734 REPORT — 1891. 



•cultivation, and were left waste after the fall of prices in 1816. Ricardo and 

 Ricardo's readers would have the clearest picture before them of the agricultural 

 conditions he assumed when his 'Principles' were published in 1817. It is said 

 that his theory of rent does not apply, without modification, to new countries 

 which have been developed since he wrote, or to old conditions of society of which 

 he was unaware, or to the highly intensive farming that has been developed since 

 he died. Very likely it does not ; it would be very odd if it did ; surely a man 

 may get the credit of giving an admirable explanation of the facts before him even 

 if tlie terms he used do not directly apply to facts which were about to come into 

 being subsequently. As his reasoning is hypothetical it has universal validity in 

 form, but Ricardo was far too good a logician to suppose that it therefore had 

 general applicability to all places and times. If he had only stated the 

 conditions he assumed — conditions which were obvious to him and might be easily 

 discerned by us if we chose — the value of his explanation, and the limits within 

 which it is true, would have been clear. 



Somewhat similar and similarly excusable carelessness was shown by those 

 economists among whom the doctrine of a wages fund grew up.- They did not 

 define it as fixed, but they thought and argued about it as though it was fixed 

 owing to the actual circumstances of their times which they implicitly assumed. 

 So far as real wages are concerned and the available ' fund ' of the necessaries of 

 life, this was restricted by the operation of the Corn Laws : it could not be easily 

 increased as a matter of fact. So far as money payments for labour were con- 

 cerned, the additional outlay which the capitalist was prepared to make for 

 wages was also closely restricted in the great trades of the country. In the 

 textile trades machinery was being introduced but slowly ; the contest between 

 hand-combing and machine-combing had still to be fought, and the power loom 

 was beginning to be a practical success, not only in cotton weaving, but in the 

 ancient and staple trades of the country. The expense of machine weaving could 

 be definitely calculated, and if the expense of production by paying hand labour 

 came up to it then the power loom would be introduced, and the weavers thrown 

 out of employment, in so far as they were not needed to mind the machines. The 

 expense of the machine production of a given quantity of cloth was a ' wages fund.' 

 This wages fund was practically fixed, and was divided between the large numbers 

 who applied for employment, and among whom the work was ' spread out.' We 

 may be thankful that these conditions have passed away, but we need not denounce 

 those who formulated a theory of wages, which was on the whole applicable to 

 the times in which they lived, because these times have changed, and it is no 

 longer so applicable to ours. The great English economists of the early part of 

 this century gave excellent explanations of the industrial phenomena with which 

 they were familiar ;, their error — and a very excusable error — lay in not stating the 

 conditions they assumed, and thus indicating the limits within which their 

 doctrine could be considered to hold good. 



I fear I have occupied a long time in saying very little ; yet it is not un- 

 necessary to insist that we shall have the best chance of advancing economic 

 science if we try to make sure, at least for ourselves, that we know what we are 

 talking about. It is well to be clear how far we are dealing with reasonings that 

 have a merely formal validity and universality, and how far with the phenomena 

 of the world we live in. If we are to pi'eserve and develop economics on all its 

 sides, both as a formal science which deals with the relations between economic 

 imits of all kiuds, and as an instrument for investigating actual facts and under- 

 standing them better, then we must be careful to see that our hypotheses are 

 appropriate to the actual conditions of life and most anxious in our endeavour to 

 state fullv the conditions we assume. 



' Bonar, Malthus, 270. 



