692 REPORT— 1902. 



this be stereotyped for all time ? Why should not the position at the eud of the 

 seventeenth century have been maintained ? Why should we not endeavour to 

 restore the working classes to their old home in the City, and remove the Bank 

 of England to Tooting?' Secondly, 'Whom do you imagine you will benefit 

 by the policy you propose ? ' 



It is ditticult to conceive of any answer to the first question. To the second 

 the reply of the dunce. would of course be that he thought the policy proposed 

 would benefit the people housed on these expensive sites. This answer would 

 at once be condemned as unsatisfactory. To build houses on land worth 100,000/., 

 and let them to the first-comers of respectable antecedents at rents which would 

 pay if the land were worth 2,000^., would be a very stupid sort of almsgiving if 

 these respectable first-comers actually got the difference between the interest on 

 the 100,000/. and the 2,000/. But no one supposes that they do get this difference 

 or any considerable part of it. The difference is almost entirely pure loss to the 

 community. The chief immediate effects of the policy are, first, to retain in the 

 centre the men, women, and children who inhabit the dwellings ; secondly, to 

 retain other workers who perform various offices for the.se inhabitants ; and thirdly, 

 to ensure a supply of labour for factories which would otherwise (to the advantage 

 of everyone concerned) be driven into the country by the pressure of the high 

 wages necessary to bring workmen to the centre or to pay their house rent if 

 they lived there. 



So much for the utility of economic theory in preventing obstruction of 

 desirable changes. My second claim on its behalf is that it serves to hinder the 

 adoption of specious but illusory projects. This, I think, may be illustrated by 

 examples closely connected Avith those which we have already considered under 

 the head of obstruction. 



The people who are most anxious to obstruct changes in the channels of trade 

 which are coming about of themselves because they are profitable, are often 

 extremely anxious to promote changes which will not come about of themselves 

 because they are not profitable. For this end one of their most favourite devices 

 at present is a State or municipal subsidy to locomotion or transport between 

 particular points. So we have shipping subsidies, free grants to light railways, 

 the construction of unprofitable telegraph lines by the post office, and the advocacy, 

 at any rate, of the construction of unprofitable tramways by municipalities. The 

 practical man, uninstructed in economic theory, feels uneasy about such projects 

 because he does not see where he is to stop, and he feels obscurely that a imiversal 

 subsidisation would mean ruin. But he does not see why he should not go a 

 little way, and he goes sufficiently far to involve a loss quite worth considering. 

 A knowledge of economic theory would come to his assistance by showing him 

 that, as a rule, the most profitable enterprises are those which it is most desirable 

 to undertake first, and that the subsidisation of the less profitable does not create 

 new enterprises, but merely changes the order from the more desirable to the less 

 desirable. I suppose that if in 1830 Parliament had offered a sufficient subsidy 

 a railway might have been at once made and worked from Fort William to Fort 

 Augustus, to the great satisfaction of the inhabitants of Fort Augustus and the 

 intermediate places. But it is obvious that it was more desirable, in the interests 

 of the whole community, that the railway from Fort William to Fort Augustus 

 should wait for seventy years, and that the railway from Manchester to Liverpool, 

 and many others, should be made first. 



Then, too, we find people who are not quite so stupid as to think the working 

 classes should always remain in the places where they were at the end of the 

 nineteenth century, alleging that the way to cure overcrowding is for local 

 authorities to enter the building trade in a general way, and build houses inside or 

 outside their districts, wherever it seems most convenient. To the mind uninstructed 

 in economic theory it seems obvious that the larger amount of housing there is the 

 less overcrowding there will be, and that the more housing local authorities pro- 

 vide the more housing there will be. Economic theory, with its explanation of 

 the general working of the organisation of production, suggests two objections. 

 First, an addition to the housing in any locality will not be effectual in diminishing 



