The Development of Economic Doctrine: An Introductory Survey

CHAPTER VI

MALTHUS AND RICARDO

Malthus

THOMAS ROBERT MALTHUS1 (1766-1834) the second of the trinity who laid the foundations of classical English Political Economy, is, for a fairly prolific writer, surprisingly the author of one book, the protagonist of one idea. That book is his Essay, to which it is scarcely prudent to give a more precise title, since it varied with the years; the idea is the so-called “Principle of Population.” It is safe to say that no reputable citizen has ever been so vilified and abused as Malthus; no writer of the first magnitude has been so often “efuted”—even though, as must be added, by writers who give so copious evidence of neither having read nor understood the object of their hatred.

Yet, in a sense, Malthus neither wrote anything very new nor anything very startling. If by Malthusianism is meant the doctrine of Malthus—which is perhaps a large assumption—then Malthusianism was not without its clear exponents before the days of the Essay on Population. In that chapter on wages, in which so many wage theories are hinted at, Adam Smith, as has been seen in the passages already quoted, had observed that “the demand for men, like that for any other commodity, regulates the production of men.” Here, if one so chooses to regard it, is the quintessence of Malthusianism, and many other writers in the second half of the eighteenth century, including the elder Mirabeau—to name but one—might be drawn upon to furnish quotations in the Malthusian line of thought. Such originality as may be claimed on behalf of Malthus, lies in the fact that he realized the importance of a principle which others had casually stated; what others had disposed of in an obiter dictum became for him a central and dominating principle illuminating all things.

Malthus is comprehensible only in the light of the impulse to which the Essay on Population owes its origin and the curious stages by which Malthus’s doctrine developed. The essay sprang from a domestic debate between Malthus and his father, Daniel Malthus, a man of left-wingish views and a friend of Rousseau. The air was then full of beatific visions of terrestrial paradises, represented by the glowing enthusiasm of Condorcet, and crystallized in this country in the Political Justice (1796) and The Enquirer (1797) of Godwin. Godwin, if anything, is a political theorist, and only by his repercussions concerns economic doctrine; it is therefore sufficient to say that the state which he prophetically foresaw was an anarchic society, in which happy men, freed from the fetters of property, of the passions and of marriage, would live blissfully at the cost of half an hour’s labour a day. On such day-dreams, based on the perfectibility of man, and indeed his ultimate immortality here on earth, father and son disputed; and the dispute being ended or suspended, young Malthus, moved by the esprit d’escalier, proceeded to commit to paper the arguments which would most effectively have cornered his father, had he thought of them in time,

Thus arose the first edition of the Essay on Population issued in 1798, and its character corresponds to its origin, It is indeed a work full of the vigour and fire of youth, a dashing polemic against Godwin and Condorcet, designed to disprove the “perfectibility of man “in the Godwinian sense, by proving the instability of the state of society foreseen by Godwin.

In the first edition Malthus, for the routing of Godwin, makes two postulates, firstly that food is necessary to the existence of man, and secondly that “the passion between the sexes is necessary, and will remain nearly in its present state.”2 Population, in short, has a greater power of increase than the means of subsistence—the celebrated geometrical and arithmetical progressions appear in a hardened and somewhat dogmatic form in the first edition. Thus armed, Malthus has much enjoyment in disposing of Godwin; for assuming the Godwinian society safely launched, it would be impossible to imagine a state of society more favourable to population. Apply the geometrical and arithmetical progressions, and where would it be in the brief period of fifty years? Back come the hateful passions; the mighty law of self-preservation reasserts itself, and “the whole black train of vices that belong to falsehood are immediately generated.” The thesis of the first edition is simple; if it be granted that population has a greater power of increase than the means of subsistence, there must be forces keeping the population within its due bounds. Now since these checks on population are reducible to vice and misery, the Godwinian Heaven upon earth is but a beautiful fabric of the imagination which vanishes at the severe touch of truth.

Having fired his squib, Malthus proceeded systematically to get up his subject, and he travelled and read extensively with the object of turning his earlier impulsive production into a mature discussion of the whole question. The result was the second edition of 1803, in some respects a very different book from its forerunner. In one particular the criticisms and discussions of the intervening years led Malthus to make an alteration which fundamentally altered his argument. In his first sketch he had allowed only two checks on population, namely vice and misery; but, as has been hinted, there are many old bachelors who are obviously not unhappy and who are not obviously vicious. To meet this difficulty, Malthus now introduced a third possible check on population, represented by moral restraint; but in thus varying his original doctrine to meet an obvious criticism, Malthus in effect knocked the bottom out of his original argument. For with moral restraint as a third possible check on population, the argument against the perfectibility of man (within reason) was clearly deflated, since the Godwinian earthly paradise might never be exposed to the insidious attack of the black train of vices, if it were a possible (even if unlikely) contingency, that the inhabitants might practise the necessary amount of moral restraint. Consequently, Condorcet and Godwin, whose names had figured on the title page, tend to fade out of the picture.

In the more careful statement of the second (and subsequent) editions, Malthus obligingly summarizes what he has to say in the opening chapter where his doctrine is conveniently compressed into his three celebrated propositions:

1. Population is necessarily limited by the means of subsistence.

2. Population invariably increases where the means of subsistence increase, unless prevented by some powerful and obvious check.

3. These checks, and the checks which repress the superior power of population, and keep its effects on a level with the means of subsistence, are all resolvable into moral restraint, vice and misery.3

Of these three propositions the first requires no proof; there cannot be more people than the means of subsistence will support. The second is obviously regarded by Malthus as an excessively cautious statement, and he hankers in a footnote after a more precise formula to the effect that “population always increases where the means of subsistence increase,” and throughout he argues on the more precise conception that where the food is increased, there will the population also be increased, so that food is in effect a demand for population. On this point hinges the discussion of the two ratios, the geometrical and arithmetical progression, which play so large a part in Malthusian controversy. Malthus assumes that the impulse to increase of numbers in the human race is constant at all times and in all circumstances. As he phrases it in one placed “the passion between the sexes has appeared in every age to be so nearly the same, that it may always be considered, in algebraic language, as a given quantity.”4 This is, of course, a mere assumption, incapable of proof, and the denial of this assumption furnishes later one of the lines of attack on Malthus. But granting for the moment that this assumption is justified, then if population is capable of doubling itself in twenty-five years (as seemed to be evidenced by contemporary American experience), in successive periods of twenty-five years population would have the power of increasing according to the progression 1:2:4:8: 16:32, etc.

The reasoning establishing the arithmetical ratio as governing the increase of the means of subsistence is less happy. It is indeed no proof at all, and is by no means creditable to a ninth wrangler. All that Malthus says is that if we allow that the produce could be doubled in the next twenty-five years, it will be “probably a greater increase than could with reason be expected”;5 and with regard to subsequent periods of twenty-five years, he merely makes a supposition that in each period there would be a uniform increase of production equal to the amount at present produced. But there is no proof of the arithmetical progression; it is merely what Malthus regards as an outside estimate, a “supposition, which, without pretending to accuracy, is clearly more favourable to the power of production in the earth than any experience we have had of its qualities will warrant.”

Accepting these ratios, there must be forces restraining the increase of population within the limits of subsistence. In the revised version these are comprehensively described as moral restraint, vice and misery, but a no less important cross division classifies them under the preventive and the positive checks. The preventive check denotes all those influences which lead to a diminution of the birth-rate. Moral restraint, if the restraint is carried far enough, clearly falls under this head; so also for Malthus do all vicious practices which result in a reduction in the number bora. Positive checks, on the other hand, are all those influences which increase the death-rate, “the whole train of epidemics, wars, plagues and famines.” If these are brought upon us by the laws of Nature, they are exclusively misery; if they are caused by our own actions, they may be described as vice, and their consequences are misery. How far this latter distinction is logical might furnish matter for argument; it may be that by foresight and knowledge, pestilence and famine and the devastation of many waters are no less avoidable than wars. It is a sign of man’s coming of age that he is prepared to shift the responsibility for such happenings from the Almighty to himself.

Moral restraint, it has been observed, is an innovation in the second edition; yet the innovation is more apparent than real.6 In the first edition Malthus in substance repeatedly emphasizes the principle of moral restraint; but for the purpose of his argument against Godwin, it had to be assumed, rather violently, that the single state was a state of misery, or, alternatively, was productive of vice. Something very like this conclusion was in fact reached by the Malthus of 1798.7 It is perhaps not an unjust comment on Malthus to say that in the first edition he recognized in substance the principle of moral restraint, but that his argument compelled him to regard it as equivalent to misery.

In one respect Malthus provides a curious complement to the work of Adam Smith, who, in his attacks on the mercantilists, had shown the superfluousness, indeed the injuriousness, of Government intervention with a view to the increase of wealth. These things were subject to law, and it was merely mischievous for authority to seek by artificial restraint to increase the amount of bullion in a country.8 This idea of law Malthus now applied to the increase of man himself. Here also there was law, not arbitrarily to be set aside. Here also it was vain for governments to seek artificially to stimulate population, which would not increase unless the means of subsistence increased, and which would assuredly increase, apart from Government encouragement, if these means were multiplied. Encouragement of population, as practised by most governments, was perfectly futile, and could only lead to increased mortality;9 indeed, death was the most powerful of all the encouragements to marriage by its action in opening the way to the marriages of the younger generation. To act consistently, those who desire to encourage early unions should, if they shrink from famine, at least “sedulously encourage the other forms of destruction which we compel Nature to use.”10 So, following the same train of thought, a country cannot be depopulated merely by emigration; those who depart will merely make room for others; but “take away its industry, and the sources of its subsistence, and it is done at once.”11 Prosperity does not depend on population, but population depends on prosperity. It is not true that God never sends a mouth without sending food; but it is true, such is the pestering of the unborn, that wherever there is food, there also a mouth will appear. Food takes the lead, and the only precept for increased population is to increase the food supply, and leave the matter to individual enterprise, which assuredly will not fail.

But if Malthus in one respect completed the doctrine of Adam Smith, in another he was diametrically opposed to him. For Adam Smith postulated an essential harmony in things, typified by that invisible hand which, out of the conflict of individual interests, would bring the greatest good for the community. He was thus entirely and sturdily optimistic, even if the invisible hand is but an act of faith. Malthus, on the other hand, is profoundly pessimistic. Here, too, there is law, but how different is its character! Apart from moral restraint, in which he has clearly no great practical confidence, the sanctions lurking behind his laws are vice and misery. The laws of Nature to which he frequently refers are essentially punitive, and these laws of Nature, as he reminds us, are the laws of God. Natural evil is the instrument by which God warns us from any mode of conduct which is not suited to our being. “If we are intemperate in eating and drinking, our health is disordered ... if we multiply too fast, we die miserably of poverty and contagious diseases.” Such are the laws of Nature and of God, warning us that we have followed our impulses too far; and if we are heedless, “we justly incur the penalty of our disobedience, and our sufferings operate as a warning to others.”12 The note of gloom and pessimism which distinguishes so much of the economic doctrine of the nineteenth century is in no small measure the legacy of Malthus.

When it comes to practical proposals, Malthus is somewhat ineffective. Contrary to the usual view as to what is involved in Malthusianism, he restricts himself to telling us not to be in too great a hurry to get married, with a special appeal to his women readers, who, “if they could look forward with just confidence to marriage at twenty-seven or twenty-eight,” should (and would) prefer to wait until then, “however impatiently the privation might be borne by the men.”13 This is the voice of a dear and kindly old uncle, rather than of the monster for whom Malthus has so frequently been mistaken; and it is as ineffective as the advice of an uncle in such matters usually is. For even with marriage at twenty-eight there is time for a disconcerting and devastating torrent of children. Unlike Mill, Malthus in no wise suggests the exercise of moral restraint after marriage. His view is rather that while man may exercise his discretion in postponing marriage, the responsibility for what may happen after marriage must rest elsewhere. “When a man marries, he cannot tell what number of children he shall have”; and he even gives a mild blessing to a modified form of family endowment in the case of very large families, and almost speaks the language of the movement when he discusses the question of relieving such a one “from a species of distress which it would be unreasonable in us to expect that he should calculate upon.”14

His other practical proposal, which hardly concerns economic theory, relates to the gradual abolition of the Poor Law. His suggestion, explicable by reference to the conditions of the time, is that the State should formally disclaim the right of the poor to support, that there should be incorporated in the marriage service a short address emphasizing the obligation on every man to support his children, and making clear that those who erred in the face of these express warnings should be left to the punishment of Nature, the punishment of want—or to the pity of some kind benefactor. Moreover, we can rely on God (or Nature) to apply the appropriate punishment, so that no conscience need be seared. “When Nature will govern and punish for us, it is a very miserable ambition to wish to snatch the rod from her hand and draw upon ourselves the odium of executioner.”15 It is the laws of Nature, which are the laws of God, that have doomed him, and society at large may look the other way while punishment is being inflicted. It is one of the least pleasing aspects of Malthus that in his scheme of things the poor are entirely responsible for their poverty. Neither the rate of wages, nor the parish, nor the institutions of society, nor Providence, nor the State are to be blamed: “they are themselves the cause of their own poverty.”16 In particular, “the inference ... drawn against governments from the unhappiness of the people is palpably unfair,” inasmuch as the principle cause of want and unhappiness is only indirectly connected with government.17 It is scarcely necessary to emphasize the close connection of this doctrine with the laissez-faire view of government.

It should be redundant at this date to defend Malthus against the old assumption that he was a monster who gloated over pestilence, famine and war, and who prayed nightly for the periodic recurrence of such scourges as the divinely appointed method of ridding the world of superfluous babies. Malthus himself thought it at least expedient formally to disclaim any approbation of his various checks,18 yet it is difficult to read his work consecutively without feeling that he was asking for trouble. Probably in the first edition Malthus was trailing his coat, a posture which is always picturesque in the young; as against all visionaries, he takes obvious delight in administering the cold douche of reality, and he manifests a singular sang-froid and imperturbability in constituting himself the chronicler of death and pestilence,

He uses his very great literary skill to invest his views with a pungency which, if not designed to wound, was almost certainly intended to shock. And at times he sails rather near the wind, as in his studiously callous reference to the “unhappy persons who in the great lottery of life have drawn a blank,”19 or again when he speaks of the preventive checks superseding “ the necessity of great and ravaging epidemics to destroy what is redundant,” apologetically interjecting that he is using an expression “which certainly at first appears strange.”20 When he contemplates the response made by Nature confronted with a redundant population, there is an air of complacency in his voice as he states that “though we cannot always predict the mode, we may with certainty predict the fact.”21 Nor is it possible for the ordinary person to read, without a slight shudder, his lucid objective account of the process whereby, when we close up any of the channels through which the great stream of mortality is constantly flowing, others will become proportionally more fatal.22 Malthus has been much misrepresented and much misunderstood, but it is difficult to exonerate him from all responsibility for the caricature which did service throughout a large part of the nineteenth century.

Malthus is in many ways a peculiar and striking figure. By a premature and incautious statement of his thesis, he gained a degree of attention which would probably not have been bestowed upon him had he been guided by the academic rather than the journalistic instinct. Though original in his method rather than in his substance, he was fortunate in the moment of his exposition, since on the one hand the growth of population in Great Britain was attracting attention, and on the other hand the positive checks, as represented by bad harvests and in the consequences of war and in the prevailing squalor, were visible to all men. Moreover, though his detached air offended many, yet in an age of dominant laissez-faire, his subtle suggestion that the poor were responsible for their poverty, and that the Government had no responsibility for the prevailing misery, commended his doctrine to those who were thus exonerated. Yet, taking the revised text as the statement by which Malthus should be judged, there is little in his doctrine that one need hesitate to accept. Nevertheless, though the European War led to a marked revival of interest in Malthus, the problem has in large measure lost its terrors for the present generation. Nor is the reason far to seek. The fundamental assumption of Malthusianism in the strict sense is the uniform power of increase of population; subject to the operation of the preventive checks, this means in effect a potential uniform birth-rate. But one of the most marked features of population statistics is the steady decline in the birthrate during the last fifty years—so marked, indeed, that in some countries the fear is of depopulation, and children are consequently at a premium. This, fortunately, is not the place to consider the cause of the decline in the birth-rate; but, without expressing views on a matter with regard to which no one will enter the witness-box, it is clear that the cause must lie eithei in a diminishing reproductive power, such as Godwin, and later Carey, postulated—in which case the fundamental assumption of Malthus would be proved false—or, alternatively, in a deliberate and intentional restriction of births after marriage. This last, as has been seen, was in no wise contemplated by Malthus. As applied to present-day conditions, therefore, it must be conceded either that his fundamental assumption of a uniformity of prolific power was stated too dogmatically, or alternatively, that the preventive checks require restatement to include points of view with which Malthus was wholly unfamiliar.

Even a brief account of Malthus calls for some reference to his doctrine on the subject of rent, as expounded in An Inquiry into the Nature and Progress of Rent (1815), in which to a very considerable extent he anticipated the essential points of the teaching of Ricardo. Malthus, in his tract, is concerned at the outset with the causes of the high price of agricultural produce, and dissents from the view expressed by those of his predecessors who, like Say and Sismondi, had regarded the high price as solely the result of a monopoly. The high price of raw produce he attributes to three causes, the first being that quality of the earth which enables it to yield more than is necessary for the maintenance of those employed on the land (a Physiocratic remnant), and the third being the comparative scarcity of the most fertile land. The second cause, which fits in with his general doctrine of population, is the ingenious point that agricultural produce, in contradistinction to any other commodity, produces its own demand. In other commodities, demand is exterior to, and independent of, the production itself, so that abundance leads to cheapness; whereas, contrariwise, since food is a demand for population, the demand for the necessaries of life is dependent upon the produce itself. Hence it follows, paradoxically, that here the cause of the high price is to be found in abundance rather than in scarcity.

The explanation of rent follows from these considerations. “While fertile land is in abundance ... nobody, I of course, will pay a rent to a landlord.” Later, “land still poorer, or still less favourably situated, may be taken into cultivation.” But the produce is in each case sold at the “natural or necessary price,” since “the price of produce, in every progressive country, must be just about equal to the cost of production on land of the poorest quality actually in use.” How closely Malthus came to the Ricardian and the ordinarily accepted statement of the doctrine of rent, will be apparent from the following passage which is based on the comparison of the earth to a “vast machine”—a simile later so dear to the heart of Carey:

“The most fertile lands of a country, those which, like the best machinery in manufactures, yield the greatest products with the least labour and capital, are never found sufficient to supply the effective demand of an increasing population. The price of raw produce, therefore, naturally rises till it becomes sufficiently high to pay the cost of raising it with inferior machines, and by a more expensive process; and as there cannot be two prices for corn of the same quality, all the other machines, the working of which requires less capital compared with the produce, must yield rents in proportion to their goodness“(P. 38).23

Ricardo

According to the point of view, David Ricardo24 (1772-1823) is the evil genius who switched Political Economy on to the wrong lines, diverting it to a harsh, barren and inhuman orthodoxy, or, alternatively, by virtue of his incisive logic and ruthless pursuit of an argument, he is about the greatest economist of all times—though perhaps one should hasten to add that little of the Ricardian edifice has endured. Nevertheless no one has been more influential than Ricardo, even if it may have been in ways which would have surprised Ricardo himself. His has indeed been a curious fate. It is round him more than anyone that controversy has raged. In his hands classical English Political Economy reaches its final and complete form, so that, for the next generation, the leaders of economic thought can do little more than repeat the perfected blend of Adam Smith, Malthus and Ricardo; yet—curious example of the irony of human effort—it is in Ricardo that there are to be found all the conclusions which, gratefully accepted by the scientific socialists, became an armoury of arguments with which to attack “bourgeois economy” and the established order of things. If Marx and Lenin deserve busts, somewhere in the background there should be room for an effigy of Ricardo.

As to the form rather than the substance of Ricardo’s writings, it is perhaps sufficient to say that he was no writer. He himself dimly realized that he was a bad writer, but it is doubtful whether he can have known the whole truth. It is undiscerning flattery to regard his chief work, The Principles of Political Economy and Taxation, as a book at all. Rather does it suggest the sweepings of a busy man’s study—chapters of very varying length, which he clearly found it difficult to arrange in the right order, brusque notes and memoranda on points which interested the author. In defence, it may be admitted that Ricardo had the plea, on which few authors can rely, that he did not mean to write a book. These were indeed memoranda written for himself and his friends, published on his friends’ incitement. But this is poor consolation to the lonely traveller befogged in the Ricardian jungle.

It is customary to say that Ricardo is the supreme example of abstract reasoning in economics. This is true, yet it is not the whole truth. Ricardo does indeed proceed from certain principles accepted as true, and he follows these to their bitter—sometimes very bitter—conclusions. If to-day we are frequently aware of the gulf between his conclusions and the world we know, it is as well to remember that probably the gulf did not yawn so widely in Ricardo’s time. It is true also that his book is a horrible concatenation of “supposes,” so that one seems to gasp for breath in a world of abstract suppositions. Yet if Ricardo appeared to write in a world of abstract assumptions, he did not live in such a world. On the contrary, no economist ever knew the world better, or made so handsome a fortune out of it. Moreover, in all his occasional writings, which are no less important than his Principles, Ricardo always had before him a very practical and urgent question of the day.

Perhaps the dominant factor in making Ricardo. what he was from a literary point of view is to be found in a certain inherited Jewish subtlety. Mr. Gonnard has elaborated, on the basis of their common racial origin, an impressive comparison between Ricardo and Marx, who certainly have many spiritual points of kinship. To this must be added his experience on the Stock Exchange, where the Ricardian assumption of free competition is most fully realized. His literary work is, in fact, the production of an unliterary Jewish stockbroker who had neither time nor skill to give grace or clarity to his writings, and who made the mistaken assumption that his readers would be as ingenious as he himself was.

One general point as to Ricardo’s views on the scope of Political Economy meets the reader on the threshold. In his preface he lays it down that the produce of the earth is divided into rent, profit and wages, and that “to determine the laws which regulate this distribution is the principal problem in Political Economy”;25 and more emphatically in a letter to Malthus (20th October, 1820) he says:

“Political Economy, you think, is an inquiry into the nature and causes of wealth: I think it should rather be called an inquiry into the laws which determine the division of the produce of industry amongst the classes who concur in its formation. No law can be laid down respecting quantity, but a tolerably correct one can be laid down respecting proportions. Every day I am more satisfied that the former inquiry is vain and delusive, and in the latter only the true object of the science.”26

Attention is thus concentrated on the problem of distribution, above all with a view to determining the proportions of the various claims made on the national dividend—a programme which Ricardo hardly fulfilled. If many of the Ricardian theories are admirably fashioned to the hands of Marx, the new emphasis on distribution is no less significant. For if in the field of production the ultimate test is efficiency, in distribution the underlying question which sooner or later thrusts itself forward is that of justice.

For an understanding of Ricardo’s place in the history of economic thought, it is almost sufficient to study his Principles. Here his starting point—whether it was in fact the starting point of his thought may be doubted—is the venerable question of value, to which he consecrates his first and longest chapter. Here his doctrine, at the first blush simple and comprehensible, trails off into modifications which leave the reader who pushes so far, not quite sure how much of the original simplicity is left, and which indeed later left Ricardo himself somewhat doubtful of the whole doctrine. He starts off in the footsteps of Adam Smith, distinguishing between value-in-use and value-in-exchange, and points out that to have exchangeable value, a commodity must have utility, though utility cannot be the measure of exchangeable value. Assuming the presence of utility, the exchangeable value of commodities comes from two sources (1) their scarcity, and (2) the quantity of labour required to obtain them. But how are we to apportion the influence of these operative causes? Here Ricardo, with magnificent daring, effects a simple dichotomy of all commodities. There are some of which no labour can increase the quantity, and therefore their value cannot be lowered by an increased supply. In these cases value is determined by scarcity alone. Of such are “rare statues and pictures, scarce books and coins,” and all the other objects of the type of the Great Auk’s egg, which figure in the economist’s museum. On the other hand, there are those commodities which can be multiplied “almost without any assignable limit “by the exertion of human industry. Here, the foundation of exchangeable value is “the comparative quantity of labour expended on each,” though even in his general statement at the beginning of the chapter, Ricardo limits this by restricting the proposition to the “early stages of society,” and further slips in a modifying “almost exclusively.”27 Apparently, however, in all stages of society, it remains the foundation.28

It may be suggested that such a bold division of the problem involves its own condemnation. The problem of value is one, and a theory of value should explain value wherever it occurs. It is in the highest degree unlikely that value should flow from one group of causes in the case of one type of commodity, and should be determined by wholly different causes in another. Ricardo’s fundamental error here lies in the assumption that there is a sharp line of division between things which may only be increased in quantity by the operation of a miracle (the possibility of which may be ignored in an economic text-book), and those which can be increased “almost without any assignable limit,” if people so choose. It might be argued that neither of these classes really exist; it is certain that, if they do exist, they fade into each other by a series of infinitely small gradations. The truth is that all commodities at a given moment are limited in quantity; it is indeed because they are so limited that the question of increasing their quantity arises. At the other extreme, though it may savour more of sophistry, there are few goods which are for practical purposes so limited that they cannot under any circumstances be increased. Old Masters and Great Auks’ eggs are probably the traditional examples. It is true that the works of any particular Old Master are obviously limited, so long as the ingenuity of the trade is restrained. But the production of Old Masters goes on, though the products may take five hundred years to mature. In the year 2400 the market for Old Masters may conceivably be flooded with Augustus Johns. So with our friend the Great Auk, the eggs she has left are indeed numbered, but it is certainly possible, though it might be troublesome, to increase the eggs of extinct birds, if only by sending sparrows and starlings the way of the Great Auk. He would be a bold man who should say that the complete success of the Farmers’ Anti-Sparrow League would have no influence on the value of Great Auks’ eggs. It would, because thereby the supply of eggs of extinct birds would be increased; and though admittedly the new supply would in a sense be a substitute for the Great Auk’s egg, nevertheless some consumers of these eggs would doubtless be prepared to accept a substitute.

It may be observed that Ricardo, less daring than Marx, in fact gives no proof that the increasable commodities exchange in accordance with the quantity of labour expended on each. The nearest approach to a purported proof is in the passage where he states that, to convince ourselves of the truth of the proposition, we have but to “suppose any improvement to be made in the means of abridging labour.” And the result? Clearly, a fall in the value of the final product—a proof of the proposition which rests on the truth of the proposition.29

But the principle thus advanced as the “foundation” is immediately made subject to a number of reservations, the effect of which is to damage the foundation more than Ricardo was prepared to admit—at least in The Principles. The first difficulty arises from the different qualities of labour. Ricardo here tells us that “the estimation in which different qualities of labour are held comes soon to be adjusted in the market with sufficient precision for all practical purposes.” A scale is thus arrived at which, “when once formed, is liable to little variation.”30 It ought to be clear, however, that a theory of value designed to explain what happens in the market cannot base itself on what does in fact happen in the market. It is the old problem which so pervades all economic discussion, of determining which of two phenomena is cause and which effect. Is the scale of values attached to different kinds of labour something which we arrive at, Heaven knows how, and which is subsequently reflected in the market in the values of the commodities produced; or is the value of commodities determined independently in the harsh, unsympathetic market and thereafter reflected back in the relative values attached to different kinds of labour? A theory which makes value in the market the expression of the amount of labour involved is clearly debarred from going to the market to find in what ratios different kinds of labour ought to be weighted.31

Other modifying conditions noted by Ricardo relate to the time and labour necessary to produce the capital involved; its distribution as between fixed and circulating capital; the greater or less degree of durability of the capital, and the time that must elapse in bringing the commodities to market. Though Ricardo professes to regard all these as relatively unimportant, his own statement leaves doubts which, it is known, disturbed Ricardo’s own peace of mind. Nevertheless in The Principles a brave show is made in identifying, as far as might be, value and the amount of labour necessary for production. His many qualifications and hesitations were easily overlooked, and Ricardo was assumed to have presented to the world a labour theory of value.

How far, it may be asked, is the doctrine that value is the expression of the labour involved, affected by the appropriation of land and the consequent payment of rent? The answer brings us to what is, if not the central, at any rate the most celebrated of Ricardian doctrines, namely the Ricardian theory of rent. That the Ricardian theory of rent had previously been stated in its essentials by others is true; nevertheless, Ricardo enunciated it with a fullness and clarity which has made it peculiarly his, for what it is worth, to all time. The Physiocrats, it will be remembered, had looked on rent as proof of the bounty of Nature; Adam Smith, with confused Physiocratic remnants in his composition, was perhaps inclined to the same view. Malthus, not to refer to less celebrated names, had shown the way to a theory of rent based, not on the bounty, but on the meanness of Nature.

The Ricardian theory of rent has for us, in these latter days, something of the obvious and platitudinous, once Ricardo’s restricted definition of rent is swallowed. It is, in a too familiar phrase, “that portion of the produce of the earth which is paid to the landlord for the use of the original and indestructible powers of the soil.”32 Ricardian rent is therefore a very different thing from rent as understood by landlords, farmers, and the other vulgar, in whose minds rent always has been, and always will be, a payment in which are contained elements in respect of farm-buildings, capital sunk in improvements, and all the rest of it. A colonist might say that the soil had no original powers except those put there by the devil; an incompetent farmer might protest that it had no powers which were indestructible. The ordinary person would say that, even assuming that there are such powers, they are so inextricably intermingled with others which have a later and more human origin, that it is futile even to attempt to visualize a separation of rent, as vulgarly understood, between the Ricardian or economic rent proper, and the other ingredients which are rather of the nature of interest.

The text-books have made the Ricardian theory of rent so familiar that the merest bones may suffice. Assuming “an abundance of rich and fertile land” in the case of a new settlement, there will be no rent, as no one will pay for that of which there is an abundant quantity not yet appropriated. But this best land not being unlimited in quantity, it is necessary, with the progress of population, to resort to land of inferior quality. Rent will then arise on the land of higher quality; and so progressively, with each increase in population which “obliges “recourse to land of inferior quality, the land last cultivated will yield no rent; rent will emerge on that which had previously been on the margin, and the existing rent on all the higher grades will be correspondingly increased.

It is possible, however, to render the theory more precise. “Suppose” (if we may borrow Ricardo’s favourite word) that three grades of land, with an equal employment of capital and labour, yield a net produce of 100, 90 and 80 quarters of corn. So long as the first only is cultivated, there will be no rent; with resort to the second quality land, a rent equivalent to 10 quarters will appear on the first grade, since there can only be one price in the market, and that price must be such as to enable farming to make ends meet with a yield of 90 quarters. So with the descent to the third quality land, the no-rent land will now be that which yields 80 quarters; the previous marginal land (yielding 90 quarters) will yield a rent of 10 quarters, and the rent of 10 quarters hitherto payable on the highest quality land will rise to 20 quarters. And so on indefinitely.

It will be seen in what way the Ricardian theory of rent is connected with the labour theory of value. Value is determined by cost of production, but in the case of agricultural produce, there is clearly no uniform cost of production. With which of the possibly infinite number of costs-of-production is value to be equated?, Clearly, with the highest, since if the needs of society require resort to production under unfavourable conditions, the costs there incurred must be covered by the price received. Price is therefore determined by the costs of those who continue to produce under the most unfavourable circumstances, and inasmuch as there is uniformity of price, there will be a surplus in the case of those who produce under better conditions. The Ricardian theory of rent thus reduces itself to the comparatively obvious statement that if there is (as there must be) uniformity of price in the market, then whenever two identical commodities are produced at different costs, a surplus will accrue on that which is produced under more favourable conditions. Rent, as Ricardo specifically states, is “always the difference between the produce obtained by the employment of two equal quantities of labour and capital’ and as so defined, rent is clearly not confined to the sphere of agriculture, but may, as later theory realized, appear in any department of economic life.

The critical may suggest that the whole of Ricardo’s account of rent is vitiated by that fruitful source of confusion, the mistaking of cause and effect. His statement is that the progress of population “obliges” a country to have recourse to land of inferior quality, and that in consequence price rises to support the increased cost of production. It is, of course, an imaginary world in which Ricardo moves, but even in such a hypothetical state, it is clear that the rise in price would precede, and not follow, recourse to inferior land. The true sequence would obviously be that when scarcity was felt, the price would rise, and the rise in price would then enable recourse to be made to land of inferior quality. It is unnecessary to underline the bearing of this point on the general Ricardian theory of value. It suggests a reversal of the statement that “that corn which is produced by the greatest quantity of labour is the regulator of the price of corn”;33 on the contrary it may be the price of corn which determines how far it is profitable to carry cultivation.

Certain footnotes to, and inferences from, the Ricardian theory of rent may be noted. While the theory implies that there is somewhere a grade of land that pays or would pay no rent, Ricardo realizes that subsequent “doses” of labour and capital (if a later phrase be admissible) may be applied to land of higher quality in preference to resort being made to lower grade lands. Such less efficient applications to land already cultivated will, however, give rise to rent in exactly the same way, since rent “invariably proceeds from the employment of an additional quantity of labour with a proportionally less return.”34 (Here the Law of Diminishing Returns is clamouring for fuller expression.) To put it once more in modern terms, this means that the Law of Rent may operate intensively as well as extensively.

The most important inference from the theory is that rent (in the Ricardian sense) does not enter into the cost of production, and that consequently the remission of rent would have no effect on price. This follows from the fact that price is determined by production under the most unfavourable conditions, on land which by hypothesis pays no rent—rent being merely an emergent surplus, representing the differential advantage of the superior land. A further conclusion implicit in the Ricardian theory is that rent, the surplus which falls into the lap of the landlords, will tend to increase as society advances. It is the effect of the increasing wealth of the country, and, with increasing wealth, there will (according to the true Malthusian doctrine) be increasing population, compelling for its maintenance the cultivation of inferior land. Such a tendency to increasing rents might, of course, be checked by improvements in agriculture which would enable the additional quantities required to be obtained from land already under cultivation. Anything that diminishes the inequalities of lands necessarily cultivated will diminish rent, and as Ricardo observes in one luminous sentence, rent increases most rapidly as the remaining disposable land decreases in its productive powers—that is to say, the most favourable position for the landlord is when, after the best lands have been exhausted, the population is forced down with a bump to the cultivation of the Bass Rock.

It will be seen how far-reaching are the implications of the Ricardian theory. Before any other claims are considered, a slice of the produce of the earth is assigned to the landlords in return for no service rendered, a slice, moreover, which grows progressively with the increase of population, so that there is scarcely (from the point of view of Ricardian theory) any limit to the proportion of the annual produce which may be absorbed in this way. So, too, there is a complete reversal of the Physiocratic point of view which not merely assigned to the landlords a place of conspicuous honour and usefulness, but viewed the existence of rent as proof of the motherly benevolence of a bountiful Nature. Nature has now become stepmotherly: “The labour of Nature is paid, not because she does much, but because she does little. In proportion as she becomes niggardly in her gifts she exacts a greater price for her works.”35 Gloom is settling down on the economic horizon.

Of the other influential doctrines of Ricardo, the most important is that which is concerned with wages. Wages, that is the price of labour, is of course merely an example of value. Value, as has been seen, is determined by the amount of labour necessary for production; but while this is the “natural price,” there may be accidental and temporary deviations occasioned by the fact that no commodity is supplied for any length of time in precisely the required degree of abundance. It is under the influence of such deviations that capital is properly apportioned between the various lines of production, and the Ricardian scheme envisages constant oscillation in the market price, tending always to return to the natural price represented by the labour cost of production.36 Applying these principles to wages, the price of labour, there will here also be a market price and a natural price. The market price will be the price actually paid, depending on the proportion of supply and demand, excess of labour depressing and scarcity of labour raising the market price. But whatever these deviations, there will be a tendency, here as elsewhere, to return to the natural price.

What, then, is the natural price of labour? The answer is to be found in what later, following Lassalle, came to be known as the Iron or Brazen Law of Wages. If there be obloquy attaching to the authorship of this law, it must rest, not on Ricardo, but on many Others who expressed what was tending to become a commonplace view in the late eighteenth century. The very precise statement of Turgot has already been noted.37 According to Ricardo, “the natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.”38 According as the price of food and necessaries rises and falls, so will the natural price of labour rise and fall. The market price of labour will tend towards the natural price, because it obviously cannot remain below it without leading to a reduction in the volume of labour, while, if it rises above it, the population will increase, and with redundancy of labour the market price will again tend to fall. For Ricardo, a complete Malthusian, “no point is better established than that the supply of labourers will always ultimately be in proportion to the means of supporting them.”39 The natural price of labour, in short, is the minimum cost of producing men.

Such is Ricardo’s first brutal statement which suggests that the natural rate to which wages will always tend to fall is the bare minimum necessary to allow a labourer and his wife to bring up a family of approximately two; but as so often with Ricardo, the theory is imperceptibly modified, if not seriously undermined in subsequent discussion. He admits in the first place that in what he calls an “improving society,” in which one increase of capital follows another, the market rate may be above the natural rate for “an indefinite period.” Apart from the fact that the operation of the law may be indefinitely suspended, there is the further damaging concession that even when estimated in food and necessaries, the natural price of labour is not absolutely fixed and constant. It not only differs in different countries, but it varies in the same country at different times. In short, “it essentially depends on the habits and customs of the people.” The standard represented by the Ricardian wage is thus not a standard of subsistence, but a customary standard. If the natural rate is merely the customary rate, it is somewhat tautological to say that wages tend to return to their natural rate. What that may be depends entirely on “the habits and customs of the people.” Ricardo emphasized the importance of a “taste for comforts and enjoyments” as a security against a superabundant population; we should regard it to-day as buttressing the conventional standard of life. Clearly, if in one of these periods when the market rate is, for an indefinite period, above the natural rate, such a taste for comforts is developed, then at the end of this indefinite period, the “habits and customs of the people” will have changed, and Ricardo’s natural price of labour will have to take account of the fact.

So far from being rigorously adamant, Ricardo’s statement of the “iron” law of wages suggests something peculiarly adjustable. Even taking it in its cruder and more popularly accepted form, it must be remembered that in two respects the doctrine that wages tend to be depressed to a minimum—a doctrine that probably did not seriously misrepresent the position in the period between Turgot and Ricardo—has been undermined since Ricardo wrote. In the first place, he viewed the worker entirely in isolation, and as at a grave disadvantage when confronted with the employer; he could not foresee the reaction on wages of Combinations and Trade Unions. Secondly, it is clear that the Malthusian generalizations, which lurk behind the Iron Law, require restatement. The preventive check is not what it used to be; it is certainly no longer so true as it was, that children rush into the world on the slightest suggestion of food. On the contrary, a rise in the standard of life may, and generally does, lead to a decline in the birth-rate. To these two considerations, above all, is due the fact that the so-called Iron Law of Wages is to-day of little importance except for the examinee.

Ricardo’s professions would lead the reader to expect a discussion of the proportion in which the “produce” is allotted among the various claimants. While his discussion nowhere approaches such a quantitative computation as might be anticipated, he does indicate how, in accordance with his theory, the proportion will tend to vary in future. Rent, as we have seen, will rise; wages will tend to rise nominally, owing to the increased cost of food occasioned by resort to inferior land, but real wages (being governed by subsistence considerations) will not rise. Indeed, though it may appear to be in contradiction with the stricter interpretation of the Ricardian law, the normal rise in wages will not be sufficient to compensate the worker for the rise in prices of commodities in general.40 With regard to profits, along with which interest is lumped, Ricardo is not entirely clear, but to one general proposition he adheres with the utmost tenacity. It is that whatever increases wages necessarily reduces profits, and indeed nothing can affect profits but a rise in wages.41 No place here for the “economy of high wages,” or for a consideration of those causes which may lead to variations of the output of labour. Wages and profits are diametrically opposed, and a fall in the one means a rise in the other. In the long run, as has been seen, money wages will rise, so that the rate of profit will tend to fall.

Such is the Ricardian scheme of distribution; in place of the old harmony of interest, he has placed dissension and antagonism at the heart of things. “The interest of the landlord is always opposed to that of the consumer and manufacturer.”42 So also the interests of the worker and the employer are eternally and irreconcilably opposed; when one gains, the other loses. Further, the outlook for all, except the landlord, is a process of continual pejoration. Gone is the large-hearted optimism of Adam Smith, transmuted into a pessimism that will not be comforted. Yet Ricardo remains immovably non-interventionist. “These, then,” he says, “are the laws by which wages are regulated”; and he adds inconse-quently, “like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature.”43 In a world of Ricardian gloom one might ask, and did in effect ask, why there should not be interference. An optimist carolling that God’s in His Heaven, and that all’s right with enlightened self-interest has a right to nail the laissez-faire flag to the mast, but a pessimist who merely looks forward to bad days and worse times ought not in principle to be opposed to intervention, unless his pessimism is so thorough-going as to lead to the conviction that, bad as all diseases are, all remedies for all diseases are even worse.44

Much might be said, but cannot be said here, with regard to Ricardo’s writings relating to the theory of foreign trade and in the field of currency problems. It must suffice here to say that, as Ricardo’s starting point was in the urgent problems of the day, so in these more technical discussions his importance is as great as in the more general parts of economic theory. He explained the laws which govern the distribution of the precious metals among different countries as a result of international trade; in currency matters he expounded the quantity theory of money, and with much subtlety analysed the meaning of depreciation; he advocated economy in the use of gold and silver, and indeed he argued that “a currency is in its most perfect state when it consists wholly of paper money, but of paper money of an equal value with the gold which it professes to represent.”45 He anticipated in his writings the peculiar features of the Gold Standard, as reintroduced in 1925. But the temptation to discuss the currency expert in Ricardo must be resisted.

Even if little of the main Ricardian structure be left to-day, it nevertheless remains true that Ricardo was one of the dominant influences of the nineteenth century, and that, moreover, in directions which would have made Ricardo shiver to contemplate. His primary purpose was to elaborate the theory of distribution, and in particular to consider the incidence of various types of taxation. He did so on certain assumptions regarded as sacrosanct, and ruthlessly pushed on to certain logical . conclusions. There is no place in Ricardo for the waywardness of human action or for the multiplicity of causes of friction which place mere logic at a disadvantage in explaining the mechanism of society. Above all, competition—omnipresent, unrestrained and instantaneously operative—is assumed as the driving force of all action. It is not so now, nor indeed was it ever so. “Why should the manufacturer continue in the trade if his profits are below the general level?”46 He himself knows the answer, as he shows two chapters later, namely that people while losing money may continue in a trade for the very excellent reason that they cannot get out of it, that a shipbuilder overnight cannot turn his capital to agriculture. But such distracting knowledge of the real world has little influence on the march of Ricardo’s argument. Again, despite occasional sympathetic observations, his whole attitude to the working class is that they are merely a means to production. “Suppose the circumstances of the country to be such that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would be regulated accordingly,”47 Marx’s Industrial Reserve Army does not more definitely set the workers aside as a separate race maintained for the high ends of enterprise. Again in another celebrated passage which very properly stuck in the throat of Sismondi, he argues against Smith for magnifying the advantages of a large gross income rather than a large net income. It is, says Ricardo, the net income that matters, and if the net income can be obtained with a smaller population, what purpose is served by the superfluity?48 His logic would lead to the desirability of the population being reduced to one, and that last remnant producing a vast net surplus with the aid of sorcery and mechanical contrivances. The repellant doctrine that man exists for the production of wealth, rather than that wealth exists for the use of man, here finds its classical utterance.

All Ricardo’s doctrines were left in a form to invite misquotation and abuse. They are so easily remembered in their abridged form; it is so easy to forget (it was perhaps difficult ever to understand) the subsequent reservations in which Ricardo did so much to complicate and modify his simple doctrines. It is therefore not surprising that the crude and unrefined Ricardo should have been taken and applied to other purposes. Above all, he provided, all unwittingly, the foundation stones of so-called scientific socialism. The labour theory of value, with which he appears to have been increasingly dissatisfied, is the basis of Marx and the source of the claim to the “whole produce of labour.” The doctrine of rent, especially if one forgets that Ricardian rent is an abstraction, appears as an instigation to agrarian socialism. The Ricardian doctrine of wages, shorn of those reservations which go far to deprive it of all meaning, became the battle-cry of socialism. His opposition of wages and profits seems to symbolize the class war. For the ironically minded, nothing is more curious to observe than this supreme exponent of classical English Political Economy providing arguments to Marx and his followers. That the Ricardian refinements were left behind in the transplantation is true but immaterial. Perhaps the final lesson to be learned from Ricardo is that the literary graces are not merely ornamental but useful, and that he who is deficient in the art of expression has only himself to blame if he is misrepresented.

 

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49 Born near Dorking, 1766; ninth wrangler; Fellow of Jesus College; entered the Church; Professor of Political Economy at Haileybury College (East India Company). In addition to the Essay on Population, wrote a considerable number of pamphlets (as on Rent and Importation of Corn), and also Principles of Political Economy.

50 First edition, reprinted by the Economic Society, p. 11.

51 Essay on Population, Book I, chap. 2, pp. 18-19 in Vol. I of Everyman edition, to which, for convenience, subsequent references relate.

52 Ibid., Book II, chap. 13, Vol. I, p. 312.

53 Ibid., Vol I p. 9.

54 Malthus uses the expression in a very restricted sense. “By moral restraint I would be understood to mean a restraint from marriage from prudential motives, with a conduct strictly moral during the period of this restraint.” Book I, chap. 2, footnote, Vol. I, p. 14.

55 “This restraint almost necessarily, though not absolutely so, produces vice “(First edition, p. 29). “Every obstacle in the way of marriage must undoubtedly be considered as a species of unhappiness” (p. 89). “Even the slightest check to marriage, from a prospect of the difficulty of maintaining a family, may be fairly classed under the same head “(i.e., a species of misery) (p. 108). The cynic may be tempted to observe that Malthus married between the dates of the first and of the second edition.

56 Malthus himself draws attention to this analogy. Book III, chap. 14.

57 Ibid., Book II, chap. 4, Vol. I, pp. 195, 196.

58 Ibid., Book IV, chap. 5, Vol. II, p. 179.

59Ibid., Book II, chap. 10, Vol. I, p. 272.

60 Ibid., Book IV, chap, 1, Vol. II, p. 152.

61 Ibid. Book IV, chap. 2, Vol. II, p. 163.

62 Ibid., Book IV, chap. 13, Vol. II, p. 255.

63 Ibid., Book IV, chap. 8, Vol. II, p. 202.

64Ibid., Book IV, chap. 3, Vol. II, p. 170.

65Ibid., Book IV, chap. 6, Vol. II, p. 193.

66Ibid., footnote to Book I, chap. 5, Vol. I, p. 53,

67 Ibid., Book III, chap. 2, Vol. II, p. 20.

68 Ibid., Book II, chap. 13, Vol. I, p. 312.

69 Ibid., Vol. I, p. 312.

70 “The small-pox is certainly one of the channels, and a very broad one, which Nature has opened for the last thousand years to keep down the population to the level of the means of subsistence; but had this been closed, others would have become wider, or new ones would have been formed “(Book IV, chap. 5, Vol. II, p. 183). But the whole chapter reveals Malthus in his happiest vein. Characteristic also of the “brutality” of Malthus is his curt dismissal of the illegitimate child: “The infant is, comparatively speaking, of little value, as others will immediately supply its place “(Book IV, chap. 8, Vol. II, p. 203).

71 It should be noted that Malthus is more subtle than Ricardo on a point on which Ricardo has been frequently criticized, inasmuch as he makes it clear that price rises and rents emerge before resort to an inferior soil, and that these are indeed conditions of such a resort: “No fresh land can be taken into cultivation till rents have risen or would allow of a rise upon what is already cultivated.” Again, “it can never answer to take fresh land of a poorer quality into cultivation, till rents have risen or would allow of a rise, on what is already cultivated.” (Pages 27 and 28.)

72 Born in London in 1772 of Jewish extraction, his father (a banker) having been born in Holland; on the Stbck Exchange from a very early age; made a fortune; became a landowner and entered Parliament. In addition to his Principles, his various pamphlets, e.g. on the high price of bullion, Ye of the, highest importance.

73 Principles of Political Economy and Taxation, Everyman edition p. 1.

74 Letters of Ricardo to Malthus, p. 175.

75 Originally he had said “solely.” Ricardo’s doubts soon set in.

76 Principles, chap, 1, On Value, section 1.

77 Ibid., chap, 1, section 3, p. 15.

78 Ibid., chap, 1, section 2, pp. 11-12.

79 It is curious to note how similar are the words of Marx on the same point: “The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom.” (Marx, Capital, chap. 1, section 2, p. 52.) This mysterious process behind the backs of the producers is once again, of course, merely the judgment of the market.

80Ibid., chap. II, p. 33.

81 Ibid., pp. 40-41.

82 Ibid., p. 37.

83 Ibid., chap. 2, footnote, p. 39.

84 Ibid., chap. 4, On Natural and Market Price.

85 See above, p. 116.

86 Ibid., chap. 5, On Wages, p. 52.

87 Ibid., chap. 21, p. 194.

88 Ibid., chap. 5, On Wages, p. 57.

89 Ibid., chap. 6, On Profits, pp. 70-71.

90 Ibid., chap. 24, p. 225. It is true that there is a slight exception.

91 Ibid., chap. 5, On Wages, p. 61.

92 Mr. Gonnard has very properly drawn attention to the illogical combination of pessimistic belief and the cult of individual liberty, characteristic of the school of Ricardo, which he ascribes to the Calvinistic and puritanical element in the British character. But in Ricardo’s case it must go furthei back than Calvin. See Gonnard, op, cit., Vol. II, p. 250.

93 Ibid. chap. 27, p. 244.

94 Ibid., chap. 17, footnote, p. 160.

95 Ibid., chap. 16, p. 143.

96Ibid., chap. 26, On Gross and Net Revenue, p. 235.

• 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.
• 9Among 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.
• 10A 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.
• 11The 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.”
• 12Aristotle’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.
• 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.
• 15As 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.
• 16Apart 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.
• 17Under 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.
• 18For 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.
• 19Apart 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.
• 20Coming 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.
• 21The 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.”
• 22The 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.
• 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.”
• 24The 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.”
• 25It 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.
• 26Apart 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.
• 27Even 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.
• 28One 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.”
• 29Apart 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.
• 30Of the philosophers (of whom Cicero, Seneca and Pliny may be taken as typical) it may be suggested that in so far as they merely censure luxury, or emphasize the beauty of simplicity and the right uses of wealth, they are primarily moral rather than economic teachers. To a considerable extent this exhausts their content. On other questions there is little that is new. One of the most illuminating passages in Cicero’s De Officiis is that in praise of agriculture, which is also and even more emphatically in dispraise of all other occupations. In itself this passage indicates why the spirit of antiquity could scarcely be expected to evolve a body of economic doctrine. As has been properly observed, Cicero is here concerned with the respectability of various occupations, not with their productiveness. Notable is his comparative tolerance towards wholesale trade, especially if it leads to a country estate. Usury naturally is condemned, in this passage on the feeble ground that it incurs people’s ill-will; but it is also to Cicero that we owe Cato’s terse comment: “How about murder?” to one who inquired: “How about money-lending?”
• 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.”
• 32Of the philosophers (of whom Cicero, Seneca and Pliny may be taken as typical) it may be suggested that in so far as they merely censure luxury, or emphasize the beauty of simplicity and the right uses of wealth, they are primarily moral rather than economic teachers. To a considerable extent this exhausts their content. On other questions there is little that is new. One of the most illuminating passages in Cicero’s De Officiis is that in praise of agriculture, which is also and even more emphatically in dispraise of all other occupations. In itself this passage indicates why the spirit of antiquity could scarcely be expected to evolve a body of economic doctrine. As has been properly observed, Cicero is here concerned with the respectability of various occupations, not with their productiveness. Notable is his comparative tolerance towards wholesale trade, especially if it leads to a country estate. Usury naturally is condemned, in this passage on the feeble ground that it incurs people’s ill-will; but it is also to Cicero that we owe Cato’s terse comment: “How about murder?” to one who inquired: “How about money-lending?”
• 33In 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.”
• 34Apart from dithyrambic praise of agriculture, as, for instance, when Columella says that husbandry is next to and near akin to wisdom, it is notable that the writers of this group condemn slave-labour as inefficient. Pliny may be taken as typical: “It is the very worst plan of all to have land tilled by slaves let loose from the house of correction, as indeed is the case with all work entrusted to men who live without hope.” Certain sayings of Cato, as on the superiority of an agricultural population, and his dictum that he has been a useful member of society who leaves more at his death than he inherited, passed into current wisdom. But in the main these writers are concerned with tips for the landowner (and his wife): hints on the pruning of trees, where to buy tunics, the medicinal effects of cabbage, the salting of gammon and the like.
• 35Ibid., chap. 2, footnote, p. 39.
• 36Seneca’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.
• 37See above, p. 116.
• 38In 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.”
• 39Seneca’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.
• 40Ibid., chap. 5, On Wages, p. 57.
• 41Ibid., chap. 6, On Profits, pp. 70-71.
• 42The second point is more fundamental. Since there is only one source of national wealth, all taxation must ultimately fall there, and therefore all taxation should be imposed at once where the burden will ultimately fall. Quesnay, in short, advocates a single direct tax falling on the “produit net.” In this he is wholly logical on Physiocratic assumptions. Sooner or later a tax is bound to be shifted on to the “produit net,” if the “produit net” is what Quesnay considers he has shown it to be; and therefore the simplest and least onerous way of raising a revenue is to divert directly to the State a part of what is the only real national revenue. Quesnay in various places devotes considerable attention to proving the inconvenience and loss, and the detriment to the State which would result from any other method of taxation; and in particular, in The Second Economic Problem, he proves (at least to his own satisfaction) that though the landowner might imagine that he would be advantaged by some other form of taxation, yet in the end, owing to the shifting of the tax, the burden—and moreover an increased burden, owing to the inevitable incidental frictions and losses—will fall upon him. It is interesting to note, in passing, that in the course of his discussion of the incidence of taxation, Quesnay enunciates what a later generation has come to know as the Iron Law of Wages: “Wages, and in consequence the enjoyments which wage-earners can obtain, are fixed and reduced to the lowest level by the extreme competition which is among them.”
• 43In 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.”
• 44Mr. Gonnard has very properly drawn attention to the illogical combination of pessimistic belief and the cult of individual liberty, characteristic of the school of Ricardo, which he ascribes to the Calvinistic and puritanical element in the British character. But in Ricardo’s case it must go furthei back than Calvin. See Gonnard, op, cit., Vol. II, p. 250.
• 45The Réflexions are arranged in a hundred short paragraphs, and may be taken as a summarized statement of economic doctrine, as apprehended by one Physiocrat. In this brief treatise—written, it is said, for the instruction of two Chinese students—there are many acute and ingenious observations embedded in a dogmatic statement of the more untenable portions of Physiocratic theory. The superiority of agriculture is here in its full glory, and the iron law of wages, as applied to the worker who has only his arms and his industry, is one of the consequences of this superiority. The simple labourer is beaten down in his negotiations with a master who has a choice among many workers. It is different with the worker on the soil: “Nature does not bargain with him to oblige him to be content with the absolutely necessary.” The happy position of the agriculturist is that he receives, over and above his subsistence, a “richesse independente et dis-ponible” which he has not bought and which he sells. The land is therefore the unique source of all wealth, and that part which it gives as a pure gift (en pur don) is the net product. There is something excessively naïve in this touching faith in the bounty of Nature which few farmers—at least in Buchan—could share. Of other points in the Réflexions, it must suffice to note Turgot’s zealous plea for the abolition of all restraints on the fixing of the rate of interest; the payment of interest, being to the advantage of both parties concerned, should be determined solely by the course of trade. On this point, which Turgot also discusses elsewhere, he reveals the logic of laissez-faire in its most cogent form.
• 46Ibid., chap. 17, footnote, p. 160.
• 47Ibid., chap. 16, p. 143.
• 48It 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.
• 49The Republic, Jowett’s translation, p. 49.
• 50Ibid., Book III, p. 106.
• 51The Republic, Jowett’s translation, p. 154.
• 52Beer, Social Struggles in Antiquity, p. 97.
• 53The Laws, Jowett’s translation, p. 121.
• 54Ibid., p. 230.
• 55Ibid., p. 127.
• 56Politics, Book II, chap. 3, Welldon’s translation, p. 43.
• 57Ibid., p. 87.
• 58Ibid., p. 124.
• 59Ibid., p. 401.
• 60Ibid., Book II, chap. 5, p. 49.
• 61Ibid., Book I, chap. 6, Welldon, p. 13.
• 62Ibid., Book II, chap. 5, p. 48.
• 63Ibid., Book I, chap. 9.
• 64Ibid., Book I, chaps. 3 and 8.
• 65Ibid., Book I, chaps. 5 and 6.
• 66Ibid., p. 92.
• 67Ethics, Book V, chap. 5, Welldon’s translation, p. 149.
• 68Ibid., Book I, chap. 8.
• 69Ibid., p. 517.
• 70Analyse du Tableau Économique, pp. 304-309.
• 71Politics, Book III, chap. 5, Welldon, p. 113.
• 72Loeb translation, pp. 367, 409.
• 73Printed in Laistner, Greek Economics.
• 74Ibid., p. 153.
• 75“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.)
• 76Ecclesiasticus 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).
• 77Laistner, op. cit., p. 41.
• 78“Now in regard to trades and other means of livelihood, which ones are to be considered becoming to a gentleman and which ones are vulgar, we have been taught, in general, as follows: First, those means of livelihood are rejected as undesirable which incur people’s ill-will, as those of tax-gatherers and usurers. Unbecoming to a gentleman, too, and vulgar, are the means of livelihood of all hired workmen whom we pay for mere manual labour, not for artistic skill; for in their case the very wages they receive is a pledge of their slavery. Vulgar we must consider those also who buy from wholesale merchants to retail immediately; for they would get no profits without a great deal of downright lying; and verily there is no action that is meaner than misrepresentation. And all mechanics are engaged in vulgar trades; for no workshop can have anything liberal about it. Least respectable of all are those trades which cater to sensual pleasures:
• 79Ibid., p. 405.
• 80“Et cum ille, qui quæsierat, dixisset: ‘ Quid fænerari? ’, turn Cato: ‘ Quid hominem,’ inquit, ‘ occidere’” (De Officiis, Book II, xxv; Loeb, p. 266.)
• 81Pliny, Book XXXIII, chaps. 3, 4.
• 82Pliny, Book XVIII, chap. 7.
• 83It will be seen how far-reaching are the implications of the Ricardian theory. Before any other claims are considered, a slice of the produce of the earth is assigned to the landlords in return for no service rendered, a slice, moreover, which grows progressively with the increase of population, so that there is scarcely (from the point of view of Ricardian theory) any limit to the proportion of the annual produce which may be absorbed in this way. So, too, there is a complete reversal of the Physiocratic point of view which not merely assigned to the landlords a place of conspicuous honour and usefulness, but viewed the existence of rent as proof of the motherly benevolence of a bountiful Nature. Nature has now become stepmotherly: “The labour of Nature is paid, not because she does much, but because she does little. In proportion as she becomes niggardly in her gifts she exacts a greater price for her works.” Gloom is settling down on the economic horizon.
• 84De Ira, III, 32, 33.
• 85What, then, is the natural price of labour? The answer is to be found in what later, following Lassalle, came to be known as the Iron or Brazen Law of Wages. If there be obloquy attaching to the authorship of this law, it must rest, not on Ricardo, but on many Others who expressed what was tending to become a commonplace view in the late eighteenth century. The very precise statement of Turgot has already been noted. According to Ricardo, “the natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.” According as the price of food and necessaries rises and falls, so will the natural price of labour rise and fall. The market price of labour will tend towards the natural price, because it obviously cannot remain below it without leading to a reduction in the volume of labour, while, if it rises above it, the population will increase, and with redundancy of labour the market price will again tend to fall. For Ricardo, a complete Malthusian, “no point is better established than that the supply of labourers will always ultimately be in proportion to the means of supporting them.” The natural price of labour, in short, is the minimum cost of producing men.
• 86Pliny, Book XXXIII, chap. 19.
• 87Ad Helviam Matrem de Consolatione, chap. 9.
• 88Ricardo’s professions would lead the reader to expect a discussion of the proportion in which the “produce” is allotted among the various claimants. While his discussion nowhere approaches such a quantitative computation as might be anticipated, he does indicate how, in accordance with his theory, the proportion will tend to vary in future. Rent, as we have seen, will rise; wages will tend to rise nominally, owing to the increased cost of food occasioned by resort to inferior land, but real wages (being governed by subsistence considerations) will not rise. Indeed, though it may appear to be in contradiction with the stricter interpretation of the Ricardian law, the normal rise in wages will not be sufficient to compensate the worker for the rise in prices of commodities in general. With regard to profits, along with which interest is lumped, Ricardo is not entirely clear, but to one general proposition he adheres with the utmost tenacity. It is that whatever increases wages necessarily reduces profits, and indeed nothing can affect profits but a rise in wages. No place here for the “economy of high wages,” or for a consideration of those causes which may lead to variations of the output of labour. Wages and profits are diametrically opposed, and a fall in the one means a rise in the other. In the long run, as has been seen, money wages will rise, so that the rate of profit will tend to fall.
• 89Ricardo’s professions would lead the reader to expect a discussion of the proportion in which the “produce” is allotted among the various claimants. While his discussion nowhere approaches such a quantitative computation as might be anticipated, he does indicate how, in accordance with his theory, the proportion will tend to vary in future. Rent, as we have seen, will rise; wages will tend to rise nominally, owing to the increased cost of food occasioned by resort to inferior land, but real wages (being governed by subsistence considerations) will not rise. Indeed, though it may appear to be in contradiction with the stricter interpretation of the Ricardian law, the normal rise in wages will not be sufficient to compensate the worker for the rise in prices of commodities in general. With regard to profits, along with which interest is lumped, Ricardo is not entirely clear, but to one general proposition he adheres with the utmost tenacity. It is that whatever increases wages necessarily reduces profits, and indeed nothing can affect profits but a rise in wages. No place here for the “economy of high wages,” or for a consideration of those causes which may lead to variations of the output of labour. Wages and profits are diametrically opposed, and a fall in the one means a rise in the other. In the long run, as has been seen, money wages will rise, so that the rate of profit will tend to fall.
• 90Second Probleme Économique, p. 706.
• 91Pliny, Book XVIII, chap. 7.
• 92Such is the Ricardian scheme of distribution; in place of the old harmony of interest, he has placed dissension and antagonism at the heart of things. “The interest of the landlord is always opposed to that of the consumer and manufacturer.” So also the interests of the worker and the employer are eternally and irreconcilably opposed; when one gains, the other loses. Further, the outlook for all, except the landlord, is a process of continual pejoration. Gone is the large-hearted optimism of Adam Smith, transmuted into a pessimism that will not be comforted. Yet Ricardo remains immovably non-interventionist. “These, then,” he says, “are the laws by which wages are regulated”; and he adds inconse-quently, “like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature.” In a world of Ricardian gloom one might ask, and did in effect ask, why there should not be interference. An optimist carolling that God’s in His Heaven, and that all’s right with enlightened self-interest has a right to nail the laissez-faire flag to the mast, but a pessimist who merely looks forward to bad days and worse times ought not in principle to be opposed to intervention, unless his pessimism is so thorough-going as to lead to the conviction that, bad as all diseases are, all remedies for all diseases are even worse.
• 93Ibid., section 7.
• 94Even if little of the main Ricardian structure be left to-day, it nevertheless remains true that Ricardo was one of the dominant influences of the nineteenth century, and that, moreover, in directions which would have made Ricardo shiver to contemplate. His primary purpose was to elaborate the theory of distribution, and in particular to consider the incidence of various types of taxation. He did so on certain assumptions regarded as sacrosanct, and ruthlessly pushed on to certain logical . conclusions. There is no place in Ricardo for the waywardness of human action or for the multiplicity of causes of friction which place mere logic at a disadvantage in explaining the mechanism of society. Above all, competition—omnipresent, unrestrained and instantaneously operative—is assumed as the driving force of all action. It is not so now, nor indeed was it ever so. “Why should the manufacturer continue in the trade if his profits are below the general level?” He himself knows the answer, as he shows two chapters later, namely that people while losing money may continue in a trade for the very excellent reason that they cannot get out of it, that a shipbuilder overnight cannot turn his capital to agriculture. But such distracting knowledge of the real world has little influence on the march of Ricardo’s argument. Again, despite occasional sympathetic observations, his whole attitude to the working class is that they are merely a means to production. “Suppose the circumstances of the country to be such that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would be regulated accordingly,” Marx’s Industrial Reserve Army does not more definitely set the workers aside as a separate race maintained for the high ends of enterprise. Again in another celebrated passage which very properly stuck in the throat of Sismondi, he argues against Smith for magnifying the advantages of a large gross income rather than a large net income. It is, says Ricardo, the net income that matters, and if the net income can be obtained with a smaller population, what purpose is served by the superfluity? His logic would lead to the desirability of the population being reduced to one, and that last remnant producing a vast net surplus with the aid of sorcery and mechanical contrivances. The repellant doctrine that man exists for the production of wealth, rather than that wealth exists for the use of man, here finds its classical utterance.
• 95Even if little of the main Ricardian structure be left to-day, it nevertheless remains true that Ricardo was one of the dominant influences of the nineteenth century, and that, moreover, in directions which would have made Ricardo shiver to contemplate. His primary purpose was to elaborate the theory of distribution, and in particular to consider the incidence of various types of taxation. He did so on certain assumptions regarded as sacrosanct, and ruthlessly pushed on to certain logical . conclusions. There is no place in Ricardo for the waywardness of human action or for the multiplicity of causes of friction which place mere logic at a disadvantage in explaining the mechanism of society. Above all, competition—omnipresent, unrestrained and instantaneously operative—is assumed as the driving force of all action. It is not so now, nor indeed was it ever so. “Why should the manufacturer continue in the trade if his profits are below the general level?” He himself knows the answer, as he shows two chapters later, namely that people while losing money may continue in a trade for the very excellent reason that they cannot get out of it, that a shipbuilder overnight cannot turn his capital to agriculture. But such distracting knowledge of the real world has little influence on the march of Ricardo’s argument. Again, despite occasional sympathetic observations, his whole attitude to the working class is that they are merely a means to production. “Suppose the circumstances of the country to be such that the lowest labourers are not only called upon to continue their race, but to increase it; their wages would be regulated accordingly,” Marx’s Industrial Reserve Army does not more definitely set the workers aside as a separate race maintained for the high ends of enterprise. Again in another celebrated passage which very properly stuck in the throat of Sismondi, he argues against Smith for magnifying the advantages of a large gross income rather than a large net income. It is, says Ricardo, the net income that matters, and if the net income can be obtained with a smaller population, what purpose is served by the superfluity? His logic would lead to the desirability of the population being reduced to one, and that last remnant producing a vast net surplus with the aid of sorcery and mechanical contrivances. The repellant doctrine that man exists for the production of wealth, rather than that wealth exists for the use of man, here finds its classical utterance.
• 96Nos. 12 and 13 of the Maximes, attached to Grains, p. 239.