526 EEPORT— 1888. 



matter.' Aud then tlie next paragraph began with these words : — ' In a 

 certain sense, indeed, it may be said that the regulation of wages by 

 selling prices does rest upon an economic basis, however the particular 

 details of that basis may be arranged.' 



These, then, are the three passages to whicb my critics seemed to 

 refer ; and I should be inclined to summarise the argument to which they 

 were intended to give expression in some such way as this. What I 

 maintained was that, while the general nature of the principle on which a 

 sliding scale may be based or an arbitrator pi'oceed may, and indeed must, 

 possess an economic complexion, yet the particular application of that 

 principle — the special relation between wages and prices adopted as the 

 starting-point of a scale — is not strictly determinable by economic theory. 

 A treatise on sliding scales cannot then, it seems to me, be written ' un- 

 aided,' as one of my critics declares, by economic theory; and yet it is 

 none the less true to maintain— in opposition to my other critic — that 

 ' theoretic economics ' cannot resolve the problem involved in the deter- 

 mination of the exact basis of a scale. 



For what is the fundamental assumption of ' theoretic economics ' ? 

 The answer which wonld, I imagine, be at once returned to this question 

 would be, that the fundamental assumption of almost any scheme of theo- 

 retic economics is competition. That competition, indeed, may be 

 hindered in its action by qualifying circumstances — by the vis inertice of 

 custom or some other obstacle ; but we may nevertheless maintain that 

 the hypothesis which presents itself at the outset before these qualifying 

 circumstances are taken into consideration — the hypothesis which is 

 revealed in the last analysis when these circumstances have been suc- 

 cessively abstracted — is, undoubtedly, pure competition. The term 

 ' competition,' however, stands in need of fuller explanation ; for, for 

 the purposes of ' theoretic economics,' it seems to me that the objects or 

 interests about which the competitive foi'ces play must be, in theory at 

 least, susceptible of continuous subdivision. This is what I meant when 

 I followed Jevons in arguing that ' the existence of indivisihle combinations 

 in trade disputes usually ' reduced ' them to a bargain of ' an indeter- 

 minate nature.' 



The proposition just laid down seemed to me to admit of more than 

 one easy and simple test. We might take, for instance, Jevons' own con- 

 ception of ' final utility.' Few economists, I imagine, would deny that 

 that conception is now an accepted part of economic theory, and that it 

 is one of the most fertile conceptions of modern economics. There are 

 signs of its extension — along with the increasing amalgamation of the 

 theory of exchange with that of distribution — from the theory of ex- 

 change of material commodities to that of exchange of services. It has 

 been applied to the determination of interest ; and it may, I suppose, be 

 said to be connected with the theory of rent. But it cannot, I imagine, 

 be accepted, save ou the assumption enforced by Jevons himself,' that 

 'more or less of a commodity' can 'be had down to infinitely small 

 quantities.' 



Take once more the law of Diminishing Return — the overthrow of 

 which would, as Cairnes once pointed out,^ involve the rewriting of the 

 greater part of economic theory — and what do you find ? Here again the 



' Theory o'' Political Economy (2nd edition), p. 130. 

 ' Logical Method (2nd edition), p. 36. 



