TRANSACTIONS OF SECTION F. 847 



then, state the position in general terms. According to the traditional English 

 view it is not the business of the economist to decide all the disputes that may 

 arise even regarding fundamental questions in ethics, religion, fine art, education, 

 public law, administration — to decide, in a word, the first duty of man and the 

 last duty of Governments. His sphere is much more limited, and the limits have 

 been indicated with tolerable precision by the classical English economists. Even 

 in England, however, there has been a tendency in recent j'ears to remove the old 

 landmarks, and I do not mean simply on the part of socialists, but by those who 

 in the main profess to accept the English traditions. 



Just as the German idealists think it is the business of the economist to discover 

 the way to the perfectibility of the species, the English realists impose upon him 

 the duty of finding the road to the greatest happiness of the greatest number. In 

 technical language political economy is the economy of utility. No doubt, at first 

 sight, this aim seems to be both definite and practical. From the old inquiry, 

 ' How nations are made wealthy,' to the new inquiry, ' How nations are made 

 happy,' it seems a natural and easy transition. For the essence of wealth is to 

 possess utility, to satisfy desires, to create happiness. It is obvious also that the 

 happiness of a people depends largely on its economic conditions in the narrowest 

 sense of the term ; it depends, that is to say, on the amount and distribution of its 

 material wealth. Accordingly it seems plausible to maintain that the economist 

 ought to discover by his calculus of utility those principles of production and 

 distribution that will lead to most happiness. 



Plausible and natural, however, as this transition from wealth to happiness 

 may seem, it may readily lead to the abandonment of the central position of the 

 classical economists. The steps are worth tracing. The first deduction made 

 from the general principle of utility is that it obeys a law of diminishing return. 

 Every additional portion consumed or acquired of any commodity gives a decreas- 

 ing satisfaction, and passing through the point of satiety Ave reach the negative 

 utility of being a nuisance. Illustrated by tlie usual curve this law assumes the 

 character of a mathematical axiom. 



The next step is to show that the rich man derives very little utility (or happiness) 

 from his superfluity, whilst if his abundance were divided amongst the poor a 

 great amount of happiness would be created. It seems to follow at once that, 

 assuming an average capacity for happiness, the more equal the distribution of 

 wealth the greater will be the happiness of the people. Never did any theory 

 of equality assume such a simple and scientific form ; it is like the advent of 

 primitive Christianity in the guise of a new philosophy. 



The practical question remains, * How is this ideal to be carried out ? ' Obviously 

 it is too much to expect that the principle of natural liberty and the policy of 

 laisser-faire may be left to work out this latter-day salvation. Competition may 

 be well enough for the strong, but is the destruction of the poor and weak. 

 Accordingly it seems easy to prove, or at least to presume, that great powers must 

 be given to the State. It only remains to bring in the principle which Mill 

 flattered himself was his chief contribution to economic theory, viz., that the 

 distribution of wealth depends entirely on the opinions of mankind, that these 

 opinions are indefinitely pliable, and that, therefore, no schemes of distribution can 

 be called impracticable, and we arrive at the conclusion of the whole matter. 

 And practically that conclusion is nothing less than State Socialism. 



It needs no demonstration, however, that nothing could be more opposed to the 

 traditional English political economy. AVhat, then, becomes of my contention that 

 it remains unshaken, and that there are signs of a strong reaction in its favour ? 

 The truth is that this conclusion has again brought into prominence other portions 

 of the old doctrine that had been allowed to fall into the background. We are 

 confronted with the limited power of the State and the infinite variety of 

 individual enterprise. To the older economists the diff'erence seemed so great that 

 they considered the presumption against State interference to be established. The 

 rule, it is true, was never absolute and unqualified. Adam Smith himself indicated 

 some of the most important of these exceptions, and the list has been extended by 

 his successors. But these exceptions were all based upon reasoned principles, such 



