724 REPORT — 1894. 



subject.* They in this way strove to keep up their favourite science as a real and 

 positive one, while they shut out a number of trouhlesome questions. Mill and 

 Cairnes holdly maintained that political economy merely dealt with tendencies, and 

 was a hypothetical rather than a positive science ; by throwing aside all the pecu- 

 liarities and confining attention to the points of agreement certain formally valid 

 results could be reached. To directly apply them to practice or regard them 

 as a complete interpretation of concrete phenomena was simply an error in logic 

 for which, when committed by others, the economist could not be held account- 

 able.^ 



The English members of the historical school either neglect all but the crudest 

 empirical classification, or suggest that each historical period must be treated by 

 the use of special hypotheses suited to its particular condition, and thus succeed in 

 combining their acceptance of a great deal of the traditional economic doctrine with 

 Si much more realistic treatment in respect to earlier times. All these methods 

 seem defective, though in very different degrees. If the political economy of the 

 middle of this century is to be regarded as a positive science, applicable without 

 restriction of time or place, we get a ready explanation of the charge of ' undue 

 absoluteness ' so strongly urged by Knies,^ and, it must be allowed, with considerable 

 justice. There was Irom this point of view but one correct system in respect to 

 each economic element. Large farms, free bargaining between independent 

 labourers and employers, the single standard, and a banking system rigidly con- 

 forming to that prescribed by the Act of 1844, were some of the features of a well- 

 orcfamsed economic society, any aberrations from which should be rectified at the 

 first convenient opportunity. So narrow a conception could not long stand the 

 test of wider experience, and accordingly it made way for the treatment of the 

 subject as based on a series of hypotheses. By skilfully limiting and qualifying 

 the leading doctrines it was not ditiicult to avoid the more obvious contradictions, 

 and explain away persistently obstinate facts by regarding them as ' friction,' or as 

 ' minor disturbing causes ' which might be neglected without disadvantage. Used 

 with reference to a given time and place, and with a wise selection of premises, the 

 hypothetical deductive method yielded fruit of considerable value, but it utterly 

 broke down in the attempt to deal with cases outside those included in the selected 

 type, and even in dealing with them needed constant supplement and correction. 

 Though the procedure of the economic historian appears specially devised to meet 

 this defect, as it dwells on the differences found in the economic factors at different 

 periods of a nation's history, it is far too narrow and too much complicated by the 

 mass of details to render the service which is required. Economic history will, 

 in conjunction with observation of existing conditions, ultimately furnish a rich store 

 of materials out of which scientific results may be extracted, and this latter and 

 most important part of the work will need systematic classification of the several 

 types of institutions and conditions. To return to the example already given, it is 

 necessary not merely to consider the abstract theory of banking under certain sup- 

 posed conditions and its history in all countries so far as attainable. The principal 

 object should be to ascertain the different groups into which banking systems can 

 be scientifically arranged, and the ways in which each is produced by, and in turi» 

 reacts on the other parts of, the social system. Writers on sociology speak 

 somewhat pretentiously of the ' consensus of the social organism,' but they aore 

 expressing a real and important truth ; for we cannot doubt that there are ne- 

 cessary relations, modifiable, indeed, within limits hard to define, but still present 

 and not to be ignored by those who seek to interpret the movements of society. 

 There is here an immense field as yet almost entirely overlooked. One minor 

 instance may be noticed. We are all familiar with our own Treasurj' system, 

 working smoothly and effectively through the agency of the Bank of England. We 

 hardly realise that quite diflferent arrangements are employed by the United States, 



' Senior. Introductory Lectures in the University of Oxford, 1852, Lecture IV. 

 - J. S. Mill, Essays on some Unsettled Questions, Essay V. ; J. E. Cairnes, Lo^ic-zl 

 Method, Lecture II , § 3. 



3 FoUtische OeJumomie, 2nd. ed. 1883, III., viii., pp. 401 seg;. 



