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 foreign exchanges and international trade relations in those times; that the effect on wages of the state of the currency, the influx of new silver, the character of the harvests, and many other influences can be conveniently ignored. In studying, therefore, such an apparently simple question as the effect of an act of parliament on wages in a small group of trades we want a general theory which we can use as a kind of index of the factors we have to consider.

Assuming that we have in our minds this safeguard against loose thinking and neglect of important factors, the investigation of the special problems arising out of the general inquiry resolves itself into a careful definition of each problem we wish to deal with, and the collection, tabulation and interpretation of the evidence. In most cases the interpretation of the facts is far from obvious, and we have to try several hypotheses before we reach one which will bear the strain of a critical examination in the light of further evidence. But at this stage in historical investigation it is generally the want of evidence of a sufficiently complete and continuous character, rather than difficulties of method, which forces us to leave the problem unsolved. It is, for instance, practically impossible to obtain reliable evidence as to the regularity of employment in any industry in the 17th century, and the best approximations and devices we can invent are very poor substitutes for what we really want. For this reason guesswork must continue to play an important part in economic history. But every genuine attempt to overcome its difficulties brings us into closer touch with the period we are examining; and though we may not be able to throw our conclusions into the form of large generalizations, we shall get to know something of the operation of the forces which determined the economic future of England; understand more clearly than our forefathers did, for we have more information than they could command, and a fuller appreciation of the issues, the broad features of English development, and be in a position to judge fairly well of the measures they adopted in their time. By comparing England with other countries we may be able in the distant future to reach conclusions of some generality as to the laws of growth, maturity and decay of industrial nations. But like the early statisticians of the 17th century, economic historians are the “beginners of an art not yet polished, which time may bring to more perfection.”

When we come to exclusively modern questions, there is no reason or necessity for a fundamental change of method. We cannot suppose that there occurred, at or about the commencement of the 19th century, a breach of historical continuity of such a character that institutions, customs, laws and social conventions were suddenly swept away, the bonds of society loosened, and the state and people of England dissolved into an aggregate of competing individuals. The adoption of machinery gradually revolutionized the methods of production; but in the first instance only certain industries were affected, and those not at the same time or in the same degree; old laws grown obsolete were repealed, but other laws affecting wage-earners and employers took their place, more complicated and elaborate than the Elizabethan code. Trade unions, so far from disappearing, were legalized, gathered strength from the changes in industrial organization, and nowhere became so powerful as in the most progressive industries; while other forms of combination appeared, incomparably stronger, for good or evil, than those of earlier times. But while we recognize these facts, we must not suppose that we have to study the action of men as though they were all enrolled in organized associations, or covered by stringent laws which were always obeyed. There has never been in the history of English industry such licence as we find in certain directions in the earlier part of the 19th century.

It is not in the decay of combination and monopoly or in the growth of competition that we must look for the distinctive characteristics of modern problems. A 17th-century monopoly was a very weak and ineffective instrument compared with a modern syndicate; the Statute of Apprenticeship was certainly not so widely enforced as the “common rules” of trade unions; and many of the regulations of past times, which look so complicated to modern eyes, were conditions of free enterprise rather than restraints upon it. It is due to the influence of the laisser faire doctrine that we regard law and regulation as a restraint on liberty. As a maxim for guidance in public affairs, laisser faire was genuinely relevant at the end of the 18th and the beginning of the 19th century, when the Statute Book was cumbered with vexatious and obsolete laws. As an explanation of what has taken place in later years, or of the actual economic life of the present day, it is ludicrously inadequate. Competition, in the sense in which the word is still used in many economic works, is merely a special case of the struggle for survival, and, from its limitation, does not go far towards explaining the actual working of modern institutions. To buy in the cheapest market and sell in the dearest; to secure cheapness by lowering the expenses of production; to adopt the less expensive rather than the more expensive method of obtaining a given result—these and other maxims are as old as human society. Competition, in the Darwinian sense, is characteristic not only of modern industrial states, but of all living organisms; and in the narrower sense of the “higgling of the market” is found on the Stock Exchange, in the markets of old towns, in medieval fairs and Oriental bazaars. In modern countries it takes myriads of forms, from the sweating of parasitic trades to the organization of scientific research. Economic motives, again, are as varied as the forms of competition, and their development is coeval with that of human society. They have to be interpreted in every age in relation to the state of society, the other motives or ideals with which they are associated, the kind of action they inspire, and the means through which they operate. Apparently the same economic motives have led in the same age and in the same nation to monopoly and individual enterprise, protection and free trade, law and anarchy. In our own time they have inspired both the formation of trade combinations and attempts to break them up, hostility to all forms of state interference and a belief in collectivism.

The conditions which are peculiar to the modern world are the large numbers we have to deal with, the vast and fairly homogeneous areas in which justice is administered and property secured, and the enormously increased facilities for transport and communication. These conditions are of course not independent of each other, and they have brought in their train many consequences, some good and some bad. But they supply the bases for that general theory which, as we have seen, is indispensable in economic investigation. From the standpoint of general theory economic movements assume an impersonal character and economic forces operate like the forces of nature. Although economic motives have become more complex, they have just as much and no more to do with general economic reasoning and analysis than the causes of death with the normal expectation of life, or domestic ideals with the birth-rate. So far as we have anything to do with psychology at all, it is the psychology of crowds and not of individuals which we have to consider. If we study the economy of a village, the idiosyncrasies of every individual in it are of importance. If the village is replaced by a large area, inhabited by millions, with modern facilities of communication, it is a matter of observation and experience that for the purposes of general reasoning the idiosyncrasies of individuals may be neglected. Whether such large numbers have the character of the “economic man” of the early economists matters very little. All the assumptions we require are furnished by observation of people in the mass and the larger generalizations of statistics. Thus we can construct a kind of envelope of theory, which, by careful testing as we proceed, can be made to indicate in a general manner the reactions of one part of the activities of the economic world upon the others, and the interdependence of the several parts. From its very nature this general theory can never correspond strictly to the actual life and movement of any given state. It is useful and necessary, and plays somewhat the same part in economic