Principles of Political Economy

The German mind has always been familiar with the interference of the state, and a class of writers has arisen, not only advocating the inductive method, but strongly imbued with a belief in a close connection of the state with industry; and, inasmuch as the essence of modern socialism is a resort to state-help, this body of men, with Wagner at their head, has received the name of “Socialists(85) of the Chair,” and now wield a wide influence in Germany. Of these writers,(86) Wagner, Engel, Schmoller, Von Scheel, Brentano, Held, Schönberg, and Schäffle are the most prominent. The historical school has received the adhesion of Émile de Laveleye,(87) in Belgium, and other economists in England and the United States. While Cliffe Leslie has been the most vigorous opponent of the methods of the old school, there have been many others of less distinction. Indeed, the period, the close of which is marked by J. R. McCulloch’s book, was one in which the old school had seemingly come to an end of its progress, from too close an adhesion to deductions from assumed premises. Mill’s great merit was that he began the movement to better adapt political economy to society as it actually existed; and the historical school will probably give a most desirable impetus to the same results, even though its exaggerated claims as to the true method(88) can not possibly be admitted. Italian writers have not received hitherto the attention they deserve. After 1830, besides Rossi, who went to France, there was Romagnosi, who dealt more with the relations of economics to other studies; Cattanes, who turned to rural questions and free trade (combating the German, List); Scialoja, at the University of Turin; and Francesco Ferrara, also at Turin from 1849 to 1858. The latter was a follower of Bastiat and Carey, as regards value and rent, and at the same time was a radical believer in _laissez-faire_. Since the union of Italy there has been a new interest in economic study, as with us after our war. The most eminent living Italian economist is said to be Angelo Messedaglia, holding a chair at Padua since 1858. He has excelled in statistical and financial subjects, and is now engaged on a treatise on money, “Moneta,” of which one part has been issued (1882). Marco Minghetti and Fedele Lampertico stand above others, the former for a study of the connection of political economy with morals, and for his public career as a statesman; the latter for his studies on paper money and other subjects. Carlo Ferrais presented a good monograph on “Money and the Forced Currency” (1879); and Boccardo issued a library of selected works of the best economists, and a large Dictionary of Political Economy, “Dizionario universale di Economia Politica e di Commercio” (2 vols., second edition, 1875). Luigi Luzzati is a vigorous advocate of co-operation; and Elia Lattes has made a serious study of the early Venetian banks. Political economy has gained little from American writers. Of our statesmen none have made any additions to the science, and only Hamilton and Gallatin can properly be called economists. Hamilton, in his famous “Report on Manufactures” (1791), shared in some of the erroneous conceptions of his day; but this paper, together with his reports on a national bank and the public credit, are evidences of a real economic power. Gallatin’s “Memorial in Favor of Tariff Reform” (1832) is as able as Hamilton’s report on manufactures, and a strong argument against protection. Both men made a reputation as practical financiers. “With few exceptions, the works produced in the United States have been prepared as text-books(89) by authors engaged in college instruction, and therefore chiefly interested in bringing principles previously worked out by others within the easy comprehension of undergraduate students.”(90) Of these exceptions, Alexander H. Everett’s “New Ideas on Population”(91) (1822), forms a valuable part in the discussion which followed the appearance of Malthus’s “Essay.” The writer, however, who has drawn most attention, at home and abroad, for a vigorous attack on the doctrines of Ricardo is Henry Charles Carey.(92) Beginning with “The Rate of Wages” (1835), he developed a new theory of value (see “Principles of Political Economy,” 1837-1840), “which he defined as a measure of the resistance to be overcome in obtaining things required for use, or the measure of the power of nature over man. In simpler terms, value is measured by the cost of reproduction. The value of every article thus declines as the arts advance, while the general command of commodities constantly increases. This causes a constant fall in the value of accumulated capital as compared with the results of present labor, from which is inferred a tendency toward harmony rather than divergence of interests between capitalist and laborer.” This theory of value(93) he applied to land, and even to man, in his desire to give it universality. He next claimed to have discovered a law of increasing production from land in his “Past, Present, and Future” (1848), which was diametrically opposed to Ricardo’s law of diminishing returns. His proof was an historical one, that in fact the poorer, not the richer lands, were first taken into cultivation. This, however, did not explain the fact that different grades of land are simultaneously under cultivation, on which Ricardo’s doctrine of rent is based. The constantly increasing production of land naturally led Carey to believe in the indefinite increase of population. He, however, was logically brought to accept the supposed law of an ultimate limit to numbers suggested by Herbert Spencer, based on a diminution of human fertility. He tried to identify physical and social laws, and fused his political economy in a system of “Social Science” (1853), and his “Unity of Law” (1872). From about 1845 he became a protectionist, and his writings were vigorously controversial. In his doctrines on money he is distinctly a mercantilist;(94) but, by his earnest attacks on all that has been gained in the science up to his day, he has done a great service in stimulating inquiry and causing a better statement of results. While undoubtedly the best known of American writers, yet, because of a prolix style and an illogical habit of mind, he has had no extended influence on his countrymen.(95) The effect of the civil war is now beginning to show itself in an unmistakable drift toward the investigation of economic questions, and there is a distinctly energetic tone which may bring new contributions from American writers. General Francis A. Walker,(96) in his study on “The Wages Question” (1876), has combated the wages-fund theory, and proposed in its place a doctrine that wages are paid out of the product, and not out of accumulated capital. Professor W. G. Sumner(97) is a vigorous writer in the school of Mill and Cairnes, and has done good work in the cause of sound money doctrines. Both General Walker and Professor Sumner hold to the method of economic investigation as expounded by Mr. Cairnes; although several younger economists show the influence of the German school. Professor A. L. Perry,(98) of Williams College, adopted Bastiat’s theory of value. He also accepts the wages-fund theory, rejects the law of Malthus, and, although believing in the law of diminishing returns from land, regards rent as the reward for a service rendered. Another writer, Henry George,(99) has gained an abnormal prominence by a plausible book, “Progress and Poverty” (1880), which rejects the doctrine of Malthus, and argues that the increase of production of any kind augments the demand for land, and so raises its value. His conclusions lead him to advocate the nationalization of land. Although in opposition to almost all that political economy has yet produced, his writing has drawn to him very unusual notice. The increasing interest in social questions, and the general lack of economic training, which prevents a right estimate of his reasoning by people in general, sufficiently account for the wide attention he has received. Of late, however, new activity has been shown in the establishment of better facilities for the study of political economy in the principal seats of learning—Harvard, Yale, Cornell, Columbia, Michigan, and Pennsylvania: and a “Cyclopædia of Political Science” (1881-1884, three volumes) has been published by J. J. Lalor, after the example of the French dictionaries. Books For Consultation (From English, French, And German Authors). GENERAL TREATISES FORMING A PARALLEL COURSE OF READING WITH MILL. Professor Fawcett’s “Manual of Political Economy” (London, sixth edition, 1883) is a brief statement of Mill’s book, with additional matter on the precious metals, slavery, trades-unions, co-operation, local taxation, etc. Antoine-Élise Cherbuliez’s “Précis de la science économique” (Paris, 1862, 2 vols.) follows the same arrangement as Mill, and is considered the best treatise on economic science in the French language. He is methodical, profound, and clear, and separates pure from applied political economy. Other excellent books in French are: Courcelle-Seneuil’s “Traité théorique et pratique d’économie politique” (1858), (Paris, second edition, 1867, 2 vols.), and a compendium by Henri Baudrillart, “Manuel d’économie politique” (third edition, 1872). Roscher’s “Principles of Political Economy” is a good example of the German historical method; its notes are crowded with facts; but the English translation (New York, 1878) is badly done. There is an excellent translation of it into French by Wolowski. A desirable elementary work, “The Economics of Industry” (London, 1879), was prepared by Mr. and Mrs. Marshall. Professor Jevons wrote a “Primer of Political Economy” (1878), which is a simple, bird’s-eye view of the subject in a very narrow compass. IMPORTANT GENERAL WORKS. Adam Smith’s “Wealth of Nations” (1776). The edition of McCulloch is perhaps more serviceable than that of J. E. T. Rogers. Ricardo’s “Principles of Political Economy and Taxation” (1817). J. S. Mill’s “Principles of Political Economy” (2 vols., 1848—sixth edition, 1865). Schönberg’s “Handbuch der politischen Oekonomie” (1882). This is a large co-operative treatise by twenty-one writers from the historical school. Cairnes’s “Leading Principles of Political Economy” (1874); “Logical Method” (1875), lectures first delivered in Dublin in 1857. Carey’s “Social Science” (1877). This has been abridged in one volume by Kate McKean. F. A. Walker’s “Political Economy” (1883). This author differs from other economists, particularly on wages and questions of distribution. H. George’s “Progress and Poverty” (1879). In connection with this, read F. A. Walker’s “Land and Rent” (1884). TREATISES ON SPECIAL SUBJECTS. W. T. Thornton’s “On Labor” (1869). McLeod’s “Theory and Practice of Banking” (second edition, 1875-1876). M. Block’s “Traité théorique et pratique de statistique” (1878). Goschen’s “Theory of Foreign Exchanges” (eighth edition, 1875). J. Caird’s “Landed Interest” (fourth edition, 1880), treating of English land and the food-supply. W. G. Sumner’s “History of American Currency” (1874). John Jay Knox’s “United States Notes” (1884). Jevons’s “Money and the Mechanism of Exchange” (1875). Tooke and Newmarch’s “History of Prices” (1837-1856), in six volumes. Leroy-Beaulieu’s “Traité de la science des finances” (1883). This is an extended work, in two volumes, on taxation and finance; “Essai sur la répartition des richesses” (second edition, 1883). F. A. Walker’s “The Wages Question” (1876); “Money” (1878). L. Reybaud’s “Études sur les réformateurs contemporains, ou socialistes modernes” (seventh edition, 1864). DICTIONARIES. McCulloch’s “Commercial Dictionary” (new and enlarged edition, 1882).