it may be necessary to combat the latter directly, and not merely with a view to alleviation. Following the example of the physician, we should particularly direct our attention to the curative method which nature itself would pursue, were art not to intervene. "The curative power of nature is no peculiar power; it is the result of a series of happy adjustments, by means of which the morbid perturbation itself sets in motion the springs which may either destroy the evil or paralyze its action. It is, in fact, nothing but the original power which formed the body and preserves its life in contact with the external causes of perturbation and the internal disorder provoked by these causes." (Ruete.)

Chapter II.

Position Of Political Economy In The Circle Of Related Sciences.

Section XVI.

Political Or National Economy.

By the science of national,(130) or Political Economy, we understand the science which has to do with the laws of the development of the economy of a nation, or with its economic national life. (Philosophy of the history of Political Economy, according to von Mangoldt.) Like all the political sciences, or sciences of national life, it is concerned, on the one hand, with the consideration of the individual man, and on the other, it extends its investigations to the whole of human kind.(131)

National life, like all life, is a whole, the various phenomena of which are most intimately connected with one another. Hence it is, that to understand one side of it scientifically, it is necessary to know all its sides. But, especially, is it necessary to fix one's attention on the following seven: language, religion, art, science, law, the state and economy.(132) Without language, all higher mental activity is unthinkable; without religion, all else would lose its firmest foundation and highest aim. Through art, alone, do all these sides attain to beauty; through science, alone, to clearness. Law arises, the moment conflicts of will become inevitable and an adjustment is desired. The state has to do with them, in so far as they have any external force or validity. Indeed, there is no human relation, not even the highest and the sweetest, but has its economic interests. It is, therefore, natural, that each of the sciences which relate to these various regions of human life should, in part, presuppose all others, and, in part, serve as a basis for them.(133)

But in the midst of this universal relationship, it is easy to see that law, the state and economy constitute a family, as it were apart and more closely connected. (The social sciences, in the narrower sense of the expression.)

They are confined almost exclusively to what Schleiermacher has called "effective action" (wirksame Handeln), while art and science belong almost entirely to the "action of representation" (darstellenden Handeln); and religion and language combine both kinds. Law, the state, and economy too, have their roots so deep in the physical and intellectual imperfection of man, that we can scarcely imagine their continuance beyond his life on earth (Gospel of Matthew, 22, 30). But within these limits, their several provinces and the subjects with which they are concerned are almost coincident. They only consider these from different points of view: the science of politics from that of sovereignty; the science of Political Economy from that of the satisfaction of the requirement of external goods by the people; the science of law from that of the prevention or the peaceable adjustment of conflicts of will. As every economic act, consciously or unconsciously, supposes forms of law, so, by far the greater number of the laws relating to rights, and the greater number of judgments in the matter of rights, contain an economic element. In numberless cases, the science of law gives us only the external how; the deeper why is revealed to us by the science of Political Economy.(134)(135) And, as to the state, who, for instance, can appreciate the political significance of a nobility, without understanding the economic character of rent, and of the possession of large landed estates? Who can politically appreciate the inferior classes of society, unless initiated into a knowledge of the laws that govern wages and population? It were much easier to cultivate psychology without physiology! "The state is society protected by force" (Herbart). There are two bases to all material power:(136) wealth and warlike ability (χρήματα—ναυτικά, according to Thucydides); and how much the latter has need of the former is well expressed by the familiar saying of Montecuccoli: "Money is not only the first, but the second and third condition of war."(137)

Frederick the Great calls finance the pulse of the state, and Richelieu, the point of support which Archimedes was in search of, to move the world. In all modern nations, the history of the debates on the raising of revenue and of the passing of budgets is, at the same time, the history of parliamentary life; and most great revolutions, the Reformation of the sixteenth century not excepted, if not caused have been promoted, by financial embarrassment.

Section XVII.

Sciences Relating To National Life.—The Science Of Public Economy.—The Science Of Finance.

If, by the public economy of a nation, we understand economic legislation and the governmental guidance or direction of the economy of private persons,(138) the science of public economy becomes, so far as its form is concerned, a branch of political science, while as to its matter, its subject is almost coincident with that of Political Economy. Hence it is, that so many writers use the terms public economy, or the economy of the state (Staatswirthschaft), and National Economy (Volkswirthschaft), as synonymous.(139) The hypothesis, in accordance with which, this science should discard all consideration of the state, or should refuse to presuppose its formation,(140) would lead us into an ideal region, difficult to define, probably entirely impossible, and inaccessible to experience.

Just as clear, is the close connection between politics and Political Economy, in the case of the science of finance, or of the science of governmental house-keeping, otherwise the administration of public affairs. The latter, evidently, so far as its end is concerned, belongs to politics, but so far as the means to that end are concerned, to National Economy. As the physiologist cannot understand the action of the human body, without understanding that of the head; so we would not be able to grasp the organic whole of national economy, if we were to leave the state, the greatest economy of all, the one which uninterruptedly and irresistibly acts on all others, out of consideration.(141)

By the term police, we mean the state power whose office it is, without mediation, to prevent all disturbances of external order among the people.(142) It may extend its action into all the domains of national life mentioned above, whenever external order is there threatened, or calls for protection; but its action is important especially in the domains of law and economy. The science of the police power, therefore, of all those doctrines resulting from investigation into national life, takes up only one phase of each of them; and the phases of doctrine thus taken up, it combines into a whole, for practical ends. Its relation to those sciences is like that of surgery to the medical sciences, or like the science of legal procedure to the science of law.

Section XVIII.

Sciences Relating To National Life.—Statistics.

Statistics we call the picture or representation of social life at given periods of time, and especially at the present time, drawn on a scale in accordance with the laws of development discovered by means of the theoretical sciences above named; as it were, a section through the stream. (Schloezer calls them: history standing still.)(143) Statistics, as thus defined, are as far removed from saying too much as from saying too little. To give a complete tableau of their object, statistics should, of course, take in the life of a people, in all its aspects. But they should look upon such facts only as their own property, the meaning of which they are able to understand; that is, such only as can be ranged under known laws of development. Unintelligible facts are collected only in the hope of penetrating into their meaning in the future, by comparing them with one another. In the meantime, they are to the statistician only what unfinished experiments are to the investigator of nature.

The view is daily gaining ground, that statistics should be occupied—without, however, confining themselves to them—with present facts, with "facts affecting society and the state, which are susceptible of being expressed in figures."(144) The more deceptive the immediate observation of an individual, isolated fact is, in cases where a great number of simultaneous or scattered individual isolated facts of national life should be observed, the more important it is to discover proper numerical relations, by noting all the like acts or experiences of men, the time and place in question, and the relation of the aggregate of these phenomena, to the sum-total of the population, or to the sum-total of corresponding phenomena in other places. When this is done, and the facts are completely enumerated and correctly recorded, there is no danger of subjective error. And this species of "political and social measuring," as Hildebrand calls it, may be applied, not only to quantities, but to all qualities accessible to the observation of the senses; since the individual or isolated qualities of the things enumerated, may be again made objects of enumeration. Without doubt, this mode of numerical procedure is the most perfect for all those divisions of statistics in which it can be followed; and hence, it should be our endeavor to make the numerical side of statistics as comprehensive as possible. But, one side of a science is not a science itself. As there is no natural science proper called microscopy, embracing all the observations made by means of the microscope, so care should be taken not to deduce the principle of a science from the chief instrument it employs. There will always be many and important facts in national life which can not be subjected to numerical calculation, although they may be established with the usual amount of historical certainty. Were statistics to be limited, in the manner mentioned above, they would remain a collection of fragments, and instead of being a science, properly so-called, become a method.(145)

Besides, it is evident, that, of statistics in general, economic statistics constitute a chief part, and precisely the part most accessible to numerical treatment. As these economic statistics need to be always directed by the light of Political Economy, they also furnish it with rich materials for the continuation of its structure, and for the strengthening of such foundations as it already has. They, are, moreover, the indispensable condition of the application of economic theorems to practice.

Section XIX.

Private Economy—Cameralistic Science.

The meaning of the term cameralistic science (Cameralwissenschaft) can be explained only by the history of the cameralistic system.(146) From the end of the middle ages, we find, in most German countries, an institution called the Council (Kammer) whose province it was to administer the public domain, and to watch over regal rights. At first, a mere governmental commission, it was not long before it developed into an independent board. This change had taken place in Burgundy as early as the year 1409. It was in that country that the emperor Maximilian became acquainted with the institution; and by the erection of the aulic councils at Innspruck and Vienna (1498 and 1501), he gave the principal impulse to the imitation of it in Germany. As, at that time, the division of labor was very little developed, and personal and collegial authority all the more developed in consequence, it is easy to conceive that a great part of all the new and rapidly increasing business of police administration was confided to these councils. They were charged especially with what is known to-day as economic police (Wirthschaftspolizei) and an important part of the administration of justice, in its lower departments, was turned over to their subordinates. The most eminent men who wrote, in the seventeenth century, on cameralistic matters, laid great stress on the point, that it was the duty of the aulic councils to entertain not only fiscal questions, but that it was within their province also, to determine questions of economic police.(147) The interest of absolute princes must have greatly favored these cameralistic institutions, for they were in their hands docile tools, which escaped the annoying intervention of the states of their realms.

By degrees, the knowledge necessary to these council officials, and which found no place in the lectures on law, were formed into a special body of doctrine. After such men as Morhof and Thomasius had prepared the way,(148) Frederick William I., himself a clever cameralist, and author of the masterly financial system of Prussia, took the important step of founding, at Halle and Frankfurt on the Oder, special chairs of economy and cameralistic science; which, considering the time, were very ably filled by Gasser and Dithmar. (1727.) There was thus formed in the German universities a distinct school of cameralists, which, through Jung, Roessig and Schmalz, reached to the nineteenth century. The term cameralistic science, the creature of chance, was used, it must be said, with very various limits to its meaning.(149)

However, Political Economy in Germany developed out of the science of law and the cameralistic sciences, while in England and Italy it had its origin chiefly in the study of questions of finance and foreign commerce.

Section XX.

Private Economy. (Continued.)

If we abstract from cameralistic science as it was understood in the last century, what it has in common with all economy,(150) and therefore with public economy, next that which belongs to the aggregate of governmental economy, there remains only a number of rules, such as those which govern the principal branches of private business, and which indicate how they are to be carried on with the greatest advantage to those who engage in them. Such are forest and rural economy, mining science, technology, including architecture, and all that concerns founderies, and commercial science. Now that the expression cameralistic science is altogether obsolete, the aggregate of these might be designated by the name private economy. Obviously, we should have here, neither a simple nor pure science, but only a compilation of natural-philosophical and economic lemmas. Thus, in agriculture, for instance, a knowledge of the different kinds of soil, of the tillage of land, of the different plants and animals etc., belongs to the domain of natural science; while all that relates to the cost of production, the employment of capital, the wages of labor, the exchange of products, net product and the price of land, are purely politico-economical. The political economists also require a knowledge of the natural side of the cameralistic sciences. Such a knowledge is indispensable to every detailed and living theory, and especially to the application of economic science to practice. The great difference lies in this, that the cameralist interests himself in the production of material goods for their own sake, while the political economist regards them only in their relations to national life.(151)

It would seem, moreover, that political economists, especially in Germany, have attached too much importance to putting formal bounds to their special science. Why not rather follow the example of the students of nature who care little whether this or that discovery belongs to physics or chemistry, to astronomy or mathematics, provided, only, very many and important discoveries are made?(152)

Section XXI.

What Political Economy Treats Of.

Political Economy treats chiefly of the material interests of nations. It inquires how the various wants of the people of a country, especially those of food, clothing, fuel, shelter, of the sexual instinct etc., may be satisfied; how the satisfaction of these wants influences the aggregate national life, and how in turn, they are influenced by the national life. (Gospel of Matth., 4, 4.) This alone suffices to enable us to estimate the importance of the science. The relation of virtue to wealth is likened by Bacon to that of an army to its baggage. In Xenophon's opinion, wealth is really useful only to him who knows how to make a good use of it. From an economic point of view, the happiest man is he who has accumulated most, honorably, and used it best.(153) That, even in a material sense, the intellect of a people is their most important element, is evident from the example of the Chinese, who were so long acquainted with printing, powder, and the mariner's compass, without, by their means, attaining to intelligent public opinion, forming a good army, or coming to an understanding of the art of navigation, to any great extent.

The undervaluing of economic matters, for which ages of inferior cultivation, our own middle ages for instance, are now praised and now blamed, was really a rare exception even during these ages.(154) Other kinds of acquisition and enjoyment then occupied the foreground; but there never was a time, when gain and enjoyment in general were not favorite objects of pursuit, and held in high esteem. The physical wants of uncultured men cry out much louder than intellectual ones. ( 2, 14.)(155) On the other hand, in over-cultivated ages, when decay begins, an over-estimation of material things is wont to become general.(156) The mere servants of mammon, whether as political economists or as private individuals, may see their depravity faithfully reflected in communism as in a mirror. We should not overlook the fact that it is with whole nations as with the individual man who amasses his own fortune. He reaches the culminating point of his wealth generally after he has passed the prime of life. The most flourishing period of a nation's existence is wont just to precede its decay, and to introduce it.(157) Hence, here nothing could be more untrue, as Macchiavelli has remarked, than the general opinion that money is the sinew of war.(158)

Chapter III.

The Methods Of Political Economy.

Section XXII.

Former Methods.

The methods(159) which would apply to any science of national life, principles borrowed from any other science, are now generally looked upon as obsolete. This is true, especially, of the theological method which prevailed, almost exclusively during the middle ages,(160) and of the juridical method of the seventeenth century.

It would be much more in harmony with the intellectual tendencies of the time, to adopt a mathematical mode of treatment in Political Economy, involving, as such a mode of treatment does, not the matter of the science, but only a formal principle. That which is general in Political Economy has, it must be acknowledged, much that is analogous to the mathematical sciences. Like the latter, it swarms with abstractions.(161) Just as there are, strictly speaking, no mathematical lines or points in nature, and no mathematical lever, there is nowhere such a thing as production or rent, entirely pure and simple. The mathematical laws of motion operate in a hypothetical vacuum, and, where applied, are subjected to important modifications, in consequence of atmospheric resistance. Something similar is true of most of the laws of our science; as, for instance, those in accordance with which the price of commodities is fixed by the buyer and seller. It also, always supposes the parties to the contract to be guided only by a sense of their own best interest, and not to be influenced by secondary considerations. It is not, therefore, to be wondered at, that many authors have endeavored to clothe the laws of Political Economy in algebraic formulae.(162) And, indeed, wherever magnitudes and the relations of magnitudes to one another are treated of, it must be possible to subject them to calculation. Herbart has shown that this is so in the case of psychology;(163) and all the sciences which treat of national life, especially our own, are psychological.(164) But the advantages of the mathematical mode of expression diminish as the facts to which it is applied become more complicated. This is true even in the ordinary psychology of the individual. How much more, therefore, in the portraying of national life! Here the algebraic formulae would soon become so complicated, as to make all further progress in the operation next to impossible.(165) Their employment, especially in a science whose sphere it is, at present, to increase the number of the facts observed, to make them the object of exhaustive investigation, and vary the combinations into which they may be made to enter, is a matter of great difficulty, if not entirely impossible.(166) For, most assuredly, as our science has to do with men, it must take them and treat them as they actually are, moved at once by very different and non-economic motives, belonging to an entirely definite people, state, age etc. The abstraction according to which all men are by nature the same, different only in consequence of a difference of education, position in life etc., all equally well equipped, skillful and free in the matter of economic production and consumption, is one which, as Ricardo and von Thuenen have shown, must pass as an indispensable stage in the preparatory labors of political economists. It would be especially well, when an economic fact is produced by the cooperation of many different factors, for the investigator to mentally isolate the factor of which, for the time being, he wishes to examine the peculiar nature. All other factors should, for a time, be considered as not operating, and as unchangeable, and then the question asked, What would be the effect of a change in the factor to be examined, whether the change be occasioned by enlarging or diminishing it? But it never should be lost sight of, that such a one is only an abstraction after all, for which, not only in the transition to practice, but even in finished theory, we must turn to the infinite variety of real life.(167)

There are two important inquiries in all sciences whose subject matter is national or social life: 1. What is? (What has been? How did it become so? etc.) 2. What should be? The greater number of political economists have confounded these questions one with the other, but not all to the same extent.(168)

When a careful distinction is made between them, the contrast between the (realistic) physiological or historical, and the idealistic methods is brought out.(169)

Section XXIII.

The Idealistic Method.

Any one who has read a goodly number of idealistic works treating of public economy (the state, law etc.) cannot have failed to be struck by the enormous differences, and even contradictions, as to what theorizers have considered desirable and necessary. There is scarcely an important point which the highest authorities may not be cited for or against. We must not close our eyes to this fact. "The giddiness that comes from contemplating the depths of knowledge is the beginning of philosophy, as the god Thaumas was, according to the fable, the father of Iris." (Plato.) In a precisely similar manner, the student of public economy (politics, the philosophy of law etc.) must familiarize himself with the variations that have taken place in what men, at different periods of history, have required of the state and public economy, until he is lost in wonder at the contemplation.

Section XXIII.

The Idealistic Method. (Continued.)

It is impossible to fail to notice at once that those ideal descriptions which have enjoyed great fame and exerted great influence, depart very little from the real conditions of the public economy (of the state, law etc.) surrounding their authors.(170) This is not mere chance. The power of great theorizers, as, indeed, of all great men, lies, as a rule, in this, that they satisfy the want of their own time to an unusual extent; and it is the peculiar task of theorizers to give expression to this want with scientific clearness, and to justify it with scientific depth. But the real wants of a people will, in the long run, be satisfied in life,(171) so far as this is possible to the moral imperfection of man. We should at least be on our guard when we hear it said that whole nations have been forced into an "unnatural" course by priests, tyrants and cavilers. For, to leave human freedom and divine Providence out of consideration entirely, how is such a thing possible? The supposed tyrants are generally part and parcel of the people themselves; all their resources are derived from the people. They must have been new Archimedeses standing outside of their own world. (Compare, however, infra, 263.)

It is true, that if the result of the growth of generations be to gradually produce a different people, these different men may require different institutions. Then a struggle arises between the old and those of the younger generation; the former wish to retain what has been tested by time, the latter to seek for the satisfaction of their new wants by new means. As the sea always oscillates between the flowing and ebbing of the tides, so the life of nations, between periods of repose and of crisis: periods of repose, when existing forms answer to the real substance of things, and of crisis, when the changed substance or contents seeks to build up a new form for itself. Such crises are called reforms when they are effected in a peaceful way, and in accordance with positive law. When accomplished in violation of law, they are called revolutions.(172)

That every revolution, it matters not how great the need of the change produced by it, is as such an enormous evil, a serious, and sometimes, fatal disease of the body politic, is self-evident. The injury to morals which the spectacle of victorious wrong almost always produces can be healed, as a rule, only in the following generation. Where law has been once trampled on, the "right of the stronger" will prevail; and the stronger is, to some extent, the most unscrupulous and reckless in the choice of the means to be employed. Hence, the well-known fact, that in revolutionary times the worst so frequently remain the victors. The counter-revolution which is wont to follow on the heels of revolution, and with a corresponding violence, is a compensation only to the most shortsighted. It allows the disease, the familiarizing of the people with the infringement of law, to continue, until the hitherto sound parts are attacked. Hence, a people should, if they would have it go well with them, in the changes in the form of things which they make, take as their model Time, whose reforms are the surest and most irresistible, but, at the same time, as Bacon says, so gradual that they cannot be seen or observed at any one moment. It is true, that, as all that is great is difficult, so also is the carrying out of uninterrupted reform. Its carrying out, indeed, supposes two things: a constitution so wisely planned as to keep the doors open both to the disappearing institutions of the past and to the coming institutions of the future; and, among all classes of the people, a moral control of themselves, so absolute that, no matter what the inconvenience, or how great the sacrifice, legal ways shall alone be used. In this manner, two of the greatest and apparently most contradictory wants of every legal or moral person, the want of uninterrupted continuity and that of free development, may be satisfied.

Section XXV.

The Idealistic Method. (Continued.)

It is doubtless true that all economic laws, and all economic institutions are made for the people, not the people for such laws and institutions. Their mutability is, therefore, by no means such an evil as mankind should endeavor to remove, but is wholesome and laudable, so far as it runs parallel with the transformation of the people, and the changes which their wants have undergone.(173) Hence, there is no reason why the most various ideal systems should contradict one another. Any one of them may be right, but, of course, only for one people and one age. In this case, the only error would be, if they should claim to be universally applicable. There can no more be an economic ideal adapted to the various wants of every people, than a garment which should fit every individual. The leading-strings of children and the staff of age would be great annoyances to the man. "Reason becomes nonsense and beneficence a torment." Hence, whoever would elaborate the ideal of the best public economy—and the greater number of political economists have really wished to do this—should, if he would be perfectly true, and at the same time practical, place in juxta position as many different ideals as there are different types of people.(174) He would, moreover, have to revise his work every few years; for, in proportion as a people change, and new wants originate, the economic ideal suitable to them must change also. But it is impossible to accomplish this on so large a scale. Besides, to appreciate the present thus instantaneously, and to perfectly feel the pulse of time thus uninterruptedly, requires a species of talent different from what even the most distinguished scientists are wont to possess; talents of an entirely practical nature, such as become a great minister of the interior or of finance. And it is an acknowledged fact, that even the cleverest of such practicioners, as the younger Pitt said of himself, generally feel their way instinctively, and do not see it with the clearness necessary to indicate it to others.

Section XXVI.

The Historical Method—The Anatomy And Physiology Of Public Economy.

We refuse entirely to lend ourselves in theory to the construction of such ideal systems. Our aim is simply to describe man's economic nature and economic wants, to investigate the laws and the character of the institutions which are adapted to the satisfaction of these wants, and the greater or less amount of success by which they have been attended.(175) Our task is, therefore, so to speak, the anatomy and physiology of social or national economy!

These are matters to be found within the domain of reality, susceptible of demonstration or refutation by the ordinary operations of science; entirely true or entirely false, and, therefore, in the former case, not liable to become obsolete. We proceed after the manner of the investigator of nature. We, too, have our dissecting knife and microscope, and we have an advantage over the student of nature in this, that the self-observation of the body is exceedingly limited, while that of mind is almost unlimited. There are other respects, however, in which he has the advantage over us. When he wishes to study a given species, he may make a hundred or a thousand experiments, and use a hundred or a thousand individuals for his purpose. Hence, he can easily control each separate observation, and distinguish the exception from the rule. But, how many nations are there which we can make use of for purposes of comparison? Their very fewness makes it all the more imperative to compare them all. Doubtless, comparison cannot supply the place of observation; but observation may be thus rendered more thorough, many-sided, and richer in the number of its points of view. Interested alike in the differences and resemblances, we must first form our rules from the latter, consider the former as the exceptions, and then endeavor to explain them. (Infra, 266).

Section XXVII.

Advantages Of The Historical Or Physiological Method.

The thorough application of this method will do away with a great number of controversies on important questions.(176) Men are as far removed from being devils as from being angels. We meet with few who are only guided by ideal motives, but with few, also, who hearken only to the voice of egotism, and care for nothing but themselves. It may, therefore, be assumed, that any view current on certain tangible interests which concern man very nearly, and which has been shared by great parties and even by whole peoples for generations, is not based only on ignorance or a perverse love of wrong. The error consists more frequently in applying measures wholesome and even absolutely necessary under certain circumstances, to circumstances entirely different. And here, a thorough insight into the conditions of the measure suffices to compose the differences between the two parties. Once the natural laws of Political Economy are sufficiently known and recognized, all that is needed, in any given instance, is more exact and reliable statistics of the fact involved, to reconcile all party controversies on questions of the politics of public economy, so far, at least, as these controversies arise from a difference of opinion. It may be that science may never attain to this, in consequence of the new problems which are ever arising and demanding a solution. It may be, too, that in the greater number of party controversies, the opposed purposes of the parties play a more important part even than the opposed views. Be this as it may, it is necessary, especially in an age as deeply agitated as our own, when every good citizen is in duty bound to ally himself to party, that every honest party-man should seek to secure, amid the ocean of ephemeral opinions, a firm island of scientific truth, as universally recognized as truth as are the principles of mathematical physics by physicians of the most various schools.

Section XXVIII.

Advantages Of The Historical Method. (Continued.)

Another characteristic feature of the historical method is that it does away with the feeling of self-sufficiency, and the braggadocio which cause most men to ridicule what they do not understand, and the higher to look down with contempt on lower civilizations. Whoever is acquainted with the laws of the development of the plant, cannot fail to see in the seed the germ of its growth, and in its flower, the herald of decay. If there were inhabitants of the moon, and one of them should visit our earth, and find children and grown people side by side, while ignorant of the laws of human development, would he not look upon the most beautiful child as a mere monster, with an enormous head, with arms and legs of stunted growth, useless genitals, and destitute of reason? The folly of such a judgment would be obvious to every one; and yet we meet with thousands like it on the state and the public economy of nations when in lower stages of civilization, and this, even among the most distinguished writers.(177)

We may, indeed, make a critical comparison of different forms, each of which answers perfectly to its object or contents; but such a comparison can possess historical objectivity, only when it is based on a correct view of the peculiar course of development followed by the people in question.

The forms of the period of maturity may be considered the most perfect; earlier forms as the immature, and the later as those of the age of decline.(178) But it is a matter of the greatest difficulty, accurately to determine the culminating point of a people's civilization. The old man believes, as a rule, that the times are growing worse, because he is no longer in a way to utilize them; the young man, as a rule, that they are growing better, because he hopes to turn them to account. It is, however, always a purely empirical question; and in the solution of it, the observer's eye may acquire a singular acuteness by the comparative study of as many nations as possible, especially of those which have already passed away.(179)

Could anyone contemplate the history of mankind as a a whole, of which the histories of individual nations are but the parts, the successive steps in the evolution of humanity would of course afford him a similar objective rule for all these points in which whole peoples permanently differ from one another.(180)

Section XXIX.

The Practical Character Of The Historical Method In Political Economy.

Before I close, I must refer to a possible objection which may be made to historical or physiological Political Economy: that it may indeed be taught, but that it cannot be a practical science. If it be assumed that those principles only are practical, which may be applied immediately by every reader, in practice, this work must disclaim all pretensions to that title. I doubt very much if, in this sense, there is a single science susceptible of a practical exposition.(181) Genuine practitioners, who know life with its thousands of relations by experience, will be the first to grant that such a collection of prescriptions, when the question is the knowledge and guidance of men, would be misleading and dangerous in proportion as such prescriptions were positive and apodictic, that is non-practical and doctrinarian.

Our endeavor has been, not to write a practical book, but to train our readers to be practical. To this end, we have sought to describe the laws of nature which man cannot control, but, at most, only utilize. We call the attention of the reader to the different points of view, from which every economic fact must be observed, to do justice to every claim. We would like to accustom the reader, when he is examining the most insignificant politico-economical fact, never to lose sight of the whole, not only of public economy but of national life. We are very strongly of the opinion, that only he can form a correct judgment and defend his views against all objections, on such questions as to where, how and when certain liens and charges, monopolies, privileges, services etc., should be abolished, who fully understands why they were once imposed or introduced. Especially, do we not desire to impress a certain number of rules of action on those who have confided themselves to our guidance, after having first demonstrated their excellence. Our highest ambition is to put our readers in a way to discover such rules of direction for themselves, after they have conscientiously weighed all the facts, untrammeled by any earthly authority whatever.(182)(183)

Book I.


Chapter I.

Factors Of Production.

Section XXX.

Meaning Of Production.

To create new matter is more than it is given to man to do. Hence, by the term production, in its widest sense, we mean simply the bringing forth of new goods—the discovery of new utilities, the change or transformation of already existing goods into new utilities,(184) the creation of means for the satisfaction of human wants, out of the aggregate of matter originally present in the world. (Producere!) We confine ourselves, however, in this to economic goods, as defined in 2. In a secondary and more limited sense, production is an increase of resources, in so far as the goods produced satisfy a greater human want, than those employed in the production itself.(185)(186)(187)

It would, however, be an error to suppose, that the creation of certain utilities for the producer himself, or for others, constitutes the only end of economic production. The more perfect economic production becomes, the greater grows the pleasure the producer feels in his products, which pleasure is at once the effect and the cause of his success. Hence, production is to a great extent its own end. That this is so in the case of artists is well known. "If you want only progeny from her, a mortal can beget them as well. Let him who rejoices in the goddess, not seek in her the woman," says Schiller. There is not a really clever workman but has something artistic in his mode of production. And even the meanest productive activity, provided it is neither over-driven nor misdirected, must of itself exert a good influence on the physical and moral development or preservation of the producer. An idle brain is the devil's workshop.(188)

Section XXXI.

The Factors Of Production.—External Nature.(189)

The division of natural forces which formerly obtained, into organic, chemical and mechanical, is of no great importance in Political Economy. The tendency is more and more to resolve organic forces partly into chemical and partly into mechanical. Between mechanical and chemical forces, again, the boundary is not fixed, heat being always capable of producing motion, and motion always of producing heat. Hence, it is all the more important for us to find a division of the economic gifts (matter, forces(190) and relations) of external nature, into such as are capable of acquiring exchange value, and such as are not. (See 5.)

A. Those gifts of nature which, because they cannot be appropriated by any one, or which at least are inexhaustible as compared with the wants of man, and therefore never have a direct value in exchange, belong either to the class of free goods, in the fullest sense of the word, as, for instance, sunlight and the atmosphere (supra, 5);(191) or they constitute, by reason of their peculiar and intransmissible connection with the whole country, an essential element of the national resources.

Section XXXII.

External Nature.—The Sea.—Climate.

To the last category belongs, for instance, the sea, the only natural boundary of a country, which from a military point of view, constitutes a protection to it, without, at the same time, disturbing peaceful traffic. (Riedel.) Here, also belong ocean currents, especially when uniformly supported by regular winds,(192) the ebb and flow of the tides, which constitute a piece of commercial machinery of the very greatest importance, particularly when they affect the waters of rivers to a great distance.(193) In this age, when the love of travel is so great and so universal, what prices are paid in many places by strangers for the beauty of a landscape, to its owner.

Special mention should be here made of climate, and of its heat or moisture. The lines called isothermal, that is, lines of equal annual heat, are, therefore, of greatest importance to public economy, because the "zones of production" depend mainly on them.(194) However, we are concerned here, not only with the average temperature of the whole year, but especially with the distribution of heat among the several parts of the day and the different seasons of the year, and the maximum summer heat and winter cold (the isothermal and iso-cheimenal lines). Coast lands are wont to have a milder winter and a cooler summer than continental ones with an equal average yearly heat. This produces a great difference in vegetation, because there are a great many plants which can endure the winter's cold very well, but require a hot summer; and vice versa.(195) Were it not for this fact, in connection with the winter-sleep of plants, a large portion of the north would be entirely uninhabitable. Besides, the temperature of a place does not depend exclusively on its latitude, or on its height above the sea-level.(196) The humidity of the climate is, as a rule, great in proportion to the quantity of water in its neighborhood, and to the height of its temperature; although, for instance, in Europe, the number of rainy days increases, the further we advance towards the north.(197) Although the distance of a place from the equator and its height above the level of the sea have, in many respects, a similar effect (vertical, horizontal isothermal lines and zones of production), mountainous regions are uniformly distinguished by a greater degree of humidity, which makes them better adapted for pasturage and forest-culture. But the flora of a locality, being the resultant of all its conditions, affords us a much better criterion of the value of the climate for economic purposes, than the most accurate thermometric observations. Other things being equal, the productive force of nature operates, doubtless, with most energy, in warm climates. The more remote a country is from the equator, the more is its fertility confined to its lowest parts.(198) Greater heat will, as a rule, ripen the same product sooner, and thus permit the same land to be used several times in the same year.(199) Each individual harvest, as a rule, is more abundant,(200) and the products better in many respects. The fruit, for instance, and wine, contain more sugar,(201) and oleaginous plants contain more oil. Lastly, since nature in warm countries is so much more generous, it may be utilized by man with less regard for consequences. There is less need of extensive woods, of large winter supplies, especially for animals;(202) fewer buildings are demanded, and there is also less demand for human and brute labor, since the work of plowing, sowing etc., extends over a greater portion of the year.(203) It is true, on the other hand, that also the destructive force of nature is greater in warmer than in colder countries. ( 209.)(204)

Section XXXIII.

External Nature.—Gifts Of Nature With Value In Exchange.

B. Those gifts of external nature which may become objects of private property, and at the same time possess sufficient relative scarcity to give them value in exchange, are either movable, and exhaustible in a given place, or firmly connected with the land. The first category embraces, for instance, such wild animals and plants as serve some useful purpose, minerals, above all, fossil combustible matter(205)—the "black diamonds," coal, of which, with its canals, Franklin said that it had made England what it is. The economical effect of their moveable character is best seen, when the use made of an ordinary stratum of coal is compared with that of a protracted subterranean fire in a coal mine.(206) The latter can be directly useful only to those in its immediate vicinity. Every lower layer of the burning coal would be less useful. An increase of its actual power by accumulation in time or place is scarcely possible. In all these respects, the movable coal is incomparably better adapted to the satisfaction of man's wants. It may be said that the capacity of heat for drying, distilling, melting and hardening purposes, of imparting rapid motion to heavy objects by the production of confined steam, is, at least, a thousand times as great when a thousand bushels of coal are consumed as when one is consumed. In most cases even the concentration of a large quantity of coal will increase, the result not only absolutely, but relatively.(207)(208)

Section XXXIV.

External Nature. (Continued.)

The materials, forces and relations or conditions of external nature, immovably connected with parts of the land, even when in themselves exhaustless, either allow only of a definite amount of economic utilization, as, for instance, the mechanical force of a given waterfall, which can drive only a definite number of mills of a definite size;(209) or their increased utilization is accompanied by difficulties which increase with still greater rapidity. This last is the case, especially in the employment of land for agricultural purposes. It is, according to Senior, one of the four fundamental axioms of Political Economy, that additional labor, spent on a given quantity of land, produces, as a rule, a relatively smaller yield; assuming, of course, that the art of agriculture remains the same. It is not possible to determine either generally, or in particular cases, the precise point at which agriculture should stop, to prevent relatively smaller returns from increased expenditure of labor and capital. Improvements in the art of agriculture may remove it a great distance. But, that there is such a point admits of no doubt. No one will believe that an acre of land can be made to produce a quantity of the means of subsistence sufficient to support all Europe, no matter what the amount of seed used, or of manure etc. employed.(210) This is most apparent in forest-economy, where the absolute increase of the so-called wood-capital becomes, after a certain time, smaller from year to year.(211)

Section XXXV.

External Nature.—Elements Of Agricultural Productiveness.

In treating of the agricultural productiveness of a piece of land, it is necessary to distinguish three things,—its bearing-capacity, its capacity for cultivation, and its direct capacity to afford food to plants.(212) Plants grow by drawing a part of the elements which enter into their composition from the atmosphere, and a part from the earth through the agencies of sunlight and of water. While the air, the sun's heat, and in most parts of the world, water, are free and inexhaustible goods, the earth's supply of food for plants must be considered as analogous, so far as its exhaustibility and capacity to be appropriated are concerned, to the beds of coal and of ore etc. which occur in mining districts. This is certainly true, with a few important differences, however, as for instance, that, as a rule, it is impossible, except through the cultivation of plants, to obtain from the earth the stores of plant food which it contains;(213) and that it is possible to husbandry to replace the portion of these stores taken from the earth by the harvest, through the agency of manures.(214)

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