848 EEPORT— 1893.' 



as tlie incapacity of the persons concerned, e.g., children to make fair contracts, 

 the lack of individual interest in public works, e.g., the maintenance of roads, and 

 the importance of tlie highest security, as in the regulation of the issues of bank- 

 notes. And in spite of all these exceptions — strengthened and puritied by these 

 exceptions — the presumption remained undisturbed. Recently, however, some 

 writers, under the influence of the ideal of maximum happiness and impressed by 

 the power of the State, have sought to extend its interference far beyond these 

 admitted principles. But I venture to say, so far as this movement had any 

 theoretical support, the reaction has already begun. 



The fundamental importance of freedom of contract has become more apparent 

 "than ever through the application of the comparative and historical methods to 

 jurisprudence ; the proposition that the progress of society has been from status 

 to contract has almost acquired the force of an axiom. The analysis, too, of 

 modern industrial systems, in which division of labour has become more and more 

 intricate and interdependent, has shown the hopelessness of the attempt to transfer 

 the management and control to the State. Changes in the methods of production, 

 in the diftusion of knowledge, and in the transport of material commodities have 

 been so rapid and so great that no executive government could have overtaken 

 them. In the most advanced communities even that legislation which is neces- 

 sary for the new conditions lags behind ; even those elementary forms which 

 simply aim at giving an interpretation to contracts in doubtful cases, or which are 

 necessary for the adjustment of responsibility (as in bankruptcy and partnership), 

 are behind the times. The growth of joint-stock enterprise has outstripped the 

 development of the law of companies, and there is a crop of new frauds without 

 corresponding penalties. 



Turning to the executive and administrative functions of government, the 

 analysis of existing conditions shows that we have not yet overtaken those excep- 

 tions admitted by the strongest supporters of laisspr-faire. The British Govern- 

 ment has, it is true, wasted its enei-gies in devising temporary expedients of various 

 kinds, but it has not yet accomplished the programme of Adam Smith. Not only 

 are there privileges and restrictions that ought to have been abolished long ago, 

 but on the positive side the programme Is not complete. We have just begun 

 universal education on the lines laid down by Adam Smith, but his scheme for 

 Imperial federation is not yet within the range of practical politics. We have 

 effected great iinancial reforms, but we still fall far short of the full development 

 of his principle.^. Even in matters of currency and banking — In relation to which 

 the function of the State has always been recognised — we are lamentably in need 

 of reform. 



But if the State cannot overtake those duties which are so necessary and per- 

 sistent that they were forced on the attention of the strongest supporters of 

 laisser-faire, how can we possibly justify the assumption of new functions which 

 rest upon no better principle than the vague idea that the State ought to do 

 something ? 



This leads me to observe that not only theoretically but practically signs of a 

 reaction in favour of the old position are rapidly increasing. The experiments 

 already made at playing the rule of omnipotence and omniscience, against which 

 Governments were so emphatically warned by Adam Smith, have begun to bring 

 forth fruit after their kind ; thorns that were carefully nursed by the legislature, 

 instead of producing grapes, liave produced more thorns and worse thorns. 



A principle of the widest application in ethics and politics as well as in 

 ■economics, which may be described as the principle of formal justice, has 

 begun to operate in a remarkable manner. A Government which lends its power 

 and assistance to one set of people must be prepared to act in a similar manner 

 in all similar cases. If once this principle is abandoned, governmental action 

 becomes either a matter of chance or depends upon clamour and jobbery. It is 

 wonderful how quickly the human mind discovers analogies in grievances, and 

 how soon one cry leads to another. Microbes are not more rapid and relent- 

 less in their multiplication. A plain man may have his doubts about the simi- 

 larity of triangles and consent to arbitration on the question, but he has no doubt 



