July 33, 1886.] 



SCIENCE. 



83 



of bank-notes is a useful and at the same time 

 dangerous function to intrust to a bank. Shall 

 the issue of bank-notes be free, or shall it be 

 regulated by government ? How shall we answer 

 such a question ? If we examine the history of 

 banking in the United States, as President 

 Walker does in his book on money, or as Comp- 

 troller Knox did in his report for 1876, we shall 

 find that freedom of issue has always been 

 abused, and has always led to disaster, and that 

 the only good bank money we have ever had in 

 this country has been the national bank-notes 

 secured by United States bonds. Study of the 

 experience of England, Germany, and Fi-ance 

 will show that the liberty to issue bank-notes has 

 everywhere been restricted, and is now exercised 

 only by institutions under the direct or indirect 

 control of the state. It can therefore be accepted 

 as a rule that the privilege of issuing bank-notes 

 should be carefully regulated by the state. This 

 is the pure historical method in poHtical economy. 



Let us take a question which has not yet been 

 solved, or where, at any rate, no practical solu- 

 tion has been reached by the legislature. Let us 

 take, for example, the present silver question in 

 the United States. Should the United States try 

 to re-establish the silver dollar as a standard? 

 There are two questions here. One is the ques- 

 tion of the single or the double standard ; the 

 other is whether we can dispense with either one 

 of the precious metals as money. The first, which 

 is commonly known as bimetallism, although it is 

 more properly the question of the single or the 

 double standard, is akeady settled in the opinion 

 of the best economists. One has only to read 

 Professor Laughlin's book on the history of bi- 

 metallism to see that the double standard has 

 been thoroughly tried in the United States from 

 1790 to 1873, and that it has signaUy failed. It 

 always results in the presence of one metal and 

 the absence of the other. At first, with a ratio 

 of one to fifteen, we could keep no gold in the 

 country : afterwards, with the ratio of one to 

 sixteen, we could keep no silver. The history of 

 France proves exactly the same thing, so that 

 even professed bimetaUists acknowledge that the 

 double standard cannot be maintained except by 

 international agreement. This, again, is the 

 historical method. 



The second part of the problem — viz., is there 

 sufficient gold in the world to supj)ly the demand 

 for money, so that it is safe to demonetize silver? 

 — is much more difficult to answer, and is, I ven- 

 ture to say, as yet unanswered. It can be solved 

 only by the statistical method ; viz., by show- 

 ing that ijrices are declining, while at the same 

 time the supply of gold is decreasing, and that 



the latter is the only adequate cause discoverable 

 for the former phenomenon. As an example of 

 an attempt to prove this connection, I may cite 

 Mr. Giffen's well-known 'Essays in finance.' An 

 even more noted example of the same style of 

 applying the statistical method to economic prob- 

 lems may be found in the essay of Jevons, and also 

 those of Cliffe Leslie on the effect of the gold dis- 

 coveries in California and Australia on prices in 

 Europe. 



Finally, we may ask, what can the inductive 

 method do when it faces some great economic 

 problem which affects the whole community and 

 civilization itself ? Such a problem is the labor'- 

 problem. What is the condition of the laboring 

 class ? Has that condition deteriorated or im' 

 proved ? The inductive method has not shrunk 

 from attempting to find an answer to even such 

 questions as these. Thorold Rogers has labori- 

 ously traced the condition of the English laborer 

 during the last six centuries, for the purpose of 

 answermg this question historically. Giffen has 

 attempted, by statistics, to show that the con- 

 dition of the laboring class has materially im- 

 proved during the last fifty years. 



These are examples of the historical, compara- 

 tive, and statistical method applied to modern 

 economic problems. In some cases the method 

 has only confirmed what was known or at least 

 surmised before ; in most cases it has added di- 

 rectly to ovir knowledge ; in a few cases it has 

 given us results which could have been obtained 

 in no other way. Such is the value of the method 

 in these isolated cases. Can it be so utUized as 

 to enable us to formulate a body of truth worthy 

 to be called a science? This brings us to our 

 second point, — 



How to reach principles of economic life. 



It is often said, that, although the inductive 

 method may aid us in solving economic problems, 

 it falls far short of what is required by a true 

 science, because it does not enable us to formulate 

 a body of principles which shall at the same time 

 embody the highest truth, serve as a guide in 

 future economic action, and be an explanation of 

 all economic life. Nothing was more character- 

 istic of the old school than the perfect confidence 

 that they had the key to all knowledge on this 

 subject. They were accustomed to speak of 

 'immutable laws' and ' eternal principles.' Self- 

 interest, demand and suj)ply, the law of diminish- 

 ing returns from land, Malthus' law of popula- 

 tion, Gresham's law, the wage-fund, equality of 

 profits, — these were the touch-stones the applica- 

 tion of which settled every problem. Is it a 

 question whether strikes are able to raise wages p 



