ECONOMIC SCIENCE IN THE NINETEENTH CENTURY 29 



Scotchman. Suffice it to say that to the older notion of a teleological 

 trend in the course of events, Adam Smith adds the notion of a 

 normal human nature. The human propensity to " truck, barter, 

 and exchange " becomes the mechanism through which the " in- 

 visible hand " of nature accomplishes its purposes, and since men are 

 pretty much alike, the mechanism is well-nigh faultless. It is, there- 

 fore, the workings of human nature as thus conceived rather than the 

 operations of physical nature that form the object of Adam Smith's 

 analysis. His system, like the Physiocrats', is mainly a theory of 

 production, but man, not nature, is conceived to be the central 

 agent in the process. His system has, therefore, been properly called 

 the industrial system, for human industry, labor, is its efficient prin- 

 ciple, the term in which economic knowledge is formulated. Though 

 he looks in much the same direction, his outlook is broader than the 

 Physiocrats'. Everything is viewed from the standpoint of pro- 

 duction; all the economic processes are construed as aspects of the 

 productive process, but the notion of production is widened so as to 

 include every variety of industry, not alone that which helps the 

 nutritive work of nature. So "natural " value belongs to whatever 

 embodies labor; labor is the cause of value, the " real price " of 

 things. 



But while Adam Smith's notion of the natural course is appreciably 

 nearer the truth as the ordinary layman sees it than was the Physio- 

 crats', it is very far from professing to be identical with the actual 

 course. Thus natural values are not the values causally determined 

 by the "higgling of the market." But, for all that, they are the 

 "real," the "necessary" values, and the market values are the 

 "nominal" values, the "accidents," though a cynic might be par- 

 doned for refusing to see wherein they were "necessary " except to 

 establish the logical congruence of economic theory with its postu- 

 late. Of course, the gap between nature and the market is bridged, 

 in thought at least, by the workings of self-interest. Where com- 

 petition is the regulator of values a reasonable correspondence is held 

 to ensue between the "real" and the "nominal" prices of things, 

 and thus is vindicated the economist's claim that nature does 

 all things well, and that, as she does them well, the logical is the 

 " natural." 



Quite as characteristic of Adam Smith's attitude is his treatment 

 of distribution, and it is almost equally characteristic, it may be 

 added, of the attitude of many later economists toward the same 

 problem. The shares in distribution are to be accounted for. How 

 is it done? Briefly stated, by construing them in terms of the 

 "necessary " equivalence of effort and effect in production. Nature 

 does not waste. Therefore, when the natural course of things runs 

 off smoothly, that is to say, when competition does its part, effect 



