344 SECTIONAL TRANSACTIONS.— F. 



level. In spite of physical and spiritual isolation the mining population occasionally 

 threw up men of talent. After 1 815 an influx of outside labour was perhaps responsible 

 for some fall of economic standards ; and too rapid development may explain some 

 of the conditions revealed in the reports of the 'forties. 



Presidential Address by Prof. D. H. Macgregor on nationalisation 

 of Industry. (See p. 98.) 



Friday, September 2. 



Prof. J. Schumpeter. — The Instability of our Economic System. 



In what sense can our economic system be said to contain possible causes of 

 instability ? 



Dr. P. Sargant Florence. — Fallacies and Pitfalls of non-Statistical 

 Economics. 



(1) Economics assumes certain ' principles,' such as the principle of substitution 

 and the notion that all incomes except rent are remuneration for real costs in effort 

 and sacrifice, and assumes also certain conditions such as occupational mobility, 

 competition, business acumen, knowledge of trade opportunities and the stationary 

 state. 



(2) These assumptions are only gradually and grudgingly modified by a process 

 of ' disabstraction ' to approximate to the observed conditions and ways of human 

 behaviour which are variegated, changeable, uncertain and juxtaposed in unexpected 

 combinations. When applied to interpret any particular situation this deductive 

 method, though a corrective of many popular and bourgeois fallacies, is prone to lead 

 to the ' fallacy of accident ' and the pitfalls of dogmatism and fatuity. 



(3) Strict economic generalisations are blind to the implications of such statistically 

 measurable ' accidents ' as the skew distribution of incomes, or the variety of automatic 

 and deliberate methods of fixing price and production, or the variation of opportunity 

 and mentality among actual and potential entrepreneurs, or the vagaries of trade 

 from industry to industry. 



(4) Fallacies of dogmatism were frequent among the classical economists. To 

 the admitted wage-fund fallacy may be added Senior's theory of output as an exact 

 multiple of hours worked, and the iron law of wages that supposed a positive correla- 

 tion of income and births per family. 



(5) Warned by the positive fallacies of their predecessors, modern economists 

 run in most danger of a fall into the pit of fatuity. They claim that their theories 

 are true deductions from fixed principles and conditions ' other (independent) things 

 being equal,' but make little attempt to test the existence of those conditions, to 

 bring their principles into relation with the complicated welter of facts, or to find how 

 far what ' other things ' are ever equal or even independent. 



(6) Statistical methods have been specially devised for the summary measurement 

 of the variable and composite events displayed in human society. Is it possible to 

 fuse in a ' statistical economics ' statistics fidelity to facts with the tried faiths of 

 economic theory ? This fusion is certainly in line with the views of Marshall, Cassel 

 and some of the modern American school. 



(7) Statistical economics would first attempt (a) to select the units in which 

 such events as an increased supply of ' labour ' or increased productivity is to be 

 reckoned, and (b) to define such economic characteristics and principles as specialisa- 

 tion, mobility, localisation, or over-population in measurable terms such as index 

 numbers, ratios or co-efficients. This implies the use of the objective measuring rod 

 of money or quanta as a starting-point rather than vague psychological components 

 such as real costs and utility. 



(8) How economic events and characteristics (e.g. rent) are supposed to be deter- 

 mined would be finally (c) set forth step by step as correlation theories or other definitely 

 statistical issues ; these issues to be argued, after expert inquiry ' in the field,' by 

 statistical analysis in combination with such economic speculation as has stood the 

 test of time. 



