144 SECTIONAL ADDRESSES 



knowledge outside that ambit. Within this field I carve out a section 

 named dynamic theory for reasons which will be explained. The residual 

 section I call empirical study. This must not be taken to imply that the 

 knowledge considered in the earlier sections is not based on experience. 

 I expect the studies falling under this fourth head to be the most important 

 in the future ; but owing to my rearguard position I shall not be able to 

 say much about them. I hope that appreciation of the necessary limita- 

 tions to the scope of the other types of knowledge may serve to stimulate 

 the new empirical work. 



I. 



The Economic Criterion. 



The train of thought here to be considered is derived from Adam Smith. 

 His chief claim to fame consists in his origination of it, his work on this 

 topic having far greater cogency and authority than his particular formula- 

 tion of the labour theory of value or his speculations on the forces deter- 

 mining wages, profit and rent. Furthei-more I conceive it to be the central 

 core of classical economics, entitled to an easy priority over the theory of 

 value and distribution to which more recent writers, by reason of the 

 growing precision of its formulation, have tended to give pride of place. 



The contribution of this department of theory must be considered 

 under two heads : (i) the choice of the criterion itself ; (2) the mechanisrn 

 for testing how far existing or proposed arrangements and practices fulfil 

 its requirements. 



The criterion may be defined dogmatically as follows : If an individual 

 prefers a commodity or service X to Y, it is economically better that he 

 should have it. Similarly, if the individual prefers work X to Y, or dislikes 

 it less, it is economically better that he should do it. The economic good 

 is thus the preferred. If we may adopt Prof. Robbins' method of regard- 

 ing the inner structure of thought rather than the verbal formulation of it, 

 this choice of a criterion may be attributed to Adam Smith. 



The act of choice cannot be regarded either as a discovery or a hypo- 

 thesis, though it partakes to some extent in the nature of each. He per- 

 ceived that by means of it, it would be possible to make sense of the 

 confused and conflicting arguments of economic doctors and reduce chaos 

 to order. This choice involved scientific insight of a high order. Its 

 merits may be judged by its fruits. 



In appraising institutions and practices and making recommendations 

 the economist has this criterion in mind ; it constitutes his standard of 

 good and bad. 



Zealous protagonists for the scientific character of economics have 

 been disposed, especially recently, to define the advisory capacity of the 

 economist somewhat differently. Realising that in fully developed 

 sciences, laws of causation have primacy of position and practical maxims 

 issue as corollaries from them, they have been unwisely eager to assimilate 

 economics to this category. Consequently they have suggested that the " 

 economist in his advisory capacity should state that a given interference 

 will lead to certain consequences X, Y, Z . . . and then remain silent, 



