Page:Encyclopædia Britannica, Ninth Edition, v. 19.djvu/397

Rh POLITICAL ECONOMY 381 Cairnes on the method of the science, though intrinsically unsound, had an important negative effect. They let down the old political economy from its traditional posi tion, and reduced its extravagant pretensions by two modifications of commonly accepted views. First, whilst Kicardo had never doubted that in all his reasonings he was dealing with human beings as they actually exist, they showed that the science must be regarded as a purely hypothetic one. Its deductions are based on unreal, or at least one-sided, assumptions, the most essential of which is that of the existence of the so-called &quot; economic man,&quot; a being who is influenced by two motives only, that of acquiring wealth and that of avoiding exertion ; and only so far as the premises framed on this conception correspond with fact can the conclusions be depended on in practice. Senior in vain protested against such a view of tho science, which, as he saw, compromised its social efficacy; whilst Torrens, who had previously combated the doctrines of Ricardo, hailed Mill s new presentation of political economy as enabling him, whilst in one sense rejecting those doctrines, in another sense to accept them. Secondly, beside economic science, it had often been said, stands an economic art, the former ascertaining truths respecting the laws of economic phenomena, the latter prescribing the right kind of economic action ; and many had assumed that, the former being given, the latter is also in our possession that, in fact, we have only to convert theorems into precepts, and the work is done. But Mill and Cairnes made it plain that this statement could not be accepted, that action can no more in the economic world than in any other province of life be regulated by considerations borrowed from that department of things only, that economics can suggest ideas which are to be kept in view, but that, standing alone, it cannot direct conduct an office for which a wider prospect of human affairs is required. This matter is best elucidated by a reference to Comte s classification, or rather hierarchical arrangement, of the sciences. Beginning with the least complex, mathematics, we rise successively to astronomy, physics, chemistry, thence to biology, and from it again to socio logy. In the course of this ascent we come upon all the great laws which regulate the phenomena of the inorganic world, of organized beings, and of society. A further step, however, remains to be taken namely, to morals ; and at this point theory and practice tend to coincide, because every element of conduct has to be considered in relation to the general good. In the final synthesis all the previous analyses have to be used as instrumental, in order to determine how every real quality of things or men may be made to converge to the welfare of humanity. Cairnes s most important economic publication was his last, entitled Some Leading Principles of Political Economy newly Expounded, 1874. In this work, which does not pro fess to be a complete treatise on the science, he criticizes and emends the statements which preceding writers had given of some of its principal doctrines, and treats elaborately of the limitations with which they are to be understood, and the exceptions to them which may be produced by special circumstances. Whilst marked by great ability, it affords evidence of what has been justly observed as a weakness in Cairnes s mental constitution his &quot; deficiency in in tellectual sympathy,&quot; and consequent frequent inability to see more than one side of a truth. Tkc three divisions of the book relate respectively to (1) value, (2) labour and capital, and (3) international trade. In the first he begins by elucidating the meaning of the word &quot;value,&quot; and under this head controverts the view of Jevons that the exchange value of anything depends entirely on its utility, without, perhaps, distinctly apprehending what Jevons meant by this proposition. On supply and demand he shows, as Say had done before, that these, regarded as aggregates, are not independent, but strictly connected and mutually dependent phenomena identical, indeed, under a system of barter, but, under a money system, conceivable as distinct. Supply and demand with respect to particular commo dities must be understood to mean supply and demand at a given price ; and thus we are introduced to the ideas of market price and normal price (as, following Cherbuliez, he terms what Smith less happily called natural price). Normal price again leads to the consideration of cost of production, and here, against Mill and others, he denies that profit and wages enter into cost of produc tion ; in other words, he asserts what Senior (whom he does not name) had said before him, though he had not consistently carried out the nomenclature, that cost of production is the sum of labour and abstinence n ecessary to production, wages and profits being the remuneration of sacrifice and not elements of it. But, it may well be asked, How can an amount of labour be added to an amount of abstinence ? Must not wages and profits be taken as &quot;measures of cost?&quot; By adhering to the conception of &quot;sacrifice,&quot; he exposes the emptiness of the assertion that &quot; dear labour is the great obstacle to the extension of British trade &quot; a sentence in which &quot;British trade&quot; means capitalists profits. At this point we are introduced to a doctrine now first elaborated, though there are indications of it in Mill, of whose theory of inter national values it is in fact an extension. In foreign trade cost of production, in Cairnes s sense, does not regulate values, because it cannot perform that function except under a regime of effective competition, and between different countries effec tive competition does not exist. But, Cairnes asks, to what ex tent does it exist in domestic industries ? So far as capital is concerned, he thinks the condition is sufficiently fulfilled over the whole field a position, let it be said in passing, which he does not seem to make out, if we consider the practical immobility of most invested, as distinct from disposable, capital. But in the case of labour the requisite competition takes place only within certain social, or rather industrial, strata. The world of industry maybe divided into a series of superposed groups, and these groups are practically &quot;non-competing,&quot; the disposable labour in any one of them being rarely capable of choosing its field in a higher. The law that cost of production determines price cannot, therefore, be absolutely stated respecting domestic any more than respecting international exchange ; as it fails for the latter universally, so it fails for the former as between non-competing groups. The law that holds between these is similar to that governing international values, which may be called the equation of reciprocal demand. Such a state of relative prices will establish itself amongst the products of these groups as shall enable that portion of the products of each group which is applied to the purchase of the products of all other groups to discharge its liabilities towards those other groups. The reciprocal demand of the groups determines the &quot;average relative level&quot; of prices within each group ; whilst cost of production regulates the distribution of price among the indivi dual products of each group. This theorem is perhaps of no great practical value ; but the tendency of the whole investigation is to attenuate the importance of cost of production as a regulator of normal price, and so to show that yet another of the accepted doctrines of the science had been propounded in too rigid and absolute a form. As to market price, the formula by which Mill had defined it as the price which equalizes demand and supply Cairnes shows to be an identical proposition, and he defines it as the price which most advantageously adjusts the existing supply to the existing demand pending the coming forward of fresh supplies from the sources of production. His second part is chiefly remarkable for his defence of what is known as the wages fund doctrine, to which we adverted when speaking of Senior. Mill had given up this doctrine, having been convinced by Thornton that it was erroneous ; but Cairnes refused to follow his leader, who, as he believes, ought not to have been convinced. After having given what is certainly a fallacious reply to Longe s criticism of the expression &quot;average rate of wages,&quot; he proceeds to vindicate the doctrine in question by the consideration that the amount of a nation s wealth devoted at any time to the payment of wages if the character of the national industries and the methods of production employed remain the same is in a definite relation to the amount of its general capital ; the latter being given, the former is also given. In illustrating his view of the subject, he insists on the principle (true in the main, but too absolutely formulated by Mill) that &quot; demand for commodities is not demand for labour.&quot; It is not necessary here to follow his in vestigation, for his reasoning has not satisfied his successors, with the exception of Fawcett, and the question of wages is now commonly treated without reference to a supposed determinate wages fund. Cairnes next studies trades-unionism in relation to wages, and arrives in substance at the conclusion that the only way in which it can affect their rate is by accelerating an advance which must ultimately have taken place independently of its action. He also takes occasion to refute Mr (now Sir Thomas) Brassey s supposed law of a uniform cost of labour in every part of the world. Turning to consider the material prospects of the working classes, he examines