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 POLITICAL

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POLITICAL

fended as the wages of the merchant. With certain limitations, the taking of interest for money loans was forbidden. On the other hand, there were certain classes of productive investments, such as the buying of rent-charges, where interest was allowed. Among the writers of the period on economic subjects, St. Thomas Aquinas takes first place. Other writers of importance were Henry of Ghent, jEgidius Colonna, Petrarch, Nicholas Oresme, Bishop of Lisieux, who wrote a work on money for his pupil Charles V, and finally St. Antoninus, Archbishop of Florence, and St. Bernardine of Siena.

Mercanlile System. — In the sixteenth and seven- teenth centuries a revolution in industrial acti\'ities was taking place which had a profound influence upon the economic literature. The great geographical dis- coveries, the invention of gunpowder and printing, the decay of feudaUsm and the rise of modern states, the increase in the supply of the precious metals, and the growing use of credit, — all these united to furnish problems for endless discussion. Statesmen, feeling the need of money to support war, adopted various restrictive measures to obtain it. The economic writ- ers who defended these restrictions are usually classed together as the Mercantile School. Sometimes the attempt was made to keep money in the country by prohibiting its exportation or by debasing the coinage. Another way was to encourage the exportation of finished commodities and the importation of raw material in order to secure a balance of trade. Mer- cantilism reached its highest perfection under Colbert, the Minister of Finance under Louis XIV, and is sometimes referred to as Colbertism. Later imitators of Colbert were less successful, and Mercantilism often degenerated into a system of special privileges and exemptions, without any adequate advantage to the nation. Prominent among the Mercantilist writers were Jean Bodin (d. 1596), Giovanni Botero (d. 1617), Juan Mariana (d. 1623), Antonio Serra (published in 1613), Antoine de Montchri^tien (Traits d'6conomie politique, 1615), who was the originator of the term political economy, and Thomas Mun (d. 1641), author of "England's Treasure by Foreign Trade".

System of Natural Liberty. — During the Mercantile period statesmen had interested themselves in industry principally for the purpose of carrying on war; in the following period wars were carried on in the interest of industry and commerce. Under Mercantile influence, the attitude of governments had been decidedly pater- nalistic. In the eighteenth century those who speak for commerce and industry demand that these be allowed to develop freely, unhampered by the guiding strings of government. In France there grew up a school of economic writers later known as the Phys- iocrats, who protested against the balance of trade doctrine of the Mercantile School and summed up the duties of the government towards industry and commerce in the famous phrase "laissez faire et laissez passer". They believed in a beneficent "order of nature" which should be allowed free play. To them, agriculture alone was productive. The Phys- iocrats had been strongly influenced by such English writers as Locke, Petty, and Hume, and they in turn were destined to further influence English political economy. Adam Smith (1723-90), "the father of political economy", was a result of the combination of both the English and the French currents. His work, "An Inquiry into the Nature and Causes of the Wealth of Nations" (1776), gained immediate popu- larity and exercised profound political influence in the next generation. Smith held that while the indi- vidual selfishly seeks his private gain, he is led by an invisible hand to promote the public good, and that since the individual and social interests are identical, the sphere of state action should be narrowed. He thus followed up the attack on the Mercantile system begun by the Physiocrats. He differed from the

Physiocrats in making labour as well as land pro- ductive. Among the followers of Smith are to be noted Malthus ("Essay on Population", 1798), author of the startling statement that population tends to increase in a geometrical ratio while subsistence tends to increase in an arithmetical ratio, and Ricardo ("Principles of Political Economy and Taxation", 1817), whose name is associated with the differential rent theory, the subsistence theory of wages, and the labour theory of value. Other writers of the English Classical School, who followed closely in the footsteps of Malthus and Ricardo, were James ^Iill, Mac- Culloch Senior, and John Stuart Mill. The last named in his later life renounced the individualism of the Orthodox School in favour of socialistic views.

Historical School. — About the middle of the nine- teenth century there began in Germany under the leadership of Wilhelm Roscher, Karl Knies, and Bruno Hildebrand, a reaction against the Orthodox-English School. These writers insisted on the relativity of economic theory, that is, they did not believe "that economic principles, good for all times and places, and all degrees of economic development, could be estab- lished. Moreover, they insisted strongly on the need of the study of economic history and upon the ethical and practical character of political economy. They were soon in complete control of the economic teach- ing of Germany. They differ radically from the Physiocrats and Adam Smith in their repudiation of the doctrine of natural libert}'. In fact many of them have gone so far in the opposite direction as to be designated Kathedersozialislen (Professorial Social- ists), because of their reliance on state help in accom- plishing social reforms.

Austrian School. — Since 1871 there has grown up in Austria a group of WTiters who make of political econ- omy a deductive and psychological science of value. They oppose to the eost-of-production explanation of value of the Classical School, a theory of value based upon marginal utility. It is a well known psycholog- ical fact that the utilities of additional units of a com- modity to a consumer diminish as the supply in- creases. Now it is the utility of the last or marginal unit consumed, says the Austrian School, which deter- mines value. Menger, Wieser, Boehm-Bawerk, in Austria, the late W. Stanley Jevons, in England, and J. B. Clark, in America, are the leading representa- tives of this school.

Socialism. — Socialism (q. v.) represents the extreme of reaction against laissez faire or the system of natural liberty of the Physiocrats and Adam Smith. Laissez faire professes to believe in the identity of the interests of the different industrial classes and hence decries the need of restrictive legislation, while socialism em- phatically denies that this solidarity exists under our present system and seeks to develop a "class con- sciousness" among the workers that will overthrow the influence of the dominant class. Economic social- ism borrowed the labour theory of value from Ricardo and gave it an ethical interpretation, holriing that since labour is the sole producer of wealth, the labourer should receive the entire product. Accordingly, the socialists deny the right of the capitalist to interest and of the landlord to rent, and would make capital and land common property. According to Karl Marx ("Das Kapital", 1867), the founder of so-called scien- tific socialism, the labourer under the present system does not receive more than a bare subsistence. The "surplus value" which he produces above this amount is appropriated by landlords and capitalists. Another contribution of Marx to socialism is the materialistic conception of historj-, according to which such factors in history as religion, ethics, and the family, undergo changes corresponding to the changes in the under- lying economic organization of which they are a product.

Christian Democracy. — The movement which has