290 



POLITICAL ECONOMY 



It cannot be said that the current English 

 economics have given due recognition to any of 

 the above facts. Professor Marshall's important 

 Principles of Economics ( 1890), while it is learned, 

 thorough, and progressive in loin-, and does con- 

 siderably show the influence of new movements, 

 is in the main merely a reproduction of tin- tradi- 

 tionary doctrine. The only prominent thinkers who 

 give due recognition to the evolution principle in 

 economics are Herbert Spencer and Schiiffle. 



It will ! clear that the old alistract economics, 

 of which Kirardo was the signal example, is now 

 being abandoned by all competent economists. 

 Most students of tin- subject will admit that we 

 can liest comprehend the present if we consider it 

 as having grown out of the past ; and if we can throw 

 any light on the future, we can do so only by 

 studying both the past and the present. In other 

 words, the great function of the economist is to 

 collect and analyse facto and to inquire into the 

 action of the forces, whatever they may be, that 

 determine the economic well-being of mankind. 

 His aim must be on the one hand to avoid a servile 

 adherence to the historical method, through which 

 the discussion of economic theories is overburdened 

 by a too elaliorate apparatus of historical learning, 

 and on the other hand to avoid the assumption 

 that the economic conditions of our own time and 

 country are and must be normal for all other times 

 and countries. While the main body of economic 

 inquiry must be the collection and analysis of facts, 

 the best and most fruitful achievements in political 

 economy accomplished by men like Quesnay, 

 Tnrgot, Adam Smith, and J. S. Mill have been in 

 forwarding human progress. Thus the ethical or 

 ideal element has not been excluded from political 

 economy at its best. On the contrary, it has 

 informed and inspired the science in its noblest 

 efforts. While political economy must start from 

 an adequate basis of facts supplied by the cognate 

 or sulmidiary sciences, geology, geography, statis- 

 tics, history, it must own allegiance to the supreme 

 science of ethics. Progress in economic science 

 will move in harmony with and promote the social 

 and moral progress of the human race. 



Political economy may l>e regarded as concerned 

 with a vast process which is incessantly going on. 

 This process begins and ends with human beings. 

 The starting-point is found in the needs which 

 stimulate men to those efforts for their satisfaction 

 which are termed labour. Hut lalmnr can create 

 nothing ; it operates by utilising natural objects, 

 or as economists briefly express it, the land, which 

 includes mines and the sea as well as agricultural 

 land. In the history of civilisation a vast system 

 of appliance- have, under the name of capital, l>ecn 

 devel<i|Kil and accumulated by I he laliour, ingen- 

 uity, and foresight of men for more effective opera- 

 tion on nature ; thus we have the three factors of 

 production, land, hil>our, and capital. 



In the system of economics that prevails in the 

 most advanced countries these three factors of 

 production Are supplied by as many different 

 classes of individuals, whose relations to each other 

 are determined by free competition. Hence it is 

 that the problems connected with distribution 

 attain to primary importance in political economy. 

 The share of the results of production obtained by 

 tin- owner of (ami is rent; the share of the capi- 

 talist is railed profits, consisting of interest, wages 

 of management. \<-. ; the share of the labourer is 

 simply termed wages. 



One of the most marked features in the recent 

 economic history of the world is the enormous 

 development of the means of communication and 

 transport lioth by sea and land. In former times 

 the bulk of the produce of labour was locally con- 

 sumed by the producers themselves. The growing 



utilisation of steam and electricity has given rise 

 to the great markets of the world, or we should 

 rather say, to a great world-market, in which the 

 exchange of the most varied commodities is carried 

 on. Exchange had long liecn an important depart- 

 ment of economics ; it is now a dominant one. 

 Out of exchange arise the problems connected with 

 value. The medium of exchange is money, also- 

 involving a wide complex of questions banking, 

 credit, &c. 



The final aim of the whole economic process is 

 the satisfaction of the needs from which it started. 

 This satisfaction is gained in the consumption of 

 the commodities which are produced, 'distributed, 

 and exchanged ; hut they .-ire used up not only for 

 enjoyment, but for the production ana maintenance 

 of human energies. All human activity, whet her 

 it l>e viewed as the activity of individuals or of the 

 great organised communities, such as states and 

 nations, must rest on an economic basis, and must 

 lie more or less limited by the economic resources 

 which it can command. As wealth consists of 

 commodities which are derived from external 

 nature ami transformed in the process of produc- 

 tion, so in the process of consumption they are 

 returned to nature in a greatly altered form. The 

 subject of consumption has lieen much neglected 

 by political economists. The utilisation of the 

 materials returned to nature, which are often con- 

 sidered as mere waste, but which could be scien- 

 tifically applied to the recuperation of the often 

 exhausted powers of nature, has also been greatly 

 neglected in economic technique. 



The vast process which we have thus briefly 

 sketched is for the most part a private matter. It 

 rests with each individual to determine how he 

 shall relate himself to it. But there is also a large 

 public sphere connected with the state, the muni- 

 cipality, and other local bodies. It has almost 

 universally been admitted that the state must 

 provide for defence, justice, education, the larger 

 means of communication, &c. ; and the necessary 

 revenue is mostly drawn from the wealth of the 

 citizens under the name of taxation. An enlarging 

 set of functions, connected with lighting, water- 

 supply, police, and to some extent education, are 

 generally performed by municipalities and other 

 local Imdies, the funds for these Mug styled rates. 



Many of the older forms of society were marked 

 by stability or stagnation, and the economic con- 

 ditions under which they existed underwent little 

 change. Yet economic history has also lieen a 

 record of development. Labour in particular has 

 gone through a distinct succession of changes, 

 through slavery, serfdom, and the guild system, 

 into tlie present system of free laliour. Discontent 

 bos always been the mother of progress, and it is 

 ohviou- that the economic changes of the present 

 ami the future must large] \ pmc I from the dis- 

 content of the labouring class, e*|>ecially from their 

 discontent with the prevailing system of distribii 

 tion. Hence a group of most important ques- 

 tions connected with trades-unions, co-operation, 

 socialism. 



It should also be said that the economic process 

 is an organic one, that each part of it is vitally 

 connected with every other, and that the whole- 

 process is intimately related to the entire social, 

 political, artistic, moral, and religions develop- 

 ment of mankind. One of the greatest dangers to 

 political economy (as to other sciences) w the 

 excessive specialisation by which certain depart 

 incuts of it are studied in isolation from the other 

 branches of the science, and from the cognate 

 provinces of human knowledge. 



Larger works on political economy : Adam Smith, 

 Wealth of Nations; J. 8. Mill, Pritieiplet of Political 

 Economy ; Cairnea, .Some Lrailim.i J'rinriplci of Political 



