SC I EN C E.-Supplement. 



FRIDAY, MAY 28, 1886. 



THE STATE AS AN ECONOMIC FACTOR. 

 I. 



There is no more significant difference between 

 what, for lack of better terms, we may call the 

 old and the new schools of political economy than 

 their respective attitudes toward the state. The 

 old school, in which I would include Adam Smith 

 and his best-known English followers, culminat- 

 ing in the so-called orthodox economists, derived 

 their ideas in regard to the nature and functions 

 of the state from the views of the writers on 

 jural and political science which prevailed in the 

 latter half of the last century. They have almost 

 universally accepted these conceptions of the state 

 as fully satisfactory for the uses of the economist, 

 without any real attempt at an analysis of the 

 functions of the state from the economic side. 

 It is hardly necessary to say that these ideas have 

 long since been repudiated by the cultivators of the 

 jural and politico-philosophical sciences as entire- 

 ly unsatisfactory. But the orthodox economist 

 has held to them as if they were law and gospel. 

 We have, as a consequence, the rather absurd 

 phenomenon of the cultivators of one science hold- 

 ing to the conceptions taken from another which 

 the latter itself rejects as worthless for all scientific 

 purposes. 



The new school, on the contrary, has simply 

 adapted itself to the changed conditions, and ac- 

 cepted the results of scientific progress in neigh- 

 boring fields, and on this as a foundation has un- 

 dertaken to carry the science another stage for- 

 ward in its development. It has indeed con- 

 tributed something to jural philosophy itself by 

 its attempts to analyze the concept of the state 

 from the economic side, in order to ascertain the 

 function which it performs in the process of 

 economic production and distribution. 



Adam Smith, in common with the tendencies 

 of his time in the field of political and jural 

 speculation, looked upon the state as a purely 

 negative factor in economic and social life, — a 

 something which grew out of the defects of men, 

 — a necessary evil which did most good when it 

 did least harm. He considered its functions to be 

 simply those of protecting society against aggres- 

 sion from without, and violence within. He saw 

 in individual action the source of all progress, the 



hope of all civilization, and held that the race 

 would move forward in proportion as all govern- 

 ment trammels were removed from individual 

 activity. I do not mean to say, of course, that 

 Smith was consistent in this view, because con- 

 sistency in such a view is simply impossible, and 

 has never been achieved by any great thinker. 

 He was compelled to disregard his theory repeated- 

 ly when discussing practical questions of govern- 

 ment and politics of his own time, and many 

 passages may be quoted from his works to prove 

 that he tacitly repudiated the whole doctrine. In 

 this respect he resembles very much some of his 

 distinguished followers, who, finding it impossible 

 to be consistent and to bring their theories into 

 harmony with the hard facts of the actual world 

 about them, make all manner of practical con- 

 cessions inconsistent with their fundamental 

 principle, which may be quoted to prove that they 

 did not hold such doctrines at all. 



But no one can read Smith carefully without 

 admitting that his theory of the state practically 

 denies to the latter any economic function what- 

 ever, beyond the simple one of keeping order 

 within its boundaries. All that is more than this 

 cometh of and leadeth to evil. Certain it is that 

 all those in this century who have been opposed 

 to state action of any kind have appealed to the 

 authority of Smith and certain of his followers 

 as having established beyond a doubt that the 

 state has no business to interfere with economic 

 or social relations. 



As a matter of fact, Smith made successful war 

 upon certain forms of governmental interference, 

 which in his time were undoubtedly doing great 

 harm ; but instead of being content with show- 

 ing that those particular restrictions had outlived 

 their usefulness, and that the time had come when 

 they could be better dispensed with, he tried to 

 show, or rather assumed, that such restrictions 

 were per se injurious, and could be productive of 

 evil only. 



The investigation of historians in this century 

 has proven conclusively that the state, so far from 

 being the source of innumerable evils, has always 

 been not only the absolutely essential condition of 

 human progress, but also one of the most impor- 

 tant, if not, indeed, the most important, factor in 

 the economic evolution of society itself. It 

 proved that* no economic progress has ever taken 

 place outside of the state, and very little indeed 

 within it, except on the basis of the active sup- 



