The Development of Economic Doctrine: An Introductory Survey

CHAPTER IX

THE OPTIMISTS: CAREY AND BASTIAT

IT has been seen that classical Political Economy, as represented by Malthus and Ricardo, tended to certain pessimistic conclusions, above all in the inferences to be drawn from the Law of Rent, based on a Law of Diminishing Returns, and from the so-called Principle of Population, especially if this latter be carelessly apprehended. Moreover, apart from the disconcerting vision of a future in which an increasing proportion of the world’s produce would be diverted to an idle class, in which for an ever-increasing number there would be “no place at Nature’s feast,” it is to be noted that the classical school tended to a system of disharmonies and conflict. Even if outward peace might be preserved, there was at the heart of things incompatibility of interest.

Carey

The reaction to a more optimistic view of things is primarily and most conveniently represented by Henry Charles Carey1 (1793-1879), who indeed was at one time regarded as the representative of a peculiarly American Political Economy. In his time he exercised great influence, though less so in this country than in America and on the Continent; for us, at least, he has now faded into comparative insignificance, cursed by his own voluminousness and repetitiveness, and, it must be added, by a rather naïve foolishness. But to the persevering and buoyant reader he is not without interest. He had ideas which are not wholly unjust; he is, above all, the supreme example of the truth that the economist reflects his environment. Moreover, there is always profit in reconsidering an author who, like Carey, has continued to rank higher elsewhere than with us. While others may have been more than generous, we may have been less than just.

The central point in Carey’s theorizing is probably most conveniently found in his theory of value.2 Labour is, for him, the sole cause of value, but Carey’s labour theory of value has variations which lead to his peculiar conclusions. In the earliest Robinson Crusoe stage of economy (to which Carey is much addicted) articles will be measured or exchanged in proportion to the labour required; but with the appearance of capital on the scene, a change is effected in all existing values, and things will now exchange in accordance with their cost of reproduction. But with the progress of humanity, this cost of reproduction steadily falls, and there is thus a steady decline in the value of all existing capital. Value, in Carey’s rather peculiar phrase, is an “estimate of the resistance to be overcome before we can enter upon the possession of the thing desired.” It follows from this that, as labour aided by capital is superior in quality, the exchange value of labour expressed in commodities will constantly increase; while at the same time existing capital will experience a corresponding decline in values, expressed in labour, since at each stage its value is limited by its cost of reproduction, which by hypothesis is constantly falling. Moreover, not only is the labour value of all previously existing machinery constantly declining, but Carey also shows, by reasoning which is by no means impeccable, that there is likewise a diminution in the proportion of the product of labour that can be demanded for granting the use of it. The position of the labourer, that is to say, is constantly improving; the capitalist’s reward tends to increase absolutely, but it is a diminishing proportion of an increasing product.3

Carey extends the sphere of his harmony by entirely identifying land with other forms of capital, and thus eliminating rent as a separate category. He held that “capital in land differs in no respect from that invested in other machinery, that rent is only interest for capital invested, and that the value of all landed property is due, like that of all gifts of Nature existing in unlimited quantity, solely to the labour employed in its appropriation and improvement.”4 The analogy with other forms of capital also holds inasmuch as with the progress of society, later farms are brought under cultivation at less cost, so that here also the cost of reproduction is constantly falling. This is proved by the fact that land invariably sells at less than its cost of subjugation, which sufficiently refutes the Ricardian assumption that a payment is made for the “original and indestructible powers” of the soil. These last, in fact, have no existence.

It will be observed that Carey’s views are the expression of a belief in the progress, and indeed the indefinite progress, of society. Everywhere he reflects the spacious days of the early settler, when every new man added to the primitive community represented a fresh ally in the struggle against Nature. It is characteristic of Carey that, like Müller, though with a different emphasis, he makes association the fundamental need of man: “The first and great desire of man is that of association with his fellow men; and it is so because he feels that improvement of his condition, physical, moral, mental and political, is its uniform accompaniment.”5 The development and growing strength of the early community in which “the carpenter comes to exchange his labour for food,” or the farmer rejoices in the arrival of the blacksmith, furnish, in his writings, a constantly recurring idyllic picture.

Thus, viewing life from the point of view of a settler in a new country, Carey is led to deny, and indeed with vituperation and abuse, the Law of Diminishing Returns (and with it the Ricardian Law of Rent), as also the Malthusian Principle of Population. Ricardo, he says—and it is a significant sentence—“had never witnessed as at the moment we do from the window at which we write, the progress of a new settlement.” In his restatement of Ricardo’s theory, the whole doctrine is represented as resting on the proposition that in the commencement of cultivation, the best soils alone are cultivated. “That fact exists, or it does not. If it has no existence, the (Ricardian) system falls to the ground.” Accordingly a very large part of Carey is taken up with a wide inductive survey tending to prove, and with success, that the order of cultivation is the reverse of that which he regards as the essential basis of Ricardo’s theory. It is the inferior soil that is first cultivated, and it is first cultivated because it is less cumbered with vegetation and therefore more manageable in the earlier stages. It is only with increased power and with association that a descent is made from the hill-sides to the richer valleys. “We know of no exception to this rule, and we feel assured that none exists or can exist.”6 In accordance with his identification of land with other forms of capital, “the earth,” for Carey, “is a great machine given to man to be fashioned to his purpose,” but it is of the essence of all progress that man everywhere begins with the worst and proceeds to the best. First of all there are axes of stone, then of iron and lastly of steel. It is only in regard to the machinery for obtaining food, if we accept Ricardo’s theory, that man begins with the best and proceeds to the worst.7

It may be conceded that as a matter of historical investigation, Carey amply establishes his point regarding the order of settlement. There are, however, two obvious comments. In the first place, despite Carey’s dogmatism, Ricardo’s theory in no wise postulates a historical progress from the best soils in the beginnings of cultivation to inferior soils later. Ricardo was concerned with comparative fertility at any given time. That, for a time, there may be increasing returns in agriculture, that the more fertile soils at one time may be less fertile later, would have left Ricardo cold. In his voluminous criticisms of Ricardo, Carey proves primarily that he had failed to understand what Ricardo meant, just as elsewhere he manifests a similar lack of comprehension with regard to Malthus. But Carey’s work is not in vain. Apart from the historical interest of his researches, he has doubtless compelled a more careful statement of the Law of Diminishing Returns by necessitating emphasis on these blessed words: “beyond a certain point.” The other aspect provoking comment is the obvious fallacy involved in the constantly recurring analogy of the stone, the iron and the steel axe, as typifying progress from inferior to superior instruments. In the first place, when men advance beyond the stone axe, the stone axe is scrapped. Not so with the inferior land first cultivated; even if temporarily abandoned, it is kept in reserve. And secondly, when, if ever, the human race, made strong by association, has gone down into the valleys everywhere, there will obviously be no more valleys to descend, no lands of still higher fertility to cultivate, and the only course will be to return to what may have been temporarily abandoned. In short, with regard to machinery the human race tends to restrict itself to the best known at any time, so that the instruments in use tend to be of uniform efficiency. It is quite otherwise in land, where “instruments “of different efficiency are necessarily used simultaneously; and herein lies the whole of the Ricardian theory of rent.

But these things do not trouble Carey, for to him the world is limitless, nor is there any obstacle to the constant progression of increasing returns in agriculture. And indeed, greatly daring, he has the courage to say so expressly. “There is now, and always has been, an abundance of unoccupied land”; there is an “almost infinite extent of soil capable of yielding food” which yet remains unoccupied and unproductive. The earth is the great labour savings bank, the only bank “whose dividends are perpetually increasing while its capital is perpetually doubling,” and it will continue to do so for ever, provided it receives back the refuse of its produce—a point of importance in connection with Carey’s protectionist views. In short, agriculture is the only field “in which an almost unlimited amount of labour and capital might be employed at a constantly increasing rate of return.”8

These considerations, in themselves, indicate in part the nature of Carey’s reply to Malthus. It is fundamental to his doctrine that under natural conditions, and unless prevented by disturbing causes, capital will tend to increase more rapidly than population.9 This merely reflects the virtue of association and the increasing power of numbers over the forces of Nature, when “each successive addition to the population brings a consumer and a producer,”10 when the first early settlement, poor by reason of the paucity of its numbers, advances in efficiency and the power to produce wealth with each accession. All this is true. Men cannot live alone, and when population is sparse, the first condition of an increase of welfare is an increase of population. But beyond this caveat, perfectly justifiable in view of the conditions of America in the early nineteenth century, Carey advances to a jumble of curious arguments against Malthus. The one which weighed most with him is theological in origin, for whereas God had said: “Be fruitful and multiply,” the modern school of Political Economy says: “Be not fruitful; do not multiply.” “It prescribes disobedience to the earliest of God’s commands; it ascribes poverty and wretchedness to the erroneous arrangements of the Deity.”11 In a curiously confused criticism of Malthus, he points out that the Malthusian theory inverts the true order of things.12 It is when population increases that food is abundant. Again, on the Malthusian theory when the Malthusian checks are operative, food ought to be most redundant; but during war there is distress: “Peace comes—the remedy is withdrawn—and capital begins again to increase.”13 Put tersely: “Is war required to correct an error of the Creator, or has the Creator Himself provided the corrective required for removing the effects of human error?”14 All this is to betray a naïve misunderstanding of Malthus, but Carey in crusading against Malthus is largely inspired by a desire to justify the ways of God to man, and his arguments directed to that end have a childlike simplicity distantly reminiscent of Fourier.

One other argument, in itself inexpressibly foolish, which nevertheless has done good service in its time, finds its highest expression in Carey, and might also have been to the liking of Fourier. Even if man has a tendency to increase in a geometrical progression, is he not for his sustenance dependent on lower animals and vegetables, and do they not manifest a similar tendency to increase in a geometrical ratio? But Carey would have us believe that the situation is even more comforting for man than this general reflection would indicate. Men, the devourers, and rabbits, the devoured, may alike tend to increase geometrically, but it is notorious that rabbits are the more potent multipliers. The increase in numbers is everywhere, he holds, in the inverse ratio of development; as the riddle used to put it, “the higher, the fewer.” But on the Malthusian doctrine, when we come to man, “we learn the existence of a new and greater law, in virtue of which man increases in a geometrical ratio, while the increase of herrings, rabbits, oysters, potatoes, turnips and all other commodities required for his use is limited to the arithmetical one!“15 Elsewhere he tells us that “rapid as has been the growth of American population, that of the supply of oysters has been far more so.”16 On Carey’s philosophy, the obvious remedy for unemployment is for the unemployed to take to the breeding of rabbits, or still better the cultivation of oysters.

Equally deserving of note, if only as a curiosity, is the argument which centres in carbonic acid. With progress and advancing civilization, the larger lower animals die out, with a consequent disturbance of the supply of carbonic acid necessary for the maintenance of plant life. Hence, if only as producers of carbonic acid, there is need for more men to compensate for the extirpation of their larger but lower fellow-creatures. Men must breathe more, if lions breathe less. This is but another example of the “beauty of all natural arrangements.”17

In themselves such arguments are not sufficient to lay the Malthusian devil, and Carey realizes it. In his early writings he admitted that the time might come when “there will not be even standing room,” but he is content to “leave that distant future to the benevolent care of the Deity.”18 There is no immediate necessity for becoming idle, intemperate and profligate with a view to increasing the supply of food. He admits, at this stage, that possibly, and even probably, the world will some day be over-peopled, “but we must leave it to our successors to adopt the remedies whenever they shall see cause to believe that they will thereby improve their condition.”19

Nevertheless, to an apostle of harmony, such a postponement of trouble to a future, however remote, could not be satisfactory, and in his final statement he admits that if, as he puts it, “the procreative tendency is a positive quantity,’’ slavery will be the ultimate condition of the great mass of the race, and man will ultimately be subdued by Nature.20 To meet this difficulty, there is one obvious method of argument. If it can be proved that the procreative power is not constant, but is in fact a variable quantity, it will be possible to re-establish the harmony so dear to Carey’s heart. Such, in fact, is Carey’s line of argument. He cites (although there is much unconscious Malthusianism mixed up with the argument) many instances of variable procreative power, and advances the general argument that there is a relationship between the nervous and the reproductive powers.21 As energy is diverted from the muscular to the nervous system, so will the ratio of procreation diminish. Sterility goes with mental eminence, and as the race progresses there will be a natural diminution in the rate of increase. Thus harmony is again established; the Malthusian checks become superfluous, because there is a divine, self-adjusting mechanism which will temper the flow of population.

Carey is usually regarded as being the twin-exponent of Protection, alongside List. But indeed his Protection is of a most unscientific kind, springing from instinct rather than from reason. It is not for him to pursue the intricacies of the incidence of import duties. His protectionism, when it comes, is again the natural ejaculation of a backwoodsman, girding at his primitive environment. At the outset Carey was an orthodox free-trader, regarding Protection as a device “to frustrate the beneficent designs of the Deity,”22 but with his growing appreciation of the advantages of association, he became rapidly and somewhat foolishly protectionist. Here Carey’s fundamental idea, from which all others radiate, is the importance of bringing the producer and the consumer into close proximity; thus Protection represents an instinctive effort to obtain that combination which elsewhere he so fervently lauds. With Carey there are no half-lights. “Protection is right or wrong. Free Trade is right or wrong....Half-way measures are always wrong.”23

Another idea constantly recurs in Carey, so that it almost acquires the importance of an idée mère. It is his own peculiar distinction between commerce and trade. Commerce is the natural interchange between members of a community and is blessed; trade is the carrying of things to far countries and is accursed. Epigrammatically put, the followers of commerce desire to effect exchanges with their fellow-men; those engaged in trade desire to effect exchanges for them.24

Carey’s protectionism, then, is largely summed up in his proposition that “the first and heaviest tax to be paid by land and labour is that of transportation,” and in a phrase of which he never wearies, he desires to eliminate this tax by bringing “the loom and the anvil to take their natural places by the side of the plough and the harrow.” Most of his arguments, indeed, are but variants of this fundamental contention that “the object of Protection is that of diminishing the distance and the waste between the producer and the consumer,” that it is no more than an instinctive effort to attain combination.25 Some of the variations of the theme, however, are interesting, and others not unamusing. Protection promotes concentration; Free Trade dispersion. Protection is competition for the purchase of labour; Free Trade for the sale of labour. As war is encouraged if men are cheap, Free Trade encourages war. Free Trade, again, stands for distant markets; Protection for the home market; but those who seek distant markets are separated from their wives and children, spend much time on the road and in taverns, and are thus liable to be led into dissipation. Free Trade thus stands for the dissipation of the tavern; Protection for the blessedness of the home. But these, and other striking points, are perhaps but the embroidery of the argument.26

But there is one subsidiary argument of a different character. The unprotected country which is restricted to agriculture is in effect selling its own soil. The principle of returning waste products to the soil as a condition of the land playing its part in yielding ever-increasing returns exercised a curious fascination over Carey’s mind, and it involves as a consequence that the place of consumption must be sufficiently near to enable the earth to get back its own.27 Thus we arrive at a further conclusion, suggestive of List, that “manufactures always precede, and never follow, the creation of a real agriculture. In the absence of the former, all attempts at cultivation are limited to the work of tearing out and exporting the soil in the form of rude products.”28 The reader who desires economic comment on this argument will find it in its appropriate place (Book V, chap. 10) in John Stuart Mill, who apparently thought it worthy of his heaviest artillery.

Despite a certain tendency to foolishness,29 Carey is an important figure in the development of economic doctrine. He represents primarily a reaction against the pessimism of the classical school. His theory of value, resting on the idea of constant depreciation of existing wealth consequent on progress, was designed to prove the ultimate harmony of all things. There is “a perfect harmony of real and true interests among the various classes of mankind“30 —an idea to reappear in Bastiat. This is his central doctrine, but it is naturally buttressed by vigorous attacks on the two chief sources of classical pessimism, the Law of Diminishing Returns and the Principle of Population. Much of his criticism has at least the minor merit of compelling in others a greater fastidiousness of statement, if only in order to avoid being misunderstood and misrepresented by the Careys of this world. His glaring and most obvious defect is that for which he reproached others, that he is, namely, so restricted and limited by his environment. He is pathetically the economist of the earliest stage of colonization, imbued with a touching faith that there will always be wild waste places, that there will always be room, and that men will never have cause to fear the stinginess of the earth or the embarrassing fecundity of women.

Bastiat

Time has perhaps hardly been kind to Frederic Bastiat31 (1801-1850), yet he deserves a place among the landmarks. His curse was that he was pre-eminently an esprit vulgarisateur in the convenient French phrase. Not the least remarkable feature in Bastiat’s career is the fact that he began to write so late in life, and, since he died young, his very considerable literary output was the result of about five years’ feverish activity. Primarily, Bastiat was a journalist, not using the word with any highbrow condescension, but merely implying its literal sense, that he was a man who served the needs of the day. And as a journalist Bastiat has had few equals. No one has ever been quite so skilful in making the case of his antagonist look extremely foolish. Even now his most ephemeral work remains a joy to read, by reason of its wit, its merciless satire and the neatness wherewith he pinks his opponents.

Bastiat, being a journalist, was, however, never able to remove himself from the controversies of the day; and his very skill in scoring off others has created a posthumous suspicion that, if not exactly a quack in the austere eyes of science, his was at least a shallow, if an agile, mind. Bastiat was moved to write by two of the most seductive (because inexhaustible) and most enduring of journalist topics—the Free Trade and Protectionist controversy, and the eternal dispute concerning Socialism. His objection to Protection is fundamentally the same as that which he urges against Socialism; they are both devices of exploitation. The manufacturer who cannot make a profit invokes Protection, whereby the State will guarantee him a profit at other people’s expense; so likewise Socialism involves a denial of individual responsibility. Thus, in one of his most amusing skits,32 he arrives at his definition of the State as “the great fiction, by means of which everybody contrives to live at the expense of everybody else.” It is true that it is a rather crude Protection against which he tilts, just as there is not much subtlety in the Socialism against which he inveighs; but how effective his satire can be, is seen in the immortal petition of the candle-makers against the competition of the sun, or in the less well-known proposal to renounce the use of the right hand with a view to the attainment of greater wealth, based on the following train of reasoning: “The more one works, the richer one is; the greater the obstacles to be overcome, the more one has to work; therefore the greater the obstacles to be overcome, the richer one is.” Perhaps it is all slightly puerile, and his reputation as a serious writer has doubtless suffered from the faint aroma of the very junior class-room which hangs about his fables and his allegories. Nevertheless, the cause is fortunate which enlists the services of a Bastiat.

The assault on Protection and on Socialism represents the negative, destructive side of Bastiat, and it is seen at its best in The Economic Sophisms. Before his death, he embarked on a more ambitious statement of the positive side of his doctrine, of which, however, only one volume appeared. The title of this work, Economic Harmonies, sums up the essence of Bastiat. He had attacked Protection and Socialism because they represented an unnatural organization of society—each of them devices whereby certain people could sponge on others. Himself an orthodox laissez-faire economist, he was troubled by the inferences drawn from the teaching of Smith, Ricardo and Malthus, pointing to an ultimate antagonism of interests. As becomes an obdurate believer in liberty, he harks back to something like a natural order of society, and speaks reverentially of “les grandes lois providentielles.” But where are we, if these great providential laws precipitate society towards evil, as the doctrines of Ricardo and Malthus would seem to indicate?33 Bastiat, however, cannot accept the view that the various economic laws (as of rent, of population and of value) are silently thrusting society towards injustice and inequality. Herein lies the significance of Bastiat, regarded as something more than a crusader in current controversy. A non-interventionist to the fingertips, he sets out to prove that under the reign of liberty, so far from there being antagonism at the centre of things, there is complete harmony of all legitimate interests.

The essence of his doctrine is found in a rather peculiar view of value, and in a rigid distinction between value and utility.34 Utilities are of two kinds; there are, firstly, those that are accorded gratuitously by Providence, and there are those which are bought by our own efforts. Now the whole essence of progress consists in making proportionately more use of the former than of the latter class, so that a continual process is going on whereby onerous utilities are displaced by gratuitous utilities. Turning to the idea of utility, Bastiat seeks to evade difficulties by linking up the conception with that of a service. “To accomplish an effort in order to satisfy the needs of another is to render him a service.” Services are exchanged against services, and when exchange is free, the services which are exchanged are equivalent in value. There, then, we have “value”; it consists in the comparative appreciation of reciprocal services, or, more briefly, it is “the relation of two services exchanged”—a phrase which covers as miry a bog as any other definition. To introduce the optimistic tinge, it must be remembered that, on this interpretation, the free gifts of Nature have no value. The essence of value lying in human service, it follows that where no service is rendered or received, there can be no value. Thus utility springs from the collaboration of two agencies, which we may call Nature and man’s efforts. The former is gratuitous; the latter alone carries value. But, as has been seen, the meaning of progress and invention is that Nature is constrained to render a more efficacious assistance. Thus utility tends to become more and more gratuitous (since the gifts of Nature are gratuitous) while value, which corresponds to man’s share in the proceedings, tends to fall relatively to the utility. While value rests in the service, and not in the “materiality,” it may nevertheless be transferred from the service to the product, and in a sense be incorporated therein; but even when so incorporated in the product, it remains subject to all the hazards which might befall the service itself. If the service goes down in value, so will the value which has temporarily been incorporated in the product associated with that service.

But this, assuming progress, is what must normally happen. By continually making greater use of the gratuitous gifts of Nature, everything should cost less effort to make in future than it does to-day. Utility may remain unimpaired, but capital tends to depreciate. In the exchange of present labour against past labour, the advantage will always lie on the side of present labour. The workers, therefore, freed from the nightmare of the Iron Law of Wages, may look forward to a rosy future.

So also, Bastiat undertakes the defence of the landed interests. Land is not immune from the general law of slow depreciation. With Carey, he holds that the payment for land is not in respect of a gratuitous gift of Nature; it represents payment for past services in draining, fencing and all the rest of it; and as all these operations become easier, so the value of land must fall. Thus rent is likewise a legitimate payment for services rendered in the past. Nor is capital overlooked in Bastiat’s bounty. It is not merely that he defended with the utmost vigour the legitimacy of interest, but he further proved, to his own satisfaction, that the progress of labour to a better position would be in no wise bought at the expense of the capitalist’s reward. The capitalist’s share might decline proportionately, but it would increase absolutely. In all this there is much of that other optimist, Carey, whom indeed Bastiat has been accused of plagiarizing. Even in his more serious work he can hardly escape the charge of special pleading, and of being unduly influenced by the case he desires to make. He would have the reader believe that he is not blind to the imperfections of this world, but a perusal of the Economic Harmonies leaves the impression that, if only there be enough liberty, everything in the economic garden will be increasingly more and more beautiful.

________________

35 Born in Philadelphia in 1793, the son of an Irish emigrant who had become a successful publisher. Carey succeeded to the business, but retired while still young (1835), and devoted the rest of his life to producing economic literature. Few authors surely can have written quite so much. His larger works cover some thirteen volumes, and his pamphlets are at least fifty-seven in number, not all of which are mercifully small. His chief works are: Essay on the Rate of Wages, Principles of Political Economy (three volumes), The Past, the Present and the Future, Harmony of Interests, and The Principles of Social Science (three very large volumes).

36Principles of Political Economy, Vol. I, chap. 2, especially pp.19–20.

37 Social Science, Vol. I, p. 158; Vol. Ill p. 133.

38 Political Economy, Vol. I, pp. 129-130.

39 Harmony of Interests, p. 52.

40 The Past, the Present and the Future, pp. 21-39.

41 Political Economy, Vol. I, p. 25.

42 e.g., The Past, the Present and the Future, pp. 77, 99.

43 Wages, p. 81.

44 Harmony of Interests, p. 86.

45 Harmony of Interests, p. 201; Wages, p. 23.

46 Wages, p. 244.

47 Political Economy, Vol. Ill, p. 54.

48 Social Science, Vol. Ill, p. 270.

49 Social Science, Vol. I, p. 92.

50 Social Science, Vol. Ill, p. 351.

51 Social Science, Vol. Ill, pp. 319-320.

52 The Past, the Present and the Future, pp. 77.

53 Political Economy, Vol. Ill, p. 91.

54 Social Science, Vol. Ill, p. 265.

55 Social Science, Vol. Ill, p. 299.

56 Wages, p. 14.

57 Harmony of Interests, p. 67.

58 Social Science, Vol. Ill, p. 44.

59 Harmony of Interests, pp. 52, 101, etc.

60 Harmony of Interests, pp. 193, 202, 209, etc.

61 Social Science, Vol. I, p. 273.

62 Social Science, Vol. Ill, p. 333.

63 “Truth being simple, simple ideas are generally true” is one of Carey’s favourite aphoristic observations. It is hardly a promising foundation-stone for any system of thought.

64 Social Science, Vol. III, p. 113.

65 Born at Mugron, near Bayonne, in 1801, and lived obscurely on his farm until 1844, though influential in the intellectual and public life of his area. Thereafter accident and the Free Trade cause revealed his supreme journalistic powers, and he entered a larger life. He was a member of the Assémbled Con-stituante in 1848, and of the Assémbled Legislative in 1849. His last six years were years of exhaustive labour, and he seems to have died of overwork (at Rome) in 1850.

66 L’Etat.

67 See the address A la Jeunesse Frangaise prefixed to the Harmonies Economiques.

68 For a first approach, the most important chapters in the Harmonies Economiques are: Chapter 2, “Besoins, Efforts, Satisfactions”; chapter 3, “Des Besoins de l’Homme”; chapter 5, “De la Valeur,”

• 1So far as economic theory is concerned, it is in Plato that Greek thought advances beyond the level of such wise saws as may be extracted from Hesiod and others, and arrives at some consecutiveness. Yet Plato is the supreme example of the classical tendency to regard economics as a minor subsection of ethics and politics. It is above all in The Republic, and to a lesser extent in The Laws, where he indulges in “an old man’s game,” that Plato turns to economic questions. The former is primarily a discussion on Justice, and it is because the essential nature of Justice may perhaps be most easily discerned in the State—since for the short-sighted the larger letters may be more easily read—that the disputants turn aside in the second book to discuss the State and its origin, and are thus led to construct from the foundation an ideal polity. It is noticeable that the origin of the State is attributed wholly to economic considerations: “A state arises out of the needs of mankind; no one is self-sufficing, but all of us have many wants,” and moreover, Plato indicates that no other origin of a state can be imagined. This line of argument, after a consideration of the essential needs of mankind, leads to Plato’s discussion of division of labour, which has so often been compared with the famous chapter in Adam Smith. The essential needs of mankind are food, dwelling and clothing, so that the barest notion of a state must include four or five men—a husbandman, a builder, a weaver, and perhaps a shoemaker or a representative of some other similar occupation. Each of these is, moreover, to confine himself to his own calling. The governing considerations in the application of the principle of division of labour, as conceived by Plato, are then, firstly, that there are “diversities of natures among us which are adapted to different occupations,” and secondly, and as a consequence of this, that “all things are produced more plentifully and easily, and of a better quality, when one man does one thing which is natural to him and does it at the right time, and leaves other things.” It is in order that this principle may be satisfied that Plato then extends his State to include a considerable diversity of other crafts—sailors, traders, retailers and others.
• 2Thus we arrive at the guardians, who practise an art which is not to be combined with any other occupation, since one man cannot practise many arts with success. The guardians require careful selection; likewise very careful education. They must combine apparently contradictory qualities, inasmuch as they must be dangerous to their enemies and gentle to their friends. We are not here concerned with the lengthy discussion of the education of the guardians, nor with the subsequent distinction between “guardians in the fullest sense” (the real rulers) and the auxiliaries, but the words in which communism is enacted are of importance in specifying both the scope and the purpose of the communism prescribed. The guardians are to look round for a spot where they can best suppress insurrections within and defend the State from enemies without, and they are to encamp there. Further, in order to ward off the danger that they may become enemies instead of friends of the citizens, their whole mode of life is to be such that they will not be tempted to prey upon the other citizens. Consequently they are devoted to an ascetic method of life; they are to have no property beyond what is necessary; they are to receive a fixed rate of pay, sufficient to meet expenses and no more: “Should they ever acquire homes or lands or moneys of their own, they will become housekeepers and husbandmen instead of guardians, enemies and tyrants instead of allies of the other citizens.”
• 3Then secondly, as to the purpose of the guardians’ communism, it is noticeable that Plato in his motives is poles asunder from other communistic dreamers. Elsewhere the cry for communism arises from an aggrieved sense of the injustice and monstrous inequality of the world. It is not so in Plato. For his guardians, communism is an act of ascetic renunciation; it is the condition on which alone they can efficiently discharge their duties. The work they have to do is so important that they may only do it properly on condition that they remain free of the snares and the entanglements of this world. In its motive therefore it is akin to the celibacy of the Roman Catholic priesthood. The object of Plato’s communism is in no way to establish a right to equal enjoyment; rather it is a part of the price that must be paid by a class on whom special responsibilities have been imposed. An interesting, if trivial sidelight, illustrative of the fact that the whole arrangements with regard to the guardians are designed to free them from the ordinary troubles of life, is furnished by the provision that when a woman guardian has a child, the process of suckling shall not be protracted too long: “the mothers will have no getting up at night or other trouble, but will hand over all this sort of thing to the nurses and attendants.”
• 4Firstly, as to the scope of Plato’s communism, it is clear from the whole argument that it is prescribed only for the limited class of the guardians, who are indeed throughout to live a semi-military life. It is, in fact, the communism of the camp. The contrary view has been argued along lines which need not here be indicated, and one authority has contended that “a superficial reading of The Republic gives the impression . . . that Plato recommends communism solely for these upper sections.” It is almost sufficient to note that Aristotle himself is one of these superficial readers; it is entirely sufficient that Plato expressly describes the regulations as “appointed by us for the guardians,” and even more conclusive is his statement that if the guardians depart from their communistic life, they will become housekeepers and husbandmen.
• 5A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 6Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 7A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 8When we turn to Aristotle, we are confronted with a writer who, by his analytical frame of mind, went further than any other thinker in antiquity in the direction of detaching a separate science of economics. This is not the place to consider his political theories, but his starting point that man is by nature a political animal enthroned for him the science of politics, so that ethics and economics alike were viewed by him from a political angle. Two points are of peculiar interest to the economist. The first is his destructive criticism of Plato’s communism in the second book of the Politics, and the other is his analysis of the household, leading to a discussion of the economic bases of society. On the former point, with the arguments of all the ages ringing in our ears, Aristotle’s contentions may appear hackneyed. What he says about the snares inherent in community of wives need not detain us; it never has been, and is not now (it may be hoped) an urgent question. But his arguments on the general question of community of property might date from the present year of grace. It is still true that “people pay most attention to their own private property and less to that in which they have but a part interest”—as witness the carved hieroglyphics on the seats in any public park contrasted with the reverence paid to the domestic Chesterfield.
• 9Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 10Among other points it is perhaps worthy of mention that the second best State is to enjoy free trade and complete immunity from import and export duties, subject only to the importation of unnecessary luxuries and the exportation of what is wanted in the country being prohibited. Retail trade is forbidden, and there is also a curious desire to preserve the virtues and the purity of the city by removing it to a safe distance from the sea, for “the sea is pleasant enough as a daily companion, but has indeed also a bitter and brackish quality; filling the streets with merchants and shopkeepers, and begetting in the souls of men uncertain and unfaithful ways.” But into the rather wearisome details of the State contemplated in The Laws, it is unnecessary here to enter.
• 11A slight glance at The Laws, as supplementing the teaching of The Republic, is almost essential. The Laws is the work of an old man whose fire is spent, and some have found in it the marks of the disillusionment of age. Yet here Plato still clings to the old ideal: “The first and highest form of the State and of the Government and of the Law is that in which there prevails most widely the ancient saying that ‘Friends have all things in common.’” But that is rather a State for gods and the sons of gods, and therefore he now outlines the State which “when created, will be nearest to immortality and the only one which takes the second place.”Such a state comprises 5,040 lots, since the city must not be too large and the citizens should be known to each other, and this figure is administratively convenient, as it is divisible by all numbers up to ten. There is no longer any question of communism, since “community of goods goes beyond their proposed origin, and nurture, and education.” The regulations throughout are to aim at a middle and contented condition of life, based on the doctrine that poverty is to be regarded as the increase of a man’s desires and not the diminution of his property. No one is to possess gold or silver except as coin for daily use, and the currency of the country is to be peculiar to it and not acceptable abroad. Inequality of condition cannot be avoided; but undue disparity, arising from extreme poverty or excessive wealth, is to be guarded against. For this purpose the population is to be divided into four classes, the limit of poverty being one lot which is to be guarded unimpaired, while the maximum possession is to be the equivalent of four lots, the surplus to be surrendered to the State. No money is to be lent at interest, and, more startling, there is to be no obligation to repay even the capital, a provision explicable on the ground that this is to be a society of half-brothers, if not of brothers, and that there is a definite restriction imposed on the amount of permissible wealth.
• 12The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 13Under the section which deals with the relationship of master and slave occurs Aristotle’s celebrated defence of slavery, which sounds so oddly in modern ears. The principle of rule and subjection is, he says, inevitable and beneficent, and there are “natural slaves,” persons who are as far inferior to others as the body is to the soul, or a beast to a man. In these cases a life of slavish subjection is advantageous. Aristotle is not blind to the obvious objection that, as he puts it, it may happen “contrary to the intention of Nature that those who possess the bodies do not possess the souls of free men and vice versa” for even if there be those who are “slaves by nature,” it calls for supreme faith to believe that the accidents of life should at any time sort out the slaves and the non-slaves, in accordance with the definition of a “natural slave.” Hence he distinguishes between natural and legal slaves, and speaks of the law being a convention according to which all conquests in war are the property of the conqueror. The whole discussion is curious and unconvincing, and is perhaps best viewed as a reflection of the fact, not merely that many slaves were well-treated, but also that their position would have been worse but for the institution of slavery.
• 14Aristotle’s arguments, in the main, are of a highly practical character; in short, that a system of communism would not work, and that it violates natural human instincts. There would be disputes between those who get less and work more, and those who get much and work little—the old difficulty of distribution among frail, grudging and suspicious men. Unity built on communism is in fact a delusion; the common purse leads to quarrels arising out of trivial causes. Moreover there is an immense advantage in the sense of private property. It corresponds to natural instincts; “the love each individual bears to himself is not purposeless,” as he remarks in a phrase in which we seem to catch the tones of Adam Smith’s invisible hand. Again, in an argument which is still common, though of doubtful cogency, he urges that community of property would destroy the virtue of liberality. His own position is not, however, merely negative. As against reformers in a hurry in all ages, he contends that the evils are due, not to the institution which it is proposed to destroy (in this case private property), but to defects in human nature. Unless that is first amended, he would seem to say, there will be no advantage in abolishing something which in itself may be used for good or evil. “The existing system, if embellished by the moral tone of those who live under it and by a code of wise laws, would be far superior.” The ideal which Aristotle outlines is thus that of private possession with use in common, so far as that may be practicable—in modern language, private property mellowed by a sense of the responsibility of wealth, a position not so different from that of the Christian Socialists.
• 15Under the section which deals with the relationship of master and slave occurs Aristotle’s celebrated defence of slavery, which sounds so oddly in modern ears. The principle of rule and subjection is, he says, inevitable and beneficent, and there are “natural slaves,” persons who are as far inferior to others as the body is to the soul, or a beast to a man. In these cases a life of slavish subjection is advantageous. Aristotle is not blind to the obvious objection that, as he puts it, it may happen “contrary to the intention of Nature that those who possess the bodies do not possess the souls of free men and vice versa” for even if there be those who are “slaves by nature,” it calls for supreme faith to believe that the accidents of life should at any time sort out the slaves and the non-slaves, in accordance with the definition of a “natural slave.” Hence he distinguishes between natural and legal slaves, and speaks of the law being a convention according to which all conquests in war are the property of the conqueror. The whole discussion is curious and unconvincing, and is perhaps best viewed as a reflection of the fact, not merely that many slaves were well-treated, but also that their position would have been worse but for the institution of slavery.
• 16As against this, there is another kind of finance, which does not have a natural existence and which is ultimately based on the distinction, familiar long afterwards as that between value in use and value in exchange. Every object has two uses; the shoe has a use as a covering for the feet; it has also a use as an article of exchange. So long as we are in the region of primitive barter, we are still concerned with what is natural, but this has ceased when we come to retail trading, where exchange is “carried beyond the point of satisfying mere requirements.” Out of mere simple barter to satisfy a real need, the evil art of finance—retail trading—develops as a natural consequence after the introduction of a system of currency, the successive stages of which are noted with a fair approximation to the discussion in Jevons’s textbook. Finance, in the natural sense, is a part of Domestic Economy. Unnatural finance is not; it produces money merely by means of exchange, and here wealth is unlimited. The one, the healthy, might be described as the acquisition of the means of living, the securing of the “pre-requisites which Nature ought to provide”; the other is merely money-making. The one is laudable; the other enriches one party at the expense of the other. But of all evil forms of finance, the worst is usury, since here money produces the gain itself, and is diverted from the purpose for which it was devised.
• 17Apart from the dispute regarding communism, the main part of Aristotle’s economic teaching is to be found in the first book of the Politics. The place which this discussion occupies in his general treatment flows from his general theory of the State. The State has in all cases a natural existence; it is the complete development of the earlier associations, the household and the village, and Aristotle accordingly proceeds to consider, as the logical first step, the economy of the household. Here there are three fundamental relationships to be borne in mind, that of master and slave, of husband and wife, and of parent and children. The fourth and last of the parts of Domestic Economy is the art of finance, which is not to be confused with Domestic Economy, since it is the business of finance to provide and of Domestic Economy to use that which is provided.
• 18The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 19For Monchrétien, the foreigner is in the main a person given to fraud and guile. Specifically “whatever is foreign corrupts us.” In particular, foreign books “poison our spirits and corrupt our manners,” and therefore their importation should be prohibited. Indeed Montchrétien approves of a vigorous all-round national exclusiveness, hinting at a divine ordinance which has assigned to the inhabitants of any area the use of the elements and the goods which it produces. Further, he cites with admiration the example of Lyons, which acted on the principle that “each town should have something particular and in reserve for its own children, in order that it may help them.” Montchrétien is thus a stout defender of the maxim which enjoins upon us the expediency of rendering to our own sea-maws their ancient and prescriptive dues.
• 20Apart from the Politics, there is also a passage in the Nicomachcean Ethics (Book V, chaps. 7 and 8) which is of some economic interest. Aristotle is there concerned with justice in private dealings. Discarding the mathematical theory of proportion in which his doctrine is embedded, the central point of his teaching is that “when people get as the result of exchange exactly what they had at the beginning, neither more nor less, they are said to have what belongs to them and to be neither losers nor gainers.” How is this principle to be carried out? That things may be exchanged, they must in some sense be comparable, and hence money is invented. It measures all things, and consequently, in the case taken, that of a cobbler and a builder, it measures the number of shoes which are equivalent to a house. “As a builder then is to a cobbler, so must so many shoes be to a house or a meal.” It is the demand for mutual services which binds society together, and money is the recognized representative of this demand. Money, Aristotle says in this passage, has not a natural but a conventional (vóμω) existence, and for this reason it is called money (vóμlσμα): it is within our power to change it and make it useless, a doctrine which would seem to possess kinship with Knapp’s theory that money is a creature of the law. Money, he adds, is serviceable for future exchanges; it is a guarantee that if we do not desire a thing now, we shall be able to get it when we do want it. Though the value of money is not always the same, it tends to have a more constant value than anything else. Aristotle was obviously not unfamiliar with certain orthodox views regarding the nature and the functions of money.
• 21Coming to the question of acquisition or wealth-getting,Aristotle is concerned to show how far it is or is not a part of Domestic Economy. Clearly part of wealth-getting must belong to Domestic Economy, since the household requires to be supplied with what is necessary, if this is not already provided. This leads to the rather curious distinction between true or genuine wealth to which there is a limit, and another unnatural kind of acquisition (finance in the bad sense) to which there is no limit. Nature supplies men with the means of subsistence which are gathered in various ways, so that men’s lives may be classified as those of the nomad, the husbandman, the brigand, the fisherman and the hunter. Property which so arises is “assigned by Nature,” and such property and such alone constitutes genuine wealth. Apart from the odd appearance of the brigand in this galley, this is merely, in the main, an anticipation of Physiocratic thought. Here also, so far as concerns real wealth, that is to say the acquisition of the means of subsistence, there is a definite limit assigned, since wealth in this sense must be limited by the needs and the purpose of the household and the State.
• 22Seneca’s views on economic matters are not in the main of great interest. Money (and not merely the love of money) is emphatically the root of most evils. Envy and greed are the sources of all injustice. But in the midst of much in this train of thought which, even if true and well-expressed, has ill-founded claims to originality, there is one thought that is significant, namely that the various quarters of the earth have been differently endowed in such a manner that the peoples of the world would appear to have been called to enter into intercourse with each other for the mutual satisfaction of their needs.
• 23One last point worthy of passing mention is that Aristotle’s attitude towards “mechanics” and their share in the State is in line with that of most writers in antiquity. It is summed up in the general statement that all who are indispensable to the existence of the State cannot be regarded as citizens, and that in the best State (whatever may happen elsewhere) citizenship will not be conferred upon any mechanic. There is here a striking similarity to the passage in the Book of Ecclesiasticus in praise of artificers: “Without these cannot a city be inhabited”; yet “they shall not be sought for in publick counsel.”
• 24Apart from the Politics, there is also a passage in the Nicomachcean Ethics (Book V, chaps. 7 and 8) which is of some economic interest. Aristotle is there concerned with justice in private dealings. Discarding the mathematical theory of proportion in which his doctrine is embedded, the central point of his teaching is that “when people get as the result of exchange exactly what they had at the beginning, neither more nor less, they are said to have what belongs to them and to be neither losers nor gainers.” How is this principle to be carried out? That things may be exchanged, they must in some sense be comparable, and hence money is invented. It measures all things, and consequently, in the case taken, that of a cobbler and a builder, it measures the number of shoes which are equivalent to a house. “As a builder then is to a cobbler, so must so many shoes be to a house or a meal.” It is the demand for mutual services which binds society together, and money is the recognized representative of this demand. Money, Aristotle says in this passage, has not a natural but a conventional (vóμω) existence, and for this reason it is called money (vóμlσμα): it is within our power to change it and make it useless, a doctrine which would seem to possess kinship with Knapp’s theory that money is a creature of the law. Money, he adds, is serviceable for future exchanges; it is a guarantee that if we do not desire a thing now, we shall be able to get it when we do want it. Though the value of money is not always the same, it tends to have a more constant value than anything else. Aristotle was obviously not unfamiliar with certain orthodox views regarding the nature and the functions of money.
• 25In the tangled mass of Pliny’s Natural History there are certain interesting passages relating to money. There is more than a touch of Rousseau in his assertion that the worst crime against mankind was committed by him who was the first to put a ring (of gold) upon his finger. There is much vitriolic denunciation of gold “discovered only for the ruin of mankind.” How much more happy the age when things were bartered for one another! Yet despite this, he explains, not unreasonably, the causes which led to the pre-eminence of gold, as that it suffers no damage through fire, that it wears the least of all the metals by use, that no material is more malleable, that it is not subject to rust and so on. The other passage in Pliny which has been so frequently quoted is that which relates to the extent of the farm. He refers with approval to Vergil’s maxim “to praise a large farm, but cultivate a small one,” and adds in a celebrated and ominous phrase that the widespread domains had been the ruin of Italy: “latifundia Italiam perdidere.”
• 26The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 27One last point worthy of passing mention is that Aristotle’s attitude towards “mechanics” and their share in the State is in line with that of most writers in antiquity. It is summed up in the general statement that all who are indispensable to the existence of the State cannot be regarded as citizens, and that in the best State (whatever may happen elsewhere) citizenship will not be conferred upon any mechanic. There is here a striking similarity to the passage in the Book of Ecclesiasticus in praise of artificers: “Without these cannot a city be inhabited”; yet “they shall not be sought for in publick counsel.”
• 28It would, however, be a mistake to consider that the Physiocratic advocacy of Free Trade was rooted in any importance attached to foreign trade as such. On the contrary, foreign trade, like all trade, is for the Physiocrats essentially unproductive. As Quesnay specifically puts it, it is only possible to buy from the foreigner as much as one sells to him; and the consequence is that in a state of free competition in foreign trade, there can only be an exchange of value for equal value, without gain or loss on one side or the other. Reverting to Quesnay’s distinction between the two nations—agricultural and commercial—combined in a mixed kingdom, the expenses of the second, even if necessary, are to be regarded as an “onerous expense,” laid on the revenues of the landed proprietor. Foreign trade is thus primarily a liability rather than an asset. The whole tendency of Physiocratic thought is to depreciate the importance of foreign trade. It is above all by the condition of internal commerce that the wealth of a country must be judged; a nation that is making the best use of its soil and its men has no occasion to be envious of the commerce of its neighbours. It is curious that the first school in modern times to proclaim Free Trade did so, not from any belief in the advantages of foreign trade, but on general principles of a quasi-philosophical and religious nature.
• 29The distinction between agriculture on the one hand and industry and commerce on the other, is further revealed by the fact that in the former there is a surplus, while the others merely pay their way. This surplus is the famous “produit net,” the token of Nature’s superior bounty in agricultural operations. On Quesnay’s theory, agriculture is carried on by advances of various kinds (avances foncières, avances primitives, avances annuelles), some of these falling on the proprietor and some on the cultivator. But when all expenses have been met, and the cultivators have taken all that is required to maintain themselves and reimburse them in respect of their annual advances, there still remains something over, a “produit net” (a rent) which is payable to the proprietor. This “ produit net” is in fact the real revenue of the nation, and it is this which, in one form or another, supports the manufacturing and commercial classes. Thus we get the triple division of classes, so dear to the Physiocrats. There is, firstly, the class of proprietors, to whom the “produit net” is paid, whose services consist in making the avances foncières, and also in the more general and social duties which fall upon them; there is, secondly, the productive class, who cultivate the soil; and thirdly, there are all those who are lumped together under a title, which, despite all apologetics, has in it something wounding and depreciatory, the “unproductive” or sterile class. Strictly speaking, there is a fourth class, the wage-earners, but they do not occupy a large place in Physiocratic classification.
• 30It is, however, in the short essay on The Ways and Means to Increase the Revenues of Athens that Xenophon is most interesting, most enlightened and perhaps also most confused. Here he is concerned with finding a “remedy for the poverty of our citizens,” and the tract therefore resolves itself into an elementary discussion of public finance. Throughout, a more liberal view than customary is manifested. The foreign residents are seen as a source of revenue, and Xenophon argues for the abolition of all regulations that inflict disabilities on this class. He is indeed anxious to attract “more and better class foreigners to settle at Athens,” and in pursuance of this policy he would show favour to merchants—by free seats at festivals and invitations to banquets. No less significant is his suggestion to raise a capital sum to provide accommodation for merchants and shops and houses for retail dealers. Equally enlightened is his contention that it is the cities which have been longest at peace that have been most prosperous; despite the booty of war, it is in peace that wealth is accumulated; it is in war-time that it is spent.
• 31The third Greek writer to contribute certain embryonic elements to an economic science is Xenophon, who approaches matters throughout in an entirely practical spirit. His achievement is perhaps greater than has generally been admitted, and even where his speculation is confused, it may at least be pleaded on his behalf that the man who gives a wrong answer to a question has at least made some progress, insofar as he realizes that a question exists. The pleasantly innocuous dialogue Œconomicus, devoted to a discussion of the principles of estate management, opens with an analysis of wealth in the manner of Ruskin. Wealth is only wealth to him who can use it, or, more epigrammatically, useful things are those things which one knows how to use; so also, even money is not wealth to him who does not know how to use it. Further, wealth is to be interpreted in relation to needs: the man of simple tastes and little substance is wealthy in comparison with the man of great possessions on whom excessive claims rest. All this is the stuff of which proverbial philosophy and the home-spun poetry of contentment are woven. Primarily, Xenophon is an agricultural writer, and it is of interest to note that he furnishes the motto to Quesnay and the Physiocratic school many centuries later: “When husbandry flourishes, all the other arts are in good fettle; but whenever the land is compelled to lie waste, the other arts of landsmen and mariners alike wellnigh perish.” His praise of agriculture is indeed of Physiocratic excess. It is the easiest of all things to learn; none gives quicker returns (to a careful man); it is the giver of all things; no art is “dearer to servants, or pleasanter to a wife, or more delightful to children, or more agreeable to friends.” Moreover, on Xenophon has been fathered an approach to the familiar agents of production, two—land and labour—being recognized; for though agriculture or the land supplies good things in abundance, “she suffers them not to be won without toil.” So also in a fumbling way he approaches, or seems to approach, the Law of Diminishing Returns: “the landowners could all tell you how many teams and how many labourers are required for their estates. If anyone employs hands in excess of requirements, it is reckoned as a loss.”
• 32Even a brief survey of Xenophon would be incomplete without reference to a passage in the Cyropœdia which, being quoted by Marx and others, has become one of the curiosities of economic literature. It represents division of labour as applied to the kitchen, run mad, with one man to boil fish and another to bake them. Here, surely, the centuries have shown retrogression.
• 33Apart from these three main representatives of Greek thought, a passing reference is perhaps due to the dialogue called Eryxias, which is of interest as being devoted wholly to an analysis of wealth, and which clearly distinguishes between material and immaterial wealth, so that “in exchange for their art” men may obtain the necessaries of life; and to Aristophanes’ wholly diverting play Ecclesiazusœ, a skit on communism (not neglecting votes for women) which is full of the most modern thrusts.
• 34Seneca’s views on economic matters are not in the main of great interest. Money (and not merely the love of money) is emphatically the root of most evils. Envy and greed are the sources of all injustice. But in the midst of much in this train of thought which, even if true and well-expressed, has ill-founded claims to originality, there is one thought that is significant, namely that the various quarters of the earth have been differently endowed in such a manner that the peoples of the world would appear to have been called to enter into intercourse with each other for the mutual satisfaction of their needs.
• 35The Republic, Jowett’s translation, p. 49.
• 36Ibid., Book III, p. 106.
• 37The Republic, Jowett’s translation, p. 154.
• 38Beer, Social Struggles in Antiquity, p. 97.
• 39The Laws, Jowett’s translation, p. 121.
• 40Ibid., p. 230.
• 41Ibid., p. 127.
• 42Politics, Book II, chap. 3, Welldon’s translation, p. 43.
• 43Ibid., Book II, chap. 5, p. 49.
• 44Ibid., p. 87.
• 45Ibid., p. 124.
• 46Ibid., p. 401.
• 47Ibid., Book I, chap. 6, Welldon, p. 13.
• 48Ibid., Book II, chap. 5, p. 48.
• 49Ibid., Book I, chaps. 5 and 6.
• 50Ibid., Book I, chap. 9.
• 51Ibid., Book I, chaps. 3 and 8.
• 52Ibid., p. 517.
• 53Ibid., p. 92.
• 54Ethics, Book V, chap. 5, Welldon’s translation, p. 149.
• 55Ibid., Book I, chap. 8.
• 56Ad Helviam Matrem de Consolatione, chap. 9.
• 57Politics, Book III, chap. 5, Welldon, p. 113.
• 58Ibid., p. 153.
• 59Pliny, Book XVIII, chap. 7.
• 60Loeb translation, pp. 367, 409.
• 61Ecclesiasticus xxxviii. v. 32, 33. The corresponding passage on the same subject in Xenophon (Œconomicus IV, 2, 3) is interesting, inasmuch as the writer assigns reasons for the contempt of the illiberal arts: “They utterly ruin the bodies of workers and managers alike, compelling men, as they do, to lead sedentary lives and huddle indoors, or in some cases to spend the day before a fire. Then as men’s bodies become enervated, so their souls grow sicklier. And these vulgar crafts involve complete absence of leisure and hinder men from social and civic life; consequently men such as these are bad friends and indifferent defenders of their country. Moreover, in some states, particularly in those accounted warlike, no full citizen is permitted to practise the vulgar arts.” (As translated in Laistner’s Greek Economics, pp. 39, 40. See also Loeb edition, P. 391).
• 62Nos. 12 and 13 of the Maximes, attached to Grains, p. 239.
• 63Analyse du Tableau Économique, pp. 304-309.
• 64Printed in Laistner, Greek Economics.
• 65Ibid., p. 405.
• 66“For just as all other arts are developed to superior excellence in large cities, in that same way the food at the king’s palace is also elaborately prepared with superior excellence. For in small towns the same workman makes chairs and doors and ploughs and tables, and often this same artisan builds houses, and even so he is thankful if he can only find employment to support him. And it is, of course, impossible for a man of many trades to be proficient in all of them. In large cities, on the other hand, inasmuch as many people have demands to make upon each branch of industry, one trade alone, and very often even less than a whole trade, is enough to support a man: one man, for instance, makes shoes for men, and another for women; and there are places even where one man earns a living by only stitching shoes, another by cutting them out, another by sewing the uppers together, while there is another who performs none of these operations but only assembles the parts. It follows, therefore, as a matter of course, that he who devotes himself to a very specialized line of work is bound to do it in the best possible manner. Exactly the same thing holds true in reference to the kitchen; in any establishment where one and the same man arranges the dining couches, lays the table, bakes the bread, prepares now one sort of dish and now another, he must necessarily have things go as they may; but where it is all one man can do to stew meats and another to roast them, for one man to boil fish and another to bake them, for another to bake bread and not every sort at that, but where it suffices if he makes one kind that has a high reputation—everything that is prepared in such a kitchen will, I think, necessarily be worked out with superior excellence.” (Cyropœdia, Book VIII, ii, 5-6; Loeb translation, PP- 333-335.)
• 67Laistner, op. cit., p. 41.
• 68De Ira, III, 32, 33.